UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10−Q


(Mark
One)


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




For the
quarterly period ended: March 31, 2009




 ̈
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For the
transition period from ____________ to _____________




Commission
File Number: 333-141568





CHINA ADVANCED CONSTRUCTION
MATERIALS GROUP, INC.


(Exact
Name of Registrant as Specified in Its Charter)





Delaware
                  
                  20-8468508(State or other jurisdiction of incorporation or organization)
                  
                  (I.R.S. Employer Identification No.)





1515
Broadway, 11th Floor


New
York, NY 10036


(Address
of principal executive offices, Zip Code)




+86
10 82525361


(Registrant’s
telephone number, including area code)





Yingu
Plaza, 9 Beisihuanxi Road, Suite 1708


Haidian
District, Beijing 100080


People’s
Republic of China


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





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





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).  Yes    ̈  No   ̈





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





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





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





The
number of shares outstanding of each of the issuer’s classes of common equity,
as of May 13, 2009 is as follows:




Class
      of Securities
                    
                    Shares
      OutstandingCommon
      Stock, $0.001 par value
                    
                    10,508,000











TABLE
OF CONTENTS




PART
      IFINANCIAL
      INFORMATIONITEM
      1.
                        FINANCIAL
      STATEMENTS
                        2ITEM
      2.
                        MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
                        37ITEM
      3.
                        QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
                        50ITEM
      4(T).
                        CONTROLS
      AND PROCEDURES
                        50PART
      IIOTHER
      INFORMATIONITEM
      1.
                        LEGAL
      PROCEEDINGS
                        51ITEM
      1A.
                        RISK
      FACTORS
                        51ITEM
      2.
                        UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
                        51ITEM
      3.
                        DEFAULTS
      UPON SENIOR SECURITIES
                        51ITEM
      4.
                        SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
                        51ITEM
      5.
                        OTHER
      INFORMATION
                        51ITEM
      6.
                        EXHIBITS
                        51










PART
I





FINANCIAL
INFORMATION




ITEM
1.    FINANCIAL STATEMENTS.





CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC.  AND
SUBSIDIARIES





CONSOLIDATED
FINANCIAL STATEMENTS





PageConsolidated
      Balance Sheets as of March 31, 2009 (Unaudited) and as of June 30, 2008
      (Restated)
                
                3Consolidated
      Statements of Income and Other Comprehensive Income for the Three Months
      and Nine Months Ended March 31, 2009 and 2008
      (Unaudited)
                
                4Consolidated
      Statement of Stockholders’ Equity (Unaudited)
                
                5Consolidated
      Statements of Cash Flows for the Nine Months Ended March 31, 2009 and 2008
      (Unaudited)
                
                6Notes
      to Consolidated Financial Statements (Unaudited)
                
                7




2


CHINA ADVANCED CONSTRUCTION
MATERIALS GROUP, INC. AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
 
 AS
OF MARCH 31, 2009 AND JUNE 30, 2008
 ASSETSMarch
      31, 2009
                      
                      
                      June
      30, 2008(Unaudited)
                      
                      
                      RESTATEDCURRENT
      ASSETS:Cash
                      
                      $
                      870,140
                      
                      
                      $
                      1,910,495Restricted
      cash
                      
                      
                      666,954
                      
                      
                      
                      913,092Marketable
      securities
                      
                      
                      58,451
                      
                      
                      
                      61,767Accounts
      receivable, net of allowance for doubtful accounts of $357,810and
      $224,924 as of March 31, 2009 and June 30, 2008,
      respectively
                      
                      
                      14,856,208
                      
                      
                      
                      9,365,486Inventories
                      
                      
                      777,548
                      
                      
                      
                      237,836Short
      term loan receivable
                      
                      
                      1,465,000
                      
                      
                      
                      -Other
      receivables
                      
                      
                      1,008,368
                      
                      
                      
                      505,968Prepayment
                      
                      
                      3,940,771
                      
                      
                      
                      3,240,394Total
      current assets
                      
                      
                      23,643,440
                      
                      
                      
                      16,235,038PLANT
      AND EQUIPMENT, net
                      
                      
                      15,237,656
                      
                      
                      
                      16,730,220OTHER
      ASSETS:Accounts
      receivable (non-current), net of allowance for doubtful accounts of
      $664,503 and $411,061 as of March 31, 2009 and June 30, 2008,
      respectively
                      
                      
                      7,529,760
                      
                      
                      
                      4,753,006Total
      assets
                      
                      $
                      46,410,856
                      
                      
                      $
                      37,718,264LIABILITIES AND SHAREHOLDERS'
      EQUITYCURRENT
      LIABILITIES:Short
      term loans
                      
                      $
                      4,723,893
                      
                      
                      $
                      4,271,222Accounts
      payable
                      
                      
                      5,875,554
                      
                      
                      
                      6,293,553Customer
      deposits
                      
                      
                      10,751
                      
                      
                      
                      165,434Other
      payables
                      
                      
                      280,182
                      
                      
                      
                      254,259Other
      payables - shareholder
                      
                      
                      763,634
                      
                      
                      
                      880,302Accrued
      liabilities
                      
                      
                      411,168
                      
                      
                      
                      145,207Taxes
      payable
                      
                      
                      3,468,297
                      
                      
                      
                      1,073,237Interest
      payable
                      
                      
                      155,200
                      
                      
                      
                      -Total
      current liabilities
                      
                      
                      15,688,679
                      
                      
                      
                      13,083,214COMMITMENTS
      AND CONTINGENCIESREDEEMABLE
      PREFERRED STOCK ($0.001 par value, 873,000 shares issued and outstanding
      as of March 31, 2009 and 875,000 shares issued and outstanding as of June
      30, 2008)net
      of discount of $717,822 and $1,168,548 at March 31, 2009 and June 30,
      2008, respectively,liquidation
      preference of $8.00 per share and accrued dividends
                      
                      
                      6,266,178
                      
                      
                      
                      5,831,452SHAREHOLDERS'
      EQUITY:Preferred
      stock $0.001 par value, 1,000,000 shares authorized, 873,000 issued and
      outstanding as of March 31, 2009 and 875,000 issued and outstanding as of
      June 30, 2008, and classified outside shareholders' equity, liquidation
      preference of $8.00 per share and accrued dividends as of March 31, 2009
      and June 30, 2008
                      
                      
                      -
                      
                      
                      
                      -Common
      Stock, $0.001 par value, 74,000,000 shares authorized, 10,508,000 and
      10,525,000 shares issued and outstanding, as of March 31, 2009 and June
      30, 2008, respectively
                      
                      
                      10,508
                      
                      
                      
                      10,525Paid-in-capital
                      
                      
                      12,777,188
                      
                      
                      
                      12,722,260Contribution
      receivable
                      
                      
                      (1,210,000
                      )
                      
                      
                      (1,210,000
                      )Retained
      earnings
                      
                      
                      8,012,151
                      
                      
                      
                      3,257,276Statutory
      reserves
                      
                      
                      2,172,163
                      
                      
                      
                      1,452,779Accumulated
      other comprehensive income
                      
                      
                      2,693,989
                      
                      
                      
                      2,598,466Deferred
      compensation
                      
                      
                      -
                      
                      
                      
                      (27,708
                      )Total
      shareholders' equity
                      
                      
                      24,455,999
                      
                      
                      
                      18,803,598Total
      liabilities, redeemable preferred stock, and shareholders'
      equity
                      
                      $
                      46,410,856
                      
                      
                      $
                      37,718,264




The
accompanying notes are an integral part of these consolidated financial
statements.




3




CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC AND
  SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOMEFOR
      THE THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 2009 AND
2008
                        (UNAUDITED)
  Three
      months ended
                              
                              
                              Nine
      months endedMarch
      31,
                              
                              
                              March
      31,2009
                              
                              
                              2008
                              
                              
                              2009
                              
                              
                              2008REVENUE:Sales
      of concrete
                              
                              $
                              6,544,484
                              
                              
                              $
                              6,790,646
                              
                              
                              $
                              16,382,049
                              
                              
                              $
                              19,841,164Manufacturing
      services
                              
                              
                              1,304,615
                              
                              
                              
                              -
                              
                              
                              
                              5,301,154
                              
                              
                              
                              -Technical
      services
                              
                              
                              431,456
                              
                              
                              
                              -
                              
                              
                              
                              1,471,583
                              
                              
                              
                              -Mixer
      rental
                              
                              
                              995,939
                              
                              
                              
                              -
                              
                              
                              
                              1,992,520
                              
                              
                              
                              -Marketing
      cooperation
                              
                              
                              32
                              
                              
                              
                              -
                              
                              
                              
                              94,167
                              
                              
                              
                              -Total
      revenue
                              
                              
                              9,276,526
                              
                              
                              
                              6,790,646
                              
                              
                              
                              25,241,473
                              
                              
                              
                              19,841,164COST
      OF REVENUE:Concrete
                              
                              
                              4,592,863
                              
                              
                              
                              4,988,211
                              
                              
                              
                              12,147,067
                              
                              
                              
                              15,538,513Manufacturing
      services
                              
                              
                              510,268
                              
                              
                              
                              -
                              
                              
                              
                              1,803,356
                              
                              
                              
                              -Technical
      services
                              
                              
                              22,059
                              
                              
                              
                              -
                              
                              
                              
                              119,742
                              
                              
                              
                              -Mixer
      rental
                              
                              
                              265,442
                              
                              
                              
                              -
                              
                              
                              
                              602,485
                              
                              
                              
                              -Marketing
      cooperation
                              
                              
                              13
                              
                              
                              
                              -
                              
                              
                              
                              38,720
                              
                              
                              
                              -Total
      cost of revenue
                              
                              
                              5,390,645
                              
                              
                              
                              4,988,211
                              
                              
                              
                              14,711,370
                              
                              
                              
                              15,538,513GROSS
      PROFIT
                              
                              
                              3,885,881
                              
                              
                              
                              1,802,435
                              
                              
                              
                              10,530,103
                              
                              
                              
                              4,302,651SELLING,
      GENERAL AND  ADMINISTRATIVE EXPENSES
                              
                              
                              809,777
                              
                              
                              
                              404,692
                              
                              
                              
                              2,079,257
                              
                              
                              
                              1,033,958INCOME
      FROM OPERATIONS
                              
                              
                              3,076,104
                              
                              
                              
                              1,397,743
                              
                              
                              
                              8,450,846
                              
                              
                              
                              3,268,693OTHER
      (EXPENSE) INCOME, NETOther
      subsidy income
                              
                              
                              470,971
                              
                              
                              
                              407,434
                              
                              
                              
                              1,300,992
                              
                              
                              
                              1,190,159Non-operating
      expense, net
                              
                              
                              (118,343
                              )
                              
                              
                              (9,264
                              )
                              
                              
                              (201,531
                              )
                              
                              
                              (36,655
                              )Interest
      income
                              
                              
                              937
                              
                              
                              
                              -
                              
                              
                              
                              4,777
                              
                              
                              
                              -Interest
      expense
                              
                              
                              (194,200
                              )
                              
                              
                              (67,963
                              )
                              
                              
                              (640,544
                              )
                              
                              
                              (215,532
                              )Total
      other income, net
                              
                              
                              159,365
                              
                              
                              
                              330,207
                              
                              
                              
                              463,694
                              
                              
                              
                              937,972INCOME
      BEFORE PROVISION FOR INCOME TAXES
                              
                              
                              3,235,469
                              
                              
                              
                              1,727,950
                              
                              
                              
                              8,914,540
                              
                              
                              
                              4,206,665PROVISION
      FOR INCOME TAXES
                              
                              
                              941,477
                              
                              
                              
                              422,521
                              
                              
                              
                              2,516,707
                              
                              
                              
                              422,521NET
      INCOME
                              
                              
                              2,293,992
                              
                              
                              
                              1,305,429
                              
                              
                              
                              6,397,833
                              
                              
                              
                              3,784,144Dividends
      and accretion on redeemable preferred stock
                              
                              
                              305,443
                              
                              
                              
                              -
                              
                              
                              
                              923,575
                              
                              
                              
                              -Net
      income available to common shareholders
                              
                              
                              1,988,549
                              
                              
                              
                              1,305,429
                              
                              
                              
                              5,474,258
                              
                              
                              
                              3,784,144RECONCILIATION
      OF COMPREHENSIVE INCOME:Net
      income
                              
                              
                              2,293,992
                              
                              
                              
                              1,305,429
                              
                              
                              
                              6,397,833
                              
                              
                              
                              3,784,144Unrealized
      (loss) gain from marketable securities
                              
                              
                              15,901
                              
                              
                              
                              (18,220
                              )
                              
                              
                              (3,316
                              )
                              
                              
                              5,223Foreign
      currency translation adjustment
                              
                              
                              (39,340
                              )
                              
                              
                              644,374
                              
                              
                              
                              98,839
                              
                              
                              
                              1,539,290COMPREHENSIVE
      INCOME
                              
                              $
                              2,270,553
                              
                              
                              $
                              1,931,583
                              
                              
                              $
                              6,493,356
                              
                              
                              $
                              5,328,657EARNING
      PER SHARE:Basic
                              
                              $
                              0.19
                              
                              
                              $
                              0.15
                              
                              
                              $
                              0.52
                              
                              
                              $
                              0.43Diluted
                              
                              $
                              0.16
                              
                              
                              $
                              0.15
                              
                              
                              $
                              0.46
                              
                              
                              $
                              0.43WEIGHTED
      AVERAGE NUMBER OF SHARES:Basic
                              
                              
                              10,525,200
                              
                              
                              
                              8,809,583
                              
                              
                              
                              10,525,066
                              
                              
                              
                              8,809,583Diluted
                              
                              
                              14,021,832
                              
                              
                              
                              8,809,583
                              
                              
                              
                              14,024,081
                              
                              
                              
                              8,809,583


The
accompanying notes are an integral part of these consolidated financial
statements.
  4
 CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
  CONSOLIDATED
STATEMENTS OF SHAREHOLDERS' EQUITY
   Common
      stock
                                        
                                        
                                        Additional
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        Retained
      earnings
                                        
                                        
                                        AccumulatedNumber
                                          of
      shares
                                        
                                        
                                        Par
                                          value
                                        
                                        
                                        Paid-in
                                          capital
                                        
                                        
                                        Contribution
                                          receivable
                                        
                                        
                                        Deferred
                                          Compensation
                                        
                                        
                                        Unrestricted
                                        
                                        
                                        Statutory
                                          reserves
                                        
                                        
                                        other
                                          comprehensive
                                          income
                                        
                                        
                                        TotalBALANCE,
      June 30, 2007
                                        
                                        
                                        8,809,583
                                        
                                        
                                        $
                                        8,810
                                        
                                        
                                        $
                                        12,091,290
                                        
                                        
                                        $
                                        (13,470,100
                                        )
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        6,309,675
                                        
                                        
                                        $
                                        896,634
                                        
                                        
                                        $
                                        659,922
                                        
                                        
                                        $
                                        6,496,231Net
      income
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        3,784,144
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        3,784,144Adjustment
      to statutory reserve
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (378,432
                                        )
                                        
                                        
                                        378,432
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -Distribution
      to offset contribution receivable
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        7,260,000
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (7,627,051
                                        )
                                        
                                        
                                        
                                        
                                        
                                        
                                        367,051
                                        
                                        
                                        
                                        -Capital
      contribution received
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        750,100
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        750,100Unrealized
      gain from marketable securities
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        5,223
                                        
                                        
                                        
                                        5,223Foreign
      currency translation gain
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        1,185,656
                                        
                                        
                                        
                                        1,185,656BALANCE,
      March 31, 2008 (unaudited)
                                        
                                        
                                        8,809,583
                                        
                                        
                                        $
                                        8,810
                                        
                                        
                                        $
                                        12,091,290
                                        
                                        
                                        $
                                        (5,460,000
                                        )
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        2,088,336
                                        
                                        
                                        $
                                        1,275,066
                                        
                                        
                                        $
                                        2,217,852
                                        
                                        
                                        $
                                        12,221,354Shares
      issued due to reorganization
                                        
                                        
                                        1,690,417
                                        
                                        
                                        
                                        1,690
                                        
                                        
                                        
                                        (1,690
                                        )
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -Shares
      issued for services
                                        
                                        
                                        25,000
                                        
                                        
                                        
                                        25
                                        
                                        
                                        
                                        33,225
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (27,708
                                        )
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        5,542Warrants
      issued to placement agent on issuanceof
      redeemable preferred stock
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        169,345
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        169,345Capital
      contribution received
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        4,250,000
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        4,250,000Fair
      value of warrants issued with preferred stock
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        1,201,935
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        1,201,935Offering
      costs related to issuance of redeemable preferred stock
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (771,845
                                        )
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (771,845
                                        )Accretion
      of discount on redeemable preferred stock
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (33,387
                                        )
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (33,387
                                        )Net
      income
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        1,380,040
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        1,380,040Adjustment
      to statutory reserve
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (177,713
                                        )
                                        
                                        
                                        177,713
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -Unrealized
      loss on marketable securities
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (16,620
                                        )
                                        
                                        
                                        (16,620
                                        )Foreign
      currency translation gain
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        397,234
                                        
                                        
                                        
                                        397,234BALANCE,
      June 30, 2008 - Restated
                                        
                                        
                                        10,525,000
                                        
                                        
                                        $
                                        10,525
                                        
                                        
                                        $
                                        12,722,260
                                        
                                        
                                        $
                                        (1,210,000
                                        )
                                        
                                        $
                                        (27,708
                                        )
                                        
                                        $
                                        3,257,276
                                        
                                        
                                        $
                                        1,452,779
                                        
                                        
                                        $
                                        2,598,466
                                        
                                        
                                        $
                                        18,803,598Dividends
      on redeemable preferred stock
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (472,850
                                        )
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (472,850
                                        )Accretion
      of discount on redeemable preferred stock
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (450,724
                                        )
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (450,724
                                        )Stock
      based compensation
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        66,619
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        66,619Forfeited
      stock compensation
                                        
                                        
                                        (25,000
                                        )
                                        
                                        
                                        (25
                                        )
                                        
                                        
                                        (27,683
                                        )
                                        
                                        
                                        
                                        
                                        
                                        
                                        27,708
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -Preferred
      stock converted to common stock
                                        
                                        
                                        8,000
                                        
                                        
                                        
                                        8
                                        
                                        
                                        
                                        15,992
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        16,000Net
      income
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        6,397,833
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        6,397,833Adjustment
      to statutory reserve
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (719,384
                                        )
                                        
                                        
                                        719,384
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -Unrealized
      loss on marketable securities
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (3,316
                                        )
                                        
                                        
                                        (3,316
                                        )Foreign
      currency translation gain
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        98,839
                                        
                                        
                                        
                                        98,839BALANCE,
      March 31, 2009 (unaudited)
                                        
                                        
                                        10,508,000
                                        
                                        
                                        $
                                        10,508
                                        
                                        
                                        $
                                        12,777,188
                                        
                                        
                                        $
                                        (1,210,000
                                        )
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        8,012,151
                                        
                                        
                                        $
                                        2,172,163
                                        
                                        
                                        $
                                        2,693,989
                                        
                                        
                                        $
                                        24,455,999
 
 5
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
  CONSOLIDATED
STATEMENTS OF CASH FLOWS
 FOR
THE NINE MONTHS ENDED MARCH 31, 2009 AND 2008
 (UNAUDITED)
 2009
                          
                          
                          2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income
                          
                          $
                          6,397,833
                          
                          
                          $
                          3,784,144Adjustments
      to reconcile net income to net cash(used
      in) provided by operating activities:Depreciation
                          
                          
                          1,611,255
                          
                          
                          
                          815,689Stock-based
      compensation expense
                          
                          
                          66,619
                          
                          
                          
                          -Bad
      debt expense
                          
                          
                          383,581
                          
                          
                          
                          3,136Changes
      in operating assets and liabilitiesAccounts
      receivable
                          
                          
                          (14,505,340
                          )
                          
                          
                          7,298,441Inventories
                          
                          
                          (538,551
                          )
                          
                          
                          32,838Other
      receivables
                          
                          
                          (998,078
                          )
                          
                          
                          703,888Other
      receivables - related parties
                          
                          
                          -
                          
                          
                          
                          (218
                          )Prepayment
                          
                          
                          (83,374
                          )
                          
                          
                          (328,836
                          )Accounts
      payable
                          
                          
                          5,365,721
                          
                          
                          
                          (9,139,259
                          )Other
      payables
                          
                          
                          25,142
                          
                          
                          
                          363,910Accrued
      liabilities
                          
                          
                          265,272
                          
                          
                          
                          (94,066
                          )Customer
      deposits
                          
                          
                          (155,310
                          )
                          
                          
                          -Taxes
      payable
                          
                          
                          2,389,830
                          
                          
                          
                          385,422Net
      cash provided by operating activities
                          
                          
                          224,600
                          
                          
                          
                          3,825,089CASH
      FLOWS FROM INVESTING ACTIVITIES:Advances
      - short term loan receivable
                          
                          
                          (1,464,500
                          )
                          
                          
                          -Purchase
      of equipment
                          
                          
                          (50,423
                          )
                          
                          
                          (15,665
                          )Net
      cash used in investing activities
                          
                          
                          (1,514,923
                          )
                          
                          
                          (15,665
                          )CASH
      FLOWS FROM FINANCING ACTIVITIES:Principal
      payments of short term loan
                          
                          
                          (6,961,984
                          )
                          
                          
                          (5,679,400
                          )Proceeds
      from short term loan
                          
                          
                          7,398,231
                          
                          
                          
                          3,404,168Other
      payables - shareholders
                          
                          
                          (117,160
                          )
                          
                          
                          -Preferred
      dividends paid
                          
                          
                          (317,649
                          )
                          
                          
                          -Restricted
      cash
                          
                          
                          246,138
                          
                          
                          
                          751,000Net
      cash provided by (used in) financing activities
                          
                          
                          247,576
                          
                          
                          
                          (1,524,232
                          )EFFECTS
      OF EXCHANGE RATE CHANGE IN CASH
                          
                          
                          2,392
                          
                          
                          
                          125,468(DECREASE)
      INCREASE IN CASH
                          
                          
                          (1,040,355
                          )
                          
                          
                          2,410,660CASH,
      beginning
                          
                          
                          1,910,495
                          
                          
                          
                          1,424,883CASH,
      ending
                          
                          $
                          870,140
                          
                          
                          $
                          3,835,543
  
 6
 CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
   Note
1 – Organization and description of business
 
 China Advanced Construction
Materials Group, Inc. (“China ACM” or the “Company”) was founded on September 1,
2005, under the name TJS Wood Flooring, Inc. (“TJSW”), and incorporated in the
State of Delaware on February 15, 2007. On April 29, 2008, TJSW changed its name
to China Advanced Construction Materials Group, Inc. in connection with a share
exchange transaction as described below.
 
 On April
29, 2008, the Company executed a share exchange agreement with Xin Ao
Construction Materials, Inc. (“BVI-ACM”) whereby the Company issued to the
stockholders of BVI-ACM 8,809,583 shares of the Company’s common stock in
exchange for all of the issued and outstanding capital stock of BVI-ACM (the
“Share Exchange”). Prior to the Share Exchange, and after the cancellation of
9,990,000 shares, China ACM had 1,166,667 shares of common stock issued and
outstanding. After the Share Exchange, China ACM had 10,500,000 shares of common
stock outstanding and the former shareholders of BVI-ACM owned 83.9% of the
issued and outstanding shares. The directors and executive officers of BVI-ACM
became the directors and officers of China ACM. This transaction has been
accounted for as a reverse acquisition and recapitalization of the Company
whereby BVI-ACM is deemed to be the accounting acquirer (legal acquiree) and the
Company the accounting acquiree (legal acquirer). The historical financial
statements for periods prior to April 29, 2008, are those of BVI-ACM except that
the equity section and earnings per share have been retroactively restated to
reflect the reverse acquisition.
 
 BVI-ACM
was established on October 9, 2007, under the laws of the British Virgin
Islands. The majority shareholders of BVI-ACM are Chinese citizens who own 100%
of Beijing Xin Ao Concrete Co., Ltd. (“Xin Ao”), a limited liability company
formed under the laws of the People’s Republic of China (“PRC”). BVI-ACM was
established as a “special purpose vehicle” for foreign fund raising for Xin Ao.
China State Administration of Foreign Exchange (“SAFE”) requires the owners of
any Chinese companies to obtain SAFE’s approval before establishing any offshore
holding company structure for foreign financing as well as subsequent
acquisition matters under “Circular 106” in the PRC. On September 29, 2007,
BVI-ACM was approved by the local Chinese SAFE as a “special purpose vehicle”
offshore company.
 
 On
November 23, 2007, BVI-ACM established a subsidiary, Beijing Ao Hang
Construction Material Technology Co., Ltd. (“China-ACMH”), in the PRC as a
wholly-owned foreign limited liability company (“WOFE”) with registered capital
of $5 million.
 
 BVI-ACM,
through its 100% owned China-ACMH and its variable interest entity (“VIE”) Xin
Ao (see Note 2), is engaged in producing general ready-mix concrete, customized
mechanical refining concrete, and other concrete-related products that are
mainly sold in the PRC. Xin Ao, licensed by the Beijing Administration of
Industry & Commerce, PRC, was established on June 28, 2002, with an initial
capital contribution of approximately $3,630,000 (RMB30 million). On July 8,
2005, the Board of Directors of Xin Ao increased its registered capital to
$12,100,000 (RMB100 million) through the use of Xin Ao’s undistributed
profits.
 
 7
 CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  On
November 28, 2007, China-ACMH entered a series of contractual arrangements (the
“Contractual Arrangements”) with Xin Ao and its shareholders in which China-ACMH
effectively took over management of the business activities of Xin Ao. The
Contractual Arrangements are comprised of a series of agreements,
including:
 
 ·
                  Exclusive
      Technical Consulting and Services Agreement, through which China-ACMH will
      provide exclusive technical consulting and services to Xin Ao for an
      annual fee in the amount of Xin Ao’s yearly net income after
      tax.
  ·
                  Equity
      Pledge Agreement, through which Xin Ao’s shareholders pledged their
      rights, title and equity interest in Xin Ao as security for China-ACMH to
      collect technical consulting and services fees provided to
      China-ACMH.
  ·
                  Operating
      Agreement, through which China-ACMH has exclusive authority of all
      decision-making of ongoing major operations, including establishing
      compensation levels and hiring and termination of key personnel. In order
      to ensure Xin Ao’s normal operations, China-ACMH agreed to act as the
      guarantor and provide full guarantee for Xin Ao in entering and performing
      contracts, agreements or transactions in association with Xin Ao’s
      operations between Xin Ao and any other third parties. As a counter
      guarantee, Xin Ao agreed to mortgage all of its assets including
      receivables which have not been mortgaged to any third parties at the
      execution date of this agreement to
China-ACMH.
  ·
                  Power
      of Attorney, signed by Xin Ao’s 100% shareholders Mr. Han Xianfu and Mr.
      He Weili, which authorized the individuals appointed by China-ACMH to
      exercise all of their respective voting rights as a shareholder at Xin
      Ao’s shareholder meetings.
  ·
                  Option
      Agreement, through which Xin Ao’s shareholders granted China-ACMH the
      exclusive right and option to acquire all of their equity interests in Xin
      Ao. Further, the shareholders of Xin Ao pledged their shares in Xin Ao as
      collateral for the annual fees due to the
  Company.
  The term
of these agreements is for ten (10) years and terminates automatically upon
expiration, and may be extended only if China-ACMH gives its written consent of
the extension before the expiration. The parties, through negotiations,
determine the extension term. During the term, Xin Ao may not terminate the
agreements except in the case of gross negligence, fraud or other illegal acts
or bankruptcy of China-ACMH.  Notwithstanding the foregoing,
China-ACMH may terminate the agreement at any time with a written notice to Xin
Ao thirty (30) days before such termination. Additionally, without China-ACMH’s
prior written consent, Xin Ao cannot assign or otherwise transfer its rights and
obligations under the agreements. Subject to compliance with the laws of China,
China-ACMH may assign the agreements to any affiliate or any other designated
entity without the prior consent of Xin Ao.
 
 Through
China-ACMH, BVI-ACM operates and controls Xin Ao through the Contractual
Arrangements. BVI-ACM utilized the Contractual Arrangements to gain control of
the operations of Xin Ao, instead of acquiring Xin, due to : (i) new PRC laws
governing share exchange transactions with foreign entities, effective since
September 8, 2006, make the consequences of such acquisitions uncertain and (ii)
other than by share exchange transactions, PRC laws require Xin Ao to be
acquired for cash and BVI-ACM was not able to raise sufficient funds to pay the
full appraised value for Xin Ao’s assets or shares as required under PRC
laws.
  8
 CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
   Note
2 – Summary of significant accounting policies
 
 Basis of
presentation
 
 The
Company’s accounting policies used in the preparation of the accompanying
consolidated financial statements conform to accounting principles generally
accepted in the United States of America ("US GAAP") and have been consistently
applied.
 
 While
management believes that the disclosures are adequate and they included all
normal recurring adjustments considered necessary to give a fair presentation of
operating results for the periods presented, the results of operations for the
nine months ended March 31, 2009 and 2008 are not necessarily indicative of
results for a full year. It is suggested that the information included in this
Form 10-Q should be read in conjunction with information included in the
2008 annual report filed on Form 10-K.
 
 Principles of
consolidation
 
 The
accompanying consolidated financial statements include the accounts of China
ACM, BVI-ACM, including its wholly-owned subsidiary China-ACMH, and its variable
interest entity Xin Ao. All significant inter-company transactions and balances
have been eliminated in consolidation.
 
 In
accordance with Financial Accounting Standards Board (“FASB”) Interpretation No.
46(R) (“FIN 46(R)”), “Consolidation of Variable Interest
Entities,” all VIEs with which the Company is involved must be evaluated
to determine the primary beneficiary of the risks for financial reporting
purposes. Based upon a series of Contractual Arrangements, the Company
determined that Xin Ao is a variable interest entity subject to consolidation
and that the Company is the primary beneficiary. Accordingly, the financial
statements of Xin Ao are consolidated into the financial statements of the
Company.
 
 9
 CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  Use of
estimates
 
 The
preparation of financial statements in conformity with US GAAP 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 period. The significant estimates made in the
preparation of the Company’s consolidated financial statements related to the
assessment of the fair value of share-based payments and the collectability of
accounts receivable. Actual results could be materially different from those
estimates, upon which the carrying values were based.
 
 Foreign currency
translation
 
 The
reporting currency of the Company is the U.S. dollar. The functional currency of
China ACM and BVI-ACM is the U.S. dollar. China-ACMH and Xin Ao use their local
currency Chinese Renminbi (“RMB”) as their functional currency. In accordance
with SFAS No. 52, “Foreign
Currency Translation,” the Company’s results of operations and cash flows
are translated at the average exchange rates during the period, assets and
liabilities are translated at the exchange rates at the balance sheet dates, and
equity is translated at the historical exchange rates. As a result, amounts
related to assets and liabilities reported on the consolidated statements of
cash flows will not necessarily agree with changes in the corresponding balances
on the consolidated balance sheets.
 
 Asset and
liability accounts at March 31, 2009 and June 30, 2008 were translated at 6.83
RMB and 6.87 RMB to $1.00, respectively. Equity accounts were stated at their
historical rates. The average translation rates applied to consolidated
statements of income and cash flows for the three months ended March 31, 2009
and 2008 were 6.83 RMB and 7.18 RMB to $1.00, respectively. The average
translation rates applied to consolidated statements of income and cash flows
for the nine months ended March 31, 2009 and 2008 were 6.83 RMB and 7.37 RMB to
$1.00, respectively.
 
 In
accordance with SFAS 95, "Statement of Cash Flows,"
cash flows from the Company's operations is calculated based upon the local
currencies using the average translation rate. As a result, amounts related to
assets and liabilities reported on the consolidated statements of cash flows
will not necessarily agree with changes in the corresponding balances on the
consolidated balance sheets.
 
 Translation
gains and losses that arise from exchange rate fluctuations on transactions
denominated in a currency other than the functional currency are included in the
results of operations as incurred. There were no material transaction gains or
losses for the three and nine months ended March 31, 2009 and 2008.
  10
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
  Revenue
recognition
 
 The
Company recognizes revenue in accordance with Staff Accounting Bulletin (“SAB”)
No. 101, “Revenue Recognition
in Financial Statements,” as amended by SAB , which specifies that
revenue is realized or realizable and earned when four criteria are
met:
 
 ·
                  Persuasive
      evidence of an arrangement exists (the Company considers its sales
      contracts and technical service agreements to be pervasive evidence of an
      arrangement);
 ·
                  Delivery
      has occurred or services have been
rendered;
 ·
                  The
      seller’s price to the buyer is fixed or determinable;
  and
 ·
                  Collectability
      of payment is reasonably assured.
 
 The
Company sells its concrete products and provides concrete technical services
primarily to major local construction companies. Sales agreements are signed
with each customer. The agreements list all terms and conditions with the
exception of delivery date and quantity, which are evidenced separately in
purchase orders. The purchase price of products is fixed in the agreement and
customers are not permitted to renegotiate after the contracts have been signed.
The agreements include a cancellation clause if the Company breaches the
contract terms specified in the agreement.
 
 The
Company does not sell products to customers on a consignment basis. There is no
right of return after the product has been injected into the location specified
by the contract and accepted by the customer. The Company recognizes revenue
when the goods and services are provided by the Company and are accepted by the
customer.
 
 Sales
revenue represents the invoiced value of goods, net of a value added tax
(“VAT”). All of the Company’s concrete products that are sold in the PRC are
subject to a Chinese VAT at the rate of 6% of the gross sales
price.
 
 Due to
the fact that the Company uses recycled raw materials to manufacture its
products, the State Administration of Taxation has granted the Company VAT tax
exemption from August 2005 to August 2009. The VAT tax collected from the
Company’s customers is kept by the Company and recorded as other subsidy
income.
 
 The
Company also provides manufacturing services, technical consulting services and
strategic cooperation including market sharing and equipment rental with other
independently owned concrete companies. The Company signs a Technical Service
Agreement or Strategic Cooperation Agreement with each concrete company, which
specifies all terms and conditions including prices to be charged. Once concrete
products are produced by the concrete company and supplied to builders referred
by the Company or cost savings are realized by use of technical solutions
provided by the Company, the agreements consider the Company has rendered its
service. The Company recognizes revenue and invoices the concrete companies
monthly for technical service and marketing cooperation on a per-cubic-meter
basis and for equipment rental on a per-mixer truck basis.
 
 The
Company also earns income from the renting of certain of its vehicles to other
non-related concrete companies.  The rental amounts are based on
pre-determined rental rates on a per cubic meter basis.
  11
 CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
  Shipping and
handling
 
 Shipping
and handling costs related to costs of the raw materials purchased is included
in cost of revenues.  Further, transportation costs incurred in the
delivery of the Company’s concrete products are also included in cost of
revenues.
 
 Financial
instruments
 
 SFAS 107, “Disclosures
about Fair Value of Financial Instruments,” defines financial
instruments and requires disclosure about the fair value of those instruments.SFAS 157, “Fair Value
Measurements,” adopted July 1, 2008, defines fair value, establishes a
three-level valuation hierarchy for disclosures of fair value measurements and
enhances disclosures requirements. The three levels are defined as
follows:
 
 ·
                  Level
      1                      inputs
      to the valuation methodology are quoted prices (unadjusted) for identical
      assets or liabilities in active
markets.
 
 ·
                  Level
      2                      inputs
      to the valuation methodology include quoted prices for similar assets and
      liabilities in active markets, and inputs that are observable for the
      asset or liability, either directly or indirectly, substantially the full
      term of the financial instrument.
 
 ·
                  Level
      3                      inputs
      to the valuation methodology are unobservable and significant to the fair
      value measurement.
 
 As of
March 31, 2009, the outstanding principal on the Company’s short term loan
amounted to $4,723,893. Management concluded the carrying value of the short
term loan is a reasonable estimate of fair value because the amounts are due
within one year and the stated interest rate approximates current rates
available.
 
 Marketable
securities, receivables and current liabilities qualify as financial
instruments. Fair values were determined using Level 3. Marketable
securities are carried on the consolidated balance sheets at fair value, with
fair values determined by the financial institution who sold the securities. The
carrying amounts reported in the balance sheets for receivables and current
liabilities are reasonable estimates of fair values because of the short period
of time between the origination of such instruments and their expected
realization and their current market rates of interest. The Company did not
identify any assets and liabilities, other than marketable securities, that are
required to be presented on the consolidated balance sheets at fair value in
accordance with SFAS 157.
  12
 CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  
 Stock-based
compensation
 
 The
Company records stock-based compensation expense pursuant to SFAS 123R, "Share Based
Payment.”  SFAS 123R requires companies to measure compensation
cost for stock-based employee compensation plans at fair value at the grant date
and recognize the expense over the employee's requisite service period. Under
SFAS 123R, the Company’s expected volatility assumption is based on the
historical volatility of Company’s stock or the expected volatility of similar
entities. The expected life assumption is primarily based on historical exercise
patterns and employee post-vesting termination behavior. The risk-free interest
rate for the expected term of the option is based on the U.S. Treasury yield
curve in effect at the time of grant.
 
 Stock-based
compensation expense is recognized based on awards expected to vest, and there
were no estimated forfeitures as the Company has a short history of issuing
options. SFAS 123R requires forfeitures to be estimated at the time of grant and
revised in subsequent periods, if necessary, if actual forfeitures differ from
those estimates.
 
 The
Company estimates the fair value of the awards using the Cox-Ross-Rubinstein
(“CRR”) binomial model. Option pricing models, such as the CRR binomial model,
require the input of highly complex and subjective variables including the
expected life of options granted and the Company’s expected stock price
volatility over a period equal to or greater than the expected life of the
options. Because changes in the subjective assumptions can materially affect the
estimated value of the Company’s employee stock options, it is management’s
opinion that the CRR binomial model may not provide an accurate measure of the
fair value of the Company’s employee stock options. Although the fair value of
employee stock options is determined in accordance with SFAS 123R using an
option-pricing model, that value may not be indicative of the fair value
observed in a willing buyer/willing seller market transaction.
 
 Concentration of
risk
 
 ·
                  Cash
      - Cash includes cash on hand and demand deposits in accounts maintained
      with state owned banks within the PRC. The Company considers all highly
      liquid instruments purchased with original maturities of three months or
      less, and money market accounts, to be cash equivalents. Total cash in
      these banks at March 31, 2009 and June 30, 2008 amounted to $630,174 and
      $1,795,388, respectively, of which no deposits were covered by insurance.
      Also, as of March 31, 2009, the Company held $666,954 in restricted cash
      in a corporate legal counsel’s trust account, in accordance with an
      agreement with investors for the restricted use of preferred stock
      dividend and investor relation related expenses. Nonperformance by these
      institutions could expose the Company to losses not covered by insurance.
      Management reviews the financial condition of these institutions on a
      periodic basis and does not believe the concentration of cash results in a
      high level of risk.
   13
 CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 ·
                  Major
      customers – As of and for the nine months ended March 31, 2009, three
      customers accounted for approximately 12.2% of the Company’s accounts
      receivable and approximately 39.9 % of the Company's sales. As of and for
      the nine months ended March 31, 2008, three customers accounted for
      approximately 28% of the Company’s accounts receivable and approximately
      38% of the Company's sales.
 
 ·
                  Major
      suppliers – As of and for the nine months ended March 31, 2009, three
      suppliers accounted for approximately 21% of the Company’s accounts
      payable and approximately 35% of the Company’s purchases.  As of
      and for the nine months ended March 31, 2008, three suppliers accounted
      for approximately 28% of the Company’s accounts payable and approximately
      43% of the Company’s purchases.
 
 ·
                  Political
      and economic risks - The Company's operations are carried out in the PRC.
      Accordingly, the Company's business, financial condition, and results of
      operations may be influenced by the political, economic, and legal
      environments in the PRC, and by the general state of the PRC's economy.
      The Company's operations in the PRC are subject to specific considerations
      and significant risks not typically associated with companies in North
      America and Western Europe. These include risks associated with, among
      others, the political, economic, and legal environments, and foreign
      currency exchange. The Company's results may be adversely affected by
      changes in governmental policies with respect to laws and regulations,
      anti-inflationary measures, currency conversion and remittance abroad, and
      rates and methods of taxation, among
others.
 
 Restricted
Cash
 
 Restricted
cash represents portion of the proceeds received from the June 11, 2008, Private
Placement that was deposited in a trust account held by the Company’s legal
counsel for payment of dividends, investor relations fees, and other
professional fees (see Note 11). The restricted cash balance was $666,954 as of
March 31, 2009.  As of June 30, 2008, the restricted cash balance was
$913,092.
 
 Accounts
receivable
 
 During
the normal course of business, the Company extends unsecured credit to its
customers. Management reviews its accounts receivable each reporting period to
determine if the allowance for doubtful accounts is adequate. An estimate for
doubtful accounts is recorded when collection of the full amount is no longer
probable.  Known bad debts are written off against allowance for
doubtful accounts when identified. The Company’s reserves are consistent with
its historical experience and considered adequate by management.
 
 The
ultimate collection of the Company’s accounts receivable may take more than one
year, and any portion of accounts receivable expected to be collected in more
than one year is reflected as noncurrent, net of allowance for doubtful accounts
relating to that portion of the receivables. The bifurcation between current and
noncurrent portions of accounts receivable is based on management’s estimate and
predicated on historical collection experience.
  14
 CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
  Inventories
 
 Inventories
consist of raw materials and are stated at the lower of cost or market, using
the weighted average cost method. The Company reviews its inventory periodically
for possible obsolescence or if a write down is necessary because the carrying
value exceeds net realizable value. As of March 31, 2009, the Company determined
no reserves for obsolescence were necessary.
 
 Short term loan
receivable
 
 Short
term loan receivable represents the loan the Company lent to a third party for
cash flow purposes; the nature of the loan is short term and non-interest
bearing. The term of the loan is from January 4, 2009 through May 30, 2009. As
of March 31, 2009 and June 30, 2008, short term loan receivable amounted to
$1,465,000 and $0, respectively.
 
 Prepayments
 
 The
Company advances monies to certain suppliers for raw materials. These advances
are interest free and unsecured.
 
 Plant and
equipment
 
 Plant and
equipment are stated at cost. Expenditures for maintenance and repairs are
charged to earnings as incurred while additions, renewals and betterments are
capitalized. Depreciation is provided over the estimated useful life of each
class of depreciable assets and is computed using the straight-line method with
5% residual value.
 
 The
estimated useful lives of assets are as follows:
 
 Useful
      LifeTransportation
      equipment
                      10
      yearsPlant
      machinery
                      10
      yearsOffice
      equipment
                      5
      years
   15
 CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 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
consolidated statements of income.  Construction-in-progress
represents labor costs, materials, and capitalized interest incurred in
connection with the construction of a new mixer station inside the current plant
facility in Beijing.  Interest incurred during construction is capitalized
into construction in progress. All other interest is expensed as
incurred. No depreciation is provided for construction in progress until it
is completed and placed into service. Maintenance, repairs and minor renewals
are charged to expense as incurred. Major additions and betterment to property
and equipment are capitalized.
 
 Long-lived
assets of the Company are reviewed each reporting period for possible
impairment. Whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable, the Company records an
impairment charge to reduce the related assets to their net realizable value.
The Company believes no impairment exists at March 31, 2009.
 
 Redeemable preferred
stock
 
 On June
11, 2008, the Company completed the sale to certain accredited investors of
875,000 investment units for gross proceeds of $7,000,000, each unit consisting
of one share of the Company’s Series A Convertible Preferred Stock and one
warrant to purchase two shares of the Company’s common stock. The preferred
stock pays annual dividends of 9% regardless of the Company’s profitability.
Each preferred share is convertible into four shares of common stock. The
Company received net proceeds of approximately $5.3 million after offering
expenses and net of $930,000 restricted cash which was required to be placed in
escrow. Upon the two year anniversary of the closing date, the Company is
required to redeem for cash the outstanding preferred stock, if not previously
converted by the holders, for $8.00 per share plus accrued but unpaid
dividends.  Because the Company is required to redeem the
preferred stock on June 11, 2010, if it has not been previously converted by the
holders, in accordance with EITF Topic D-98, the preferred stock is classified
outside of shareholders’ equity.
 
 In
accordance with Accounting Principles Board (“APB”) 14, “Accounting for Convertible Debt and
Debt Issued with Stock Purchase Warrants,” the Company
allocated the proceeds received between the preferred stock and the
warrants.  The resulting discount from the face amount of the
preferred stock is being amortized using the effective interest method over the
period to the required redemption date. After allocating a portion of the
proceeds to the warrants, the effective conversion price of the preferred stock
was higher than the market price at the date of issuance and therefore no
beneficial conversion feature was recorded.The dividends on the
preferred stock, together with the periodic accretion of the preferred stock to
its redemption value, are charged to retained earnings.
  16
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
  Income
taxes
 
 The
Company is governed by the income tax laws of the PRC. The Company accounts for
income taxes in accordance with SFAS 109, “Accounting for Income Taxes,”
and FIN 48, “Accounting for
Uncertainty in Income Taxes-an interpretation of FASB Statements No.
109,” SFAS 109 requires the Company to use the assets and liability
method of accounting for income taxes. Under the assets and liability method,
deferred income taxes are recognized for the tax consequences of temporary
differences by applying enacted statutory tax rates applicable to future years
to differences between financial statement carrying amounts and the tax bases of
existing assets and liabilities. Under SFAS 109, the effect on deferred income
taxes of a change in tax rates is recognized in income in the period that
includes the enactment date. A valuation allowance is recognized if it is more
likely than not that some portion, or all of, a deferred tax asset will not be
realized. Since the Company’s operations are outside of the U.S., the Company
did not have any provision for U.S. income taxes including any deferred income
taxes, for the nine months ended March 31, 2009 and 2008.
 
 Under FIN
48, the evaluation of a tax position is a two-step process. The first step is to
determine whether it is more likely than not that a tax position will be
sustained upon examination, including the resolution of any related appeals or
litigation based on the technical merits of that position. The second step is to
measure a tax position that meets the more-likely-than-not threshold to
determine the amount of benefit to be recognized in the financial statements. A
tax position is measured at the largest amount of benefit that is greater than
50 percent likelihood of being realized upon ultimate settlement. Tax positions
that previously failed to meet the more-likely-than-not recognition threshold
should be recognized in the first subsequent period in which the threshold is
met. Previously recognized tax positions that no longer meet the
more-likely-than-not criteria should be de-recognized in the first subsequent
financial reporting period in which the threshold is no longer met. FIN 48 also
provides guidance on de-recognition, classification, interest and penalties,
accounting in interim periods, disclosures, and transition.  There
were no deferred tax amounts as of March 31, 2009 and June 30,
2008.
 
 Chinese Income
Taxes
 
 The
Company and its subsidiaries are governed by the income tax laws of the PRC
concerning Foreign Investment Enterprises and Foreign Enterprises and various
local income tax laws (the “Income Tax Laws”).
 
 Xin Ao’s
use of recycled raw materials in its production since its inception entitled the
Company to an income tax exemption from January 1, 2003, through to December 31,
2007, as granted by the State Administration of Taxation of the PRC. The income
tax exemption granted to the Company was eliminated after December 31,
2007.  Beginning January 1, 2008, the new Chinese Enterprise Income
Tax (“EIT”) law replaced the existing laws for Domestic Enterprises (“DES”) and
Foreign Invested Enterprises (“FIEs”). The new standard EIT rate of 25% replaced
the existing rates currently applicable to both DES and FIEs. The Company is
currently evaluating the effect the new EIT law will have on its consolidated
financial position.
  17
 CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 PRC laws
require that before a FIE can legally distribute profits to its shareholders, it
must satisfy all tax liabilities, provide for losses in previous years, and make
allocations in proportions made at the discretion of the board of directors,
after the statutory reserve. The statutory reserve includes the surplus reserve
fund, the common welfare fund, and represents restricted retained
earnings.
 
 The
Company adopted accounting policies in accordance to U.S. GAAP with regard to
provisions, reserves, inventory valuation method, and depreciation that are
consistent with requirements under Chinese income tax laws. Therefore, there
were no deferred tax assets or liabilities during the nine months ended March
31, 2009 and 2008.
 
 The
Company classifies interest and penalties assessed due to underpayment of income
taxes as interest expense and other expenses, respectively. The Company incurred
no such expenses for the nine months periods ended March 31, 2009 and
2008.
 
 Value added
tax
 
 Enterprises
or individuals, who sell commodities, engage in repair and maintenance, or
import and export goods in the PRC are subject to a value added tax. The
standard VAT rate is 6% of gross sales for the Company’s industry. A credit is
available whereby VAT paid on the purchases of raw materials used in the
production of the Company’s finished products can be used to offset the VAT due
on sales of finished products. Due to the fact that the Company uses recycled
raw materials to manufacture its products, the State Administration of Taxation
has granted the Company VAT exemption from August 2005 through to August
2009.
 
 Research and development
costs
 
 Research
and development costs are expensed as incurred. The cost of materials and
equipment that are acquired or constructed for research and development
activities, and have alternative future uses, either in research and
development, marketing, or sales, are classified as property and equipment, and
depreciated over their estimated useful lives. Research and development expenses
amounted to $0 for the three months ended March 31, 2009 and
2008.  Research and development expenses amounted to $0 and $6,029 for
the nine months ended March 31, 2009 and 2008.
  18
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
   Earnings per
share
 
 The
company reports earnings per share in accordance with SFAS 128, “Earnings Per Share.” SFAS 128
requires presentation of basic and diluted earnings per share in conjunction
with the disclosure of the methodology used in computing such earnings per
share. Basic earnings per share excludes dilution and is computed by dividing
income available to common shareholders by the weighted average common shares
outstanding during the period.  Diluted earnings per share takes into
account the potential dilution that could occur if securities or other
contracts, such as warrants and convertible preferred stock, to issue common
stock were exercised and converted into common stock. Dilutive securities having
an anti-dilutive effect on diluted earnings per share are excluded from the
calculation.
 
 Comprehensive
income
 
 SFAS 130,
“Reporting Comprehensive
Income,” establishes standards for reporting and display of comprehensive
income and its components in financial statements. It requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same providence as other financial statements. The accompanying consolidated
financial statements include the provision of SFAS 130, and therefore,
comprehensive income consists of net income, unrealized gains and losses from
marketable securities, and foreign currency translation
adjustments.
 
 Recently issued accounting
pronouncements
 
 In
December 2007, the FASB issued SFAS 141(R), “Business Combinations,” which
replaces SFAS 141. SFAS 141R retains the purchase method of accounting for
acquisitions, but requires a number of changes, including changes in the way
assets and liabilities are recognized in the purchase accounting as well as
requiring the expensing of acquisition-related costs as incurred. Furthermore,
SFAS 141R provides guidance for recognizing and measuring the goodwill acquired
in the business combination and determines what information to disclose to
enable users of the financial statements to evaluate the nature and financial
effects of the business combination. SFAS 141R is effective for fiscal years
beginning on or after December 15, 2008. Earlier adoption is prohibited. The
Company is evaluating the impact, if any, that the adoption of this statement
will have on its consolidated results of operations or consolidated financial
position.
 
 In
December 2007, the FASB issued SFAS 160, “Noncontrolling Interests in
Consolidated Financial Statements—An Amendment of ARB No. 51.”
SFAS 160 amends ARB 51 to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It is intended to eliminate the diversity in practice regarding the
accounting for transactions between equity and noncontrolling interests by
requiring that they be treated as equity transactions. Further, it requires
consolidated net income to be reported at amounts that include the amounts
attributable to both the parent and the noncontrolling interest. SFAS 160 also
establishes a single method of accounting for changes in a parent’s ownership
interest in a subsidiary that do not result in deconsolidation, requires that a
parent recognize a gain or loss in net income when a subsidiary is
deconsolidated, requires expanded disclosures in the consolidated financial
statements that clearly identify and distinguish between the interests of
the parent’s owners and the interests of the noncontrolling owners of a
subsidiary, among others. SFAS 160 is effective for fiscal years beginning on or
after December 15, 2008, with early adoption permitted, and it is to be applied
prospectively. SFAS 160 is to be applied prospectively as of the beginning of
the fiscal year in which it is initially applied, except for the presentation
and disclosure requirements, which must be applied retrospectively for all
periods presented. The Company is currently evaluating the impact that SFAS 160
will have on its consolidated financial position or consolidated results of
operations.
  19
 CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 In March
2008, the FASB issued SFAS 161, "Disclosures about Derivative
Instruments and Hedging
Activities." SFAS 161 is intended to improve financial reporting of
derivative instruments and hedging activities by requiring enhanced disclosures
to enable financial statement users to better understand the effects of
derivatives and hedging on an entity's financial position, financial performance
and cash flows. The provisions of SFAS 161 are effective for interim periods and
fiscal years beginning after November 15, 2008, with early adoption encouraged.
The Company does not anticipate that the adoption of SFAS 161 will have a
material impact on its consolidated results of operations or consolidated
financial position.
 
 In May
2008, the FASB issued SFAS 162, "The Hierarchy of Generally Accepted
Accounting Principles." SFAS 162 is intended to improve financial
reporting by identifying a consistent framework, or hierarchy, for selecting
accounting principles to be used in preparing financial statements that are
presented in conformity with GAAP for nongovernmental entities. SFAS 162 is
effective 60 days following the SEC's approval of the Public Company Accounting
Oversight Board (“PCAOB”) amendments to AU Section 411, "The Meaning of Present Fairly in
Conformity with Generally Accepted Accounting Principles." The Company
does not expect the adoption of SFAS 162 will have a material impact on its
consolidated results of operations or consolidated financial
position.
  In May
2008, the FASB issued SFAS 163, “Accounting for Financial Guarantee
Insurance Contracts, an interpretation of FASB Statement No. 60.” The scope of SFAS 163
is limited to financial guarantee insurance (and reinsurance) contracts issued
by enterprises included within the scope of FASB Statement No. 60. Accordingly,
SFAS 163 does not apply to financial guarantee contracts issued by enterprises
excluded from the scope of FASB Statement No. 60 or to some insurance contracts
that seem similar to financial guarantee insurance contracts issued by insurance
enterprises (such as mortgage guaranty insurance or credit insurance on trade
receivables). SFAS 163 also does not apply to financial guarantee insurance
contracts that are derivative instruments included within the scope of SFAS 133,
“Accounting for Derivative
Instruments and Hedging Activities.” SFAS 163 is effective for
financial statements issued for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years; disclosure requirements in
paragraphs 30(g) and 31 are effective for the first period (including interim
periods) beginning after May 23, 2008The Company is currently evaluating the
impact that SFAS 163 will have on its consolidated results of operations or
consolidated financial position.
  20
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 On May 9,
2008, the FASB issued FSP APB 14-1, "Accounting for Convertible Debt
Instruments ThatMay
BeSettled in Cash upon Conversion
(Including Partial Cash Settlement)." FSP APB 14-1 clarifies that
convertible debt instruments that may be settled in cash upon conversion
(including partial cash settlement) are not addressed by paragraph 12 of APB 14,
"Accounting for Convertible Debt and Debt
Issued with Stock Purchase Warrants." Additionally, FSP APB 14-1
specifies that issuers of such instruments should separately account for the
liability and equity components in a manner that will reflect the entity's
nonconvertible debt borrowing rate when interest cost is recognized in
subsequent periods. FSP APB14-1 is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within those
fiscal years. The Company is currently evaluating the impact that FSP APB
14-1 will have on its consolidated results of operations or consolidated
financial position.
 
 On June
16, 2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating
Securities,” to address the question of whether instruments granted in
share-based payment transactions are participating securities prior to vesting.
FSP EITF 03-6-1 indicates that unvested share-based payment awards that contain
rights to dividend payments should be included in earnings per share
calculations. The guidance will be effective for fiscal years beginning after
December 15, 2008. The Company is currently evaluating the requirements of FSP
EITF 03-6-1 and the impact that its adoption will have on the consolidated
results of operations or consolidated financial position.
 
 In June
2008, the FASB issued EITF 07-5, “Determining whether an Instrument
(or Embedded Feature) is indexed to an Entity’s Own Stock.” EITF 07-5 is
effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. Early
application is permitted under certain cirumstances. Paragraph 11(a) of SFAS 133
“Accounting for
Derivativesand Hedging
Activities,” specifies that a contract that would otherwise meet the
definition of a derivative but is both (a) indexed to the Company’s own stock
and (b) classified in stockholders’ equity in the statement of financial
position would not be considered a derivative financial instrument. EITF 07-5
provides a new two-step model to be applied in determining whether a financial
instrument or an embedded feature is indexed to an issuer’s own stock and thus
able to qualify for the SFAS 133 paragraph 11(a) scope exception. This
standard triggers liability accounting on all options and warrants exercisable
at strike prices denominated in any currency other than the functional currency
of the operating entity in the PRC (Renminbi). The Company has evaluated the
impact of the adoption of EITF 07-5 on the accounting for related warrants
transactions, and has determined that the adoption of EITF 07-5 would result in
liability accounting.
 
 In June
2008, FASB issued EITF 08-4, “Transition Guidance for
Conforming Changes to
Issue No. 98-5.” The objective of EITF 08-4 is to provide transition
guidance for conforming changes made to EITF 98-5, “Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Ratios,” that result from EITF 00-27 “Application of Issue No. 98-5 to
Certain Convertible Instruments,” and SFAS 150, “Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity.” EITF
08-4 is effective for financial statements issued for fiscal years ending after
December 15, 2008. Early application is permitted.  The Company is
currently evaluating the impact of adoption of EITF 08-4 on the accounting for
the convertible notes and related warrants transactions.
  21
 CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 On
October 10, 2008, the FASB issued FSP 157-3, “Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active,” which
clarifies the application of SFAS 157 in a market that is not active and
provides an example to illustrate key considerations in determining the fair
value of a financial asset when the market for that financial asset is not
active. FSP 157-3 became effective on October 10, 2008, and its adoption did not
have a material impact on the Company’s consolidated results of operations or
consolidated financial position for the nine months ended March 31,
2009.
 
 In
January 2009, the FASB issued FSP EITF 99-20-1, “Amendments to the Impairment
Guidance of EITF Issue No. 99-20, and EITF Issue No. 99-20, Recognition of
Interest Income and Impairment on Purchased and Retained Beneficial Interests in
Securitized Financial Assets”. FSP EITF 99-20-1 changes the impairment model
included within EITF 99-20 to be more consistent with the impairment model of
FAS 115. FSP EITF 99-20-1 achieves this by amending the impairment model in
EITF 99-20 to remove its exclusive reliance on “market participant” estimates of
future cash flows used in determining fair value. Changing the cash flows used
to analyze other-than-temporary impairment from the “market participant” view to
a holder’s estimate of whether there has been a “probable” adverse change in
estimated cash flows allows companies to apply reasonable judgment in assessing
whether an other-than-temporary impairment has occurred. The FSP is effective
for interim and annual reporting periods ending after December 15, 2008, and
shall be applied prospectively. Retrospective application to a prior interim or
annual reporting period is not permitted. The Company believes that the
adoption of FSP EITF 99-20-1 will not have a material impact of our financial
results.
 
 In April 2009, the FASB issued
FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for
the Asset or Liability Have Significantly Decreased and Identifying Transactions
That Are Not Orderly”. FSP FAS 157-4 amends SFAS 157 and provides additional
guidance for estimating fair value in accordance with SFAS 157 when the volume
and level of activity for the asset or liability have significantly decreased
and also includes guidance on identifying circumstances that indicate a
transaction is not orderly for fair value measurements. This FSP shall be
applied prospectively with retrospective application not permitted. This FSP
shall be effective for interim and annual periods ending after June 15,
2009, with early adoption permitted for periods ending after March 15,
2009. An entity early adopting this FSP must also early adopt FSP FAS 115-2 and
FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments”.
Additionally, if an entity elects to early adopt either FSP FAS 107-1 and APB
28-1, “Interim Disclosures about Fair Value of Financial Instruments” or FSP FAS
115-2 and FAS 124-2, it must also elect to early adopt this FSP. We are
currently evaluating this new FSP but do not believe that it will have a
significant impact on the determination or reporting of our financial
results.
 
 In April
2009, the FASB issued FSP FAS 115-2 and FAS 124-2. This FSP amends SFAS 115,
“Accounting for Certain Investments in Debt and Equity Securities,” SFAS 124,
“Accounting for Certain Investments Held by Not-for-Profit Organizations,” and
EITF 99-20, “Recognition of Interest Income and Impairment on Purchased
Beneficial Interests and Beneficial Interests That Continue to Be Held by a
Transferor in Securitized Financial Assets,” to make the other-than-temporary
impairments guidance more operational and to improve the presentation of
other-than-temporary impairments in the financial statements. This FSP will
replace the existing requirement that the entity’s management assert it has both
the intent and ability to hold an impaired debt security until recovery with a
requirement that management assert it does not have the intent to sell the
security, and it is more likely than not it will not have to sell the security
before recovery of its cost basis. This FSP provides increased disclosure about
the credit and noncredit components of impaired debt securities that are not
expected to be sold and also requires increased and more frequent disclosures
regarding expected cash flows, credit losses, and an aging of securities with
unrealized losses. Although this FSP does not result in a change in the carrying
amount of debt securities, it does require that the portion of an
other-than-temporary impairment not related to a credit loss for a
held-to-maturity security be recognized in a new category of other comprehensive
income and be amortized over the remaining life of the debt security as an
increase in the carrying value of the security. This FSP shall be effective for
interim and annual periods ending after June 15, 2009, with early adoption
permitted for periods ending after March 15, 2009. An entity may early
adopt this FSP only if it also elects to early adopt FSP FAS 157-4. Also, if an
entity elects to early adopt either FSP FAS 157-4 or FSP FAS 107-1 and APB 28-1,
the entity also is required to early adopt this FSP. We are currently evaluating
this new FSP but do not believe that it will have a significant impact on the
determination or reporting of our financial results.
 
 In April
2009, the FASB issued FSP FAS 107-1 and APB 28-1. This FSP amends SFAS 107to
require disclosures about fair value of financial instruments not measured on
the balance sheet at fair value in interim financial statements as well as in
annual financial statements. Prior to this FSP, fair values for these assets and
liabilities were only disclosed annually. This FSP applies to all financial
instruments within the scope of SFAS 107 and requires all entities to
disclose the method(s) and significant assumptions used to estimate the
fair value of financial instruments. This FSP shall be effective for interim
periods ending after June 15, 2009, with early adoption permitted for
periods ending after March 15, 2009. An entity may early adopt this FSP
only if it also elects to early adopt FSP FAS 157-4 and FSP FAS 115-2 and FAS
124-2. This FSP does not require disclosures for earlier periods presented for
comparative purposes at initial adoption. In periods after initial adoption,
this FSP requires comparative disclosures only for periods ending after initial
adoption. We are currently evaluating the disclosure requirements of this new
FSP.
 
 22
 CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  Note
3 – Supplemental disclosure of cash flow information
 
 During
the nine months ended March 31, 2009 and 2008, the Company paid in cash interest
in the amount of $637,124 and $151,669, respectively.
 
 During
the nine months ended March 31, 2009, the Company made an income tax payment in
the amount of $146,000. There were no cash payments for income taxes for the
nine months ended March 31, 2008.
 
 Non-cash
transactions
 
 As of
March 31, 2009, the Company assigned accounts receivables totaling approximately
$5,800,000 as payment to suppliers whose balances were included in accounts
payable.  Balances of accounts receivable and accounts payable
reported on the consolidated balance sheets are net of the
assignments.
 
 As of
March 31, 2008, the Company assigned accounts receivables totaling approximately
$8,112,183 to the suppliers as an offset of the liability owed recorded under
accounts payable. Balances of accounts receivable and payables reported on the
consolidated balance sheets are net of the assignments.
 
 As of
March 31, 2009, the accretion of the discount on redeemable preferred stock
amounted to approximately $450,000, and has been included in the consolidated
statements of shareholders’ equity.  No balance recorded for the nine
months ended March 31, 2008.
 
 Note
4 – Marketable securities
 
 All
securities are available for sale and therefore are carried at fair value with
unrealized gains and losses reported as accumulated other comprehensive income
in shareholders’ equity. Realized gains and losses on marketable securities are
included in other income or expense in the period they incurred, and when
applicable, are reported as a reclassification adjustment in other comprehensive
income. Gains and losses on the sale of marketable securities are determined
using the specific-identification method.
 
 23
 CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  Note
5 – Accounts receivable
 
 Accounts
receivable are generated from concrete products sold, vehicle rental services
provided to other non-related concrete companies, and technological consulting
services provided to the Company’s customers and other concrete companies with
which the Company conducts business. The payment terms are defined in the
respective contracts. For certain large construction projects that can take
several years to complete, the Company provides extended payment terms to the
general contractors. These contractors are usually large state-owned builders
with good credit ratings. At the end of each period, the Company evaluates the
structure and collectability of accounts receivable and for these receivables
that are past due or not being paid according to payment terms, the Company
takes appropriate actions including seeking legal resolution in a court of law,
for its collection efforts.
 
 Accounts
receivable and allowance for doubtful accounts consisted of the
following:
 
 March
      31, 2009
                        (Unaudited)
                      
                      
                      June
      30, 2008Accounts
      receivable, current
                      
                      $
                      15,214,018
                      
                      
                      $
                      9,590,410Less:  allowance
      for doubtful accounts, current
                      
                      
                      (357,810
                      )
                      
                      
                      (224,924
                      )Net
      accounts receivable, current
                      
                      
                      14,856,208
                      
                      
                      
                      9,365,486Accounts
      receivable, non-current
                      
                      
                      8,194,263
                      
                      
                      
                      5,164,067Less:  allowance
      for doubtful accounts, non-current
                      
                      
                      (664,503
                      )
                      
                      
                      (411,061
                      )Net
      accounts receivable, non-current
                      
                      
                      7,529,760
                      
                      
                      
                      4,753,006Total
      accounts receivable, net
                      
                      $
                      22,385,968
                      
                      
                      $
                      14,118,492
 
 Note
6 – Prepayment
 
 Prepayment
was mainly cash advance to certain suppliers for raw materials purchase and
prepaid expenses. These advances are interest free and unsecured. Prepayment
consisted of following:
 
 March
      31, 2009
                          (Unaudited)
                        
                        
                        June
      30, 2008Raw
      material purchase
                        
                        $
                        3,309,771
                        
                        
                        $
                        3,195,394Rent
                        
                        
                        586,000
                        
                        
                        
                        -Service
                        
                        
                        45,000
                        
                        
                        
                        45,000Total
                        
                        $
                        3,940,771
                        
                        
                        $
                        3,240,394
  24
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 Note
7 – Plant and equipment
 
 Plant and
equipment consist of the following:
 
 March
      31, 2009
                        (Unaudited)
                      
                      
                      June
      30,2008Transportation
      equipment
                      
                      $
                      20,370,293
                      
                      
                      $
                      20,286,866Plant
      machinery
                      
                      
                      2,236,456
                      
                      
                      
                      1,894,585Office
      equipment
                      
                      
                      55,841
                      
                      
                      
                      43,057Construction-
      in-progress
                      
                      
                      -
                      
                      
                      
                      295,033Total
                      
                      
                      22,662,590
                      
                      
                      
                      22,519,541Less:
      accumulated depreciation
                      
                      
                      (7,424,934
                      )
                      
                      
                      (5,789,321
                      )Plant
      and equipment, net
                      
                      $
                      15,237,656
                      
                      
                      $
                      16,730,220
 
 Construction
of the new plant was completed and transferred to fixed assets in August
2008.
 
 Depreciation
expense for the three months ended March 31, 2009 and 2008 amounted to $539,885
and $271,330, respectively. Depreciation expense for the nine months ended March
31, 2009 and 2008 amounted to $1,611,255 and $815,689,
respectively.
 
 25
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  Note
8 – Short term loans
 
 Short
term loans represent amounts due to various banks, finance companies, unrelated
companies with existing business relationships with the Company, and the
Company’s employees, that are due on demand or within one year.  As of
March 31, 2009 and June 30, 2008, the short term loans consisted of the
following:
 
 March
      31,
                        
                        
                        June
      30,2009
                          (Unaudited)
                        
                        
                        2008Loan
      from Huaxia Bank, effective interest rate of 7.56% per annum, due November
      16, 2008, guaranteed by the Company’s shareholder, Mr. Han Xianfu, fully
      paid as of December 31, 2008.
                        
                        $
                        -
                        
                        
                        $
                        2,918,000Loan
      from Beijing International Trust Co, Ltd. interest rate of 15% per annum,
      due July 15, 2009, guaranteed by Rayland Credit Guarantee Co.
      Ltd.
                        
                        
                        4,395,000
                        
                        
                        
                        -Loan
      from Beijing Hengxin Huaxing Auto Accessories Company, unrelated entity,
      non-interest bearing, fully paid as of December 31, 2008.
                        
                        
                        -
                        
                        
                        
                        379,340Loan
      from Beijing Hongda Huaxin Wujinjidian Company, unrelated company,
      non-interest bearing, fully paid as of December 31, 2008.
                        
                        
                        -
                        
                        
                        
                        204,260Loan
      from Beijing Sigi Qingbaosan Cement Company, unrelated company,
      non-interest bearing, fully paid as of December 31, 2008.
                        
                        
                        -
                        
                        
                        
                        116,720Loan
      from Xia Hua Qing, unrelated individual, non-interest bearing, fully paid
      as of December 31, 2008.
                        
                        
                        -
                        
                        
                        
                        128,392Loan
      from various employees, effective interest rate of 20% per annum, due upon
      demand, unsecured.
                        
                        
                        328,893
                        
                        
                        
                        524,510Total
      short term loans
                        
                        $
                        4,723,893
                        
                        
                        $
                        4,271,222
 
 Interest
expense on these short-term loans amounted to $190,563 and $58,770 for the three
months ended March 31, 2009 and 2008, respectively. Interest expense on
short-term loans for the nine months ended March 31, 2009 and 2008 amounted to
$636,907 and $206,339, respectively.
 
 Note
9 – Related party transactions
 
 Other payables –
shareholder
 
 Beginning
in July 2007, Mr. He
Weili, a 38.10% shareholder, leased an office space to the Company. For
the three months ended March 31, 2009 and 2008, the Company recorded rent
expense from the shareholder in the amount of $43,000 and $69,302,
respectively.  For the nine months ended March 31, 2009 and 2008, the
Company recorded rent expense from the shareholder in the amount of
approximately $87,000 and $120,302, respectively. As of March 31, 2009 and June
30, 2008, approximately $87,000 and $84,435, respectively, remained unpaid, and
is included as other payables - shareholder.
 
 26
 CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  The Company’s
shareholders Mr. Han Xianfu and Mr. He Weili, who have 57.15% and 38.10%
of ownership interests in BVI-ACM, respectively, together loaned $750,900 to
BVI-ACM on March 12, 2008, for the entity’s cash flow purposes. The loan is
non-interest bearing, unsecured, and is payable in cash on demand.
 
 Total
other payables - shareholders are as follows:
 
 March
      31, 2009
                          (Unaudited)
                        
                        
                        June
      30, 2008Han
      Xianfu, shareholder
                        
                        $
                        450,550
                        
                        
                        $
                        450,550He
      Weili, shareholder
                        
                        
                        313,084
                        
                        
                        
                        429,752Total
      other payable – shareholder
                        
                        $
                        763,634
                        
                        
                        $
                        880,302
 
 Other
receivable
 
 Other
receivable includes monies advanced to an entity that was in part formerly owned
by Mr. He Weili.  Prior to the reverse acquisition (Note 1), the
Company and this related entity were engaged in joint contracts, business
licenses, and other partnership agreements. Pursuant to the reverse acquisition,
the Company and this related entity began separate operations and the process of
obtaining separate contracts, business licenses, and other partnership
agreements were initiated. To date, the Company and this related entity is
finalizing the aforementioned process of obtaining separate contracts, business
licenses, and agreements.
 
 Due to
the relationship of the two companies, certain monies were exchanged as part of
their joint contracts.  During the nine months ended March 31, 2009,
the Company advanced approximately $12,690,000 to this entity, and approximately
$12,167,000 was repaid.  As of March 31, 2009 and June 30, 2008,
approximately $790,000 and $266,000 was due from this entity, and the Company’s
management expects the full amount will be collected in the near
term.  Once the joint contracts are finalized and segregated,
management does not expect any further advances.
 
 Note
10 – Taxes payable
 
 Corporate income
taxes
 
 Companies
established before March 16, 2007, will continue to enjoy tax holiday treatment
approved by the local government for a grace period of either for the next five
years or until the tax holiday term is completed, whichever is sooner. These
companies will pay the standard tax rate when the grace period
expires.
 
 27
 CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  The Company was granted
income tax exemption from January 1, 2003 to December 31, 2007. Beginning on
January 1, 2008, the Company and its subsidiaries were subject to an EIT rate of
25%.The estimated tax savings due to this tax exemption for
the nine months ended March 31, 2008, amounted to $816,413.If the income
tax had been applied, for the nine months ended March 31, 2008, the basic and
diluted earnings per share would have decreased by $0.09 per share.
 
 The
following table reconciles the U.S. statutory rates to the Company’s effective
tax rate for the nine months ended March 31, 2009 and 2008:
 
 2009
                        
                        
                        2008U.S.
      statutory rates
                        
                        
                        34
                        %
                        
                        
                        34
                        %Foreign
      income not recognized in the U.S.
                        
                        
                        -34
                        %
                        
                        
                        -34
                        %China
      income taxes
                        
                        
                        25
                        %
                        
                        
                        25
                        %China
      income tax exemption
                        
                        
                        -
                        
                        
                        
                        (15
                        %)Other
      item (a)
                        
                        
                        3
                        %
                        
                        
                        -Effective
      income tax rates
                        
                        
                        28
                        %
                        
                        
                        10
                        %
 
 (a)  The 3%
represents the expenses incurred by the Company that are not subjected to PRC
income tax.
 
 Taxes
payable consisted of the following:
 
 March
      31, 2009
                          (Unaudited)
                        
                        
                        June
      30, 2008Income
      taxes payable
                        
                        $
                        3,448,588
                        
                        
                        $
                        1,072,747Other
                        
                        
                        19,709
                        
                        
                        
                        490Total
      taxes payable
                        
                        $
                        3,468,297
                        
                        
                        $
                        1,073,237
 
 Note
11 – Shareholders’ equity
 
 On June
11, 2008, the Company completed an offering (the “Offering”) on the sale of
875,000 of investment units for a total of $7,000,000, each unit consisting of
one share of the Company’s Series A convertible preferred stock, $0.001 par
value per share, and one (1) five year warrant to purchase two shares of Common
Stock (the “Warrants”). Each preferred share is convertible into four shares of
common stock.  Additionally, each holder is entitled to cumulative
dividends equal to 9% annually, payable in cash, irrespective of the
profitability of the Company.
 
 28
 CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  The
Company received net proceeds of approximately $5,223,291 with $930,000 in an
escrow and after payment of certain fees and expenses.  $497,500 was
paid to Maxim Group LLC (“Maxim”) who served as the placement agent for the
transaction, $60,000 was paid to the attorney, and $45,000 was paid for a
finance fee for the purchasers in connection with the transaction. These
offering costs approximating $602,500 were charged to additional paid-in
capital.
 
 The
Company also issued to the placement agent a warrant to purchase an aggregate of
245,000 shares of common stock with an exercise price of $2.40 per share with a
life of five years. The warrants are exercisable on a cashless basis, in whole
or in part, at an exercise price equal to $2.40 per share. The Company may call
the warrants for redemption at any time after the warrants become exercisable
(i) at a price of $.01 per warrant; (ii) upon not less than 30 days’ prior
written notice of redemption to each warrant holder; and (iii) if, and only if,
the last sale price of the common stock equals or exceeds $5.00 per share, for
any twenty (20) trading days within a thirty (30) consecutive trading day period
ending on the third business day prior to the notice of redemption to warrant
holders.
 
 The value
of the warrants issued to the placement agent was calculated as $169,345 using
the Cox-Ross-Rubinstein (“CRR”) Binomial Model. The fair value of these warrants
of $169,345 was recognized as offering expense and charged to additional paid-in
capital. The value of the warrants was determined using the CRR Binomial Model
using the following assumptions: volatility 75%; risk-free interest rate of
3.49% of the Investor Warrants, the Placement and Advisory Warrants; dividend
yield of 0%, and expected term of 5 years of the Investor Warrants and the
Placement and Advisory Warrants. The volatility of the Company’s common stock
was estimated by management based on the historical volatility of a similar U.S.
public company due to limited trading history of the Company’s common stock. The
risk-free interest rate was based on the Treasury Constant Maturity Rates
published by the U.S. Federal Reserve for periods applicable to the expected
life of the warrants. The expected dividend yield was based on the Company’s
current and expected dividend policy and the expected term is equal to the
contractual life of the warrants.
 
 Following
is a summary of the status of warrants outstanding:
  Outstanding
      WarrantsExercise
      Price
                                                          
                                                          
                                                          Number
                                                          
                                                          Average
                                                            Remaining
                                                            Contractual
      Life$           
      2.40
                                                          
                                                          
                                                          
                                                          1,750,000
                                                          
                                                          4.32
      years$           
      2.40
                                                          
                                                          
                                                          
                                                          245,000
                                                          
                                                          4.32
      yearsTotal
                                                          
                                                          
                                                          
                                                          1,995,000
 
 29
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  Following
is a summary of the warrants activity:
 
 Outstanding
      as of June 30, 2007
                          
                          
                          -Granted
                          
                          
                          1,995,000Forfeited
                          
                          
                          -Exercised
                          
                          
                          -Outstanding
      as of June 30, 2008
                          
                          
                          1,995,000Granted
                          
                          
                          -Forfeited
                          
                          
                          -Exercised
                          
                          
                          -Outstanding
      as of March 31, 2009
                          
                          
                          1,995,000
 
 Additionally,
the Company's officers, directors and majority shareholders, Han Xianfu and He
Weili, entered into a Lock-Up Agreement with the investors whereby both Han
Xianfu and He Weili agreed they will not, offer, pledge, sell or otherwise
dispose of any shares of the Company’s common stock or any securities
convertible into or exercisable or exchangeable for common stock during the
period beginning on and including the date of the final closing of the Offering
through and including the earlier of (i) two (2) years after the final closing
of the Offering, (ii) the voluntary conversion of all outstanding shares of
preferred stock, (iii) the mandatory conversion of all outstanding shares of the
Company’s preferred stock, or (iv) the sale of the Company.
 
 Pursuant
to an escrow agreement signed between the Company, Maxim and the investors on
June 11, 2008, the Company placed a total of $930,000 in an escrow account with
the Company’s legal counsel, $630,000 of which will be used for the payment of
dividends on the preferred stock which the Company shall be obligated to
replenish each year prior to the year’s end, and $300,000 of which will be used
for the payment of investor relation fees. As of March 31, 2009, restricted cash
balance amounted to $666,954.
 
 Pursuant
to the Make Good Escrow agreement, signed between the Company, American Stock
Transfer Trust Company, the shareholders Han Xianfu and He Weili, and the
investors on June 11, 2008, the shareholders agreed to transfer a total of
3,500,000 shares of common stock into the name of the escrow agent if the
Company fails to meet certain performance thresholds: (1) $5,200,000 of net
income (calculated on a pre-tax basis solely with respect to 2008) for 2008; (2)
$9,000,000 of net income for 2009; (3) net income equal or greater than the
Company's net income for 2009, for 2010. The Company has determined that the
threshold for the period ended March 31, 2009 has been met.
 
 On May 1,
2008, the Company issued 25,000 common shares to a Company executive, par value
$0.001 for services the executive renders to the Company.  On July 31
2008, the executive terminated his employment with the Company, and the 25,000
shares were returned to the Company, and cancelled as of March 31,
2009.
 
 30
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  On
October 3, 2008, the Company entered into a one-year agreement with one of the
members of the Company’s board of directors. In connection with the
agreement, the Company granted an aggregate of 50,000 options at
an exercise price of $2.90 per share. The options vest in equal quarterly
installments over the terms of the agreement.
 
 On
December 1, 2008, the company entered into a three-year agreement with
the Company’s Chief Financial Officer. In connection with the employment,
the Company granted total of 200,000 options. The option consists of four equal
tranches of 50,000 options, with the first tranche of 50,000 options
with an exercise price of $3.00, the second tranche of 50,000 options
with an exercise price of $3.50, the third tranche of 50,000 with an
exercise price of $4.00, and the fourth tranche of 50,000 options with an
exercise price of $4.50. A quarter (25%) of each tranche of options will vest at
the end of each twelve-month period of the agreement.
 
 The
Company valued the stock options by the Cox-Ross-Rubinstein (“CRR”) binomial
model with the following weighted-average assumptions:
  Expected
                                                  
                                                  Expected
                                                  
                                                  Dividend
                                                  
                                                  Risk Free
                                                  
                                                  
                                                  Grant DateTerm
      (years)
                                                  
                                                  Volatility
                                                  
                                                  Yield
                                                  
                                                  Interest Rate
                                                  
                                                  
                                                  Fair
      ValueChief
      Financial Officer
                                                  
                                                  
                                                  6.25
                                                  
                                                  
                                                  75
                                                  %
                                                  
                                                  0
                                                  %
                                                  
                                                  1.16
                                                  %
                                                  
                                                  $
                                                  3.00Director
                                                  
                                                  
                                                  5.31
                                                  years
                                                  
                                                  75
                                                  %
                                                  
                                                  0
                                                  %
                                                  
                                                  1.41
                                                  %
                                                  
                                                  $
                                                  2.90
   The
following is a summary of the option activity:
 
 Number
      of optionsOutstanding
      as of June 30, 2007
                                                  
                                                  
                                                  -Granted
                                                  
                                                  
                                                  -Forfeited
                                                  
                                                  
                                                  -Exercised
                                                  
                                                  
                                                  -Outstanding
      as of June 30, 2008
                                                  
                                                  
                                                  -Granted
                                                  
                                                  
                                                  250,000Forfeited
                                                  
                                                  
                                                  -Exercised
                                                  
                                                  
                                                  -Outstanding
      as of March 31, 2009
                                                  
                                                  
                                                  250,000
  31
 CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  Following
is a summary of the status of options outstanding at March 31,
2009:
 
 Outstanding options
                                        
                                        Exercisable optionsAverage
                                          Exercise price
                                        
                                        Number
                                        Average
                                          remaining
                                          contractual life
                                          (years)
                                        
                                        Average
                                          Exercise
                                          price
                                        
                                        Number
                                        Weighted
                                          average
                                          exercise
                                          price$
                                        2.90
                                        
                                        50,000
                                        9.52
                                        
                                        $
                                        2.90
                                        
                                        12,500
                                        $
                                        -3.00
                                        
                                        50,000
                                        9.67
                                        
                                        
                                        -
                                        
                                        -
                                        
                                        -3.50
                                        
                                        50,000
                                        9.67
                                        
                                        
                                        -
                                        
                                        -
                                        
                                        -4.00
                                        
                                        50,000
                                        9.67
                                        
                                        
                                        -
                                        
                                        -
                                        
                                        -4.50
                                        
                                        50,000
                                        9.67
                                        
                                        
                                        -
                                        
                                        -
                                        
                                        -$
                                        3.58
                                        
                                        250,000
                                        
                                        
                                        $
                                        2.90
                                        
                                        12,500
                                        $
                                        -
 
 As of
March 31, 2009, there was approximately $353,000 of total unrecognized
compensation expense related to un-vested share-based compensation arrangements.
That cost is expected to be recognized over a weighted-average period of three
years.
 
 For the
three and nine months ended March 31, 2009, the Company recognized approximately
$40,000 and $67,000 respectively as compensation expenses for its stock option
plan.  For the three and nine months ended March 31, 2008, there was
no such compensation expense for the Company’s stock options.
 
 Note
12 – Contribution receivable
 
 Further,
pursuant to BVI-ACM’s establishment of China-ACMH in November 2007, BVI-ACM was
required to pay 15% of $5,000,000 by February 22, 2008, and the remaining
balance by November 22, 2009, in accordance with the laws of the
PRC.
 
 On March
30, 2008, Xin Ao’s board of directors approved to transfer $7,260,000 from
undistributed retained earnings into registered capital of the Company.
Contemporaneously, China-ACMH made a payment of $5,000,000 and BVI-ACM made a
payment of $100 to the Company. As of March 31, 2009, a contribution receivable
in the amount of $1,210,000 remains unpaid.
 
 32
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  Contribution
receivable consisted of the following:
 
 Xin
      Ao
                        
                        
                        CHINA-ACMH
                        
                        
                        BVI-ACM
                        
                        
                        TotalBalance,
      June 30, 2007
                        
                        $
                        8,470,000
                        
                        
                        $
                        5,000,000
                        
                        
                        $
                        100
                        
                        
                        $
                        13,470,100Less:
      contribution received
                        
                        
                        -
                        
                        
                        
                        (750,000
                        )
                        
                        
                        (100
                        )
                        
                        
                        (750,100
                        )Less:
      distribution to offset contribution receivable
                        
                        
                        (7,260,000
                        )
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (7,260,000
                        )Balance,
      March 31, 2008 (unaudited)
                        
                        
                        1,210,000
                        
                        
                        
                        4,250,000
                        
                        
                        
                        -
                        
                        
                        
                        5,460,000Less:
      contribution received
                        
                        
                        -
                        
                        
                        
                        (4,250,000
                        )
                        
                        
                        -
                        
                        
                        
                        (4,250,000
                        )Balance,
      June 30, 2008 - restated
                        
                        
                        1,210,000
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        1,210,000Less:
      contribution received
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Balance,
      March 31, 2009 (unaudited)
                        
                        $
                        1,210,000
                        
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        1,210,000
  Note
13 – Reserves and dividends
 
 The laws
and regulations of the PRC require that before foreign invested enterprise can
legally distribute profits, it must first satisfy all tax liabilities, provide
for losses in previous years, and make allocations, in proportions determined at
the discretion of the board of directors, after the statutory reserves. The
statutory reserves include the surplus reserve fund and the common welfare
fund.
 
 The
Company is required to transfer 10% of its net income, as determined in
accordance with the PRC accounting rules and regulations, to a statutory surplus
reserve fund until such reserve balance reaches 50% of the Company’s registered
capital. The remaining reserve to fulfill the 50% registered capital requirement
amounted to approximately $4,970,050 and $5,650,808 as of March 31, 2009 and
June 30, 2008.
 
 The
transfer to this reserve must be made before distribution of any dividends to
the Company’s shareholders. The surplus reserve fund is non-distributable other
than during liquidation and can be used to fund previous years’ losses, if any,
and may be utilized for business expansion or converted into share capital by
issuing new shares to existing shareholders in proportion to their shareholding
or by increasing the par value of the shares currently held by them, provided
that the remaining reserve balance after such issue is not less than 25% of the
registered capital.
 
 The
Chinese government restricts distributions of registered capital and the
additional investment amounts required by foreign invested enterprises. Approval
by the Chinese government must be obtained before distributions of these amounts
can be returned to the shareholders.
 
 Note
14 – Earnings per share
 
 The
following is a reconciliation of the basic and diluted earnings per share
computation for the three months ended March 31, 2009 and 2008:
 
 Basic
      earning per share
                          
                          2009
                          
                          
                          2008Net
      income available to common shareholders
                          
                          $
                          1,988,549
                          
                          
                          $
                          1,305,429Weighted
      average shares outstanding-Basic
                          
                          
                          10,525,200
                          
                          
                          
                          8,809,583Earnings
      per share-Basic
                          
                          $
                          0.19
                          
                          
                          $
                          0.15Diluted
      earning per shareNet
      income available to common shareholders
                          
                          $
                          1,988,549
                          
                          
                          $
                          1,305,429Add:
      Dividends on preferred stock
                          
                          
                          155,200
                          
                          
                          
                          -Add:
      Accretion on preferred stock
                          
                          
                          150,241
                          
                          
                          
                          -Net
      income for diluted EPS
                          
                          $
                          2,293,990
                          
                          
                          $
                          1,305,429Weighted
      average shares outstanding-Basic
                          
                          
                          10,525,200
                          
                          
                          
                          8,809,583Preferred
      stock
                          
                          
                          3,496,632
                          
                          
                          
                          -Weighted
      shares outstanding-Diluted
                          
                          
                          14,021,832
                          
                          
                          
                          8,809,583Earning
      per share-Diluted
                          
                          $
                          0.16
                          
                          
                          $
                          0.15
 
 33
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  The
following is a reconciliation of the basic and diluted earnings per share
computation for the nine months ended March 31, 2009 and 2008:
 
 Basic
      earning per share
                              
                              2009
                              
                              
                              2008Net
      income available to common shareholders
                              
                              $
                              5,474,258
                              
                              
                              $
                              3,784,144Weighted
      average shares outstanding-Basic
                              
                              
                              10,525,066
                              
                              
                              
                              8,809,583Earnings
      per share-Basic
                              
                              $
                              0.52
                              
                              
                              $
                              0.43Diluted
      earning per shareNet
      income available to common shareholders
                              
                              $
                              5,474,258
                              
                              
                              $
                              3,784,144Add:
      Dividends on preferred stock
                              
                              
                              472,850
                              
                              
                              
                              -Add:
      Accretion on preferred stock
                              
                              
                              450,723
                              
                              
                              
                              -Net
      income for diluted EPS
                              
                              $
                              6,397,831
                              
                              
                              $
                              3,784,144Weighted
      average shares outstanding-Basic
                              
                              
                              10,525,066
                              
                              
                              
                              8,809,583Preferred
      stock
                              
                              
                              3,499,015
                              
                              
                              
                              -Weighted
      shares outstanding-Diluted
                              
                              
                              14,024,081
                              
                              
                              
                              8,809,583Earning
      per share-Diluted
                              
                              $
                              0.46
                              
                              
                              $
                              0.43
 
 On June
11, 2008, the Company issued 875,000 shares of preferred stock, each of which
can be converted into four shares of common stock. The convertible preferred
stock is mandatorily redeemable for cash at the end of two years if not yet
converted. As of March 31, 2009, two thousands of the preferred stock had been
converted into eight thousands of common stock. Dividends on the preferred stock
and accretion of the initial discount from the redemption value of the preferred
stock, both of which are charged to retained earnings, are subtracted from net
income to determine net income available to common shareholders for the purposes
of computing basic earnings per share. The dividends and accretion on the
preferred stock are added back to the net income available to common
shareholders for calculating diluted earnings per share, as if the preferred
stock were converted at the beginning of the period.  For the three
months and the nine months ended March 31, 2009, 1,995,000 warrants and 12,500
stock options at an exercise price of $2.40 and $2.90 per share were excluded in
the diluted EPS calculation because of their anti-dilutive effect.
 
 34
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  Note
15 – Employee pension
 
 The
Company offers a discretionary pension fund, a defined contribution plan, to
qualified employees. The pension includes two parts: the first to be paid by the
Company is 20% of the employee’s actual salary in the prior year. The other
part, paid by the employee, is 8% of the actual salary. The Company’s
contributions of employment benefits, including pension, for the nine months
ended March 31, 2009 and 2008 were immaterial.
 
 Note
16 – Operating leases
 
 The
Company entered into a lease agreement for a manufacturing plant with an
unrelated party from October 1, 2007 to September 30, 2010 with monthly payment
of $14,426.  Further, the Company agreed to lease office space from
the Company’s shareholder, Mr. He Weili, from July 2007 to June 2009 with annual
payment of $197,245. On January 8, 2009, the Company entered into a lease
agreement for a manufacturing plant with an unrelated party from January 8, 2009
to January 7, 2014 with annual payment of $732,500. Total operating lease
expense for the three months ended March 31, 2009 and 2008 was $92,705 and
$109,126, respectively. Total operating lease expense for the nine months ended
March 31, 2009 and 2008 was $277,884 and $251,027, respectively, and is included
in selling, general, and administrative expenses. Future minimum annual lease
payments under noncancellable operating leases with a term of one year or more
consist of the following:
  
  Years
      ending June 30,
                            
                            Amount2009
                            
                            $275,7852010
                            
                            929,8942011
                            
                            732,5002012
                            
                            732,5002013
                            
                            732,500Thereafter
                            
                            366,250
 
  35
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
   Note
17 – Commitments and contingencies
 
 Litigation
 
 From time
to time, the Company is a party to various legal actions arising in the ordinary
course of business.  The Company’s management does not expect the legal
matters involving the Company would have a material impact on the Company’s
consolidated financial position or results of operations.
  Following
is the summary of the current litigation:
  Beijing Xin’Ao Concrete Co.,
Ltd vs. Beijing Boda Guosheng Investment Co., Ltd. (Beijing District Court,
PRC)
 
 In August
2006, Xin Ao filed a lawsuit against Beijing Boda Guosheng Investment Co., Ltd
(“Boda”) seeking specific performance of Boda’s obligations under the sales
contract to pay approximately $275,380 (RMB 2,000,000) for the cement supplied
by Xin Ao between March 2005 and June 2005 and compensatory damages of
approximately $23,500 (RMB 171,000) to cover the interest incurred on the unpaid
balance. The Court ruled against Boda and ordered Boda to pay the amounts
requested by Xin Ao; however, Boda appealed the court’s rulings. In November
2007, the Appeals Court upheld the original verdict and again ordered Boda to
pay all the damages. Management does not believe that the ultimate outcome of
this case will have a material adverse effect on the Company’s consolidated
financial position or results of operations. As of March 31, 2009, the Company
has not received the payment from Boda, and management has estimated that the
collectability of the receivable is deemed low.  Therefore, the
consolidated financial statements do not reflect this amount.
 
 Registration
Rights
  In
connection with the private placement on June 11, 2008, the Company agreed to
file a registration statement to register the warrants and common stock issuable
upon conversion of the preferred stock and exercise of the warrants, as defined.
In accordance with FSP EITF 00-19-2, registration rights penalties should be
accounted for under SFAS 5, “Accounting for
Contingencies,” in that it should be recorded when it is probable that
penalties will be incurred and it can be reasonably estimated. If at the time of
issuance it appears that any penalties are probable, they should be accrued as
part of the allocation of the initial proceeds received. The Company determined
that it was not probable at inception on June 11, 2008.  However, as
of March 31, 2009, management determined that penalties for late registration
effectiveness in the amount of $140,000 had been incurred and was paid based on
the contract in connection with the private placement. The Company believes that
there should be no additional penalties because the registration statement was
declared effective in January, 2009.


36




ITEM
      2.
              MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS.
  The
following discussion and analysis of the results of operations and financial
condition of China Advanced Construction Materials Group, Inc. (“China ACM”) for
the nine months ended March 31, 2009 and 2008, should be read in conjunction
with the selected consolidated financial data, China ACM’s consolidated
financial statements, and the notes to those financial statements that are
included elsewhere in this Form 10-Q. Our discussion includes forward-looking
statements based upon current expectations that involve risks and uncertainties,
such as our plans, objectives, expectations and intentions. Actual results and
the timing of events could differ materially from those anticipated in these
forward-looking statements as a result of a number of factors, including those
set forth under the Risk Factors and Business sections in this Form 10-Q. We use
words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,”
“ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and
similar expressions to identify forward-looking statements.
 
 Overview
  China
Advanced Construction Materials Group, Inc. (“China ACM”) is a holding company
whose primary business operations are conducted through our wholly-owned
subsidiaries BVI-ACM and China-ACMH. BVI-ACM engages in the production of
advanced construction materials for large scale commercial, residential, and
infrastructure developments. The Company is primarily focused on producing and
supplying a wide range of advanced ready-mix concrete materials for highly
technical, large scale, and environmentally-friendly construction projects.
BVI-ACM owns 100% of the issued and outstanding capital stock of China-ACMH, a
company incorporated under the laws of China. On November 28, 2007, China-ACMH
entered into a series of contractual agreements with Beijing Xin Ao Concrete Co.
Ltd. (“Xin Ao”), a company incorporated under the laws of China, and its two
shareholders pursuant to which China-ACMH effectively takes over management of
the business activities of Xin Ao and has the right to appoint all executives
and senior management and the members of the board of directors of Xin Ao. The
contractual arrangements are comprised of a series of agreements, including an
Exclusive Technical Consulting and Services Agreement and an Operating
Agreement, through which China-ACMH has the right to advise, consult, manage and
operate Xin Ao for an annual fee in the amount of Xin Ao’s yearly net profits
after tax. Additionally, Xin Ao’s Shareholders have pledged their rights, titles
and equity interest in Xin Ao as security for China-ACMH to collect technical
consulting and services fees provided to China-ACMH through an Equity Pledge
Agreement. In order to further reinforce China-ACMH’s rights to control and
operate Xin Ao, Xin Ao’s shareholders have granted China-ACMH the exclusive
right and option to acquire all of their equity interests in Xin Ao through an
Option Agreement. As all of the companies are under common control, this has
been accounted for as a reorganization of entities and the financial statements
have been prepared as if the reorganization had occurred retroactively. The
Company has consolidated Xin Ao’s operating results, assets and liabilities
within its financial statements.
  BVI-ACM,
through China-ACMH, operates and controls Xin Ao through the contractual
arrangements mentioned above. BVI-ACM used the contractual arrangements to
acquire control of Xin Ao, instead of using a complete acquisition of Xin Ao’s
assets or equity to make Xin Ao a wholly-owned subsidiary of BVI-ACM because (i)
new PRC laws governing share exchanges with foreign entities, which became
effective on September 8, 2006, make the consequences of such acquisitions
uncertain and (ii) other than by share exchange transactions, PRC law requires
Xin Ao to be acquired for cash and BVI-ACM was not able to raise sufficient
funds to pay the full appraised value for Xin Ao’s assets or shares as required
under PRC law.
 
 Together
with our subsidiaries, we are an advanced ready-mix concrete provider in the
Beijing area with an estimated market share of 6.8% in the open tendered
ready-mix concrete market in Beijing, based on our production value compared to
the value of the entire ready-mix concrete market in Beijing. Our management
believes that we have the ability to capture a much greater share of the Beijing
market and further expand our footprint in China via expanding relationships and
networking, signing new contracts, and continually developing market-leading
innovative and eco-friendly ready-mix concrete products.  Based on
reports from the National Development and Reform Commission, or NDRC, we
anticipate that our market share will further expand due to the recently
announced $586 billion infrastructure stimulus packages by the Chinese
government, which will focus primary on transportation related projects such as
railway, highway, and transportation related
infrastructure.
  37
  In fiscal
year 2007 and in the first half of fiscal year 2008, we solely operated out of
one plant, which has an operating capacity of 768,000 cubic meters. Starting the
second half of fiscal year 2008, we entered manufacturing services, technical
consulting and marketing cooperation agreements with several independently owned
mixture stations, pursuant to which, we are paid certain percentages of cost
savings for technical support provided to clients and of sales price for
projects we refer to other stations due to the restriction of our station’s
geographical location.
 
 Principal
Factors Affecting Our Financial Performance
  We
believe that the following factors will continue to affect our financial
performance:
  Large Scale Contractor
Relationships. We have contracts with major construction contractors
which are constructing key infrastructure, commercial and residential projects.
Our sales efforts focus on large-scale projects and large customers which place
large recurring orders and present less credit risks to us. In the nine months
ended March 31, 2009, our top ten customers’ sales accounted for 70.3% of all
sales revenue; our three largest customers accounted for sales of 12.8%, 11.3%,
and 9.1%, respectively.
  Experienced Management.
Management’s technical knowledge and business relationships gives us the ability
to secure major infrastructure projects, which provides us with leverage to
acquire less sophisticated operators, increase production volumes, and implement
quality standards and environmentally sensitive policies.
  Innovation Efforts. We strive
to produce the most technically and scientifically advanced products to our
customers and maintain close relationships with Tsinghua University, Xi’an
University of Architecture and Technology and Beijing Dongfangjianyu
Institute of Concrete Science & Technology which assist us with our research
and development activities. During our 5 year agreement with the parties, we
have realized an advantage over many of our competitors by gaining access to a
wide array of resources and knowledge.  At present, no payments have
been made by us under the agreement.
 
 PRC
Taxation
 
 Our
subsidiary China-ACMH is governed by the Income Tax Law of the People’s Republic
of China concerning Foreign Investment Enterprises (“FIE”) and Foreign
Enterprises and various local income tax laws (the Income Tax
Laws).
 
 Xin Ao
has been using recycled raw materials in its production since its inception
which entitled us to an income tax exemption from January 1, 2003 through
December 31, 2007 as granted by the State Administration of Taxation, PRC. The
Company will apply for renewal of the income tax exemption. However in the
interim, the Company estimates Xin Ao’s net income after January 1, 2008 will be
taxed at a rate of 25%.
 
 On March
16, 2007, the National People’s Congress of the PRC passed the new EIT Law,
which took effect as of January 1, 2008. Under the new EIT Law, an enterprise
established outside of the PRC with “de facto management bodies” within the PRC
is considered a resident enterprise and will normally be subject to the
enterprise income tax at the rate of 25.0% on its global income. The new EIT
Law, however, does not define the term “de facto management bodies.” If the PRC
tax authorities subsequently determine that we should be classified as a
resident enterprise, then our global income will be subject to PRC income tax at
a tax rate of 25.0%. In addition, under the new EIT Law, dividends from our PRC
subsidiaries to us will be subject to a withholding tax. The rate of the
withholding tax has not yet been finalized, pending promulgation of implementing
regulations. Furthermore, the ultimate tax rate will be determined by treaty
between the PRC and the tax residence of the holder of the PRC subsidiary. We
are actively monitoring the proposed withholding tax and are evaluating
appropriate organizational changes to minimize the corresponding tax impact. The
new EIT Law imposes a unified income tax rate of 25.0% on all domestic-invested
enterprises and FIEs, such as our PRC operating subsidiaries, unless they
qualify under certain limited exceptions, but the EIT Law permits companies to
continue to enjoy their existing preferential tax treatments until such
treatments expire in accordance with their current terms. We expect details of
the transitional arrangement for the five-year period from January 1, 2008 to
December 31, 2012 applicable to enterprises approved for establishment prior to
March 16, 2007 to be set out in more detailed implementing rules to be adopted
in the future. Any increase in our effective tax rate as a result of the above
may adversely affect our operating results. However, details regarding
implementation of this new law are expected to be provided in the form of one or
more implementing regulations to be promulgated by the PRC government, and the
timing of the issuance of such implementing regulations is currently
unclear.
  38
  Results
of Operations
  The
following table sets forth key components of our results of operations for the
periods indicated, in US dollars:
 
 Three Months Ended
                              
                              
                              Nine Months EndedMarch 31,
                              
                              
                              March 31,2009
                              
                              
                              2008
                              
                              
                              2009
                              
                              
                              2008(Unaudited)
                              
                              
                              (Unaudited)
                              
                              
                              (Unaudited)
                              
                              
                              (Unaudited)RevenueSales
      of concrete
                              
                              $
                              6,544,484
                              
                              
                              $
                              6,790,646
                              
                              
                              $
                              16,382,049
                              
                              
                              $
                              19,841,164Manufacturing
      services
                              
                              
                              1,304,615
                              
                              
                              
                              -
                              
                              
                              
                              5,301,154
                              
                              
                              
                              -Technical
      services
                              
                              
                              431,456
                              
                              
                              
                              -
                              
                              
                              
                              1,471,583
                              
                              
                              
                              -Mixer
      rental
                              
                              
                              995,939
                              
                              
                              
                              -
                              
                              
                              
                              1,992,520
                              
                              
                              
                              -Marketing
      cooperation
                              
                              
                              32
                              
                              
                              
                              -
                              
                              
                              
                              94,167
                              
                              
                              
                              -Total
      revenue
                              
                              
                              9,276,526
                              
                              
                              
                              6,790,646
                              
                              
                              
                              25,241,473
                              
                              
                              
                              19,841,164Cost of revenueCost
      of concrete sales
                              
                              
                              4,592,863
                              
                              
                              
                              4,988,211
                              
                              
                              
                              12,147,067
                              
                              
                              
                              15,538,513Manufacturing
      services
                              
                              
                              510,268
                              
                              
                              
                              -
                              
                              
                              
                              1,803,356
                              
                              
                              
                              -Technical
      services
                              
                              
                              22,059
                              
                              
                              
                              -
                              
                              
                              
                              119,742
                              
                              
                              
                              -Mixer
      rental
                              
                              
                              265,442
                              
                              
                              
                              -
                              
                              
                              
                              602,485
                              
                              
                              
                              -Marketing
      cooperation
                              
                              
                              13
                              
                              
                              
                              -
                              
                              
                              
                              38,720
                              
                              
                              
                              -Total
      cost of revenue
                              
                              
                              5,390,645
                              
                              
                              
                              4,988,211
                              
                              
                              
                              14,711,370
                              
                              
                              
                              15,538,513Gross profit
                              
                              
                              3,885,881
                              
                              
                              
                              1,802,435
                              
                              
                              
                              10,530,103
                              
                              
                              
                              4,302,651Selling,
      general and administrative expenses
                              
                              
                              809,777
                              
                              
                              
                              404,692
                              
                              
                              
                              2,079,257
                              
                              
                              
                              1,033,958Other
      income, net
                              
                              
                              159,365
                              
                              
                              
                              330,207
                              
                              
                              
                              463,694
                              
                              
                              
                              937,972Income before provision for
      income taxes
                              
                              
                              3,235,469
                              
                              
                              
                              1,727,950
                              
                              
                              
                              8,914,540
                              
                              
                              
                              4,206,665Income
      taxes
                              
                              
                              941,477
                              
                              
                              
                              422,521
                              
                              
                              
                              2,516,707
                              
                              
                              
                              422,521Net income
                              
                              
                              2,293,992
                              
                              
                              
                              1,305,429
                              
                              
                              
                              6,397,833
                              
                              
                              
                              3,784,144Dividends
      and accretion on redeemable preferred
                              
                              
                              305,443
                              
                              
                              
                              -
                              
                              
                              
                              923,575
                              
                              
                              
                              -Net income available to Common
      shareholders
                              
                              $
                              1,988,549
                              
                              
                              $
                              1,305,429
                              
                              
                              $
                              5,474,258
                              
                              
                              $
                              3,784,144
  39
 
 The
following table sets forth the results of our operations for the periods
indicated as a percentage of total sales:
  Three
      Months Ended
                              
                              
                              Nine
      Months EndedMarch 31,
                              
                              
                              March 31,2009
                              
                              
                              2008
                              
                              
                              2009
                              
                              
                              2008(Unaudited)
                              
                              
                              (Unaudited)
                              
                              
                              (Unaudited)
                              
                              
                              (Unaudited)RevenueSales
      of concrete
                              
                              
                              70.5
                              %
                              
                              
                              100.0
                              %
                              
                              
                              64.9
                              %
                              
                              
                              100.0
                              %Manufacturing
      services
                              
                              
                              14.1
                              %
                              
                              
                              -
                              
                              
                              
                              21.0
                              %
                              
                              
                              -Technical
      services
                              
                              
                              4.7
                              %
                              
                              
                              -
                              
                              
                              
                              5.8
                              %
                              
                              
                              -Mixer
      rental
                              
                              
                              10.7
                              %
                              
                              
                              -
                              
                              
                              
                              7.9
                              %
                              
                              
                              -Marketing
      cooperation
                              
                              
                              0.0
                              %
                              
                              
                              -
                              
                              
                              
                              0.4
                              %
                              
                              
                              -Total
      revenue
                              
                              
                              100.0
                              %
                              
                              
                              100.0
                              %
                              
                              
                              100.0
                              %
                              
                              
                              100.0
                              %Cost of revenueCost
      of sales
                              
                              
                              49.5
                              %
                              
                              
                              73.5
                              %
                              
                              
                              48.1
                              %
                              
                              
                              78.3
                              %Manufacturing
      services
                              
                              
                              5.5
                              %
                              
                              
                              -
                              
                              
                              
                              7.1
                              %
                              
                              
                              -Technical
      services
                              
                              
                              0.2
                              %
                              
                              
                              -
                              
                              
                              
                              0.5
                              %
                              
                              
                              -Mixer
      rental
                              
                              
                              2.9
                              %
                              
                              
                              -
                              
                              
                              
                              2.4
                              %
                              
                              
                              -Marketing
      cooperation
                              
                              
                              0.0
                              %
                              
                              
                              -
                              
                              
                              
                              0.2
                              %
                              
                              
                              -Total
      cost of revenue
                              
                              
                              58.1
                              %
                              
                              
                              73.5
                              %
                              
                              
                              58.3
                              %
                              
                              
                              78.3
                              %Gross profit
                              
                              
                              41.9
                              %
                              
                              
                              26.5
                              %
                              
                              
                              41.7
                              %
                              
                              
                              21.7
                              %Selling,
      general and administrative expenses
                              
                              
                              8.7
                              %
                              
                              
                              6.0
                              %
                              
                              
                              8.2
                              %
                              
                              
                              5.2
                              %Other
      (expense) income, net
                              
                              
                              1.7
                              %
                              
                              
                              4.9
                              %
                              
                              
                              1.8
                              %
                              
                              
                              4.7
                              %Income before provision for
      income taxes
                              
                              
                              34.9
                              %
                              
                              
                              25.4
                              %
                              
                              
                              35.3
                              %
                              
                              
                              21.2
                              %Income
      taxes
                              
                              
                              10.2
                              %
                              
                              
                              6.2
                              %
                              
                              
                              10.0
                              %
                              
                              
                              2.1
                              %Net income
                              
                              
                              24.7
                              %
                              
                              
                              19.2
                              %
                              
                              
                              25.3
                              %
                              
                              
                              19.1
                              %Dividends
      and accretion on redeemable preferred
                              
                              
                              3.3
                              %
                              
                              
                              -
                              
                              
                              
                              3.7
                              %
                              
                              
                              -Net income available to common
      shareholders
                              
                              $
                              21.4
                              %
                              
                              $
                              19.2
                              %
                              
                              $
                              21.7
                              %
                              
                              $
                              19.1
                              %
  Comparison
of Three Months Ended March 31, 2009 and 2008
 
 Revenue.
Our revenue is generated from sales of our advanced ready-mix concrete products,
manufacturing services, technical consulting services, marketing cooperation
services, and mixer rental. For the three months ended March 31, 2009, we
generated revenue of $9,276,526, a 36.6% or $2,485,880 increase from revenue of
$6,790,646 during the same period of 2008. We generated concrete revenue of $
6,544,484 for the quarter ended March 31, 2009, a decrease of $ 246,162 in
revenue or 3.6% compared to the same period last year.  During the
quarter, we continued to supply concrete products to four railway projects
located outside Beijing area through our portable plants, specifically the
Suzhou and Danyang sections of the Beijing-Shanghai high-speed railway project,
the East Datong-Gudian connection railway project and, Zhumadian railway
project. These four projects contributed $1,304,615 to our total revenue for the
quarter. For these railway projects, the general contractors supplied their own
raw materials, electricity, and water usage and we provided manufacturing and
transportation services. The company did not provide manufacturing services for
the same quarter last year. Additionally, technical consulting services
generated revenue of $431,456 for the quarter ended March 31, 2009. During the
quarter, we generated revenues of $995,939 from our mixer truck rental. Our
management had focused on mixer truck rental activities owing to the limitation
on production activities during the winter. We had no activities on marketing
cooperation agreements during the quarter.  The marketing cooperation
agreement is generally done with several concrete producers where we were paid a
minimum of RMB 5 per cubic meter for projects we refer to them due to
restriction of our station’s geographical location. The company did not provide
technical consulting services, mixer truck rental, and marketing cooperation
agreement for the same quarter last year. We believe our sales revenue will
continue to grow as the Chinese government announced its 4 trillion Yuan
(USD$586 billion) stimulus package in November 2008 as well as the Chinese’s
government’s railroad project plans, which is expected to cost a total of $730
billion through 2020. We will be the direct beneficiary of transport and
infrastructure build-out from China’s stimulus package.  We will also
continue to expand our business into additional geographical markets due to our
strong relationship with major contractors in China.
  40
  Cost of
Revenue. Cost of
Revenue, which consists of direct labor, rentals, depreciation, other overheads
and raw materials including inbound freight charge, was $5,390,645 for the three
months ended March 31, 2009 as compared to $4,988,211 for the three months ended
March 31, 2008, an increase of $402,434 or 8.1%.The increase on
cost of revenue is due primarily to increase in revenue of 36.6% compared to the
same period in 2008. The percentage of cost of revenue has decreased
significantly compared to the percentage of increase in revenue. As previously
discussed, we continued to work on the four railway projects during the quarter
ended March 31, 2009, the costs of which did not include raw material, water,
and electricity, as such costs were paid directly by the projects’ general
contractors. During the quarter, we have continued to enter concrete manufacture
service and technical service contracts which have lower cost of revenue and
higher gross margins and continued to engage in mixer rental, which is a source
of revenue that we were not engaged during the same period in 2008.
  Gross
Profit. Our gross profit is equal to the difference between our revenue
and cost of revenue. Overall gross profit was $3,885,881 for the three months
ended March 31, 2009 as compared to $1,802,435 for the three months ended March
31, 2008, representing gross margin of approximately 41.9% and 26.5%,
respectively. The gross profit for sale of concrete was $1,951,621 or 29.8% for
the quarter compared to $1,802,435 or 26.5% for the same period last year, an
increase of $149,186 or 8.3%. The gross profit on our manufacturing services was
$794,347 or 60.9% for the quarter and technical services was $409,397 or 94.9%
for the quarter.  The higher gross margin on manufacturing services
reflects the fact that cost of the four railway projects did not include raw
materials, water, and electricity that were supplied directly by the projects’
general contractors. The higher gross margin is also attributable to more
profitable technical services and mixer rental during the quarter. The gross
profit on mixer rental services was $730,497 or 73.3% for the quarter. We will
continue to expand our manufacturing and technical services throughout our
market areas, as these services produce the highest gross profits among our
revenue sectors.
 
 Selling, General
and Administrative Expenses. Selling, general and administrative expenses
consist of sales commissions, advertising and marketing costs, office rent and
expenses, costs associated with staff and support personnel who manage our
business activities, and professional and legal fees paid to third parties. The
company incurred selling, general and administrative expenses of $809,777 for
the three months ended March 31, 2009, an increase of $405,085or 100%, as compared to
$404,692 for the three months ended March 31, 2008. The increase is primarily
due to increased legal fees, auditing and accounting expenses, investor relation
and other professional expenses after the reverse merger and financing, as well
as additional salary expenses and bad debt accrual incurred during the
quarter.
 
 Other Income
(Expenses). Our other income (expenses) consists of valued added tax
exemption from the government, financial income (expenses) and other
non-operating income (expenses). We had net other income of $159,365 for the
three months ended March 31, 2009 as compared to net other income of $330,207
for the three months ended March 31, 2008, a decrease in net other income of
$170,842 or 51.7%. The decrease in net other income is partly due to receiving
of value added tax exemption from the government offset by increase in interest
expense and other non-operating expense. We had interest expenses of $194,200
for the three months ended March 31, 2009 as compared to $67,963 for the three
months ended March 31, 2008, an increase of $126,237. The increase is
contributing to higher interest expense on short-term loans for the three months
ended March 31, 2009, and financial leverage as compared to the same period last
year. The decrease was also due to an additional $87,500 of liquidated damages
incurred during the quarter to preferred stock investors as a result of late
registration effectiveness under our private placement
agreement.
  41
  Provision for
Income Taxes. Provision for income taxes amounted to $941,477 and
$422,521 for the three months ended March 31, 2009 and 2008, respectively. The
Company has been using recycled raw materials in its production since its
inception which entitled us to an income tax exemption from January 1, 2003
through December 31, 2007 as granted by the State Administration of Taxation,
PRC. Starting January 1, 2008, the Company is subject to 25% income tax. The
Company’s income tax has increased as a result of its earning from manufacture
and technical services as well as mixer rental and marketing cooperation that
were introduced in July, 2008 and their high gross margin improvements from
these service sectors.
 
 Net
Income. We generated net income of $2,293,992 for the three months ended
March 31, 2009 as compared to $1,305,429 for the three months ended March 31,
2008, an increase of $988,563or 75.7%. The increase
in net income is attributable to higher overall gross revenue, higher gross
profit on the four railway projects, technical service and rent income of mixer
trucks as well as appreciating of RMB against USD as all of our revenues were
generated in PRC, partially offset by higher general and administrative expenses
and interest expenses after the reverse merger and financing in addition to the
25% income tax that we became subject to on manufacture, technical, and other
services we provided this quarter. There were no such services from the same
quarter last year. Our net margin increased from 19.2% for the three months
ended March 31, 2008 to 24.7% for the three months ended March 31, 2009 due to
higher margin we realized on the four railway projects on a lower
cost-of-revenue basis as the general contractors supplied raw materials
themselves, as well as greater profitability from the rent of mixer trucks and
technical service contracts performed during the quarter. Our management
believes that our profits will continue to increase as we are a direct
beneficiary of Chinese government’s stimulus package on infrastructure projects.
We also plan to lease or build new plants in order to increase our accessibility
to construction sites located in Beijing, expand into other geographical areas,
as well as vertically integrate our operations across the supply chain, which
will further lower our costs and provide even greater
profitability.
  Dividends and accretion on redeemable
preferred stock.  The increase of $305,443 compared to the
three months ended March 31, 2008 is due to our redeemable preferred stock
offering in June 2008.  It included preferred dividend expense of
$155,200 and accretion of discount on the preferred stock of
$150,243.
 
 Comparison
of Nine Months Ended March 31, 2009 and 2008
 
 Revenue.
Our revenue is generated from sales of our advanced ready-mix concrete products,
manufacturing services, technical consulting, marketing cooperation services,
and mixer rental. For the nine months ended march 31, 2009, we generated revenue
of $25,241,473 compared to $19,841,164 during the same period of 2008, an
increase of $5,400,309 or 27.2%. During the nine months surrounding the Olympic
Games held in August in Beijing, our primary area of operation, all construction
within the 5th ring
expressway surrounding the city was halted and delayed until after the Olympics.
In anticipation of this work stoppage and in an attempt to counter any adverse
effect such an event could have on our operations, we focused efforts during
this time to expanding the geographic area of our operations, providing
manufacture services and technical consulting services to other companies as
well as renting our equipment to other companies. Our sales revenue increased as
the construction industry in Beijing returned back to full scale following the
Olympics. As a result, our concrete revenue decreased $3,459,115 or 17.4 %
compared to the same period last year. During the nine months period ended March
31, 2008, we continued to supply concrete products to four railway projects
located outside Beijing area through our portable plants, specifically the
Suzhou and Danyang sections of the Beijing-Shanghai high-speed railway project,
the East Datong-Gudian connection railway project, and Zhumadian railway
project. These four projects contributed $5,301,154 to our total revenue for the
nine months ended March 31, 2009. For these railway projects, the general
contractors supplied their own raw materials and we provided manufacturing and
transportation services. Additionally, technical consulting services generated
revenue of $1,471,583 during the nine months. During the nine month period ended
March 31, 2009, we also rented our mixer trucks to mixture stations located
outside the 5th ring expressway of Beijing, which generated revenues of
$1,992,520, and we entered into marketing cooperation agreements with several
concrete producers under which we were paid a minimum of RMB 5 per cubic meter
for projects we refer to such producers because of our station’s geographical
location, which generated revenue of $94,167. We believe our sales revenue will
continue to grow as the Chinese government announced its 4 trillion Yuan
(USD$586 billion) stimulus package in November 2008 well as the Chinese
government’s railroad project plans which are expected to cost a total of $730
billion through 2020. We will be a direct beneficiary of transport and
infrastructure build-out from China’s stimulus package. We will also continue to
expand our business into additional geographical markets due to our strong
relationship with major contractors in China.
  42
  Cost of
Revenue. Cost of
Revenue, which consists of direct labor, rentals, depreciation, other overheads
and raw materials including inbound freight charge, was $14,711,370 for the nine
months ended March 31, 2009 as compared to $15,538,513 for the nine months ended
March 31, 2008, a decrease of 5.3% or $827,143.  The decrease on cost
of revenue is due to decrease in sales of concrete revenue of 17.4%as a result of Olympic
event restriction and by low cost of revenue on manufacture and technical
services as well as other services compared to the same period in 2008. The cost
of revenue has decreased significantly compared to the percentage of increase in
revenue. As previously discussed, we continued to work on the four railway
projects for the nine months ended March 31, 2009, the costs of which did not
include raw material, water and electricity, as such costs were paid directly by
the projects’ general contractors. We also continued to enter concrete technical
and marketing cooperation service contracts which have higher gross margins and
continued to engage in mixer rental during the quarter, which was a source of
revenue that we were not engaged during same period in 2008.
  Gross
Profit. Our gross profit is equal to the difference between our revenue
and cost of revenue. Gross profit was $10,530,103 for the nine months ended
March 31, 2009 as compared to $4,302,651 for the nine months ended March 31,
2008, representing gross margin of approximately 41.7% and 21.7%, respectively.
The gross profit for sale of concrete was $4,234,982 or 25.9% for the nine
months ended march 31, 2009 compared to $4,302,651 or 21.7% for the same period
last year, a decrease of $67,669 or 1.6%. The gross profit on our manufacturing
services was $3,497,798 or 66.0% for the nine months ended March 31, 2009. The
higher gross margin reflects the fact that cost of the four railway projects did
not include raw materials that were supplied directly by the projects’ general
contractors. The higher gross margin is also attributable to more profitable
technical services and marketing cooperation contracts we performed, as well as
mixer rental during the nine month ended March 31, 2009.  We will
continue to expand our manufacturing and technical services, which produce the
highest gross profits among our revenue sectors.
 
 Selling, General
and Administrative Expenses. Selling, general and administrative expenses
consist of sales commissions, advertising and marketing costs, office rent and
expenses, costs associated with staff and support personnel who manage our
business activities, and professional and legal fees paid to third parties. The
company incurred selling, general and administrative expenses of $2,079,257 for
the nine months ended March 31, 2009, an increase of 101.1% or $1,045,299, as
compared to $1,033,958 for the nine months ended March 31, 2008. The increase is
primarily due to increased legal fees, auditing and accounting expenses,
investor relations and other professional expenses following our reverse merger
and financing, as well as additional bad debt expense recognized during the nine
months ended March 31, 2009.
 
 Other Income
(Expenses). Our other income (expenses) consists of valued added tax
exemption from the government, financial income (expenses) and other
non-operating income (expenses). We had net other income of $463,694 for the
nine months ended March 31, 2009 as compared to net other income of $937,972 for
the nine months ended March 31, 2008, a decrease in net other income of $474,278
or 50.6%. The decrease in net other income is partly due to receiving of value
added tax exemption from the government offset by increase in other
non-operating expense and interest expense. We had interest expenses of $640,544
for the nine months ended March 31, 2009 as compared to $215,532 for the nine
months ended March 31, 2008, an increase of $425,012. The increase is
contributing to higher interest expense on short-term loans for the nine months
ended March 31, 2009, and financial leverage as compared to the same period last
year. The increase was also due to a non-operating expense of $140,000 for
liquidated damages we paid to preferred stock investors as a result of late
registration effectiveness under our private placement agreement.
  Provision for
Income Taxes. Provision for income taxes amounted to $2,516,707 and
$422,521 for the nine months ended March 31, 2009 and 2008, respectively. The
Company has been using recycled raw materials in its production since its
inception which entitled us to an income tax exemption from January 1, 2003
through December 31, 2007 as granted by the State Administration of Taxation,
PRC. Starting January 1, 2008, the Company is subject to 25% income
tax.  Therefore, the total income taxes incurred for the nine month
ended March 31, 2009 comprised of nine month tax activities compared to three
month tax activities for same period in 2008.
  43
  Net
Income. We had net income of $6,397,833 for the nine months ended March
31, 2009 as compared to $3,784,144 for the nine months ended March 31, 2008, an
increase of 69.1%or $2,613,689. The
increase in net income is attributable to higher gross profit on the four
railway projects, technical services, marketing cooperation contracts, and rent
income of mixer trucks, as well as the appreciation of the of RMB against the
USD as all of our revenues were generated in PRC, partially offset by higher
general and administrative expenses and interest expenses after the reverse
merger and financing in addition to the 25% income tax that we became subject to
in January 2008. Our net margin increased from 19.1% for the nine months ended
March 31, 2008 to 25.3% for the nine months ended March 31, 2009 due to higher
margin we realized on the four railway projects on a lower cost-of-revenue basis
as the general contractors supplied raw materials themselves as well as greater
profitability from the rent of mixer trucks and technical service and marketing
cooperation contracts performed during the nine months ended March 31, 2009. Our
management believes that our profits will continue to increase as we are a
direct beneficiary of Chinese government’s stimulus package on infrastructure
projects. We also plan to lease or build new plants in order to increase our
accessibility to construction sites located in Beijing, expand into other
geographical areas, as well as vertically integrate our operations across the
supply chain, which will further lower our costs and provide even greater
profitability
 
 Dividends and accretion on redeemable
preferred stock.
 
 The
increase of $923,575 compared to the nine months ended March 31, 2008 is due to
our redeemable preferred stock offering in June 2008.  It included
preferred dividend expense of $472,850 and accretion of discount on the
preferred stock of $450,725.
 
 Liquidity
and Capital Resources
  As of
March 31, 2009, we had cash and cash equivalents of $870,140 and restricted cash
of $666,954. The following table provides detailed information about our net
cash flow for financial statement periods presented in this Form
10-Q:
 
 Summary
      of Cash Flow StatementsNine
      Months EndedMarch 31,(Unaudited)
                                                          
                                                          
                                                          (Unaudited)2009
                                                          
                                                          
                                                          2008Net
      cash provided by operating activities
                                                          
                                                          $
                                                          224,600
                                                          
                                                          
                                                          $
                                                          3,825,089Net
      cash used in  investing activities
                                                          
                                                          
                                                          (1,514,923
                                                          )
                                                          
                                                          
                                                          (15,665
                                                          )Net
      cash provided by (used in) financing activities
                                                          
                                                          
                                                          247,576
                                                          
                                                          
                                                          
                                                          (1,524,232
                                                          )Effect
      of foreign currency translation on cash and cash
    equivalents
                                                          
                                                          
                                                          2,392
                                                          
                                                          
                                                          
                                                          125,468Net
      (decrease) increase in cash and cash equivalent
                                                          
                                                          $
                                                          (1,040,355
                                                          )
                                                          
                                                          $
                                                          2,410,660
  Principal
demands for liquidity are for construction or acquisition of concrete mixture
stations, purchases of concrete mixers and pump trucks, working capital and
general corporate purposes.  44
 Comparison
of Nine Months Ended March 31, 2009 and 2008
 
 Net Cash Provided
by Operating Activities. Net cash provided in operating activities
totaled $224,600 for the nine months ended March 31, 2009 as to net cash
provided by operating activities of $3,825,089 for the nine months ended March
31, 2008. The decrease in net cash provided by operating activities was
primarily due to increases in accounts receivable, other receivables, and
inventory of raw materials, partially offset by deferred payment of cash on tax
and accounts payable during the nine months ended March 31, 2009. We expect our
cash flow from operating activities to improve as the construction industry in
Beijing accelerates following the Olympic Games, and we strengthen our efforts
to negotiate more favorable terms with our suppliers and customers.
  Net Cash Used In
Investing Activities.  Net cash used in investing activities was
$1,514,923for the
nine months ended March 31, 2009 and $15,665 for the nine months ended March 31,
2008. The cash was primarily used for a disbursement of short term loan and
purchase of new equipment and for construction in progress.
 
 Net Cash Provided
by/used in Financing Activities. Net cash provided by financing
activities totaled $247,576for the nine months
ended March 31, 2009 as compared to net cash used in financing activities of
$1,524,232 for the nine months ended March 31, 2008. The reason for the increase
in cash provided by financing activities was due to short-term loans of
$4,395,000 (RMB 30 million) from Beijing International Trust & Investment
Co., due July 15, 2009 and $2,930,000 (RMB 20 million) from Huaxia Bank, due
November 16, 2008, partially offset by repayment of short-term loans from Huaxia
Bank for $5,868,000 (RMB 40 million), and from employees and unrelated companies
for $1,028,634 (RMB 7,030,000) offset by dividend paid to our preferred stock
owners. The net proceeds from the loans will be used for building plant,
purchasing concrete mixers and pump trucks, working capital and general
corporate purposes.
 
 Cash.  As of March 31,
2009, we had cash of $870,140 as compared to $1,910,495 as of June 30, 2008.
This decrease was due primarily to increase in net short-term borrowings and
deferred payment of payable offset by increase in accounts
receivable.
  We
believe that we can meet our liquidity and capital requirements in 2009 from a
variety of sources. These include present capital resources, internally
generated cash, short-term borrowings from both related parties and financial
institutions, and future equity financings.
 
 Loan
Facilities
 
 We had a
total of $4,723,893 and $4,271,222 outstanding on loans and credit facilities as
of March 31, 2009 and June 30, 2008, respectively. The loans consisted of the
following:
 
 March
      31,
                    
                    
                    June
      30,2009
                    
                    
                    2008(Unaudited)Loan
      from Huaxia Bank, with effective annual interest rate of 7.5555%, due
      November 16, 2008, guaranteed by the Company’s shareholder, Mr. Han Xianfu
                    
                    $
                    -
                    
                    
                    $
                    2,918,000Loan
      from Beijing International Trust Co, Ltd. with effective annual interest
      rate of 15%, due July 15, 2009, guaranteed by Rayland Credit Guarantee Co.
      Ltd
                    
                    
                    4,395,000
                    
                    
                    
                    -Loan
      from unrelated company Beijing Hengxin Huaxing Auto Accessories Company,
      with no interest, fully paid.
                    
                    
                    -
                    
                    
                    
                    379,340Loan
      from unrelated company Beijing Hongda Huaxin Wujinjidian Company, with no
      interest, fully paid.
                    
                    
                    -
                    
                    
                    
                    204,260Loan
      from unrelated company, Beijing Sigi Qingbaosan Cement Company, with no
      interest, fully paid.
                    
                    
                    -
                    
                    
                    
                    116,720Loan
      from unrelated individual Xia Hua Qing, with no interest, fully paid.
                    
                    
                    -
                    
                    
                    
                    128,392Loan
      from various employees, with effective annual interest rate of 20%, due
      upon demand, unsecured.
                    
                    
                    328,893
                    
                    
                    
                    524,510Total
      short term loans
                    
                    $
                    4,723,893
                    
                    
                    $
                    4,271,222
  45
  Total
interest expense on short-term loans for the nine months ended March 31, 2009
and 2008 amounted to $636,907 and $215,532, respectively.
 
 Obligations
Under Material Contracts
 
 Below is
a table setting forth our contractual obligations as of March 31,
2009:
 
 Payment due in
      year ended June 30,Total
                          
                          
                          2009
                          
                          
                          2010
                          
                          
                          2011
                          
                          
                          ThereafterLong
      term debt obligations
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Capital
      commitment
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Operating
      lease obligations
                          
                          $
                          3,769,429
                          
                          
                          $
                          275,785
                          
                          
                          $
                          929,894
                          
                          
                          $
                          732,500
                          
                          
                          $
                          1,831,250Purchase
      obligations
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Total
                          
                          $
                          3,769,429
                          
                          
                          $
                          275,785
                          
                          
                          $
                          929,894
                          
                          
                          $
                          732,500
                          
                          
                          $
                          1,831,250
 
 Seasonality
  Our
manufacturing operations are primarily located in northeastern China, which is
extremely cold during the winter months. During such time, we are able to
manufacture our advanced ready-mix concrete materials, however many construction
projects operate on an abbreviated work schedule, if at all.
  Critical
Accounting Policies and Estimates
  The
accompanying consolidated financial statements include the financial statements
of China ACM and its wholly owned subsidiaries, BVI-ACM, China-ACMH and its
variable interest entity Xin Ao. All significant inter-company transactions and
balances have been eliminated in consolidation. China ACM, its subsidiaries and
Xin Ao, together are referred to as the Company. In accordance with FASB
Interpretation No. 46(R), Consolidation of Variable Interest Entities (“FIN
46(R)”), variable interest entities, or VIEs, are generally entities that lack
sufficient equity to finance their activities without additional financial
support from other parties or whose equity holders lack adequate decision making
ability. All VIEs with which the Company is involved must be evaluated to
determine the primary beneficiary of the risks and rewards of the VIE. The
primary beneficiary is required to consolidate the VIE for financial reporting
purposes. In connection with the adoption of FIN 46(R), the Company concludes
that Xin Ao is a VIE and China ACM is the primary beneficiary. Under FIN 46(R)
transition rules, the financial statements of Xin Ao are then consolidated into
the Company’s consolidated financial statements.
 
 Our
management's discussion and analysis of our financial condition and results of
operations are based on the consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements as well as the reported net sales and expenses
during the reporting periods. On an ongoing basis, we evaluate our estimates and
assumptions. We base our estimates on historical experience and on various other
factors that we believe are reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or
conditions.
 
 While our
significant accounting policies are more fully described in Note 2 to our
consolidated financial statements included , we believe that the following
accounting policies are the most critical to aid you in fully understanding and
evaluating this management discussion and analysis:
  46
  Revenue
Recognition. The Company recognizes revenue in accordance with Staff
Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial
Statements” as amended by SAB No. 104 (together, “SAB 104”), which specifies
that revenue is realized or realizable and earned when four criteria are
met:
 
 ·
              Persuasive
      evidence of an arrangement exists (the Company considers its sales
      contracts and technical service agreements to be pervasive evidence of an
      arrangement);
 
 ·
              Delivery
      has occurred or services have been
rendered;
 
 ·
              The
      seller’s price to the buyer is fixed or determinable;
  and
 
 ·
              Collectability
      of payment is reasonably assured.
 
 The
Company sells its concrete products and provides concrete manufacturing services
mainly to major construction companies. Sales agreements are signed with each
customer. The agreements list all terms and conditions with the exception of
delivery date and quantity, which are evidenced separately in purchase orders.
The purchase price of products is fixed in the agreement and customers are not
permitted to renegotiate after the contracts have been signed. The agreements
include a cancellation clause if the Company breaches the contract terms
specified in the agreement. The Company does not sell products to customers on a
consignment basis. There is no right of return after the product has been
injected into the location specified by the contract and accepted by the
customer. The Company recognizes revenue when the goods are accepted by the
customer and title has passed.
 
 Sales
revenue represents the invoiced value of goods, net of a value-added tax
(“VAT”). All of the Company’s concrete products that are sold in the PRC are
subject to a Chinese value-added tax at the rate of 6% of the gross sales
price.
 
 Due to
the fact that the Company uses recycled raw materials to manufacture its
products, the State Administration of Taxation has granted the Company VAT tax
exemption from August 2005 through to August 2009. The VAT tax collected from
the Company’s customers is kept by the Company and recorded as Other Subsidy
Income.
 
 The
Company also provides technical consulting services to and enters strategic
cooperation including market sharing and equipment rental with other
independently owned concrete companies. The Company signs a Technical Service
Agreement or Strategic Cooperation Agreement with each client, which specifies
all terms and conditions including prices to be charged. Once concrete products
are produced by clients and supplied to builders referred by the Company or cost
savings are realized by use of technical solutions provided by the Company, the
agreements consider the Company has rendered its service. The Company recognizes
revenue and invoices client monthly for technical service and marketing
cooperation on a per-cubic-meter basis and for equipment rental on a per-mixer
truck basis.
 
 Accounts
receivable. During the normal course of business, the Company extends
unsecured credit to its customers. Management reviews its accounts receivable
each reporting period to determine if the allowance for doubtful accounts is
adequate. An estimate for doubtful accounts is recorded when collection of the
full amount is no longer probable. The Company’s reserves are consistent with
its historical experience and considered adequate by management.
 
 The
ultimate collection of the Company’s accounts receivable may take more than one
year, and any portion of accounts receivable expected to be collected in more
than one year is reflected as non-current, net of allowance for doubtful
accounts relating to that portion of receivables. The bifurcation between
current and non-current portions of accounts receivable is based on management’s
estimate and predicated on historical collection experience.
 
 Value added
tax. Enterprises or individuals who sell commodities, engage in repair
and maintenance or import and export goods in the PRC are subject to a value
added tax (“VAT”). The standard VAT rate is 6% of gross sales for the Company’s
industry. A credit is available whereby VAT paid on the purchases of raw
materials used in the production of the Company’s finished products can be used
to offset the VAT due on sales of finished products. Due to the fact that the
Company uses recycled raw materials to manufacture its products, the State
Administration of Taxation has granted the Company VAT Tax Exemption from August
2005 through to August 2009. For the nine months ended March 31, 2009 and 2008,
$1,300,992 and $1,190,159, respectively, was recognized as other subsidy income
from VAT taxes collected.
  47
  Recently
Issued Accounting Pronouncements
 
 In
February 2007, the FASB issued Statement of Financial Accounting Standards
No. 159 (“SFAS 159”), “The Fair Value Option for Financial Assets and
Financial Liabilities-Including an amendment of FASB Statement No. 115.
SFAS No. 159 permits entities to choose to measure many financial
instruments and certain other items at fair value. Most of the provisions of
SFAS 159 apply only to entities that elect the fair value option. However, the
amendment to SFAS No. 115, “Accounting for Certain Investments in Debt and
Equity Securities, applies to all entities with available-for-sale and trading
securities. SFAS 159 is effective for financial statements with fiscal
years beginning after November 15, 2007. The Company chose not to elect the
option to measure the fair value of eligible financial assets and
liabilities.
 
 In
December 2007, the FASB issued SFAS 160, “Noncontrolling Interests in
Consolidated Financial Statements - an amendment of Accounting Research Bulletin
No. 51” , which establishes accounting and reporting standards for ownership
interests in subsidiaries held by parties other than the parent, the amount of
consolidated net income attributable to the parent and to the noncontrolling
interest, changes in a parent’s ownership interest and the valuation of retained
non-controlling equity investments when a subsidiary is deconsolidated. The
Statement also establishes reporting requirements that provide sufficient
disclosures that clearly identify and distinguish between the interests of the
parent and the interests of the non-controlling owners. SFAS 160 is effective
for fiscal years beginning after December 15, 2008. The Company has determined
that the application of SFAS 160 will have no effect on its consolidated
financial statements.
 
 In
December 2007, SFAS 141(R), Business Combinations, was issued. SFAS 141R
requires an acquirer to recognize the assets acquired, the liabilities assumed,
and any noncontrolling interest in the acquiree at the acquisition date,
measured at their fair values as of that date, with limited exceptions. This
replaces SFAS 141’s cost-allocation process, which required the cost of an
acquisition to be allocated to the individual assets acquired and liabilities
assumed based on their estimated fair values. SFAS 141R also requires the
acquirer in a business combination achieved in stages (sometimes referred to as
a step acquisition) to recognize the identifiable assets and liabilities, as
well as the noncontrolling interest in the acquiree, at the full amounts of
their fair values (or other amounts determined in accordance with SFAS 141R).
SFAS 141R applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. An entity may not apply it
before that date. SFAS 141R will change the accounting for all future business
combinations.
 
 In March
2008, SFAS 161, “Disclosures about Derivative Instruments and Hedging Activities
- An Amendment of SFAS No. 133” was issued. SFAS 161 requires (1) the
disclosure of the fair value of derivative instruments and gains and losses in a
tabular format; (2) the disclosure of derivative features that are credit
risk-related; and (3) cross-referencing within the footnotes. The
provisions of SFAS 61 are effective for interim period and fiscal years
beginning after November 15, 2008. The Company does not anticipate that the
adoption of SFAS 161 will have a material impact on its consolidated financial
position or results of operations.
 
 In June
2008, EITF 07-5, “Determining whether an Instrument (or Embedded Feature) is
indexed to an Entity’s Own Stock” was issued. This standard triggers liability
accounting on all options and warrants exercisable at strike prices denominated
in any currency other than the Company’s functional currency. This Issue is
effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. Early
application is not permitted.
 
 In June
2008, FASB issued EITF 08-4, “Transition Guidance for Conforming Changes to
Issue No. 98-5”. The objective of EITF 08-4 is to provide transition
guidance for conforming changes made to EITF 98-5, “Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Ratios”, that result from EITF 00-27 “Application of Issue No. 98-5
to Certain Convertible Instruments”, and SFAS 150, “Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity”. This
Issue is effective for financial statements issued for fiscal years ending after
December 15, 2008. Early application is permitted. Management is currently
evaluating the impact of adoption of EITF 08-4.
  48
  On
October 10, 2008, the FASB issued FSP 157-3, “Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active,” which
clarifies the application of SFAS 157 in a market that is not active and
provides an example to illustrate key considerations in determining the fair
value of a financial asset when the market for that financial asset is not
active. FSP 157-3 became effective on October 10, 2008, and its adoption did not
have a material impact on the Company’s consolidated results of operations or
consolidated financial position for the nine months ended March 31,
2009.
 
 In
January 2009, the FASB issued FSP EITF 99-20-1, “Amendments to the Impairment
Guidance of EITF Issue No. 99-20, and EITF Issue No. 99-20, Recognition of
Interest Income and Impairment on Purchased and Retained Beneficial Interests in
Securitized Financial Assets”. FSP EITF 99-20-1 changes the impairment model
included within EITF 99-20 to be more consistent with the impairment model of
FAS 115. FSP EITF 99-20-1 achieves this by amending the impairment model in EITF
99-20 to remove its exclusive reliance on “market participant” estimates of
future cash flows used in determining fair value. Changing the cash flows used
to analyze other-than-temporary impairment from the “market participant” view to
a holder’s estimate of whether there has been a “probable” adverse change in
estimated cash flows allows companies to apply reasonable judgment in assessing
whether an other-than-temporary impairment has occurred. The Company believes
that the adoption of FSP EITF 99-20-1 will not have a material impact of our
financial results.
 
 In April
2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly” (FSP FAS 157-4). FSP FAS 157-4
amends SFAS 157 and provides additional guidance for estimating fair value in
accordance with SFAS 157 when the volume and level of activity for the asset or
liability have significantly decreased and also includes guidance on identifying
circumstances that indicate a transaction is not orderly for fair value
measurements. This FSP shall be applied prospectively with retrospective
application not permitted. This FSP shall be effective for interim and annual
periods ending after June 15, 2009, with early adoption permitted for
periods ending after March 15, 2009. An entity early adopting this FSP must
also early adopt FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of
Other-Than-Temporary Impairments” (FSP FAS 115-2 and FAS 124-2). Additionally,
if an entity elects to early adopt either FSP FAS 107-1 and APB 28-1, “Interim
Disclosures about Fair Value of Financial Instruments” (FSP FAS 107-1 and APB
28-1) or FSP FAS 115-2 and FAS 124-2, it must also elect to early adopt this
FSP. We are currently evaluating this new FSP but do not believe that it will
have a significant impact on the determination or reporting of our financial
results.
 
 In April
2009, the FASB issued FSP FAS 115-2 and FAS 124-2. This FSP amends SFAS 115,
“Accounting for Certain Investments in Debt and Equity Securities,” SFAS 124,
“Accounting for Certain Investments Held by Not-for-Profit Organizations,” and
EITF Issue No. 99-20, “Recognition of Interest Income and Impairment on
Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held
by a Transferor in Securitized Financial Assets,” to make the
other-than-temporary impairments guidance more operational and to improve the
presentation of other-than-temporary impairments in the financial statements.
This FSP will replace the existing requirement that the entity’s management
assert it has both the intent and ability to hold an impaired debt security
until recovery with a requirement that management assert it does not have the
intent to sell the security, and it is more likely than not it will not have to
sell the security before recovery of its cost basis. This FSP provides increased
disclosure about the credit and noncredit components of impaired debt securities
that are not expected to be sold and also requires increased and more frequent
disclosures regarding expected cash flows, credit losses, and an aging of
securities with unrealized losses. Although this FSP does not result in a change
in the carrying amount of debt securities, it does require that the portion of
an other-than-temporary impairment not related to a credit loss for a
held-to-maturity security be recognized in a new category of other comprehensive
income and be amortized over the remaining life of the debt security as an
increase in the carrying value of the security. This FSP shall be effective for
interim and annual periods ending after June 15, 2009, with early adoption
permitted for periods ending after March 15, 2009. An entity may early
adopt this FSP only if it also elects to early adopt FSP FAS 157-4. Also, if an
entity elects to early adopt either FSP FAS 157-4 or FSP FAS 107-1 and APB 28-1,
the entity also is required to early adopt this FSP. We are currently evaluating
this new FSP but do not believe that it will have a significant impact on the
determination or reporting of our financial results.
  49
 
 In April
2009, the FASB issued FSP FAS 107-1 and APB 28-1. This FSP amends SFAS
No. 107, “Disclosures about Fair Value of Financial Instruments,” to
require disclosures about fair value of financial instruments not measured on
the balance sheet at fair value in interim financial statements as well as in
annual financial statements. Prior to this FSP, fair values for these assets and
liabilities were only disclosed annually. This FSP applies to all financial
instruments within the scope of SFAS 107 and requires all entities to disclose
the method(s) and significant assumptions used to estimate the fair value of
financial instruments. This FSP shall be effective for interim periods ending
after June 15, 2009, with early adoption permitted for periods ending after
March 15, 2009. An entity may early adopt this FSP only if it also elects
to early adopt FSP FAS 157-4 and FSP FAS 115-2 and FAS 124-2. This FSP does not
require disclosures for earlier periods presented for comparative purposes at
initial adoption. In periods after initial adoption, this FSP requires
comparative disclosures only for periods ending after initial adoption. We are
currently evaluating the disclosure requirements of this new FSP.
 
 Off-Balance
Sheet Arrangements
  We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to our
stockholders.
 
 ITEM
      3.
              QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
 
 Not
Applicable.
 
 ITEM
      4(T).
              CONTROLS
      AND PROCEDURES.
 
 Evaluation
of Disclosure Controls and Procedures.
 
 Disclosure
controls and procedures (as defined in Rule 13a-15 of the Exchange Act) are
controls and other procedures that are designed to ensure that information
required to be disclosed in our reports filed or submitted under the Exchange
Act is recorded, processed, summarized and reported, within the time periods
specified in the SEC’s rules and forms.  Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed in our reports filed under the
Exchange Act is accumulated and communicated to management, including our chief
executive officer and chief financial officer as appropriate, to allow timely
decisions regarding required disclosure.
 
 Our
management, with the participation of our chief executive officer and chief
financial officer, evaluated the effectiveness of our disclosure controls and
procedures as of the end of the period covered by this report.  Based
on that evaluation, our chief executive officer and chief financial officer
concluded that our disclosure controls and procedures as of the end of the
period covered by this report were not functioning effectively to provide
reasonable assurance that the information required to be disclosed by the
Company in reports filed under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC’s
rules and forms.  The current staff in the Company’s accounting
department is relatively new and inexperienced, and needs substantial training
so as to meet with the higher demands of being a U.S. public
company.  Therefore, the Company lacks qualified resources to perform
the internal audit functions properly.  In addition, the scope and
effectiveness of the internal audit function are yet to be
developed.
 
 In order
to correct the foregoing deficiencies, we have hired an independent director to
focus on our internal controls and procedures.  We have also
established an internal audit department to assist the independent director in
developing internal audit functions and procedures.  In an attempt to
fully in comply with the Sarbanes-Oxley Act of 2002, in March 2009 we retained
Ernst &Young to perform SOX implementation for us, which process
began  shortly thereafter.
  Changes
in Internal Control over Financial Reporting.
  During
the fiscal quarter ended March 31, 2009, there were no changes in our internal
control over financial reporting that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.
  50
  PART
II
 
 OTHER
INFORMATION
  ITEM
      1.
              LEGAL
      PROCEEDINGS.
 
 From time
to time, we may become involved in various lawsuits and legal proceedings, which
arise, in the ordinary course of business.  However, litigation is
subject to inherent uncertainties, and an adverse result in these, or other
matters, may arise from time to time that may harm our business.  We
are currently not aware of any such legal proceedings or claims that we believe
will have a material adverse affect on our business, financial condition or
operating results.
 
 ITEM
      1A.
              RISK
      FACTORS.
 
 Not
applicable.
 
 ITEM
      2.
              UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS.
 
 None.
 
 ITEM
      3.
              DEFAULTS
      UPON SENIOR SECURITIES.
 
 None.
 
 ITEM
      4.
              SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY
HOLDERS.
 
 None.
 
 ITEM
      5.
              OTHER
      INFORMATION.
 
 None.
 
 ITEM
      6.
              EXHIBITS.
 
 The
following exhibits are filed as part of this report or incorporated by
reference:
 
 Exhibit No.
              
              Description31.1
              
              Certifications
      of Principal Executive Officer filed pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.31.2
              
              Certifications
      of Principal Financial Officer filed pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
              
              Certifications
      of Principal Executive Officer furnished pursuant to 18 U.S.C. Section
      1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2
              
              Certifications
      of Principal Financial Officer furnished pursuant to 18 U.S.C. Section
      1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.
  51
 
 SIGNATURES
 
 In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
 
 
 Date:
      May 15, 2009
                  CHINA
      ADVANCED CONSTRUCTION
                    MATERIALS
      GROUP, INC.By:
                  /s/ Xianfu HanXianfu
      Han, Chief Executive Officer(Principal
      Executive Officer)By:
                  /s/ Chin
      HsiaoChin
      Hsiao, Chief Financial Officer(Principal
      Financial Officer and Principal
                    Accounting
      Officer)
  52