**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**


_______________




**FORM
      10-Q**


_______________




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




**For
      the quarterly period ended September 30, 2008**




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





**For
      the transition period from ______to______.**




**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC.**


**(Exact
      name of registrant as specified in Charter**




**Delaware**
            
            **333-141568**
            
            ******20-8468508****(State
                or other jurisdiction of**
              **incorporation
                or organization)**
            
            **(Commission
                File No.)**
            
            **(IRS
                Employee Identification
                No.)**





**Xianfu
      Han**


**Yingu
      Plaza, 9 Beisihuanxi Road, Suite 1708**


**Haidian
      District, Beijing 100080 PRC**


**(Address
      of Principal Executive Offices)**


**_______________**





**+86
      10 82525301**


**(Issuer
      Telephone number)**


**_______________**




**(Former
      Name or Former Address if Changed Since Last Report)**




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




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




Large
      Accelerated Filer o Accelerated
      Filer o Non-Accelerated
      Filer o 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 o No x




State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of November 11, 2008: 10,525,000 shares
      of
      common stock.













**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC.**




**FORM
      10-Q**




**September
      30, 2008**




**INDEX**




**PART
      I-- FINANCIAL INFORMATION**




Item
                1.
            Financial
                StatementsItem
                2.
            Management’s
                Discussion and Analysis of Financial ConditionItem
                3.
            Quantitative
                and Qualitative Disclosures About Market RiskItem
                4T.
            Control
                and Procedures






**PART
      II-- OTHER INFORMATION**




Item
                1
            Legal
                ProceedingsItem
                1A
            Risk
                FactorsItem
                2.
            Unregistered
                Sales of Equity Securities and Use of ProceedsItem
                3.
            Defaults
                Upon Senior SecuritiesItem
                4.
            Submission
                of Matters to a Vote of Security HoldersItem
                5.
            Other
                InformationItem
                6.
            Exhibits
                and Reports on Form 8-K






**SIGNATURE**




1


**Item
      1. Financial Information**












**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC.**




**FINANCIAL
      STATEMENTS**




**AS
      OF SEPTEMBER 30, 2008**





**CONTENTS**








CONSOLIDATED
                BALANCE SHEETS AS OF SEPTEMBER 30, 2008 (UNAUDITED) AND AS OF JUNE
                30,
                2008 (AUDITED).
            3CONSOLIDATED
                STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30,
                2008 AND
                2007 (UNAUDITED).
            4CONSOLIDATED
                STATEMENT OF STOCKHOLDERS’ EQUITY FOR THE THREE MONTHS ENDED SEPTEMBER 30,
                2008 (UNAUDITED).
            5CONSOLIDATED
                STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED SEPTEMBER 30,
                2008 AND
                2007 (UNAUDITED).
            6NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED).
            7-31






2


**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
      SUBSIDIARIES**





**CONSOLIDATED
      BALANCE SHEETS**


**AS
      OF SEPTEMBER 30 AND JUNE 30, 2008**




September
                30, 2008
            
            June
                30, 2008(Unaudited)**ASSETS**CURRENT
                ASSETS:Cash
            
            $
            5,083,962
            
            
            1,910,495Restricted
                cash
            
            
            888,802
            
            
            913,092Marketable
                securities
            
            
            48,604
            
            
            61,767Accounts
                receivable, net of allowance for doubtful accounts of$254,037
                and $224,924 as of September 30, 2008 and June 30, 2008,
                respectively
            
            
            9,337,189
            
            
            9,365,486Inventories
            
            
            671,604
            
            
            237,836Other
                receivables
            
            
            206,535
            
            
            505,968Prepayment
            
            
            3,981,480
            
            
            3,240,394Total
                current assets
            
            
            20,218,176
            
            
            16,235,038PLANT
                AND EQUIPMENT, net
            
            
            16,262,344
            
            
            16,730,220OTHER
                ASSETS:Financing
                cost
            
            
            511,506
            
            
            586,818Account
                receivable (non-current), net of allowance for doubtful accounts
                of
                $471,783 and $411,061 as of September 30, 2008 and June 30, 2008,
                respectively
            
            
            4,692,723
            
            
            4,753,006Total
                other assets
            
            
            5,204,229
            
            
            5,339,824Total
                assets
            
            $
            41,684,749
            
            
            38,305,082**LIABILITIES
                AND SHAREHOLDERS' EQUITY**CURRENT
                LIABILITIES:Accounts
                payable
            
            $
            4,075,106
            
            
            6,293,553Customer
                deposits
            
            
            138,618
            
            
            165,434Short
                term loans
            
            
            7,811,689
            
            
            4,271,222Other
                payables
            
            
            214,163
            
            
            254,259Other
                payables - shareholder
            
            
            794,152
            
            
            880,302Accrued
                liabilities
            
            
            337,267
            
            
            145,207Taxes
                payable
            
            
            1,655,565
            
            
            1,073,237Interest
                payable
            
            
            158,795
            
            
            -Total
                current liabilities
            
            
            15,185,355
            
            
            13,083,214REDEEMABLE
                PREFERRED STOCK ($0.001 par value, 875,000 shares issued) net of
                discount
                of $1,018,306 and $1,168,548 at September 30 and June 30, 2008,
                respectively
            
            
            5,981,694
            
            
            5,831,452Total
                liabilities
            
            
            21,167,049
            
            
            18,914,666COMMITMENTS
                AND CONTINGENCIES
            
            
            -
            
            
            -SHAREHOLDERS'
                EQUITY:Preferred
                stock $0.001 par value, 1,000,000 shares authorized, 875,000 redeemable
                preferred shares issued and outstanding in 2008, and reported in
                liability
                above
            
            
            -
            
            
            -Common
                Stock, $0.001 par value, 74,000,000 shares authorized,10,525,000
                shares issued and outstanding, respectively
            
            
            10,525
            
            
            10,525Paid-in-capital
            
            
            13,469,168
            
            
            13,494,105Contribution
                receivable
            
            
            (1,210,000
            )
            
            (1,210,000
            )Retained
                earnings
            
            
            3,983,045
            
            
            3,072,249Statutory
                reserves
            
            
            1,616,413
            
            
            1,452,779Accumulated
                other comprehensive income
            
            
            2,648,549
            
            
            2,598,466Deferred
                compensation
            
            
            -
            
            
            (27,708
            )Total
                shareholders' equity
            
            
            20,517,700
            
            
            19,390,416Total
                liabilities and shareholders' equity
            
            $
            41,684,749
            
            
            38,305,082




The
      accompanying notes are an integral part of these statements.  3


**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC AND
      SUBSIDIARIES**





**CONSOLIDATED
      STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME**


**FOR
      THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007**


**(UNAUDITED)**





Three
                months endedSeptember
                30,2008
            
            2007REVENUE:Sales
                of concrete
            
            $
            1,867,687
            
            $
            5,981,669Manufacturing
                services
            
            
            1,925,543
            
            
            -Technical
                services
            
            
            616,797
            
            
            -Mixer
                rental
            
            
            656,814
            
            
            -Marketing
                cooperation
            
            
            69,905
            
            
            -Total
                revenue
            
            
            5,136,746
            
            
            5,981,669COST
                OF REVENUE:Cost
                of sales
            
            
            1,560,307
            
            
            4,950,871Manufacturing
                services
            
            
            497,208
            
            
            -Technical
                services
            
            
            67,902
            
            
            -Mixer
                rental
            
            
            292,045
            
            
            -Marketing
                cooperation
            
            
            30,870
            
            
            -Total
                cost of revenue
            
            
            2,448,332
            
            
            4,950,871GROSS
                PROFIT
            
            
            2,688,414
            
            
            1,030,798SELLING,
                GENERAL AND ADMINISTRATIVE EXPENSES
            
            
            657,109
            
            
            298,975INCOME
                FROM OPERATIONS
            
            
            2,031,305
            
            
            731,823OTHER
                (EXPENSE) INCOME, NETOther
                subsidy income
            
            
            227,594
            
            
            358,715Non-operating
                income (expense), net
            
            
            2,107
            
            
            (14,709
            )Interest
                income
            
            
            1,434
            
            
            1,196Interest
                expense
            
            
            (613,183
            )
            
            (84,540
            )Total
                other (expense) income, net
            
            
            (382,048
            )
            
            260,662INCOME
                BEFORE PROVISION FOR INCOME TAXES
            
            
            1,649,257
            
            
            992,485PROVISION
                FOR INCOME TAXES
            
            
            574,827
            
            
            -NET
                INCOME
            
            
            1,074,430
            
            
            992,485OTHER
                COMPREHENSIVE INCOME:Unrealized
                (loss) gain from marketable securities
            
            
            (13,341
            )
            
            27,527Foreign
                currency translation adjustment
            
            
            63,424
            
            
            172,815COMPREHENSIVE
                INCOME
            
            $
            1,124,513
            
            $
            1,192,827EARNING
                PER SHAREBasicWeighted
                average number of shares
            
            
            10,525,000
            
            
            8,809,583Earning
                per share
            
            $
            0.10
            
            $
            0.11DilutedWeighted
                average number of shares
            
            
            10,621,413
            
            
            8,809,583Earning
                per share
            
            $
            0.10
            
            $
            0.11




The
      accompanying notes are an integral part of these statements.


4


**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
      SUBSIDIARIES**





**CONSOLIDATED
      STATEMENTS OF SHAREHOLDERS' EQUITY**





Common
                stock
            
            Additional
            
            
            
            
            
            Retained
                earnings
            
            AccumulatedNumber
            
            Par
            
            Paid-in
            
            Contribution
            
            Deferred
            
            
            
            Statutory
            
            other
                comprehensiveof
                shares
            
            value
            
            capital
            
            receivable
            
            Compensation
            
            Unrestricted
            
            reserves
            
            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
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            992,485
            
            
            
            
            
            
            
            
            992,485Adjustment
                to statutory reserve
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (99,249
            )
            
            99,249
            
            
            
            
            
            -Unrealized
                gain from marketable securities
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            27,527
            
            
            27,527Foreign
                currency translation gain
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            172,815
            
            
            172,815BALANCE,
                September 30, 2007 (unaudited)
            
            
            8,809,583
            
            $
            8,810
            
            $
            12,091,290
            
            $
            (13,470,100
            )
            $
            -
            
            $
            7,202,911
            
            $
            995,883
            
            $
            860,264
            
            $
            7,689,058Shares
                issued due to reorganization
            
            
            1,690,417
            
            
            1,690.00
            
            
            (1,690
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -Shares
                issued for services
            
            
            25,000
            
            
            25.00
            
            
            33,225
            
            
            
            
            
            (27,708
            )
            
            
            
            
            
            
            
            
            
            
            5,542Warrants
                issued for services
            
            
            
            
            
            
            
            
            169,345
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            169,345Contribution
                receivable offset with distribution owed
            
            
            
            
            
            
            
            
            
            
            
            7,260,000
            
            
            
            
            
            (7,627,051
            )
            
            
            
            
            367,051
            
            
            -Capital
                contribution received
            
            
            
            
            
            
            
            
            
            
            
            5,000,100
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            5,000,100Fair
                value of warrants issued with preferred stock
            
            
            
            
            
            
            
            
            1,201,935
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,201,935Adjustment
                to statutory reserve
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (456,896
            )
            
            456,896
            
            
            
            
            
            -Net
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            3,953,285
            
            
            
            
            
            
            
            
            3,953,285Unrealized
                loss on marketable securities
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (40,009
            )
            
            (40,009
            )Foreign
                currency translation gain
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,411,160
            
            
            1,411,160BALANCE,
                June 30, 2008
            
            
            10,525,000
            
            $
            10,525
            
            $
            13,494,105
            
            $
            (1,210,000
            )
            $
            (27,708
            )
            $
            3,072,249
            
            $
            1,452,779
            
            $
            2,598,466
            
            $
            19,390,416Stock
                based compensation
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2,771
            
            
            
            
            
            
            
            
            
            
            
            2,771Forfeited
                stock compensation
            
            
            
            
            
            
            
            
            (24,937
            )
            
            
            
            
            24,937
            
            
            
            
            
            
            
            
            
            
            
            -Net
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,074,430
            
            
            
            
            
            
            
            
            1,074,430Adjustment
                to statutory reserve
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (163,634
            )
            
            163,634
            
            
            
            
            
            -Unrealized
                loss on marketable securities
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (13,341
            )
            
            (13,341
            )Foreign
                currency translation gain
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            63,424
            
            
            63,424BALANCE,
                September 30, 2008 (unaudited)
            
            
            10,525,000
            
            $
            10,525
            
            $
            13,469,168
            
            $
            (1,210,000
            )
            $
            -
            
            $
            3,983,045
            
            $
            1,616,413
            
            $
            2,648,549
            
            $
            20,517,700


The
        accompanying notes are an integral part of these statements.  5
 **CHINA
          ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
          SUBSIDIARIES**
 **CONSOLIDATED
          STATEMENTS OF CASH FLOWS**


**FOR
      THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007**


**(UNAUDITED)**





2008
            
            2007CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                income
            
            $
            1,074,430
            
            $
            992,485Adjustments
                to reconcile net income to cash (used in) provided by operating
                activities:Depreciation
            
            
            533,125
            
            
            282,942Amortization
                of financing cost
            
            
            75,312
            
            
            -Amortization
                of discount on convertible perferred stock
            
            
            150,242
            
            
            -Amortization
                of deferred compensation expense
            
            
            2,771
            
            
            -Bad
                debt expense
            
            
            88,144
            
            
            -Change
                in operating assets and liabilitiesAccounts
                receivable
            
            
            (4,797,624
            )
            
            (1,967,122
            )Inventories
            
            
            (433,383
            )
            
            60,639Other
                receivables
            
            
            301,005
            
            
            629,600Prepayment
            
            
            1,012,365
            
            
            (43,248
            )Accounts
                payable
            
            
            854,631
            
            
            1,787,444Other
                payables
            
            
            (40,636
            )
            
            94,679Other
                payables - shareholders
            
            
            (86,558
            )
            
            -Accrued
                liabilities
            
            
            350,573
            
            
            (39,163
            )Customer
                deposit
            
            
            (27,286
            )
            
            -Taxes
                payable
            
            
            579,742
            
            
            6,965Net
                cash (used in) provided by operating activities
            
            
            (363,147
            )
            
            1,805,221CASH
                FLOWS FROM INVESTING ACTIVITIES:Purchase
                of property, plant and equipment
            
            
            (19,067
            )
            
            (6,173
            )Net
                cash used in investing activities
            
            
            (19,067
            )
            
            (6,173
            )CASH
                FLOWS FINANCING ACTIVITIES:Payments
                of short term loan
            
            
            (3,821,544
            )
            
            (3,031,400
            )Proceeds
                from short term loan
            
            
            7,354,278
            
            
            646,405Restricted
                cash
            
            
            24,290
            
            
            -Net
                cash provided by (used in) financing activities
            
            
            3,557,024
            
            
            (2,384,995
            )EFFECTS
                OF EXCHANGE RATE CHANGE IN CASH
            
            
            (1,343
            )
            
            1,144INCREASE
                (DECREASE) IN CASH
            
            
            3,173,467
            
            
            (584,803
            )CASH,
                beginning of period
            
            
            1,910,495
            
            
            1,424,883CASH,
                end of period
            
            $
            5,083,962
            
            $
            840,080


The
        accompanying notes are an integral part of these
        statements.


6


**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**


**(UNAUDITED)**





**Note
      1 - Organization and description of business**





China
      Advanced Construction Materials Group, Inc. (“China ACM” or the “Company”) was
      founded as an unincorporated business 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 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 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
      the “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 PRC as a
      wholly-owned foreign limited liability company 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-mixed 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**


**SEPTEMBER
      30, 2008**


**(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. 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 firing of key personnel. In order
                to
                ensure Xin Ao’s normal operation, China-ACMH agrees 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
                operation between Xin Ao and any other third parties. As a counter
                guarantee, Xin Ao agrees 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 authorize 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.




The
      term
      of these agreements is for ten (10) years and shall terminate automatically
      upon
      expiration, and may be extended only if China-ACMH gives its written consent
      of
      the extension before the expiration. The parties shall, 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 shall not 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.




8


**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**


**(UNAUDITED)**





Through
      China-ACMH, BVI-ACM operates and controls Xin Ao through the Contractual
      Arrangements. BVI-ACM utilized the Contractual Arrangements to gain control
      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.





Through
      this series of Contractual Arrangements, China-ACMH provides exclusive technical
      consulting services to Xin Ao for an annual fee equal to Xin Ao’s yearly net
      income. China-ACMH effectively took over management of daily business activities
      of Xin Ao and has the right to appoint all executives, senior management and
      members of the board of directors of Xin Ao. China-ACMH guarantees all of Xin
      Ao’s business activities with any third parties and in return is guaranteed all
      of Xin Ao’s assets. In addition, shareholders of Xin Ao pledged their shares in
      Xin Ao as collateral for the annual fees due to the Company and granted
      China-ACMH the exclusive right and option to acquire all of their equity
      interests in Xin Ao.







**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.





Management
      has included all normal recurring adjustments considered necessary to give
      a
      fair presentation of operating results for the periods presented. Interim
      results are not necessarily indicative of results for a full year. 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.


9


**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**


**(UNAUDITED)**





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. Through a series
      of
      Contractual Arrangements, China-ACMH effectively took over management of daily
      business activities of Xin Ao and has the right to appoint all executives,
      senior management and members of the board of directors of Xin Ao. Equity
      holders of Xin Ao also signed a Power of Attorney, which authorizes the
      individuals appointed by China-ACMH to exercise all of their voting rights
      as
      shareholder at Xin Ao’s shareholder meetings. China-ACMH provides exclusive
      technical consulting services to Xin Ao for an annual fee equal to Xin Ao’s
      yearly net income, and guarantees all of Xin Ao’s business activities with any
      third parties and in return is guaranteed all of Xin Ao’s assets. In addition,
      shareholders of Xin Ao pledged their shares in Xin Ao as collateral for the
      annual fees due to the Company and granted China-ACMH the exclusive right and
      option to acquire all of their equity interests in Xin Ao. In accordance to
      Paragraph 5 of FIN 46(R), the Company determined Xin Ao is a variable interest
      entity subject to consolidation under the Interpretation and the Company is
      the
      primary beneficiary. Accordingly, the financial statements of Xin Ao are
      included in the consolidated financial statements of the Company.




Foreign
      currency translation





The
      reporting currency of the Company is the US dollar. The functional currency
      of
      China ACM and BVI-ACM is the US dollar. China-ACMH and Xin Ao use their local
      currency Chinese Renminbi (“RMB”) as their functional currency. According to
      Statement of Financial Accounting Standards (“SFAS”) No. 52, “ *Foreign
      Currency Translation,* ”
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 statement
      of cash flows will not necessarily agree with changes in the corresponding
      balances on the balance sheets.





Accumulated
      other comprehensive income in the consolidated statement of shareholders’ equity
      amounted to $2,648,549 and $2,598,466 as of September 30, 2008 and June 30,
      2008, respectively. Asset and liability accounts at September 30, 2008 and
      June
      30, 2008 were translated at 6.84 RMB and 6.85 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 September 30, 2008 and 2007 were 6.84 RMB and 7.55 RMB to $1.00,
      respectively.





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. Gains and losses from foreign currency
      transactions are included in the results of operations. No material transaction
      gain or loss for the periods ended September 30, 2008 and 2007.


10


**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**


**(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 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 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 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.


11


**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**


**(UNAUDITED)**





Shipping
      and handling





Shipping
      and handling costs related to costs of the raw materials purchased is included
      in cost of revenues.





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.





Financial
      instruments





SFAS
      107,
“ *Disclosures
      about Fair Value of Financial Instruments* ”
      requires disclosure of the fair value of financial instruments held by the
      Company. SFAS 107 defines the fair value of the financial instruments as the
      amount at which the instrument could be exchanged in a current transaction
      between willing parties. The Company considers the carrying amount of cash,
      accounts receivable, other receivables, prepayments, accounts payable, accrued
      liabilities, other payables, taxes payable, and loans to approximate their
      fair
      values because of the short period of time between the origination of such
      instruments and their expected realization and their current market rate of
      interest.





On
      July
      1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements. SFAS No.
      157
      defines fair value, establishes a three-level valuation hierarchy for
      disclosures of fair value measurement and enhances disclosures requirements
      for
      fair value measures. The carrying amounts reported in the balance sheets for
      receivables and current liabilities each qualify as financial instruments and
      are a reasonable estimate of fair value because of the short period of time
      between the origination of such instruments and their expected realization
      and
      their current market rate of interest. The three levels are defined as
      follow:


12


**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**


**(UNAUDITED)**





·
            Level
                1inputs
                to the valuation methodology are quoted prices (unadjusted) for identical
                assets or liabilities in active
                markets.




·
            Level
                2inputs
                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, for substantially
                the
                full term of the financial
                instrument.





·
            Level
                3inputs
                to the valuation methodology are unobservable and significant to
                the fair
                value measurement.





The
      Company did not identify any assets and liabilities that are required to be
      presented on the balance sheet at fair value in accordance with SFAS 157.





Concentration
      of risk





·
            Cash
                - Cash includes cash on hand and demand deposits in accounts maintained
                with state owned banks within the People’s Republic of China.The
                Company considers all highly liquid instruments purchased with original
                maturities of three months or less, and money market account, to
                be cash
                equivalents. Total cash in these banks at September 30, 2008 and
                June 30,
                2008 amounted to $4,962,477 and $1,795,388, respectively, of which
                no
                deposits were covered by insurance. Also, as of September 30, 2008,
                the
                Company held $888,802 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. The Company has not experienced,
                nor dose
                it anticipate, nonperformance by the institutions.





·
            Major
                customers and suppliers - For thethree
                months ended September 30, 2008, two customer accounted for approximately
                37.3% of the Company's sales and 9.3% of the Company’s accounts receivable
                as of September 30, 2008. For the three months ended September 30,
                2007,
                one customer accounted for approximately 24% of the September 30,
                2007.
                For the three months ended September 30, 2008, two suppliers accounted
                for
                approximately 51.8% of the Company’s purchase and approximately 4.4% to
                this supplier as of September 30, 2008. For the three months ended
                September 30, 2007, three suppliers accounted for approximately 37.4%
                of
                the Company's purchases. These three suppliers represent approximately
                12%
                of the Company's total accounts payable balance as of September 30,
                2007.


13


**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**


**(UNAUDITED)**





·
            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
      miscellaneous professional fees (see Note 10). Restricted cash is classified
      in
      current assets as of September 30, 2008, based on the time period funds are
      expected to be used.





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. As of September 30, 2008, the Company determined
      no
      reserves were necessary.





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. Depreciation is provided over the estimated useful
      life of each class of depreciable asset and is computed using the straight-line
      method with 5% residual value.


14


**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**


**(UNAUDITED)**





The
      estimated useful lives of assets are as follows:





Useful
                LifeTransportation
                equipment
            10
                yearsPlant
                machinery
            10
                yearsOffice
                equipment
            5
                years





The
      cost
      and related accumulated depreciation of assets sold or otherwise retired are
      eliminated from the accounts and any gain or loss is included in the statement
      of income.





Impairment
      of long-lived assets





Long-lived
      assets of the Company are reviewed at least annually, more often if
      circumstances dictate, 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 to reduce the related assets
      to
      their net realizable value. The Company believes no impairment exists at
      September 30, 2008.





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 receivables. The bifurcation between current and
      noncurrent portions of accounts receivable is based on management’s estimate and
      predicated on historical collection experience.





Redeemable
      preferred stock





On
      June
      11, 2008, the Company completed an offering of the sale of 875,000 units. Each
      unit consists 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 $7,000,000 (or approximately $5.3 million net
      proceeds after offering expense and the $930,000 restricted cash placed in
      escrow) from a group of accredited investors. On June 11, 2010, subject to
      the
      prior conversion by the holders, the Company will redeem any outstanding
      preferred stock at $8.00 plus accrued but unpaid dividends. Consequently, the
      total amount of the gross proceeds has been excluded from permanent equity
      and
      recorded as redeemable preferred stock in accordance with Rule 5-02.28 of
      Regulation S-X and Section 211 of the Codification of Financial Reporting
      Policies. SFAS 150, “Accounting for Certain Financial Instruments with
      Characteristics of Both Liabilities and Equity,” requires the redeemable
      preferred stock to be carried at the fair value of the redemption or cash
      settlement amount because the terms of the stock permit the holder to demand
      redemption. Also, since the redemption obligation and annual 9% dividends
      payable to the holder regardless of profitability made the instrument more
      akin
      to a debt instrument than temporary equity, the Company recorded the redeemable
      preferred stock as a liability.. The dividends are accounted for as interest.
      Additionally, pursuant to APB 14, “Accounting for Convertible Debt and Debt
      Issued with Stock Purchase Warrants,” the Company discounted the fair value of
      the warrants from the carrying value of the redeemable stock. The discount
      is
      amortized into interest expense over the two year redemption period. The Company
      analyzed the conversion feature and determined the effective conversion price
      was higher than the market price; therefore, no beneficial conversion feature
      was recorded.


15


**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**


**(UNAUDITED)**







Income
      taxes





The
      Company is governed by the Income Tax Law s
      of the
      PRC. The Company accounts for income taxes in accordance with FAS 109,
“ *Accounting
      for Income Taxes* ”
which
      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 United States, the Company did not have any provision for
      income taxes including any deferred income taxes, for the three months ended
      September 30, 2008 and 2007.





The
      Company adopted FIN 48, “ *Accounting
      for Uncertainty in Income Taxes-an interpretation of FASB Statements No.
      109* ,”
as
      of
      July 1, 2007. 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 likely of being
      realized upon ultimate settlement. Tax positions that previously failed to
      meet
      the more-likely-than-not recognition threshold should be recognized in the
      first
      subsequent period in which the threshold is met. Previously recognized tax
      positions that no longer meet the more-likely-than-not criteria should be
      de-recognized in the first subsequent financial reporting period in which the
      threshold is no longer met. FIN 48 also provides guidance on de-recognition,
      classification, interest and penalties, accounting in interim periods,
      disclosures, and transition. The adoption had no affect on the Company’s
      financial statements. There are no deferred tax amounts as of September 30,
      2008
      and June 30, 2008.


16


**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**


**(UNAUDITED)**





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 entitles
      the
      Company to an income tax exemption from January 1, 2003, through December 31,
      2007, as granted by the State Administration of Taxation of the PRC. 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 income tax exemption granted to the Company
      was eliminated after December 31, 2007. The Company is currently evaluating
      the
      effect of the new EIT law will have on its financial position.





PRC
      law
      requires that before a foreign invested enterprise can legally distribute
      profits to its partners, 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 and the common welfare fund, and represents
      restricted retained earnings.





The
      following table reconciles the U.S. statutory rates to the Company’s effective
      tax rate for the three months ended September 30, 2008 and 2008:





2008
            
            2007U.S.
                statutory rates
            
            
            34.0
            %
            
            34.0
            %Foreign
                income not recognized in U.S.
            
            
            (34.0
            )
            
            (34.0
            )China
                income taxes
            
            
            25.0
            
            
            33.0China
                income tax exemption
            
            
            -
            
            
            (33.0
            )Effective
                income tax rates
            
            
            25.0
            %
            
            -
            %





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 three months period ended September 30,
      2008.


17


**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**


**(UNAUDITED)**





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 three months ended September 30, 2008 and 2007, $227,594 and
      $358,715, respectively, was recognized as other subsidy income from VAT taxes
      collected.





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 and $1,272 for the three months ended September 30, 2008 and
      2007, respectively.





Earnings
      per share





Basic
      earnings per common share is computed on the basis of the weighted average
      number of common shares outstanding during the period. Diluted earnings per
      share is computed on the basis of the weighted average number of common shares
      and dilutive securities (such as warrants and convertible preferred stock)
      outstanding. 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.


18


**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**


**(UNAUDITED)**





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 not
      determined the effect that the application of SFAS 160 will have 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.


19


**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**


**(UNAUDITED)**





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.





In
      October 2008, the FASB issued FASB Staff Position No. FAS 157-3, “Determining
      the Fair Value of a Financial Asset in a Market That Is Not Active” (FSP 157-3),
      which clarifies the application of SFAS 157 when the market for a financial
      asset is inactive. Specifically, FSP 157-3 clarifies how (1) management’s
      internal assumptions should be considered in measuring fair value when
      observable data are not present, (2) observable market information from an
      inactive market should be taken into account, and (3) the use of broker quotes
      or pricing services should be considered in assessing the relevance of
      observable and unobservable data to measure fair value. FSP 157-3 became
      effective on October 10, 2008, and its adoption did not have a material impact
      on our financial position or results for the quarter ended September 30,
      2008.





**Note
      3 - Supplemental disclosure of cash flow information**





During
      the three months ended September 30, 2008 and 2007, the Company paid interest
      totaling $58,645 and $84,540, respectively.





There
      were no income tax payments for the three months ended September 30, 2008 and
      2007.





20


**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**


**(UNAUDITED)**





Non-cash
      transactions





The
      Company assigned accounts receivables totaling $ 4,833,849
      as payment to suppliers whose balances were included in accounts
      payable.





Balances
      of accounts receivable and payable reported on the balance sheets are net of
      the
      assignments.





Non-cash
      transactions in the three months ended September 30, 2007





The
      Company assigned accounts receivables totaling $1,343,937 to the suppliers
      as an
      offset of the liability owed recorded under accounts payable and also assigned
      and also assigned accounts receivables totaling $13,246 as an offset to other
      payable. Balances of accounts receivable and payables reported on the balance
      sheets are net of the assignments.





**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 are included in other income
      (expense) and, when applicable, are reported as a reclassification adjustment
      in
      other comprehensive income. Gains and losses on the sale of securities are
      determined using the specific-identification method.





There
      were no realized gains or losses from the sale of marketable securities for
      the
      three months ended September 30, 2008 and 2007. The Company determines cost
      on
      the specific identification method. Unrealized gains (losses) totaling ($13,341)
      and $27,527 were recorded as other comprehensive income for the three months
      ended September 30, 2008 and 2008, respectively.





**Note
      5 - Accounts receivable, trade**





Accounts
      receivable, trade, are generated from concrete products sold and technological
      consulting services provided to clients. The payment terms are defined in
      contracts. Over 80% of our receivables are due within a year by contract and
      are
      classified as current assets on the balance sheet. For some large construction
      projects that take years to complete, we may provide extended payment terms
      to
      the general contractors. These contractors are usually large state-owned
      builders with good credit rating. Sales and accounting departments together
      evaluate at each period end the aging, structure and collectability of accounts
      receivable and for these receivables that are past due or not being paid
      according to payment terms, we will take actions including sending out past
      due
      notice, strengthening collections efforts, lowering the client's credit rating,
      seeking legal resolution in a court of law, and increasing allowance for bad
      debt.


21


**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**


**(UNAUDITED)**





Accounts
      receivable and allowance for doubtful accounts consist of the following:





September
                30, 2008
              (Unaudited)
            
            June
                30, 2008Accounts
                receivable, current
            
            $
            9,591,226
            
            $
            9,590,410Less:
                allowance for doubtful accounts, current
            
            
            (254,037
            )
            
            (224,924
            )Net
                accounts receivable, current
            
            
            9,337,189
            
            
            9,365,486Accounts
                receivable, non-current
            
            
            5,164,506
            
            
            5,164,067Less:
                allowance for doubtful accounts, non-current
            
            
            (471,783
            )
            
            (411,061
            )Net
                accounts receivable, non-current
            
            
            4,692,723
            
            
            4,753,006Total
                accounts receivable, net
            
            $
            14,029,912
            
            $
            14,118,492





**Note
      6 - Plant and equipment**





Plant
      and
      equipment consist of the following:





September
                30, 2008
              (Unaudited)
            
            June
                30, 2008Transportation
                equipment
            
            $
            20,342,484
            
            $
            20,286,866Plant
                machinery
            
            
            2,214,676
            
            
            1,894,585Office
                equipment
            
            
            43,175
            
            
            43,057Construction-
                in-progress
            
            
            -
            
            
            295,033Total
            
            
            22,600,335
            
            
            22,519,541Less:
                accumulated depreciation
            
            
            (6,337,991
            )
            
            (5,789,321
            )Plant
                and equipments, net
            
            $
            16,262,344
            
            $
            16,730,220





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. 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. Construction of the new plant was
      completed and transferred to fixed assets by August 2008. As of September 30,
      2008 and June 30, 2008, $0 and $16,248, respectively, of interest was
      capitalized into construction in progress.


22


**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**


**(UNAUDITED)**





Depreciation
      expense for the three months ended September 30, 2008 and 2007 amounted to
      $533,125 and $282,942, respectively.





**Note
      7 - 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. These loans are
      renewable. As of September 30, 2008 and June 30, 2008, the outstanding balance
      on these loans was $7,811,689 and $4,271,222, respectively, and these loans
      consisted of the following:





September
                30,
            
            June
                30,2008
              (Unaudited)
            
            2008Loan
                from Huaxia Bank, with effective annual interest rate of 7.5555%,
                due
                November 16, 2008, guaranteed by the Company’s shareholder, Mr. Han
                Xianfu
            
            $
            2,926,000
            
            $
            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
            
            
            4,389,000
            
            
            -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.
            
            
            496,689
            
            
            524,510Total
                short term loans
            
            $
            7,811,689
            
            $
            4,271,222





Total
      interest expense on short-term loans for the three months ended September 30,
      2008 and 2007 amounted to $227,811 and $84,540, respectively.


23


**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**


**(UNAUDITED)**





**Note
      8- Other payables - shareholder**





Beginning
      in July 2007, one of the Company’s shareholder, leased an office to the Company.
      For the three months ended September 30, 2008, the Company recorded rent expense
      from shareholder of $43,279, all of which remained unpaid as of September 30,
      2008 and is included as other payables- shareholder.





The
      Company’s shareholders Mr. Han, Xianfu and Mr. He Weili, who have 57.15% and
      38.10% of ownership interest in BVI-ACM, respectively, together loaned $750,900
      to BVI-ACM on March 12, 2008 for cash flow purposes. This is a non-interest
      bearing loan, unsecured, and is payable on demand.





Total
      other payables - shareholders are as follows:





September
                30, 2008
              (Unaudited)
            
            June
                30, 2008Han
                Xianfu, shareholder
            
            $
            450,540
            
            $
            450,550He
                Weili, shareholder
            
            
            343,612
            
            
            429,752Total
                other payable - shareholder
            
            $
            794,152
            
            $
            880,302





**Note** **9-
      Taxes payable**





Corporate
      income taxes





Companies
      established before March 16, 2007 will continue to enjoy tax holiday treatment
      approved by local government for a grace period of either for the next 5 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.





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%. For the three months ended September 30, 2008
      and
      2007, the provision for income taxes amounted to $574,827 and $0, respectively.
      The estimated tax savings due to this tax exemption for the three months ended
      2007 amounted to $254,438.  If
      the
      income tax had been applied, for the three months ended September 30, 2007,
      the
      basic and diluted earnings per share will decrease by $0.03.


24


**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**


**(UNAUDITED)**





Taxes
      payable consisted of the following:





September
                30, 2008
              (Unaudited)
            
            June
                30, 2008Income
                taxes payable
            
            $
            1,650,162
            
            $
            1,072,747Other
            
            
            5,403
            
            
            490Total
                taxes payable
            
            $
            1,655,565
            
            $
            1,073,237





The
      Company did not make any income tax payments during the three months ended
      September 30, 2008 and 2007.





**Note
      10 - 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, whether or not the Company has profits.





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,
      $9,500 was paid to American Stock Transfer & Trust Company as a transfer
      agent fee, $60,000 was paid to the attorney, and $45,000 was paid for a finance
      fee for the purchasers in connection with the transaction.





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.


25


**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**


**(UNAUDITED)**





The
      value
      of the warrants issued to the placement agent was calculated as $169,345 using
      the CRR Binomial Model. The fair value of these warrants of $169,345 was
      recognized as offering expense in the consolidated statement of income for
      the
      year ended June 30, 2008. 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 US public company due to limited trading history of
      the
      common stock. The risk-free interest rate was based on 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.





On
      May 1,
      2008, the Company issued 25,000 common shares to the Company’s Executive, par
      value $0.001 for services to the Executive renders to the Company. The shares
      become fully vested after one year from the date of grants. On July 31 2008,
      the
      Company terminated employment, and 25,000 shares were forfeited upon
      resignation.





Following
      is a summary of the status of warrants outstanding:





Outstanding
                WarrantsExercise
                Price
            
            Number
            
            Average
                Remaining Contractual Life$2.40
            
            875,000
            
            4.69
                years$2.40
            
            122,500
            
            4.69
                yearsTotal
            
            997,500





Following
      is a summary of the Warrants activity:





Outstanding
                as of June 30, 2007
            
            -Granted
            
            
            997,500Forfeited
            
            
            -Exercised
            
            
            -Outstanding
                as of June 30, 2008
            
            
            997,500GrantedForfeitedExercisedOutstanding
                as of September 30, 2008
            
            
            997,500





26


**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**


**(UNAUDITED)**





Additionally,
      the Company's officers, directors and majority shareholders, Xianfu Han and
      Weili He, entered into a Lock-Up Agreement with the investors whereby both
      Xianfu Han and Weili He agreed they will not, offer, pledge, sell or otherwise
      dispose of any shares of 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 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 September 30, 2008, restricted
      cash balance amounted to $888,802.





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 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 determined that the threshold for the period ended
      September 30, 2008 has not been met.




**Note
      11 - Contribution receivable**





On
      July
      8, 2005, Xin Ao’s board of directors passed a resolution to increase the
      registered capital from $3,630,000 (RMB30 million) to $12,100,000 (RMB100
      million). The increase in registered capital of $8,470,000 (RMB70 million)
      was
      funded by the undistributed profits as of June 30, 2005. Since Xin Ao did not
      have sufficient undistributed profits from June 30, 2005, based on the PRC
      government regulation, all companies need to record its capital in accordance
      with the business license, the unfunded amount has been recorded as contribution
      receivable. Since the capital should be contributed by the shareholders of
      the
      Company, the contribution receivable was recorded as part of the equity
      transaction.





At the
      inception of BVI-ACM, BVI-ACM issued 10,000 shares of common stock to its
      founding shareholders. The shares were issued at par value or $0.01 per share.


27


**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**


**(UNAUDITED)**





On
      November 23, 2007, BVI-ACM established a 100% subsidiary, Beijing Ao Hang
      Construction Material Technology Co., Ltd. (“China-ACMH”), in PRC as a wholly
      owned foreign limited liability company with registered capital of $5 million.
      According to the
      laws of PRC, BVI-ACM is required to pay 15% of $5 million by February 22, 2008
      and the remaining balance by November 22, 2009.





On
      March
      30, 2008, Xin Ao’s board of directors approved to transfer $7,260,000 from
      undistributed retained earnings into registered capital. Concurrently,
      China-ACMH made a payment of $5 million and BVI-ACM made a payment of $100.
      As
      of September 30, 2008, a contribution receivable in the amount of $1,210,000
      remains unpaid.





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
            
            
            (7,260,000
            )
            
            (5,000,000
            )
            
            (100
            )
            
            (12,260,100
            )Balance,
                June 30, 2008
            
            $
            1,210,000
            
            $
            -
            
            $
            -
            
            $
            1,210,000Less:
                contribution received
            
            
            -
            
            
            -
            
            
            -
            
            
            -Balance,
                September 30, 2008
            
            $
            1,210,000
            
            $
            -
            
            $
            -
            
            $
            1,210,000





**Note
      12 - 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
      transfer to this reserve must be made before distribution of any dividends
      to
      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.


28


**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**


**(UNAUDITED)**





The
      Chinese government restricts distributions of registered capital and the
      additional investment amounts required by a foreign invested enterprise.
      Approval by the Chinese government must be obtained before distributions of
      these amounts can be returned to the shareholders.





**Note
      13 - Earnings Per Share**





The
      following demonstrates calculation of the differences between basic and diluted
      earnings per common share for the three months ended September 30, 2008 and
      2007:





**Basic
                earning per share**
            
            2008
            
            2007Net
                income
            
            $
            1,074,430
            
            
            992,485Weighted
                shares outstanding-Basic
            
            
            10,525,000
            
            
            8,809,583Earnings
                per share-Basic
            
            $
            0.10
            
            
            0.11**Diluted
                earning per share**Net
                income for diluted EPS
            
            $
            1,074,430
            
            
            993,586Weighted
                shares outstanding-Basic
            
            
            10,525,000
            
            
            8,809,583Effect
                of diluted securities-Warrants
            
            
            96,413
            
            
            -Weighted
                shares outstanding-Diluted
            
            
            10,621,413
            
            
            8,809,583Earning
                per share-Diluted
            
            $
            0.10
            
            
            0.11





For
      the
      three months ended September 30, 2008, 1,995,000 warrants at an exercise price
      of $2.40 per share were included in the diluted EPS, which resulted for
      additional 96,413 shares of common stock. 875,000 shares of redeemable preferred
      stocks were excluded from the diluted earnings per share calculation due to
      the
      anti-diluted effect.





**Note
      14 - 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 made $17,450
      and $3,036 in contributions of employment benefits, including pension for the
      three months ended September 30, 2008 and 2007, respectively.


29


**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**


**(UNAUDITED)**





**Note
      15 - Operating leases**





The
      Company entered
      into a lease agreement for manufacturing plant with an unrelated party from
      October 1, 2007 to September 30, 2010 with monthly payment of $14,426 and leased
      office space from the Company’s shareholder, Mr. He Weili, from July 2007 to
      June 2009 with annual payment of $197,245. Total operating lease expense for
      the
      three months ended September 30, 2008 and 2007 was $92,590 and $147,646,
      respectively, and is included in selling, general, and administrative expenses.
      Future minimum lease payments under noncancellable operating leases with a
      term
      of one year or more consist of the following:









Year
                ended June 30,
            
            Amount2009
            
            $
            278,8292010
            
            
            197,1242011
            
            
            49,281Thereafter
            
            
            -





**Note
      16 - Commitments and contingencies**





Litigation





From
      time
      to time, the Company becomes involved in various lawsuits and legal proceedings
      which arise in the ordinary course of business.




Following
      is the summary of the current litigation as of September 30, 2008:




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 (RMB2 million) for the cement supplied
      by
      Xin Ao between March 2005 and June 2005 and compensatory damages of
      approximately $23,500 (RMB171 thousand) 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 September 30, 2008, the
      Company has not received the damage payment from Boda, and management has
      estimated that the collectability of the receivable is deemed low, therefore,
      the Company wrote off the amount from its book.


30


**CHINA
      ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND
      SUBSIDIARIES**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2008**


**(UNAUDITED)**





Yunwei
      Zhang vs. Beijing Xin’Ao Concrete Co., Ltd. (Beijing District Court,
      PRC)





In
      May
      2006, an action against Xin Ao and Beijing Shangdi Xinda Company was filed
      by
      (“Shangdi”) Yunwei Zhang in Beijing District Court seeking payment of
      approximately $112,000 (RMB814 thousand for damages caused by Qingbao Zhang,
      a
      contracted driver of Xin Ao and an employee of Zhangbei County Labor Service
      Co., Ltd. The vehicle involved in the accident is owned by Beijing Shangdi
      Xingda Company who leased to Xin Ao who subsequently leased the vehicle to
      Zhangbei County Labor Service Company. On June 16, 2008, the Court ruled against
      Xin Ao and Shangdi to pay the damages incurred to Yunwei Zhang in the accident. Xinao
      is
      responsible for approximately $39,000 (approximately RMB 273,000) for the
      damages .




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. In
      accordance with FSP EITF 00-19-2, registration rights penalties should be
      accounted for under FAS 5 (i.e., 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 they were not “probable” at inception on June 11, 2008 and that any
      penalties are not “probable” as of September 30, 2008. Accordingly, no accrual
      for any penalties has been made. The Company will continually re-assess whether
      the payment of any penalties is “probable” and, if it becomes “probable” that
      penalties will be incurred, the estimated amount of those penalties will be
      accrued.





**Note
      17 - Subsequent Events**





On
      October 3, 2008, the Company entered into a one year director agreement with
      Mr.
      Jeremy Goodwin in connection with his services as a member of the board of
      directors, subject to a third party background check. The agreement provided
      a
      stock option to purchase a total of 50,000 shares of the Company’s common stock
      at an exercise price of $2.90 per share. Each quarter 12,500 options vest and
      became exercisable





31




**Item
      2.**  **Management’s
      Discussion and Analysis or Plan of Operation**





*The
      following discussion and analysis of the results of operations and financial
      condition of China Advanced Construction Materials Group, Inc. (“China ACM”) for
      the three months ended September 30, 2008 and 2007, 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. 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.





**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 three months ended September 30, 2008,
      our top ten customers’ sales accounted for 77.1% of all sales revenue; the
      largest three of these customers accounted for sales of 24.6%, 12.7%, and 9.3%,
      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.





32


**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.




**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 September 30,****2008**
            
            **2007**(Unaudited)
            
            (Unaudited)RevenueSales
                of concrete
            
            $
            1,867,687
            
            $
            5,981,669Manufacturing
                services
            
            
            1,925,543
            
            
            -Technical
                services
            
            
            616,797
            
            
            -Mixer
                rental
            
            
            656,814
            
            
            -Marketing
                cooperation
            
            
            69,905
            
            
            -Total
                revenue
            
            
            5,136,746
            
            
            5,981,669Cost
                of revenueCost
                of sales
            
            
            1,560,307
            
            
            4,950,871Manufacturing
                services
            
            
            497,208
            
            
            -Technical
                services
            
            
            67,902
            
            
            -Mixer
                rental
            
            
            292,045
            
            
            -Marketing
                cooperation
            
            
            30,870
            
            
            -Total
                cost of revenue
            
            
            2,448,332
            
            
            4,950,871Gross
                profit
            
            
            2,688,414
            
            
            1,030,798Selling,
                general and administrative expenses
            
            
            657,109
            
            
            298,975Other
                (expense) income, net
            
            
            (382,048
            )
            
            260,662Income
                before provision for income taxes
            
            
            1,649,257
            
            
            992,485Income
                taxes
            
            
            574,827
            
            
            -Net
                income
            
            $
            1,074,430
            
            $
            992,485




33


The
      following table sets forth the results of our operations for the periods
      indicated as a percentage of total sales:




**Three
                Months Ended September 30,****As
              a percentage of Revenue**
            
            
            **2008**
            
            
            **2007**RevenueSales
                of concrete
            
            
            36.4
            %
            
            100.0
            %Manufacturing
                services
            
            
            37.5
            %
            
            -Technical
                services
            
            
            12.0
            %
            
            -Mixer
                rental
            
            
            12.8
            %
            
            -Marketing
                cooperation
            
            
            1.4
            %
            
            -Total
                revenue
            
            
            100.0
            %
            
            100.0
            %Cost
                of revenueCost
                of sales
            
            
            30.4
            %
            
            83
            %Manufacturing
                services
            
            
            9.7
            %
            
            -Technical
                services
            
            
            1.3
            %
            
            -Mixer
                rental
            
            
            5.7
            %
            
            -Marketing
                cooperation
            
            
            0.6
            %
            
            -Total
                cost of revenue
            
            
            47.7
            %
            
            -Gross
                profit
            
            
            52.3
            %
            
            17.2
            %Selling,
                general and administrative expenses
            
            
            12.8
            %
            
            5.0
            %Other
                (expense) income, net
            
            
            (7.4
            )%
            
            4.4
            %Income
                before provision for income taxes
            
            
            32.1
            %
            
            16.6
            %Income
                taxes
            
            
            11.2
            %
            
            -
            %Net
                income
            
            
            20.9
            %
            
            16.6
            %





***Comparison
      of Three Months Ended September 30, 2008 and 2007***





***Revenue*** .
      Our
      revenue is generated from sales of our advanced ready-mix concrete products,
      manufacturing services, technical consulting and marketing cooperation services,
      and mixer rental. For the three months ended September 30, 2008 as compared
      to
      the three months ended September 30, 2007, the Company generated revenues of
      $5,136,746 and $5,981,669, respectively, reflecting a decrease of 14.1%. During
      the three months surrounding the Olympic Games held in August in Beijing, where
      our primary market locates, construction work was banned in the city area within
      the 5 th ring
      expressway. In anticipation of the effect that the event could have on our
      business, management took several initiatives and made adjustments to our normal
      business. They include i) strengthening our efforts to expand into other
      geographical areas. During the quarter, we started supplying concrete products
      to three railway projects located outside Beijing area through our portable
      plants. Specifically, they are Beijing-Shanghai high-speed railway projects
      /
      Suzhou and Danyang sections, and East Datong-Gudian connection railway project.
      These three projects contributed $1,925,543 to our total revenue for the
      quarter. For these railway projects, the general contractors supply raw
      materials themselves and we provided manufacturing and transportation; as such
      their cost don’t include cost of raw materials for these projects and revenue
      from them are classified as manufacturing services; ii) providing technical
      consulting service to several independently owned mixture stations. The Company
      was paid 70% of any cost savings over RMB 5 per cubic meter for technical
      solutions provided to clients. Technical service generated revenue of $616,797;
      iii) renting out mixer trucks and implementing strategic marketing cooperation.
      During the quarter, we rented our mixer trucks to mixture stations located
      outside the 5 th ring
      expressway of Beijing and reached marketing cooperation agreements 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 mixer rental and marketing cooperation generated revenue of
      $656,814 and 69,905, respectively. We believe our sales revenue will grow as
      our
      market in Beijing is rolling back to full scale after the Olympic Games and
      we
      further expand into other geographical markets.





34


***Cost
      of Revenue*** *.* Cost of
      Revenue, which consists of direct labor, rentals, depreciation, other overheads
      and raw materials including inbound freight charge, was $2,448,332 for the
      three
      months ended September 30, 2008 as compared to $4,950,871 for the three months
      ended September 30, 2007, a decrease of 50.6%, which is more than the percentage
      decrease in revenue. As previously mentioned, we took on three railway projects
      this quarter, cost of which didn’t include raw material because the general
      contractors supplied it themselves. We also entered concrete technical and
      marketing cooperation service contracts and engaged in mixer rental during
      the
      quarter which have a high margin, while we didn’t have such revenues for the
      same period in 2007.




***Gross
      Profit*** .
      Our
      gross profit is equal to the difference between our revenue and cost of revenue.
      Gross profit was $2,688,414 for the three months ended September 30, 2008 as
      compared to $1,030,798 for the three months ended September 30, 2007,
      representing gross margin of approximately 52.3% and 17.2%, respectively. The
      higher gross margin on lower revenue reflects the fact that cost of the three
      railway projects did not include raw materials that were supplied by clients
      themselves. The higher gross margin is also attributable to more profitable
      technical service and marketing cooperation contracts we performed and mixer
      rental during the quarter.





***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 $657,109 for the three months ended September 30,
      2008, an increase of 119.8%, as compared to $298,975 for the three months ended
      September 30, 2007. 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 bad
      debt
      expense recognized during the quarter. Salaries for employees also increased
      an
      average of 35% as a result of conforming to new Chinese Labor Law that became
      effective on January 1, 2008.





***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). $227,594 in other subsidy income is due to receiving of value added
      tax exemption from the government, which decreased 36.6% and is in line with
      the
      decrease in concrete sales as this tax credit is related to gross sales price
      of
      our concrete products. We had interest expenses of $613,183 for the three months
      ended September 30, 2008 as compared to $84,540 for the three months ended
      September 30, 2007, an increase of $528,643. The increase in interest expenses
      is mainly due to dividend and amortization of discount on redeemable preferred
      stock classified as liability as well as amortization of financing costs,
      totaling $384,409. The Company also had more short-term loans for the three
      months ended September 30, 2008, contributing to higher interest expense and
      financial leverage as compared to the same period last year. **




***Provision
      for Income Taxes.*** Provision
      for income taxes amounted to $574,827 and $0 for the three months ended
      September 30, 2008 and 2007, 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.





***Net
      Income*** .
      We had
      net income of $1,074,430 for the three months ended September 30, 2008 as
      compared to $992,485 for the three months ended September 30, 2007, an increase
      of 8.26%. The increase in net income is attributable to higher gross profit
      on
      the three railway projects and technical service and marketing cooperation
      contracts, and rent income of mixer trucks as well as appreciating 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
      this year. Our net margin increased from 16.6% for the three months ended
      September 30, 2007 to 20.9% for the three months ended September 30, 2008 due
      to
      higher margin we realized on the three 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
      quarter. Our management believes that our profits will continue to increase
      as
      we lease or build new plants to increase the customer reach 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.




**Liquidity
      and Capital Resources**




As
      of
      September 30, 2008, we had cash and cash equivalents of $5,083,962 and
      restricted cash of $888,802. The following table provides detailed information
      about our net cash flow for financial statement periods presented in this Form
      10-Q:





**Three
                Months Ended September 30,****2008**
            
            **2007**(Unaudited)
            
            (Unaudited)Net
                cash (used in) provided by operating activities
            
            $
            (363,147
            )
            $
            1,805,221Net
                cash used in investing activities
            
            
            (19,067
            )
            
            (6,173
            )Net
                cash provided by (used in) financing activities
            
            
            3,557,024
            
            
            (2,384,995
            )Effect
                of foreign currency translation on cash and cash
                equivalents
            
            
            (1,343
            )
            
            1,144Net
                cash Flow
            
            $
            3,173,467
            
            $
            (584,803
            )





35


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.





**Comparison
      of Three Months Ended September 30, 2008 and 2007**





***Net
      Cash Used in/Provided by Operating Activities*** .
      Net
      cash used in operating activities totaled $363,147 for the three months ended
      September 30, 2008 as compared to net cash provided by operating activities
      of
      $1,805,221 for the three months ended September 30, 2007. The decrease in net
      cash from operating activities was primarily due to increases in accounts
      receivable and inventory of raw materials, partially offset by deferred payment
      of cash tax and various non-cash charges to income in the quarter such as bad
      debt and amortizations of financing cost and discount on redeemable preferred
      stock. We expect our cash flow from operating activities will improve as
      the
      construction industry in Beijing accelerates following the Olympic Games and
      we
      strengthen our efforts to negotiate better terms with our suppliers and
      customers.




***Net
      Cash Used In Investing Activities*** .
       Net cash used in investing activities was $19,067 **** for
      the
      three months ended September 30, 2008 and $6,173 for the three months ended
      September 30, 2007. The cash was primarily used for construction in
      progress.





***Net
      Cash Provided by/used in Financing Activities*** .
      Net
      cash provided by financing activities totaled $3,557,024 **** for
      the
      three months ended September 30, 2008 as compared to net cash used in financing
      activities of $2,384,995 for the three months ended September 30, 2007. 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 $2,932,000 (RMB 20 million) and from employees and
      unrelated companies for $860,266 (RMB 5,880,000). 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 September 30, 2008, we had cash of $5,083,962, as compared to $840,080 as
      of
      September 30, 2007. This increase was due primarily to increase in net
      short-term borrowings.




The
      Company believes it can meet its 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 $7,811,689 and $4,271,222 outstanding on loans and credit facilities
      as
      of September 30 and June 30, 2008, respectively. The loans consisted of the
      following:





September
                30,
            
            June
                30,2008
            
            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
            
            $
            2,926,000
            
            $
            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
            
            
            4,389,000
            
            
            -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.
            
            
            496,689
            
            
            524,510Total
                short term loans
            
            $
            7,811,689
            
            $
            4,271,222





36


Total
      interest expense on short-term loans for the three months ended September 30,
      2008 and 2007 amounted to $227,811 and
      $84,540, respectively.





***Obligations
      Under Material Contracts***





Below
      is
      a table setting forth our contractual obligations as of September 30,
      2008:





**Payment due in
                year ended June 30,****Total**
            
            **2009**
            
            **2010**
            
            **2011**
            
            **Thereafter**Long
                term debt obligations
            
            -
            
            -
            
            -
            
            -
            
            -Capital
                commitment
            
            -
            
            -
            
            -
            
            -
            
            -Operating
                lease obligations
            
            $
            525,234
            
            $
            278,829
            
            $
            197,124
            
            $
            49,281
            
            $
            -Purchase
                obligations
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Total
            
            $
            525,234
            
            $
            278,829
            
            $
            197,124
            
            $
            49,281
            
            $
            -





**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.





37


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:




***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.




***Shipping
      and handling.*** Shipping
      and handling costs related to costs of the raw materials purchased is included
      in cost of revenues.





***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. As of September 30, 2008, the Company determined
      no
      reserves were necessary.





***Prepayments.*** The
      Company advances monies to certain suppliers for raw materials. These advances
      are interest free and unsecured.





***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 noncurrent, net of allowance for doubtful accounts
      relating to that portion of receivables. The bifurcation between current and
      noncurrent 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 three months ended September 30, 2008 and 2007, $227,594 and
      $358,715, respectively, was recognized as other subsidy income from VAT taxes
      collected.





38




**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 not determined the effect that the application of SFAS 160 will
      have
      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.





In
      October 2008, the FASB issued FASB Staff Position No. FAS 157-3, “Determining
      the Fair Value of a Financial Asset in a Market That Is Not Active” (FSP 157-3),
      which clarifies the application of SFAS 157 when the market for a financial
      asset is inactive. Specifically, FSP 157-3 clarifies how (1) management’s
      internal assumptions should be considered in measuring fair value when
      observable data are not present, (2) observable market information from an
      inactive market should be taken into account, and (3) the use of broker quotes
      or pricing services should be considered in assessing the relevance of
      observable and unobservable data to measure fair value. FSP 157-3 became
      effective on October 10, 2008, and its adoption did not have a material impact
      on our financial position or results for the quarter ended September 30,
      2008.





**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.





39




**Item
      3.**  **Quantitative
      and Qualitative Disclosures About Market Risk**





The
      Company is subject to certain market risks, including changes in interest rates
      and currency exchange rates.  The Company does not undertake any specific
      actions to limit those exposures.





**Item
      4T.  Evaluation of Disclosure Controls and Procedures**





a) *Evaluation
      of Disclosure Controls.* Our
      Chief Executive Officer and Chief Accounting Officer evaluated the effectiveness
      of our disclosure controls and procedures as of the end of our first fiscal
      quarter 2008 pursuant to Rule 13a-15(b) of the Securities and Exchange Act.
      Disclosure controls and procedures are controls and other procedures that are
      designed to ensure that information required to be disclosed by us in the
      reports that we file or submit 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
      by
      us in the reports that we file under the Exchange Act is accumulated and
      communicated to our management, as appropriate to allow timely decisions
      regarding required disclosure. Based on his evaluation, our Chief Executive
      Officer and Chief Accounting Officer concluded that our disclosure controls
      and
      procedures were effective as of September 30, 2008.





It
      should
      be noted that any system of controls, however well designed and operated, can
      provide only reasonable, and not absolute, assurance that the objectives of
      the
      system are met. In addition, the design of any control system is based in part
      upon certain assumptions about the likelihood of future events. Because of
      these
      and other inherent limitations of control systems, there can be no assurance
      that any design will succeed in achieving its stated goals under all potential
      future conditions





(b) *Changes
      in internal control over financial reporting.* There
      have been no changes in our internal control over financial reporting that
      occurred during the last fiscal quarter that has materially affected, or is
      reasonably likely to materially affect, our internal control over financial
      reporting. Our management team will continue to evaluate our internal control
      over financial reporting in 2008 as we implement our Sarbanes Oxley Act
      testing.







40


**PART
      II - OTHER INFORMATION**




**Item
      1. Legal Proceedings.**




Currently,
      we are not aware of any litigation pending or threatened by or against the
      Company.





**Item
      1A. Risk Factors**





There
      have been no material changes from the risk factors included in the Annual
      Report on Form 10-K for the year ended June 30, 2008.




**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.**




On
      October 4, 2008, the majority shareholders approved by written consent the
      appointment of Jeremy Goodwin to our Board of Directors and approved the
      Director Agreement with Mr. Goodwin.




**Item
      5. Other Information.**




None




**Item
      6. Exhibits and Reports of Form 8-K.**




(a)           Exhibits




31.1
      Certifications pursuant to Section 302 of Sarbanes Oxley Act of
      2002




32.1
      Certifications pursuant to Section 906 of Sarbanes Oxley Act of
      2002




(b)           Reports
      of Form 8-K




On
      August
      4, 2008, the Company filed a Form 8-K with the SEC disclosing a change in
      directors .





On
      August
      7, 2008, the Company filed a Form 8-K with the SEC disclosing a change in
      directors.





41




**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, there unto duly
      authorized.




**CHINA
                ADVANCED CONSTRUCTION MATERIALS GROUP, INC.**Registrant





By:
            /s/
                Xianfu HanXianfu
                Han
              *Prinicipal
                Executive Officer and*
              *Principal
                Financial and Accounting
                Officer*




Date:
                November __, 2008




42