Cannabis Bioscience International Holdings, Inc. - Quarter Report: 2010 November (Form 10-Q)

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 November 30, 2010

¨ 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 January 14, 2011, there were outstanding 12,930,620 shares of the registrant’s common stock, no par value.

TABLE OF CONTENTS

	Page

PART I Financial Information	F-1

Item 1. Financial Statements.	F-1

Consolidated Balance Sheets as of November 30, 2010 (Unaudited) and May 31, 2010	F-1

Consolidated Statements of Income And Comprehensive Income for the three and six months ended November 30, 2010 and 2009 (Unaudited)	F-2

Consolidated Statements of Cash Flows for the six months ended November 30, 2010 and November 30, 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.	3

Item 4T. Controls and Procedures	12

PART II Other Information	13

Item 6. Exhibits.	13

Signatures	14

Exhibits/Certifications

PART I-FINANCIAL INFORMATION

CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED BALANCE SHEETS

AS OF NOVEMBER 30, 2010 AND MAY 31, 2010

	November 30,		May 31,
	2010		2010
	(UNAUDITED)
Assets
Current assets
Cash and cash equivalents	$	803,470	$	1,102,879
Restricted cash		69,409		146,089
Trade accounts receivable, net		66,786,773		53,411,689
Other receivables		381,786		950,671
Inventories		533,472		575,452
Total current assets		68,574,910		56,186,780

Property, plant and equipment, net		7,618,902		7,995,701

Prepayments		5,004,059		1,289,007
Other receivables - long term		5,366,335		4,955,648
Related party receivables		1,225,696		1,286,945
Total other assets		11,596,090		7,531,600

Total assets	$	87,789,902	$	71,714,081

Liabilities and equity
Current liabilities
Trade accounts payable	$	16,472,613	$	13,376,119
Related party payable		681,306		47,125
Other payables		3,908,353		2,217,307
Current portion of capital lease obligations		2,230,000		1,949,183
Accrued expenses		500,611		491,885
Tax payable		1,036,799		-
Shares to be issued		77,700		-
Bank loan payable		-		1,317,600
Total current liabilities		24,907,382		19,399,219

Long-term liabilities
Long-term portion of capital lease obligations		1,474,775		2,185,820
Total long-term liabilities		1,474,775		2,185,820

Total liabilities		26,382,157		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 November 30, 2010 and May 31, 2010		42,916,468		42,252,295
Retained earnings		13,175,921		4,321,221
Accumulated other comprehensive income		2,671,276		1,509,314
Total China Infrastructure Construction Corporation stockholders' equity		58,763,665		48,082,830

Noncontrolling interests		2,644,080		2,046,212

Total liabilities and equity	$	87,789,902	$	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 AND SIX MONTHS ENDED NOVEMBER 30, 2010 AND 2009

(UNAUDITED)

	THREE MONTHS ENDED NOVEMBER 30,						SIX MONTHS ENDED NOVEMBER 30,
	2010			2009			2010			2009

Sales Revenue, Net	$	25,930,120		$	19,155,132		$	47,117,650		$	31,410,860

Cost of goods sold		18,703,068			14,655,122			33,757,085			24,504,167

Gross profit		7,227,052			4,500,010			13,360,565			6,906,693

General and administrative expenses		1,851,878			28,794,545			3,294,188			29,183,485

Net operating income (loss)		5,375,174			(24,294,535	)		10,066,377			(22,276,792	)

Other income (expense):
Interest income		450			-			994			-
Interest expense		(51,574	)		(3,183	)		(103,207	)		(3,655	)
Other income		8,482			4,996			18,666			4,996
Other expense		(8,877	)		-			(8,877	)		-
Total other (expense)		(51,519	)		1,813			(92,424	)		1,341

Net income (loss) before income taxes		5,323,655			(24,292,722	)		9,973,953			(22,275,451	)

Income taxes		174,175			-			580,930			-

Net income (loss)		5,149,480			(24,292,722	)		9,393,023			(22,275,451	)

Less: Net income attributable to noncontrolling interests		271,229			173,666			538,323			284,134

Net income (loss) attributable to China Infrastructure Construction Corporation	$	4,878,251		$	(24,466,388	)	$	8,854,700		$	(22,559,585	)

Earnings (loss) per share - basic and diluted	$	0.38		$	(3.72	)	$	0.68		$	(5.60	)

Basic and dilutive weighted average shares outstanding		12,930,620			6,578,625			12,929,992			4,026,345

Comprehensive income

Net income (loss)		5,149,480			(24,292,722	)		9,393,023			(22,275,451	)

Foreign currency translation adjustment		985,304			(194,921	)		1,221,507			(191,269	)

Comprehensive income (loss)	$	6,134,784		$	(24,487,643	)	$	10,614,530		$	(22,466,720	)

Comprehensive income attributable to non-controlling interests	$	320,500		$	173,525		$	597,868		$	274,571

Comprehensive income (loss) attributable to China Infrastructure Construction Corporation	$	5,814,284		$	(24,661,168	)	$	10,016,662		$	(22,741,291	)

The accompanying notes are an integral part of this statement.

F-2

CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED NOVEMBER 30, 2010 AND 2009

(UNAUDITED)

	November 30,
	2010			2009

Cash flows from operating activities:
Net income (loss)	$	9,393,023		$	(22,275,451	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operations:
Loss from property, plant and equipment disposal		8,877			-
Depreciation		873,212			548,431
Shares issued for compensation		393,950			27,422,242
Stock option expenses		347,923			-
Changes in operating liabilities and assets:
Trade accounts receivable		(11,812,272	)		(11,186,190	)
Prepayments		(3,637,611	)		-
Inventories		56,639			(281,126	)
Other receivables		311,844			(1,064,571	)
Trade accounts payable		2,710,530			2,353,912
Other payables		1,599,842			738,976
Accrued expenses and tax payable		23,230			81,826
Tax payable		1,024,659			-
Net cash provided by (used in) operating activities		1,293,846			(3,661,951	)

Cash flows from investing activities:
Property, plant, and equipment additions		(336,332	)		(754,827	)
Property, plant, and equipment disposal		37,135			-
Payments to related party receivable		(93,000	)		(163,458	)
Proceeds from related party receivable		31,751			-
Net cash used in investing activities		(360,446	)		(918,285	)

Cash flows from financing activities:
Shares issued for cash		-			8,605,625
Restricted cash		76,680			(158,089	)
Proceeds from Bank loan payable and capital lease obligations		31,111			1,466,200
Payment to Bank loan payable and capital lease obligations		(1,902,024	)		-
Proceeds from related party payable		540,894			237,278
Payments to related party payable		-			-
Net cash provided by (used in) financing activities		(1,253,339	)		10,151,014

Effect of rate changes on cash		20,530			10,510

(Decrease) Increase in cash and cash equivalents		(299,409	)		5,581,288
Cash and cash equivalents, beginning of period		1,102,879			921,841
Cash and cash equivalents, end of period	$	803,470		$	6,503,129

Supplemental disclosures of cash flow information:
Interest paid in cash	$	102,044		$	-
Income taxes paid in cash	$	-		$	-
Non-cash investing activities:
Acquisition of property, plant and equipment through loan payable	$	-		$	-
Disposal of property, plant and equipment through other receivable	$			$	2,073,287
Related party receivable offset by payable to related party payable	$			$	674,289

The accompanying notes are an integral part of this statement.

F-3

CHINA INFRASTRUCTURE CONSTRUCTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 30, 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.

F-4

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, Shanxi 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.

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 the production of ready-mixed concrete for developers and the construction industry in the PRC. In addition, we have a 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 six-month period ended November 30, 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.

F-5

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. Noncontrolling 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.

F-6

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 November 30, 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.

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 $407,619 and $397,042 as of November 30, 2010 and May 31, 2010, respectively.

F-7

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:

		November 30, 2010				May 31, 2010
Raw materials		$	533,472			$	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 November 30, 2010, the Company expects these assets to be fully recoverable. No impairment of assets was recorded in the periods reported.

F-8

Accumulated Other Comprehensive Income

Accumulated other comprehensive income represents foreign currency translation adjustments.

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.

F-9

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 six months ended November 30, 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.

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.

F-10

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 November 30, 2010 and May 31, 2010.

F-11

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 November 30, 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.

	For the six months ended November 30,
	2010			2009
Income tax expenses
Current tax	$	-		$	-
Change in deferred tax assets		128,645			3,196
Change in valuation allowance		(128,645	)		(3,196	)
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 November 30, 2010, the Company has accrued income tax payable of $1,032,164 for income tax expenses for Hongruida.

The current income tax expense and deferred tax expense for the three and six months ended November 30, 2010 and 2009 are as follows:

F-12

	Three Months Ended November 30,				Six Months Ended November 30,
	2010		2009		2010		2009
Current tax expense	$	174,175	$	-	$	580,930	$	-
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).

F-13

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.

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:

The following is a reconciliation of the basic and diluted earnings per share for the three and six months ended November 30, 2010 and 2009:

F-14

	THREE MONTHS ENDED NOVEMBER 30,					SIX MONTHS ENDED NOVEMBER 30,
	2010		2009			2010		2009
Net income (loss) for earnings per share attributable to China Infrastructure Construction Corporation	$	4,878,251	$	(24,466,388	)	$	8,854,700	$	(22,559,585	)

Weighted average shares used in basic computation		12,930,620		6,578,625			12,929,992		4,026,345

Diluted effect of warrants and options		-		-			-		-

Weighted average shares used in diluted computation		12,930,620		6,578,625			12,929,992		4,026,345

Earnings (loss) per share, basic	$	0.38	$	(3.72	)	$	0.68	$	(5.60	)

Earnings (loss) per share, diluted	$	0.38	$	(3.72	)	$	0.68	$	(5.60	)

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-15

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 February 2010, the FASB issued Accounting Standards Update 2010-09, “Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements,” or ASU 2010-09. ASU 2010-09 primarily rescinds the requirement that, for listed companies, financial statements clearly disclose the date through which subsequent events have been evaluated. Subsequent events must still be evaluated through the date of financial statement issuance; however, the disclosure requirement has been removed to avoid conflicts with other SEC guidelines. ASU 2010-09 was effective immediately upon issuance and was adopted in February 2010.

F-16

In July 2010, the FASB issued Accounting Standards Update 2010-20 which amend “Receivables” (Topic 310). ASU 2010-20 is intended to provide additional information to assist financial statement users in assessing an entity’s risk exposures and evaluating the adequacy of its allowance for credit losses. The disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. The amendments in ASU 2010-20 encourage, but do not require, comparative disclosures for earlier reporting periods that ended before initial adoption. However, an entity should provide comparative disclosures for those reporting periods ending after initial adoption. The Company does not expect the adoption of ASU 2010-20 to have a significant impact on its consolidated financial statements.

The Company has reviewed the Accounting Standards Updates up through 2010-29.

Reclassifications

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

4.	Property, Plant and Equipment

Plant and equipment consist of the following:

	November 30, 2010			May 31, 2010
Office trailers	$	926,600		$	902,556
Machinery and equipment		9,301,305			8,292,669
Motor vehicles		693,566			1,452,308
Furniture and office equipment		582,860			509,611
Construction in progress		610,973			421,716
Total property, plant and equipment		12,115,304			11,578,860
Accumulated depreciation		(4,496,402	)		(3,583,159	)
Net property, plant and equipment	$	7,618,902		$	7,995,701

Depreciation expense included in general and administrative expenses for the three months ended November 30, 2010 and 2009 was $36,180 and $52,799, respectively. Depreciation expense included in general and administrative expenses for the six months ended November 30, 2010 and 2009 was $104,983 and $106,353, respectively. Depreciation expense included in cost of sales for the three months ended November 30, 2010 and 2009 was $406,708 and $241,481, respectively. Depreciation expense included in cost of sales for the six months ended November 30, 2010 and 2009 was $768,229 and $442,078, respectively.

F-17

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 six months ended November 30, 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 $5,004,059 and $1,289,007 as of November 30, 2010 and May 31, 2010, respectively. There is no provision made for the prepayment at November 30, 2010 and May 31, 2010.

6.	Other Receivables

Other receivables in current assets amounted to $381,786 and $950,671 as of November 30, 2010 and May 31, 2010, respectively.

Other receivables in long-term assets amounted to $5,366,335 and $4,955,648 as of November 30, 2010 and May 31, 2010, respectively.

As of November 30, 2010, other receivables include approximately $3.32 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 due 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 November 30, 2010 and May 31, 2010.

F-18

7.	Other Payables

Other payables in current liabilities consist of the following as of November 30, 2010 and May 31, 2010

	November 30, 2010		May 31, 2010
Commission payable	$	2,426,225	$	1,488,213
Payable to CRCG (note 1)		736,867		265,838
Staff and other companies deposit		745,261		463,256
Total other payables	$	3,908,353	$	2,217,307

Commission expense has been included in cost of goods sold.

8.	Accrued Expenses

Accrued expenses amounted to $500,611 and $491,885 as of November 30, 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 $681,306 and $47,125 as of November 30, 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:

F-19

	November 30, 2010		May 31, 2010
Rong Yang (Chairman)	$	681,306	$	47,125
Total	$	681,306	$	47,125

Total outstanding amount of related party receivables was $1,225,696 and $1,286,945 as of November 30, 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:

	November 30, 2010			May 31, 2010
Yang Ming (Chairman Yang Rong’s brother)	$	161,000	(1)	$	147,817
Guiping Liao (CEO’s wife)		1,044,696	(1)		1,126,661
Xi Yang (CEO’s son)		20,000	(1)		12,467
	$	1,225,696		$	1,286,945

(1)

The purpose of these related party receivables are for business purposes such as travel advances and advances to vendors paid through related parties.

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 November 30, 2010 and May 31, 2010, the loan payable to bank amounted to $0 and $1,317,600, respectively. There is no interest expense capitalized into construction in progress for the three and six months ended November 30, 2010 and 2009.

Interest

Total interest expense and financial charges for the three months ended November 30, 2010 and 2009 on all debt amounted to $51,574 and $3,183, respectively. Total interest expense and financial charges for the six months ended November 30, 2010 and 2009 on all debt amounted to $103,207 and $3,655, respectively. Total interest income for the three months ended November 30, 2010 and 2009 amounted to $450 and $0, respectively. Total interest income for the six months ended November 30, 2010 and 2009 amounted to $994 and $0, respectively.

F-20

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 19 months from December 2010 to June 2012 are as follows:

Total lease payment	$	1,272,753
Less imputed interest		83,205
Total capital lease obligation as of November 30, 2010		1,189,548
Less current maturity		662,398
Capital lease obligation – long-term portion as of November 30, 2010	$	527,150