UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-K




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




For the
Fiscal Year EndedJune 30, 2009




OR




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




Commission
file number333-141568




CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC.


(Exact
name of registrant as specified in its charter)




Delaware
            20-8468508(State or other Jurisdiction of Incorporation or
            (I.R.S. Employer Identification No.)Organization)1515
      Broadway, 11th FloorNew
      York, NY
            10036(Address of Principal Executive Offices)
            (zip code)




Registrant's
telephone number, including area code:+86 10 82525361




Securities
registered pursuant to Section 12(b) of the Act:




Title of Each Class
            
            Name of Each Exchange On Which RegisteredN/A
            
            N/A




Securities
registered pursuant to Section 12(g) of the Act:




Common Stock, Par Value
$0.001




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes  ̈No x




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes  ̈No x




Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.  Yes xNo  ̈




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the
best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. x




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




Large
      accelerated filer  ̈
            Accelerated
      filer  ̈
            Non-accelerated
      filer  ̈
            Smaller
      reporting company x




Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act).




Yes  ̈  No x




As of
September 18, 2009 there were 11,548,710 shares of the Registrant’s common stock
outstanding.




DOCUMENTS
INCORPORATED BY REFERENCE




None.









TABLE
OF CONTENTS




PageItem
      1.
                          Business
                          1Item
      2.
                          Properties
                          19Item
      3.
                          Legal
      Proceedings
                          19Item
      4.
                          Submission
      of Matters to a Vote of Security Holders
                          19Item
      5.
                          Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                          19Item
      6.
                          Selected
      Financial Data
                          20Item
      7.
                          Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                          20Item
      7A.
                          Quantitative
      and Qualitative Disclosure of Market Risk
                          31Item
      8.
                          Financial
      Statements and Supplementary Data
                          31Item
      9.
                          Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure
                          31Item
      9A(T).
                          Controls
      and Procedures
                          31Item
      9B.
                          Other
      Information
                          32Item
      10.
                          Directors,
      Executive Officers and Corporate Governance
                          33Item
      11.
                          Executive
      Compensation
                          36Item
      12.
                          Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                          38Item
      13.
                          Certain
      Relationships and Related Transactions, and Director
      Independence
                          39Item
      14.
                          Principal
      Accountant Fees and Services
                          42Item
      15.
                          Exhibits,
      Financial Statements and Schedules
                          42




i





INTRODUCTORY
NOTE





In this
report, unless indicated otherwise, references to





·
              “China,”
      “Chinese” and “PRC,” are references to the People’s Republic of
      China;·
              “BVI”
      are references to the British Virgin Islands·
              “China
      Advanced,” “China-ACM,” “the Company,” “we,” “us,” or “our,” are
      references to the combined business of China Advanced Construction
      Materials, Group, Inc. and its wholly-owned subsidiaries, BVI-ACM and
      China-ACMH, as well as Xin Ao, but do not include the stockholders of
      China Advanced;·
              “BVI-ACM”
      are references to Xin Ao Construction Materials, Inc.·
              “China-ACMH”
      are references to Beijing Ao Hang Construction Materials Technology Co.,
      Ltd.;·
              “Xin
      Ao” are references to Beijing Xin Ao Concrete Co.,
Ltd.;·
              “RMB”
      are references to the Renminbi, the legal currency of China;
      and·
              “U.S.
      dollars,” “dollars” and “$” refer to the legal currency of the United
      States.





SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS





In
addition to historical information, this report contains forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act.  You can identify such forward-looking
statements by terms such as “anticipates,” “believes,” “could,” “estimates,”
“expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,”
“should,” “would” and similar expressions intended to identify forward-looking
statements. Forward-looking statements reflect our current views with respect to
future events and are based on assumptions and subject to risks and
uncertainties. Given these uncertainties, you should not place undue reliance on
these forward-looking statements. These forward-looking statements include,
among other things, statements relating to:





·
            our
      expectations regarding the market for our products and
      services;·
            our
      expectations regarding the continued growth of the building materials
      market;·
            our
      beliefs regarding the competitiveness of our services;·
            our
      expectations regarding the expansion of our manufacturing
      operations;·
            our
      expectations with respect to increased revenue growth and our ability to
      achieve profitability resulting from increases in our production
      volumes;·
            our
      future business development, results of operations and financial
      condition; and·
            competition
      from other building materials
manufacturers.




Also,
forward-looking statements represent our estimates and assumptions only as of
the date of this report. You should read this report and the documents that we
reference in this report, or that we filed as exhibits to the registration
statement of which this report is a part, completely and with the understanding
that our actual future results may be materially different from what we
expect.




Except as
required by law, we assume no obligation to update any forward-looking
statements publicly, or to update the reasons actual results could differ
materially from those anticipated in any forward-looking statements, even if new
information becomes available in the future.


ii





PART
I




Item
1.        Business




Our
Corporate Structure





We own
all of the issued and outstanding capital stock of Xin Ao Construction
Materials, Inc., or BVI-ACM, a British Virgin Islands corporation, which in turn
owns 100% of the outstanding capital stock of Beijing Ao Hang Construction
Materials Technology Co., Ltd., or 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., or Xin Ao, a
company incorporated under the laws of China, and its two shareholders, in which
China-ACMH effectively took 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.





The
following chart reflects our organizational structure as of the date of this
10K.











Our
Corporate History




China
Advanced Construction Materials Group, Inc. was founded as an unincorporated
business on September 1, 2005, under the name TJS Wood Flooring, Inc., and
became a C corporate in the State of Delaware on February 15, 2007. On April 29,
2008, we changed our name to China Advanced Construction Materials Group, Inc.
in connection with a reverse acquisition transaction with BVI-ACM as described
below.





Background
and History of BVI-ACM and China-ACMH





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 Xin
Ao, a limited liability company formed under laws of China. BVI-ACM was
established as a “special purpose vehicle” for foreign fund raising for Xin Ao.
China State Administration of Foreign Exchange, or 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 matter under the “Circular 106” in the PRC. On September 29, 2007,
BVI-ACM was approved by local Chinese SAFE as a “special purpose vehicle”
offshore company.





On
November 23, 2007, BVI-ACM established a subsidiary, China-ACMH, in China 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 Xin Ao, is
engaged in producing general ready-mixed concrete, customized mechanical
refining concrete, and some other concrete-related products which are mainly
sold in China.


1





Xin Ao,
licensed by Beijing Administration of Industry & Commerce, PRC, was
established on June 28, 2002 with an initial capital contribution of
approximately $3,630,000 (RMB30 million) and owned by Beijing Shang Di Xing Da
Mixed Soil Ltd Co. (“Shang Di”) with 79% of ownership and Beijing Heng Xin Ao
Tong Trading Ltd. (“Heng Xin”) with 21% of ownership. On September 17, 2004,
Shang Di transferred its 79% ownership in Xin Ao to Beijing Boya Fangyuan
Investment Management Co. (“Boya Fangyuan”) and Heng Xin transferred its 21%
ownership to Beijing Jia Shi Long Teng Technology Development Co. (“Jia Shi Long
Teng”). The transfers were approved at Xin Ao’s shareholder
meeting.





On July 8, 2005, the Board
of Directors of Xin Ao increased its registered capital from approximately
$3,630,000 (RMB30 million) to $12,100,000 (RMB100 million) through the use of
Xin Ao’s undistributed profits. The percentage of the shareholders did not
change and the registered capital contributed by Boya Fangyuan had
increased from approximately $2.9 million (RMB23.7 million) to $9.6 million
(RMB79 million) and by Jia Shi Long Teng had increased from approximately
$762,300 (RMB6.3 million) to $2.5 million (RMB21 million). On the same day, Xin
Ao had an ownership change with Boya Fangyuan transferring 50% of its 79%
ownership, which was approximately $6.05 million (RMB50 million) of registered
capital to Mr. Han Xianfu and Jia Shi Long Teng transferring 1% of its 21%
interest to Mr. Han Xianfu. In December 2005, Jia Shi Long Teng transferred
its remaining 20% ownership in Xin Ao to Boya Fangyuan. On August 27, 2007, Boya
Fangyuan transferred its 9% to Mr. Han Xianfu and 40% to Mr. He
Weili.  Approximately $1.2 million of Xin Ao’s registered capital
remains unpaid by its shareholders as of June 30, 2009.  Pursuant to
applicable PRC rules and regulations, registered capital should be paid within
two years after issuance of a business license.  Failure to pay such
registered capital could result in imposition of monetary fines or penalties as
well as restriction or revocation of the business license, however Xin Ao has
received no notice from any governmental entity of the imposition of any such
penalties. Xin Ao plans to fund the remaining registered capital from its
unrestricted retained earning in October 2009.




As
discussed above, on November 28, 2007, China-ACMH entered a series of
contractual arrangements with Xin Ao and its shareholders pursuant to which
China-ACMH effectively assumes control 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.





Through
China-ACMH, BVI-ACM operates and controls Xin Ao.  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 effective as of September 8,
2006, governing share exchanges with foreign entities, 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.





Acquisition
of BVI-ACM and Related Financing





On April
29, 2008, we completed a reverse acquisition transaction with BVI-ACM whereby we
issued to the stockholders of BVI-ACM 8,809,583 shares of our common stock in
exchange for all of the issued and outstanding capital stock of BVI-ACM. BVI-ACM
thereby became our wholly owned subsidiary and the former stockholders of
BVI-ACM became our controlling stockholders.




Upon the
closing of the reverse acquisition, Brandi Iannelli, our former President, Chief
Executive Officer, Chief Financial Officer, Principal Accounting Officer, and
Chairman and Frank Iannelli, our former Secretary, Treasurer and Director
resigned from their respective positions. Xianfu Han, Weili He and Xiangsheng
“Norman” Xu were appointed to the board of directors at the closing of the
reverse acquisition. In addition, our executive officers were replaced by the
BVI-ACM executive officers upon the closing of the reverse acquisition as
indicated in more detail below.




For
accounting purposes, the share exchange transaction was treated as a reverse
acquisition with BVI-ACM as the acquirer and TJS Wood Flooring, Inc. as the
acquired party. When we refer in this report to business and financial
information for periods prior to the consummation of the reverse acquisition, we
are referring to the business and financial information of BVI-ACM on a
consolidated basis unless the context suggests otherwise.





Thereafter
on June 11, 2008, we completed a private placement pursuant to which we sold to
27 accredited investors 875,000 investment units, or Units, for a total of
$7,000,000 in gross proceeds. Each Unit consists of one share of the Company’s
Series A Convertible Preferred Stock, each share of which is convertible into
four shares of our common stock, and a common stock purchase warrant for the
purchase of two shares of our common stock at an exercise price equal to $2.40
per share. After the payment of certain fees and expenses in connection with the
private placement and after $930,000 was placed into an escrow account
pursuant to an agreement with the investors in the private placement, the net
proceeds to the Company was $5,223,291. The fees and expenses incurred in
connection with the private placement amounted to an aggregate of $846,709,
which included placement agent fees of $488,470 paid to Maxim Group LLC, dealer
fees of 53,760 paid to Monarch Bay Associates, legal fees of $158,583,
consultant fees of $110,103 paid to All Star Capital Inc., and other ancillary
fees in connection with the private placement of $35,523.


2





OUR
BUSINESS




Overview




We are a
producer of advanced ready mix concrete materials in China. We are committed to
conducting our operations with an emphasis on the extensive use of recycled
waste materials, the efficient production of our concrete materials with minimal
energy usage, dust and air pollution, and innovative products, methods and
practices.




We are
able to meet the stringent environmental and technical needs of the Chinese
construction market. The types of projects that we provide concrete for include
large express railways, bridges, tunnels, skyscrapers, dams, and nuclear reactor
infrastructure projects that many competitors are not able to produce due to
technical difficulties, resource and information limitations. Recent projects
for which we have acted as a leading concrete and structural materials provider
include the new CCTV broadcasting site in Beijing, the Beijing-Tianjin Intercity
Rail/Beijing South Railway Station, the Beijing Olympic Park Conference Center,
Financial Street F2 Office Building, DongGuan Bridge Project, MaJuQiao
Residential Project, US Embassy in Beijing, French Embassy in Beijing, Beijing
Railway Control Center, and various national express railway projects all over
the China.




Our
Industry




According
to Global Insight, a leading provider of global economic and financial
intelligence, the global construction market will be slowed further in 2009 with
an increase of less than 2% and some regional markets such as the North American
market may even experience a decline of up to approximately 9%. The global
construction market is expected to experience a slow recovery after
2011.  Despite the global construction market problems, the Chinese
construction market has been maintaining a double digit increase over the past
10 years, which makes it one of the most dynamic markets in the
world.




China is
among the world’s largest construction materials producers, ranking first in the
world’s annual output of cement, flat glass, building ceramic and ceramic
sanitary ware. According to the Industrial Ceramics, Vol. 27, February 2007,
total revenues for the Chinese construction materials market in 2006 was
approximately $171.5 billion.” and “[i]t is estimated that the total production
value will reach $294.8 billion by 2011, an average annual growth rate of 11.4%.
(Industrial Ceramics, Vol. 27, February 2007,” page 142). This information is
publicly available at www.technagroup.it/sample_IC.pdf.  According
to the National Development and Reform Commission, or NDRC, profits by companies
in the construction materials market in China during the first five months of
2009 were approximately $6.16 billion, representing an increase of 13.7% over
the same period in 2008.  The “Year 2009 First Five Months
Construction Material Industry Sector Analysis” is provided by the National
Development and Reform Commission (NDRC). The Chinese version of this
information is publicly available on NDRC’s website at  http://yxj.ndrc.gov.cn/gjyx/cyyxdt/t20090722_292050.htm.





Construction
Demand in China





According
to the evaluation by Research Institute of Investment, National Development and
Research Commission, China’s economic stimulus package, valued RMB 4 trillion,
has had a material impact on the construction industry, contributing to a growth
in the construction industry of approximately RMB 594 billion in 2009. According
to data prepared by the National Bureau of Statistics of China, from January to
April this year, urban fixed assets investment reached RMB3.7082 trillion, up
30.5 percent year by year. Driven by a series of policies on keeping growth and
expanding domestic demand, we believe that the construction industry in China
will continue to grow.





In
November 2008, China launched a RMB 4 trillion (approximately US$593 billion)
fiscal stimulus package to bolster the economy. The stimulus package will be
used to finance programs, over the next two years in 10 major areas, such as
low-income housing, rural infrastructure, water, electricity, transportation,
the environment, technological innovation and rebuilding disaster struck areas.
The economic stimulus package passed by China's State Council in November 2008
focuses on infrastructure projects such as new railways, roads, and airports.
The country plans to double its investment in railways to about RMB 600 billion
(approximately US $87.8 billion) this year according to the Ministry of
Railways. Part of the new funds will go to building 5,148 km of new lines,
including five passenger-only high-speed lines this year. The ministry also
plans to start 70 other new projects this year, which will cost RMB 1.5 trillion
(approximately US $219.6 billion) by the time they are finished. By 2012 China
is expected to have 110,000 km of rail lines, including 13,000 km of passenger
routes, of which, many will be high-speed railways allowing trains to run
between 200 and 350 km an hour. Chinese version available at http://www.concrete365.com/news/2009/7-20/H142630705.htm).





The
Chinese Construction industry accounted for approximately 20% of the nominal
gross domestic product (GDP), contributing RMB 6,114 billion in 2008. China is
expected to have the world’s highest construction output growth rate in 2009 and
the world’s highest GDP growth rate in 2009. The government stimulus package has
helped to fuel this growth in construction and infrastructure
development. Concrete product producers will remain the largest market for
cement in China, accounting for approximately 40% of all cement consumption in
2010. The government’s continued efforts to modernize the country’s
infrastructure is exemplified by such massive projects as the South-North Water
Diversion — designed to redirect water to the northern plains from Central and
South China. This project, scheduled for completion in 2050, will result in
annual cement consumption of over one million metric tons.





China
accounts for half of all new building activity in the world and rapid expansion
is expected to continue to 2030 as up to 400 million citizens are expected to
move into urban areas.


3





China’s
Cement & Concrete Demand





In the
past four months, the country's cement output rose 13 percent from the same
period of 2008. The year to year growth was 3.1 percentage points larger than
that of a year ago.“Demand
for cement in China is forecast to rise 6.0 percent annually through 2012 to 1.8
billion metric tons. Growth will be driven by rising, but decelerating,
construction expenditures in China. Further advances in cement manufacturing
technology will also help stimulate sales by improving the quality of the
product. Blended cements will account for about 90 percent of total sales
in 2012, reflecting the versatility of these types across a range of
construction applications, as well as their performance and/or price benefits
over competitive cements. Regional cement markets reflect differences in
construction expenditures, which in turn are driven by local trends in
demographics, industrial output and economic activity. The Central-East is
expected to remain the largest cement market in China through 2012, fueled by
increases in regional construction expenditures. However, the cement markets in
the Northwest and Southwest will grow at the fastest pace, benefiting from the
government’s Great Western Development strategy, which aims to promote
investment in these areas. Consumption of cement in the Central- North is also
expected to perform above the national average, supported by high levels of
transportation infrastructure construction and booming urban markets in Beijing
and Tianjin.” (from Business Wire).


Residential
and non-residential buildings in China are increasingly requiring much more
concrete due to, among other reasons, the short supply of wood. China is
currently the largest consumption market of cement worldwide at over $200
billion annually. China’s cement consumption amounted to approximately 44% of
global demand in 2008 and will be greater than current combined consumption of
India and the U.S. by 2010. According to the National Development and Reform
Commission, companies in the construction materials market in China recognized a
92.6% increase in profits from 2005 to 2006. The government’s continued efforts
to modernize the country’s infrastructure are exemplified by such projects as
the South-North Water Diversion. At the present rate, it is presumed that China
will continue to be an important player in the global construction materials
marketplace for at least the next two decades.




As a
result of the government stimulus package, the demand for cement & concrete
is expected to be significantly increased in China in the following several
years. For example, the concrete demand in 2009 is expected to reach
approximately 1.5 billion tons.




Demand for
Ready-Mixed Concrete




Construction
contractors should continue to represent the largest market for cement,
accounting for a estimated one-third of total demand in 2012. However, we
believe that the ready-mix concrete market could exhibit the strongest growth in
the cement industry, and could possible have near double-digit gains through
2012. Gains will benefit from government regulations banning on-site concrete
and mortar mixing. Demand for cement used in concrete products will be driven by
the increasing popularity of precast concrete with many construction
contractors. In addition, the phase-out of clay bricks will heighten demand
for concrete blocks. We anticipate that cement demand in the ready-mixed
concrete market will realize the strongest gains of any market category through
2010, with an annual increase of 11.2%. Recognizing the environmental
devastation created from the massive construction activities undertaken in the
past few decades, China’s government implemented Decree #341 in 2004 which bans
onsite concrete production in over 200 major cities across China in order to
reduce environmental damage from onsite cement mixing and improve the quality of
concrete used in construction.





Our
Competitive Strengths





We
believe that the following competitive strengths enable us to compete
effectively and to capitalize on the growth of the market for construction
materials in China:





·
            Large Scale
      Contractor
      Relationships. We have contracts
      with major construction contractors that are constructing key
      infrastructure, commercial and residential projects. Our sales efforts
      focus on large-scale projects and large customers that place large
      recurring orders and present less credit risks to us. Five customers
      accounted for approximately 32.03 % and 41.49% of the Company’s sales for
      the years ended June 30, 2009 and 2008, respectively. The total accounts
      receivable from these customers amounted to $3,624,793 and $3,584,879 as
      of June 30, 2009 and 2008.




·
            Experienced
      Management. Management’s technological knowledge and business
      relationships gives us the ability to secure major infrastructure
      projects, which provides us with leverage to potentially acquire less
      sophisticated operators, increase production volumes, and implement
      quality standards and environmentally sensitive
  policies.




4





·
            Preferred
      Tax Treatment due to Recycled Materials.The Company’s income tax
      rate has been reduced to 15% from 25% as a result of the Company's
      involvement in producing high-tech products. The Company has also been
      approved for a 6% value added tax (VAT) credit by the State Administration
      of Taxation. The total tax saving for the Company is over millions a
      year.  Combining tax saving and growing economies of scale
      result in superior pricing and higher margins for the
    Company.





·
            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. As a result of our relationships with these universities and
      institute, we have realized an advantage over many of our competitors by
      gaining access to a wide array of resources and
  knowledge.





Our
Growth Strategy





We are
committed to enhancing profitability and cash flows through the following
strategies:




·
            Capacity
      Expansion via Building New Plants. We added nine portable stations
      during the fiscal year 2009 in order to meet the requirements of existing
      contracts and anticipated demand. We plan to add more portable stations in
      2010 and 2011 as part of our long-term expansion plans due to very
      attractive margins and high return on
  investment.




·
            Mergers and
      Acquisitions. We intend to capitalize on the challenges that
      smaller companies are encountering in our industry by acquiring
      complementary companies at favorable prices. We believe that buying rather
      than building capacity is an option that may be attractive to us if
      replacement costs are higher than purchase prices. We are currently
      looking into acquiring smaller concrete manufacturers in China as part of
      our expansion plans; further information will be reported when key details
      have been confirmed. No Letters-of-Intent have been entered into or
      specific targets identified at this
time.




·
            Vertical
      Integration. We plan to acquire smaller companies within the
      construction industry, develop more material recycling centers, and hire
      additional highly qualified employees. In order to accomplish this, we may
      be required to offer additional equity or debt securities. Certain of the
      companies we may seek to acquire are suppliers of the raw materials we
      purchase to manufacture our products. If we do acquire such companies we
      will have greater control over our raw material
  costs.




·
            Supply
      ChainEfficiencies and Scale. We intend to streamline our supply chain
      process and leveraging our economies of
scale.




·
            New Product
      Offering. We plan to produce a lightweight aggregate concrete for
      use in projects and to expand product offerings to include pre-cast
      concrete.





Our
Operations





We
provide materials and services through our network of seven ready-mixed concrete
plants located throughout Beijing and nine portable concrete plants located in
various provinces all over China. We own one plant, lease two plants, and the
remaining four are operated under technical services and preferred
procurement agreements at unrelated third party facilities. We own all of the
production equipment in one of the fixed plants located in Beijing, as well
as 116 concrete mixers and 17 pump trucks at our plants, though we do not own
the land use rights or the factory buildings, which we lease from the owner,
Beijing SanTaiSan Chemical Trading & Logistics Co. At two of our plants in
Beijing, we lease all of the production equipment, mixers, pump trucks and
factory buildings from the plant owners. At the remaining four plants, which are
independently operated, we perform work through technical services and preferred
procurement agreements.




In fiscal
2009, we operated out of three fixed plants located in the Beijing area, which
have operating capacity of 6,336,000 cubic meters and nine portable plants in
various provinces, which have operating capacity of 3,360,000 cubic meters. We
produced approximately 607,217 cubic meters and 877,194 cubic meters,
respectively, of ready mix concrete as most operating capacity were added during
the fourth quarter of fiscal 2009.


5





In fiscal
2009, we had nine portable plants supporting the build-out of China's national
railway network. The portable plants can be dismantled and moved to new sites in
less than a few weeks. The plants are currently located between railway stations
and each of these plants is directly tied to contracts we have recently won and
are expect to operate near capacity. Almost all our general contract
contractors supply raw materials resulting in higher gross margins for the
Company and reduce upfront capital investment on raw material purchase. The one
time start up cost for each plant and associated equipment is approximately $3
million. Each plant is capable of generating over $2 million in revenue per
year, with very attractive margins and high return on investment.





In fiscal year 2009,wealsoentered technical consulting and
marketing cooperation agreements withseveral independently owned mixture
stations, pursuant to which we are paid certain percentages of cost savings for
technical support provided to clients and of sales price for projects we refer
to other stations due to the restriction of our station’s geographical location.





We have an extensive fleet
of 116 concrete mixers, 17 pump trucks, and we have access to additional rental
vehicles if needed for certain larger projects. Most vehicles are equipped with
GPS and tracking devices from the plants central dispatch center in order to
optimize capacity utilization, production and delivery
schedules.





We are
led by a well-rounded management team that, in only six years, has built a
fast-growing, highly-profitable concrete company. Our success has been achieved
by consistently delivering quality products and services backed by a team of
dedicated managers and employees. Collectively, the management team has
extensive experience in engineering, operations, construction materials and
working in the concrete industry. Through the Company’s extensive relationships
with R&D institutions and industry associations, we have access to a large
pool of experienced managers and knowledgeable advisors.





Products
and Services





As
architectural designs have become more complex, challenging, and modern in
scope, the need for technology driven companies, such us, to provide high-end
specialty concrete mixtures has been rapidly accelerating. Increasing demand for
state-of-the-art cement mixtures has spurred our technological innovation and
our ability to provide advanced mixtures of building materials that meet project
specific engineering and environmental specifications. We produce C15 to C100
range of concrete materials and specialize in an array of specialized
ready-mixed concretes tailored to each project’s technical specifications and
environmental standards.





We
specialize in “ready-mixed concrete”, a concrete mixture made at our facility
with complete computerized operating systems. Such concrete is the most common
form of concrete, and accounts for nearly three-fourths of all concrete
produced. Ready-mixed concrete is mixed on demand and is shipped to worksites by
concrete mixer trucks.




The
ready-mixed concrete sector in the concrete market is growing at a fast rate,
largely due to the Chinese government’s implementation of Decree #341 in 2004.
This law bans on-site concrete production in over 200 cities across China, with
the goal of reducing environmental damages from onsite cement mixing and
improves the quality of cement used in construction. The use of ready-mix
concrete minimizes worksite noise, dirt and congestion, and most additives used
in ready-mix concrete are environmentally safe. Our goal is to continue to use
at least 30% recyclable components in our concrete mixtures.





We are
building a product portfolio that serves the diverse needs of our developing
customer base and its unique construction and infrastructure projects. While we
mainly specialize in ready-mix concrete formulations from controlled
low-strength material to high-strength concrete, each specifically formulated to
meet the individual needs of each project. We provide both industry
standard and highly innovative products, including:





Common Industry Mixtures
              (Customized to Project)
            
            Industry Leading Mixtures
              Highly Technical Blends·
            Ready-mixed Concrete Blends: C10 to C100
            
            ·
            Compound Admixture Concrete·
            Controlled Low-Strength Material (CLSM)
            
            ·
            Lightweight Aggregate Concrete·
            High-Strength Concrete with Customized Fibers
            
            ·
            Energy-saving Phase change thermostat concrete·
            Soil Cement, Unique Foundation Concrete
            
            ·
            C100 High Performance Concrete





Our
Customers





For
fiscal year 2009 which ended on June 30, 2009, we had one customer, China
Railway Construction, Beijing to Shanghai Branch, whose sales accounted for more
than 9% of our total sales. Five customers accounted for approximately 32.03 %
and 41.49% of the Company’s sales for the years ended June 30, 2009 and 2008,
respectively. The total accounts receivable from these customers amounted to
$3,624,793 and $3,584,879 as of June 30, 2009 and 2008.


6





Developing
New Relationships





Our sales
strategy focuses on building new long-term cooperative relationships with some
of China’s top construction companies in order to benefit from their reputations
and to enter new markets. Our sales representatives are actively building
relationships with the Chinese government, general contractors, architects,
engineers, and other potential sources of new business in our target markets.
Our sales efforts are further supported by our executive officers and
engineering personnel, who have substantial experience in the design,
formulation and implementation of advanced construction and concrete materials
projects.




Our
Suppliers





We rely
on third party suppliers of the raw materials to manufacture our products. Our
top five suppliers accounted for approximately 43.90% of the Company’s purchases
for the year ended June 30, 2009, and our top five suppliers accounted for
approximately 51.77 % of the Company’s purchases for the year ended June 30,
2008. The total accounts payable to these suppliers amounted to $2,551,604 and
$440,981 as of June 30, 2009 and 2008, respectively.





Sales
and Marketing




Our
marketing efforts are geared towards advancing China-ACMH as the supplier of
choice for building China’s most modern and challenging projects. The Company is
constantly seeking ways to raise its profile and leverage additional publicity.
To this end, the Company plans to expand its presence at leading construction
industry events and in periodicals to build on its successful reputation. The
primary goal when expanding into new markets is to reinforce the sales effort by
promoting positive testimonials and success stories from the Company’s strong
base of high profile clients.





Research
and Development





Construction
materials companies are under extreme pressure to respond quickly to industry
demands with new designs and product innovations that support rapidly changing
technical demand and regulatory requirements. We devote a substantial amount of
attention to the research and development of advanced construction materials
that meet the demands of project specific needs while striving to lead the
industry in value, materials and processes. We have sophisticated in house
R&D and testing facilities, a highly technical onsite team, access to highly
specialized market research, cooperation with a leading research institution,
experienced management and advisory board, and close relationships with leading
concrete materials experts. We expect our research development expense will
increase in the fiscal year 2010.





University
Relationships & Cooperation Agreements





We have
strong relationships with Tsinghua University and the Xi’an University of
Architecture and Technology. We have signed a ten-year cooperation agreement
with Xi’an University on June 10, 2007 pursuant to which we expect to pay
approximately $42,857 to Xi’an University per year and Xi’an University will set
up a technical research center to conduct scientific research for the Company
and work with the Company in the areas of technical development, engineering
design and human resource training according to the Company’s business
strategies and requirements. Xi’an University is a top university in the
fields of building and material science research and education and works with
the Company to follow the advancements of the cement and concrete industries
globally.





Beijing
Concrete Institute Partnership





The
Beijing Dongfang Jianyu Institute of Concrete Science & Technology, or
Beijing Concrete Institute, has 40 employees, with five senior research fellows,
and 15 mid-level researchers. The Institute and its staff have participated and
collaborated with national and local government agencies to establish the
following industry standards:




·
            Specification
      For Mix Proportion Design of Ordinary Concrete
  JGJ55-2000




·
            Code
      for Acceptance of Constructional Quality Of Concrete Structures GB
      50204-2002




·
            Applied
      Technical Specification of Mineral Admixtures In Concrete
      DBJ/T01-64-2002




·
            Ready-Mixed
      Concrete GB/T 14902-2003




·
            Practice
      Code for Application of Ready-Mixed Mortar DBJ
  01-99-2005




·
            Management
      Specification of Quality for Ready-Mixed
  Concrete




7





·
            Technical
      Requirement for Environmental Labeling Products Ready-Mixed Concrete
      HJ/T412-2007




We have a
close association with the Beijing Concrete Institute and have been able to
incorporate many of these research findings into our operations, products, and
procedures. The Beijing Concrete Institute was established by our Chairman and
Vice Chairman, which currently maintain majority ownership. As such, we work
closely with the institute and, in return for sponsoring multiple research
initiatives, have been granted exclusive work space for the development of
the materials used for our existing plant’s regional projects.





We are
able to use the Research Findings & Technical Publication and Procedures of
the Beijing Concrete Institute in our business, which provides us with an
advantage over many of our competitors. Because our five year exclusive contract
with the institute, our competitors are unable to benefit from the same findings
for commercial use. Some of these findings include:




·
            Research
      on Compound Admixture HPC; 3rd Class Award for China Building Materials
      Science & Technology Progress.




·
            Research
      and Application of C100 HPC; 3rd Class Award for Beijing Science &
      Technology Progress.




·
            Research
      on pumping Light Aggregate Concrete; Innovation Award for China Building
      Materials Science & Technology.




·
            Research
      and Application of Green (nontoxic) HPC; First Prize for Beijing Science
      & Technology Progress.




·
            Construction
      Technology of HPC for the Capital International
  Airport




·
            Research
      on Production and Construction Technology of Phase Change Energy-saving
      Thermostat Concrete and Mortar




·
            Polycarboxylate
      Series High Performance Water Reducing Agent Compositing
      Technique




·
            State
      Swimming Center for Concrete Cracking Control
  Technology




In
addition, we are able to collaborate closely with the institute and its
executives who play a strong role recommending industry standards, advising on
major infrastructure developments, and creating and maintaining strong
connections with leading developers, construction companies, and governmental
officials.





Successful
Innovations





Some of
our more advanced products and processes developed through our relationships
with research institutes and universities include:





C100
High Performance Concrete





High
Strength Concrete is often defined as concrete with a compressive strength
greater than 6000 psi (41 MPa). The primary difference between
high-strength concrete and normal-strength concrete relates to the compressive
strength that refers to the maximum resistance of a concrete sample to applied
pressure. Manufacturing high-strength concrete involves making optimal use of
the basic ingredients that constitute normal-strength concrete.





Through
our collaborative efforts, we have developed a high performance concrete which
can be produced at an impermeable grade above P35, and can be used as
self-waterproofing concrete for structural engineering, as the water-cement
(W/C) ratio and carbonized shrinking is minimal and the structure is
close-grained.





Only a
limited number of firms in the Beijing area have the expertise to produce C100
High Performance Concrete.





Compound
Admixture Concrete





This
compound mineral mixture is a composite of coal powder, mineral powder and
mineral activators blended to specific proportions. This mixture improves
activity, filling, and super-additive effects of the concrete and also improves
the compatibility between cement and adding. The mixture is the sixth composite
of the concrete which adds water reducing admixture to produce a high quality
concrete.


8




Lightweight
Aggregate Concrete & Innovative Pumping Technology





This
procedure involves a pumping technology of lightweight aggregate. It is a
pretreatment method of lightweight aggregate. Setting appropriate times and
pressure, lightweight aggregate will reach an appropriate saturation state under
pressure once it is put into a custom designed sealed pressure vessel. After
preservation, a shell will be made. Lightweight aggregate concrete prepared
using the above pretreatment method, will dry quicker under pumping pressure,
and maintain saturation state. Accordingly, lightweight aggregate concrete will
be easily pumped which can shorten construction time.





Energy-saving
Technologies of Phase Change Thermostat Concrete





Energy
conservation concrete may adjust and reflect process temperature, and
temperature self-control may solve cracking brought by cement heat of hydration
in large-scale concrete.





Polycarboxylate
Series High Performance Water Reducing Agent Compositing Technique





The
research and production of water reducing admixture in the world tends to be
high performance and low polluting. Super plasticizer Polycarboxylate series
with high water reducing rates is an attractive admixture in that it prepares
high strength concrete, super-strength concrete, high fluidity and super
plasticizer concrete, and self-dense concrete. The water reducing rate of
Polycarboxylate series product may reach 20% to 25%, which is higher than the
Naphthaline series water reducing agent, which is the current industry standard.
The cost of the water reducing agent is well situated and it may be used to
prepare high strength and performance concrete instead of the Naphthaline series
water reducing agent.





Application of Reused Water in
Concrete





The
re-use of waste water of a concrete plant to mix concrete is significant as its
saves production costs, minimizes fresh water use and represents an efficient
approach to address industrial wastes. The practical application of this effort
is a further step towards the goal of minimal pollution and
emissions.





Our
Competition




Our
principal market, Beijing, has enjoyed stronger economic growth and a higher
demand for construction than other regions of China. As a result, we believe
that competitors will try to expand their sales and build up their distribution
networks in our principal market.




We
compete primarily on the basis of quality, technological innovation and price.
Our main competitors include Jiangong Shanggong Center, Jingo Group Concrete,
Zhuzong Shanggong Center and Zhonghang Konggang Concrete.





Essentially
all of the contracts on which we bid are awarded through a competitive bid
process, with awards generally being made to the lowest bidder, though other
factors such as shorter contract schedules or prior experience with the customer
are often just as important. Within our markets, we compete with many national,
regional and local construction firms. Some of these competitors have achieved
greater market penetration or have greater financial and other resources than
us.





There are
approximately 127 concrete mixture stations in the Beijing area. The concrete
production industry is highly segmented, with no single supplier having greater
than a 10% market share.




Intellectual
Property





We
currently own the following intellectual property rights:




C100
High Performance Concrete:  Patent #2007102011320


Compound
mineral mixture with:Patent#200710107881.7


Pressurized
light aggregate pre-wetted equipment:  Patent
#ZL200720200683.0





Environmental
Matters




We are
required to comply with environmental protection laws and regulations
promulgated by the Ministry of Construction and the State Environmental
Protection Administration. Some specific environmental regulations apply to
sealed transportation of dust materials and final products, non-open storage of
sand and gravel, as well as reduction of noise and dust pollution on production
site and encouraged use of waste materials. The governmental regulatory
authorities conduct periodic inspections. We have met all the requirements in
the past inspections. We are one of ten companies in the industry that have been
awarded the honor of “Green Concrete Producer” by the PRC
government.


9





Regulation




The
company has been in compliance with all registrations and requirements for the
issuance and maintenance of all licenses and certificates required by the
applicable governing authorities, including the Ministry of Construction and the
Beijing Administration of Industry & Commerce. The Ministry of
Construction awards Level II and Level III qualifications to concrete producers
in the PRC construction industry, based on criteria such as production capacity,
technical qualification, registered capital and capital equipment, as well
as performance on past projects. Level II companies are licensed to produce
concrete of all strength levels as well as special concrete, and Level III
producers are licensed to produce concrete with strength level C60 and below. We
are a Level II concrete producer.





Additionally,
to make improvements at our currently existing plants, we do not need to apply
for regulatory approval. However, in order to build a new concrete plant, we
will need to (i) apply for a business license from the local Administration of
Industry and Commerce, (ii) receive environmental approval from the local
Environmental Protection Bureau in the relevant district area, and (iii) apply
for an Industry Qualification Certificate from the local Municipal Construction
Committee. The time estimated to receive each of these approvals is
approximately one month. We are quite confident that we can receive these
approvals. In the past, we have not been rejected by any of these three
regulators for approval.





Our
Employees




As of
June 30, 2009, we employed 758 full-time employees. The following table sets
forth the number of our full-time employees by function as of June 30,
2009




Functions
                
                As of
                  June 30, 2009Management
      & Administrative Staff
                
                
                122
                
                
                
                16
                %Sales
                
                
                53
                
                
                
                7
                %Technical
      & Engineering Staff
                
                
                53
                
                
                
                7
                %Production
      Staff
                
                
                152
                
                
                
                20
                %Equipment
      & Maintenance
                
                
                44
                
                
                
                6
                %Drivers
      & Heavy Equipment Operators
                
                
                334
                
                
                
                44
                %Total
                
                
                758
                
                
                
                100
                %





As
required by applicable PRC law, we have entered into employment contracts with
all of our officers, managers and employees. We believe that we maintain a
satisfactory working relationship with our employees and we have not experienced
any significant labor disputes or any difficulty in recruiting staff for our
operations.




In
addition, we are required by PRC law to cover employees in China with various
types of social insurance and believe that we are in material compliance with
the relevant PRC laws.




Insurance




We
believe our insurance coverage is customary and standard of companies of
comparable size in comparable industries in China.





REPORTS
TO SECURITY HOLDERS




We are
required to file annual, quarterly and current reports, proxy statements and
other information with the Securities and Exchange Commission and our filings
are available to the public over the internet at the Securities and Exchange
Commission’s website at http://www.sec.gov. The public may read and copy any
materials filed by us with the Securities and Exchange Commission at the
Securities and Exchange Commission’s Public Reference Room at 100 F Street N.E.
Washington D.C. 20549. The public may obtain information on the operation of the
Public Reference Room by calling the Securities and Exchange Commission at
1-800-732-0330. The SEC also maintains an Internet site that contains reports,
proxy and formation statements, and other information regarding issuers that
file electronically with the SEC, at http://www.sec.gov.




Item
1A.    Risk Factors





An
investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below, together with all of the other
information included in this report, before making an investment decision. If
any of the following risks actually occurs, our business, financial condition or
results of operations could suffer. In that case, the trading price of our
common stock could decline, and you may lose all or part of your
investment.


10




RISKS
RELATED TO OUR BUSINESS




Our
plans to build additional plants and to improve and upgrade our internal control
and management system will require capital expenditures in fiscal year
2010.





Our plans
to build additional plants and to improve and upgrade our internal control and
management system will require significant capital expenditures in fiscal year
2010. We may also need further funding for working capital, investments,
potential acquisitions and joint ventures and other corporate requirements. We
cannot assure you that cash generated from our operations will be sufficient to
fund these development plans, or that our actual capital expenditures and
investments will not significantly exceed our current planned amounts. If either
of these conditions arises, we may have to seek external financing to satisfy
our capital needs. Our ability to obtain external financing at reasonable costs
is subject to a variety of uncertainties. Failure to obtain sufficient external
funds for our development plans could adversely affect our business, financial
condition and operating performance.





Five
customer orders consisted of 32.03% of the net sales of the Company for the
fiscal year ended June 30, 2009, and the loss of any of these three customers
can result in a depressive effect on our net profit.





Our
Company focuses on large projects for large Chinese customers. Five customers
accounted for approximately 32.03 % and 41.49% of the Company’s sales for the
years ended June 30, 2009 and 2008, respectively. The total accounts receivable
from these customers amounted to $3,624,793 and $3,584,879 as of June 30, 2009
and 2008.  Should we lose any of these customers in the future and are
unable to obtain additional customers, our revenues will decrease.





We
may experience major accidents in the course of our operations, which may cause
significant property damage and personal injuries.





Significant
industry-related accidents and natural disasters may cause interruptions to
various parts of our operations, or could result in property or environmental
damage, increase in operating expenses or loss of revenue. The occurrence of
such accidents and the resulting consequences may not be covered adequately, or
at all, by the insurance policies we carry. In accordance with customary
practice in China, we do not carry any business interruption insurance or third
party liability insurance for personal injury or environmental damage arising
from accidents on our property or relating to our operations other than our
automobiles. Losses or payments incurred may have a material adverse effect on
our operating performance if such losses or payments are not fully
insured.




Our
planned expansion and technical improvement projects could be delayed or
adversely affected by, among other things, failures to receive regulatory
approvals, difficulties in obtaining sufficient financing, technical
difficulties, or human or other resource constraints.





We intend
to expand new production facilities during the next few years. The costs
projected for our planned expansion and technical improvement projects and
expansion may exceed those originally contemplated. Costs savings and other
economic benefits expected from these projects may not materialize as a result
of any such project delays, cost overruns or changes in market
circumstances.





To make
improvement at our currently existing plants, we do not need to apply for
regulatory approval. However, in order to build a new concrete plant, we will
need to (i) apply for a business license from the local Administration of
Industry and Commerce, (ii) apply for an Industry Qualification Certificate from
the local Municipal Construction Committee, and (iii) receive environmental
approval from the local Environmental Protection Bureau in the relevant district
area. There is no guarantee that we will be able to obtain these regulatory
approvals in a timely manner or at all.




Additionally,
in order to construct a new concrete plant, we will need to apply for a short
term loan from a local commercial bank to be used for working capital. Because
the lending policies of the local commercial banks are subject to change, there
is no guarantee that we will be able to obtain approval for such a loan with
conditions favorable to us in a timely manner or at all.




Failure
to obtain intended economic benefits from these new plants and technical
improvements projects, either due to cost overruns, our failure to obtain the
necessary regulatory approvals or our failure to obtain necessary loan financing
on terms favorable to us could adversely affect our business, financial
condition and operating performances.





We
cannot assure you that our growth strategy will be successful.





One of
our strategies is to grow through increasing the distribution and sales of our
products by penetrating existing markets in China and entering new geographic
markets in China. However, many obstacles to entering such new markets exist
including, but not limited to, competition from established companies in such
existing markets in the China. We cannot, therefore, assure you that we will be
able to successfully overcome such obstacles and establish our products in any
additional markets. Our inability to implement this growth strategy successfully
may have a negative impact on our growth, future financial condition, results of
operations or cash flows.


11





If
we fail to effectively manage our growth and expand our operations, our
business, financial condition, results of operations and prospects could be
adversely affected.





Our
future success depends on our ability to expand our business to address growth
in demand for our products and services. In order to maximize potential growth
in our current and potential markets, we believe that we must expand our
manufacturing and marketing operations. Our ability to accomplish these goals is
subject to significant risks and uncertainties, including:




·
            the
      need for additional funding to construct additional manufacturing
      facilities, which we may be unable to obtain on reasonable terms or at
      all;




·
            delays
      and cost overruns as a result of a number of factors, many of which may be
      beyond our control, such as problems with equipment vendors and
      manufacturing services provided by third-party manufacturers or
      subcontractors;




·
            our
      receipt of any necessary government approvals or permits that may be
      required to expand our operations in a timely manner or at
      all;




·
            diversion
      of significant management attention and other resources;
    and




·
            failure
      to execute our expansion plan
effectively.




To
accommodate our growth, we will need to implement a variety of new and upgraded
operational and financial systems, procedures, and controls, including
improvements to our accounting and other internal management systems, by
dedicating additional resources to our reporting and accounting function, and
improvements to our record keeping and contract tracking system. We will also
need to recruit more personnel and train and manage our growing employee base.
Furthermore, our management will be required to maintain and expand our
relationships with our existing customers and find new customers for our
services. There is no guarantee that our management can succeed in maintaining
and expanding these relationships.





If we
encounter any of the risks described above, or if we are otherwise unable to
establish or successfully operate additional capacity or increase our output, we
may be unable to grow our business and revenues, reduce our operating costs,
maintain our competitiveness or improve our profitability and, consequently, our
business, financial condition, results of operations, and prospects will be
adversely affected.




If
we are unable to accurately estimate the overall risks or costs associated with
a project on which we are bidding on, we may achieve a profit lower than
anticipated or even incur a loss on the contract.




Substantially
all of our revenues and contract backlog are typically derived from fixed unit
price contracts. Fixed unit price contracts require us to perform the contract
for a fixed unit price irrespective of our actual costs. As a result, we realize
a profit on these contracts only if we successfully estimate our costs and then
successfully control actual costs and avoid cost overruns. If our cost estimates
for a contract are inaccurate, or if we do not execute the contract within our
cost estimates, then cost overruns may cause the contract not to be as
profitable as we expected, or may cause us to incur losses. This, in turn, could
negatively affect our cash flow, earnings and financial position.





The costs
incurred and gross profit realized on those contracts can vary, sometimes
substantially, from the original projections due to a variety of factors,
including, but not limited to:




·
            onsite
      conditions that differ from those assumed in the original
    bid;




·
            delays
      caused by weather conditions;




·
            later
      contract start dates than expected when we bid the
    contract;




·
            contract
      modifications creating unanticipated costs not covered by change
      orders;




·
            changes
      in availability, proximity and costs of materials, including steel,
      concrete, aggregate and other construction materials (such as stone,
      gravel and sand), as well as fuel and lubricants for our
      equipment;




12





·
            availability
      and skill level of workers in the geographic location of a
      project;




·
            our
      suppliers’ or subcontractors’ failure to
  perform;




·
            fraud
      or theft committed by our
employees;




·
            mechanical
      problems with our machinery or
equipment;




·
            citations
      issued by governmental authorities




·
            difficulties
      in obtaining required governmental permits or
  approvals;




·
            changes
      in applicable laws and regulations;
and




·
            claims
      or demands from third parties alleging damages arising from our work or
      from the project of which our work is
part.





Economic
downturns or reductions in government funding of infrastructure projects could
significantly reduce our revenues.





Our
business is highly dependent on the amount of infrastructure work funded by
various governmental entities, which, in turn, depends on the overall condition
of the economy, the need for new or replacement infrastructure, the priorities
placed on various projects funded by governmental entities and national or local
government spending levels. Decreases in government funding of infrastructure
projects could decrease the number of civil construction contracts available and
limit our ability to obtain new contracts, which could reduce our revenues and
profits.





Our
business will be damaged if project contracts with the Chinese government, for
which we may act as a sub-contractor are cancelled;





We do not
enter into any contracts directly with the Chinese government. For contracts
that are funded by the Chinese government, we place bids and enter into
subcontracts with the private entity prime contractor. A sudden cancellation of
a prime contract, and in turn our subcontract, could cause our equipment and
work crews to remain idle for a significant period of time until other
comparable work becomes available. This idle time could have a material adverse
effect on our business and results of operations.





Our
industry is highly competitive, with numerous larger companies with greater
resources competing with us, and our failure to compete effectively could reduce
the number of new contracts awarded to us or adversely affect our margins on
contracts awarded.





Our
competition includes a number of PRC-based manufacturers and distributors that
produce and sell products similar to ours. We compete primarily on the basis of
quality, technological innovation and price. Our main competitors include
Jiangong Shanggong Center, Jinyu Group Concrete, Zhuzong Shanggong Center
and Zhonghang Konggang Concrete. Essentially all of the contracts on which we
bid are awarded through a competitive bid process, with awards generally being
made to the lowest bidder, though other factors such as shorter contract
schedules or prior experience with the customer are often just as important.
Within our markets, we compete with many national, regional and local
construction firms. Some of these competitors have achieved greater market
penetration or have greater financial and other resources than us. In addition,
there are a number of larger national companies in our industry that could
potentially establish a presence in our markets and compete with us for
contracts. As a result, we may need to accept lower contract margins in order to
compete against these competitors. If we are unable to compete successfully in
our markets, our relative market share and profits could be
reduced.





We
could face increased competition in our principal market.





Our
principal market, Beijing, has enjoyed stronger economic growth and a higher
demand for construction than other regions of China. As a result, we believe
that competitors will try to expand their sales and build up their distribution
networks in our principal market. We anticipate that this trend will continue
and likely accelerate. Increased competition may have a material adverse effect
on our financial condition and results of operations.





Our
dependence on subcontractors and suppliers of materials could increase our costs
and impair our ability to compete on contracts on a timely basis or at all,
which would adversely affect our profits and cash flow.





We rely
on third-party subcontractors to perform some of the work on many of our
contracts. We do not bid on contracts unless we have the necessary
subcontractors committed for the anticipated scope of the contract and at prices
that we have included in our bid. Therefore, to the extent that we cannot obtain
third-party subcontractors, our profits and cash flow will
suffer.


13





Our
planned expansion and technical improvement projects could be delayed or
adversely affected by, among other things, failures to receive regulatory
approvals, difficulties in obtaining sufficient financing, technical
difficulties, or human or other resource constraints.





We intend
to build up to three new production facilities during the next two years. The
costs projected for our planned expansion and technical improvement projects and
expansion may exceed those originally contemplated. Costs savings and other
economic benefits expected from these projects may not materialize as a result
of any such project delays, cost overruns or changes in market
circumstances.





To make
improvement at our currently existing plants, we do not need to apply for
regulatory approval. However, in order to build a new concrete plant, we will
need to (i) apply for a business license from the local Administration of
Industry and Commerce, (ii) apply for an Industry Qualification Certificate from
the local Municipal Construction Committee, and (iii) receive environmental
approval from the local Environmental Protection Bureau in the relevant district
area. There is no guarantee that we will be able to obtain these regulatory
approvals in a timely manner or at all.




Additionally,
in order to construct a new concrete plant, we will need to apply for a short
term loan from a local commercial bank to be used for working capital. Because
the lending policies of the local commercial banks are subject to change, there
is no guarantee that we will be able to obtain approval for such a loan with
conditions favorable to us in a timely manner or at all.




Failure
to obtain intended economic benefits from these new plants and technical
improvements projects, either due to cost overruns, our failure to obtain the
necessary regulatory approvals or our failure to obtain necessary loan financing
on terms favorable to us could adversely affect our business, financial
condition and operating performances.




We
may be exposed to liabilities under the Foreign Corrupt Practices Act, and any
determination that we violated the Foreign Corrupt Practices Act could have a
material adverse effect on our business.





We are
subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that
prohibit improper payments or offers of payments to foreign governments and
their officials and political parties by U.S. persons and issuers as defined by
the statute for the purpose of obtaining or retaining business. We have
operations, agreements with third parties and make sales in China, which may
experience corruption. Our activities in China create the risk of unauthorized
payments or offers of payments by one of the employees, consultants, sales
agents or distributors of our Company, even though these parties are not always
subject to our control. It is our policy to implement safeguards to discourage
these practices by our employees. However, our existing safeguards and any
future improvements may prove to be less than effective, and the employees,
consultants, sales agents or distributors of our Company may engage in conduct
for which we might be held responsible. Violations of the FCPA may result in
severe criminal or civil sanctions, and we may be subject to other liabilities,
which could negatively affect our business, operating results and financial
condition. In addition, the government may seek to hold our Company liable for
successor liability FCPA violations committed by companies in which we invest or
that we acquire.





We
depend heavily on key personnel, and turnover of key employees and senior
management could harm our business.




Our
future business and results of operations depend in significant part upon the
continued contributions of our key technical and senior management personnel,
including Xianfu Han, our Chairman and Chief Executive Officer and Weili He, our
Vice-Chairman and Chief Operating Officer. They also depend in significant part
upon our ability to attract and retain additional qualified management,
technical, operational and support personnel for our operations. If we lose a
key employee, if a key employee fails to perform in his or her current position,
or if we are not able to attract and retain skilled employees as needed, our
business could suffer. Significant turnover in our senior management could
significantly deplete the institutional knowledge held by our existing senior
management team. We depend on the skills and abilities of these key employees in
managing the reclamation, technical, and marketing aspects of our business, any
part of which could be harmed by turnover in the future.




Certain
of our existing stockholders have substantial influence over our company, and
their interests may not be aligned with the interests of our other
stockholders.




Our
Chairman, Xianfu Han, owns approximately 37.76% of our outstanding voting
securities and our Vice-Chairman, Weili He, owns approximately 25.17% of our
outstanding voting securities as of June 30, 2009 in a fully diluted share base.
As a result, each have significant influence over our business, including
decisions regarding mergers, consolidations, liquidations and the sale of all or
substantially all of our assets, election of directors and other significant
corporate actions. This concentration of ownership may also have the effect of
discouraging, delaying or preventing a future change of control, which could
deprive our stockholders of an opportunity to receive a premium for their shares
as part of a sale of our company and might reduce the price of our
shares.


14




We
may require additional capital and we may not be able to obtain it on acceptable
terms or at all.





We
believe that our current cash and cash flow from operations will be sufficient
to meet our present cash needs. We may, however, require additional cash
resources due to changed business conditions or other future developments,
including any investments or acquisitions we may decide to pursue. If these
resources are insufficient to satisfy our cash requirements, we may seek to sell
additional equity or debt securities or obtain additional credit facilities. The
sale of additional equity securities could result in dilution to our
stockholders. The incurrence of indebtedness would result in increased debt
service obligations and could require us to agree to operating and financing
covenants that would restrict our operations. Our ability to obtain additional
capital on acceptable terms is subject to a variety of uncertainties,
including:




·
            investors’
      perception of, and demand for, securities of Chinese-based companies
      involved in construction supply or concrete
  industries;





·
            conditions
      of the U.S. and other capital markets in which we may seek to raise
      funds;





·
            our
      future results of operations, financial condition and cash flows;
      and





·
            economic,
      political and other conditions in
China.





Financing
may not be available in amounts or on terms acceptable to us, if at all. Any
failure by us to raise additional funds on terms favorable to us, or at all,
could have a material adverse effect on our business, financial condition and
results of operations.





We
may be exposed to potential risks relating to our internal controls over
financial reporting and our ability to have those controls attested to by our
independent auditors for the year ending June 30, 2010, in accordance with the
Sarbanes-Oxley Act of 2002..





As
directed by Section 404 of the Sarbanes-Oxley Act of 2002 or SOX 404, the SEC
adopted rules requiring public companies to include a report of management on
the company’s internal controls over financial reporting in their annual
reports, including Form 10-K. In addition, the independent registered public
accounting firm auditing a company’s financial statements must also attest to
and report on management’s assessment of the effectiveness of the company’s
internal controls over financial reporting as well as the operating
effectiveness of the company’s internal controls. We were subject to management
attestation report for the fiscal year ended June 30, 2009, accordingly we have
evaluated our internal control systems in order to allow our management to
report on our internal controls as required by these requirements of SOX 404.
Our management has concluded that our internal control over financial reporting
is not effective and has material weaknesses for the year ended June 30, 2009.
We have hired Ernst & Young in assisting and implementing SOX 404 for us in
March, 2009. Under current law, we will be subject to these requirements
beginning with our annual report for the fiscal year ending June 30, 2009,
although the auditor attestation will not be required until our annual report
for the fiscal year ending June 30, 2010. We can provide no assurance that we
will comply with all of the requirements imposed thereby. There can be no
positive assurance that we will receive a positive attestation from our
independent auditors. In the event we identify significant deficiencies or
material weaknesses in our internal controls that we cannot remediate in a
timely manner or we are unable to receive a positive attestation from our
independent auditors with respect to our internal controls, investors and others
may lose confidence in the reliability of our financial statements, which could
adversely affect the price of our shares.




RISKS
RELATED TO DOING BUSINESS IN CHINA




Adverse
changes in political and economic policies of the PRC government could impede
the overall economic growth of China, which could reduce the demand for our
products and damage our business.





We
conduct all of our operations and generate all of our revenue in China.
Accordingly, our business, financial condition, results of operations and
prospects are affected significantly by economic, political and legal
developments in China. The PRC economy differs from the economies of most
developed countries in many respects, including:




·
            the
      higher level of government
involvement;




·
            the
      early stage of development of the market-oriented sector of the
      economy;




·
            the
      rapid growth rate;




·
            the
      higher level of control over foreign exchange;
  and




·
            the
      allocation of resources.




15





As the
PRC economy has been transitioning from a planned economy to a more
market-oriented economy, the PRC government has implemented various measures to
encourage economic growth and guide the allocation of resources. While these
measures may benefit the overall PRC economy, they may also have a negative
effect on us.





Although
the PRC government has in recent years implemented measures emphasizing the
utilization of market forces for economic reform, the PRC government continues
to exercise significant control over economic growth in China through the
allocation of resources, controlling payment of foreign currency-denominated
obligations, setting monetary policy and imposing policies that impact
particular industries or companies in different ways.





Any
adverse change in the economic conditions or government policies in China could
have a material adverse effect on the overall economic growth and the level of
new construction investments and expenditures in China, which in turn could lead
to a reduction in demand for our services and consequently have a material
adverse effect on our business and prospects.





Uncertainties
with respect to the PRC legal system could limit the legal protections available
to you and us.




We
conduct substantially all of our business through our operating subsidiary in
the PRC. Our operating subsidiaries are generally subject to laws and
regulations applicable to foreign investments in China and, in particular, laws
applicable to foreign-invested enterprises. The PRC legal system is based on
written statutes, and prior court decisions may be cited for reference but have
limited precedential value. Since 1979, a series of new PRC laws and regulations
have significantly enhanced the protections afforded to various forms of foreign
investments in China. However, since the PRC legal system continues to rapidly
evolve, the interpretations of many laws, regulations and rules are not always
uniform and enforcement of these laws, regulations and rules involve
uncertainties, which may limit legal protections available to you and us. In
addition, any litigation in China may be protracted and result in substantial
costs and diversion of resources and management attention. In addition, all of
our executive officers and all of our directors are residents of China and not
of the United States, and substantially all the assets of these persons are
located outside the United States. As a result, it could be difficult for
investors to affect service of process in the United States or to enforce a
judgment obtained in the United States against our Chinese operations and
subsidiaries.




The
PRC government exerts substantial influence over the manner in which we must
conduct our business activities.




The PRC
government has exercised and continues to exercise substantial control over
virtually every sector of the Chinese economy through regulation and state
ownership. Our ability to operate in China may be harmed by changes in its laws
and regulations, including those relating to taxation, import and export
tariffs, environmental regulations, land use rights, property and other matters.
We believe that our operations in China are in material compliance with all
applicable legal and regulatory requirements. However, the central or local
governments of the jurisdictions in which we operate may impose new, stricter
regulations or interpretations of existing regulations that would require
additional expenditures and efforts on our part to ensure our compliance with
such regulations or interpretations.




Accordingly,
government actions in the future, including any decision not to continue to
support recent economic reforms and to return to a more centrally planned
economy or regional or local variations in the implementation of economic
policies, could have a significant effect on economic conditions in China or
particular regions thereof and could require us to divest ourselves of any
interest we then hold in Chinese properties or joint ventures.




Aslowdown or other
adversedevelopments in
the PRC economy may materially and adversely affect our customers, demand for
our services and our business.




We are a
holding company. All of our operations are conducted in the PRC and all of our
revenues are generated from sales in the PRC. Although the PRC economy has grown
significantly in recent years, we cannot assure you that such growth will
continue. A slowdown in overall economic growth, an economic downturn or
recession or other adverse economic developments in the PRC may materially
reduce the demand for new construction projects and adversely affect our
business.





Restrictions on currency exchange
may limit our ability to receive and use our sales revenue
effectively.




Most of
our sales revenue and expenses are denominated in RMB. Under PRC law, the RMB is
currently convertible under the “current account,” which includes dividends and
trade and service-related foreign exchange transactions, but not under the
“capital account,” which includes foreign direct investment and loans.
Currently, our PRC operating subsidiary may purchase foreign currencies for
settlement of current account transactions, including payments of dividends to
us, without the approval of the State Administration of Foreign Exchange, or
SAFE, by complying with certain procedural requirements. However, the relevant
PRC government authorities may limit or eliminate our ability to purchase
foreign currencies in the future. Since a significant amount of our future
revenue will be denominated in RMB, any existing and future restrictions on
currency exchange may limit our ability to utilize revenue generated in RMB to
fund our business activities outside China that are denominated in foreign
currencies.


16




Foreign
exchange transactions by PRC operating subsidiaries under the capital account
continue to be subject to significant foreign exchange controls and require the
approval of or need to register with PRC government authorities, including SAFE.
In particular, if our PRC operating subsidiaries borrow foreign currency through
loans from us or other foreign lenders, these loans must be registered with
SAFE, and if we finance the subsidiaries by means of additional capital
contributions, these capital contributions must be approved by certain
government authorities, including the Ministry of Commerce, or MOFCOM, or their
respective local counterparts. These limitations could affect their ability to
obtain foreign exchange through debt or equity financing.





PRC
regulations relating to the establishment of offshore special purpose companies
by PRC residents, if applied to us, may subject our PRC resident stockholders to
personal liability and limit our ability to acquire PRC companies or to inject
capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to
distribute profits to us or otherwise materially adversely affect
us.





In
October 2005, SAFE issued the Notice on Relevant Issues in the Foreign Exchange
Control over Financing and Return Investment Through Special Purpose Companies
by Residents Inside China, or the SAFE Notice. The SAFE Notice requires PRC
residents to register with the appropriate local SAFE branch before using assets
or equity interests in their PRC entities to capitalize offshore special purpose
companies, or SPVs, or to raise capital overseas. A SAFE registration must be
amended by a PRC resident if the SPV undergoes a significant event, such as a
change in share capital, share transfer, merger, acquisition, spin-off
transaction or use of assets in China to guarantee offshore
obligations. Moreover, if the SPV was established and owned the onshore
assets or equity interests before the implementation of the SAFE Notice, a
retroactive SAFE registration is required to have been completed before March
31, 2006. Our PRC resident shareholders have filed their SAFE registration with
the local SAFE branch which has indicated to us that the registrations comply
with applicable laws. However, we cannot provide any assurances that their
existing registration have fully complied with, and they have
made necessary amendments to their registration to fully comply with, all
applicable registrations or approvals required by this SAFE Notice.




Moreover,
because of uncertainty over how the SAFE Notice will be interpreted and
implemented, and how or whether SAFE will apply it to us, we cannot predict how
it will affect our business operations or future strategies. For example, our
present and prospective PRC subsidiaries’ ability to conduct foreign exchange
activities, such as the remittance of dividends and foreign currency-denominated
borrowings, may be subject to compliance with the SAFE Notice by our PRC
resident beneficial holders. In addition, such PRC residents may not always be
able to complete the necessary registration procedures required by the SAFE
Notice. We also have little control over either our present or prospective
direct or indirect stockholders or the outcome of such registration procedures.
A failure by our PRC resident beneficial holders or future PRC resident
stockholders to comply with the SAFE Notice, if SAFE requires it, could subject
these PRC resident beneficial holders to fines or legal sanctions, restrict our
overseas or cross-border investment activities, limit our subsidiaries’ ability
to make distributions or pay dividends or affect our ownership structure, which
could adversely affect our business and prospects.





We
may be unable to complete a business combination transaction efficiently or on
favorable terms due to complicated merger and acquisition regulations
implemented on September 8, 2006.




The
recent PRC Regulation on Mergers and Acquisitions of Domestic Companies by
Foreign Investors also governs the approval process by which a PRC company may
participate in an acquisition of its assets or its equity interests. Depending
on the structure of the transaction, the new regulation will require the Chinese
parties to make a series of applications and supplemental applications to the
government agencies. In some instances, the application process may require the
presentation of economic data concerning a transaction, including appraisals of
the target business and evaluations of the acquirer, which are designed to allow
the government to assess the transaction. Government approvals will have
expiration dates by which a transaction must be completed and reported to the
government agencies. Compliance with the new regulations is likely to be more
time consuming and expensive than in the past and the government can now exert
more control over the combination of two businesses. Accordingly, due to the new
regulation, our ability to engage in business combination transactions has
become significantly more complicated, time consuming and expensive, and we may
not be able to negotiate a transaction that is acceptable to our stockholders or
sufficiently protect their interests in a transaction.




The new
regulation allows PRC government agencies to assess the economic terms of a
business combination transaction. Parties to a business combination transaction
may have to submit to MOFCOM and the other government agencies an appraisal
report, an evaluation report and the acquisition agreement, all of which form
part of the application for approval, depending on the structure of the
transaction. The regulations also prohibit a transaction at an acquisition price
obviously lower than the appraised value of the Chinese business or assets and
in certain transaction structures, require that consideration must be paid
within defined periods, generally not in excess of a year. The regulation also
limits our ability to negotiate various terms of the acquisition, including
aspects of the initial consideration, contingent consideration, holdback
provisions, indemnification provisions and provisions relating to the assumption
and allocation of assets and liabilities. Transaction structures involving
trusts, nominees and similar entities are prohibited. Therefore, such regulation
may impede our ability to negotiate and complete a business combination
transaction on financial terms that satisfy our investors and protect our
stockholders’ economic interests.


17


Fluctuations
in exchange rates could adversely affect our business and the value of our
securities.




The value
of our common stock will be indirectly affected by the foreign exchange rate
between U.S. dollars and RMB and between those currencies and other currencies
in which our sales may be denominated. Because substantially all of our earnings
and cash assets are denominated in RMB and the net proceeds from this offering
will be denominated in U.S. dollars, fluctuations in the exchange rate between
the U.S. dollar and the RMB will affect the relative purchasing power of these
proceeds, our balance sheet and our earnings per share in U.S. dollars following
this offering. In addition, appreciation or depreciation in the value of the RMB
relative to the U.S. dollar would affect our financial results reported in U.S.
dollar terms without giving effect to any underlying change in our business or
results of operations. Fluctuations in the exchange rate will also affect the
relative value of any dividend we issue after this offering that will be
exchanged into U.S. dollars and earnings from, and the value of, any U.S.
dollar-denominated investments we make in the future.




Since
July 2005, the RMB has no longer been pegged to the U.S. dollar. Although the
People’s Bank of China regularly intervenes in the foreign exchange market to
prevent significant short-term fluctuations in the exchange rate, the RMB may
appreciate or depreciate significantly in value against the U.S. dollar in
the medium to long term. Moreover, it is possible that in the future PRC
authorities may lift restrictions on fluctuations in the RMB exchange rate and
lessen intervention in the foreign exchange market.





Very
limited hedging transactions are available in China to reduce our exposure to
exchange rate fluctuations. To date, we have not entered into any hedging
transactions in an effort to reduce our exposure to foreign currency exchange
risk. While we may enter into hedging transactions in the future, the
availability and effectiveness of these transactions may be limited, and we may
not be able to successfully hedge our exposure at all. In addition, our foreign
currency exchange losses may be magnified by PRC exchange control regulations
that restrict our ability to convert RMB into foreign
currencies.





Currently,
some of our raw materials and major equipment are imported. In the event that
the U.S. dollars appreciate against RMB, our costs will increase. If we can not
pass the resulting costs on to our customers, our profitability and operating
results will suffer.





RISKS
RELATED TO THE MARKET FOR OUR COMMON STOCK




Our
shares of common stock are very thinly traded, and there can be no assurance
that there will be an active market for our shares of common stock in the
future.





Our
shares of common stock are very thinly traded, and the price if traded may not
reflect our value. There can be no assurance that there will be an active market
for our shares of common stock in the future. The market liquidity will be
dependent on the perception of our operating business and any steps that our
management might take to bring us to the awareness of investors. There can be no
assurance given that there will be any awareness generated. Consequently,
investors may not be able to liquidate their investment or liquidate it at a
price that reflects the value of the business. If a more active market should
develop, the price may be highly volatile. Because there may be a low price for
our shares of common stock, many brokerage firms may not be willing to effect
transactions in the securities. Even if an investor finds a broker willing to
effect a transaction in the shares of our common stock, the combination of
brokerage commissions, transfer fees, taxes, if any, and any other selling
costs may exceed the selling price. Further, many lending institutions will not
permit the use of such shares of common stock as collateral for any
loans.





We
do not intend to pay dividends on shares of our common stock for the foreseeable
future, but if we intend to do so our holding company structure may limit the
payment of dividends to our stockholders.





We have
no direct business operations, other than our ownership of our subsidiaries.
While we have no current intention of paying dividends, should we decide in the
future to do so, as a holding company, our ability to pay dividends and meet
other obligations depends upon the receipt of dividends or other payments from
our operating subsidiaries and other holdings and investments. In addition, our
operating subsidiaries, from time to time, may be subject to restrictions on
their ability to make distributions to us, including as a result of restrictive
covenants in loan agreements, restrictions on the conversion of local currency
into U.S. dollars or other hard currency and other regulatory restrictions as
discussed below. If future dividends are paid in RMB, fluctuations in the
exchange rate for the conversion of RMB into U.S. dollars may reduce the amount
received by U.S. stockholders upon conversion of the dividend payment into U.S.
dollars.




Chinese
regulations currently permit the payment of dividends only out of accumulated
profits as determined in accordance with Chinese accounting standards and
regulations. Our subsidiaries in China are also required to set aside a portion
of their after tax profits according to Chinese accounting standards and
regulations to fund certain reserve funds. Currently, our subsidiaries in China
are the only sources of revenues or investment holdings for the payment of
dividends. If they do not accumulate sufficient profits under Chinese accounting
standards and regulations to first fund certain reserve funds as required by
Chinese accounting standards, we will be unable to pay any
dividends.




We
may be subject to penny stock regulations and restrictions and you may have
difficulty selling shares of our common stock.





The SEC
has adopted regulations which generally define so-called “penny stocks” to be an
equity security that has a market price less than $5.00 per share or an exercise
price of less than $5.00 per share, subject to certain exemptions. If our common
stock becomes a “penny stock”, we may become subject to Rule 15g-9 under the
Exchange Act, or the “Penny Stock Rule”. This rule imposes additional sales
practice requirements on broker-dealers that sell such securities to persons
other than established customers and “accredited investors” (generally,
individuals with a net worth in excess of $1,000,000 or annual incomes exceeding
$200,000, or $300,000 together with their spouses). For transactions covered by
Rule 15g-9, a broker-dealer must make a special suitability determination for
the purchaser and have received the purchaser’s written consent to the
transaction prior to sale. As a result, this rule may affect the ability of
broker-dealers to sell our securities and may affect the ability of purchasers
to sell any of our securities in the secondary market.


18





For any
transaction involving a penny stock, unless exempt, the rules require delivery,
prior to any transaction in a penny stock, of a disclosure schedule prepared by
the SEC relating to the penny stock market. Disclosure is also required to be
made about sales commissions payable to both the broker-dealer and the
registered representative and current quotations for the securities. Finally,
monthly statements are required to be sent disclosing recent price information
for the penny stock held in the account and information on the limited market in
penny stock.





There can
be no assurance that our common stock will qualify for exemption from the Penny
Stock Rule. In any event, even if our common stock were exempt from the Penny
Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act,
which gives the SEC the authority to restrict any person from participating in a
distribution of penny stock, if the SEC finds that such a restriction would be
in the public interest.




Item
1B.     Unresolved Staff Comments




Not
applicable.




Item
2.        Properties




There is
no private land ownership in China. Individuals and companies are permitted to
acquire land use rights for specific purposes. We lease our 44,041 square meter
facility located at Jia 1, SanTaiShan, XiaoHongMen County, ChaoYang District,
Beijing, China, from Beijing SanTaiShan Chemical Trading & Logistics Co.,
who was granted land use rights from the PRC government. The lease provides for
a five year term beginning on October 1, 2008, with the option to extend
following expiration. Annual rent on the property is approximately
$192,000.





We
entered into three different five-year operating lease agreements during the
fourth quarter of 2009.  The lease payments are for three manufacture
plants with different unrelated parties for a total monthly payment of $176,000.
Some lease payments have been pre-paid by transferring the Company’s long-term
accounts receivable to the leasers at approximately the fair market value of the
future lease payments as the Company believes that a lump-sum pre-payments from
aging receivable in exchange for agreeing to no increase in the future lease
will benefit its future operation.




We have
an extensive fleet of 116 concrete mixers, 17 pump trucks, and we have access to
additional 10-20 rental vehicles depending on specific project requirements.
More than half of the vehicles are equipped with GPS and tracking devices from
the plants central dispatch center in order to optimize capacity utilization,
production and delivery schedules.





Item
3.        Legal Proceedings





From time
to time, we may become involved in various lawsuits and legal proceedings, which
arise, in the ordinary course of business. However, litigation is subject to
inherent uncertainties, and an adverse result in these or other matters may
arise from time to time that may harm our business. We are currently not aware
of any such legal proceedings or claims that we believe will have a material
adverse effect on our business, financial condition or operating results.
Details of our current legal proceedings are disclosed under item 1.
Litigation.





Item
4.        Submission of Matters to a Vote of
Security Holders




None.




PART
II




Item
5.        Market for Registrant’s Common
Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities





Market
Information





Our
common stock has been quoted on the OTC Bulletin Board since May 19, 2008 under
the symbol CADC. Prior to that date, there was no active market for our common
stock. The following table sets forth the high and low bid prices for our common
stock for the periods indicated, as reported by the OTC Bulletin Board. The
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission, and may not represent actual transactions.


19





Year
                            
                            Quarter Ending
                            
                            High
                            
                            Low2009
                            
                            September
      30 (as of September 22)
                            
                            $
                            5.50
                            
                            
                            $
                            2.30June
      30
                            
                            $
                            3.90
                            
                            
                            $
                            1.71March
      31
                            
                            $
                            2.75
                            
                            
                            $
                            1.012008
                            
                            December
      31
                            
                            $
                            2.75
                            
                            
                            $
                            2.74September
      30
                            
                            $
                            2.60
                            
                            
                            $
                            2.60June
      30 (from May 19)
                            
                            $
                            2.30
                            
                            
                            $
                            0.30




As of
September 22, 2009, there were 426 stockholders of record of our common
stock.





We have
not declared or paid any cash dividends on our common stock and do not
anticipate declaring or paying any cash dividends in the foreseeable future. We
currently expect to retain future earnings, if any, for the development of our
business. Dividends may be paid on our common stock only if and when declared by
our board of directors.





Dividends





We have
never paid dividends on our common stock. While any future dividends will be
determined by our directors after consideration of the earnings, financial
condition, and other relevant factors, it is currently expected that available
cash resources will be utilized in connection with our ongoing
operations.





Section
15(g) of the Securities Exchange Act of 1934 — The Penny Stock
Rules





Our
shares are covered by Section 15(g) of the Securities Exchange Act of 1934 as
amended, that imposes additional sales practice requirements on broker/dealers
who sell such securities to persons other than established customers and
accredited investors (generally institutions with assets in excess of
$5,000,000, or individuals with net worth in excess of $1,000,000 or annual
income exceeding $200,000, or $300,000 jointly with their spouses). For
transactions covered by this Section 15(g), the broker/dealer must make a
special suitability determination for the purchase and have received the
purchaser’s written agreement to the transaction prior to the sale.
Consequently, Section 15(g) may affect the ability of broker/dealers to sell our
securities and also may affect your ability to sell your shares in the secondary
market.




Item
6.        Selected Financial
Data




Not
Applicable.




Item
7.        Management’s Discussion and
Analysis of Financial Condition and Results of Operations




The
following Management’s Discussion and Analysis of Financial Condition and
Results of Operations, or MD&A,  is intended to help the reader
understand our operations and the present business environment. MD&A is
provided as a supplement to, and should be read in conjunction with, our
consolidated financial statements and the accompanying notes thereto contained
in “Item 8. Financial Statements and Supplementary Data” of this report. This
overview summarizes the MD&A, which includes the following
sections:





•
            Our
      Business — a general overview of our two business
      segments, the material opportunities and challenges of our
      business;





•
            Critical Accounting Policies
      and Estimates — a discussion of accounting policies that
      require critical judgments and
estimates;





•
            Operations
      Review — an analysis of our Company’s consolidated
      results of operations for the two years presented in our consolidated
      financial statements. Except to the extent that differences among our
      operating segments are material to an understanding of our business as a
      whole, we present the discussion in the MD&A on a consolidated basis;
      and





•
            Liquidity, Capital Resources
      and Financial Position — an analysis of cash flows; an
      overview of financial position.





The
following discussion contains forward-looking statements that involve risks,
uncertainties, and assumptions such as statements of our plans, objectives,
expectations, and intentions. Our actual results may differ materially from
those discussed in these forward-looking statements because of the risks and
uncertainties inherent in future events.


20




Management’s
Discussion and Analysis or Plan of Operation





Overview




We are a
holding company whose primary business operations are conducted through our
wholly-owned subsidiaries BVI-ACM and China-ACMH. China-ACMH and its variable
interest entity Xin Ao are engaged in the production of advanced construction
materials for large scale commercial, residential, and infrastructure
developments, and 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, as described elsewhere in this report, with Xin Ao
through which China-ACMH operates and controls Xin Ao.





Together
with our subsidiaries, we provide materials and services through our network of
seven ready-mixed concrete plants throughout Beijing and nine portable concrete
plants located in various provinces all over China that are currently supporting
our high speed railway projects. Our management believes that we have the
ability to capture a much greater share of the Beijing market and further expand
our footprint in China via expanding relationships and networking, signing new
contracts, and continually developing market-leading innovative and eco-friendly
ready-mix concrete products.  Based on reports from the National
Development and Reform Commission, or NDRC, we anticipate that our market share
will further expand due to the announced $586 billion infrastructure stimulus
packages by the Chinese government last year, which will focus primary on
transportation related projects such as railway, highway, and transportation
related infrastructure.





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. Five customers
accounted for approximately 32.03 % and 41.49% of the Company’s sales for the
years ended June 30, 2009 and 2008, respectively. The total accounts receivable
from these customers amounted to $3,624,793 and $3,584,879 as of June 30, 2009
and 2008, respectively.




Experienced Management.
Management’s technical knowledge and business relationships gives us the ability
to secure major infrastructure projects, which provides us with leverage to
acquire less sophisticated operators, increase production volumes, and implement
quality standards and environmentally sensitive policies.




Innovation Efforts. We strive
to produce the most technically and scientifically advanced products to our
customers and maintain close relationships with Tsinghua University, Xi’an
University of Architecture and Technology and Beijing Dongfangjianyu
Institute of Concrete Science & Technology which assist us with our research
and development activities. During our 5 year agreement with the parties, we
have realized an advantage over many of our competitors by gaining access to a
wide array of resources and knowledge.  At present, no payments have
been made by us under the agreement.





Results
of Operations




The
following table sets forth key components of our results of operations for the
periods indicated, in US dollars:





For the years ended June 30,2009
                    
                    
                    2008Total
      revenue
                    
                    $
                    39,714,802
                    
                    
                    $
                    27,565,044Total
      cost of revenue
                    
                    
                    24,518,042
                    
                    
                    
                    20,799,398Gross
      profit
                    
                    
                    15,196,760
                    
                    
                    
                    6,765,646Selling,
      general and administrative expenses
                    
                    
                    (1,717,794
                    )
                    
                    
                    (1,946,541
                    )Other
      income, net
                    
                    
                    704,620
                    
                    
                    
                    1,357,461Income
      before provision for income taxes
                    
                    
                    14,183,586
                    
                    
                    
                    6,176,566Income
      taxes
                    
                    
                    2,115,097
                    
                    
                    
                    1,012,382Net
      income
                    
                    
                    12,068,489
                    
                    
                    
                    5,164,184Dividends
      and accretion on redeemable convertible preferred
                    
                    
                    1,229,473
                    
                    
                    
                    33,387Net
      income available to Common shareholders
                    
                    $
                    10,839,016
                    
                    
                    $
                    5,130,797




21





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





For the years ended June 30,2009
                    
                    
                    2008Total
      revenue
                    
                    
                    100.0
                    %
                    
                    
                    100.0
                    %Total
      cost of revenue
                    
                    
                    61.7
                    %
                    
                    
                    75.5
                    %Gross
      profit
                    
                    
                    38.3
                    %
                    
                    
                    24.5
                    %Selling,
      general and administrative expenses
                    
                    
                    (4.3
                    )%
                    
                    
                    (7.1
                    )%Other
      income, net
                    
                    
                    1.8
                    %
                    
                    
                    4.9
                    %Income
      before provision for income taxes
                    
                    
                    35.8
                    %
                    
                    
                    22.3
                    %Income
      taxes
                    
                    
                    5.3
                    %
                    
                    
                    3.7
                    %Net
      income
                    
                    
                    30.5
                    %
                    
                    
                    18.6
                    %Dividends
      and accretion on redeemable convertible preferred
                    
                    
                    3.1
                    %
                    
                    
                    0.1
                    %Net
      income available to common shareholders
                    
                    
                    27.4
                    %
                    
                    
                    18.5
                    %





Comparison
of the year Ended June 30, 2009 and 2008





Revenue. Our
revenue is generated from sales of our advanced ready-mix concrete products,
manufacturing services, technical consulting, and mixer rental. For the year
ended June 30, 2009, we generated revenue of $39,714,802 compared to $27,565,044
during the same period of 2008, an increase of $12,149,758 or 44.1%. During the
fiscal year surrounding the Olympic Games held in August in Beijing, our primary
area of operation, all construction within the 5th ring expressway surrounding
the city was halted and delayed until after the Olympics. In anticipation of
this work stoppage and in an attempt to counter any adverse effect such an event
could have on our operations, we focused efforts during this time to expanding
the geographic area of our operations, providing manufacture services and
technical consulting services to other companies as well as renting our
equipment to other companies. Our concrete sales revenue increased as the
construction industry in Beijing returned back to full scale following the
Olympics. The Company also increased concrete capacity in its concrete plants in
Beijing area during the fourth quarter this fiscal year.  As a result,
our concrete revenue increased by $553,448 compared to the same period last year
despite the Olympics affects. During the year ended June 30, 2009, we continued
to supply concrete products to nine railway projects located outside Beijing
area through our portable plants, specifically the Suzhou and Danyang sections
of the Beijing-Shanghai high-speed railway project, the East Datong-Gudian
connection railway project, Zhumadian railway project, Qinhuangdao project,
Yongfu project, Liuzhou project, and Hangzhou projects.  These nine
projects contributed $7,053,728 to our total revenue for the year ended June 30,
2009. For these railway projects, the general contractors supplied their own raw
materials and we provided manufacturing and transportation services.
Additionally, technical consulting services generated revenue of $1,924,089
during the year. During the twelve month period ended June 30, 2009, we
also rented our mixer trucks to mixture stations located outside the 5th ring
expressway of Beijing which generated revenues of $2,618,493. We anticipate our
sales revenue will continue to grow as the Chinese government announced its 4
trillion Yuan (USD$586 billion) stimulus package in November 2008 well as the
Chinese government’s railroad project plans which are expected to cost a total
of $730 billion through 2020. We should be a direct beneficiary of transport and
infrastructure build-out from China’s stimulus package. We plan to continue to
expand our business into additional geographical markets due to our strong
relationship with major contractors in China.


22


Cost of
Revenue. Cost of
Revenue, which consists of direct labor, rentals, depreciation, other overheads
and raw materials including inbound freight charge, was $24,518,042 for the year
ended June 30, 2009 as compared to $20,799,398 for the year ended June 30, 2008,
an increase of 17.9% or $3,718,644.  The increase on cost of revenue
was due to overall increase in sales revenue of 44.1%as a result of the
increase in production from three fixed concrete plants in Beijing areas and
increase production on manufacture and technical services as well as other
services compared to the same period in 2008. The cost of revenue has decreased
significantly compared to the percentage increase in revenue. As previously
discussed, we continued to work on the nine railway projects for the year ended
June 30, 2009, the costs of which did not include raw material, water and
electricity, as such costs were paid directly by the projects’ general
contractors. We also continued to enter into concrete technical and mixer rental
service contracts which have higher gross margins. We did not engage in this
source of service contracts during the same period in 2008.




Gross
Profit. Our gross profit is equal to the difference between our revenue
and cost of revenue. Gross profit was $15,196,760 for the year ended June 30,
2009 as compared to $6,765,646 for the year ended June 30, 2008, representing
gross margin of approximately 38.3% and 24.5%, respectively. The gross profit
for sale of concrete was $7,461,180 or 26.5% for the year ended June 30, 2009
compared to $6,765,646 or 24.5% for the same period last year, an increase of
$695,534 or 10.3%. The gross profit on our manufacturing services was $4,285,473
or 60.8% for the year ended June 30, 2009. The higher gross margin on
manufacture service reflects the fact that cost of the nine railway projects did
not include raw materials that were supplied directly by the project’s general
contractors. The higher gross margin is also attributable to more profitable
technical services and mixer rental during the year ended June 30,
2009.  We plan to expand our manufacturing and technical
services, which produce the highest gross profits among our revenue
sectors.





Selling, General
and Administrative Expenses. Selling, general and administrative expenses
consist of sales commissions, advertising and marketing costs, office rent and
expenses, costs associated with staff and support personnel who manage our
business activities, and professional and legal fees paid to third parties. The
company incurred selling, general and administrative expenses of $1,717,794 for
the year ended June 30, 2009, a decrease of 7.1% or $228,747, as compared to
$1,946,541 for the year ended June 30, 2008. The decrease is primarily due to
cash and non-cash expenses associated with the reverse merger of BVI-ACM and the
preferred stock offering, totaling $420,159 and including fees paid to
attorneys and consultants and non-cash charges related warrants issued for
services in 2008 offset by increased legal fees, auditing and accounting
expenses, investor relations and other professional expenses following our
reverse merger and financing in 2009. The decrease was also due to a credit
adjustment in bad debt expenses resulting from an overall reduction in aging
receivable balance.





Other
Incomeand
Expenses,net. Our
other income consists of valued added tax exemption from the government,
interest income and other non-operating income. We had net other income of
$704,620 for the year ended June 30, 2009 as compared to net other income of
$1,357,461 for the year ended June 30, 2008, a decrease in net other income of
$652,841 or 48.1%. The decrease in net other income is partly due to receiving
of value added tax exemption from the government offset by increase in other
non-operating expense and interest expense. We had interest expenses of $802,650
for the year ended June 30, 2009 as compared to $149,419 for the year ended June
30, 2008, an increase of $653,231. The increase is contributing to higher
interest expense on short-term loans for the year ended June 30, 2009, and
financial leverage as compared to the same period last year. The increase was
also due to a non-operating expense of $140,000 for liquidated damages we paid
to preferred stock investors as a result of late registration effectiveness
under our private placement agreement and a non-operating expense for
accounts receivable factoring fee that represented 8.8% on total receivable
transferred or $361,396 incurred for selling our aging accounts
receivable.




Provision for
Income Taxes. Provision for income taxes amounted to $2,115,097 and
$1,012,382 for the year ended June 30, 2009 and 2008, respectively. The Company
has been using recycled raw materials in its production since its inception
which entitled us to an income tax exemption from January 1, 2003 through
December 31, 2007 and an income tax rate reduction from January 1, 2009 to
December 31, 2011 as granted by the State Administration of Taxation, PRC.
Starting January 1, 2008, the Company was subject to 25% income tax rate and
starting January 1, 2009, the Company is subject to 15% income tax
rate.  Therefore, the total income taxes incurred for the fiscal year
ended June 30, 2009 comprised of 25% income tax rate for the first six months
and 15% income tax rate for the next six months compared to 0% income tax rate
for the first six months and 25% income tax rate for the next six months for the
same period in 2008. The new tax rate granted to the Company in June this year
and the provision for income taxes provision was retro-active adjusted from the
beginning of the calendar year 2009 in the fourth quarter ended June 30, 2009.
The Company had requested three months corporate income tax extension and the
request was approved by the Chinese governments.  In the past, XinAo
has been paying corporate income tax on behalf of China-ACMH and there could be
a potential liability for additional taxes for China-ACMH, though at present the
Company is unable to determine the extent of any such liability, if
any.




Net
Income. We had net income of $12,068,489 for the year ended June 30, 2009
as compared to $5,164,184 for the year ended June 30, 2008, an increase of
133.7%or
$6,904,305. The increase in net income is attributable to increase in our plant
production in Beijing area, higher gross profit on the nine railway projects,
technical services, other Income contracts, and rent income of mixer
trucks.  The increase in net income is also due to the reduction in
general and administrative expenses and other expenses after the reverse merger
and financing offset by increase in income tax expense. Our net margin increased
from 18.7% for the year ended June 30, 2008 to 30.4% for the year ended June 30,
2009 due to higher margin we realized on the nine 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 year
ended June 30, 2009. The increase in net margin is also due to decrease in bad
debt allowance resulting from overall reduction in aging receivable balances.
Our management believes that our profits should continue to increase as we
continue to expand our service sectors which generate higher gross margins and
as we are a direct beneficiary of Chinese government’s stimulus package on
infrastructure projects. We also plan to lease or build new plants in order to
increase our accessibility to construction sites located in Beijing, expand into
other geographical areas, as well as vertically integrate our operations across
the supply chain, which should further lower our costs and provide even greater
profitability


23





Dividends and
accretion onredeemable
convertiblepreferred
stock.The increase in
dividends and accretion on redeemable convertible preferred stock of $1,196,086
compared to the year ended June 30, 2008 is due to our redeemable convertible
preferred stock offering consummated in June 2008, which included preferred
dividend expense of $628,505 and $33,387 for the years ended June 30, 2009 and
2008, respectively, and accretion of discount on the preferred stock of $600,968
for the year ended June 30, 2009.





Liquidity
and Capital Resources




As of
June 30, 2009, we had cash and cash equivalents of $3,634,805 and restricted
cash of $453,192. The following table provides detailed information about our
net cash flow for financial statement periods presented in this
report:




Summary of Cash Flow StatementsFortheyearsendedJune30,2009
                    
                    2008Net
      cash provided by (used in) operating activities
                    
                    $
                    3,361,128
                    
                    
                    $
                    5,110,924Net
      cash provided by (used in)  investing activities
                    
                    
                    (1,771,915
                    )
                    
                    
                    (8,701,026
                    )Net
      cash provided by (used in) financing activities
                    
                    
                    136,572
                    
                    
                    
                    4,376,507Effect
      of foreign currency translation on cash and cash
    equivalents
                    
                    
                    (1,475
                    )
                    
                    
                    (300,793
                    )Net
      (decrease) increase in cash and cash equivalent
                    
                    $
                    1,724,310
                    
                    
                    $
                    485,612





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 Year Ended June 30, 2009 and 2008





Net Cash Provided
by Operating Activities. Net cash provided in operating activities
totaled $3,361,128 for the year ended June 30, 2009 as to net cash provided by
operating activities of $5,110,924 for the year ended June 30, 2008. The
decrease in net cash provided by operating activities was primarily due to
increases in accounts receivable, other receivables, and inventory of raw
materials, partially offset by deferred payment of cash on tax, accounts
payable, and other payable during the year ended June 30, 2009. We expect our
cash flow from operating activities to improve as the construction industry in
Beijing accelerates following the Olympic Games, and we strengthen our efforts
to negotiate more favorable terms with our suppliers and customers.




Net Cash Used In
Investing Activities.  Net cash used in investing activities was
$1,771,915for the
year ended June 30, 2009 and $8,701,026 for the year ended June 30, 2008. The
cash was used to purchase of new equipment and for construction in progress for
portable plants.





Net Cash Provided
by/used in Financing Activities. Net cash provided by financing
activities totaled $136,572for the year ended June
30, 2009 as compared to net cash provided in financing activities of $4,376,507
for the year ended June 30, 2008. The reason for the increase in cash provided
by financing activities was due to short-term loans of $4,395,000 (RMB 30
million) from Beijing International Trust & Investment Co., due July 15,
2009 and $2,930,000 (RMB 20 million) from Huaxia Bank, due November 16, 2008,
partially offset by repayment of short-term loans from Huaxia Bank for
$5,868,000 (RMB 40 million), and from employees and unrelated companies for
$822,950 (RMB 6,300,000) offset by dividend paid to our preferred stock owners.
The net proceeds from the loans will be used for building plant, purchasing
concrete mixers and pump trucks, working capital and general corporate
purposes.





Cash.  As of June 30,
2009, we had cash of $3,634,805 as compared to $1,910,495 as of June 30, 2008.
This increase was due primarily to an increase in net short-term borrowings and
deferred payment of payable offset by increase in accounts receivable and
equipment purchased.





The
Company has significantly reduced its receivables balance by transferring a
large portion of its long-term accounts receivable rights to unrelated third
parties this year. For the years ended June 30, 2009 and 2008, the Company
transferred a total of $16.2 million and $0 of accounts receivable,
respectively, as payments for the acquisition of fixed assets, as prepayment for
rental expense, and as a factoring agreement.  All receivables
transferred in the contracts were based on the current market
value.


24





We
believe that we can meet our liquidity and capital requirements in 2010 from a
variety of sources. These include present capital resources, internally
generated cash, short-term borrowings from both related parties and financial
institutions, and future equity financings.





Loan
Facilities





We had a
total of $4,512,200 and $4,271,222 outstanding on loans and credit facilities as
of June 30, 2009 and 2008 respectively. The loans consisted of the
following:





June 30, 2009
                                          
                                          
                                          June 30, 2008Loan
      from Huaxia Bank, effective interest rate of 7.56% per annum, due November
      16, 2008, guaranteed by the Company’s shareholder, Mr. Han
      Xianfu.
                                            (paid
      in full as of December 31, 2008)
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          2,918,000Loan from Beijing International Trust Co, Ltd. interest rate
      of 15% per annum, due July 15, 2009, guaranteed by Rayland Credit
      Guarantee Co. Ltd. (paid in full in July 2009)
                                          
                                          
                                          4,395,000
                                          
                                          
                                          
                                          -Loan
      from Beijing Hengxin Huaxing Auto Accessories Company, unrelated entity,
      non-interest bearing.
                                            (paid
      in full as of December 31, 2008)
                                          
                                          
                                          -
                                          
                                          
                                          
                                          379,340Loan
      from Beijing Hongda Huaxin Wujinjidian Company, unrelated company,
      non-interest bearing.
                                            (paid
      in full as of December 31, 2008)
                                          
                                          
                                          -
                                          
                                          
                                          
                                          204,260Loan
      from Beijing Sigi Qingbaosan Cement Company, unrelated company,
      non-interest bearing.
                                            (paid
      in full as of December 31, 2008)
                                          
                                          
                                          -
                                          
                                          
                                          
                                          116,720Loan
      from Xia Hua Qing, unrelated individual, non-interest bearing. (paid in
      full as of December 31, 2008)
                                          
                                          
                                          -
                                          
                                          
                                          
                                          128,392Loan
      from various employees, effective interest rate of 20% per annum, due upon
      demand, unsecured.
                                          
                                          
                                          117,200
                                          
                                          
                                          
                                          524,510Total short term loans
                                          
                                          $
                                          4,512,200
                                          
                                          
                                          $
                                          4,271,222





Total
interest expense on short-term loans for the year ended June 30, 2009 and 2008
amounted to $802,804 and $310,875, respectively.





Obligations
Under Material Contracts





Below is
a table setting forth our contractual obligations as of June 30,
2009:





Payment due in
      year ended June
    30,Total
                                                                  
                                                                  
                                                                  2010
                                                                  
                                                                  
                                                                  2011
                                                                  
                                                                  
                                                                  2012
                                                                  
                                                                  
                                                                  2013
                                                                  
                                                                  
                                                                  2014
                                                                  
                                                                  
                                                                  ThereafterLong
      term debt obligations
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -Capital
      commitment
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -Operating
      lease obligations
                                                                  
                                                                  $
                                                                  4,340,202
                                                                  
                                                                  
                                                                  $
                                                                  424,930
                                                                  
                                                                  
                                                                  
                                                                  929,894
                                                                  
                                                                  
                                                                  $
                                                                  929,894
                                                                  
                                                                  
                                                                  $
                                                                  1,101,498
                                                                  
                                                                  
                                                                  $
                                                                  953,986
                                                                  
                                                                  
                                                                  $
                                                                  -Purchase
      obligations
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -Total
                                                                  
                                                                  $
                                                                  4,340,202
                                                                  
                                                                  
                                                                  $
                                                                  424,930
                                                                  
                                                                  
                                                                  
                                                                  929,894
                                                                  
                                                                  
                                                                  $
                                                                  929,894
                                                                  
                                                                  
                                                                  $
                                                                  1,101,498
                                                                  
                                                                  
                                                                  $
                                                                  953,986
                                                                  
                                                                  
                                                                  $
                                                                  -


25





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, or FIN
46(R), variable interest entities, or VIEs, are generally entities that lack
sufficient equity to finance their activities without additional financial
support from other parties or whose equity holders lack adequate decision making
ability. All VIEs with which the Company is involved must be evaluated to
determine the primary beneficiary of the risks and rewards of the VIE. The
primary beneficiary is required to consolidate the VIE for financial reporting
purposes. In connection with the adoption of FIN 46(R), the Company concludes
that Xin Ao is a VIE and China ACM is the primary beneficiary. Under FIN 46(R)
transition rules, the financial statements of Xin Ao are then consolidated into
the Company’s consolidated financial statements.





Our
management's discussion and analysis of our financial condition and results of
operations are based on the consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements as well as the reported net sales and expenses
during the reporting periods. On an ongoing basis, we evaluate our estimates and
assumptions. We base our estimates on historical experience and on various other
factors that we believe are reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or
conditions.





While our
significant accounting policies are more fully described in Note 2 to our
consolidated financial statements included , we believe that the following
accounting policies are the most critical to aid you in fully understanding and
evaluating this management discussion and analysis:




Revenue
Recognition. The Company recognizes revenue in accordance with Staff
Accounting Bulletin, or  SAB, No. 101, “Revenue Recognition in
Financial Statements” as amended by SAB No. 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, or
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 2011. The VAT tax collected from
the Company’s customers is kept by the Company and recorded as Other Subsidy
Income.


26


The
Company also provides technical consulting services to and enters strategic
cooperation including market sharing and equipment rental with other
independently owned concrete companies. The Company signs a Technical Service
Agreement or Strategic Cooperation Agreement with each client, which specifies
all terms and conditions including prices to be charged. Once concrete products
are produced by clients and supplied to builders referred by the Company or cost
savings are realized by use of technical solutions provided by the Company, the
agreements consider the Company has rendered its service. The Company recognizes
revenue and invoices client monthly for technical service and marketing
cooperation on a per-cubic-meter basis and for equipment rental on a per-mixer
truck basis.





Accounts
receivable. During the normal course of business, the Company extends
unsecured credit to its customers. Management reviews its accounts receivable
each reporting period to determine if the allowance for doubtful accounts is
adequate. An estimate for doubtful accounts is recorded when collection of the
full amount is no longer probable. The Company’s reserves are consistent with
its historical experience and considered adequate by management.





The
ultimate collection of the Company’s accounts receivable may take more than one
year, and any portion of accounts receivable expected to be collected in more
than one year is reflected as non-current, net of allowance for doubtful
accounts relating to that portion of receivables. The bifurcation between
current and non-current portions of accounts receivable is based on management’s
estimate and predicated on historical collection experience.





Value added
tax. Enterprises or individuals who sell commodities, engage in repair
and maintenance or import and export goods in the PRC are subject to a 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 and a two year tax (VAT) credit extension from August 2009 through August
2011. For the year ended June 30, 2009 and 2008, $2,109,290 and $1,586,192
respectively, was recognized as other subsidy income from VAT taxes
collected.





Recently
Issued Accounting Pronouncements





Recently issued accounting
pronouncements





In
December 2007, the FASB issued SFAS 141R, “Business Combinations,” which
replaced SFAS 141. SFAS 141R retains the purchase method of accounting for
acquisitions, but requires a number of changes, including changes in the way
assets and liabilities are recognized in the purchase accounting as well as
requiring the expensing of acquisition-related costs as incurred. Furthermore,
SFAS 141R provides guidance for recognizing and measuring the goodwill acquired
in the business combination and determines what information to disclose to
enable users of the financial statements to evaluate the nature and financial
effects of the business combination. SFAS 141R is effective for fiscal years
beginning on or after December 15, 2008. Earlier adoption is prohibited. The
adoption of this statement is not expected to have any material impact on the
Company’s consolidated results of operations or consolidated financial
position.





In
December 2007, the FASB issued SFAS 160, “Noncontrolling Interests in
Consolidated Financial Statements—An Amendment of ARB No. 51.”
SFAS 160 amends ARB 51 to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It is intended to eliminate the diversity in practice regarding the
accounting for transactions between equity and noncontrolling interests by
requiring that they be treated as equity transactions. Further, it requires
consolidated net income to be reported at amounts that include the amounts
attributable to both the parent and the noncontrolling interest. SFAS 160 also
establishes a single method of accounting for changes in a parent’s ownership
interest in a subsidiary that do not result in deconsolidation, requires that a
parent recognize a gain or loss in net income when a subsidiary is
deconsolidated, requires expanded disclosures in the consolidated financial
statements that clearly identify and distinguish between the interests of the
parent’s owners and the interests of the noncontrolling owners of a subsidiary,
among others. SFAS 160 is effective for fiscal years beginning on or after
December 15, 2008, with early adoption permitted, and it is to be applied
prospectively. SFAS 160 is to be applied prospectively as of the beginning of
the fiscal year in which it is initially applied, except for the presentation
and disclosure requirements, which must be applied retrospectively for all
periods presented. The SFAS 160 is not expected to have any material impact on
the Company’s consolidated financial position or consolidated results of
operations.





In
February 2008, the FASB issued FSP FAS 157-1, “Application of FASB Statement No.
157 to FASB
Statement No. 13 and Other Accounting Pronouncements That Address Fair Value
Measurements for Purposes of Lease Classification or Measurement under Statement
13.” FSP FAS 157-1 indicates that it does not apply under SFAS 13, “Accounting for Leases,” and
other accounting pronouncements that address fair value measurements for
purposes of lease classification or measurement under SFAS 13. This scope
exception does not apply to assets acquired and liabilities assumed in a
business combination that are required to be measured at fair value under SFAS
141 or SFAS 141R, regardless of whether those assets and liabilities are related
to leases.





Also in
February 2008, the FASB issued FSP FAS 157-2, “Effective Date of FASB Statement No. 157.” With the issuance
of FSP FAS 157-2, the FASB agreed to: (a) defer the effective date in SFAS 157
for one year for certain nonfinancial assets and nonfinancial liabilities,
except those that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually), and (b) remove certain
leasing transactions from the scope of SFAS 157. The deferral is intended to
provide the FASB time to consider the effect of certain implementation issues
that have arisen from the application of SFAS 157 to these assets and
liabilities.


27





In March
2008, the FASB issued SFAS 161, “Disclosures about Derivative
Instruments and Hedging Activities–An Amendment of SFAS No.
133.” SFAS 161 is intended to improve financial reporting of derivative
instruments and hedging activities by requiring enhanced disclosures to enable
financial statement users to better understand the effects of derivatives and
hedging on an entity's financial position, financial performance and cash flows.
To achieve this increased transparency, 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. SFAS 161 is effective on January
1, 2009. The Company has adopted SFAS 161.





In June
2008, the FASB issued EITF 07-5, “Determining whether an Instrument
(or Embedded Feature) is indexed to an Entity’s Own Stock.” EITF 07-5 is
effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. Early
application is not permitted. Paragraph 11(a) of SFAS 133 specifies that a
contract that would otherwise meet the definition of a derivative but is both
(a) indexed to the Company’s own stock and (b) classified in stockholders’
equity in the statement of financial position would not be considered a
derivative financial instrument. EITF 07-5 provides a new two-step model to be
applied in determining whether a financial instrument or an embedded feature is
indexed to an issuer’s own stock and thus able to qualify for the SFAS 133
paragraph 11(a) scope exception. This standard triggers liability accounting on
all options and warrants exercisable at strike prices denominated in any
currency other than the functional currency in China (Renminbi). The Company
will adopt EITF 07-5 effective July 1, 2009.





In June
2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities,” to
address the question of whether instruments granted in share-based payment
transactions are participating securities prior to vesting. FSP EITF 03-6-1
indicates that unvested share-based payment awards that contain rights to
dividend payments should be included in earnings per share calculations. The
guidance will be effective for fiscal years beginning after December 15, 2008.
The Company is currently evaluating the requirements of FSP EITF 03-6-1 and the
impact that its adoption will have on the consolidated results of operations or
consolidated financial position.





In
October 2008, the FASB issued FSP FAS 157-3, “Determining the Fair Value of a
Financial Asset ina
Market That Is Not Active,” which clarifies the application of SFAS 157
when the market for a financial asset is inactive. Specifically, FSP FAS 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. The Company
is currently evaluating the impact of adoption of FSP FAS 157-3 on the Company’s
consolidated financial statements.





In April
2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability
Have Significantly Decreased and Identifying Transactions That Are Not
Orderly.” FSP FAS 157-4 amends SFAS 157 and provides additional guidance
for estimating fair value in accordance with SFAS 157 when the volume and level
of activity for the asset or liability have significantly decreased and also
includes guidance on identifying circumstances that indicate a transaction is
not orderly for fair value measurements. FSP FAS 157-4 shall be applied
prospectively with retrospective application not permitted. FSP FAS 157-4 shall
be effective for interim and annual periods ending after June 15, 2009, with
early adoption permitted for periods ending after March 15, 2009. An entity
early adopting FSP FAS 157-4 must also early adopt FSP FAS 115-2 and 124-2,
“Recognition and Presentation
of Other-Than-Temporary Impairments”. Additionally, if an entity elects
to early adopt either FSP FAS 107-1 and 28-1, “Interim Disclosures about Fair Value
of Financial Instruments” or FSP FAS 115-2 and 124-2, it must also elect
to early adopt this FSP. The Company has determined that this new FSP did not
have a material impact on the consolidated financial statements.





In April
2009, the FASB issued FSP FAS 115-2 and 124-2. FSP FAS 115-2 amends SFAS 115,
“Accounting for Certain
Investments in Debt and Equity Securities,” SFAS 124, “Accounting for Certain Investments
Held by Not-for-Profit Organizations,” and EITF 99-20, “Recognition of Interest Income and
Impairment on Purchased Beneficial Interests andBeneficial Interests That Continue
to Be Held by a Transferor in Securitized Financial Assets,” to make the
other-than-temporary impairments guidance more operational and to improve the
presentation of other-than-temporary impairments in the financial statements.
This FSP will replace the existing requirement that the entity’s management
assert it has both the intent and ability to hold an impaired debt security
until recovery with a requirement that management assert it does not have the
intent to sell the security, and it is more likely than not it will not have to
sell the security before recovery of its cost basis. This FSP provides increased
disclosure about the credit and noncredit components of impaired debt securities
that are not expected to be sold and also requires increased and more frequent
disclosures regarding expected cash flows, credit losses, and an aging of
securities with unrealized losses. Although this FSP does not result in a change
in the carrying amount of debt securities, it does require that the portion of
an other-than-temporary impairment not related to a credit loss for a
held-to-maturity security be recognized in a new category of other comprehensive
income and be amortized over the remaining life of the debt security as an
increase in the carrying value of the security. This FSP shall be effective for
interim and annual periods ending after June 15, 2009, with early adoption
permitted for periods ending after March 15, 2009. An entity may early adopt
this FSP only if it also elects to early adopt FSP FAS 157-4. Also, if an entity
elects to early adopt either FSP FAS 157-4 or FSP FAS 107-1 and 28-1, the entity
also is required to early adopt this FSP. The Company does not expect this new
FSP to have a material impact on the consolidated financial
statements.


28





In April
2009, the FASB issued FSP FAS 107-1 and 28-1. This FSP amends SFAS 107, to
require disclosures about fair value of financial instruments not measured on
the balance sheet at fair value in interim financial statements as well as in
annual financial statements. Prior to this FSP, fair values for these assets and
liabilities were only disclosed annually. This FSP applies to all financial
instruments within the scope of SFAS 107 and requires all entities to disclose
the method(s) and significant assumptions used to estimate the fair value of
financial instruments. This FSP shall be effective for interim periods ending
after June 15, 2009, with early adoption permitted for periods ending after
March 15, 2009. An entity may early adopt this FSP only if it also elects to
early adopt FSP FAS 157-4 and 115-2 and 124-2. This FSP does not require
disclosures for earlier periods presented for comparative purposes at initial
adoption. In periods after initial adoption, this FSP requires comparative
disclosures only for periods ending after initial adoption. The Company is
currently evaluating the disclosure requirements of this new FSP.





In May
2009, the FASB issued SFAS No. 165, “Subsequent Events,” which is
effective for interim or annual financial periods ending after June 15, 2009.
SFAS No. 165 establishes general standards of accounting and disclosure of
events that occur after the balance sheet but before financial statements are
issued or are available to be issued.  However, since the Company is a
public entity, management is required to evaluate subsequent events through the
date that financial statements are issued and disclose the date through which
subsequent events have been evaluated, as well as the date the financial
statements were issued. SFAS No. 165 was adopted for the year ended June 30,
2009. Subsequent events have been evaluated through September 18, 2009, the date
the consolidated financial statements were issued as further discussed in EITF
Topic No. D-86.





In June
2009, the FASB issued SFAS 168, “The FASB Accounting Standards
CodificationTM and the Hierarchy of Generally
Accepted Accounting Principles a Replacement of FASB Statement No. 162”
(“SFAS 168”). This Standard establishes the FASB Accounting Standards
CodificationTM (the
“Codification”) as the source of authoritative accounting principles recognized
by the FASB to be applied by nongovernmental entities in the preparation of
financial statements in conformity with U.S. GAAP. The Codification does not
change current U.S. GAAP, but is intended to simplify user access to all
authoritative U.S. GAAP by providing all the authoritative literature related to
a particular topic in one place. The Codification is effective for interim and
annual periods ending after September 15, 2009, and as of the effective
date, all existing accounting standard documents will be superseded. The
Codification is effective in the third quarter of 2009, and accordingly, the
Quarterly Report on Form 10-Q for the quarter ending September 30, 2009 and all
subsequent public filings will reference the Codification as the sole source of
authoritative literature.





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.





PRC
Taxation





Our
subsidiary, China-ACMH and its variable interest entity, Xin Ao, are 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 and an income tax reduction from 25% to 15% from January 1,
2009 through December 31, 2011 as granted by the State Administration of
Taxation, PRC. The renewal certificate was awarded based on the company's
involvement in producing high-tech products, its research and development, as
well as its technical services.





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% 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%. 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. The
new EIT Law imposes a unified income tax rate of 25% 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. Because the Company’s
operating subsidiary, Xin Ao’s use of recycled raw materials in its production
since its inception entitled the Company to an income tax exemption from January
1, 2003, through to December 31, 2007 and an income tax reduction from 25% to
15% from January 1, 2009 to December 31, 2011 as granted by the State
Administration of Taxation of the PRC. The income tax exemption granted to the
Company was eliminated after December 31, 2007.  Beginning January 1,
2008, the new Chinese Enterprise Income Tax law, or EIT, replaced the existing
laws for Domestic Enterprises, or DES, and Foreign Invested Enterprises, or
FIEs. Effective January 1, 2009, the China-ACM new reduced EIT rate of 15%
replaced the existing rates of 25% currently applicable to both DES and
FIEs.


29





Interest Rate
Risk




At times
when we have short-term loans outstanding, we are exposed to interest rate risk
due primarily to our short-term bank loans. Although the interest rates for our
short-term loans are typically fixed for the terms of the loans, the terms are
typically twelve months and interest rates are subject to change upon renewal.
In a response to a slowdown in the Chinese economy and the global economic
slowdown, The Chinese central bank cut rates five times in year 2008. The new
interest rates are approximately 5.31% for Renminbi bank loans with
a  term of 12 months. The change in interest rates has minimum impact
on our bank loans. The Company also paid off its short term bank loan balance
with Beijing International Trust Co, Ltd. in July 2009 for approximately $4.4
million dollars.  We monitor interest rates in conjunction with our
cash requirements to determine the appropriate level of debt balances relative
to other sources of funds.





Credit
Risk





The
Company is exposed to credit risk from its cash in bank and fixed deposits and
bills and accounts receivable. The credit risk on cash in bank and fixed
deposits is limited because the counterparties are recognized financial
institutions. Bills and accounts receivable are subjected to credit evaluations.
An allowance has been made for estimated irrecoverable amounts which have been
determined by reference to past default experience and the current economic
environment.





Foreign
Exchange Risk




The value
of the Renminbi against the U.S. dollar and other currencies is affected by,
among other things, changes in China’s political and economic conditions. Since
July 2005, the Renminbi has no longer been pegged to the U.S. Dollar. Although
the People’s Bank of China regularly intervenes in the foreign exchange market
to prevent significant short-term fluctuations in the exchange rate, the
Renminbi may appreciate or depreciate significantly in value against the U.S.
dollar in the medium to long term. Moreover, it is possible that in the future,
PRC authorities may lift restrictions on fluctuations in the Renminbi exchange
rate and lessen intervention in the foreign exchange market.





Because
substantially all of our earnings and cash assets are denominated in Renminbi,
but our reporting currency is the U.S. dollar, fluctuations in the exchange rate
between the U.S. dollar and the Renminbi will affect our balance sheet and our
earnings per share in U.S. dollars. In addition, appreciation or depreciation in
the value of the Renminbi relative to the U.S. dollar would affect our financial
results reported in U.S. dollar terms without giving effect to any underlying
change in our business or results of operations. Fluctuations in the exchange
rate will also affect the relative value of any dividend we issue in the future
that will be exchanged into U.S. dollars and earnings from, and the value of,
any U.S. dollar-denominated investments we make in the future.




Very
limited hedging transactions are available in China to reduce our exposure to
exchange rate fluctuations. To date, we have not entered into any hedging
transactions in an effort to reduce our exposure to foreign currency exchange
risk. While we may enter into hedging transactions in the future, the
availability and effectiveness of these transactions may be limited, and we may
not be able to successfully hedge our exposure at all. In addition, our foreign
currency exchange losses may be magnified by PRC exchange control regulations
that restrict our ability to convert Renminbi into foreign
currencies.





Most of
the transactions of the Company are settled in Renminbi and U.S. dollars. In the
opinion of the directors, the Company is not exposed to significant foreign
currency risk.




Inflation




Inflationary
factors, such as increases in the cost of raw materials and overhead costs,
could impair our operating results. Although we do not believe that inflation
has had a material impact on our financial position or results of operations to
date, a high rate of inflation in the future may have an adverse effect on our
ability to maintain current levels of gross margin and selling, general and
administrative expenses as a percentage of sales revenue if the selling prices
of our products do not increase with these increased costs.





30


Company’s
Operations are Substantially in China





Substantially
all of our operations are conducted in China and are subject to various
political, economic, and other risks and uncertainties inherent in conducting
business in China. Among other risks, the Group’s operations are subject to the
risks of restrictions on transfer of funds; export duties, quotas, and
embargoes; domestic and international customs and tariffs; changing taxation
policies; foreign exchange restrictions; and political conditions and
governmental regulations. Additional information regarding such risks can be
found under the heading “Risk Factors” located elsewhere in this
report.





Item
7A.     Quantitative and Qualitative Disclosures About
Market Risk





Not
Applicable.





Item
8.        Financial Statements and
Supplementary Data





The full
text of our audited consolidated financial statements as of June 30, 2009 and
2008 begins on page F-1 of this Report.




Item
9.        Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure




None.





Item
9A(T). Controls and Procedures




Disclosure
Controls and Procedures





We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our reports filed under theSecurities Exchange Act
of 1934  , as amended, is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms, and that such information is accumulated and
communicated to our management, including our principal executive officer (our
president) and our principal accounting and financial officer (our chief
financial officer) to allow for timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, our
management recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and our management is required to apply its judgment
in evaluating the cost-benefit relationship of possible controls and
procedures.




Our
management does not expect that our disclosure controls or our internal controls
over financial reporting will prevent all error and fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, but no
absolute, assurance that the objectives of a control system are met. Further,
any control system reflects limitations on resources, and the benefits of a
control system must be considered relative to its costs. These limitations also
include the realities that judgments in decision-making can be faulty and
that breakdowns can occur because of simple error or mistake. Additionally,
controls can be circumvented by the individual acts of some persons, by
collusion of two or more people or by management override of a control. A
design of a control system is also based upon certain assumptions about
potential future conditions; over time, controls may become inadequate because
of changes in conditions, or the degree of compliance with the policies or
procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
may not be detected.




As of
June 30, 2009, the year end period covered by this report, we carried out an
evaluation, under the supervision and with the participation of our management,
including our principal executive officer and our principal accounting officer,
of the effectiveness of the design and operation of our disclosure controls and
procedures. Based on the foregoing, our president and our chief financial
officer concluded that our disclosure controls and procedures were not effective
as of the end of the period covered by this annual report.




Management's Report on Internal
Control over Financial Reporting




Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Securities Exchange Act.  Our management is also required to
assess and report on the effectiveness of our internal control over financial
reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002
(“Section 404”).   Management assessed the effectiveness of our
internal control over financial reporting as of June 30, 2009.  In
making this assessment, we used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control - Integrated Framework.





Any
system of internal control, no matter how well designed, has inherent
limitations, including the possibility that a control can be circumvented or
overridden and misstatements due to error or fraud may occur and not be detected
in a timely manner. Also, because of changes in conditions, internal control
effectiveness may vary over time. Accordingly, even an effective system of
internal control will provide only reasonable assurance with respect to
financial statement preparation.


31


A
material weakness (within the meaning of PCAOB Auditing Standard No. 5) is a
deficiency, or a combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a material
misstatement of our annual or interim financial statements will not be prevented
or detected on a timely basis.  A significant deficiency is a
deficiency, or a combination of deficiencies, in internal control over financial
reporting that is less severe than a material weakness, yet important enough to
merit attention by those responsible for oversight of the company's
financial reporting.





Our
management assessed the effectiveness of our internal control over financial
reporting as of June 30, 2009.  Management identified significant
deficiencies related to the following:




1.  Lack
of internal audit function–Although
we maintain internal audit department, the scope and effectiveness goals of
internal audit function have not been identified. Due to this weakness, we may
be ineffective in timely prevention or detection of errors in the recording of
accounting transactions, which may have a material impact on our financial
statements.




2. Lack of
integrated operating and accounting system – Although we have operating
and accounting systems in place, certain functions and procedures in both our
operating and accounting systems are not fully developed and the two systems are
not adequately integrated. Some process in the accounting and system operations
are currently done manually in order to complete a normal business transaction
cycles even though reconciliation processes are properly performed and
supervised. The processes are not efficient and are in risk of potential human
errors.




Our
management assessed the effectiveness of our internal control over financial
reporting as of June 30, 2009. Management identified material weakness
related to the following:




1.  Financial
statements closing process–There was a material
weakness in the process of closing and consolidating our financial statements
which resulted from the fact that the work of our chief financial officer in
this process (starting with processing the trial balance, through the evaluation
and implementation of policies and accounting issues, until the complete
production of consolidated financial statements) is not reviewed by anyone
else.




2.  Equity
instruments –There was a material weakness in the process related to
evaluating certain debt and equity transactions and the accounting treatment for
these non-frequent transactions. We have restated our June 30, 2008 for the
reporting of Series A Convertible Preferred Stock, which was issued in a private
placement on June 11, 2008.




In light
of the foregoing material weaknesses, our management has concluded that our
internal control over financial reporting was not effective as of June 30, 2009.
Our ineffective internal control over financial reporting could result in
material misstatements in our annual or interim financial statements that would
not be prevented or detected. However, nothing has come to the attention of
management that causes them to believe that any material inaccuracies or errors
exist in our financial statements as of June 30, 2009.





In order
to correct the foregoing deficiencies, we have taken the following remediation
measures:




1.
            The
      Company will continue to enhance its internal audit department functions
      by providing more staff and internal audit trainings.  The
      company has recently added two more independent audit committee members,
      making the total of the audit committee members to three.  We
      believe the audit committee will continue to strengthen our internal
      control oversight.




2.
            The
      Company has evaluated new operating and accounting systems which can
      replace and upgrade our current systems and become one complete ERP
      system.  The new operating system will have comprehensive
      operating functions and will be able to bridge into our accounting system
      automatically. Once we complete upgrading our system implementation, both
      operating systems and accounting system will be operated without much
      human intervention.  The new operating and accounting systems
      will enhance our internal controls and will elevate our operating
      efficiency when they are completely
implemented.




3.
            We
      will hire independent consultants to evaluate our debt / equity
      transactions in the future.




We
believe that the foregoing steps will remediate the significant deficiency
identified above, and we will continue to monitor the effectiveness of these
steps and make any changes that our management deems appropriate.





Changes
in Internal Controls over Financial Reporting




Except as
described above, there were no changes in our internal controls over financial
reporting during fiscal year 2009 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.




Item
9B.     Other Information




None.


32




PART
III




Item
10.      Directors, Executive Officers and Corporate
Governance




The
following individuals serve as the directors and executive officers of our
company as of the date of this annual report. All directors of our company hold
office until the next annual meeting of our shareholders or until their
successors have been elected and qualified. The executive officers of our
company are appointed by our board of directors and hold office until their
death, resignation or removal from office.





Name
            
            Age
            
            PositionXianfu Han
            
            50
            
            Chairman, Chief Executive Officer and DirectorWeili He
            
            52
            
            Chief Operating Officer, Vice Chairman and DirectorChin Hsiao
            
            46
            
            Chief Financial Officer,
      DirectorJeremy Goodwin
            
            36
            
            DirectorDenis
      Slavich
            
            69
            
            DirectorShaojian
      (Sean) Wang
            
            45
            
            DirectorLarry
      Goldman
            
            53
            
            Director





Xianfu Han. Mr. Han became our
Chairman and Chief Executive Officer on April 29, 2008. From January 2003 to
present, Mr. Han has worked with Xin Ao as Chairman of the Board of Directors.
His main responsibilities include daily board leadership and strategy
initiatives. Since November 2002, Mr. Han has been Chairman at Beijing Tsinghua
University Management School’s Weilun Club. His responsibilities involve daily
management work. From January 2001 to March 2007, Mr. Han acted as Executive
Vice Chairman of the Beijing Concrete Association. His primary functions
involved public relations and communication with various governmental and
agencies. Mr. Han is a senior engineer with over 25 years of management
experience in the building material industry. He contributed to the draft of the
"Local Standard of Mineral Admixtures" regulations and was responsible for the
"Research and Application of Green High Performance Concrete" published by the
Ministry of Construction.




Mr. Han
graduated in 1995 from the Tsinghua University executive MBA program. Mr. Han
received his Bachelor degree in engineering management in 1992 from Northern
China University of Technology.




Weili He. Mr. He became our
Vice-Chairman and Chief Operating Officer on April 29, 2008. From August 2007 to
present, Mr. He has worked as Vice Chairman of the Board of Directors of Xin Ao.
His primary responsibility is large client development. From January 2003 to
August 2007, Mr. He worked as Chairman of the Board of Directors of Beijing
Xinhang Construction Materials Co., Ltd. His primary responsibilities included
strategic planning. Since 2007, Mr. He has served as a Vice Chairman of the
Beijing Concrete Associations. His primary functions include market research.
Mr. He has extensive construction and concrete engineering experience in China
and Japan on numerous high profile projects. His primary expertise is plant
management and operations. Mr. He received a bachelor’s degree in law from
Party School of the Central Committee of C.P.C.




Chin Hsiao. Mr. Hsiao became
our Chief Financial Officer on December 1, 2008. Prior to his appointment with
us, Chin Hsiao served as Controller of Milligan and Company, LLC from 2000 to
2008, where he managed the overall accounting and financial reporting functions
as well as the company’s internal control processes. From 1997 to 1999, he
served as Finance Manager for J&J Snack Foods Corporation where he was
responsible for financial reporting and SEC schedule preparation. From 1995 to
1997, he served as Accounting Supervisor of RCN Corporation and as the Senior
Operation Analyst at ARAMARK Corporation from 1992 to 1995. Mr. Hsiao has over
15 years of experience in corporate finance and management.





Mr. Hsiao
received his B.S. degree from Drexel University in Philadelphia, and he is also
a certified public accountant in the U.S.





Jeremy Goodwin. Mr. Goodwin
became a member of our Board of Directors as of October 6, 2008. He has
extensive experience in finance advising multi-national and Asian companies on
key corporate initiatives such as M&A, debt and equity financing,
restructuring, privatization and business expansion. Since 2006, Mr. Goodwin has
been Managing Partner of 3G Capital Partners, a corporate finance advisory firm,
and was a Vice President of Global Capital Group Enterprises, from 2002 to 2005
where he and his team advised Changzhou Xingrong Copper on its $20 million sale
to Mueller Industries, Inc. From 1999 to 2001, Mr. Goodwin was with the ING
Beijing Investment arm of Baring Private Equity Partners in Hong Kong. In
addition, from 1997 to 1998, Mr. Goodwin worked at ABN Amro in Beijing, where he
assisted notable clients such as Royal Dutch Shell Oil and Beijing Capital
International Airport with its listing on the Hong Kong stock
exchange.





Mr.
Goodwin began his career at Mees Pierson Investment Finance S.A., a Geneva based
investment fund private placement firm. He earned a Bachelor of Science degree
from Cornell University and is fluent in Mandarin.


33





Mr.
Goodwin serves as a member of our Audit Committee and Nominating and Governance
Committee, and as chairman of our Compensation Committee..





Denis SlavichDenis
Slavich became a member of our Board of Directors on August 11,
2009.  Mr. Slavich has extensive experience in the areas of
engineering, management and finance, including his service from 1971 to 1991 in
various executive positions at Bechtel Corporation, Inc. including Sr. VP, CFO,
and director, Sr. VP and manager of the International Power Division and project
manager for Bechtel’s operations at the Lawrence Livermore National
Laboratory.  From 1995 to 1996, Mr. Slavich served as the CFO for
Morrison Kundsen Corporation, an Idaho-based construction company.  From
1998 to 2000 Mr. Slavich was the CFO and director of KMR Power Corporation and
was responsible for the development of an international IPP company that
developed projects in Columbia as well as other areas. From 2000 until 2002, he
served as Vice President and CFO of BigMachines Inc., a software
company.  Mr. Slavich also served as acting President for Kellogg
Development Corporation, a division of M.W. Kellogg, during 1997. From 1991 to
1995, Mr. Slavich was also a Vice President of Marketing for Fluor
Daniel.  Since 2001, Mr. Slavich has served as the Chairman, and since
2008 as CEO, for Leading Edge Technologies in Dubai, UAE, a company engaged in
the development of water desalinization technologies.  He is also
currently an advisor and board member for a number of additional firms,
including Synthesis Energy Systems, Inc. (Nasdaq: SYMX), for which he
serves as the chairman of the audit committee of the board of directors.  
Mr. Slavich received his Ph.D. from Massachusetts Institute of Technology, his
M.B.A. from the University of Pittsburgh and his B.S. in Electrical Engineering
from the University of California at Berkeley.





Mr.
Slavich serves as a member of our Audit Committee, Compensation Committee and
Nominating and Governance Committee.





Shaojian (Sean) Wang.Sean Wang became a
member of our Board of Directors on August 11, 2009.  Mr. Wang has over 20 years of
management and finance experience working with both U.S. and China-based
companies.  Since June 2008, Mr. Wang has served as executive director and
CFO of SOHO China, Ltd., a developer of commercial buildings in central Beijing,
and is responsible for financial and fiscal management of the company’s
operations.  From April 2006 to June 2008, Mr. Wang served as President and
COO for Hurray! Holding Co., Ltd., a provider of wireless value added services
and music and music-related products to mobile users in China.  From May
2004 to March 2006, Mr. Wang served as COO and CFO for Opta Corporation, a
California- based electronics company.Mr. Wang
holds an MBA from the Carlson School of Management at the University of
Minnesota, a Bachelor of Science degree from the Chinese Exchange Student
Program, Economics from Hamline University in Minnesota and a degree in National
Economic Management from Beijing University in China. Mr. Wang is fluent in both
English and Mandarin Chinese.





Mr. Wang
serves as a member of our Compensation Committee and as chairman of our
Nominating and Governance Committee.





Larry
Goldman.  Larry Goldman became a member of our Board of
Directors on August 11, 2009.  Mr. Goldman is a Certified Public
Accountant, with over 20 years of auditing, consulting and technical SEC
reporting experience.  Mr. Goldman  served from May 2006 to
October 2007, as Acting CFO, and currently as a financial consultant, for
Thorium Power, Ltd. (OTCBB: THPW), a nuclear fuels development company. Prior to
joining Thorium Power, Ltd., Mr. Goldman served as the CFO and VP of Finance for
WinWin Gaming, Inc. (OTCBB: WNWN), a multi-media developer and publisher of
sports, lottery and other games. Prior to joining WinWin in October 2004, Mr.
Goldman was a partner at Livingston Wachtell & Co., LLP and had been with
that firm for the previous 19 years. Mr. Goldman is also an independent
director and audit committee chairman for Winner Medical Group Inc. (OTCBB:
WMDG), a China based manufacturer of medical disposable products and surgical
dressings, Wonder Auto Tech, Inc. (Nasdaq: WATG), a leading manufacturer of
automotive electrics, suspension products and engine accessories in China, and
China Bio Energy Holding Co., Ltd., a bio-diesel company in China. Mr. Goldman
has extensive experience in both auditing and consulting with Chinese public
companies, working in the Asian marketplace since 2000, and he frequently
travels to China.  He currently provides various CFO consulting and
SEC reporting support to a number of other Chinese companies listed in the
United States.  Mr. Goldman holds a Bachelor of Science degree in
Accounting from the State University of New York at Oswego and a Masters of
Science degree in Taxation from Pace University.





Mr.
Goldman serves as the chairman of our Audit Committee.





CORPORATE
GOVERNANCE





Our
current corporate governance practices and policies are designed to promote
stockholder value and we are committed to the highest standards of corporate
ethics and diligent compliance with financial accounting and reporting rules.
Our Board provides independent leadership in the exercise of its
responsibilities. Our management oversees a system of internal controls and
compliance with corporate policies and applicable laws and regulations, and our
employees operate in a climate of responsibility, candor and
integrity.


34





The
Board and Committees of the Board





The
Company is governed by the Board that currently consists of seven members as
identified above. On August 7, 2009, the Board established three committees: the
Audit Committee, the Compensation Committee and the Nominating and Governance
Committee. Each of these committees are comprised entirely of independent
directors. From time to time, the Board may establish other committees. The
Board has adopted a written charter for each of the committees which may be
obtained, without charge, by contacting the Corporate Secretary, China Advanced
Construction Materials Group, Inc.,
Yingu Plaza, 9 Beisihuanxi Road, Suite 1708,
Haidian District, Beijing 100080 PRC.





Prior to
establishing the committees of the Board of Directors, our entire Board of
Directors handled the functions that would otherwise be handled by each of the
committees.





Independent
Directors





Our Board
has determined that the majority of the Board is comprised of “independent
directors” within the meaning of applicable Nasdaq listing standards relating to
Board composition and Section 301 of the Sarbanes-Oxley Act of 2002. Our
independent directors are Messrs. Goodwin, Slavich, Wang and
Goldman.





Audit
Committee





Our audit
committee consists of Messrs. Goldman, Goodwin and Slavich, each of whom is
“independent” as that term is defined under the Nasdaq listing standards. The
audit committee oversees our accounting and financial reporting processes and
the audits of the financial statements of our company. Mr. Goldman serves as our
audit committee financial expert as that term is defined by the applicable SEC
rules. The audit committee is responsible for, among other things:





•
            selecting
      our independent auditors and pre-approving all auditing and non-auditing
      services permitted to be performed by our independent
      auditors;





•
            reviewing
      with our independent auditors any audit problems or difficulties and
      management’s response;





•
            reviewing
      and approving all proposed related-party transactions, as defined in Item
      404 of Regulation S-K under the Securities Act of 1933, as
      amended;





•
            discussing
      the annual audited financial statements with management and our
      independent auditors;





•
            reviewing
      major issues as to the adequacy of our internal controls and any special
      audit steps adopted in light of significant internal control
      deficiencies;





•
            annually
      reviewing and reassessing the adequacy of our audit committee
      charter;





•
            meeting
      separately and periodically with management and our internal and
      independent auditors; and





•
            reporting
      regularly to the full board of directors;
and




•
            such
      other matters that are specifically delegated to our audit committee by
      our board of directors from time to
time.





Compensation
Committee





Our
compensation committee consists of Messrs. Goodwin, Slavich and Wang, each of
whom is “independent” as that term is defined under the Nasdaq listing
standards. Our compensation committee assists the board in reviewing and
approving the compensation structure of our directors and executive officers,
including all forms of compensation to be provided to our directors and
executive officers. Our chief executive officer may not be present at any
committee meeting during which his compensation is deliberated. The compensation
committee is responsible for, among other things:





•
            approving
      and overseeing the compensation package for our executive
      officers;





•
            reviewing
      and making recommendations to the board with respect to the compensation
      of our directors;





•
            reviewing
      and approving corporate goals and objectives relevant to the compensation
      of our chief executive officer, evaluating the performance of our chief
      executive officer in light of those goals and objectives, and setting the
      compensation level of our chief executive officer based on this
      evaluation; and




35





•
            reviewing
      periodically and making recommendations to the board regarding any
      long-term incentive compensation or equity plans, programs or similar
      arrangements, annual bonuses, employee pension and welfare benefit
      plans.





The
compensation committee has sole authority to retain and terminate outside
counsel, compensation consultants retained to assist the compensation committee
in determining the compensation of the Chief Executive Officer or senior
executive officers, or other experts or consultants, as it deems appropriate,
including sole authority to approve the firms' fees and other retention terms.
The compensation committee may also form and delegate authority to subcommittees
and may delegate authority to one or more designated members of the compensation
committee. The compensation committee may from time to time seek recommendations
from the executive officers of the Company regarding matters under the purview
of the compensation committee, though the authority to act on such
recommendations rests solely with the compensation committee.





Governance
and Nominating Committee





Our
governance and nominating committee consists of Messrs. Goodwin, Slavich and
Wang, each of whom is “independent” as that term is defined under the Nasdaq
listing standards. The governance and nominating committee assists the board of
directors in identifying individuals qualified to become our directors and in
determining the composition of the board and its committees. The governance and
nominating committee is responsible for, among other things:





•
            identifying
      and recommending to the board nominees for election or re-election to the
      board, or for appointment to fill any
vacancy;





•
            reviewing
      annually with the board the current composition of the board in light of
      the characteristics of independence, age, skills, experience and
      availability of service to us;





•
            identifying
      and recommending to the board the directors to serve as members of the
      board’s committees; and





•
            monitoring
      compliance with our code of business conduct and
  ethics.





Family
Relationships





There is
no family relationship among any of our officers or directors.





Involvement
in Certain Legal Proceedings




To the
best of our knowledge, none of our directors or executive officers has been
convicted in a criminal proceeding, excluding traffic violations or similar
misdemeanors, or has been a party to any judicial or administrative proceeding
during the past five years that resulted in a judgment, decree or final order
enjoining the person from future violations of, or prohibiting activities
subject to, federal or state securities laws, or a finding of any violation of
federal or state securities laws, except for matters that were dismissed without
sanction or settlement. Except as set forth in our discussion below in “Certain
Relationships and Related Transactions,” none of our directors, director
nominees or executive officers has been involved in any transactions with us or
any of our directors, executive officers, affiliates or associates which are
required to be disclosed pursuant to the rules and regulations of the
SEC.





Code
of Business Conduct and Ethics





We
currently do not have a code of ethics that applies to our officers, employees
and directors, including our Chief Executive Officer and senior
executives.




Item
11.      Executive Compensation




Summary
Compensation Table— Fiscal Years Ended June 30, 2008 and 2009





The
following table sets forth information concerning all cash and non-cash
compensation awarded to, earned by or paid to the named persons for services
rendered in all capacities during the noted periods. No other executive officers
received total annual salary and bonus compensation in excess of $100,000 during
the fiscal years ended June 30, 2008 and 2009.




Name and
                                Principal
                                Position (1)
                              
                              Year
                                Ended
                                June 30
                              
                              Salary
                                ($)
                              
                              Bonus ($)
                              
                              Stock
                                Awards
                                ($)
                              
                              Option
                                Awards
                                ($)
                              
                              Non-Equity
                                Incentive Plan
                                Compensation
                                Earnings
                                ($)
                              
                              Non-
                                Qualified
                                Deferred
                                Compensation
                                Earnings
                                ($)
                              
                              All Other
                                Compensation
                                ($)
                              
                              Total
                                ($)Xianfu
      Han
                              
                              
                              2008
                              
                              110,719
                              
                              
                              67,620
                              
                              -
                              
                              
                              -
                              
                              -
                              
                              
                              -
                              
                              -
                              
                              
                              178,339Chairman
      and CEO (2)
                              
                              
                              2009
                              
                              140,000
                              
                              
                              -
                              
                              -
                              
                              
                              -
                              
                              -
                              
                              
                              -
                              
                              -
                              
                              
                              140,000Weili He,
                              
                              
                              2008
                              
                              -
                              
                              
                              -
                              
                              -
                              
                              
                              -
                              
                              -
                              
                              
                              -
                              
                              -
                              
                              
                              -Vice
      Chairman and COO
                              
                              
                              2009
                              
                              109,342
                              
                              
                              -
                              
                              -
                              
                              
                              -
                              
                              -
                              
                              
                              -
                              
                              -
                              
                              
                              109,342





(1)
              While
      our chief financial officer, Chin Hsiao has employment agreements which
      provide for compensation in excess of $100,000, his actual compensation
      during the fiscal years ended June 30, 2008 or 2009 was not in excess of
      $100,000.


(2)
            In
      connection with the reverse acquisition of BVI-ACM on April 29, 2008, Mr.
      Han was elected as our Chairman and Chief Executive Officer effective
      immediately.




36


Employment
Agreements





In
connection with the reverse acquisition of BVI-ACM on April 29, 2008, Mr. Han
was elected as our Chairman and Chief Executive Officer effective immediately.
On May 1, 2008, we entered into a three year Employment Agreement with Mr. Han
pursuant to which he will receive an annual salary of $140,000 for service as
our Chief Executive Officer.





Upon
termination of Mr. Han’s employment because of death, disability or for cause,
the Company will pay or provide to Mr. Han or his estate, as the case may be (i)
any unpaid base salary and any accrued vacation through the date of termination;
(ii) any unpaid annual bonus accrued with respect to the fiscal year ending on
or preceding the date of termination; (iii) reimbursement for any unreimbursed
expenses properly incurred through the date of termination; and (iv) all other
payments or benefits to which Mr. Han may be entitled under the terms of any
applicable employee benefit plan, program or arrangement.





Upon the
termination of Mr. Han’s employment by the Company without cause, the Company
will pay or provide to Mr. Han (i) all amounts due as if Mr. Han’s employment
were terminated because of death, disability or for cause, and (ii) subject to
Mr. Han’s execution (and non-revocation) of a general release of claims against
the Company and its affiliates in a form reasonably requested by the Company,
(a) continued payment of his base salary for two months after termination,
payable in accordance with the regular payroll practices of the Company, but off
the payroll; and (b) payment of his cost of continued medical coverage for
two (2) months after termination (subject to his co-payment of the costs in the
same proportion as such costs were shared immediately prior to the date of
termination).  Payments provided under this Section 6(d) shall be in lieu
of any termination or severance payments or benefits for which Mr. Han may be
eligible under any of the plans, policies or programs of the
Company.




Outstanding
Equity Awards at Fiscal Year End





None.





Compensation
of Directors





During
the 2008 and 2009 fiscal years, only one member of our board of directors
received any compensation solely for service as a director during fiscal year
2009.





On
October 3, 2008, we entered into a one year director agreement with Mr. Goodwin
in connection with his service as a member of our board of directors. The
agreement provides for a monthly fee of $3,500 and stock options to purchase an
aggregate of 50,000 shares of our common stock at an exercise price of $2.90 per
share. The options vest in equal quarterly installments over the first twelve
months of the agreement.





On August
11, 2009, each of Messrs. Slavich, Wang and Goldman entered into director
agreements with the Company pursuant to which each will receive, annually, a fee
of $25,000 in cash and 10,000 restricted shares of the Company’s common stock,
which shall vest in four equal quarterly installments.





Compensation
Committee Interlocks and Insider Participation




During
the last fiscal year we did not have a standing Compensation Committee. The
Board was responsible for the functions that would otherwise be handled by the
compensation committee.


37


Indemnification
of Directors and Executive Officers and Limitation of Liability





The
General Corporation Law of Delaware, Section 102(b)(7) provides that directors,
officers, employees or agents of Delaware corporations are entitled, under
certain circumstances, to be indemnified against expenses (including attorneys’
fees) and other liabilities actually and reasonably incurred by them in
connection with any suit brought against them in their capacity as a
director, officer, employee or agent, if they acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interests of
the corporation, and with respect to any criminal action or proceeding, if they
had no reasonable cause to believe their conduct was unlawful. This statute
provides that directors, officers, employees and agents may also be indemnified
against expenses (including attorneys’ fees) actually and reasonably incurred by
them in connection with a derivative suit brought against them in their capacity
as a director, if they acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation,
except that no indemnification may be made without court approval if such
person was adjudged liable to the corporation





At the
present time, there is no pending litigation or proceeding involving a director,
officer, employee or other agent of ours in which indemnification would be
required or permitted. We are not aware of any threatened litigation or
proceeding which may result in a claim for such indemnification.




Item
      12.
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters




The
following table sets forth, as of September 23, 2009, certain information with
respect to the beneficial ownership of our common shares by each shareholder
known by us to be the beneficial owner of more than 5% of our common shares, as
well as by each of our current directors and executive officers as a group. Each
person has sole voting and investment power with respect to the shares of common
stock, except as otherwise indicated. Beneficial ownership is determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934
and does not necessarily bear on the economic incidents of ownership or the
rights to transfer the shares described below. Unless otherwise indicated,
(a) each stockholder has sole voting power and dispositive power with
respect to the indicated shares and (b) the address of each stockholder who
is a director or executive officer is c/o Yingu Plaza, #1708, 9 Beisihuanxi
Road, Haidian District, Beijing 100080, China.





Amount and Nature of Beneficial Ownership(1)Series A ConvertibleCommon Stock
                                                          
                                                          
                                                          Preferred Stock(2)
                                                          
                                                          
                                                          TotalName & Address of Beneficial
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          % of
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          % of
                                                          
                                                          
                                                          VotingOwner
                                                          
                                                          Office, If Any
                                                          
                                                          
                                                          Shares
                                                          
                                                          
                                                          Class
                                                          
                                                          
                                                          Shares
                                                          
                                                          
                                                          Class
                                                          
                                                          
                                                          Power(3)Officers and DirectorsXianfu
      Han
                                                          
                                                          Chairman
      and CEO
                                                          
                                                          
                                                          
                                                          5,285,750
                                                          
                                                          
                                                          
                                                          49.89
                                                          %
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          37.76
                                                          %Weile
      He
                                                          
                                                          Vice Chairman
                                                            and COO
                                                          
                                                          
                                                          
                                                          3,523,833
                                                          
                                                          
                                                          
                                                          33.26
                                                          %
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          25.17
                                                          %Chin
      Hsiao
                                                          
                                                          CFO
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -Jeremy
      Goodwin
                                                          
                                                          Director
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -Denis
      Slavich
                                                          
                                                          Director
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -Sean
      Wang
                                                          
                                                          Director
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -Larry
      Goldman
                                                          
                                                          Director
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -All
      officers and directors as a group (4 persons named
    above)
                                                          
                                                          
                                                          
                                                          
                                                          
                                                          8,809,583
                                                          
                                                          
                                                          
                                                          83.15
                                                          %
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          62.93
                                                          %5% Security HoldersXianfu
      Han (4)
                                                          
                                                          Chairman and
                                                            CEO
                                                          
                                                          
                                                          
                                                          5,285,750
                                                          
                                                          
                                                          
                                                          49.89
                                                          %
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          37.76
                                                          %Weile
      He (5)
                                                          
                                                          Vice Chairman
                                                            and
      COO
                                                          
                                                          
                                                          
                                                          3,523,833
                                                          
                                                          
                                                          
                                                          33.26
                                                          %
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          25.17
                                                          %Professional
      Offshore Opportunity Fund LTD  (6)
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          312,500
                                                          
                                                          
                                                          
                                                          35.71
                                                          %
                                                          
                                                          
                                                          8.93
                                                          %Whitebox
      Intermarket Partners LP  (7)
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          125,000
                                                          
                                                          
                                                          
                                                          14.29
                                                          %
                                                          
                                                          
                                                          3.57
                                                          %Professional
      Traders Fund (8)
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          62,500
                                                          
                                                          
                                                          
                                                          7.14
                                                          %
                                                          
                                                          
                                                          1.79
                                                          %Jayhawk
      Private Equity Fund II, L.P.  (9)
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          62,500
                                                          
                                                          
                                                          
                                                          7.14
                                                          %
                                                          
                                                          
                                                          1.79
                                                          %


38




(1)
            Beneficial
      Ownership is determined in accordance with the rules of the SEC and
      generally includes voting or investment power with respect to securities.
      Each of the beneficial owners listed above has direct ownership of and
      sole voting power and investment power with respect to the shares of our
      common stock.





(2)
            Shares
      of Series A Preferred Stock, which are convertible into shares of our
      common stock on the basis of 4 shares of common stock for each share
      of Series A Preferred Stock. Holders of Series A Preferred Stock vote
      with the holders of Common Stock on all matters on an as converted to
      common stock basis. Therefore, each share of Series A Preferred Stock
      is entitled to 4 votes per share whereas each share of common stock is
      entitled to one vote per share. 851,125 shares of Series A Preferred
      Stock are currently issued and
outstanding.





(3)
            Percentage
      total voting power represents voting power with respect to all shares of
      our common stock and Series A Preferred Stock, on an as-converted basis,
      as a single class. As of June 30, 2009, a total of 10,595,500 shares of
      our common stock and 851,125 shares of our Series A Preferred Stock, or
      3,404,500 shares of common stock on an as-converted basis, are considered to be outstanding pursuant
      to SEC Rule 13d-3(d)(1). For each Beneficial Owner above, any options
      exercisable within 60 days have been included in the
      denominator.




(4)
            On
      June 11, 2008, Mr. Han entered into a Securities Escrow Agreement by and
      among the investors to the private placement that closed on June 11, 2008
      and American Stock Transfer & Trust Company, or AST, whereby 2,100,000
      shares of the Company’s common stock owned by Mr. Han were placed into
      escrow, with AST appointed as the escrow agent. The 2,100,000 shares were
      thereafter transferred into the name of AST and are to be held in
      escrow and released to Mr. Han if the Company does, or to the investors if
      the Company does not, meet certain performance milestones described in the
      Securities Escrow Agreement. Mr. Han maintains voting power over all
      2,100,000 shares until such time as any such shares are transferred to the
      investors, at which time, such transferred shares will be beneficially
      owned by such investors.





(5)
            On
      June 11, 2008, Mr. He entered into a Securities Escrow Agreement by and
      among the investors to the private placement that closed on June 11, 2008
      and American Stock Transfer & Trust Company, or AST, whereby 1,400,000
      shares of the Company’s common stock owned by Mr. He were placed into
      escrow, with AST appointed as the escrow agent. The 1,400,000 shares were
      thereafter transferred into the name of AST and are to be held in escrow
      and released to Mr. He if the Company does, or to the investors if the
      Company does not, meet certain performance milestones described in the
      Securities Escrow Agreement. Mr. He maintains voting power over all
      1,400,000 shares until such time as any such shares are transferred to the
      investors, at which time, such transferred shares will be beneficially
      owned by such investors.





(6)
            Includes
      312,500 shares of Series A preferred stock that are exercisable upon
      exercise of preferred stock. Howard Berger and Mark Swickle have voting
      and investment power over the securities held by Professional Offshore
      Opportunity Fund LTD





(7)
            Includes
      125,000 shares of Series A preferred stock that are exercisable upon
      exercise of preferred stock. Andrew J. Redleaf is the managing member the
      general partner of Whitebox Intermarket Partners LP and has voting and
      investment power over the securities held by Whitebox Intermarket Partners
      LP.




(8)
            Includes
      62,500 shares of Series A preferred stock that are exercisable upon
      exercise of preferred stock. Howard Berger and Mark Swickle have voting
      and investment power over the securities held by Professional traders
      Fund.




(9)
            Includes
      62,500 shares of Series A preferred stock that are exercisable upon
      exercise of preferred stock. Ken McKarthy has voting and investment power
      over the securities held by Jayhawk Private Equity Fund II,
      L.P..





Item
      13.
            Certain
      Relationships and Related Transactions, and Director
      Independence





Transactions
with Related Persons





The
following includes a summary of transactions since the beginning of the 2006
fiscal year, or any currently proposed transaction, in which we were or are to
be a participant and the amount involved exceeded or exceeds the lesser of
$120,000 or one percent of the average of our total assets at year-end for the
last three completed fiscal years, and in which any related person had or will
have a direct or indirect material interest (other than compensation described
under “Executive Compensation”). We believe the terms obtained or consideration
that we paid or received, as applicable, in connection with the transactions
described below were comparable to terms available or the amounts that would be
paid or received, as applicable, in arm’s-length transactions.


39


Reverse
Acquisition Transaction





On April
29, 2008 we consummated the transactions contemplated by a share exchange
agreement with the owners of all issued and outstanding capital stock of
BVI-ACM, which included our Chairman and CEO, Xianfu Han, and our Vice-Chairman
and COO, Weili He. Pursuant to the share exchange agreement, we acquired 100% of
the outstanding capital stock of BVI-ACM in exchange for 11,500,000 shares of
our common stock. As a result of this transaction, Mr. Han and Mr. He became the
beneficial owners of approximately 51.5% and 33.34% of our outstanding capital
stock, respectively.





Securities
Escrow Agreement in connection with the Private Placement





In
connection with the private placement that we closed on June 11, 2008, our
Chairman and CEO, Xianfu Han, our Vice-Chairman and COO, Weili He, the Company
and the investors in the private placement entered into a Make Good Agreement
whereby Mr. Han and Mr. He have agreed to transfer a total of 3,500,000
shares of Common Stock to the investors on a pro rata basis in the event that
the Company does not meet certain performance targets for its fiscal years
ending June 30, 2008, June 30, 2009 and June 30, 2010. The performance target
for the Company's fiscal year ended June 30, 2008 is the achievement of pre-tax
net income of at least $5,200,000. This target has been met. The performance
target for the Company's fiscal year ended June 30, 2009 is the achievement of
after-tax net income of at least $9,000,000. The performance target for the
Company's fiscal year ended June 30, 2010 is the achievement of after-tax net
income equal to or greater than the Company’s after-tax net income for the
fiscal year ended June 30, 2009.





Beijing
Concrete Institute





We paid
the Beijing Concrete Institute fees of $165,404 and $213,430 for the years ended
June 30, 2007 and 2006, respectively. The Beijing Concrete Institute is 50%
owned by our Chairman and CEO, Xianfu Han and 45% by our Vice-Chairman and COO,
Weili He.





On
January 1, 2008, we entered into a 6 year contract with the Beijing Concrete
Institute with an expiration date of December 31, 2013, whereby we will
compensate the Beijing Concrete Institute based on research and development
projects they complete for us on an as-needed basis. The annual project-based
payment is capped at RMB 1,000,000 (approximately US $140,000) and in return we
will receive the exclusive right for technical procedures and findings as well
as training for our employees. As of June 30, 2009, we have not referred
any research and development projects, and have not provided any payment, to the
Beijing Concrete Institute.





Related
Party Loans





During
the years ended June 30, 2008 and 2007 we have received loans from a number of
our employees, the proceeds of which are used for working capital and general
corporate purposes. The principal amounts of the loans we received in each of
2008 and 2007 are $375,693 and $222,235, respectively. The current
outstanding balances for these loans were $524,510 and $117,200 for the years
ended June 30, 2008 and 2009. The effective annual interest rate on the loans
was 20%, and the loans mature at various times in between 2007 and 2009. The
employees from whom we received loans were Xueying Ma, Xue Zhang, Ying Zhang,
Changjun Guo, Wenxiang Zhang, Jianguo Zhang, Li Geng, Junping Li, Xiangrong Mao,
Fie Xia, Weihong Liu, Fang Cao, Liangcai Chen, and Shixun Xu and none of the
employee held a management position at the company. No one individual loaned to
us in excess of $120,000 except for Fang Cao, who loaned the Company $145,900.
For the year ended June 30, 2009, we have paid $51,625 and $86,883 in interest
for the years ended June 30, 2008 and 2009, respectively.




Reorganization
Related Transactions





BVI-ACM
owns 100% of the issued and outstanding capital stock of China-ACMH. On November
28, 2007, China-ACMH entered into a series of contractual agreements with Xin Ao
and its two shareholders pursuant to which China-ACMH effectively assumed
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
which include the following:





·
            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 an amount equal to Xin Ao’s yearly net
    income,





·
            Operating
      Agreement – through which China-ACMH has exclusive authority over 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.





·
            Equity
      Pledge Agreement – through which Xin Ao’s Shareholders have 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.


40


·
            Option
      Agreement – through which Xin Ao’s shareholders have granted China-ACMH
      the exclusive right and option to acquire all of their equity interests in
      Xin Ao The option agreement is intended to further reinforce China-ACMH’s
      rights to control and operate Xin
Ao.





·
            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





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 prior to expiration. The parties shall, through negotiations,
determine the term of any extension. During the term of the agreements, Xin Ao
may not terminate the agreements except in the case of gross negligence, fraud
or other illegal acts or bankruptcy of China-ACMH. China-ACMH may terminate the
agreement at any time with a written notice to Xin Ao thirty days prior to such
termination. Additionally, without China-ACMH’s prior written consent, Xin Ao
may 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.





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 consolidates Xin Ao’s
results, assets and liabilities in its financial statements.





Through
China-ACMH, BVI-ACM operates and controls Xin Ao through the contractual
arrangements discussed above. The reasons that BVI-ACM used these 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, are that (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.





Policies
and Procedures for Review, Approval or Ratification of Transactions with Related
Persons





We are in
the process of finalizing a written related-person transactions policy that sets
forth our policies and procedures regarding the identification, review,
consideration and approval or ratification of “related-persons
transactions.” For purposes of our policy only, a “related-person transaction”
will be a transaction, arrangement or relationship (or any series of similar
transactions, arrangements or relationships) in which we and any “related
person” are participants involving an amount that exceeds $50,000. Transactions
involving compensation for services provided to us as an employee, director,
consultant or similar capacity by a related person will not be covered by this
policy. A related person will be any executive officer, director or a holder of
more than five percent of our common stock, including any of their immediate
family members and any entity owned or controlled by such persons.





Under the
policy, we expect that where a transaction has been identified as a
related-person transaction, management must present information regarding the
proposed related-person transaction to our audit committee (or, where approval
by our audit committee would be inappropriate, to another independent body of
our board of directors) for consideration and approval or ratification. The
presentation will be expected to include a description of, among other things,
the material facts, and the direct and indirect interests of the related
persons, the benefits of the transaction to us and whether any alternative
transactions are available. To identify related-person transactions in advance,
we will rely on information supplied by our executive officers, directors and
certain significant stockholders. In considering related-person transactions,
our audit committee will take into account the relevant available facts and
circumstances including, but not limited to:




·
            the
      risks, costs and benefits to us;





·
            the
      impact on a director’s independence in the event the related person is a
      director, immediate family member of a director or an entity with which a
      director is affiliated;





·
            the
      terms of the transaction;





·
            the
      availability of other sources for comparable services or products;
      and





·
            the
      terms available to or from, as the case may be, unrelated third parties or
      to or from our employees
generally.


41


In the
event a director has an interest in the proposed transaction, the director must
excuse himself or herself form the deliberations and approval. Our policy will
require that, in determining whether to approve, ratify or reject a
related-person transaction, our audit committee must consider, in light of known
circumstances, whether the transaction is in, or is not inconsistent with, the
best interests of our company and our stockholders, as our audit committee
determines in the good faith exercise of its discretion. We did not previously
have a formal policy concerning transactions with related persons.





Promoters
and Certain Control Persons





We did
not have any promoters at any time during the past five fiscal
years.





Except as
set forth in our discussion above, none of our directors, director nominees or
executive officers has been involved in any transactions with us or any of our
directors, executive officers, affiliates or associates which are required to be
disclosed pursuant to the rules and regulations of the SEC.





Item
      14.
            Principal Accounting Fees and
Services





The
aggregate fees billed for the most recently completed fiscal year ended June 30,
2008 and for fiscal year ended June 30, 2009 for professional services rendered
by the principal accountant for the audit of our annual financial statements and
review of the financial statements included in our quarterly reports on Form
10-QSB and services that are normally provided by the accountant in connection
with statutory and regulatory filings or engagements for these fiscal periods
were as follows:




Years EndedJune 30, 2008
                    
                    
                    June 30, 2009Audit
      Fees
                    
                    $
                    100,000
                    
                    
                    $
                    100,000Interim
      Financial Review Fees
                    
                    
                    -
                    
                    
                    
                    60,000Tax
      Fees
                    
                    
                    -
                    
                    
                    
                    -All
      Other Fees
                    
                    
                    -
                    
                    
                    
                    14,835Total
                    
                    $
                    100,000
                    
                    
                    $
                    174,835





Our board
of directors pre-approves all services provided by our independent auditors. All
of the above services and fees were reviewed and approved by the board of
directors either before or after the respective services were
rendered.





Our board
of directors has considered the nature and amount of fees billed by our
independent auditors and believes that the provision of services for activities
unrelated to the audit is compatible with maintaining our independent auditors’
independence.





PART
IV





Item
      15.
            Exhibits,
      Financial Statement Schedules




(a)
            Financial
      Statements





(1)
            Financial
      statements for our company are listed in the index under Item 8 of this
      document





(2)
            All
      financial statement schedules are omitted because they are not applicable,
      not material or the required information is shown in the financial
      statements or notes thereto.





(b)
            Exhibits


42





Exhibit
              
              
              
              FiledIndex
              
              Description of Document
              
              Herewith
              
              Incorporated by Reference To:2.1
              
              Share
      Exchange Agreement by and among TJS Wood Flooring, Inc.; Xin Ao
      Construction Materials, Inc.; and each of the equity owners of Xin Ao
      Construction Materials, Inc. Shareholders, dated April 29,
      2008
              
              
              
              Exhibit
      2.1 to the Registrant’s Current Report on Form 8-K filed on May 5,
      2008.3.1
              
              Articles
      of Incorporation of the Registrant as filed with the Secretary of State of
      Delaware on February 13, 2007, as amended to
    date.
              
              
              
              Exhibits
      3.1 and 3.1a to the Registrant’s Registration Statement on Form SB-2 filed
      on March 26, 2007.3.2
              
              Amended
      and Restated Bylaws of the registrant.
              
              
              
              Exhibit
      3.2 to the Registrant’s Registration Statement on Form SB-2 filed on March
      26, 2007.4.1
              
              Certificate
      of Designation for Series A Convertible Preferred Stock
              
              
              
              Exhibit
      4.1 to the Registrant’s Current Report on Form 8-K filed on June 13,
      2008.4.2
              
              Lock-Up
      Agreement amongst Registrant, Xianfu Han and Weili He dated June 11,
      2008
              
              
              
              Exhibit
      4.2 to the Registrant’s Current Report on Form 8-K filed on June 13,
      2008.10.1
              
              Employment
      Agreement with Xiangsheng Xu
              
              
              
              Exhibit
      10.1 to the Registrant’s Current Report on Form 8-K filed on May 5,
      2008.10.2
              
              Employment
      Agreement with Weili He
              
              
              
              Exhibit
      10.2 to the Registrant’s Current Report on Form 8-K filed on May 5,
      2008.10.3
              
              Employment
      Agreement with Xianfu Han
              
              
              
              Exhibit
      10.3 to the Registrant’s Current Report on Form 8-K filed on May 5,
      2008.10.4
              
              Employment
      Agreement with Alex Yao
              
              
              
              Exhibit
      10.1 to the Registrant’s Current Report on Form 8-K filed on May 7,
      2008.10.5
              
              Subscription
      Escrow Agreement between the Registrant, Maxim Group, LLC and American
      Stock Transfer & Trust Company as Escrow Agent dated June 11,
      2008.
              
              
              
              Exhibit
      10.1 to the Registrant’s Current Report on Form 8-K filed on June 13,
      2008.10.6
              
              Make
      Good Escrow Agreement by and among the Registrant, the Investors, the
      Investor Representative, Xianfu Han and Weili He, and American Stock
      Transfer & Trust Company as Escrow Agent, dated June 11,
      2008
              
              
              
              Exhibit
      10.2 to the Registrant’s Current Report on Form 8-K filed on June 13,
      2008.10.7
              
              Form
      of Common Stock Purchase Warrant
              
              
              
              Exhibit
      10.3 to the Registrant’s Current Report on Form 8-K filed on June 13,
      2008.10.8
              
              Form
      of Placement Agent Stock Purchase Warrant
              
              
              
              Exhibit
      10.4 to the Registrant’s Current Report on Form 8-K filed on June 13,
      2008.10.9
              
              Escrow
      Agreement for IR and Dividends by and among the Registrant, the Investor
      Representative, Maxim Group, LLC and Anslow + Jaclin, LLP as Escrow
      Agent
              
              
              
              Exhibit
      10.5 to the Registrant’s Current Report on Form 8-K filed on June 13,
      2008.


43





10.10
              
              2009
      Equity Incentive Plan
              
              
              
              Exhibit
      10.1 to the Registrant’s Current Report on Form 8-K filed on June 25,
      2009.10.11
              
              Form
      of Subscription Agreement with Chinese Investors
              
              
              
              Exhibit
      10.1 to the Registrant’s Current Report on Form 8-K filed on August 3,
      2009.10.12
              
              Director
      Agreement, dated August 15, 2009, between the Company and Denis
      Slavich.
              
              
              
              Exhibit
      10.1 to the Registrant’s Current Report on Form 8-K filed on August 17,
      2009.10.13
              
              Director
      Agreement, dated August 15, 2009, between the Company and Sean
      Wang.
              
              
              
              Exhibit
      10.2 to the Registrant’s Current Report on Form 8-K filed on August 17,
      2009.10.14
              
              Director
      Agreement, dated August 15, 2009, between the Company and Larry
      Goldman.
              
              
              
              Exhibit
      10.3 to the Registrant’s Current Report on Form 8-K filed on August 17,
      2009.31.1
              
              Rule
      13a-14(a)/15d-14(a) Certification — Principal Executive
      Officer
              
              ü31.2
              
              Rule
      13a-14(a)/15d-14(a) Certification — Principal Financial
      Officer
              
              ü32.1
              
              Certification
      of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
              
              ü32.2
              
              Certification
      of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
              
              ü


44


AUDITED
FINANCIAL STATEMENTS





CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC.





JUNE
30, 2009 AND 2008





TABLE
OF CONTENTS





PageReport
      of Independent Registered Public Accounting Firm
                                          
                                          F-2Consolidated
      Balance Sheets
                                          
                                          F-3Consolidated
      Statements of Income and Other Comprehensive Income
                                          
                                          F-4Consolidated
      Statement of Shareholder’s Equity
                                          
                                          F-5Consolidated
      Statements of Cash Flows
                                          
                                          F-6Notes
      to Consolidated Financial Statements
                                          
                                          F-7


F-1


REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Board of Directors and
 Shareholders
of China Advanced Construction Materials Group, Inc. and
Subsidiaries
 
 We have
audited the accompanying consolidated balance sheets of China Advanced
Construction Materials Group, Inc. and Subsidiaries (the “Company”) as of June
30, 2009 and 2008, and the related consolidated statements of income and other
comprehensive income, shareholders’ equity, and cash flows for each of the years
in the two-year period ended June 30, 2009. China Advanced Construction
Materials Group, Inc.’s management is responsible for these consolidated
financial statements. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of China Advanced
Construction Materials Group, Inc. and Subsidiaries as of June 30, 2009 and
2008, and the consolidated results of its operations and its cash flows for each
of the years in the two-year period ended June 30, 2009 in conformity with
accounting principles generally accepted in the United States of
America.
 
 /S/ Moore
Stephens Wurth Frazer and Torbet, LLP
 
 Brea,
      CaliforniaSeptember
      22, 2009




F-2




CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED
BALANCE SHEETS
 AS OF
JUNE 30, 2009 AND 2008
 
 2009
                    
                    
                    2008ASSETSCURRENT
      ASSETS:Cash
                    
                    $
                    3,634,805
                    
                    
                    $
                    1,910,495Restricted
      cash
                    
                    
                    453,192
                    
                    
                    
                    913,092Marketable
      securities
                    
                    
                    71,880
                    
                    
                    
                    61,767Notes
      receivable
                    
                    
                    10,799
                    
                    
                    
                    -Accounts
      receivable, net of allowance for doubtful accounts of $120,986
      and  $224,924, respectively
                    
                    
                    11,815,402
                    
                    
                    
                    9,365,486Inventories
                    
                    
                    1,216,014
                    
                    
                    
                    237,836Other
      receivables
                    
                    
                    3,845,186
                    
                    
                    
                    505,968Prepayments
                    
                    
                    4,255,326
                    
                    
                    
                    3,240,394Total
      current assets
                    
                    
                    25,302,604
                    
                    
                    
                    16,235,038PLANT
      AND EQUIPMENT, net
                    
                    
                    22,089,717
                    
                    
                    
                    16,730,220OTHER
      ASSETS:Accounts
      receivable (non-current), net of allowance for doubtful accounts
      of  $328,563 and $411,061 respectively
                    
                    
                    4,132,706
                    
                    
                    
                    4,753,006Long
      term prepayments
                    
                    
                    4,794,746
                    
                    
                    
                    -Total
      other assets
                    
                    
                    8,927,452
                    
                    
                    
                    4,753,006Total
      assets
                    
                    $
                    56,319,773
                    
                    
                    $
                    37,718,264LIABILITIES
      AND SHAREHOLDERS' EQUITYCURRENT
      LIABILITIES:Short
      term loans
                    
                    $
                    4,512,200
                    
                    
                    $
                    4,271,222Accounts
      payable
                    
                    
                    10,722,741
                    
                    
                    
                    6,293,553Customer
      deposits
                    
                    
                    -
                    
                    
                    
                    165,434Other
      payables
                    
                    
                    352,880
                    
                    
                    
                    254,259Other
      payables - shareholder
                    
                    
                    806,946
                    
                    
                    
                    880,302Accrued
      liabilities
                    
                    
                    593,057
                    
                    
                    
                    145,207Taxes
      payable
                    
                    
                    3,048,179
                    
                    
                    
                    1,073,237Total
      current liabilities
                    
                    
                    20,036,003
                    
                    
                    
                    13,083,214Total
      liabilities
                    
                    
                    20,036,003
                    
                    
                    
                    13,083,214COMMITMENTS
      AND CONTINGENCIESREDEEMABLE
      CONVERTIBLE PREFERRED STOCK ($0.001 par value, 851,125 shares issued and
      outstanding  as of June 30, 2009 and 875,000 shares issued and
      outstanding as of June 30, 2008), net of discount for the amount of
      $567,581 and $1,168,548 as of June 30, 2009 and 2008,
      respectively
                    
                    
                    6,241,419
                    
                    
                    
                    5,831,452SHAREHOLDERS'
      EQUITY:Preferred
      stock $0.001 par value, 1,000,000 shares authorized, 851,125 issued and
      outstanding as  of June 30, 2009, and 875,000 shared issued and
      outstanding as of June 30, 2008 and classified  outside
      shareholders' equity (see above), liquidation preference of $8.00 per
      share and  accrued dividends as of June 30, 2009 and June 30,
      2008
                    
                    
                    -
                    
                    
                    
                    -Common
      stock, $0.001 par value, 74,000,000 shares authorized, 10,595,500 and
      10,525,000 shares issued and outstanding, as of June 30, 2009 and June 30,
      2008, respectively
                    
                    
                    10,596
                    
                    
                    
                    10,525Paid-in-capital
                    
                    
                    12,987,417
                    
                    
                    
                    12,722,260Contribution
      receivable
                    
                    
                    (1,210,000
                    )
                    
                    
                    (1,210,000
                    )Deferred
      compensation
                    
                    
                    -
                    
                    
                    
                    (27,708
                    )Retained
      earnings
                    
                    
                    12,783,892
                    
                    
                    
                    3,257,276Statutory
      reserves
                    
                    
                    2,765,179
                    
                    
                    
                    1,452,779Accumulated
      other comprehensive income
                    
                    
                    2,705,267
                    
                    
                    
                    2,598,466Total
      shareholders' equity
                    
                    
                    30,042,351
                    
                    
                    
                    18,803,598Total
      liabilities, redeemable preferred stock and shareholders'
      equity
                    
                    $
                    56,319,773
                    
                    
                    $
                    37,718,264
 
 See
report of independent registered public accounting firm.
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F-3
 
 CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED
STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
 FOR THE
YEARS ENDED JUNE 30, 2009 AND 2008
 
 2009
                          
                          
                          2008REVENUESales
      of concrete
                          
                          $
                          28,118,492
                          
                          
                          $
                          27,565,044Manufacturing
      services
                          
                          
                          7,053,728
                          
                          
                          
                          -Technical
      services
                          
                          
                          1,924,089
                          
                          
                          
                          -Mixer
      rental
                          
                          
                          2,618,493
                          
                          
                          
                          -Total
      revenue
                          
                          
                          39,714,802
                          
                          
                          
                          27,565,044COST
      OF SALESConcrete
                          
                          
                          20,657,312
                          
                          
                          
                          20,799,398Manufacturing
      services
                          
                          
                          2,768,255
                          
                          
                          
                          -Technical
      services
                          
                          
                          147,418
                          
                          
                          
                          -Mixer
      rental
                          
                          
                          945,057
                          
                          
                          
                          -Total
      cost of revenue
                          
                          
                          24,518,042
                          
                          
                          
                          20,799,398GROSS
      PROFIT
                          
                          
                          15,196,760
                          
                          
                          
                          6,765,646SELLING,
      GENERAL AND ADMINISTRATIVE EXPENSES
                          
                          
                          1,717,794
                          
                          
                          
                          1,946,541INCOME
      FROM OPERATIONS
                          
                          
                          13,478,966
                          
                          
                          
                          4,819,105OTHER
      INCOME (EXPENSE), NETOther
      subsidy income
                          
                          
                          2,109,290
                          
                          
                          
                          1,586,192Non-operating
      expense, net
                          
                          
                          (602,020
                          )
                          
                          
                          (79,312
                          )Interest
      expense, net
                          
                          
                          (802,650
                          )
                          
                          
                          (149,419
                          )TOTAL
      OTHER INCOME, NET
                          
                          
                          704,620
                          
                          
                          
                          1,357,461INCOME
      BEFORE PROVISION FOR INCOME TAXES
                          
                          
                          14,183,586
                          
                          
                          
                          6,176,566PROVISION
      FOR INCOME TAXES
                          
                          
                          2,115,097
                          
                          
                          
                          1,012,382NET
      INCOME
                          
                          
                          12,068,489
                          
                          
                          
                          5,164,184DIVIDENDS
      AND ACCRETION ON REDEEMABLE CONVERTIBLE PREFERRED STOCK
                          
                          
                          1,229,473
                          
                          
                          
                          33,387NET
      INCOME AVAILABLE TO COMMON SHAREHOLDERS
                          
                          
                          10,839,016
                          
                          
                          
                          5,130,797RECONCILIATION
      OF COMPREHENSIVE INCOME:Net
      Income
                          
                          
                          12,068,489
                          
                          
                          
                          5,164,184Unrealized
      gain (loss) from marketable securities
                          
                          
                          20,605
                          
                          
                          
                          (12,482
                          )Foreign
      currency translation adjustment
                          
                          
                          86,196
                          
                          
                          
                          1,951,026COMPREHENSIVE
      INCOME
                          
                          $
                          12,175,290
                          
                          
                          $
                          7,102,728EARNING
      PER COMMON SHARE ALLOCATED TO COMMON SHAREHOLDERSWeighted
      average number of shares:Basic
                          
                          
                          10,526,719
                          
                          
                          
                          9,064,359Diluted
                          
                          
                          14,032,479
                          
                          
                          
                          9,255,616Earnings
      per share:Basic
                          
                          $
                          1.03
                          
                          
                          $
                          0.57Diluted
                          
                          $
                          0.86
                          
                          
                          $
                          0.56
 
 See
report of independent regsitered public accounting firm.
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F-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
                        
                        
                        amount
                        
                        
                        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
                        
                        
                        $
                        6,496,231Contribution
      receivable offset with distribution owed
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        7,260,000
                        
                        
                        
                        
                        
                        
                        
                        (7,627,051
                        )
                        
                        
                        
                        
                        
                        
                        367,051
                        
                        
                        
                        -Shares
      issued due to reorganization
                        
                        
                        1,690,417
                        
                        
                        
                        1,690
                        
                        
                        
                        (1,690
                        )
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        -Shares
      issued for services
                        
                        
                        25,000
                        
                        
                        
                        25
                        
                        
                        
                        33,225
                        
                        
                        
                        
                        
                        
                        
                        (27,708
                        )
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        5,542Warrants
      issued for services
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        169,345
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        169,345Capital
      contribution received
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        5,000,100
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        5,000,100Fair
      value of warrants issued with preferred stock
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        1,201,935
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        1,201,935Offering
      costs related to issuance of redeemable preferred stock
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (771,845
                        )
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (771,845
                        )Accretion
      of discount on redeemable preferred stock
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (33,387
                        )
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (33,387
                        )Adjustment
      to statutory reserve
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (556,145
                        )
                        
                        
                        556,145
                        
                        
                        
                        
                        
                        
                        
                        -Net
      income
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        5,164,184
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        5,164,184Unrealized
      loss on marketable securities
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (12,482
                        )
                        
                        
                        (12,482
                        )Foreign
      currency translation gain
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        1,583,975
                        
                        
                        
                        1,583,975BALANCE,
      June 30, 2008
                        
                        
                        10,525,000
                        
                        
                        $
                        10,525
                        
                        
                        $
                        12,722,260
                        
                        
                        $
                        (1,210,000
                        )
                        
                        $
                        (27,708
                        )
                        
                        $
                        3,257,276
                        
                        
                        $
                        1,452,779
                        
                        
                        $
                        2,598,466
                        
                        
                        $
                        18,803,598Dividends
      on redeemable preferred stock
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (628,505
                        )
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (628,505
                        )Accretion
      of discount on redeemable preferred stock
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (600,968
                        )
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (600,968
                        )Stock
      based compensation
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        107,477
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        107,477Forfeited
      stock compensation
                        
                        
                        (25,000
                        )
                        
                        
                        (25
                        )
                        
                        
                        (33,225
                        )
                        
                        
                        
                        
                        
                        
                        27,708
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (5,542
                        )Preferred
      stock converted to common stock
                        
                        
                        95,500
                        
                        
                        
                        96
                        
                        
                        
                        190,905
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        191,001Net
      income
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        12,068,489
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        12,068,489Adjustment
      to statutory reserve
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (1,312,400
                        )
                        
                        
                        1,312,400
                        
                        
                        
                        
                        
                        
                        
                        -Unrealized
      gain on marketable securities
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        20,605
                        
                        
                        
                        20,605Foreign
      currency translation gain
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        86,196
                        
                        
                        
                        86,196BALANCE,
      June 30, 2009
                        
                        
                        10,595,500
                        
                        
                        $
                        10,596
                        
                        
                        $
                        12,987,417
                        
                        
                        $
                        (1,210,000
                        )
                        
                        $
                        -
                        
                        
                        $
                        12,783,892
                        
                        
                        $
                        2,765,179
                        
                        
                        $
                        2,705,267
                        
                        
                        $
                        30,042,351
 
 See
report of independent registered public accounting firm.
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F-5
 
 CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 FOR THE
YEARS ENDED JUNE 30, 2009 AND 2008
 
 2009
                        
                        
                        2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income
                        
                        $
                        12,068,489
                        
                        
                        $
                        5,164,184Adjustments
      to reconcile net income to cash
                          provided
      by operating activities:Depreciation
                        
                        
                        2,184,462
                        
                        
                        
                        1,178,745Amortization
      of long term deferred expense
                        
                        
                        179,463
                        
                        
                        
                        -Bad
      debt expense, net of recovery
                        
                        
                        (189,052
                        )
                        
                        
                        443,171Amortization
      of deferred compensation expense
                        
                        
                        107,477
                        
                        
                        
                        5,542Changes
      in operating assets and liabilitiesAccounts
      receivable
                        
                        
                        (13,681,007
                        )
                        
                        
                        1,561,399Inventories
                        
                        
                        (977,200
                        )
                        
                        
                        211,569Other
      receivables
                        
                        
                        (3,347,936
                        )
                        
                        
                        1,109,454Prepayment
                        
                        
                        419,258
                        
                        
                        
                        (2,825,219
                        )Accounts
      payable
                        
                        
                        4,403,314
                        
                        
                        
                        (2,933,778
                        )Customer
      deposits
                        
                        
                        (166,114
                        )
                        
                        
                        156,125Other
      payables
                        
                        
                        97,849
                        
                        
                        
                        108,430Accrued
      liabilities
                        
                        
                        291,597
                        
                        
                        
                        (80,851
                        )Taxes
      payable
                        
                        
                        1,970,528
                        
                        
                        
                        1,012,153Net
      cash provided by operating activities
                        
                        
                        3,361,128
                        
                        
                        
                        5,110,924CASH
      FLOWS FROM INVESTING ACTIVITIES:Acquisition
      of property, and equipment
                        
                        
                        (1,771,915
                        )
                        
                        
                        (8,701,026
                        )Net
      cash used in investing activities
                        
                        
                        (1,771,915
                        )
                        
                        
                        (8,701,026
                        )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from short term loans
                        
                        
                        8,247,950
                        
                        
                        
                        3,925,075Payments
      for short term loans
                        
                        
                        (8,024,538
                        )
                        
                        
                        (5,906,096
                        )Payments
      on other payables - Shareholder
                        
                        
                        (73,889
                        )
                        
                        
                        -Restricted
      cash
                        
                        
                        459,900
                        
                        
                        
                        (913,092
                        )Proceeds
      from issuance of redeemable preferred stock
                        
                        
                        -
                        
                        
                        
                        6,397,500Proceeds
      from capital contribution
                        
                        
                        -
                        
                        
                        
                        100Proceeds
      from advances by shareholder
                        
                        
                        -
                        
                        
                        
                        873,020Preferred
      dividends paid
                        
                        
                        (472,851
                        )
                        
                        
                        -Net
      cash provided by financing activities
                        
                        
                        136,572
                        
                        
                        
                        4,376,507EFFECTS
      OF EXCHANGE RATE CHANGE IN CASH
                        
                        
                        (1,475
                        )
                        
                        
                        (300,793
                        )INCREASE
      IN CASH
                        
                        
                        1,724,310
                        
                        
                        
                        485,612CASH,
      beginning of year
                        
                        
                        1,910,495
                        
                        
                        
                        1,424,883CASH,
      end of year
                        
                        $
                        3,634,805
                        
                        
                        $
                        1,910,495
 
 Supplemental
cash flow information disclosures (See note 3)
 
 See
report of independent registered public accounting firm.
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F-6




CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 Note
1 – Organization and description of business
 
 China
Advanced Construction Materials Group, Inc. (“China ACM” or the “Company”) was
founded on September 1, 2005, under the name TJS Wood Flooring, Inc. (“TJSW”),
and incorporated in the State of Delaware on February 15, 2007. On April 29,
2008, TJSW changed its name to China Advanced Construction Materials Group, Inc.
in connection with a share exchange transaction as described below.
 
 On April
29, 2008, the Company executed a share exchange agreement with Xin Ao
Construction Materials, Inc. (“BVI-ACM”) whereby the Company issued to the
stockholders of BVI-ACM 8,809,583 shares of the Company’s common stock in
exchange for all of the issued and outstanding capital stock of BVI-ACM (the
“Share Exchange”). Prior to the Share Exchange, and after the cancellation of
9,990,000 shares, China ACM had 1,166,667 shares of common stock issued and
outstanding. After the Share Exchange, China ACM had 10,500,000 shares of common
stock outstanding and the former shareholders of BVI-ACM owned 83.9% of the
issued and outstanding shares. The directors and executive officers of BVI-ACM
became the directors and officers of China ACM. This transaction has been
accounted for as a reverse acquisition and recapitalization of the Company
whereby BVI-ACM is deemed to be the accounting acquirer (legal acquiree) and the
Company the accounting acquiree (legal acquirer). The historical financial
statements for periods prior to April 29, 2008, are those of BVI-ACM except that
the equity section and earnings per share have been retroactively restated to
reflect the reverse acquisition.
 
 BVI-ACM
was established on October 9, 2007, under the laws of the British Virgin
Islands. The majority shareholders of BVI-ACM are Chinese citizens who own 100%
of Beijing Xin Ao Concrete Co., Ltd. (“Xin Ao”), a limited liability company
formed under the laws of the People’s Republic of China (“PRC”). BVI-ACM was
established as a “special purpose vehicle” for foreign fund raising for Xin Ao.
China State Administration of Foreign Exchange (“SAFE”) requires the owners of
any Chinese companies to obtain SAFE’s approval before establishing any offshore
holding company structure for foreign financing as well as subsequent
acquisition matters under Circular 106 in the PRC. On September 29, 2007,
BVI-ACM was approved by the local Chinese SAFE as a “special purpose vehicle”
offshore company.
 
 On
November 23, 2007, BVI-ACM established a subsidiary, Beijing Ao Hang
Construction Material Technology Co., Ltd. (“China-ACMH”), in the PRC as a
wholly-owned foreign limited liability company (“WOFE”) with registered capital
of $5 million.
 
 BVI-ACM,
through its 100% owned China-ACMH and its variable interest entity (“VIE”) Xin
Ao (see Note 2), is engaged in producing general ready-mix concrete, customized
mechanical refining concrete, and other concrete-related products that are
mainly sold in the PRC. Xin Ao, licensed by the Beijing Administration of
Industry & Commerce, PRC, was established on June 28, 2002, with an initial
capital contribution of approximately $3,630,000 (RMB30 million). On July 8,
2005, the Board of Directors of Xin Ao increased its registered capital to
$12,100,000 (RMB100 million) through the use of Xin Ao’s undistributed
profits.
 
 See
report of independent registered public accounting firm
  F-7
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 On
November 28, 2007, China-ACMH entered a series of contractual arrangements (the
“Contractual Arrangements”) with Xin Ao and its shareholders in which China-ACMH
effectively took over management of the business activities of Xin Ao. The
Contractual Arrangements are comprised of a series of agreements,
including:
 
 ·
              Exclusive
      Technical Consulting and Services Agreement, through which China-ACMH will
      provide exclusive technical consulting and services to Xin Ao for an
      annual fee in the amount of Xin Ao’s yearly net income after
      tax.
  ·
              Equity
      Pledge Agreement, through which Xin Ao’s shareholders pledged their
      rights, title and equity interest in Xin Ao as security for China-ACMH to
      collect technical consulting and services fees provided to
      China-ACMH.
  ·
              Operating
      Agreement, through which China-ACMH has exclusive authority of all
      decision-making of ongoing major operations, including establishing
      compensation levels and hiring and termination of key personnel. In order
      to ensure Xin Ao’s normal operations, China-ACMH agreed to act as the
      guarantor and provide full guarantee for Xin Ao in entering and performing
      contracts, agreements or transactions in association with Xin Ao’s
      operations between Xin Ao and any other third parties. As a counter
      guarantee, Xin Ao agreed to mortgage all of its assets including
      receivables which have not been mortgaged to any third parties at the
      execution date of this agreement to
China-ACMH.
  ·
              Power
      of Attorney, signed by Xin Ao’s 100% shareholders Mr. Han Xianfu and Mr.
      He Weili, which authorized the individuals appointed by China-ACMH to
      exercise all of their respective voting rights as a shareholder at Xin
      Ao’s shareholder meetings.
  ·
              Option
      Agreement, through which Xin Ao’s shareholders granted China-ACMH the
      exclusive right and option to acquire all of their equity interests in Xin
      Ao. Further, the shareholders of Xin Ao pledged their shares in Xin Ao as
      collateral for the annual fees due to the
  Company.
  The term
of these agreements is for ten (10) years and terminates automatically upon
expiration, and may be extended only if China-ACMH gives its written consent of
the extension before the expiration. The parties, through negotiations,
determine the extension term. During the term, Xin Ao may not terminate the
agreements except in the case of gross negligence, fraud or other illegal acts
or bankruptcy of China-ACMH.  Notwithstanding the foregoing,
China-ACMH may terminate the agreement at any time with a written notice to Xin
Ao thirty (30) days before such termination. Additionally, without China-ACMH’s
prior written consent, Xin Ao cannot assign or otherwise transfer its rights and
obligations under the agreements. Subject to compliance with the laws of China,
China-ACMH may assign the agreements to any affiliate or any other designated
entity without the prior consent of Xin Ao.
 
 See
report of independent registered public accounting firm
  F-8
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 Through
China-ACMH, BVI-ACM operates and controls Xin Ao through the Contractual
Arrangements. BVI-ACM utilized the Contractual Arrangements to gain control of
the operations of Xin Ao, instead of acquiring Xin Ao, 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.
 
 Principles of
consolidation
 
 The
accompanying consolidated financial statements include the accounts of China
ACM, BVI-ACM, including its wholly-owned subsidiary China-ACMH, and its variable
interest entity Xin Ao. All significant inter-company transactions and balances
have been eliminated in consolidation.
 
 In
accordance with Financial Accounting Standards Board (“FASB”) Interpretation No.
46(R) (“FIN 46(R)”), “Consolidation of Variable Interest
Entities,” all VIEs with which the Company is involved must be evaluated
to determine the primary beneficiary of the risks for financial reporting
purposes. Based upon a series of Contractual Arrangements, 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 and other 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 with FIN 46(R), the Company determined that
Xin Ao is a variable interest entity subject to consolidation and that the
Company is the primary beneficiary. Accordingly, the financial statements of Xin
Ao are consolidated into the financial statements of the Company.
 
 See
report of independent registered public accounting firm
  F-9
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 Company reporting year
end
 
 For US
financial statement reporting purposes beginning from 2008, the Company has
adopted June 30 as its fiscal year end.
 
 Use of
estimates
 
 The
preparation of financial statements in conformity with U.S. 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 relate to the
assessment of the fair value of share-based payments and the collectability of
accounts receivable. Actual results could be materially different from those
estimates, upon which the carrying values were based.
 
 Foreign currency
translation
 
 The
reporting currency of the Company is the U.S. dollar. The functional currency of
China ACM and BVI-ACM is the U.S. dollar. China-ACMH and Xin Ao use their local
currency Chinese Renminbi (“RMB”) as their functional currency. In accordance
with SFAS No. 52, “Foreign
Currency Translation,” the Company’s results of operations and cash flows
are translated at the average exchange rates during the period, assets and
liabilities are translated at the exchange rates at the balance sheet dates, and
equity is translated at the historical exchange rates. As a result, amounts
related to assets and liabilities reported on the consolidated statements of
cash flows will not necessarily agree with changes in the corresponding balances
on the consolidated balance sheets.
 
 Accumulated
other comprehensive income in the consolidated statements of shareholders’
equity amounted to $2,705,267 and $2,598,466 as of June 30, 2009 and 2008,
respectively. Asset and liability accounts at June 30, 2009 and June 30, 2008
were translated at 6.83 RMB and 6.85 RMB to $1.00, respectively. The average
translation rates applied to the consolidated statements of income and cash
flows for the years ended June 30, 2009 and 2008 were 6.83 RMB and 7.26 RMB to
$1.00, respectively.
 
 See
report of independent registered public accounting firm
  F-10
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 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. There were no material
transaction gains or losses for the years ended June 30, 2009 and
2008.
 
 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 technical services
primarily to major local construction companies. Sales agreements are signed
with each customer. The agreements list all terms and conditions with the
exception of delivery date and quantity, which are evidenced separately in
purchase orders. The purchase price of products is fixed in the agreement and
customers are not permitted to renegotiate after the contracts have been signed.
The agreements include a cancellation clause if the Company or customers breach
the contract terms specified in the agreement.
 
 The
Company does not sell products to customers on a consignment basis. There is no
right of return after the product has been injected into the location specified
by the contract and accepted by the customer. The Company recognizes revenue
when the goods and services are provided by the Company and are accepted by the
customer.
 
 Sales
revenue represents the invoiced value of goods, net of a value added tax
(“VAT”). All of the Company’s concrete products that are sold in the PRC are
subject to a Chinese VAT at the rate of 6% of the gross sales
price.
 
 Due to
the fact that the Company uses recycled raw materials to manufacture its
products, the State Administration of Taxation has granted the Company VAT tax
exemption from August 2005 to August 2009 and a two year extension on the VAT
tax exemption from August 2009 to August 2011. The VAT tax collected during the
aforementioned period from the Company’s customers is retained by the Company
and recorded as other subsidy income.
 
 See
report of independent registered public accounting firm
  F-11
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 The
Company also provides manufacturing services, technical consulting services and
strategic cooperation including market sharing and equipment rental with other
independently owned concrete companies. The Company signs a Technical Service
Agreement or Strategic Cooperation Agreement with each concrete company, which
specifies all terms and conditions including prices to be charged. Once concrete
products are produced by the concrete company and supplied to builders referred
by the Company or cost savings are realized by the use of technical solutions
provided by the Company, the Company has in effect rendered its service pursuant
to the agreements. The Company recognizes revenue and invoices the concrete
companies monthly for technical service and marketing cooperation on a
per-cubic-meter basis and for equipment rental on a per-mixer truck
basis.
 
 The
Company also earns income from the renting of certain of its vehicles to other
non-related concrete companies.  The rental amounts are based on
pre-determined rental rates on a per cubic meter basis.
 
 Segment
report
 
 Management
reviews financial information presented on a consolidated basis, accompanied by
disaggregated information about revenues by product lines for purposes of
allocating resources and evaluating financial performance. There are no segment
managers who are held accountable for operations, operating results and plans
for levels or components below the consolidated unit level.  Based on
qualitative and quantitative criteria established by SFAS 131, “Disclosures about Segments of an
Enterprise and Related Information”, the Company considers itself to be
operating within one reportable segment.
 
 Shipping and
handling
 
 Shipping
and handling costs related to costs of the raw materials purchased is included
in cost of revenues.  Further, transportation costs incurred in the
delivery of the Company’s concrete products are also included in cost of
revenues.
 
 Financial
instruments
 
 SFAS 107,
“Disclosures about Fair Value
of Financial Instruments,” defines financial instruments and requires
disclosure about the fair value of those financial instruments held by the
Company. SFAS 157,
“Fair
Value Measurements”, defines fair value,
establishes a three-level valuation hierarchy for disclosures of fair value
measurements, and enhances disclosures requirements.
 
 See
report of independent registered public accounting firm
  F-12
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 The three
levels are defined as follows:
 ·
                    Level 1inputs to the valuation methodology are quoted prices (unadjusted)
      for identical assets or liabilities in active
  markets.
 
 ·
                    Level
      2 inputs to the valuation methodology include quoted prices for similar
      assets and liabilities in active markets, and inputs that are observable
      for the asset or liability, either directly or indirectly, substantially
      the full term of the financial
instrument.
 
 ·
                    Level
      3 inputs to the valuation methodology are unobservable and significant to
      the fair value
measurement.
 
 As of
June 30, 2009, the outstanding principal on the Company’s short term loan
amounted to $4,512,200.  Management concluded the carrying value of
the short term loan is a reasonable estimate of fair value because the amounts
are due within one year and the stated interest rate approximates current rates
available. The Company paid off its loan balance due to Beijing International
Turst Co. Ltd. for the amount of $4,395,000 in July 2009.
 
 Marketable
securities, receivables and current liabilities qualify as financial
instruments. Marketable securities were determined using Level 3,
which are carried on the consolidated balance sheets at fair value, with fair
values determined by the financial institution who sold the securities. The
carrying amounts reported in the consolidated balance sheets for receivables and
current liabilities are reasonable estimates of fair values because of the short
period of time between the origination of such instruments and their expected
realization and their current market rates of interest. The Company did not
identify any assets and liabilities, other than marketable securities, that are
required to be presented on the consolidated balance sheets at fair value in
accordance with SFAS 157.
 
 Stock-based
compensation
 
 The
Company records stock-based compensation expense pursuant to SFAS 123R, "Share Based
Payment.”  SFAS 123R requires companies to measure compensation
cost for stock-based employee compensation plans at fair value at the grant date
and recognize the expense over the employee's requisite service period. Under
SFAS 123R, the Company’s expected volatility assumption is based on the
historical volatility of Company’s stock or the expected volatility of similar
entities. The expected life assumption is primarily based on historical exercise
patterns and employee post-vesting termination behavior. The risk-free interest
rate for the expected term of the option is based on the U.S. Treasury yield
curve in effect at the time of grant.
 
 See
report of independent registered public accounting firm
  F-13
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 Stock-based
compensation expense is recognized based on awards expected to vest, and there
were no estimated forfeitures as the Company has a short history of issuing
options. SFAS 123R requires forfeitures to be estimated at the time of grant and
revised in subsequent periods, if necessary, if actual forfeitures differ from
those estimates.
 
 The
Company estimates the fair value of the awards using the Cox-Ross-Rubinstein
(“CRR”) binomial model. Option pricing models, such as the CRR binomial model,
require the input of highly complex and subjective variables including the
expected life of options granted and the Company’s expected stock price
volatility over a period equal to or greater than the expected life of the
options. Because changes in the subjective assumptions can materially affect the
estimated value of the Company’s employee stock options, it is management’s
opinion that the CRR binomial model may not provide an accurate measure of the
fair value of the Company’s employee stock options. Although the fair value of
employee stock options is determined in accordance with SFAS 123R using an
option-pricing model, that value may not be indicative of the fair value
observed in a willing buyer/willing seller market transaction.
 
 Concentration of
risk
 
 ·
              Cash
      - Cash includes cash on hand and demand deposits in accounts maintained
      with state owned banks within the PRC. The Company considers all highly
      liquid instruments purchased with original maturities of three months or
      less, and money market accounts, to be cash equivalents. Total cash in
      these banks at June 30, 2009 and 2008 amounted to $3,634,805 and
      $1,910,495, respectively, of which no deposits were covered by insurance.
      Also, as of June 30, 2009, the Company held $453,192 in restricted cash in
      a corporate legal counsel’s trust account, in accordance with an agreement
      with investors for the restricted use of preferred stock dividend and
      investor relation related expenses. Nonperformance by these institutions
      could expose the Company to losses not covered by insurance. Management
      reviews the financial condition of these institutions on a periodic
      basis.  The Company has not incurred any losses on these
      accounts from nonperformance by the aforementioned
      institutions.
 
 ·
              Major
      customers – Five customers accounted for approximately 32.03 % and 41.49%
      of the Company’s sales for the years ended June 30, 2009 and 2008,
      respectively. The total accounts receivable from these customers amounted
      to $3,624,793 and $3,584,879 as of June 30, 2009 and 2008,
      respectively.
 
 ·
              Major
      suppliers – Five suppliers accounted for approximately 43.90% and 51.77%
      of the Company’s purchase for the years ended June 30, 2009 and 2008,
      respectively. The total accounts payable to these suppliers amounted to
      $2,551,604 and $440,981 as of June 30, 2009 and
  2008.
 
 See
report of independent registered public accounting firm
  F-14
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 ·
              Political
      and economic risks - The Company's operations are carried out in the PRC.
      Accordingly, the Company's business, financial condition, and results of
      operations may be influenced by the political, economic, and legal
      environments in the PRC, and by the general state of the PRC's economy.
      The Company's operations in the PRC are subject to specific considerations
      and significant risks not typically associated with companies in North
      America and Western Europe. These include risks associated with, among
      others, the political, economic, and legal environments, and foreign
      currency exchange. The Company's results may be adversely affected by
      changes in governmental policies with respect to laws and regulations,
      anti-inflationary measures, currency conversion and remittance abroad, and
      rates and methods of taxation, among
others.
 
 Restricted
Cash
 
 Restricted
cash represents portion of the proceeds received from the June 11, 2008, Private
Placement that was deposited in a trust account held by the Company’s legal
counsel for payment of dividends, investor relations fees, and other
professional fees (see Note 12). The restricted cash balance was $453,192 as of
June 30, 2009.  As of June 30, 2008, the restricted cash balance was
$913,092.
 
 Accounts
receivable
 
 During
the normal course of business, the Company extends unsecured credit to its
customers. Management reviews its accounts receivable each reporting period to
determine if the allowance for doubtful accounts is adequate. An estimate for
doubtful accounts is recorded when collection of the full amount is no longer
probable.  Known bad debts are written off against allowance for
doubtful accounts when identified. The Company’s reserves are consistent with
its historical experience and considered adequate by management.
 
 The
ultimate collection of the Company’s accounts receivable may take more than one
year, and any portion of accounts receivable expected to be collected in more
than one year is reflected as noncurrent, net of allowance for doubtful accounts
relating to that portion of the receivables. The bifurcation between current and
noncurrent portions of accounts receivable is based on management’s estimate and
predicated on historical collection experience.
 
 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 June 30, 2009 and 2008, the Company determined
no reserves for obsolescence were necessary.
 
 Prepayments
 
 The
Company advances monies to certain suppliers for raw materials and short term
prepaid rent. These advances are interest free and unsecured. In addition, the
prepayments also include amounts prepaid for rent.
 
 See
report of independent registered public accounting firm
  F-15
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 Plant, machinery and
equipment
 
 Plant,
machinery and equipment are stated at cost. Depreciation is provided over the
estimated useful life of each class of depreciable assets and is computed using
the straight-line method with 5% residual value. Maintenance, repairs and minor
renewals are charged to expense as incurred. Major additions and betterment to
property and equipment are capitalized. The cost and related accumulated
depreciation of assets sold or otherwise retired are eliminated from the
accounts and any gain or loss is included in the consolidated statements of
income.
 
 The
estimated useful lives of assets are as follows:
 
 Useful LifeTransportation
      equipment
                10
      yearsPlant
      machinery
                10
      yearsOffice
      equipment
                5
      years
  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 charge to reduce the related
assets to their net realizable value. The Company believes no impairment exists
at June 30, 2009.
 
 Redeemable convertible
preferred stock
 
 On June
11, 2008, the Company completed the sale to certain accredited investors of
875,000 investment units for gross proceeds of $7,000,000, each unit consisting
of one share of the Company’s Series A Convertible Preferred Stock and one
warrant to purchase two shares of the Company’s common stock. The preferred
stock pays annual dividends of 9% regardless of the Company’s profitability.
Each preferred share is convertible into four shares of common stock. The
Company received net proceeds of approximately $5.3 million after offering
expenses and net of $930,000 restricted cash which was required to be placed in
escrow. Upon the two year anniversary of the closing date, the Company is
required to redeem for cash the outstanding preferred stock, if not previously
converted by the holders, for $8.00 per share plus accrued but unpaid
dividends.  Because the Company is required to redeem the
preferred stock on June 11, 2010, if it has not been previously converted by the
holders, in accordance with EITF Topic D-98, the preferred stock is classified
outside of shareholders’ equity.
 
 See
report of independent registered public accounting firm
  F-16
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 In
accordance with Accounting Principles Board (“APB”) No. 14, “Accounting for Convertible Debt and
Debt Issued with Stock Purchase Warrants,” the Company allocated the
proceeds received between the preferred stock and the warrants.  The
resulting discount from the face amount of the preferred stock is being
amortized using the effective interest method over the period to the required
redemption date. After allocating a portion of the proceeds to the warrants, the
effective conversion price of the preferred stock was higher than the market
price at the date of issuance, and therefore, no beneficial conversion feature
was recorded.The
dividends on the preferred stock, together with the periodic accretion of the
preferred stock to its redemption value, are charged to retained
earnings.
 
 Income
taxes
 
 The
Company’s subsidiaries Xin Ao and WOFE are governed by the income tax laws
of the PRC. The Company accounts for income taxes in accordance with SFAS 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 U.S., the Company did not have
any provision for U.S. income taxes including any deferred income taxes, for the
years ended June 30, 2009 and 2008.
 
 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 likelihood of being
realized upon ultimate settlement. Tax positions that previously failed to meet
the more-likely-than-not recognition threshold should be recognized in the first
subsequent period in which the threshold is met. Previously recognized tax
positions that no longer meet the more-likely-than-not criteria should be
de-recognized in the first subsequent financial reporting period in which the
threshold is no longer met. FIN 48 also provides guidance on de-recognition,
classification, interest and penalties, accounting in interim periods,
disclosures, and transition.  The adoption had no effect on the
Company’s consolidated financial statements.  There were no material
deferred tax amounts as of June 30, 2009 and 2008.
 
 See
report of independent registered public accounting firm
  F-17
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 The
Company has cumulative undistributed earnings of China ACMH of approximately
$14.8 million as of June 30, 2009, is included in consolidated retained earnings
and will continue to be indefinitely reinvested in international operations.
 Accordingly, no provision has been made for U.S. deferred taxes related to
future repatriation of these earnings.
 
 Chinese Income
Taxes
 
 The
Company and its subsidiaries are governed by the income tax laws of the PRC
concerning Foreign Investment Enterprises and Foreign Enterprises and various
local income tax laws (the “Income Tax Laws”).
 
 Xin Ao’s
use of recycled raw materials in its production since its inception entitled the
Company to an income tax exemption from January 1, 2003, through to December 31,
2007 and an income tax reduction from 25% to 15% from January 1, 2009 to
December 31, 2012  as granted by the State Administration of Taxation
of the PRC. The income tax exemption granted to the Company was eliminated after
December 31, 2007.  Beginning January 1, 2008, the new Chinese
Enterprise Income Tax (“EIT”) law replaced the existing laws for Domestic
Enterprises (“DES”) and Foreign Invested Enterprises (“FIEs”). Effective January
1, 2009, the new reduced EIT rate of 15% replaced the existing rates of 25%
currently applicable to both DES and FIEs.
 
 PRC laws
require that before a FIE can legally distribute profits to its shareholders, it
must satisfy all tax liabilities, provide for losses in previous years, and make
allocations in proportions made at the discretion of the board of directors,
after the statutory reserve. The statutory reserve includes the surplus reserve
fund, the common welfare fund, and represents restricted retained
earnings.
 
 The
Company adopted accounting policies in accordance to U.S. GAAP with regard to
provisions, reserves, inventory valuation method, and depreciation that are
consistent with requirements under Chinese income tax laws. Therefore, there
were no significant deferred tax assets or liabilities during the years ended
June 30, 2009 and 2008.
 
 The
Company classifies interest and penalties assessed due to underpayment of income
taxes as interest expense and other expenses, respectively. The Company incurred
no such expenses for the years ended June 30, 2009 and 2008.
 
 See
report of independent registered public accounting firm
  F-18
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 Value added
tax
 
 Enterprises
or individuals, who sell commodities, engage in repair and maintenance, or
import and export goods in the PRC are subject to a value added tax. The
standard VAT rate is 6% of gross sales for the Company’s industry. A credit is
available whereby VAT paid on the purchases of raw materials used in the
production of the Company’s finished products can be used to offset the VAT due
on sales of finished products. Due to the fact that the Company uses recycled
raw materials to manufacture its products, the State Administration of Taxation
has granted the Company VAT exemption from August 2005 through to August 2009
and a two year tax (VAT) credit extension from August 2009 through August 2011.
For the years ended June 30, 2009 and 2008, the Company recognized VAT collected
as other subsidy income in the amounts of $2,109,290 and $1,586,192
respectively.
 
 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
for the years ended June 30, 2009 and 2008 were not significant.
 
 Earnings per
share
 
 The
Company reports earnings per share in accordance with SFAS 128, “Earnings Per Share.” SFAS 128
requires presentation of basic and diluted earnings per share in conjunction
with the disclosure of the methodology used in computing such earnings per
share. Basic earnings per share excludes dilution and is computed by dividing
income available to common shareholders by the weighted average common shares
outstanding during the period.  Diluted earnings per share takes into
account the potential dilution that could occur if securities or other
contracts, such as warrants and convertible preferred stock, to issue common
stock were exercised and converted into common stock. Dilutive securities having
an anti-dilutive effect on diluted earnings per share are excluded from the
calculation.
 
 Comprehensive
income
 
 SFAS 130,
“Reporting Comprehensive
Income,” establishes standards for reporting and display of comprehensive
income and its components in financial statements. It requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same providence as other financial statements. The accompanying consolidated
financial statements include the provision of SFAS 130, and therefore,
comprehensive income consists of net income, unrealized gains and losses from
marketable securities, and foreign currency translation
adjustments.
 
 See
report of independent registered public accounting firm
  F-19
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 Recently issued accounting
pronouncements
 
 In
December 2007, the FASB issued SFAS 141R, “Business Combinations,” which
replaced SFAS 141. SFAS 141R retains the purchase method of accounting for
acquisitions, but requires a number of changes, including changes in the way
assets and liabilities are recognized in the purchase accounting as well as
requiring the expensing of acquisition-related costs as incurred. Furthermore,
SFAS 141R provides guidance for recognizing and measuring the goodwill acquired
in the business combination and determines what information to disclose to
enable users of the financial statements to evaluate the nature and financial
effects of the business combination. SFAS 141R is effective for fiscal years
beginning on or after December 15, 2008. Earlier adoption is prohibited. The
adoption of this statement is not expected to have any material impact on
the Company’s consolidated results of operations or consolidated financial
position.
 
 In
December 2007, the FASB issued SFAS 160, “Noncontrolling Interests inConsolidated Financial Statements—An Amendment of ARB No. 51.”
SFAS 160 amends ARB 51 to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It is intended to eliminate the diversity in practice regarding the
accounting for transactions between equity and noncontrolling interests by
requiring that they be treated as equity transactions. Further, it requires
consolidated net income to be reported at amounts that include the amounts
attributable to both the parent and the noncontrolling interest. SFAS 160 also
establishes a single method of accounting for changes in a parent’s ownership
interest in a subsidiary that do not result in deconsolidation, requires that a
parent recognize a gain or loss in net income when a subsidiary is
deconsolidated, requires expanded disclosures in the consolidated financial
statements that clearly identify and distinguish between the interests of the
parent’s owners and the interests of the noncontrolling owners of a subsidiary,
among others. SFAS 160 is effective for fiscal years beginning on or after
December 15, 2008, with early adoption permitted, and it is to be applied
prospectively. SFAS 160 is to be applied prospectively as of the beginning of
the fiscal year in which it is initially applied, except for the presentation
and disclosure requirements, which must be applied retrospectively for all
periods presented. The SFAS 160 is not expected to have any material impact on
the Company’s consolidated financial position or consolidated results of
operations.
 
 In
February 2008, the FASB issued FSP FAS 157-1, “Application of FASB Statement No.
157 to FASB
Statement No. 13 and Other Accounting Pronouncements That Address Fair Value
Measurements for
Purposes of Lease Classification or Measurement under Statement 13.” FSP
FAS 157-1 indicates that it does not apply under SFAS 13, “Accounting for Leases,” and
other accounting pronouncements that address fair value measurements for
purposes of lease classification or measurement under SFAS 13. This scope
exception does not apply to assets acquired and liabilities assumed in a
business combination that are required to be measured at fair value under SFAS
141 or SFAS 141R, regardless of whether those assets and liabilities are related
to leases.
 
 See
report of independent registered public accounting firm
  F-20
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 Also in
February 2008, the FASB issued FSP FAS 157-2, “Effective Date of FASB
Statement No.
157.” With the issuance of FSP FAS 157-2, the FASB agreed to: (a) defer
the effective date in SFAS 157 for one year for certain nonfinancial assets and
nonfinancial liabilities, except those that are recognized or disclosed at fair
value in the financial statements on a recurring basis (at least annually), and
(b) remove certain leasing transactions from the scope of SFAS 157. The deferral
is intended to provide the FASB time to consider the effect of certain
implementation issues that have arisen from the application of SFAS 157 to these
assets and liabilities.
 
 In March
2008, the FASB issued SFAS 161, “Disclosures about Derivative Instruments and Hedging
Activities–An Amendment of SFAS No.
133.” SFAS 161 is intended to improve financial reporting of derivative
instruments and hedging activities by requiring enhanced disclosures to enable
financial statement users to better understand the effects of derivatives and
hedging on an entity's financial position, financial performance and cash flows.
To achieve this increased transparency, 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. SFAS 161 is effective on January
1, 2009. The Company has adopted SFAS 161.
 
 In June
2008, the FASB issued EITF 07-5, “Determining whether an Instrument
(or Embedded Feature) is indexed to an Entity’s Own Stock.” EITF 07-5 is
effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. Early
application is not permitted. Paragraph 11(a) of SFAS 133 specifies that a
contract that would otherwise meet the definition of a derivative but is both
(a) indexed to the Company’s own stock and (b) classified in stockholders’
equity in the statement of financial position would not be considered a
derivative financial instrument. EITF 07-5 provides a new two-step model to be
applied in determining whether a financial instrument or an embedded feature is
indexed to an issuer’s own stock and thus able to qualify for the SFAS 133
paragraph 11(a) scope exception. This standard triggers liability accounting on
all options and warrants exercisable at strike prices denominated in any
currency other than the functional currency in China (Renminbi). The Company
will adopt EITF 07-5 effective July 1, 2009.
 
 In June
2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating
Securities,” to address the question of whether instruments granted in
share-based payment transactions are participating securities prior to vesting.
FSP EITF 03-6-1 indicates that unvested share-based payment awards that contain
rights to dividend payments should be included in earnings per share
calculations. The guidance will be effective for fiscal years beginning after
December 15, 2008. The Company is currently evaluating the requirements of FSP
EITF 03-6-1 and the impact that its adoption will have on the consolidated
results of operations or consolidated financial position.
 
 See
report of independent registered public accounting firm
  F-21
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 In
October 2008, the FASB issued FSP FAS 157-3, “Determining the Fair Value of a
Financial Asset in a Market That Is Not Active,” which clarifies the
application of SFAS 157 when the market for a financial asset is inactive.
Specifically, FSP FAS 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. The Company is currently evaluating the impact of adoption
of FSP FAS 157-3 on the Company’s consolidated financial
statements.
 
 In April
2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly.” FSP FAS
157-4 amends SFAS 157 and provides additional guidance for estimating
fair value in accordance with SFAS 157 when the volume and level of
activity for the asset or liability have significantly decreased and also
includes guidance on identifying circumstances that indicate a transaction is
not orderly for fair value measurements. FSP FAS 157-4 shall be applied
prospectively with retrospective application not permitted. FSP FAS 157-4 shall
be effective for interim and annual periods ending after June 15, 2009, with
early adoption permitted for periods ending after March 15, 2009. An entity
early adopting FSP FAS 157-4 must also early adopt FSP FAS 115-2 and 124-2,
“Recognition and Presentation
of Other-Than-Temporary Impairments”. Additionally, if an entity elects
to early adopt either FSP FAS 107-1 and 28-1, “Interim Disclosures about Fair Value
of Financial Instruments” or FSP FAS 115-2 and 124-2, it must also elect
to early adopt this FSP. The Company has determined that this new FSP did not
have a material impact on the consolidated financial statements.
 
 In April
2009, the FASB issued FSP FAS 115-2 and 124-2. FSP FAS 115-2 amends SFAS 115,
“Accounting for Certain
Investments in Debt and Equity Securities,” SFAS 124, “Accounting for Certain Investments
Held by Not-for-Profit
Organizations,” and EITF 99-20, “Recognition of Interest Income and
Impairment on Purchased Beneficial Interests and Beneficial Interests That
Continue to Be Held by a Transferor in Securitized Financial Assets,” to
make the other-than-temporary impairments guidance more operational and to
improve the presentation of other-than-temporary impairments in the financial
statements. This FSP will replace the existing requirement that the entity’s
management assert it has both the intent and ability to hold an impaired
debt security until recovery with a requirement that management assert it does
not have the intent to sell the security, and it is more likely than not it will
not have to sell the security before recovery of its cost basis. This FSP
provides increased disclosure about the credit and noncredit components of
impaired debt securities that are not expected to be sold and also requires
increased and more frequent disclosures regarding expected cash flows, credit
losses, and an aging of securities with unrealized losses. Although this
FSP does not result in a change in the carrying amount of debt securities, it
does require that the portion of an other-than-temporary impairment not related
to a credit loss for a held-to-maturity security be recognized in a new category
of other comprehensive income and be amortized over the remaining life of the
debt security as an increase in the carrying value of the security. This FSP
shall be effective for interim and annual periods ending after June 15, 2009,
with early adoption permitted for periods ending after March 15, 2009. An entity
may early adopt this FSP only if it also elects to early adopt FSP FAS 157-4.
Also, if an entity elects to early adopt either FSP FAS 157-4 or FSP FAS 107-1
and 28-1, the entity also is required to early adopt this FSP. The Company does
not expect this new FSP to have a material impact on the consolidated financial
statements.
 
 See
report of independent registered public accounting firm
  F-22
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 In April
2009, the FASB issued FSP FAS 107-1 and 28-1. This FSP amends SFAS 107, to
require disclosures about fair value of financial instruments not measured on
the balance sheet at fair value in interim financial statements as well as in
annual financial statements. Prior to this FSP, fair values for these assets and
liabilities were only disclosed annually. This FSP applies to all financial
instruments within the scope of SFAS 107 and requires all entities to disclose
the method(s) and significant assumptions used to estimate the fair value of
financial instruments. This FSP shall be effective for interim periods ending
after June 15, 2009, with early adoption permitted for periods ending after
March 15, 2009. An entity may early adopt this FSP only if it also elects to
early adopt FSP FAS 157-4 and 115-2 and 124-2. This FSP does not require
disclosures for earlier periods presented for comparative purposes at initial
adoption. In periods after initial adoption, this FSP requires comparative
disclosures only for periods ending after initial adoption. The Company is
currently evaluating the disclosure requirements of this new FSP.
 
 In May
2009, the FASB issued SFAS. 165, “Subsequent Events,” which is
effective for interim or annual financial periods ending after June 15, 2009.
SFAS. 165 establishes general standards of accounting and disclosure of events
that occur after the balance sheet but before financial statements are issued or
are available to be issued.  Management is required to evaluate
subsequent events through the date that financial statements are issued and
disclose the date through which subsequent events have been evaluated, as well
as the date the financial statements were issued. SFAS. 165 was adopted for the
year ended June 30, 2009.
  In June
2009, the FASB issued SFAS 168, “The FASB Accounting Standards
CodificationTM and the Hierarchy of Generally
Accepted Accounting Principles a Replacement of FASB Statement
No. 162”. This Standard establishes the FASB Accounting Standards
CodificationTM
(the “Codification”) as the source of authoritative accounting principles
recognized by the FASB to be applied by nongovernmental entities in the
preparation of financial statements in conformity with U.S. GAAP. The
Codification does not change current U.S. GAAP, but is intended to simplify user
access to all authoritative U.S. GAAP by providing all the authoritative
literature related to a particular topic in one place. The Codification is
effective for interim and annual periods ending after September 15, 2009, and as
of the effective date, all existing accounting standard documents will be
superseded. The Codification is effective in the third calendar quarter of
2009, and accordingly, the Quarterly Report on Form 10-Q for the quarter ending
September 30, 2009 and all subsequent public filings will reference the
Codification as the sole source of authoritative literature.
 
 See
report of independent registered public accounting firm
  F-23
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 Reclassifications
 
 Certain
prior period amounts have been reclassified to conform to the current period
presentation.  These reclassifications have no effect on net income or
cash flows.
 
 Note
3 – Supplemental disclosure of cash flow information
 
 During
the years ended June 30, 2009 and 2008, the Company paid interest in the amount
of $802,804 and $151,669, respectively.
 
 Cash
payments for income taxes for the years ended June 30, 2009 and 2008 were
$152,350 and $0, respectively.
 
 For the
years ended June 30, 2009 and 2008, the Company transferred a total of $16.2
million and $0 of accounts receivable, respectively, as payments for the
acquisition of fixed assets, as prepayment for rental expense, and as a
factoring agreement on a non-recourse basis. For factoring agreement, the
Company transferred its receivables to a third party unrelated trust company for
cash.  The factor performs all credit and collection functions, and
assumes all risks associated with the collection of the receivables. The Company
pays a fee of 8.8% of the face value of each receivable for this service. This
fee is included in non-operating expense on the Company's consolidated
statements of income. The Company believes that the accounts receivable
transferred represents the current fair market value of the future benefits it
received for these transactions, detail are as follows:
 
 For
      the years ended June 30,2009
                          
                          
                          2008As
      a prepayment for rental expense
                          
                          $
                          6,395,259
                          
                          
                          $
                          -For
      purchase of fixed assets
                          
                          
                          5,703,245
                          
                          
                          
                          -Factored
      to a trust company and transferred to other receivable
                          
                          
                          4,106,774
                          
                          
                          
                          -Total
      non cash accounts receivable offset
                          
                          $
                          16,205,278
                          
                          
                          $
                          -
 
 As of
June 30, 2009, the accretion of the discount on redeemable convertible preferred
stock amounted to approximately $601,000, and has been included in the
consolidated statements of shareholders’ equity.  No such amount was
recorded as of June 30, 2008.
 
 See
report of independent registered public accounting firm
  F-24
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 Note
4 – Marketable securities
 
 Marketable
securities are the mutual fund that Xinao purchased from CYJA Allianz Fund, all
securities are available for sale and therefore are carried at fair value with
unrealized gains and losses reported as accumulated other comprehensive income
in shareholders’ equity. Realized gains and losses on marketable securities are
included in other income or expense in the period they incurred, and when
applicable, are reported as a reclassification adjustment in other comprehensive
income. Gains and losses on the sale of marketable securities are determined
using the specific-identification method.
 
 Note
5 – Accounts receivable
 
 Accounts
receivable are generated from concrete products sold, vehicle rental services
provided to other unrelated concrete companies, and technological consulting
services provided to the Company’s customers and other concrete companies with
which the Company conducts business. The payment terms are defined in the
respective contracts. Over 80% of the Company’s receivables are due within a
year by contract and are classified as current assets on the consolidated
balance sheets. For certain large construction projects that can take several
years to complete, the Company provides extended payment terms to the general
contractors. These contractors are usually large state-owned builders with good
credit ratings. At the end of each period, the Company evaluates the structure
and collectability of accounts receivable and for these receivables that are
past due or not being paid according to payment terms, the Company takes
appropriate actions including seeking legal resolution in a court of law, for
its collection efforts.
 
 The
Company has significantly reduced its receivables balance by transferring a
large portion of its long-term accounts receivable rights to third parties
during the fourth quarter of 2009 without recourse. However, the Company will
assist in providing necessary documents to transferees and introduce all parties
involving the contracts in order to facilitate the collection processes between
original customers and transferees (see Note 3 – supplemental disclosures of
cash flow information for more details).
 
 As of
June 30, 2009
and 2008, accounts receivable and allowance for doubtful accounts consisted of
the following:
 
 2009
                    
                    
                    2008Accounts
      receivable, current
                    
                    $
                    11,936,388
                    
                    
                    $
                    9,590,410Less:  allowance
      for doubtful accounts, current
                    
                    
                    (120,986
                    )
                    
                    
                    (224,924
                    )Net
      accounts receivable, current
                    
                    
                    11,815,402
                    
                    
                    
                    9,365,486Accounts
      receivable, non-current
                    
                    
                    4,461,269
                    
                    
                    
                    5,164,067Less:  allowance
      for doubtful accounts, non-current
                    
                    
                    (328,563
                    )
                    
                    
                    (411,061
                    )Net
      accounts receivable, non-current
                    
                    
                    4,132,706
                    
                    
                    
                    4,753,006Total
      accounts receivable, net
                    
                    $
                    15,948,108
                    
                    
                    $
                    14,118,492
 
 See
report of independent registered public accounting firm
  F-25
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 Note
6 – Other receivables
 
 Other
receivables consisted of accounts receivables that were factored to a trust
company, employee advances, station advances, and bidding deposits. For the
years ended June 30, 2009, the Company had a factoring agreement with a third
party unrelated trust company wherein it transferred its receivables for cash
during the fourth quarter of 2009. (See Note 3 – supplemental disclosures of
cash flow information for more details)  As of June 30, 2009, the
Company had not collected $3.6 million from the trust company and recorded the
uncollected balances as other receivable. The Company received its remaining
balances in July 2009.
 
 Note
7 – Plant and equipment
 
 Plant and
equipment consist of the following as of June 30, 2009 and 2008:
 
 2009
                      
                      
                      2008Transportation
      equipment
                      
                      $
                      20,375,873
                      
                      
                      $
                      20,286,866Plant
      machinery
                      
                      
                      6,246,380
                      
                      
                      
                      1,894,585Office
      equipment
                      
                      
                      95,556
                      
                      
                      
                      43,057Construction-in-progress
                      
                      
                      3,369,500
                      
                      
                      
                      295,033Total
                      
                      
                      30,087,309
                      
                      
                      
                      22,519,541Less:
      accumulated depreciation
                      
                      
                      (7,997,592
                      )
                      
                      
                      (5,789,321
                      )Plant
      and equipment, net
                      
                      $
                      22,089,717
                      
                      
                      $
                      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. Most construction-in-progress is
related to assembling of portable machinery we purchased with cash and in
general the assembling process can be done in less than three weeks. Therefore,
no interest expense was capitalized as the capitalized interest was not
significant.
 
 Depreciation
expense for the years ended June 30, 2009 and 2008 amounted to $2,184,462 and
$1,178,745, respectively. For the years ended June 30, 2009 and 2008, no
material interest amounts were capitalized.
 
 See
report of independent registered public accounting firm
  F-26
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 Note
8 – Prepayments
 
 Prepayments
comprised of short-term and long-term factory rental prepayments the Company
made during the fourth quarter of 2009 and also prepayments for inventory
purchases. Prepayments as of June 30, 2009 and 2008 consisted of the
following:
 
 2009
                    
                    
                    2008Prepayments
      for inventories
                    
                    $
                    2,431,401
                    
                    
                    $
                    3,240,394Short
      term prepayments-rent
                    
                    
                    1,823,925
                    
                    
                    
                    -Total
      prepayments
                    
                    $
                    4,255,326
                    
                    
                    $
                    3,240,394
 
 Long term
prepayments represented the non-current portion of the factory rental
prepayments the Company made during the fourth quarter of 2009. As of June 30,
2009 and 2008, long term prepayments amounted to $4,794,746 and $0,
respectively. Rent payments for the next five years ended June 30 amounted to
$6,618,671 and consists of the following:
 
 Years ending June 30,
                    
                    Amount2010
                    
                    $
                    1,823,9252011
                    
                    
                    1,421,0502012
                    
                    
                    1,421,0502013
                    
                    
                    1,249,4462014
                    
                    
                    703,200Thereafter
                    
                    
                    -
 
 Note
9 – 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 June 30, 2009 and
2008, the outstanding balances on these loans were $4,512,200 and $4,271,222,
respectively, and these loans consisted of the following:
  See
report of independent registered public accounting firm
  F-27
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 2009
                  
                  
                  2008Loan
      from Huaxia Bank, effective interest rate of 7.56% per annum, due November
      16, 2008, guaranteed by the Company’s shareholder, Mr. Han Xianfu, fully
      paid as of December 31, 2008.
                  
                  $
                  -
                  
                  
                  $
                  2,918,000Loan
      from Beijing International Trust Co, Ltd. interest rate of 15% per annum,
      due July 15, 2009, guaranteed by Rayland Credit Guarantee Co. Ltd., paid
      off in July 2009
                  
                  
                  4,395,000
                  
                  
                  
                  -Loan
      from Beijing Hengxin Huaxing Auto Accessories Company, unrelated entity,
      non-interest bearing, fully paid as of December 31, 2008.
                  
                  
                  -
                  
                  
                  
                  379,340Loan
      from Beijing Hongda Huaxin Wujinjidian Company, unrelated company,
      non-interest bearing, fully paid as of December 31, 2008.
                  
                  
                  -
                  
                  
                  
                  204,260Loan
      from Beijing Sigi Qingbaosan Cement Company, unrelated company,
      non-interest bearing, fully paid as of December 31, 2008.
                  
                  
                  -
                  
                  
                  
                  116,720Loan
      from Xia Hua Qing, unrelated individual, non-interest bearing, fully paid
      as of December 31, 2008.
                  
                  
                  -
                  
                  
                  
                  128,392Loan
      from various employees, effective interest rate of 20% per annum, due upon
      demand, unsecured.
                  
                  
                  117,200
                  
                  
                  
                  524,510Total
      short term loans
                  
                  $
                  4,512,200
                  
                  
                  $
                  4,271,222
 
 Interest
expense on short-term loans for the years ended June 30, 2009 and
2008 amounted to $802,804 and $310,875,
respectively.
 
 Note
10 – Related party transactions
 
 Other payables –
shareholder
 
 Beginning
in July 2007, Mr. He
Weili, a 38.10% shareholder, leased an office space to the Company at
approximately the current fair market value from July 2007 to June 2009
with annual payment of $197,245.  For the years ended June 30, 2009 and
2008, the Company recorded rent expense from the shareholder in the amount of
approximately $173,246 and $162,827,
respectively. As of June 30, 2009 and
2008, approximately $56,046 and $129,402,
respectively, remained unpaid, and is included as other payables -
shareholder.
  See
report of independent registered public accounting firm
  F-28
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 The Company’s
shareholders Mr. Han Xianfu and Mr. He Weili, who have 57.15% and 38.10%
indirect ownership interests in BVI-ACM, respectively, together loaned $750,900
to BVI-ACM on March 12, 2008, for the entity’s cash flow purposes. The loan is
non-interest bearing, unsecured, and is payable in cash on demand.
 
 Total
other payables - shareholders as of June 30, 2009 and 2008 are as
follows:
 
 2009
                    
                    
                    2008Han
      Xianfu, shareholder
                    
                    $
                    450,550
                    
                    
                    $
                    450,550He
      Weili, shareholder
                    
                    
                    356,396
                    
                    
                    
                    429,752Total
      other payable – shareholder
                    
                    $
                    806,946
                    
                    
                    $
                    880,302
 Other
receivable
 
 Other
receivable includes monies advanced to an entity that was in part formerly owned
by Mr. He Weili.  Prior to the reverse acquisition (Note 1), the
Company and this related entity were engaged in joint contracts, business
licenses, and other partnership agreements. Pursuant to the reverse acquisition,
the Company and this related entity began separate operations and the process of
obtaining separate contracts, business licenses, and other partnership
agreements were initiated. To date, the Company and this related entity are
finalizing the aforementioned process of obtaining separate contracts, business
licenses, and agreements.
 
 Due to
the relationship of the two companies, certain monies were exchanged as part of
their joint contracts.  During the year ended June 30, 2009, the
Company advanced approximately $13,032,000 to this entity, and approximately
$13,298,000 was repaid.  As of June 30, 2009, the balance of other
receivable for related party transaction was $0.
 
 The other
receivable balance of $3.8 million consisted primarily accounts receivable that
were factored to an unrelated third party trust company but had not collected
the cash from the trust company as of June 30, 2009. The company did receive the
remaining balances in July 2009. (See footnote 6 – other
receivable)
 
 Note
11 – Income taxes
 
 Corporate income
taxes
 
 Companies
established before March 16, 2007, will continue to enjoy tax holiday treatment
approved by the local government for a grace period of either for the next five
years or until the tax holiday term is completed, whichever is sooner. These
companies will pay the standard tax rate when the grace period expires. The
Company had received its tax holiday treatment until December
2007.  During the fourth quarter of the year, the Company has applied
and received the Enterprise High-Tech Certificate. The certificate was awarded
based on the Company's involvement in producing high-tech products, its research
and development, as well as its technical services. As a result of this
certification, the Company's effective income tax rate has been reduced to 15%
from 25%. The new tax rate will be retroactive to January 1, 2009 and will be
effective for three years, through December 31, 2011.
  See
report of independent registered public accounting firm
  F-29
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 The
Company was granted income tax exemption from January 1, 2003 to December 31,
2007. Beginning on January 1, 2008, the Company and its subsidiaries were
subject to an EIT rate of 25%.  The Company was granted a 10% tax
deduction on 90% of the total sales revenue by the local authority due to the
Company’s utilization of recycled raw materials.  Beginning on January
1, 2009, the Company and its subsidiaries were subject to an EIT rate of
15%.  For
theyearsendedJune 30, 2009 and 2008, the
provision for income taxes amounted to $2,115,097 and $1,012,382,
respectively.  The Company
did not have provision for income taxes due to the income tax exemption for the
first six months ended on December 31, 2007.  The estimated tax
savings for the year ended June 30, 2008 amounted to $816,413. If the income tax had been
applied, the basic and diluted earnings per share would have decreased by $0.08
per share for the year ended June 30, 2008.
 
 The
following table reconciles the U.S. statutory rates to the Company’s effective
tax rate for the years ended June 30, 2009 and 2008:
 
 2009
                    
                    
                    2008U.S.
      statutory rates
                    
                    
                    34
                    %
                    
                    
                    34
                    %Foreign
      income not recognized in the U.S.
                    
                    
                    (34
                    )%
                    
                    
                    (34
                    )%China
      income taxes
                    
                    
                    25
                    %
                    
                    
                    25
                    %China
      income tax exemption
                    
                    
                    (3
                    )%
                    
                    
                    (9
                    )%Other(a)
                    
                    
                    (7
                    )%
                    
                    
                    -Effective
      income tax rates
                    
                    
                    15
                    %
                    
                    
                    16
                    %
 (a)     The
7% represents the expenses incurred by the Company that were not deductible
for  PRC income tax for the year ended June 30, 2009.
 
 Taxes
payable consisted of the following:
 
 June 30, 2009
                    
                    
                    June 30, 2008Income
      taxes payable
                    
                    $
                    3,039,905
                    
                    
                    $
                    1,072,747Other
      taxes
                    
                    
                    8,274
                    
                    
                    
                    490Total
      taxes payable
                    
                    $
                    3,048,179
                    
                    
                    $
                    1,073,237
 
 Note
12 – Shareholders’ equity
 
 On June
11, 2008, the Company completed an offering (the “Offering”) on the sale of
875,000 of investment units for a total of $7,000,000, each unit consisting of
one share of the Company’s Series A Convertible Preferred Stock, $0.001 par
value per share, and one (1) five year warrant to purchase two shares of Common
Stock (the “Warrants”). Each preferred share is convertible into four shares of
common stock.  Additionally, each holder is entitled to cumulative
dividends equal to 9% annually, payable in cash, irrespective of the
profitability of the Company.
  See
report of independent registered public accounting firm
  F-30
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 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. These
offering costs approximating $602,500 were charged to additional paid-in
capital. The allocation of the proceeds from the investment to a relative
fair value basis which resulted in the allocation of $5,798,000 to the Series A
Preferred and $1,202,000 to the warrants.
 
 The
following is a summary of our current Redeemable Convertible Preferred Stock
issued and outstanding net of discount:
 
 As of June 30,
                    2009
                  
                  
                  As of June 30,
                    2008Numbers
      of Redeemable Convertible Preferred shares outstanding in the beginning of
      the fiscal year
                  
                  
                  875,000
                  
                  
                  
                  875,000Redeemable
      Convertible Preferred shares converted to Common share during the fiscal
      year
                  
                  
                  (23,875
                  )
                  
                  
                  -Current
      Redeemable Convertible Preferred shares outstanding
                  
                  
                  851,125
                  
                  
                  
                  875,000Per
      share conversion price from Redeemable Convertible Preferred shares to
      Common share
                  
                  $
                  8
                  
                  
                  $
                  8Current
      Redeemable Convertible Preferred outstanding before
    discount
                  
                  $
                  6,809,000
                  
                  
                  $
                  7,000,000Discount
      on Redeemable Convertible Preferred shares outstanding
                  
                  $
                  (567,581
                  )
                  
                  $
                  (1,168,548
                  )Total
      Current Redeemable Convertible Preferred stocks net of
      discount
                  
                  $
                  6,241,419
                  
                  
                  $
                  5,831,452
 
 See
report of independent registered public accounting firm
  F-31
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 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
term of five years. The warrants are exercisable on a cashless basis, in whole
or in part, at an exercise price equal to $2.40 per share. The Company may call
the warrants for redemption at any time after the warrants become exercisable
(i) at a price of $.01 per warrant; (ii) upon not less than 30 days’ prior
written notice of redemption to each warrant holder; and (iii) if, and only if,
the last sale price of the common stock equals or exceeds $5.00 per share, for
any twenty (20) trading days within a thirty (30) consecutive trading day period
ending on the third business day prior to the notice of redemption to warrant
holders.
 
 The value
of the warrants issued to the placement agent was $169,345 calculated by using
the Cox-Ross-Rubinstein (“CRR”) Binomial Model. The fair value of these warrants
of $169,345 was recognized as offering expense and charged to additional paid-in
capital. The value of the warrants was determined using the CRR Binomial Model
using the following assumptions: volatility 75%; risk-free interest rate of
3.49% of the Investor Warrants, the Placement and Advisory Warrants; dividend
yield of 0%, and expected term of 5 years of the Investor Warrants and the
Placement and Advisory Warrants. The volatility of the Company’s common stock
was estimated by management based on the historical volatility of a similar U.S.
public company due to limited trading history of the Company’s common stock. The
risk-free interest rate was based on the Treasury Constant Maturity Rates
published by the U.S. Federal Reserve for periods applicable to the expected
life of the warrants. The expected dividend yield was based on the Company’s
current and expected dividend policy and the expected term is equal to the
contractual life of the warrants.
 
 Following
is a summary of the status of warrants outstanding:
 
 Outstanding Common Stocks Underlying WarrantsExercise Price
                        
                        Number
                        
                        Average
                          Remaining
                          Contractual Life$2.40
                        
                        
                        1,750,000
                        
                        3.92 years$2.40
                        
                        
                        245,000
                        
                        3.92 yearsTotal
                        
                        
                        1,995,000
 
 Following
is a summary of the warrant activity:
 
 Number of
                      WarrantsOutstanding
      as of June 30, 2007
                    
                    
                    -Granted
                    
                    
                    1,995,000Forfeited
                    
                    
                    -Exercised
                    
                    
                    -Outstanding
      as of June 30, 2008
                    
                    
                    1,995,000Granted
                    
                    
                    -Forfeited
                    
                    
                    -Exercised
                    
                    
                    -Outstanding
      as of June 30, 2009
                    
                    
                    1,995,000
 
 See
report of independent registered public accounting firm
  F-32
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 In
connection with the private placement, the Company agreed to file a registration
statement to register the warrants and common stock issuable upon conversion of
the preferred stock and exercise of the warrants, as defined. The registration
statement was declared effective in January 2009, the Company incurred $140,000
penalties for late registration and was paid based on the contract in connection
with the private placement.
 
 Additionally,
the Company's officers, directors and majority shareholders, Han Xianfu and He
Weili, entered into a Lock-Up Agreement with the investors whereby both Han
Xianfu and He Weili agreed they will not, offer, pledge, sell or otherwise
dispose of any shares of the Company’s common stock or any securities
convertible into or exercisable or exchangeable for common stock during the
period beginning on and including the date of the final closing of the Offering
through and including the earlier of (i) two (2) years after the final closing
of the Offering, (ii) the voluntary conversion of all outstanding shares of
preferred stock, (iii) the mandatory conversion of all outstanding shares of the
Company’s preferred stock, or (iv) the sale of the Company.
 
 Pursuant
to an escrow agreement signed between the Company, Maxim and the investors on
June 11, 2008, the Company placed a total of $930,000 in an escrow account with
the Company’s legal counsel, $630,000 of which will be used for the payment of
dividends on the preferred stock which the Company shall be obligated to
replenish each year prior to the year’s end, and $300,000 of which will be used
for the payment of investor relation fees. As of June 30, 2009, restricted cash
balance amounted to $453,192.
 
 Pursuant
to the Make Good Escrow agreement, signed between the Company, American Stock
Transfer Trust Company, the shareholders Han Xianfu and He Weili, and the
investors on June 11, 2008, the shareholders agreed to transfer a total of
3,500,000 shares of common stock into the name of the escrow agent if the
Company fails to meet certain performance thresholds: (1) $5,200,000 of net
income (calculated on a pre-tax basis solely with respect to 2008) for 2008; (2)
$9,000,000 of net income for 2009; (3) net income equal or greater than the
Company's net income for 2009, for 2010. The Company has determined that the
requirement for the period ended June 30, 2009 has been met.
 
 On May 1,
2008, the Company issued 25,000 common shares to a Company executive, par value
$0.001 for services the executive renders to the Company.  The shares
become fully vested after one year from the date of grant. On July 31 2008, the
executive’s employment with the Company terminated, and the 25,000 shares were
forfeited upon resignation.
 
 On
October 3, 2008, the Company entered into a one-year agreement with one of the
Company’s board of directors. In connection with his services, the Company
issued an aggregate of 50,000 options of the Company’s common stock at an
exercise price of $2.90 per share. The options vest in equal quarterly
installments over the first year of the agreement.
  See
report of independent registered public accounting firm
  F-33
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 On
December 1, 2008, the Company entered into a three-year agreement with
the Company’s Chief Financial Officer. In connection with his services, the
Company issued a total of 200,000 options of the Company’s common stock
from the option bonus pool. The option bonus pool consists of four equal
tranches of 50,000 options, with the first tranche of 50,000 options carrying an
exercise price of $3.00, the second tranche of 50,000 options carrying an
exercise price of $3.50, the third tranche of 50,000 options carrying an
exercise price of $4.00, and the fourth tranche of 50,000 options carrying an
exercise price of $4.50. A quarter (25%) of each tranche of options will vest at
the end of each twelve-month period of the agreement.
 
 The
Company valued the stock options by the Cox-Ross-Rubinstein (“CRR”) binomial
model with the following assumptions:
 
 Expected
                      
                      Expected
                      
                      Dividend
                      
                      Risk Free
                      
                      Grant DateTerm
                      
                      Volatility
                      
                      Yield
                      
                      Interest Rate
                      
                      Fair ValueChief
      Financial Officer
                      
                      
                      6.25
                      
                      75
                      %
                      0
                      %
                      1.16
                      %
                      $
                      3.00Director
                      
                      
                      5.31
                      
                      75
                      %
                      0
                      %
                      1.41
                      %
                      $
                      2.90
 
 The
following is a summary of the option activity:
 
 NumberofoptionsOutstanding
      as of June 30, 2007
                  
                  
                  -Granted
                  
                  
                  -Forfeited
                  
                  
                  -Exercised
                  
                  
                  -Outstanding
      as of June 30, 2008
                  
                  
                  -Granted
                  
                  
                  250,000Forfeited
                  
                  
                  -Exercised
                  
                  
                  -Outstanding
      as of June 30, 2009
                  
                  
                  250,000
 
 Following
is a summary of the status of options outstanding at June 30, 2009:
 
 Outstanding options
                                                        
                                                        Exercisable optionsAverage
                                                          Exercise price
                                                        
                                                        Number
                                                        
                                                        Average
                                                          remaining
                                                          contractual life
                                                          (years)
                                                        
                                                        Average
                                                          Exercise
                                                          price
                                                        
                                                        Number
                                                        
                                                        Weighted
                                                          average
                                                          exercise
                                                          price$
                                                        2.90
                                                        
                                                        50,000
                                                        
                                                        9.33
                                                        
                                                        $
                                                        2.90
                                                        
                                                        25,000
                                                        
                                                        $
                                                        -3.00
                                                        
                                                        50,000
                                                        
                                                        9.67
                                                        
                                                        
                                                        -
                                                        
                                                        -
                                                        
                                                        
                                                        -3.50
                                                        
                                                        50,000
                                                        
                                                        9.67
                                                        
                                                        
                                                        -
                                                        
                                                        -
                                                        
                                                        
                                                        -4.00
                                                        
                                                        50,000
                                                        
                                                        9.67
                                                        
                                                        
                                                        -
                                                        
                                                        -
                                                        
                                                        
                                                        -4.50
                                                        
                                                        50,000
                                                        
                                                        9.67
                                                        
                                                        
                                                        -
                                                        
                                                        -
                                                        
                                                        
                                                        -$
                                                        3.58
                                                        
                                                        250,000
                                                        
                                                        
                                                        
                                                        $
                                                        2.90
                                                        
                                                        25,000
                                                        
                                                        $
                                                        -
 
 See
report of independent registered public accounting firm
  F-34
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 As of
June 30, 2009, there was approximately $312,000 of total unrecognized
compensation expense related to un-vested share-based compensation arrangements.
That cost is expected to be recognized over a weighted-average period of three
years.
 
 For the
years ended June 30, 2009 and 2008, the Company recognized approximately
$107,000 and $5,542, respectively, as compensation expenses for its stock option
plan.
 
 Note
13 – 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. Based on the PRC
government’s regulations, all companies are required to record its capital in
accordance with the business license, and since Xin Ao did not have sufficient
undistributed profits as of June 30, 2005, 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.
 
 Further,
pursuant to BVI-ACM’s establishment of China-ACMH in November 2007, BVI-ACM was
required to pay 15% of $5,000,000 by February 22, 2008, and the remaining
balance by November 22, 2009, in accordance with the laws of the
PRC.
 
 On March
30, 2008, Xin Ao’s board of directors approved to transfer $7,260,000 from
undistributed retained earnings into registered capital of the Company.
Contemporaneously, China-ACMH made a payment of $5,000,000 and BVI-ACM made a
payment of $100 to the Company. As of June 30, 2009, a contribution receivable
in the amount of $1,210,000 remains unpaid.
 
 Contribution
receivable consisted of the following:
 
 Xin Ao
                                  
                                  
                                  CHINA-AC
                                    MH
                                  
                                  
                                  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,
      June 30, 2009
                                  
                                  $
                                  1,210,000
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  1,210,000
 
 See
report of independent registered public accounting firm
  F-35
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 Note
14 – Reserves and dividends
 
 The laws
and regulations of the PRC require that before a 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
the Company’s shareholders. The surplus reserve fund is non-distributable other
than during liquidation and can be used to fund previous years’ losses, if any,
and may be utilized for business expansion or converted into share capital by
issuing new shares to existing shareholders in proportion to their shareholding
or by increasing the par value of the shares currently held by them, provided
that the remaining reserve balance after such issue is not less than 25% of the
registered capital.
 
 The
Chinese government restricts distributions of registered capital and the
additional investment amounts required by foreign invested enterprises. Approval
by the Chinese government must be obtained before distributions of these amounts
can be returned to the shareholders.
 
 Note
15 – Earnings per share
 
 The
following is a reconciliation of the basic and diluted earnings per share
computation for the years ended June, 2009 and 2008:
 
 2009
                                  
                                  
                                  2008Basic earning per shareNet
      income available to common shareholders
                                  
                                  $
                                  10,839,016
                                  
                                  
                                  $
                                  5,130,797Weighted
      average shares outstanding-Basic
                                  
                                  
                                  10,526,719
                                  
                                  
                                  
                                  9,064,359Earnings
      per share-Basic
                                  
                                  $
                                  1.03
                                  
                                  
                                  $
                                  0.57Diluted
      earning per shareNet
      income available to common shareholders
                                  
                                  $
                                  10,839,016
                                  
                                  
                                  $
                                  5,130,797Add:
      Dividends on preferred stock
                                  
                                  
                                  628,505
                                  
                                  
                                  
                                  -Add:
      Accretion on preferred stock
                                  
                                  
                                  600,968
                                  
                                  
                                  
                                  33,387Net
      income for diluted EPS
                                  
                                  $
                                  12,068,489
                                  
                                  
                                  $
                                  5,164,184Weighted
      average shares outstanding-Basic
                                  
                                  
                                  10,526,719
                                  
                                  
                                  
                                  9,064,359Warrants
                                  
                                  
                                  14,671
                                  
                                  
                                  
                                  -Preferred
      stock
                                  
                                  
                                  3,491,089
                                  
                                  
                                  
                                  191,257Weighted
      shares outstanding-Diluted
                                  
                                  
                                  14,032,479
                                  
                                  
                                  
                                  9,255,616Earning
      per share-Diluted
                                  
                                  $
                                  0.86
                                  
                                  
                                  $
                                  0.56
 
 See
report of independent registered public accounting firm
  F-36
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 On June
11, 2008, the Company issued 875,000 shares of preferred stock, each of which
can be converted into four shares of common stock. The convertible preferred
stock is mandatorily redeemable for cash at the end of two years if not yet
converted. As of June 30, 2009, 23,875 of the preferred stock had been converted
into 95,500 of common stock. Dividends on the preferred stock and accretion of
the initial discount from the redemption value of the preferred stock, both of
which are charged to retained earnings, are subtracted from net income to
determine net income available to common shareholders for the purposes of
computing basic earnings per share. In calculating diluted earnings per share,
the convertible preferred stock is treated as common stock equivalents on an
as-converted basis, on which basis the weighted average common shares
outstanding for the years ended June 30, 2009 and 2008 were 3,491,089
and 191,257 shares, respectively. The dividends and accretion on the
preferred stock are added back to the net income available to common
shareholders for calculating diluted earnings per share, as if the preferred
stock were converted at the beginning of the period.  For the years
ended June 30, 2009 and 2008, total dividend and accretion were $1,229,472
and $33,387, respectively.  For the year ended June 30, 2009,
12,500 stock options at an exercise price of $2.90 per share were excluded in
the diluted EPS calculation because of their anti-dilutive effect. For year
ended June 30, 2009, 1,995,000 warrants at an exercise price of $2.40 per share
were included in the diluted EPS calculation based on approximately $2.418 per
average outstanding share for the year, which under the treasury stock method
resulted in 14,671 additional shares of common stock for the year ended June 30,
2009.
 
 Note
16 – Employee pension
 
 The
Company offers a discretionary pension fund, a defined contribution plan, to
qualified employees. The pension includes two parts: the first to be paid by the
Company is 20% of the employee’s actual salary in the prior year. The other
part, paid by the employee, is 8% of the actual salary. The Company’s
contributions of employment benefits, including pension were approximately
$81,000 and $45,000 for the years ended June 30, 2009 and 2008,
respectively.
  See
report of independent registered public accounting firm
  F-37
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 Note
17 – Operating leases
 
 The
Company entered into a lease agreement for a manufacturing plant with an
unrelated party from October 1, 2008 to September 30, 2013 with monthly payment
of $16,000.  Further, the Company agreed to lease office space from
the Company’s shareholder, Mr. He Weili, from July 2007 to June 2009 with annual
payment of $197,245, the rent is valued at fair value from the main property
management.
 
 The
Company entered into three different five-year operating lease agreements during
the fourth quarter of 2009.  The lease payments are for three
manufacturing plants with various unrelated parties for a total monthly payment
of $176,000. Certain lease payments have been pre-paid by transferring the
Company’s long-term accounts receivable to the leasors as the Company believes
that a lump-sum pre-payments from aging receivable in exchange for agreeing to
no increase in the future lease will benefit its future operation.
 
 Total
operating lease expense for the years ended June, 2009 and 2008 was $370,513 and
$309,840, respectively, and is included in selling, general, and administrative
expenses. Future minimum annual lease payments under non-cancelable operating
leases with a term of one year or more consist of the
following:
  Years ending June 30,
                      
                      Amount2010
                      
                      $
                      424,9302011
                      
                      
                      929,8942012
                      
                      
                      929,8942013
                      
                      
                      1,101,4982014
                      
                      
                      953,986Thereafter,
                      
                      
                      -
 
 Note
18 – Commitments and contingencies
 
 Litigation
 
 From time
to time, the Company is a party to various legal actions arising in the ordinary
course of business.  The Company’s management does not expect the legal
matters involving the Company would have a material impact on the Company’s
consolidated financial position or results of operations.
  See
report of independent registered public accounting firm
  F-38
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
  
  Beijing Xin’Ao Concrete Co.,
Ltd vs. Beijing Boda Guosheng Investment Co., Ltd. (Beijing District Court,
PRC)
 
 In August
2006, Xin Ao filed a lawsuit against Beijing Boda Guosheng Investment Co., Ltd
(“Boda”) seeking specific performance of Boda’s obligations under the sales
contract to pay approximately $275,380 (RMB 2,000,000) for the cement supplied
by Xin Ao between March 2005 and June 2005 and compensatory damages of
approximately $23,500 (RMB 171,000) to cover the interest incurred on the unpaid
balance. The Court ruled against Boda and ordered Boda to pay the amounts
requested by Xin Ao; however, Boda appealed the court’s rulings. In November
2007, the Appeals Court upheld the original verdict and again ordered Boda to
pay all the damages. Management does not believe that the ultimate outcome of
this case will have a material adverse effect on the Company’s consolidated
financial position or results of operations. As of June 30, 2009, the Company
has not received the payment from Boda, and management has estimated that the
collectability of the receivable is deemed low.  Therefore, the
consolidated financial statements do not reflect this amount.
 
 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
Yunwei Zhang (“Shangdi”) in Beijing District Court seeking payment of
approximately $112,000 (RMB 814,000) 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.
Xin Ao is responsible for approximately $39,000 (approximately RMB 273,000) for
the damages,. and as of
June 30, 2009, the Company has paid approximately $35,000
 
 Note
19 – Subsequent Events
 
 On July
14, 2009, The Company was issued the Enterprise High-Tech Certificate within
PRC. The certificate was awarded based on the Company's involvement in producing
high-tech products, its research and development, as well as its technical
services. As a result of this certification, the Company's effective income tax
rate has been reduced to 15% from 25%. The new tax rate will be retroactive to
January 1, 2009 and will be effective for three years, through December 31,
2011. The Company also has been approved for a 6% value added tax credit by the
State Administration of Taxation, extending its prior credit for an additional
two years. Due to the fact that China ACM uses recycled raw materials to
manufacture its products, the State Administration of Taxation had previously
granted the company a VAT exemption from August 2005 through August 2009. The
two year extension provides China ACM an exemption from the VAT through August
2011.
  See
report of independent registered public accounting firm
  F-39
  CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC. AND SUBSIDIARIES
 
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 JUNE 30,
2009
 
 On July
19, 2009, the Company paid off its loan from Beijing International Trust Co.,
Ltd in the amount of $4,395,000 and it was not renewed.
 
 On July
28, 2009, the Company entered into subscription agreements (the "Subscription
Agreements") with 357 Chinese investors (the "Investors") pursuant to which the
Company issued and sold to the Investors, and the Investors purchased from the
Company, an aggregate of 650,988 shares of the Company's common stock, par value
$0.001, (the "Common Stock") for an aggregate purchase price of $1,497,272, or
$2.30 per share of common stock.
  The
Company has performed an evaluation of subsequent events through September 22,
2009, which is the date the financial statements were issued.
  See
report of independent registered public accounting firm
  F-40




SIGNATURES





In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized, on September 28, 2009





CHINA
ADVANCED CONSTRUCTION MATERIALS GROUP, INC.





By:
                  /s/ Xianfu HanXianfu
      Han
                    Prinicipal
      Executive OfficerBy:
                  /s/ Chin HsiaoChin
      Hsiao
                    Principal
      Financial and
                    Accounting
      Officer





In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.




Signature
                      
                      Title
                      
                      Date/s/ Xianfu Han
                      
                      Chief
      Executive Officer and Chairman of
                      
                      September
      28, 2009Xianfu
      Han
                      
                      the
      Board/s/Weili
      He
                      
                      Vice
      Chairman and Chief Operating Officer
                      
                      September
      28, 2009Weili
      He/s/Chin Hsiao
                      
                      Principal
      Financial and Accounting Officer, Director
                      
                      September
      28, 2009Chin
      Hsiao/s/Jeremy Goodwin
                      
                      Director
                      
                      September
      28, 2009Jeremy
      Goodwin/s/Denis Slavich
                      
                      Director
                      
                      September
      28, 2009Denis
      Slavich/s/Sean Wang
                      
                      Director
                      
                      September
      28, 2009Sean
      Wang/s/Larry Goldman
                      
                      Director
                      
                      September
      28, 2009Larry
      Goldman