What changed in this filing

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Item 7. Management’s Discussion and Analysis

2010-08-30 compared with 2009-09-15 · 147 added, 111 removed, 89 unchanged (74% of the section changed)

27 unchanged sentences

ASSURANCE OF FUTURE PERFORMANCE OR FUTURE RESULTS.

"Company", "we," "us," and "our," refer to (i) China Infrastructure Construction

(ii) Beijing Chengzhi Qianmao Concrete Corporation Ltd.

Concrete”), (iii) Beijing Fortune Capital Management, Ltd.

and (iv) Northern Construction Holdings, Ltd.

Company’s business was launched in 2003 when it borrowed $125,000 to purchase

two non-flying, narrow-body DC-9-51 airframes without engines and thrust

The Company salvaged the rotable parts and systems from those

airframes, and our business consisted of selling them to the aviation industry.

Aviation customers for the parts were primarily:

1) aircraft operators,

including leasing companies, charter airlines and scheduled-service airlines

that operate DC-9 and MD-80 aircraft, as well as 2) the maintenance and repair

organizations which service those aircraft.

We evaluated the perspectives of our

aircraft parts business and resolved not to pursue this line of business

October 8, 2008, the Company 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 the Company purchased from the shareholder of NCH all issued and

outstanding shares of NCH’s common stock in consideration of the issuance of

12,000,000 shares of common stock of Fidelity (the “Share

Exchange resulted in (i) a change in control of Fidelity with the shareholder of

NCH owning approximately 78% of issued and outstanding shares of common stock of

Fidelity, (ii) NCH becoming a wholly-owned subsidiary of Fidelity, and (iii)

appointment of certain nominees of the shareholder of NCH as directors and

officers of Fidelity and resignation of John Schoenauer as director, Chief

Executive Officer, Chief Financial Officer, Secretary and Treasurer of

through its subsidiary Beijing Chengzhi Qianmao Concrete Corporation Ltd.

(“Beijing Concrete”) engages in production of ready-mixed concrete and other

special high-performance concrete for developers and the construction industry.

It has two prime production facilities.

One facility is located in the Nanhaizi

area, on the west side of the Yizhuang economic development zone in Beijing.

other is located at the Tangshan harbor, about two hundred kilometers from

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.

Infrastructure Construction Corporation (the “Company”, “China Infrastructure”,

“CHNC”, “We”, “Our”) was organized in Colorado on February 28, 2003.

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.

The Company primarily operates through its

indirect majority-owned subsidiary, Beijing Chengzhi Qianmao Concrete Co., Ltd.

(“Beijing Concrete”), a company organized under the laws of the

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.

of Operations

Year Ended May 31, 2010 Compared to Fiscal Year Ended May 31, 2009

the fiscal year ended May 31, 2009 were $66,778,296 as compared to $39,302,543

revenue for the fiscal year ended May 31, 2010 was $73,998,463 as compared to

$66,778,296 for the same period last year, an increase of 10.81%.

The increase in sales is

attributable to the successful development of our customers’ network and to the

increase of sales prices.

The Company has been implementing a policy of

reciprocal arrangements with its suppliers, whereby the suppliers refer

potential customers to the Company in consideration of awarding more business to

such suppliers.

In addition, the Company has been encouraging and rewarding the

non-sales employees for referring business to the Company.

Increase of sales

prices proportionally to the increase of cost of raw materials, mainly cement,

and labor costs, also contributed to the increase of revenues.

of Goods Sold

in net revenue is mainly attributable to our geographic expansion.

We had set up

new factories in Xi’an and Shidu.

The sales volume of concrete products

increased approximately 28.61% for the fiscal year ended May 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 $1.26 million

in net revenue.

Since March 2010, we have also leased stone and sand equipment

from a supplier.

Starting from April 2010, all sand and stone produced by this

equipment were exclusively supplied to us.

This contributed approximately $0.90

million to our net revenue.

We also have less sales commission accrued to offset

sales revenue for the year ended May 31, 2010 than 2009.

Cost of Goods

goods sold for the fiscal year ended May 31, 2010 was $55,960,792 as compared to

1 unchanged sentence

The increase in

cost of goods is attributable to the increase of cost of raw materials during

this period and the increase of sales due to the development of our customer

cost of goods is attributable to the increase of sales due to the geographic

development of our business.

profit for the fiscal year ended May 31, 2010 was $18,037,671, an increase of

approximately 38.74%, as compared to $13,001,362 for the fiscal year ended May

The increase in gross profit is attributable to the increase of sales due

to the successful development of our customers’ network.

With improved cost

control activities, our gross margin in the fiscal year ended May 31, 2009 was

approximately 19.5%, which is higher than the 15.9% in the same period last

expenses for the fiscal year ended May 31, 2009 were $391,789 as compared to

$234,209 for the same period last year, an increase of $157,580, or

approximately 67%.

Selling expenses consisted primarily of expenses

relating to after sales services, promotional measures for customers’

network development, and vehicular usage and maintenance.

The increase in

selling expenses was primarily due to the increase in sales

and Administrative Expenses

and administrative expenses for the fiscal year ended May 31, 2009 were

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

profit margin for the fiscal year ended May 31, 2010 was 24.38%, compared to

19.47% for the same period last year.

The increase of the gross profit margin is

mainly because technical service provided a higher margin, the integration with

one sand and stone company lowered the cost of goods sold, and less sales

commission were accrued as an offset to sales revenue.

Selling, General and

Administrative Expenses

general and administrative expenses for the fiscal year ended May 31, 2010 were

$31,323,026 as compared to $1,931,333 for the same period last year, an increase

of $29,391,693, or approximately 1,521.83%.

The increase of the general and

administrative expenses was primarily due to the consummation of the Share

Exchange Agreement and related legal and professional expenses.

operating income for the fiscal year ended May 31, 2009 was $11,298,531, an

increase of approximately 115% as compared to $5,261,442 for the fiscal year

ended May 31, 2008.

The increased income was due to the increased sales revenue

and our budget control on operating expenses.

The increase of the selling, general

and administrative expenses was primarily due to increased professional expenses

as a public company.

A one-time non-cash compensation expense of $27,422,242 and

a non-cash stock option expense of $199,003 were included in the selling,

general, and administrative expenses for the year ended May 31,

Operating Income

operating loss for the fiscal year ended May 31, 2010 was $13,285,355, a

decrease of $24,355,384, or approximately 220.01%, as compared to $11,070,029 in

operating income for the fiscal year ended May 31, 2009.

The decrease was mainly

due to the $27,422,242 one-time non-cash compensation expense and $199,003

non-cash stock option expense included in the selling, general, and

administrative expenses for the year ended May 31, 2010.

the fiscal year ended May 31, 2010, our business operations were solely

6 unchanged sentences

at the rate of 25%.

our PRC subsidiary is considered by the respective tax authorities a resource

multipurpose utilization enterprise, which qualifies it for an exemption from

income tax until December 31, 2010.

income was $10,461,209 for the fiscal year ended May 31, 2009, compared to

$4,802,337 in the last fiscal year, an increase of $5,658,872 or approximately

The increase was primarily due to the increased sales and our budget

control on operating expenses during the fiscal year ended May 31,

Beijing Concrete, our PRC subsidiary, is considered by the respective tax

authorities a resource multipurpose utilization enterprise, which qualifies it

for an exemption from income tax until December 31, 2010.

Net Income (loss)

Attributable To China Infrastructure Construction

was $13,434,410 for the fiscal year ended May 31, 2010, compared to net income

of $10,461,209 in the last fiscal year, a decrease of $23,895,619, or

approximately 228.42%.

The decrease was primarily due to the $27,422,242

one-time non-cash compensation expense and a $199,003 non-cash stock option

expense included in the selling, general, and administrative expenses for the

year ended May 31, 2010.

and Capital Resources

8 unchanged sentences

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

12 Months Ended

cash provided by operating activities

Fiscal Year Ended

cash provided by (used in) operating activities

cash used in investing activities

cash provided by (used in) financing activities

cash provided by financing activities

of exchange rate change on cash and cash equivalents

2 unchanged sentences

and cash equivalents, ending balance

provided by operating activities was $2,277,902 for the fiscal year ended May

31, 2009, whereas an amount of $4,870,154 in net cash was provided by operating

activities for the corresponding period of 2008.

The net cash reflects the

revenues generated by the operations of Beijing Concrete.

used in investing activities was $2,375,085 during the fiscal year 2009.

primarily used for construction of new production facility in

$123,861 of cash provided by financing activities during the fiscal year ended

May 31, 2009, as a result of receipt of payables from related

used in operating activities was $10,208,535 for the fiscal year ended May 31,

2010, a decrease of $12,486,437, or 548.16%, as compared to net cash of

$2,277,902 provided by operating activities for the fiscal year ended May 31,

The decrease of net cash used in operating activities was due to the

increase of trade accounts receivable.

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 May 31, 2010, trade accounts

receivable with aging over twelve months old amounted to $339,034, or only 0.63%

of total trade accounts receivable.

We collected approximately $5,200,000

accounts receivable from June 1, 2010 to Aug.

used in investing activities was $4,015,685 for the fiscal year ended May 31,

2010, an increase of $1,640,600, or 69.08%, compared to $2,375,085 for the

fiscal year ended May 31, 2009.

Acquisitions of plant, properties and equipment

were the main contributors to the increase of net cash used in investing

provided by financing activities was $14,408,077 for the fiscal year ended May

31, 2010, an increase of $14,284,216, or 11,532.46%, compared to $123,861 for

the fiscal year ended May 31, 2009.

The increase was primarily due to the sale

of stock by the Company to investors resulting in net proceeds of $13,234,406

and receipt of a bank loan of $1,319,760.

Accounting Policies and Estimates

13 unchanged sentences

results of operations.

Company receives revenue from sales of concrete products.

We recognize revenue

when all four revenue recognition criteria have been met:

persuasive evidence of

an arrangement exists, we have delivered the product, the fee is fixed or

determinable and collection is reasonably assured.

Our product delivered to

customers would be checked on site by customers and once the products are

accepted by customers they will sign the check or notes payable.

warranty issue after the delivery.

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.

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

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.

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.

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.

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.

Company has enjoyed the free VAT policy from January 1, 2006 and has been

reviewed every year by the local tax bureau.

preparation of financial statements in conformity with accounting principles

9 unchanged sentences

ordinary course of business, less estimated costs to complete and

Sheet Arrangements

Off-Balance Sheet

Company does not have any off-balance sheet arrangements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis