CBIH 10-Q Quarterly Report Aug. 31, 2010 | Alphaminr
Cannabis Bioscience International Holdings, Inc.
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CBIH 10-Q Quarter ended Aug. 31, 2010

Balance Sheet
Cash Flow
Income Statement
Debt
10-Q 1 v198856_10q.htm Unassociated Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended August 31, 2010
or

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

For the transition period from ___________ to ______________

Commission File Number: 333-146758
China Infrastructure Construction Corporation

(Exact name of registrant as specified in its charter)
Colorado
16-1718190
(State or other jurisdiction of incorporation)
(IRS Employer Identification Number)

Shidai Caifu Tiandi Suite 1906-1909
1 Hangfeng Road Fengtai District
Beijing, China 100070
(Address of principal executive offices)
86-10-5809-0217
(Registrant’s telephone number, including area code)

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 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. x Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was Required to submit and post such files). ¨ Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

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

As of October 13, 2010, there were outstanding 12,930,620 shares of the registrant’s common stock, no par value.


TABLE OF CONTENTS
Page
PART I Financial Information
3
Item 1. Financial Statements.
3
Consolidated Balance Sheets as of August 31, 2010 (Unaudited) and May 31, 2010
F-1
Consolidated Statements of Income And Comprehensive Income for the three months ended August 31, 2010 and 2009 (Unaudited)
F-2
Consolidated Statements of Cash Flows for the three months ended August 31, 2010 and August 31, 2009 (Unaudited)
F-3
Notes to Consolidated Financial Statements (Unaudited)
F-4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
4
Item 4T. Controls and Procedures
9
PART II Other Information
9
Item 6. Exhibits.
10
Signatures
11
Exhibits/Certifications
2

PART I-FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 2010
(UNAUDITED)

Index to Consolidated Financial Statements
Page
Consolidated Balance Sheets (Unaudited)
F-1
Consolidated Statements of Income and Comprehensive Income  (Unaudited)
F-2
Consolidated Statements of Cash Flows (Unaudited)
F-3
Notes to Consolidated Financial Statements (Unaudited)
F-4
3
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF AUGUST 31, 2010 AND MAY 31, 2010

August 31,
May 31,
2010
2010
(UNAUDITED)
Assets
Current assets
Cash and cash equivalents
$ 903,715 $ 1,102,879
Restricted cash
69,409 146,089
Trade accounts receivable, net
62,427,793 53,411,689
Other receivables
381,786 950,671
Inventories
509,737 575,452
Total current assets
64,292,440 56,186,780
Property, plant and equipment, net
7,714,656 7,995,701
Prepayments
1,440,425 1,289,007
Other receivables - long term
5,189,130 4,955,648
Related party receivables
1,358,980 1,286,945
Total other assets
7,988,535 7,531,600
Total assets
$ 79,995,631 $ 71,714,081
Liabilities and equity
Current liabilities
Trade accounts payable
$ 15,800,366 $ 13,376,119
Related party payable
46,892 47,125
Other payables
3,002,320 2,217,307
Current portion of capital lease obligations
1,832,746 1,949,183
Accrued expenses
712,651 491,885
Tax payable
406,203 -
Bank loan payable
1,177,600 1,317,600
Total current liabilities
22,978,778 19,399,219
Long-term liabilities
Long-term portion of capital lease obligations
2,056,951 2,185,820
Total long-term liabilities
2,056,951 2,185,820
Total liabilities
25,035,729 21,585,039
Stockholders' equity
Preferred stock, no par value; 10,000,000 shares authorized; no shares issued and outstanding
- -
Common stock: no par value; 100,000,000 shares authorized; 12,930,620 and 12,815,620 shares issued and outstanding as of August 31, 2010 and May 31, 2010
42,761,534 42,252,295
Deferred consulting fee
(158,125 ) -
Retained earnings
8,297,670 4,321,221
Accumulated other comprehensive income
1,735,243 1,509,314
Total China Infrastructure Construction Corporation stockholders' equity
52,636,322 48,082,830
Noncontrolling interests
2,323,580 2,046,212
Total liabilities and equity
$ 79,995,631 $ 71,714,081

The accompanying notes are an integral part of this statement.

F-1

CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED AUGUST 31, 2010 AND 2009
(UNAUDITED)

August 31,
2010
2009
Sales Revenue, Net
$ 21,187,530 $ 12,255,728
Cost of goods sold
15,054,017 9,849,045
Gross profit
6,133,513 2,406,683
General and administrative expenses
1,442,310 388,940
Net operating income
4,691,203 2,017,743
Other income (expense):
Interest income
544 -
Interest expense
(51,633 ) (472 )
Other income
10,184 -
Total other (expense)
(40,905 ) (472 )
Net income before income taxes
4,650,298 2,017,271
Income taxes
406,755 -
Net income
4,243,543 2,017,271
Less: Net income attributable to noncontrolling interests
267,094 110,468
Net income attributable to China Infrastructure Construction Corporation
$ 3,976,449 $ 1,906,803
Earnings per share - basic and dilutive
$ 0.31 $ 1.25
Basic and dilutive weighted average shares outstanding
12,929,370 1,529,550
Comprehensive income
Net income
4,243,543 2,017,271
Foreign currency translation adjustment
236,203 3,652
Comprehensive income
$ 4,479,746 $ 2,020,923
Comprehensive income attributable to non-controlling interests
$ 277,368 $ 101,046
Comprehensive income attributable to China Infrastructure Construction Corporation
$ 4,202,378 $ 1,919,877

The accompanying notes are an integral part of this statement.

F-2

CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED AUGUST 31, 2010 AND 2009
(UNAUDITED)

August 31,
2010
2009
Cash flows from operating activities:
Net income
$ 4,243,543 $ 2,017,271
Adjustments to reconcile net income to net cash used in operations:
Bad debt expenses
71,719 -
Depreciation
430,323 253,684
Shares issued for compensation
158,125 -
Stock option expenses
192,989 -
Changes in operating liabilities and assets:
Trade accounts receivable
(8,807,810 ) (4,831,747 )
Prepayments
(144,511 ) -
Inventories
68,953 128,889
Other receivables
368,177 (167,240 )
Trade accounts payable
2,354,312 1,403,755
Other payables
740,799 248,980
Accrued expenses and tax payable
657,045 68,399
Net cash provided by (used) in operating activities
333,664 (878,009 )
Cash flows from investing activities:
Property, plant, and equipment additions
(105,145 ) (99,242 )
Payments to related party receivable
(93,134 ) -
Proceeds from related party receivable
447 656,400
Net cash provided by (used in) investing activities
(197,832 ) 557,158
Cash flows from financing activities:
Restricted cash
76,680 -
Bank loan payable and capital lease obligations
(415,664 ) -
Proceeds from related party payable
- -
Payments to related party payable
(233 ) (564,419 )
Net cash used in financing activities
(339,217 ) (564,419 )
Effect of rate changes on cash
4,221 84
Decrease in cash and cash equivalents
(199,164 ) (885,186 )
Cash and cash equivalents, beginning of period
1,102,879 921,841
Cash and cash equivalents, end of period
$ 903,715 $ 36,655
Supplemental disclosures of cash flow information:
Interest paid in cash
$ 19,002 $ -
Income taxes paid in cash
$ - $ -
Non-cash investing activities:
Acquisition of property, plant and equipment through loan payable
$ - $ 2,472,279

The accompanying notes are an integral part of this statement.
F-3

CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2010
(UNAUDITED)

1.
Nature of operations

China Infrastructure Construction Corporation (“China Infrastructure”), formerly Fidelity Aviation Corporation, was organized on February 28, 2003 as Fidelity Aircraft Partners LLC, a Colorado limited liability company (“Fidelity LLC”). On December 16, 2004, Fidelity LLC converted itself into Fidelity Aviation Corporation by filing a Statement of Conversion and Articles of Incorporation with the Colorado Secretary of State. Fidelity was formed to purchase large commercial (transport category) jet airframes, salvage the usable aircraft parts and components from them and sell the parts and components. The Board of Directors evaluated the future market for aircraft parts business and resolved not to pursue this line of business anymore.

On October 8, 2008, China Infrastructure entered into and consummated the transactions contemplated under a Share Exchange Agreement with Northern Construction Holdings, Ltd., a Hong Kong limited company (“NCH”) and its shareholder pursuant to which China Infrastructure issued 1,200,000 (12,000,000 pre-reverse split) shares of China Infrastructure common stock (the “Share Exchange”) in exchange for all issued and outstanding common stock of NCH.

The Share Exchange resulted in (i) a change in control of China Infrastructure with the shareholder of NCH owning approximately 78% of the issued and outstanding shares of common stock of China Infrastructure, (ii) NCH becoming a wholly-owned subsidiary of China Infrastructure, and (iii) appointment of certain nominees of the shareholder of NCH as directors and officers of China Infrastructure and resignation of John Schoenauer as director, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer of China Infrastructure.

As a result of the Share Exchange Agreement, Beijing Fortune Capital Management Co., Ltd. (“BFCM”), a 95% owned subsidiary of NCH, became our indirect majority-owned subsidiary.  Also as a result of the Share Exchange Agreement, Beijing Chengzhi Qianmao Concrete Co., Ltd., (“Beijing Concrete”), the operating company, and a 99.5% owned subsidiary of BFCM, also became our indirect majority-owned subsidiary.
For accounting purposes, the share exchange transaction was treated as a capital transaction where the acquiring corporation issued stock for the net monetary assets of the shell corporation, accompanied by a recapitalization. The accounting is similar in form to a reverse acquisition, except that goodwill or other intangibles are not recorded.  All references to NCH common stock have been restated to reflect the equivalent numbers of China Infrastructure common shares.

On January 15, 2010, Beijing Concrete increased its registered capital from RMB 15 million (approximately $2.2 million) to RMB 30 million (approximately $4.4 million) and BFCM increased its investment in Beijing Concrete accordingly. Its share capital increased from RMB 10 million (approximately $1.47 million) to RMB 15 million (approximately $2.2 million). As a result, BFCM owns 99.67% of Beijing Concrete from January 15, 2010.

On February 1, 2010, Beijing Concrete formed a subsidiary, Shaanxi Hongruida Concrete Ltd. (“Hongruida”) and contributed RMB 10 million (approximately $1.47 million) to its capital. Beijing Concrete is the sole shareholder of Hongruida. Hongruida was organized to implement the 10-year strategic cooperative agreement with one of the Company’s major clients, China Railway Construction Group Co., Ltd (“CRCG”). Under the Agreement, the Company and CRCG will jointly manage the concrete mixing stations to be operated by Hongruida. CRCG will provide the cement for manufacturing the concrete mix in such concrete mixing stations, and will be able to purchase the concrete mix at discounted prices. Also, in accordance with the Agreement, each party will lease certain equipment to the concrete mixing stations.  The Company and CRCG will share 75% and 25% of the annual profits of such concrete mixing stations in Xi’an. Hongruida commenced its operations at the end of March 2010.

F-4

CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2010
(UNAUDITED)

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 NCH on a consolidated basis unless the context suggests otherwise.
The Company through its subsidiaries in Hong Kong and the People’s Republic of China (“PRC” or “China”), engages in production of ready-mixed concrete for developers and the construction industry in the PRC. In addition, we have technical service agreement with an independently owned concrete mixture station, pursuant to which we are paid by percentages of sales for technical support provided.

2.
Basis of Presentation

The accompanying financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). This basis differs from that used in the statutory accounts of the Company, which were prepared in accordance with the accounting principles and relevant financial regulations applicable to enterprises in the PRC.  All necessary adjustments have been made to present the financial statements in accordance with US GAAP. Operating results for the three-month period ended August 31, 2010 are not necessarily indicative of the results that may be expected for the fiscal year ending May 31, 2011.  For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report for the year ended May 31, 2010.
3.
Summary of Significant Accounting Policies

Economic and Political Risks

The Company faces a number of risks and challenges as a result of having primary operations and marketing in the PRC. Changing political climates in the PRC could have a significant effect on the Company’s business.

Control by Principal Stockholders

The directors, executive officers and their affiliates or related parties own, beneficially and in the aggregate, the majority of the voting power of the registered capital of the Company. Accordingly, the directors, executive officers and their affiliates, if they voted their shares uniformly, would have the ability to control the approval of most corporate actions, including increasing the authorized capital stock of the Company and the dissolution, merger or sale of the Company’s assets.

Principles of Consolidation

The consolidated financial statements include the financial statements of China Infrastructure and its wholly-owned and majority-owned subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation. The Company’s foreign subsidiaries have fiscal year ends of May 31 and the results are consolidated up to that date. Non controlling interests consist of other stockholders’ ownership interests in majority-owned subsidiaries of the Company.

Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents

For purposes of the statements of cash flows, cash and cash equivalents includes cash on hand and demand deposits held by banks. Deposits held in financial institutions in the PRC are not insured by any government entity or agency.

Restricted Cash

In accordance with the Escrow Agreement and the Subscription Agreement (note 12) signed by China Infrastructure Construction Corporation, Trillion Growth China General Partner and Anslow & Jaclin, LLP (the “Escrow Agent”) in October 2009, the Company was required to keep with the Escrow Agent $120,000 immediately on the Closing Date of the Subscription Agreement. This fund can only be disbursed when certain criteria are met. The escrow account also keeps $38,089 of attorney fees as a covenant for future services. As of August 31, 2010 and May 31, 2010, the amount not disbursed was $69,409 and $146,089, respectively, and these are included in restricted cash in the consolidated balance sheets. Deposits held in the escrow account are not insured by any government entity or agency.

F-5

CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2010
(UNAUDITED)

Trade Accounts Receivable
The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. Trade accounts receivable are recognized and carried at original invoice amount less an allowance for any uncollectible amounts. An allowance for doubtful accounts is established and determined based on management’s regular assessment of known requirements, aging of receivables, payment history, the customer’s current credit worthiness and the economic environment. These factors continuously change and can have an impact on collections and the Company’s estimation process. These impacts may be material. Management reviews and maintains an allowance for doubtful accounts that reflects management’s best estimate of potentially uncollectible trade receivables. Certain accounts receivable amounts are charged off against allowances after a designated period of collection efforts. Subsequent cash recoveries are recognized as income in the period when they occur. Allowance for doubtful debts amounted to $470,833 and $397,042 as of August 31, 2010 and May 31, 2010, respectively.
Inventories

Inventories are stated at the lower of cost, determined on a weighted average basis, and net realizable value. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose. Inventories consist of the following:

August 31, 2010
May 31, 2010
Raw materials
$
509,737
$
575,452

Property and Equipment

Property, plant and equipment are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the useful lives of the assets. Major renewals are capitalized and depreciated; maintenance and repairs that do not extend the life of the respective assets are charged to expense as incurred. Upon disposal of assets, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in income. Depreciation related to property and equipment is reported in cost of revenues. Property, plant and equipment are depreciated over their estimated useful lives as follows:

Office trailers
10 years
Machinery and equipment
3-8 years
Furniture and office equipment
5-8 years
Motor vehicles
3-5 years
Impairment of Long-Lived and Intangible Assets

Long-lived assets of the Company are reviewed annually to assess whether the carrying value has become impaired according to the guidelines established in FASB Codification (ASC) 360 . The Company considers assets to be impaired if the carrying value exceeds the future projected cash flows from related operations. The Company also re-evaluates the periods of depreciation to determine whether subsequent events and circumstances warrant revised estimates of useful lives. As of August 31, 2010, the Company expects these assets to be fully recoverable. No impairment of assets was recorded in the periods reported.

Accumulated Other Comprehensive Income

Accumulated other comprehensive income represents foreign currency translation adjustments.

F-6
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2010
(UNAUDITED)

Revenue Recognition

The Company receives revenue from sales of concrete products and from provision of concrete pumping services and consulting services. The Company's revenue recognition policies are in compliance with ASC 605 (previously Staff Accounting Bulletin 104). Sales revenue is recognized at the date of shipment to customers or services have been rendered when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Our sales are non-returnable. Therefore, we do not estimate deductions or allowance for sales returns. Sales are presented net of any discounts, reward, or incentive given to customers.  Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.

Our products delivered to customers are checked on site by customers and, once the products are accepted by customers, they will sign the acceptance notice. There is no warranty issue after the delivery.

Reward or incentive given to our customers is an adjustment of the selling prices of our products; therefore, the consideration is characterized as a reduction of revenue when recognized in our income statement.

The Company recognizes its revenues net of value-added taxes (“VAT”).  The Company is subject to VAT which is levied at the rate of 6% on the invoiced value of sales. However, the Company enjoys a free VAT policy according to the national policy, which encourages the development of the cement industry if the manufacturer satisfies the environmental protection requirements. The Company has enjoyed the free VAT policy from January 1, 2006 and has been reviewed every year by the local tax bureau.

Cost of Goods Sold

Cost of goods sold consists primarily of the costs of the raw materials, freight charges, direct labor, depreciation of plant and machinery, warehousing cost and overhead associated with the manufacturing process and commission expenses.
Shipping Income and Expense

ASC 605-45-20 “Shipping and Handling Costs” establishes standards for the classification of shipping and handling costs. All amounts billed to a customer related to shipping and handling are classified as revenue.

Advertising Costs

The Company expenses advertising costs as incurred.  Advertising expenses charged to operations were $0 for the three months ended August 31, 2010 and 2009, respectively. Advertising costs, if any, are included in selling, general and administrative expense on the income statement.

Foreign Currency and Comprehensive Income

The accompanying financial statements are presented in US dollars. The functional currency of the Company is U.S. Dollars and that of Beijing Concrete is the Renminbi (“RMB”) of the PRC. The financial statements are translated into US dollars from RMB at period-end exchange rates for assets and liabilities, and weighted average exchange rates for revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.
On July 21, 2005, the PRC changed its foreign currency exchange policy from a fixed RMB/USD exchange rate into a flexible rate under the control of the PRC’s government. We use the Closing Rate Method in currency translation of the financial statements of the Company.

RMB is not freely convertible into the currency of other nations. All such exchange transactions must take place through authorized institutions. There is no guarantee the RMB amounts could have been, or could be, converted into US dollars at rates used in translation.

F-7

CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2010
(UNAUDITED)

Income Taxes

The Company accounts for income taxes in accordance with ASC 740 (formerly SFAS 109, “Accounting for Income Taxes.”) Under the asset and liability method as required by ASC 740 (formerly SFAS 109), 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 the financial statement carrying amounts and the tax bases of existing assets and liabilities. Under ASC 740, 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.
ASC 740 (formerly FIN 48) clarifies the accounting and disclosure for uncertain tax positions and prescribes a recognition threshold and measurement attribute for recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
Under ASC 740, evaluation of a tax position is a two-step process. The first step is to determine whether it is more-likely-than-not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met.

The Company’s operations are subject to income and transaction taxes in the United States, Hong Kong, and the PRC jurisdictions. Significant estimates and judgments are required in determining the Company’s worldwide provision for income taxes. Some of these estimates are based on interpretations of existing tax laws or regulations, and as a result the ultimate amount of tax liability may be uncertain. However, the Company does not anticipate any events that would lead to changes to these uncertainties.

USA

The Company and its subsidiaries are subject to income taxes on an entity basis on income arising in, or derived from, the tax jurisdiction in which they operate. As the Group has no income generated in the United States, there was no tax expense or tax liability due to the Internal Revenue Service of the United States as of August 31, 2010 and May 31, 2010.

Hong Kong

As the Group has no income generated in Hong Kong, there was no tax expense or tax liability due to the tax rule of Hong Kong as of August 31, 2010 and May 31, 2010.

PRC

Under the Income Tax Laws of the PRC, the Company’s subsidiaries are generally subject to an income tax at an effective rate of 25% on income reported in the statutory financial statements after appropriate tax adjustments.

Beijing Concrete is subject to a special tax exemption approved by the PRC tax department. The exemption of income tax to the Company will last until December 31, 2010, and from year 2011, the Company will be subject to an income tax at a standard rate of 25%.

BFCM has an accumulated operating loss, thus there is no income tax expense for BFCM. The Company has not recorded deferred taxes, as valuation allowances were provided because all significant differences in tax basis and financial statement amounts are permanent differences.
F-8

CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2010
(UNAUDITED)

For the three months ended August 31,
2010
2009
Income tax expenses
Current tax
$ - $ -
Change in deferred tax assets
39,949 -
Change in valuation allowance
(39,949 ) -
Total
$ - $ -

Hongruida is subject to a 25% income tax rate. According to Chinese tax law, the income tax will be calculated at the year end. As of August 31, 2010, the Company has accrued tax payable of $406,203 for income tax expenses for Hongruida.

The current income tax expense and deferred tax expense for the three months ended August 31, 2010 and 2009 are as follows:
2010
2009
Current tax expense
$
406,755
$
-
Deferred tax expense
$
-
$
-

Restrictions on Transfer of Assets Out of the PRC

Dividend payments by the Company are limited by certain statutory regulations in the PRC. No dividends may be paid by the Company without first receiving prior approval from the Foreign Currency Exchange Management Bureau. However, no such restrictions exist with respect to loans and advances.

Financial Instruments
ASC 825 (formerly SFAS 107, “Disclosures about Fair Value of Financial Instruments”) defines financial instruments and requires disclosure of the fair value of those instruments. ASC 820 (formerly SFAS 157, “Fair Value Measurements”), adopted July 1, 2008, defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The carrying amounts reported in the balance sheets for current receivables and payables, including short-term loans, qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments, their expected realization and, if applicable, the stated rate of interest is equivalent to rates currently available. The three levels are defined as follows:
¨
Level 1: inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

¨
Level 2: inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

¨
Level 3: inputs to the valuation methodology are unobservable and significant to the fair value.
The Company did not identify any assets or liabilities that are required to be presented on the balance sheet at fair value in accordance with ASC 820 (formerly SFAS 157).

Stock-Based Compensation

The Company records stock-based compensation expense pursuant to ASC 718 (formerly SFAS 123R, “Share Based Payment.”) The Company uses the Black-Scholes option pricing model which requires 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 Black-Scholes option pricing 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 ASC 718 using an option pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction.

F-9
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2010
(UNAUDITED)

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. ASC 718 (formerly 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.

Basic and Diluted Earnings Per Share

The Company reports earnings per share in accordance with the provisions of ASC 260 (formerly SFAS No. 128, "Earnings Per Share.") ASC 260 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 stockholders 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 to issue common stock were exercised and converted into common stock. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.
The following is a reconciliation of the basic and diluted earnings per share for the three months ended August 31, 2010 and 2009:

2010
2009
Net income for earnings per share attributable to China Infrastructure Construction Corporation
$ 3,976,449 $ 1,906,803
Weighted average shares used in basic computation
12,929,370 1,529,550
Diluted effect of warrants and options
- -
Weighted average shares used in diluted computation
12,929,370 1,529,550
Earnings per share, basic
$ 0.31 $ 1.25
Earnings per share, diluted
$ 0.31 $ 1.25
Statement of Cash Flows
In accordance with FASB ASC 230, cash flows from the Company's operations is calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet.

Segment Reporting

ASC 280 “Segment reporting” (formerly SFAS 131) requires use of the management approach model for segment reporting. The management approach model is based on the way a company's management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.
Since management does not disaggregate Company data, the Company has determined that only one segment exists.

F-10

CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2010
(UNAUDITED)

Recent Accounting Pronouncements
In June 2009, the FASB issued ASC 810 (previously SFAS No. 167) for determining whether to consolidate a variable interest entity. These amended standards eliminate a mandatory quantitative approach to determine whether a variable interest gives the entity a controlling financial interest in a variable interest entity in favor of a qualitatively focused analysis, and require an ongoing reassessment of whether an entity is the primary beneficiary. We are currently evaluating the impact that adoption will have on our consolidated financial statements.

In August 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, which amends ASC Topic 820, Measuring Liabilities at Fair Value , which provides additional guidance on the measurement of liabilities at fair value. These amended standards clarify that in circumstances in which a quoted price in an active market for the identical liability is not available, we are required to use the quoted price of the identical liability when traded as an asset, quoted prices for similar liabilities, or quoted prices for similar liabilities when traded as assets. If these quoted prices are not available, we are required to use another valuation technique, such as an income approach or a market approach. We do not expect it to have a significant impact on our consolidated financial statements.
In October 2009, the FASB issued Accounting Standards Update, 2009-13, Revenue Recognition (Topic 605): Multiple Deliverable Revenue Arrangements - A Consensus of the FASB Emerging Issues Task Force.” This update provides application guidance on whether multiple deliverables exist, how the deliverables should be separated and how the consideration should be allocated to one or more units of accounting. This update establishes a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence, if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific or third-party evidence is available. The Company will be required to apply this guidance prospectively for revenue arrangements entered into or materially modified after January 1, 2011; however, earlier application is permitted. Management is in the process of evaluating the impact of adopting this ASC update on the Company’s financial statements.
In April 2010, the FASB issued Accounting Standard Update 2010-17, “Revenue Recognition—Milestone Method (Topic 605): Milestone Method of Revenue Recognition” or ASU 2010-17. This Update provides guidance on the recognition of revenue under the milestone method, which allows a vendor to adopt an accounting policy to recognize all of the arrangement consideration that is contingent on the achievement of a substantive milestone (milestone consideration) in the period the milestone is achieved. The pronouncement is effective on a prospective basis for milestones achieved in fiscal years and interim periods within those years, beginning on or after June 15, 2010. The Company does not expect the adoption of ASU 2010-17 to have a significant impact on its consolidated financial statements.

F-11

CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2010
(UNAUDITED)

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

4.
Property, Plant and Equipmen t

Plant and equipment consist of the following:

August 31, 2010
May 31, 2010
Office trailers
$
907,488
$
902,556
Machinery and equipment
8,386,685
8,292,669
Motor vehicles
1,467,562
1,452,308
Furniture and office equipment
532,065
509,611
Construction in progress
453,335
421,716
Total property, plant and equipment
11,747,135
11,578,860
Accumulated depreciation
(4,032,479
)
(3,583,159
)
Net property, plant and equipment
$
7,714,656
$
7,995,701

Depreciation expense included in general and administrative expenses for the three months ended August 31, 2010 and 2009 was $68,803 and $54,453, respectively. Depreciation expense included in cost of sales for the three months ended August 31, 2010 and 2009 was $361,520 and $199,231, respectively.

Construction in progress represents direct costs of construction and design fees incurred for the Company’s new project in Tangshan. All construction costs associated with this project are accumulated and capitalized as construction in progress. The construction in progress is closed out to the appropriate asset classification when the project is substantially complete, occupied, or placed into service. No depreciation is provided until it is completed and ready for its intended use.
Interest costs totaling $0 were capitalized into construction in progress for the three months ended August 31, 2010 and 2009.

5.
Prepayments

Prepayments consist of the prepaid expenses and the monies deposited with the suppliers for purchasing vehicles and raw material. The total outstanding amount was $1,440,425 and $1,289,007 as of August 31, 2010 and May 31, 2010, respectively. There is no provision made for the prepayment at August 31, 2010 and May 31, 2010.

6.
Other Receivables

Other receivables in current assets amounted to $381,786 and $950,671 as of August 31, 2010 and May 31, 2010, respectively.

Other receivables in long term assets amounted to $5,189,130 and $4,955,648 as of August 31, 2010 and May 31, 2010, respectively.

As of August 31, 2010, other receivables include $3.25 million related to construction in progress disposal to an unrelated party. On February 28, 2010, we sold construction in progress in Tangshan to an unrelated third party at a price of approximately $3.8 million. The amount will be due in 4 annual equal installments starting September 1, 2010. The receivable is unsecured, interest free, and with fixed repayment dates. Other receivables also include insurance claims and deposits that are from unrelated parties, interest free, unsecured, and with no fixed repayment date, and advances to employees for business purposes.

F-12

CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2010
(UNAUDITED)

As of May 31, 2010, other receivables include $3.8 million related to construction in progress disposal to an unrelated party. On February 28, 2010, we sold construction in progress in Tangshan to an unrelated third party at a price of approximately $3.8 million. The amount will be due in 4 annual equal installments starting September 1, 2010. The receivable is unsecured, interest free, and with fixed repayment dates. Other receivables also include insurance claims and deposits that are from unrelated parties, interest free, unsecured, and with no fixed repayment date, and advances to employees for business purposes.

The allowances on the other accounts receivable are recorded when circumstances indicate collection is doubtful for particular accounts receivable.  The Company provides for allowances on a specific account basis. There is no provision made for the other receivables at August 31, 2010 and May 31, 2010.
7.
Other Payables

Other payables in current liabilities consist of the following as of August 31, 2010 and May 31, 2010
August 31, 2010
May 31, 2010
Commission payable
$
888,836
$
1,488,213
Payable to CRCG (note 1)
496,360
265,838
Staff and other companies deposit
1,617,124
463,256
Total other payables
$
3,002,320
$
2,217,307

Commission expense has been included in cost of goods sold.

8.
Accrued Expenses

Accrued expenses amounted to $712,651 and $491,885 as of August 31, 2010 and May 31, 2010 , respectively . The accrued expenses mainly include accrued land lease expenses, accrued electricity and utility expenses, and accrued interest.

9.
Related Party Transactions

Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence.

Total outstanding amount of related party payable was $46,892 and $47,125 as of August 31, 2010 and May 31, 2010, respectively. These payables bear no interest and have no fixed payment terms. Currently, the related party payable consists of the following:

August 31, 2010
May 31, 2010
Rong Yang (Chairman)
$
46,892
$
47,125
Total
$
46,892
$
47,125
Total outstanding amount of related party receivables was $1,358,980 and $1,286,945 as of August 31, 2010 and May 31, 2010, respectively. These receivables require no interest and have no fixed re-payment terms. Currently, the receivables from related party consist of the following:

August 31, 2010
May 31, 2010
Yang Ming (Chairman Yang Rong’s brother)
$
161,000
(1)
$
147,817
Guiping Liao (CEO’s wife)
1,137,980
(1)
1,126,661
Xi Yang (CEO’s son)
60,000
(1)
12,467
$
1,358,980
$
1,286,945
(1)
The purpose of these related party receivables are for business purposes such as travel advances.
F-13
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2010
(UNAUDITED)

10.
Debt

Bank Loan Payable

On October 16, 2009, the Company borrowed $1,466,000 from Beijng Bank. The loan is unsecured, and with an annual interest rate of 5.31%. $1,317,600 of the total amount is guaranteed by an unrelated party. The due dates are as follows: $146,400 due on July 16, 2010, $292,800 due on August 16, 2010, $439,200 due on September 16, 2010, and $439,200 due on October 16, 2010. Interest expenses are due on the 16th of every third month. As of August 31, 2010 and May 31, 2010, the loan payable to bank amounted to $1,177,600 and $1,317,600, respectively. There is no interest expense capitalized into construction in progress for the three months ended August 31, 2010 and 2009. By October 5, 2010, total bank loan payable of $883,200 was paid back.

Interest

Total interest expense and financial charges for the three months ended August 31, 2010 and 2009 on all debt amounted to $51,633 and $472, respectively. Total interest income for the three months ended August 31, 2010 and 2009 amounted to $544 and $0, respectively.
Capital Leases

In July 2009, the Company entered into a capital leaseback arrangement with an unrelated third party for approximately $1,774,368 with an annual interest rate of 6.76%. The lease has been accounted for as a capital lease with the same third party to lease the equipment for three years, with total payments of approximately $1,965,343. The title of the equipment will be transferred back to the Company upon the last payment. A one time processing fee of $22,106 was paid by the Company related to this lease. The minimum payments for the remaining lease term of 22 months from September 2010 to June 2012 are as follows:

Total lease payment
$
1,372,281
Less imputed interest
95,605
Total capital lease obligation as of August 31, 2010
1,276,676
Less current maturity
744,403
Capital lease obligation – long-term portion as of August 31, 2010
$
532,273

The future lease commitments for the next three years after August 31, 2010 are as follows:

2011
$ 823,371
2012
548,910
2013
-
Total
$ 1,372,281

In November 2009, the Company entered into a capital leaseback arrangement with an unrelated third party for approximately $187,392 with an annual interest rate of 5.94%. The lease has been accounted for as a capital lease with the same third party to lease the equipment for three years, with total payments of approximately $205,050. The title of the equipment will be transferred back to the Company upon the last payment. A one time processing fee of $2,811 was paid by the Company related to this lease. The minimum payments for the remaining lease term of 31 months from September 2010 to March 2013 are as follows:

Total lease payment
$
177,538
Less imputed interest
13,332
Total capital lease obligation as of August 31, 2010
164,206
Less current maturity
45,113
Capital lease obligation – long-term portion as of August 31, 2010
$
119,093
F-14
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2010
(UNAUDITED)

The future lease commitments for the next three years after August 31, 2010 are as follows:

2011
$ 68,726
2012
80,179
2013
28,633
Total
$ 177,538

In December 2009, the Company entered into a capital leaseback arrangement with an unrelated third party for approximately $545,779 with an annual interest rate of 5.94%. The lease has been accounted for as a capital lease with the same third party to lease the equipment for three years, with total payments of approximately $597,200. The title of the equipment will be transferred back to the Company upon the last payment. A one time processing fee of $6,822 was paid by the Company related to this lease. The minimum payments for the remaining lease term of 32 months from September 2010 to April 2013 are as follows:

Total lease payment
$
600,463
Less imputed interest
51,701
Total capital lease obligation as of August 31, 2010
548,762
Less current maturity
187,010
Capital lease obligation – long-term portion as of August 31, 2010
$
361,752

The future lease commitments for the next three years after August 31, 2010 are as follows:

2011
$
266,872
2012
150,116
2013
183,475
Total
$
600,463
In December 2009, the Company entered into a capital leaseback arrangement with an unrelated third party for approximately $249,466 with an annual interest rate of 5.94%. The lease has been accounted for as a capital lease with the same third party to lease the equipment for three years, with total payments of approximately $272,920. The title of the equipment will be transferred back to the Company upon the last payment. A one time processing fee of $3,118 was paid by the Company related to this lease. The minimum payments for the remaining lease term of 31 months from September 2010 to March 2013 are as follows:

Total lease payment
$
251,590
Less imputed interest
20,002
Total capital lease obligation as of August 31, 2010
231,588
Less current maturity
73,043
Capital lease obligation – long-term portion as of August 31, 2010
$
158,545

The future lease commitments for the next three years after August 31, 2010 are as follows:

2011
$
106,735
2012
91,487
2013
53,368
Total
$
251,590
F-15
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2010
(UNAUDITED)

In January 2010, the Company entered into a capital leaseback arrangement with an unrelated third party for approximately $56,979 with an annual interest rate of 6.70%. The lease has been accounted for as a capital lease with the same third party to lease the equipment for one year, with total payments of approximately $59,067. The title of the equipment will be transferred back to the Company upon the last payment. A one time processing fee of $814 was paid by the Company related to this lease. The minimum payments for the remaining lease term of 5 months from September 2010 to January 2011 are as follows:

Total lease payment
$
29,695
Less imputed interest
572
Total capital lease obligation as of August 31, 2010
29,123
Less current maturity
29,123
Capital lease obligation – long-term portion as of August 31, 2010
$
0

The future lease commitments for the next three years after August 31, 2010 are as follows:

2011
$
29,695
2012
-
2013
-
Total
$
29,695

In February 2010, the Company entered into a capital leaseback arrangement with an unrelated third party for approximately $14,640 with an annual interest rate of 9.98%. The lease has been accounted for as a capital lease with the same third party to lease the equipment for three years, with total payments of approximately $17,034. The title of the equipment will be transferred back to the Company upon the last payment. The minimum payments for the remaining lease term of 30 months from September 2010 to February 2013 are as follows:

Total lease payment
$
14,720
Less imputed interest
1,792
Total capital lease obligation as of August 31, 2010
12,928
Less current maturity
3,813
Capital lease obligation – long-term portion as of August 31, 2010
$
9,115

The future lease commitments for the next three years after August 31, 2010 are as follows:

2011
$
6,173
2012
5,698
2013
2,849
Total
$
14,720

In March 2010, the Company entered into a capital leaseback arrangement with an unrelated third party for approximately $203,789 with an annual interest rate of 5.94%. The lease has been accounted for as a capital lease with the same third party to lease the equipment for three years, with total payments of approximately $222,991. The title of the equipment will be transferred back to the Company upon the last payment. A one time processing fee of $2,547 was paid by the Company related to this lease. The minimum payments for the remaining lease term of 31 months from September 2010 to March 2013 are as follows:

F-16

CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2010
(UNAUDITED)

Total lease payment
$
205,525
Less imputed interest
16,341
Total capital lease obligation as of August 31, 2010
189,184
Less current maturity
59,670
Capital lease obligation – long-term portion as of August 31, 2010
$
129,514

The future lease commitments for the next three years after August 31, 2010 are as follows:

2011
$
87,192
2012
74,736
2013
43,597
Total
$
205,525

In March 2010, the Company entered into a capital leaseback arrangement with an unrelated third party for approximately $28,489 with an annual interest rate of 6.70%. The lease has been accounted for as a capital lease with the same third party to lease the equipment for one year, with total payments of approximately $29,534. The title of the equipment will be transferred back to the Company upon the last payment. A one time processing fee of $407 was paid by the Company related to this lease. The minimum payments for the remaining lease term of 8 months from September 2010 to April 2011 are as follows:

Total lease payment
$
22,271
Less imputed interest
610
Total capital lease obligation as of August 31, 2010
21,661
Less current maturity
21,544
Capital lease obligation – long-term portion as of August 31, 2010
$
117

The future lease commitments for the next three years after August 31, 2010 are as follows:

2011
$
22,271
2012
-
2013
-
Total
$
22,271

In March 2010, the Company entered into a capital leaseback arrangement with an unrelated third party for approximately $339,642 with an annual interest rate of 11.13%. The lease has been accounted for as a capital lease with the same third party to lease the equipment for two years, with total payments of approximately $380,403. The title of the equipment will be transferred back to the Company upon the last payment. A one time processing fee of $293 will be paid by the Company related to this lease. The minimum payments for the remaining lease term of 20 months from September 2010 to April 2012 are as follows:

Total lease payment
$
350,611
Less imputed interest
34,770
Total capital lease obligation as of August 31, 2010
315,841
Less current maturity
136,902
Capital lease obligation – long-term portion as of August 31, 2010
$
178,939
F-17
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2010
(UNAUDITED)

The future lease commitments for the next three years after August 31, 2010 are as follows:

2011
$
207,179
2012
127,495
2013
15,937
Total
$
350,611

In March 2010, the Company entered into a capital leaseback arrangement with an unrelated third party for approximately $1,161,830 with an annual interest rate of 11.13%. The lease has been accounted for as a capital lease with the same third party to lease the equipment for two years, with total payments of approximately $1,301,262. The title of the equipment will be transferred back to the Company upon the last payment. A one time processing fee of $2,928 will be paid by the Company related to this lease. The minimum payments for the remaining lease term of 20 months from September 2010 to April 2012 are as follows:

Total lease payment
$
1,199,341
Less imputed interest
118,932
Total capital lease obligation as of August 31, 2010
1,080,409
Less current maturity
512,803
Capital lease obligation – long-term portion as of August 31, 2010
$
567,606

The future lease commitments for the next three years after August 31, 2010 are as follows:

2011
$
763,217
2012
436,124
2013
-
Total
$
1,199,341

In May 2010, the Company entered into a capital leaseback arrangement with an unrelated third party for approximately $28,505 with an annual interest rate of 6.70%. The lease has been accounted for as a capital lease with the same third party to lease the equipment for one year, with total payments of approximately $29,549. The title of the equipment will be transferred back to the Company upon the last payment. A one time processing fee of $407 was paid by the Company related to this lease. The minimum payments for the remaining lease term of 8 months from September 2010 to May 2011 are as follows:

Total lease payment
$
19,807
Less imputed interest
488
Total capital lease obligation as of August 31, 2010
19,319
Less current maturity
19,319
Capital lease obligation – long-term portion as of August 31, 2010
$
0
F-18
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2010
(UNAUDITED)
The future lease commitments for the next three years after August 31, 2010 are as follows:
2011
$
19,807
2012
-
2013
-
Total
$
19,807

The summary of all lease commitments is as follows:

Total lease payment
$
4,243,842
Less imputed interest
354,145
Total capital lease obligation as of August 31, 2010
3,889,697
Less current maturity
1,832,746
Capital lease obligation – long term portion as of August 31, 2010
$
2,056,951

The summary of future lease commitments for the next three years after August 31, 2010 is as follows:

2011
$
2,401,238
2012
1,514,745
2013
327,859
Total
$
4,243,842
11.
Non-controlling Interest

Non-controlling interest consists of other stockholders’ ownership interest in majority-owned subsidiaries of the Company, which is about 5.48% of the total ownership before the change of the non-controlling interest and 5.32% of the total ownership after the change of the non-controlling interest (Note 1). As of August 31, 2010 and May 31, 2010, the balance of non-controlling interest was $2,323,580 and $2,046,212, respectively.

12.
Shareholder’s Equity

Stock Issuance For Compensation
On June 1, 2010, the Company hired a consulting company. As compensation, the Company paid $45,000 and issued 115,000 shares of restricted common stock, and another 100,000 shares of restricted common stock will be issued upon certain terms. The shares are valued at market price of a total of $316,250 at $2.75 per share. The cash paid was first recorded as prepaid expenses. The shares issued are recorded as deferred consulting fee. Both the prepaid expenses and deferred consulting fee will amortize to expense over the agreement term of six-month period. As of August 31, 2010, prepaid expenses for this service has a balance of  $22,500 and deferred consulting fee has a balance of $158,125.

F-19
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2010
(UNAUDITED)
Options

On December 17, 2009, we granted to our newly appointed CFO options to purchase 300,000 shares of common stock, with an exercise price of $3.90 per share, which was the closest stock issuance price of the date of grant. The options will vest over 2 years and expire 3 years after the vesting date or after a termination date whichever is earlier.

F-20
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2010
(UNAUDITED)

On February 12, 2010, we granted to our CEO options to purchase 400,000 shares of common stock, with an exercise price of $3.90 per share. The options will vest over 2 years and no option can be exercised after 5 years from the vesting date.
On February 12, 2010, we granted three independent directors each, options to purchase 10,000 shares of common stock, with an exercise price of $3.90 per share. The options will vest over 1 year and no option can be exercised after 3 years from the vesting date.

On March 22, 2010, we granted one independent director options to purchase 10,000 shares of common stock, with an exercise price of $3.90 per share. The options will vest over 1 year and no option can be exercised after 3 years from the vesting date.

The assumptions used in calculating the fair value of options granted using the Black-Scholes option- pricing model are as follows:

Risk-free interest rate
0.86
%
Expected life of the options
1- 2 years
Expected volatility
45
%
Expected dividend yield
0

Following is a summary of the stock option activity for the three months ended August 31, 2010 :

Options
outstanding
Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value
Outstanding, May 31, 2010
740,000
$
3.90
$
0.00
Granted
-
-
-
Forfeited
-
-
-
Exercised
-
-
-
Outstanding August 31, 2010
740,000
$
3.90
$
0.00
Following is a summary of the status of options outstanding at August 31, 2010:

Outstanding Options
Exercisable Options
Exercise Price
Number
Average
Remaining
Contractual
Life
Average
Exercise
Price
Number
Average
Exercise Price
$
3.90
740,000
1.34
$
3.90
-
$
3.90

Warrants

On October 16, 2009, in connection with the Share Purchase Agreement in October 2009, the Company issued 153,846 warrants to Hunter Wise Financial Group, LLC, the Placement Agent. The warrants carry an exercise price of $3.90 and a 5-year term. The Warrants contain standard adjustment provisions upon stock dividend, stock split, stock combination, recapitalization, and a change of control transaction.

On March 22, 2010, in connection with the Share Purchase Agreement in March 2010, the Company issued 69,231 warrants to various parties as part of placement cost. The warrants carry an exercise price of $3.90 and a 5-year term. The Warrants contain standard adjustment provisions upon stock dividend, stock split, stock combination, recapitalization, and a change of control transaction.

On March 22, 2010, in connection with the Share Purchase Agreement in March 2010, the Company issued 1,281,083 warrants to October 2009 investors. The warrants carry an exercise price of $6.00 and a 3-year term. The Warrants contain standard adjustment provisions upon stock dividend, stock split, stock combination, recapitalization, and a change of control transaction.

F-21
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2010
(UNAUDITED)

Placement Agent Warrants meet the conditions for equity classification pursuant to FASB ASC 815 “Derivatives and Hedging” and EITF 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock.” Therefore, these warrants were classified as equity and accounted for as common stock issuance cost.

Warrants
Outstanding
Warrants
Exercisable
Weighted
Average
Exercise
Price
Average
Remaining
Contractual
Life
Outstanding, May 31, 2010
1,504,160
1,504,160
$
5.69
3.05
Granted
-
-
-
-
Forfeited
-
-
-
-
Exercised
-
-
-
-
Outstanding, August 31, 2010
1,504,160
1,504,160
$
5.69
2.80

13.
Employee Welfare Plan
The Company has established its own employee welfare plan in accordance with Chinese law and regulations. The Company makes contributions to an employee welfare plan.  The total expense for the above plan was $2,141 and $13,542 for the three months ended August 31, 2010 and 2009, respectively.

14.
Income Tax

The following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the three months ended August 31, 2010 and 2009:

2010
2009
U.S. Statutory rates
34.0
%
34.0
%
Foreign income not recognized in USA
(34.0
)
(34.0
)
China income taxes
25.0
0
China income tax exemption
16.2
0
Total provision for income taxes
8.8
%
0
%

USA

The Company and its subsidiaries are subject to income taxes on an entity basis on income arising in, or derived from, the tax jurisdiction in which they operate. As the Group has no income generated in the United States, there was no tax expense or tax liability due to the Internal Revenue Service of the United States as of August 31, 2010 and May 31, 2010.

Hong Kong

As the Group has no income generated in Hong Kong, there was no tax expense or tax liability due to the tax rule of Hong Kong as of August 31, 2010 and May 31, 2010.

People’s Republic of China (PRC)

Under the Income Tax Laws of the PRC, the Company’s subsidiaries are generally subject to an Enterprise Income Tax (EIT) at a standard rate of 25% on income reported in the statutory financial statements after appropriate tax adjustments.

Beijing Concrete is subject to a special tax exemption approved by the PRC tax department. The exemption of income tax to the Company will last until December 31, 2010, and from year 2011, the Company will be subject to an income tax at a standard rate of 25%.

F-22
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2010
(UNAUDITED)

BFCM has an accumulated operating loss, thus there is no income tax expense for BFCM. The Company has not recorded deferred taxes, as valuation allowances were provided because all significant differences in tax basis and financial statement amounts are permanent differences.

For the three months ended August 31,
2010
2009
Income tax expenses
Current tax
$ - $ -
Change in deferred tax assets
39,949 -
Change in valuation allowance
(39,949 ) -
Total
$ - $ -

Hongruida is subject to a 25% income tax rate. According to Chinese tax law, the income tax will be calculated at the year end. As of August 31, 2010, the Company has accrued tax payable of $406,203 for income tax expenses for Hongruida.

The estimated tax savings due to the tax exemption for the three months ended August 31, 2010 and 2009 amounted to approximately $1,229,473 and $506,516, respectively. The net effect on earnings per share if the income tax had been applied would decrease the basic and diluted earnings per share for the three months ended August 31, 2010 by $0.10 and $0.10, respectively. The net effect on earnings per share if the income tax had been applied would decrease the basic and diluted earnings per share for the three months ended August 31, 2009 by $0.33 and $0.33, respectively.

15.
Other Income (Expenses)

Other income was $10,184 for the three months ended August 31, 2010. It consists of income from selling recycled paper and vehicle accident compensation. Other expenses were $0 for the three months ended August 31, 2010.

Other income was $0 for the three months ended August 31, 2009. Other expenses were $0 for the three months ended August 31, 2009.

16.
Concentration of Credit Risks and Uncertainties

Concentration of credit risk exists when changes in economic, industry or geographic factors similarly affect groups of counter parties whose aggregate credit exposure is material in relation to the Company’s total credit exposure.

Three major customers,  China Railway Construction Group, China Construction Group, and Guangzhou Tianli Construction Group accounted for  20%, 12% and 10% of the Company’s total sales for the three months ended August 31, 2010, respectively. Three major customers,  China Railway Construction Group, Beijing Sanyuan Construction Group, and Guangzhou Tianli Construction Group accounted for  24%, 11% and 10% of the Company’s total sales for the three months ended August 31, 2009, respectively.

Three customers, China Railway Construction Group, Guangzhou Tianli Construction Group, and China Construction Group accounted for 26%, 12%, and 10% of the Company’s accounts receivable balance at August 31, 2010. Two customers, China Railway Construction Group, and Beijing Sanyuan Construction Group accounted for 29% and 11% of the Company’s accounts receivable balance at August 31, 2009.

Three major vendors, Beijing Liulihe Cement Company, Haidebao Cement Company, and Hekai Stone and Sand company, accounted for 15%, 14%, and 10% of the Company’s total inventory purchases for the three months ended August 31, 2010. One major vendor, Tianjin Zhenxin Cement Company, accounted for 13% of the Company’s total inventory purchases for the three months ended August 31, 2009.

F-23
CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2010
(UNAUDITED)

One major vendor, Beijing Liulihe Cement Company, accounted for 17% of the Company’s accounts payable at August 31, 2010. No vendor accounted for more than 10% of the Company’s accounts payable at August 31, 2009.

The Company’s exposure to foreign currency exchange rate risk primarily relates to cash and cash equivalents and short-term investments, denominated in the U.S. dollar. Any significant revaluation of RMB may materially and adversely affect the cash flows, revenues, earnings and financial position of the Company.

Contingencies

The Company has not, historically, carried any property or casualty insurance. No amounts have been accrued for any liability that could arise from the lack of insurance. Management feels the chances of such an obligation arising are remote.

Deposits in banks in the PRC are not insured by any government entity or agency, and are consequently exposed to risk of loss. Management believes the probability of a bank failure, causing loss to the Company, is remote.

Operating Lease Commitment

As of August 31, 2010, the Company was committed to minimum rentals for the leased land under long-term non-cancellable operating leases as follows:

Twelve Months Ended August 31,
2011
$
256,926
2012
262,365
2013
179,155
2014
107,456
2015
107,456
Thereafter
714,656
Total:
$
1,628,014

We currently have a ten-year lease with an annual payment of approximately $48,000, from March 1, 2008 to February 28, 2018, for our Beijing production base. We have built our offices and manufacturing facilities on this site. We also lease land for our Xi’an production facility. The annual payment is approximately $59,000. We also leased two offices in Beijing as our headquarter office. One office lease is from July 11, 2010 to July 10, 2012, with an annual payment of approximately $48,000. One office lease is from December 15, 2009 to December 14, 2011, with an annual payment of approximately $106,000.

Operating lease expenses amounted to $62,701 and $12,161 for the three months ended August 31, 2010 and 2009, respectively.
17.
Subsequent events

There are no material subsequent events. The Company has evaluated subsequent events from the balance sheet date through the date the report is issued.
The Company is obligated to issue additional 100,000 restricted shares as consulting expenses to an unrelated third party under certain terms. Currently the terms are not met and the Company estimates that the possibility of the Company meet the terms is remote. Once the shares are issued, the Company will book consulting expenses of $308,000.

F-24
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

SPECIAL NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS

CERTAIN STATEMENTS IN THIS REPORT, INCLUDING STATEMENTS IN THE FOLLOWING DISCUSSION, ARE WHAT ARE KNOWN AS "FORWARD-LOOKING STATEMENTS", WHICH ARE BASICALLY STATEMENTS ABOUT THE FUTURE. FOR THAT REASON, THESE STATEMENTS INVOLVE RISK AND UNCERTAINTY SINCE NO ONE CAN ACCURATELY PREDICT THE FUTURE. WORDS SUCH AS "PLANS", "INTENDS", "WILL", "HOPES", "SEEKS", "ANTICIPATES", "EXPECTS "AND THE LIKE OFTEN IDENTIFY SUCH FORWARD-LOOKING STATEMENTS, BUT ARE NOT THE ONLY INDICATION THAT A STATEMENT IS A FORWARD-LOOKING STATEMENT. SUCH FORWARD-LOOKING STATEMENTS INCLUDE STATEMENTS CONCERNING OUR PLANS AND OBJECTIVES WITH RESPECT TO THE PRESENT AND FUTURE OPERATIONS OF THE COMPANY, AND STATEMENTS WHICH EXPRESS OR IMPLY THAT SUCH PRESENT AND FUTURE OPERATIONS WILL OR MAY PRODUCE REVENUES, INCOME OR PROFITS. NUMEROUS FACTORS AND FUTURE EVENTS COULD CAUSE THE COMPANY TO CHANGE SUCH PLANS AND OBJECTIVES OR FAIL TO SUCCESSFULLY IMPLEMENT SUCH PLANS OR ACHIEVE SUCH OBJECTIVES, OR CAUSE SUCH PRESENT AND FUTURE OPERATIONS TO FAIL TO PRODUCE REVENUES, INCOME OR PROFITS. THEREFORE, THE READER IS ADVISED THAT THE FOLLOWING DISCUSSION SHOULD BE CONSIDERED IN LIGHT OF THE DISCUSSION OF RISKS AND OTHER FACTORS CONTAINED IN THIS REPORT ON FORM 10-K AND IN THE COMPANY'S OTHER FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. NO STATEMENTS CONTAINED IN THE FOLLOWING DISCUSSION SHOULD BE CONSTRUED AS A GUARANTEE OR ASSURANCE OF FUTURE PERFORMANCE OR FUTURE RESULTS.

Unless the context otherwise requires, The "Company", "we," "us," and "our," refer to (i) China Infrastructure Construction Corporation; (ii) Beijing Chengzhi Qianmao Concrete Co., Ltd. (“Beijing Concrete”), (iii) Beijing Fortune Capital Management, Ltd. (“BFCM”), (iv) Shaanxi Hongruida Concrete Ltd. (“Hongruida”) and (v) Northern Construction Holdings, Ltd. (“NCH”).

Overview

China Infrastructure Construction Corporation (the “Company”, “China Infrastructure”, “CHNC”, “We”, “Our”) was organized in Colorado on February 28, 2003. The Company through its subsidiaries in Hong Kong and the People’s Republic of China (“PRC” or “China”), engages in production of ready-mixed concrete for developers and the construction industry in the PRC.

Beijing Concrete currently has four production facilities. One facility is located in the Nanhaizi area, on the west side of the Yizhuang economic development zone in Beijing, one is in Shidu, a suburban area of Beijing, one is in Xi’an West New High-tech Zone, and another one is located at the Tangshan harbor, about two hundred kilometers from Beijing. The plant located in Xi’an was put into operation at the end of March 2010.
4

Results of Operations

Three months ended August 31, 2010 Compared to Three months ended August 31, 2009

Net Revenue

Net Revenue for the three months ended August 31, 2010 were $21,187,530 as compared to $12,255,728 for the same period last year, an increase of $8,931,802, or approximately 72.88%. The increase in net revenue is mainly attributable to our geographic expansion. We had set up new factories in Xi’an and Shidu in 2010. The sales volume of concrete products increased approximately 125.09% for the three months ended August 31, 2010 as compared to the same period last year. The increase in net revenue is also attributable to technical services we provided to a Tianjin concrete producer from late March 2010. These services generated approximately $1.22 million in net revenue for the three months ended August 31, 2010.
Costs of Goods Sold

Cost of goods sold for the three months ended August 31, 2010 was $15,054,017 as compared to $9,849,045 for the same period last year, an increase of $5,204,972, or approximately 52.85%. The increase in cost of goods sold is mainly because of the increase of the net revenue.

Gross Profit

Gross profit for the three months ended August 31, 2010 was $6,133,513, an increase of $3,726,830 or approximately 154.85%, as compared to $2,406,683 for the same period last year. The increase in gross profit is attributable to the increase of sales due to geographic development of our business, our business expansion into technical service, and vertical integration with one sand and stone vendor.

Gross Profit Margin
Gross profit margin for the three months ended August 31, 2010 was 28.95%, compared to 19.64% for the same period last year. The increase of the gross profit margin is mainly because technical service provided a higher margin and the integration with one sand and stone company lowered the cost of goods sold.

General and administrative Expenses

General and administrative expenses for the three months ended August 31, 2010 were $1,442,310, as compared to $388,940 for the same period last year, an increase of $1,053,370, or approximately 270.83%. The increase of the general and administrative expenses was primarily due to expansion of business and due to increased professional expenses as a public company.
5

Operating Income

Our operating income for the three months ended August 31, 2010 was $4,691,203, an increase of $2,673,460 or approximately 132.50%, as compared to $2,017,743 for the same period last year. The increased income was due to the increased sales revenue from our business expansion geographically and toward higher margin business.

Income Taxes

The following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the three months ended August 31, 2010 and 2009:

2010
2009
U.S. Statutory rates
34.0
%
34.0
%
Foreign income not recognized in USA
(34.0
)
(34.0
)
China income taxes
25.0
0
China income tax exemption
16.2
0
Total provision for income taxes
8.8
%
0
%

USA

The Company and its subsidiaries are subject to income taxes on an entity basis on income arising in, or derived from, the tax jurisdiction in which they operate. As the Group has no income generated in the United States, there was no tax expense or tax liability due to the Internal Revenue Service of the United States as of August 31, 2010 and May 31, 2010.

Hong Kong

As the Group has no income generated in Hong Kong, there was no tax expense or tax liability due to the tax rule of Hong Kong as of August 31, 2010 and May 31, 2010.

People’s Republic of China (PRC)

Under the Income Tax Laws of the PRC, the Company’s subsidiaries are generally subject to an Enterprise Income Tax (EIT) at a standard rate of 25% on income reported in the statutory financial statements after appropriate tax adjustments.
6

Beijing Concrete is subject to a special tax exemption approved by the PRC tax department. The exemption of income tax to the Company will last until December 31, 2010, and from year 2011, the Company will be subject to an income tax at a standard rate of 25%.

BFCM has an accumulated operating loss, thus there is no income tax expense for BFCM. The Company has not recorded deferred taxes, as valuation allowances were provided because all significant differences in tax basis and financial statement amounts are permanent differences.

For the three months ended August 31,
2010
2009
Income tax expenses
Current tax
$ - $ -
Change in deferred tax assets
39,949 -
Change in valuation allowance
(39,949 ) -
Total
$ - $ -

Hongruida is subject to a 25% income tax rate. According to Chinese tax law, the income tax will be calculated at the year end. As of August 31, 2010, the Company has accrued tax payable of $406,203 for income tax expenses for Hongruida.

The estimated tax savings due to the tax exemption for the three months ended August 31, 2010 and 2009 amounted to approximately $1,229,473 and $506,516, respectively. The net effect on earnings per share if the income tax had been applied would decrease the basic and diluted earnings per share for the three months ended August 31, 2010 by $0.10 and $0.10, respectively. The net effect on earnings per share if the income tax had been applied would decrease the basic and diluted earnings per share for the three months ended August 31, 2009 by $0.33 and $0.33, respectively.

Net Income Attributable To China Infrastructure Construction Corporation

Net income was $3,976,449 for the three months ended August 31, 2010, an increase of $2,069,646 or approximately 108.54%, as compared to $1,906,803 for the same period last year. The increase was primarily due to the increased sales from our business expansion geographically and toward higher margin business.

Liquidity and Capital Resources

As of August 31, 2010, we had cash and cash equivalents of $903,715. We have historically funded our working capital needs from operations, advance payments from customers, bank borrowings, and capital from shareholders. Our working capital requirements are influenced by the level of our operations, the numerical and dollar volume of our project contracts, the progress of our contract execution, and the timing of accounts receivable collections.

The following table sets forth a summary of our cash flows for the periods indicated:

7

Three Months Ended
August 31
2010
2009
Unaudited
Unaudited
Net cash provided by (used in) operating activities
$
333,664
$
(878,009)
Net cash provided by (used in) investing activities
(197,832
)
557,158
Net cash used in financing activities
(339,217
)
(564,419)
Effect of exchange rate change on cash and cash equivalents
4,221
84
Decrease in cash and cash equivalents
(199,164)
(885,186)
Cash and cash equivalents, beginning balance
1,102,879
921,841
Cash and cash equivalents, ending balance
903,715
36,655

Operating Activities

Net cash provided by operating activities was $333,664 for the three months ended August 31, 2010, an increase of $1,211,673, or 138.00%, as compared to $878,009 net cash used in operating activities for the same period last year. The increase of net cash used in operating activities was due to the increase of trade accounts payable.  Accounts receivable increased as well. The trade accounts receivable increased because of the growing sales. We typically had long-term annual and multi-year contracts with our major customers. We entered into varying payment terms with our customers ranging from payment before delivery, payment on delivery or up to 1 year after the project completion. As of August 31, 2010, trade accounts receivable with aging over twelve months old amounted to $1,851,085, only 2.97% of total trade accounts receivable.

Investing Activities

Net cash used in investing activities was $197,832 for the three months ended August 31, 2010, a decrease of $754,990 or approximately 135.51%, as compared to $557,158 net cash provided by investing activities for the same period last year. The decrease of net cash provided by investing activities was primarily due to the increased investments of property, plant, and equipment and less proceeds from related party receivable.

Financing Activities

Net cash used in financing activities was $339,217 for the three months ended August 31, 2010, a decrease of $225,202, or 39.90%, compared to $564,419 for the same period last year. The decrease was primarily due to less payment to related party payable.

Critical Accounting Policies and Estimates

Management's discussion and analysis of its financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. Our financial statements reflect the selection and application of accounting policies which require management to make significant estimates and judgments. See note 3 to our consolidated financial statements, "Summary of Significant Accounting Policies." Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We believe that the following reflect the more critical accounting policies that currently affect our financial condition and results of operations.
8

Revenue recognition

The Company receives revenue from sales of concrete products and from provision of concrete pumping service and consulting service. The Company's revenue recognition policies are in compliance with ASC 605 (previously Staff Accounting Bulletin 104). Sales revenue is recognized at the date of shipment to customers or services have been rendered when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Our sales are non-returnable. Therefore, we do not estimate deductions or allowance for sales returns. Sales are presented net of any discounts, reward, or incentive given to customers.  Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.

Our products delivered to customers would be checked on site by customers and, once the products are accepted by customers, they will sign the acceptance notice. There is no warranty issue after the delivery.
Reward or incentive given to our customers is an adjustment of the selling prices of our products, therefore, the consideration is characterized as a reduction of revenue when recognized in our income statement.

The Company recognizes its revenues net of value-added taxes (“VAT”).  The Company is subject to VAT which is levied at the rate of 6% on the invoiced value of sales. However, the Company enjoys a free VAT policy according to the national policy, which encourages the development of the cement industry if the manufacturer satisfies the environmental protection requirements. The Company has enjoyed the free VAT policy from January 1, 2006 and has been reviewed every year by the local tax bureau.

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the combined financial statements and accompanying notes. Management believes that the estimates utilized in preparing its financial statements are reasonable and prudent. Actual results could differ from these estimates.

Inventories

Inventories are stated at the lower of cost, determined on a weighted average basis, and net realizable value. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose.
9

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements.

ITEM 4T.   CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.  The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to principal executive and principal financial officers to allow timely decisions regarding disclosure.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures.  Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.
Changes in Internal Control over Financial Reporting

There was no change in the Company's internal control over financial reporting during the period ended August 31, 2010, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II-OTHER INFORMATION

ITEM 6.   EXHIBITS.

(a) The following exhibits are filed herewith:

31.1
Certifications by the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
10

31.2
Certifications by the Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1
Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
11

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION
By:
/s/ Rong Yang
Rong Yang,
Chief Executive Officer, Director
(principal executive officer)

By:
/s/ Yiru Shi
Yiru Shi,
Chief Financial Officer
(principal financial and accounting officer)
Date:  October 13, 2010

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