What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2010-08-30 compared with 2009-09-15 · 1613 added, 594 removed, 461 unchanged (83% of the section changed)

12 unchanged sentences

Operations" appearing elsewhere in this report.

Our historical results are not

necessarily indicative of the results to be expected in any future

For Year Ended

operating income

operating income (loss)

income (loss)

Company's consolidated audited financial statements for the fiscal years ended

16 unchanged sentences

Controls and Procedures

required by Rule 13a-15 under the Exchange Act, our management, including our

Chief Executive Officer and our Chief Financial Officer, evaluated the

effectiveness of the design and operation of our disclosure controls and

procedures as of May 31, 2009.

controls and procedures refer to controls and other procedures designed to

ensure that information required to be disclosed in the reports we file or

submit under the Securities Exchange Act is recorded, processed, summarized and

reported within the time periods specified in the rules and forms of the SEC and

that such information is accumulated and communicated to our management,

including our chief executive officer and chief financial officer, as

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.

designing and evaluating our disclosure controls and procedures, management

recognizes that any controls and procedures, no matter how well designed and

operated, can provide only reasonable assurance of achieving the desired control

objectives, and management is required to apply its judgment in evaluating and

implementing possible controls and procedures.

conducted its evaluation of disclosure controls and procedures under the

supervision of our chief executive officer and our chief financial officer.

Based on that evaluation, management concluded that because of the material

weakness in internal control over financial reporting described below, our

disclosure controls and procedures were not effective as of May 31,

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.

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.

Annual Report on Internal Control over Financial Reporting

32 unchanged sentences

based reporting, including the skills of subsidiary financial statements

consolidations, are inadequate and were inadequately supervised.

of sufficient and adequately trained accounting and finance personnel

resulted in a restatement of the consolidated financial statements of NCH,

a direct wholly-owned subsidiary of the Company, for the fiscal years

ended May 31, 2008 and 2007 to correct an error in certain minority

interest ownership accounting.

consolidations, are inadequate and were inadequately

of Internal Audit Function – We lack qualified resources to perform the

4 unchanged sentences

deficiencies, when aggregated, amounted to a material weakness.

Company plans to take the following actions to remediate the material weakness:

(i) hire additional English speaking personnel in the administrative division,

(ii) continue to implement its written control and accountability policies for

administrative personnel, and (iii) start search for US GAAP knowledgeable

financial professionals.

Additionally, during the fiscal year ended May 31,

2009, the Company’s staff in the accounting department gained more expertise in

internal audit functions.

We plan to continue to take measures to remediate the

material weakness as soon as practicable including providing US GAAP training to

our staff in the accounting department.

the fiscal year ended May 31, 2010, the Company took the following actions to

remediate the material weakness:

(i) hired English speaking U.S.

knowledgeable Chief Financial Officer, (ii) established an audit committee,

(iii) continued to implement its written control and accountability policies for

administrative personnel, and (iv) hired additional English speaking personnel

in the administrative division.

Additionally, during the fiscal year ended

May 31, 2010, the Company’s staff in the accounting department gained more

expertise in internal audit functions.

We plan to continue to take measures to

remediate the material weakness as soon as practicable including providing U.S.

GAAP training to our staff in the accounting department.

material weakness (within the meaning of PCAOB Auditing Standard No.

13 unchanged sentences

in Internal Controls over Financial Reporting

described above, there were no changes in our internal controls over financial

reporting during the fourth quarter of the fiscal year ended May 31, 2009 that

have materially affected, or are reasonably likely to materially affect, our

internal control over financial reporting.

described above, during the fiscal year ended May 31, 2010, we implemented

certain remediation measures that have materially affected, or are reasonably

likely to materially affect, the Company’s internal control over financial

OTHER INFORMATION

2 unchanged sentences

following are the officers and directors of the Company as of the date of this

All of our officers and directors are residents of the PRC.

it may be difficult for investors to effect service of process within the United

States upon them or to enforce judgments obtained in the United States courts

against them in the PRC.

President, CEO, CFO and Director

Yang (CEO, President and Director)

is the Chairman and Chief Executive of Beijing Chengzhi Qianmao Concrete Co.,

He is also the original founder of the company.

over 20 years experience in the concrete industry.

In the mid 80’s, he started

his career by joining China Railway Construction (“CRC”), one of the largest

construction groups in China as well as in Asia.

founded Beijing Concrete, he was the project manager for one of CRC’s subsidiary

Bringing all his management experience and sales resources, Mr.

founded Beijing Concrete in 2002 and he has been the key executive leading the

company successfully to date.

Xiao (Director)

becoming a Director of the Company on November 5, 2008, Bingchuan Xiao, age 49,

has been working as the Deputy Manager of Xing Yu Qing Technical Trading Co.,

Ltd., a Chinese private company, since May 2007.

From May 2001 to April 2007,

Xiao worked as a consultant and representative of SOS Kinderdorf

International, the umbrella organization in China that unites all autonomous

national SOS Children's Villages.

Xiao graduated from Guangzhou Institute of

Foreign Languages with a degree of Bachelor of Arts in English Literature and

not yet appointed an audit committee.

Our board of directors currently acts as

our audit committee.

At the present time, we believe that the members of

board of directors are collectively capable of analyzing and evaluating our

financial statements and understanding internal controls and procedures for

financial reporting.

Some of our officers and directors are residents of the PRC.

result, it may be difficult for investors to effect service of process within

the United States upon them or to enforce judgments obtained in the United

States courts against them in the PRC.

of Board of Directors, President and CEO

Financial Officer

Nyon Seng Leong

Yang (CEO, President and Chairman)

age 49, has been our Chairman and Chief Executive since October 2008.

been the Chairman and Chief Executive of Beijing Concrete since its inception in

He is also the founder of Beijing Concrete.

Yang has over

20 years experience in the concrete industry.

In the mid 1980’s, he started his

career by joining China Railway Construction (“CRC”), one of the largest

construction groups in China and Asia.

Beijing Concrete, he was the project manager for one of CRC’s subsidiary

Yang graduated from Guizhou College of Finance and Economics with

a Bachelor degree in administrative management.

We believe that Mr.

knowledge of all aspects of the Company’s business and his in-depth

understanding of its operations, combined with his years of experience in the

concrete industry position him well as our Chairman and Chief Executive

Shi, age 37, has been our Chief Financial Officer since December 2009.

Shi served as the Chief Financial Officer of Shengtai Pharmaceutical,

public company from 2008.

From 2005 to 2008, Ms.

Shi was the audit

manager for Kabani & Co., Inc., a PCAOB registered auditor headquartered in

From 2002 to 2004, Ms.

Shi was a controller at Aroa Marketing.

Shi worked as Channel Program Manager at Sun Microsystems and as a

financial analyst at Hewlett Packard China.

Shi is a Certified Public

Accountant since 2007.

She graduated with an MBA degree from the University of

California, Irvine in 2003.

She received her Bachelor degrees in Computer

Science and International Trade and Business from the Beijing Polytechnic

University in 1997.

Wang (Director)

age 43, has been our Director since September 2009.

She is a partner at East

Associates, a law firm in China, since October 2002.

Prior to that, she was with

another PRC law firm, C&T Partners, from September 1989 to 1996 as an

associate, and from 1996 to 2002 as a partner.

Wang graduated from

University of Kent at Canterbury with an LL.M.

degree in International Trade Law

in 1997, and she received her Bachelor degree in law from the School of Law of

Nanjing University in 1988.

We believe that Ms.

Wang’s qualifications and her

over 20 year experience in advising Chinese companies on complicated legal

issues arising in connection with capital formation and M&A provide a unique

perspective for our Board.

Nyon Seng Leong (Director)

Leong, age 66, has been our Director since February 2010.

He has been the

principal of Sungai River Inc., an international financial consulting company

since October 2003.

From March to June of 2004, he was Chief Financial Officer

and Secretary of Blue Diamond Mining Corporation, an NEX board listed company in

the oil and gas industry.

Prior to that, Mr.

Leong was the Treasurer for the

City of Calgary, Canada from October 1999 through August 2003.

Currently, Mr.

Leong is serving on the boards and the committees of the following public

Boyuan Construction Group, a construction company listed on Toronto

Stock Exchange.

, Andatee China Marine Fuel Services Corporation, a NASDAQ

traded company in the marine fuel industry and China Industrial Waste

Management, Inc., an industrial waste management company listed on the OTC

Bulletin Board.

Leong received his Master’s degree in Public Administration

from the Marriott School of Management of Brigham Young University in 1975.

1968, he graduated from National Chengchi University in Taiwan with a Bachelor

degree in commerce.

We believe that Mr.

Leong’s qualifications to serve as our

director include his extensive experience in corporate finance and corporate

governance acquired by him while serving on the boards and committees of several

public companies.

Niu (Director)

age 48, has been our Director since February 2010.

He is currently the general

manager of Beijing Ritan Hotel from February 2008.

Prior to that, he was the

manager of China Hainan Huandao Taide Hotel from 1995 to 2008.

his Bachelor’s degree in Management from Beijing University and Capital

University of Economics and Business in 1987 and 1985, respectively.

Niu’s qualifications to serve as our director include his extensive

management experience as well as his executive leadership.

Lee Spector (Director)

Spector, age 66, has been our Director since February 2010.

been an Executive Advisor of AECOM Technology, Inc., a technical and

management service provider that is currently listed on New York Stock Exchange

(“NYSE”) since September 2007.

From January 1999 through May 2007, he served as

a Vice President of Jacobs Engineering Group Inc., a NYSE listed company that is

engaged in the business of technical services and support.

Spector received

his Master degree in Architecture in 1970 and his Bachelor degree in Physics in

1966 from Washington University.

of Directors created the audit committee in March 2010.

The Audit Committee is

to oversee the Company's accounting and financial reporting processes, as well

as its financial statement audits.

The committee recommends to the Board of

Directors the selection of the Company’s outside auditors and reviews their

procedures for ensuring their independence with respect to the services

performed for the Company.

Committee is comprised of three directors:

Francis Leong, Ms.

Leong is the Chairman of the Audit Committee.

In the opinion of the Board of Directors, Ms.

Wang, Messrs.

Leong and Spector

are independent of management and free of any relationship that would interfere

with their exercise of independent judgment as members of this committee and

they are independent as defined by the rules of the NASDAQ Stock Market.

Board of Directors has adopted a written charter for the Audit

Committee Financial Expert

of directors is in the process of finding an “audit committee financial expert”

as defined in Regulation S-K.

do not presently have a compensation committee.

Our board of directors

currently acts as our compensation committee.

of Directors has determined that we have an Audit Committee financial expert, as

defined under Item 407(d)(5)(i) of Regulation S-K, serving on our Audit

Leong is our Audit Committee financial expert, and he is

independent as defined by the rules of the NASDAQ Stock Market.

2010, the Board of Directors established a Compensation Committee, which is

responsible for the design, review, recommendation and approval of compensation

arrangements for our directors, executive officers and key employees, and for

the administration of our equity incentive plans, including the approval of

grants under such plans to our employees, consultants and directors.

Compensation Committee also reviews and determines compensation of our executive

officers, including our Chief Executive Officer.

The board of directors has

adopted a written charter for the Compensation Committee.

Francis Leong, Mr.

Zhenhai Niu and Mr.

Pat Spector, each of whom is an independent director,

currently serve on the Compensation Committee.

Spector is the Chairman of

the Compensation Committee.

2010, the Board of Directors established a Nominating Committee, which assists

in the selection of director nominees, approves director nominations to be

presented for stockholder approval at our annual general meeting and fills any

vacancies on our board of directors, considers any nominations of director

candidates validly made by stockholders, and reviews and considers developments

in corporate governance practices.

The board of directors has adopted a written

charter for the Nominating Committee.

Shuqian Wang, Mr.

Zhenhai Niu and Mr.

Pat Spector, each of whom is an independent director, currently serve on the

Nominating Committee.

Wang is the Chairman of the Nominating

16(a) Beneficial Reporting Compliance

not yet adopted a Code of Ethics.

We intend to adopt a Code of Ethics in the

of Executive Compensation

adopted a Code of Conduct that applies to all of our employees and officers, and

the members of our Board of Directors.

A copy of the Code of Ethics was

included as Exhibit 14.1 to our current report on Form 8-K filed on March 12,

A printed copy of the Code of Conduct may also be obtained free of

charge by writing to us at our headquarters located at Shidai Caifu Tiandi

Building Suite 1906-09 1 Hangfeng Road Fengtai District, Beijing, China 100070;

Company Secretary.

following table reflects the compensation paid to our principal executive

2 unchanged sentences

Compensation Table

Name and Principal

President, CEO and CFO of Fidelity Aviation Corporation

Schoenauer (1)

President and CEO of Fidelity Aviation Corporation

Schonauer tendered his resignation as President, CFO and Treasurer of the

Company on October 8, 2008.

Schoenauer voluntarily resigned

and did not express disagreement with any policies or actions of the

December 19, 2009, Beijing Concrete entered into an employment agreement with

Yang as its Chief Executive Officer.

The employment agreement has a

five-year term that provides for automatic one-year extension, beginning on the

first anniversary of the date of the employment agreement, unless either Beijing

Concrete or Mr.

Yang gives a 30-day prior notice of termination.

Yang will receive a base salary at a rate of RMB 840,000 per year or

approximately $122,900.

Yang’s employment agreement provides that he

may also be eligible for an annual discretionary bonus in an amount of up to 25%

of his base salary dependent upon the company’s financial performance.

employment agreement also provides that Mr.

Yang shall be entitled during the

employment period to (i) a car with a driver, and (ii) paid annual leave of 20

President and

Executive Officer (2)

Financial Officer (3)

amounts in these columns represent the compensation cost of stock options

granted in 2010, except that these amounts do not include any estimate of

The aggregate grant date fair value of option awards granted

were determined in accordance with Financial Accounting Standard Board

Accounting Standards Codification Topic 718 (formerly SFAS123(R) and are

recognized as compensation cost over the requisite service period.

amount recognized for these awards was calculated using the Black Scholes

option-pricing model, and our 2010 Stock Incentive Plan is described in

Yang was also the Chief Financial Officer of the Company until December

17, 2009 when he resigned from this position and Yiru Shi was appointed as

the Chief Financial Officer of the

Shi was appointed as the Chief Financial Officer of the Company on

December 17, 2009.

Disclosure to Summary Compensation Table

February 12, 2010, the Company and Mr.

Rong Yang entered into an amended and

restated employment agreement (the “CEO Employment Agreement”) for his

service as the Company’s Chief Executive Officer for a term of five years.

CEO Employment Agreement is automatically renewable for an additional year

unless either party notifies the other at least 30 days prior to the end of the

term of an intention to terminate.

Under the CEO Employment Agreement, Mr.

will be compensated with an annual salary of RMB 1,500,000, payable monthly in

equal installments in arrears.

He will also receive options to purchase 400,000

shares of the Common Stock, exercisable at $3.90 per share.

event that Mr.

Yang’s service as the Company’s CEO is terminated, whether

involuntarily or voluntarily, under certain circumstances, or following the

occurrence of a Change of Control, as defined under the Employment Agreement

(the “Separation from Service”), Mr.

Yang shall receive:

(i) a lump sum payment

of fifteen times of Mr.

Yang’s annual salary;

(ii) Common Stock equal to 3% of

then outstanding Common Stock;

and (iii) continuing health insurance benefits

for two years after the occurrence of Change of Control.

Additionally, all

unvested options, restricted stock, performance shares and stock appreciation

rights previously granted to Mr.

Yang under the Company’s incentive plan will

immediately be fully vested upon his Separation from Service.

event that the above payments and benefits to Mr.

Yang upon his Separation from

Service following a Change of Control (the “Separation Parachute Payments”)

would (i) constitute a parachute payment within the meaning of

Section 280G of the Internal Revenue Code of 1986 (the “Code”) or any

similar or successor provision to 280G;

and (ii) be subject to the excise

tax imposed by Section 4999 of the Code or any similar or successor

provision to Section 4999 (the “Excise Tax”), then such Severance Parachute

Payments shall be reduced to the largest amount which would result in no portion

of the Severance Parachute Payments being subject to the Excise Tax, at the

discretion of Mr.

December 17, 2009, the Company entered into an employment agreement with Ms.

Yiru Shi as its Chief Financial Officer (the “CFO Employment Agreement”).

Employment Agreement provides that Ms.

Shi will serve as acting CFO of the

Company for a three-month probation period (the “Probation Period”), at the end

of which the Board will review Ms.

Shi’s performance and approve her appointment

as the Company’s Chief Financial Officer.

The term of the Employment Agreement

is two years, including the Probation Period, with a renewal option upon a

15-day written notice in advance (the “Term”).

Shi will be compensated as

annual salary of $150,000, or $12,500 monthly payable in U.S.

to purchase 300,000 shares of the Common Stock of the Company, exercisable

at $3.90 per share, to vest in two equal installments respectively on

December 17, 2010 and December 17, 2011.

Shi’s employment is

terminated prior to the vesting date, any unvested options will be

If her employment is terminated after the vesting date, any

vested but unexercised options shall terminate on the 91st day following

the date of the termination of her

Discussion and Analysis

12 unchanged sentences

time of promotion or other changes in responsibilities.

to implement a more comprehensive compensation program, which takes into account

other elements of compensation, including, without limitation, short and

long-term compensation, cash and non-cash, and other equity-based compensation

such as stock options.

We expect that this compensation program will be

comparable to the programs of our peer companies and aimed to retain and attract

talented individuals.

also consider forming a compensation committee to oversee the compensation of

our named executive officers.

The majority of the members of the compensation

committee would be independent directors.

2010, our board of directors established a compensation committee comprised of

independent directors.

The compensation committee will perform periodically a

strategic review of the compensation program for our executive officers to

determine whether it provides adequate incentives and motivation to our

executive officers and whether it adequately compensates our executive officers

relative to comparable officers in other companies with which we compete for

Those companies may or may not be public companies or

companies located in the PRC or even, in all cases, companies in a similar

Stock Incentive Plan

February 2010, we adopted the 2010 Stock Incentive Plan (the “2010 Plan”).

officers and key employees, directors of, and consultants to the Company and its

subsidiaries and affiliates, who are responsible for or contribute to the

management, growth and/or profitability of the business of the Company and/or

its subsidiaries and affiliates are eligible for participation in the 2010

One Million One Hundred Fifty Thousand (1,150,000) shares of

the Company’s common stock have been authorized and reserved for the 2010 Plan,

subject to an increase of up to 10% of the Company’s issued and outstanding

Common Stock, and any shares that may become available for issuance under awards

under the 2010 Plan as a result of expiration or forfeiture.

The Company may

issue stock options, stock appreciation rights, restricted stock awards,

restricted stock units, performance awards and other stock-based awards under

the 2010 Plan.

The 2010 plan is administered by our Compensation

Equity Awards

following table reflects the unexercised options, stock that has not vested and

equity incentive plan awards for each named executive officer outstanding as of

the end of the fiscal year ended May 31, 2010:

Option Awards

options vest in two equal installments on February 13, 2011 and February

13, 2012, respectively.

Each installment expires 5 years

after its date of vesting.

options vest in two equal installments on December 17, 2010 and December

17, 2011, respectively.

Each installment expires 3 years after

its date of vesting.

Narrative Disclosure

3 unchanged sentences

qualified defined contribution plans and non-qualified defined contribution

no contracts agreements, plans or arrangements, whether written or oral, that

provide for payment to a named executive officer at, following, or in connection

with the resignation, retirement or other termination of a named executive

officer or a change in control or the company or a change in the executive

officers responsibilities following a change in control, with respect to each

named executive officer.

the fiscal year ended May 31, 2009, we did not pay our directors any

compensation for their services as our directors.

In the future, we may

adopt a policy of paying independent directors a fee for their attendance at

board and committee meetings.

We do reimburse each director for reasonable

travel expenses related to such director’s attendance at board of directors and

committee meetings.

following table reflects the compensation of the current directors (other than

the named executive officers) for the Company’s fiscal year ended May 31,

Name of Director

amounts in these columns represent the compensation cost of stock options

granted in 2010, except that these amounts do not include any estimate of

The grant date fair value of option awards granted were

determined in accordance with Financial Accounting Standard Board

Accounting Standards Codification Topic 718 (formerly

SFAS123(R) and are recognized as compensation cost over the

requisite service period.

The amount recognized for these awards was

calculated using the Black Scholes option-pricing

of May 31, 2010, Messrs.

Leong, Niu, Spector and Ms.

Wang each held

options to purchase 10,000 shares of our common stock at an exercise price

of $3.90 per share.

February 12, 2010, Messrs.

Francis Nyon Seng Leong, Zhenhai Niu, and Pat Lee

Spector were appointed as directors of the Company.

Each of Messrs Leong, Niu

and Spector entered into an Independent Director Agreement with the Company.

March 22, 2010, Ms.

Shuqian Wang entered into an Independent Director Agreement

with the Company.

A summary of the compensation for the directorship of each of

Leong, Niu and Spector and Ms.

Wang is set forth as

annual salary of $15,000, or $1,250 payable at the end of each

the service as a chairman of a committee, such director shall receive an

additional fee of $5,000 per annum, payable in equal installments at the

end of each month.

For the service as a member of a committee, such

director shall receive an additional fee of $2,000 per annum, payable in

equal installments at the end of each

to purchase 10,000 shares of the Common Stock subject to the 2010 Plan,

exercisable at $3.90 per share, to vest one year after the grant date.

Such options will expire 36 months from the date of the

If the directorship is terminated, the vested option

will expire 365 calendar days after the

Reimbursement

of traveling expenses for such director’s attendance of meetings of the

Board or any committee of the

SECURITY OWNERSHIP OF CERTAIN

BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER

following table sets forth as of the date of this report, certain information

with respect to the beneficial ownership of our voting securities by (i) each

person or group owning more than 5% of the Company’s securities, (ii) each

director, (iii) each executive officer, and (iv) all executive officers and

directors as a group.

following table provides information concerning beneficial ownership of our

capital stock as of August 27, 2010 by:

stockholder, or group of affiliated stockholders, who owns more than 5% of

our outstanding capital stock;

of our named executive officers;

of our directors;

of our directors and executive officers as a

following table lists the number of shares and percentage of shares beneficially

owned based on 12,930,620 shares of Common Stock outstanding as of August 27,

ownership is determined in accordance with the rules of the SEC, and generally

includes voting power and/or investment power with respect to the securities

Shares of Common Stock subject to options and warrants currently

exercisable or exercisable within 60 days of August 27, 2010 or issuable upon

conversion of convertible securities which are currently convertible or

convertible within 60 days of August 27, 2010 are deemed outstanding and

beneficially owned by the person holding those options, warrants or convertible

securities for purposes of computing the number of shares and percentage of

shares beneficially owned by that person, but are not deemed outstanding for

purposes of computing the percentage beneficially owned by any other person.

Except as indicated in the footnotes to this table, and subject to applicable

community property laws, the persons or entities named have sole voting and

investment power with respect to all shares of our Common Stock shown as

beneficially owned by them.

Name & Address of

4 unchanged sentences

Officers and Directors

Jia Hao International Business Center

Zizhuyuan Road Haidan District

Caifu Tiandi Building

1906-09 1 Hangfeng

Fengtai District

China 100070 (3)

CEO, CFO and President

Jia Hao International Business Center

Zizhuyuan Road Haidan District

officers and directors as a group (2 persons named above)

Securities Holder

Floor, Landmark Tower 2

North Dongsanhuan Road

China 100004 (8)

Less than 1/10 of 1%

Nyon Seng Leong

Millview Bay SW

Calgary, Alberta

McSkimming Road

Colorado 81611 (6)

than 1/10 of 1%

1-201, Chaoyang District,

than 1/10 of 1%

Caifu Tiandi Building

1906-09 1 Hangfeng

Fengtai District

China 100070 (4)

Financial Officer

Securities Holders

Ballentree Way

Combined Partners

Excelsior Blvd.,

MN 55416 (10)

1906-09 1 Hangfeng

Fengtai District

China 100070 (9)

Ownership is determined in accordance with the rules of the SEC and

generally includes voting or investment power with respect to

As of the date of this

report, we had 15,295,500 shares of our common stock

of the date of this report, we had 12,930,620 shares of our

common stock outstanding.

those certain call option agreements between Mr.

Yang has an option to purchase 5,113,384 shares of common stock from Mr.

Shen over the course of approximately two years in installments upon

achievement of certain performance milestones by the Company.

Call Option Agreement, Mr.

Yang can assign the right to purchase the

shares to third parties.

options to purchase 300,000 shares of the Common Stock of the Company,

exercisable at $3.90 per share, to vest in two equal installments

respectively on December 17, 2010 and December 17, 2011.

employment is terminated prior to the vesting date, any unvested options

will be terminated.

If her employment is terminated after the vesting

date, any vested but unexercised options shall terminate on the 91st day

following the date of the termination of her

that certain call option agreement between Mr.

Shen, the then

holder of 12,000,000 shares of our common stock, Mr.

Yang was granted an

option to purchase all of the stock held by Mr.

has an option to purchase 559,978 held by Mr.

Shen over the course of

approximately three years in installments, for a total purchase price of

one thousand two hundred dollars, upon occurrence of certain events as

described below.

Under the Call Option Agreement, Mr.

Yang can assign the

right to purchase the shares to third

Yang and the Company into a binding employment agreement for a term

of not less than five years for Mr.

Yang to serve as the Company’s

Chairman and Chief Executive Officer

Company and its subsidiaries achieving not less than $5,000,000 in

after-tax net income, as determined under United States Generally Accepted

Accounting Principles consistently applied (“US GAAP”) for the fiscal year

ended May 31, 2009

Company and its subsidiaries achieving not less than $9,000,000 in

after-tax profits, as determined under US GAAP, for the fiscal year ending

Company and its subsidiaries achieving not less than $14,000,000 in

after-tax profits, as determined under US GAAP, for the fiscal year ending

May 31, 2011.

December 19, 2009, Mr.

Yang entered into a binding employment agreement with the

Company for a term of five years and exercised option to assign to certain third

parties the purchase from Mr.

Shen of 4,000,000 shares in

approximately two years in installments upon achievement of certain

performance milestones by the Company.

Under the Call Option Agreement,

Xiao can assign the right to purchase the shares to third

options to purchase 10,000 shares of the Common Stock of the Company,

exercisable at $3.90 per share, to vest on February 12,

options to purchase 400,000 shares of the Common Stock of the Company,

exercisable at $3.90 per share, to vest on February 12, 2011.

1,240,607 shares of the Common Stock of the Company held by Guiping Liao,

the spouse of Mr.

options to purchase 10,000 shares of the Common Stock of the Company,

exercisable at $3.90 per share, to vest on March 22,

options held by Mr.

Yang, the spouse of Ms.

Liao, to purchase 400,000

shares of the Common Stock of the Company, exercisable at $3.90 per share,

to vest on February 12, 2011.

Includes options held by Mr.

purchase 5,113,384 shares of common stock from Mr.

64,103 shares issuable upon exercise of

Authorized for Issuance under Equity Compensation Plan

following table summarizes the equity compensation plans under which our

securities may be issued as of the date of this report.

Plan Category

securities to

average exercise

available for

compensation plans approved by security

compensation plan not approved by security holders

of directors adopted the China Infrastructure Construction Corporation 2010

Stock Incentive Plan (the “2010 Plan”) on February 12, 2010.

All our officers

and key employees, and directors of, and consultants including those of our

subsidiaries and affiliates, who are responsible for or contribute to the

management, growth and/or profitability of our business, are eligible for

participation in the 2010 Plan.

One Million One Hundred Fifty

Thousand (1,150,000) shares of our common stock have been authorized and

reserved for the 2010 Plan, subject to an increase of up to 10% of our issued

and outstanding common stock, and any shares that may become available for

issuance under awards under the 2010 Plan as a result of expiration or

We may issue stock options, stock appreciation rights, restricted

stock awards, restricted stock units, performance awards and other stock-based

awards under the 2010 Plan.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR

11 unchanged sentences

31, 2010 and 2009, respectively.

These payables bear no interest and have no

fixed payment terms.

Currently, the related party payable consists of the

These payables are loans from

related parties for business purposes.

They bear no interest, are unsecured and

have no fixed payment terms.

Currently, the related party payable consists of

the following:

Yang (Chairman)

Zhan (common shareholder)

Jian (20% owned by a common shareholder)

Shunjun (Chairman’s brother-in-law)

Liao(Chairman’s brother-in-law)

Chang Shen Transportation (20% owned by a common

outstanding amount of related party receivables was $674,289 and $236,042 as of

May 31, 2009 and 2008, respectively.

The receivables from related party

consisted of the following:

outstanding amount of related party receivables was $1,286,945 and $674,289 as

of May 31, 2010 and 2009, respectively.

These receivables require no interest

and have no fixed re-payment terms.

Currently, the receivables from related

parties consist of the following:

Zhan (common shareholder)

Ming (Chairman Yang Rong’s brother)

Liao (CEO’s wife)

Jian (20% owned by a common shareholder )

Chang Shen Transportation (20% owned by a common

Yihua Daxin Investment (holding company)

purpose of this loan was compliance with the PRC currency regulations.

loan was extended by our Hong Kong

set forth in our discussion above, none of our directors, director nominees or

31 unchanged sentences

circumstances including, but not limited to:

the risks, costs and benefits to

the impact on a director's

independence in the event the related person is a director, immediate

family member of a director or an entity with which a director is

the terms of the

the availability of other sources

for comparable services or products;

the terms available to or from,

as the case may be, unrelated third parties or to or from our employees

risks, costs and benefits to us;

impact on a director's independence in the event the related person is a

director, immediate family member of a director or an entity with which a

director is affiliated;

terms of the transaction;

availability of other sources for comparable services or products;

terms available to or from, as the case may be, unrelated third parties or

to or from our employees generally.

expect that the policy will require any interested director to excuse himself or

1 unchanged sentence

interested director is involved.

Francis Leong, Ms.

Shuqian Wang, Mr.

Zhenhai Niu and Mr.

Pat Spector are

independent directors pursuant to the definition of “independent director” under

the Rules of NASDAQ, Marketplace Rule 5605(a)(2).

PRINCIPAL ACCOUNTANT FEES AND

6 unchanged sentences

of Incorporation of the Company (2)

of Amendment (4)

of the Company (2)

4 unchanged sentences

Yang and Beijing Concrete

of Subscription Agreement dated October 16, 2009, among the Company and

the Investors named therein (5)

of Investor Relations Escrow Agreement dated October 16, 2009, among the

Company, Anslow& Jaclin, LLP and Trillion Growth China General Partner

of Lockup Agreement dated October 16, 2009, by and between the Company and

certain directors and officers (5)

of Lockup Agreement dated October 16, 2009, by and between the Company and

certain non-affiliates shareholders (5)

of Call Option Agreement dated October 14, 2009, by and between Rui Shen

and Rong Yang (5)

of Call Option Agreement dated October 14, 2009, by and between Rui Shen

and Bingchuan Xiao (5)

of Voting Trust Agreement dated October 14, 2009, by and between Rui Shen

and Rong Yang (5)

of Voting Trust Agreement dated October 14, 2009, by and between Rui Shen

and Bingchuan Xiao (5)

of Employment Agreement dated December 17, 2009, by and between the

Company and Ms.

of Option Agreement dated December 17, 2009, by and between the Company

China Infrastructure Construction Corporation 2010 Stock Incentive Plan,

dated February 12, 2010 (7)

of Independent Director Agreement (7)

and Restated Employment Agreement with Rong Yang, dated February 12, 2010

Non-Qualified

Stock Option Agreement with Rong yang, dated February 12, 2010

of Subscription Agreement dated March 5, 2010, by and among the Company

and the parties named therein (8)

of Amendment dated March 5, 2010 to Subscription Agreement dated October

16, 2009 by and among the Company and the parties named therein

of Warrant issued to the Company’s placement agent and certain finder

of Warrant issued to the 2009 Investors (8)

Chadwick, P.C.

4 unchanged sentences

adopted pursuant to Section 302 of the Sarbanes-Oxley Act of

Certifications

of Yiru Shi pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as

adopted pursuant to Section 302 of the Sarbanes-Oxley Act of

Certification

2 unchanged sentences

the Sarbanes-Oxley Act of

Incorporated by reference to the

Current Report on Form 8-K filed by the Company with the SEC on October

Incorporated by reference to the

Registration Statement on Form SB-2 filed by the Company with the SEC on

by reference to our Current Report on Form 8-K filed with the SEC on

October 10, 2008.

Incorporated by reference to the

Current Report on Form 8-K/A filed by the Company with the SEC on April

by reference to our Registration Statement on Form SB-2 (Reg.

333-146758) filed with the SEC on October 17,

by reference to our Current Report on Form 8-K/A filed with the SEC on

April 29, 2009.

by reference to our Annual Report on Form 10-K filed with the SEC on

September 15, 2009.

by reference to our Current Report on Form 8-K filed with the SEC on

October 20, 2009.

by reference to our Current Report on Form 8-K filed with the SEC on

December 22, 2009.

by reference to our Current Report on Form 8-K filed with the SEC on

February 19, 2009.

by reference to our Current Report on Form 8-K filed with the SEC on March

to the requirements of Section 13 or 15(d) of the Securities Exchange Act of

2 unchanged sentences

INFRASTRUCTURE

September 15, 2009

Yang, CEO and CFO

executive officer, principal

officer and principal

August 30, 2010

/s/ Rong Yang

Executive Officer, Director

executive officer)

to the requirements of Section 13 or 15(d) of the Securities Exchange Act of

1934, this Report has been signed below by the following persons on behalf of

the Registrant in the capacities and on September 15, 2009.

Yang, Director

Bingchuan Xiao

Xiao, Director

Bradshaw, CPA

Anderson, CPA

City, Utah 84107

852.21.555.333

852.21.165.222

www.cpaone.net

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

To The Board of Directors and

Stockholders of

China Infrastructure Construction

We have audited the accompanying

consolidated balance sheets of China Infrastructure Construction

Corporation (the Company) as of May 31, 2009 and 2008, and the related

consolidated statements of operations and comprehensive income, cash

flows, and changes in stockholders’ equity for the years ended May 31,

2009 and 2008.

These consolidated financial statements are the

responsibility of the Company's management.

Our responsibility is to

express an opinion on these consolidated financial statements based on our

We conducted our audits in

accordance with the standards of the Public Company Accounting Oversight

Board (United States of America).

Those standards require that we plan and

perform the audits to obtain reasonable assurance about whether the

consolidated financial statements are free of material misstatement.

company is not required to have, nor were we engaged to perform, an audit

of its internal control over financial reporting.

Our audits included

consideration of internal control over financial reporting as a basis for

designing audit procedures that are appropriate in the circumstances, but

not for the purpose of expressing an opinion on the effectiveness of the

company's internal control over financial reporting.

Accordingly, we

express no such opinion.

An audit also includes examining, on a test

basis, evidence supporting the amounts and disclosures in the financial

statements, assessing the accounting principles used and significant

estimates made by management, as well as evaluating the overall financial

statement presentation.

We believe that our audits provide a reasonable

basis for our opinion.

In our opinion, the consolidated

financial statements referred to above present fairly, in all material

respects, the financial position of China Infrastructure Construction

Corporation as of May 31, 2009 and 2008, and the results of its operations

and its cash flows for the years ended May 31, 2009 and 2008, in

conformity with accounting principles generally accepted in the United

States of America.

Child, Van Wagoner & Bradshaw,

Salt Lake City, Utah

the Registrant in the capacities and on the dates indicated.

/s/ Rong Yang

Executive Officer and Director

Executive officer)

Financial Officer

Financial Officer and

Accounting Officer)

/s/ Shuqian Wang

Wang, Director

/s/ Francis Nyon Seng Leong

Nyon Seng Leong, Director

/s/ Pat Lee Spector

Lee Spector, Director

/s/ Zhenhai Niu

Niu, Director

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

The Board of Directors and Stockholders of

Infrastructure Construction Corporation

have audited the accompanying consolidated balance sheets of China

Infrastructure Construction Corporation (the Company) as of May 31, 2010

and 2009, and the related consolidated statements of operations and

comprehensive income, cash flows, and changes in stockholders’ equity for

the years ended May 31, 2010 and 2009.

These consolidated financial

statements are the responsibility of the Company's management.

responsibility is to express an opinion on these consolidated financial

statements based on our audits.

conducted our audits in accordance with the standards of the Public

Company Accounting Oversight Board (United States of America).

standards require that we plan and perform the audits to obtain reasonable

assurance about whether the consolidated financial statements are free of

material misstatement.

The company is not required to have, nor were we

engaged to perform, an audit of its internal control over financial

Our audits included consideration of internal control over

financial reporting as a basis for designing audit procedures that are

appropriate in the circumstances, but not for the purpose of expressing an

opinion on the effectiveness of the company's internal control over

financial reporting.

Accordingly, we express no such opinion.

also includes examining, on a test basis, evidence supporting the amounts

and disclosures in the financial statements, assessing the accounting

principles used and significant estimates made by management, as well as

evaluating the overall financial statement presentation.

We believe that

our audits provide a reasonable basis for our opinion.

our opinion, the consolidated financial statements referred to above

present fairly, in all material respects, the financial position of China

Infrastructure Construction Corporation as of May 31, 2010 and 2009, and

the results of its operations and its cash flows for the years ended May

31, 2010 and 2009, in conformity with accounting principles generally

accepted in the United States of America.

Van Wagoner & Bradshaw, PLLC

Lake City, Utah

INFRASTRUCTURE CONSTRUCTION CORPORATION

FINANCIAL STATEMENTS

3 unchanged sentences

Statements of Operations and Comprehensive Income

Statement of Changes in Stockholders’ Equity

Statements of Cash Flows

Statement of Changes in Stockholders’ Equity

to Consolidated Financial Statements

1 unchanged sentence

BALANCE SHEETS

31, 2010 AND 2009

and cash equivalents

trade accounts receivable

accounts receivable, net

current assets

plant and equipment, net

receivables - long term

party receivables

and stockholders’ equity

accounts payable

party payable

portion of capital lease obligations

current liabilities

portion of capital lease obligations

long-term liabilities

Stockholders'

4 unchanged sentences

100,000,000 shares authorized;

shares issued and outstanding

12,815,620 and

1,529,550 shares issued and outstanding as of May 31, 2010 and May 31,

other comprehensive income

stockholders' equity

Liabilities and stockholders’ equity

accompanying notes to consolidated financial statements

China Infrastructure Construction Corporation stockholders'

Noncontrolling

liabilities and equity

accompanying notes are an integral part of this statement.

INFRASTRUCTURE CONSTRUCTION CORPORATION

STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

Year ended May 31, 2009

Year ended May 31, 2008

STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

FISCAL YEARS ENDED MAY 31, 2010 AND 2009

YEARS ENDED MAY 31,

of goods sold

and administrative expenses

operating expenses

operating income

operating income (loss)

income (expense):

other income (expense)

income before income taxes

income before minority interests

income (loss) before income taxes

income (loss)

Net income attributable to noncontrolling interests

income (loss) attributable to China Infrastructure Construction

(loss) per share - basic and dilutive

and dilutive weighted average shares outstanding

Comprehensive

income (loss)

currency translation adjustment

Comprehensive

per share - basic and diluted

and diluted weighted average shares outstanding

accompanying notes to consolidated financial statements

INFRASTRUCTURE CONSTRUCTION CORPORATION

STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Accumulated Other

income (loss)

Comprehensive

currency translation adjustment

effectively issued to former shareholder as part of the recapitalization

currency translation adjustment

accompanying notes to consolidated financial statements

income attributable to non-controlling interests

Comprehensive

income (loss) attributable to China Infrastructure Construction

accompanying notes are an integral part of this statement.

INFRASTRUCTURE CONSTRUCTION CORPORATION

STATEMENTS OF CASH FLOWS

Year ended May 31, 2009

Year ended May 31, 2008

FISCAL YEARS ENDED MAY 31, 2010 AND 2009

flows from operating activities:

to reconcile net income to net cash provided by

and amortization

for allowance on accounts receivable

income (loss)

to reconcile net income (loss) to net cash provided by (used in)

from property, plant and equipment disposal

debt expenses

issued for compensation

option expenses

in operating liabilities and assets:

1 unchanged sentence

accounts payable

cash provided by operating activities

cash provided by (used in) operating activities

flows from investing activities:

assets additions

plant, and equipment additions

- construction in progress

1 unchanged sentence

from related party receivable

cash used by investing activities

cash used in investing activities

flows from financing activities:

for short-term notes payable

issued for cash

from related party payable

to related party payable

paid to minority interest

cash provided (used) by financing activities

acquired in recapitalization

cash provided by financing activities

of rate changes on cash

in cash and cash equivalents

(decrease) in cash and cash equivalents

and cash equivalents, beginning of period

2 unchanged sentences

taxes paid in cash

accompanying notes to consolidated financial statements

investing activities:

of property, plant and equipment through other payable

of property, plant and equipment through other receivable

party receivable offset by payable to related party

accompanying notes to unaudited consolidated financial

INFRASTRUCTURE CONSTRUCTION CORPORATION

STATEMENT OF CHANGES IN EQUITY

YEARS ENDED MAY 31, 2010 AND 2009

Accumulated Other

Retained Earnings

Comprehensive

Noncontrolling

(Accumulated Deficit)

effectively issued to former shareholder as part of the recapitalization

currency translation adjustment

income (loss)

for 1:10 reverse split

issued for cash in October 2009

issued for fund raising service in October 2009

issued for cash in March 2010

issued to placement agent

issued to investors

issued for compensation

option expenses

currency translation adjustment

income (loss)

accompanying notes are an integral part of this statement.

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

Nature of operations

Infrastructure Construction Corporation (“China Infrastructure”), formerly

12 unchanged sentences

Construction Holdings, Ltd., a Hong Kong limited company (“NCH”) and its

shareholder pursuant to which China Infrastructure issued 12,000,000 shares

of China Infrastructure common stock (the “Share Exchange”) in

exchange for all issued and outstanding common stock of NCH.

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

Exchange resulted in (i) a change in control of China Infrastructure with the

12 unchanged sentences

indirect majority-owned subsidiary.

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

accounting purposes, the share exchange transaction was treated as a capital

6 unchanged sentences

Infrastructure common shares.

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.

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.

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.

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.

commenced its operations at the end of March 2010.

refer in this report to business and financial information for periods prior to

2 unchanged sentences

suggests otherwise.

of Presentation

accompanying financial statements are prepared in accordance with accounting

7 unchanged sentences

CONSOLIDATED FINANCIAL STATEMENTS

of Significant Accounting Policies

Summary of Significant

Accounting Policies

Economic and Political

20 unchanged sentences

31 and the results are consolidated up to that date.

Minority interests consist

of other stockholders’ ownership interests in majority-owned subsidiaries of the

Reclassifications

prior year amounts on the consolidated balance sheets have been reclassified to

conform to current classifications.

Such reclassification has no

effect on net income.

Non controlling interests

consist of other stockholders’ ownership interests in majority-owned

subsidiaries of the Company.

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.

results could differ from those estimates.

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

Cash and Cash

3 unchanged sentences

institutions in the PRC are not insured by any government entity or

Accumulated Other

Comprehensive Income

other comprehensive income represents foreign currency translation

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 May 31, 2010

and 2009, the amount not disbursed was $146,089 and $0, respectively, and these

are included in restricted cash in the consolidated balance sheets.

held in the escrow account are not insured by any government entity or

Trade Accounts

5 unchanged sentences

An allowance for doubtful accounts is established and determined based

on management’s assessment of known requirements, aging of receivables, payment

history, the customer’s current credit worthiness and the economic

on management’s regular assessment of known requirements, aging of receivables,

payment history, the customer’s current credit worthiness and the economic

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 the management’s best estimate of potentially uncollectible trade

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 $397,042 and $311,928 as of May 31, 2010 and 2009,

respectively.

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

of Significant Accounting Policies (continued)

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.

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 recognizes its revenues net of value-added taxes (“VAT”).

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.

Shipping Income and

00-10 “ Accounting for Shipping

and Handling fees and 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.

All costs incurred by the

Company for shipping and handling are included in cost of sales.

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.

results could differ from those estimates.

are stated at the lower of cost, determined on a weighted average basis, and net

1 unchanged sentence

Net realizable value is the estimated selling price, in the

ordinary course of business, less estimated costs to complete and

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

of Significant Accounting Policies (continued)

ordinary course of business, less estimated costs to complete and dispose.

Inventories consist of the following:

Raw materials

plant and equipment are carried at cost less accumulated depreciation.

11 unchanged sentences

and office equipment

and equipment

and office equipment

– construction in progress

property, plant and equipment

expense included in general and administrative expenses for the fiscal year

ended May 31, 2009 and 2008 was $208,509 and $121,105, respectively.

Depreciation expense included in cost of sales for the fiscal year ended May 31,

2009 and 2008 was $486,955 and $489,095, respectively.

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.

construction in progress is closed out to the appropriate asset classification

when the project is substantially complete, occupied, or placed into service.

depreciation is provided until it is completed and ready for its intended use.

At May 31, 2009, the costs involved with construction in progress were

Impairment of Long-Lived and

1 unchanged sentence

assets of the Company are reviewed annually to assess whether the carrying value

has become impaired according to the guidelines established in Statement of

Accounting Standards (SFAS) No.

144, “Accounting for the Impairment or

Disposal of Long-Lived Assets.” No impairment of assets was

has become impaired according to the guidelines established in FASB Codification

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 May 31, 2010, the Company

expects these assets to be fully recoverable.

No impairment of assets was

recorded in the periods reported.

Company expenses non-direct advertising costs as incurred.

The Company did not

incur any direct response advertising costs during the years ended May 31, 2009

and 2008 to be capitalized and deferred to future periods.

Accumulated Other

Comprehensive Income

other comprehensive income represents foreign currency translation

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

of Significant Accounting Policies (continued)

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 are checked on site by customers and, once the

products are accepted by customers, they will sign the acceptance notice.

is no warranty issue after the delivery.

incentive given to our customers is an adjustment of the selling prices of our

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”).

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.

Cost of Goods

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

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

Shipping Income and

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.

Company expenses advertising costs as incurred.

Advertising expenses

charged to operations were $0 for the years ended May 31, 2010 and 2009,

respectively.

Advertising costs, if any, are included in selling, general and

administrative expense on the income statement.

Foreign Currency and

2 unchanged sentences

The functional

currency is the Renminbi (“RMB”) of the PRC.

The financial statements are

translated into US dollars from RMB at year-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.

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

21, 2005, the PRC changed its foreign currency exchange policy from a fixed

7 unchanged sentences

dollars at rates used in translation.

Company has implemented SFAS No.109 “Accounting for Income Taxes”, which

provides for a liability approach to accounting for income taxes.

income taxes result from the effect of transactions that are recognized in

different periods for financial and tax reporting purposes.

The Company has

recorded no deferred tax assets or liabilities as of May 31, 2009 and

There are no material timing differences and therefore no

deferred tax asset or liability as of May 31, 2009 and 2008.

There are no net

operating loss carry forwards as of May 31, 2009 and 2008.

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.

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.

As of May 31, 2010 and 2009, the

Company did not have any deferred tax assets or liabilities, and as such, no

valuation allowances were recorded at May 31, 2010 and 2009.

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

(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

ASC 740 also provides guidance on de-recognition, classification,

interest and penalties, accounting in interim periods, disclosure and

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.

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.

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.

Income Tax Laws of the PRC, the Company’s subsidiaries are generally subject to

8 unchanged sentences

expense for the fiscal years ended May 31, 2010 and 2009 are as

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

Restrictions on Transfer of

5 unchanged sentences

restrictions exist with respect to loans and advances.

(formerly SFAS 107, “Disclosures about Fair Value of Financial Instruments”)

defines financial instruments and requires disclosure of the fair value of those

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:

inputs to the valuation methodology are quoted prices (unadjusted) for

identical assets or liabilities in active

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

inputs to the valuation methodology are unobservable and significant to

the fair value.

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

of Significant Accounting Policies (continued)

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).

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

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.

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

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 is calculated in accordance with Statement of Financial Accounting

Standards No.

128 ("SFAS No.

128"), "Earnings per share".

Basic net earnings per

share is based upon the weighted average number of common shares outstanding.

Diluted net earnings per share is based on the assumption that all dilutive

convertible shares and stock options were converted or exercised.

computed by applying the treasury stock method.

Allowance for Doubtful

maintain an allowance for doubtful accounts which reflects our best estimate of

potentially uncollectible trade receivables.

We regularly review our trade

receivables allowances by considering such factors as historical experience,

credit-worthiness, the age of the trade receivable balances and current economic

conditions that may affect a customer’s ability to pay.

accounts receivable

for doubtful accounts

trade accounts receivable

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.

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

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

following is a reconciliation of the basic and diluted earnings per

income (loss) for earnings per share

average shares used in basic computation

effect of warrants and options

average shares used in diluted computation

(loss) per share, basic

(loss) per share, diluted

Statement of Cash

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

“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.

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

management does not disaggregate Company data, the Company has determined that

only one segment exists.

Recent Accounting

Pronouncements

2009, the FASB issued ASC 105 (previously SFAS No.

168, The FASB Accounting

Standards Codification and the Hierarchy of Generally Accepted Accounting

Principles ("GAAP") - a replacement of FASB Statement No.

162 ), which has

become the source of authoritative accounting principles generally accepted in

the United States recognized by the FASB to be applied to nongovernmental

June 2009, the FASB issued ASC 860 (previously SFAS No.

“Accounting for Transfers of Financial Assets”), which requires additional

information regarding transfers of financial assets, including securitization

transactions, and where companies have continuing exposure to the risks related

to transferred financial assets.

SFAS 166 eliminates the concept of a

“qualifying special-purpose entity,” changes the requirements for derecognizing

financial assets, and requires additional disclosures.

SFAS 166 is effective for

fiscal years beginning after November 15, 2009.

The Company does not

believe this pronouncement will impact its financial statements.

June 2009, the FASB issued ASC 810 (previously SFAS No.

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.

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.

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

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

February 2010, FASB issued ASU No.

2010-9 –"Subsequent events (Topic 855)"

Amendments to Certain Recognition and Disclosure Requirements.

addresses certain implementation issues related to an entity’s requirement to

perform and disclose subsequent-events procedures, removes the requirement that

public companies disclose the date of their financial statements in both issued

and revised financial statements.

According to the FASB, the revised statements

include those that have been changed to correct an error or conform to a

retrospective application of U.S.

The amendments were effective upon

issuance of the update, except for the use of the issued date for conduit debt

That amendment is effective for interim or annual periods ending after

June 15, 2010.

The Company does not expect the adoption of this ASU to have a

material impact on the Company’s consolidated financial statements.

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.

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

Reclassifications

prior period amounts have been reclassified to conform to the current period

presentation.

Property, Plant and

equipment consist of the following:

and equipment

and office equipment

property, plant and equipment

expense included in general and administrative expenses for the fiscal year

ended May 31, 2010 and 2009 was $163,573 and $208,509, respectively.

Depreciation expense included in cost of sales for the fiscal year ended May 31,

2010 and 2009 was $1,010,448 and $486,955, respectively.

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.

construction in progress is closed out to the appropriate asset classification

when the project is substantially complete, occupied, or placed into service.

depreciation is provided until it is completed and ready for its intended

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.

As of May 31, 2010, the

book value of the construction in progress sold was approximately $3.3 million.

A gain from property, plant and equipment disposal of $496,816 was recorded in

other income.

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

costs totaling $0 were capitalized into construction in progress for the years

ended May 31, 2010 and 2009.

consist of the prepaid expenses and the monies deposited with the suppliers for

purchasing vehicles and raw material.

The total outstanding amount was Nil and

$245,495 as of May 31, 2009 and May 31, 2008, respectively.

provision made for the prepayment at May 31, 2009 and May 31, 2008.

Other Receivables

receivables consist of insurance claims and the temporary lending to the staff

with no fixed repayment date and with no interest bearing on it.

The allowances

on the other accounts receivable are recorded when circumstances indicate

collection is doubtful for particular accounts receivable.

Company provides for allowances on a specific account basis.

outstanding amount was $270,819 and $472,451 as of May 31, 2009 and May 31,

The total outstanding amount were

$1,289,007 and $0 as of May 31, 2010 and 2009, respectively.

no provision made for the prepayment at May 31, 2010 and 2009.

receivable in current assets amounted to $950,671 and $0 as of May 31, 2010 and

2009, respectively.

There is no provision made for the other receivables at May

31, 2009 and May 31, 2008.

is stated at weighted average cost and consisted of the following:

Raw materials

CHINA INFRASTRUCTURE

CONSTRUCTION CORPORATION

receivables in long term assets amounted to $4,955,648 and $270,819 as of May

31, 2010 and 2009, respectively.

31, 2010 other receivable includes $3.8 million related to construction in

progress disposal to an unrelated party.

The receivable is unsecured, interest

free, and with fixed repayment dates (note 4).

It also includes insurance claims

and deposits, that are from unrelated parties, interest free, unsecured, and

with no fixed repayment date, and advances to employees for business

31, 2009, other receivables in long term assets amounted to $270,819, which

mainly consists of insurance claims and the temporary lending to the staff with

no fixed repayment date, unsecured, and with no interest bearing on

allowances on the other accounts receivable are recorded when circumstances

indicate collection is doubtful for particular accounts

The Company provides for allowances on a specific account

There is no provision made for the other receivables at May 31, 2010 and

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

Other Payables

payables consist of the following as of May 31, 2009 and 2008:

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

to CRCG (note 1)

other companies deposit

1 unchanged sentence

expense has been included in cost of goods sold.

expenses amounted to $491,885 and $277,329 as of May 31, 2010 and 2009.

accrued expenses mainly include accrued land lease expenses, accrued electricity

and utility expenses, and accrued interest.

Related Party

11 unchanged sentences

Yang (Chairman)

Zhan (common shareholder)

Jian (20% owned by a common shareholder)

Shunjun (Chairman’s brother-in-law)

Liao(Chairman’s brother-in-law)

Chang Shen Transportation (20% owned by a common

outstanding amount of related party receivables was $674,289 and $236,042 as of

May 31, 2009 and 2008, respectively.

These receivables require no interest and

have no fixed re-payment terms.

Currently, the receivables from related party

consist of the following:

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

outstanding amount of related party receivables was $1,286,945 and $674,289 as

of May 31, 2010 and 2009, respectively.

These receivables require no interest

and have no fixed re-payment terms.

Currently, the receivables from related

party consist of the following:

Zhan (common shareholder)

Ming (Chairman Yang Rong’s brother)

Liao (CEO’s wife)

Jian (20% owned by a common shareholder )

Chang Shen Transportation (20% owned by a common

Yihua Daxin Investment (holding company)

purpose of this loan was compliance with the PRC currency regulations.

loan was extended by our Hong Kong

October 16, 2009, the Company borrowed $1,466,000 from Beijng Bank.

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 May 31, 2010, the loan payable to

bank amounted to $1,317,600.

There is no interest expense capitalized into

construction in progress for the years ended May 31, 2010 and 2009.

30, 2010, total loan bank payable of $146,400 was paid

no bank loan payable as of May 31, 2009.

interest expense and financial charges for the years ended May 31, 2010 and 2009

on all debt amounted to $163,646 and $2,097, respectively.

Total interest income

for the years ended May 31, 2010 and 2009 amounted to $4,424 and $0,

respectively.

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

Operating Lease Commitment

31, 2009, the Company was committed to minimum rentals for the leased land under

long-term non-cancellable operating leases as follows:

Year Ended May 31,

Minority Interests

interests consist of other stockholders’ ownership interests in majority-owned

subsidiaries of the Company, which is about 5.48% of the total ownership.

May 31, 2009 and 2008, the balance of minority interests was $1,210,695 and

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

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 25 months from June 2010 to June 2012 are as follows:

lease payment

imputed interest

capital lease obligation as of May 31, 2010

current maturity

lease obligation – long-term portion as of May 31, 2010

future lease commitments for the next three years after May 31, 2010 are as

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

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 34 months from June 2010 to March 2013 are as

lease payment

imputed interest

capital lease obligation as of May 31, 2010

current maturity

lease obligation – long-term portion as of May 31, 2010

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

future lease commitments for the next three years after May 31, 2010 are as

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

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 35 months from June 2010 to April 2013 are as

lease payment

imputed interest

capital lease obligation as of May 31, 2010

current maturity

lease obligation – long-term portion as of May 31, 2010

future lease commitments for the next three years after May 31, 2010 are as

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

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

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 34 months from June 2010 to March 2013 are as

lease payment

imputed interest

capital lease obligation as of May 31, 2010

current maturity

lease obligation – long-term portion as of May 31, 2010

future lease commitments for the next three years after May 31, 2010 are as

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

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

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 8

months from June 2010 to January 2011 are as follows:

lease payment

imputed interest

capital lease obligation as of May 31, 2010

current maturity

lease obligation – long-term portion as of May 31, 2010

future lease commitments for the next three years after May 31, 2010 are as

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

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

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 33 months from June 2010 to February 2013 are as follows:

lease payment

imputed interest

capital lease obligation as of May 31, 2010

current maturity

lease obligation – long-term portion as of May 31, 2010

future lease commitments for the next three years after May 31, 2010 are as

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

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 34 months from June 2010 to March 2013 are as follows:

lease payment

imputed interest

capital lease obligation as of May 31, 2010

current maturity

lease obligation – long-term portion as of May 31, 2010

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

future lease commitments for the next three years after May 31, 2010 are as

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%.

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

A one time processing fee of $407 was paid by the Company related to

The minimum payments for the remaining lease term of 11 months from

June 2010 to April 2011 are as follows:

lease payment

imputed interest

capital lease obligation as of May 31, 2010

current maturity

lease obligation – long-term portion as of May 31, 2010

future lease commitments for the next three years after May 31, 2010 are as

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

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 23 months from June 2010 to April 2012 are as follows:

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

lease payment

imputed interest

capital lease obligation as of May 31, 2010

current maturity

lease obligation – long-term portion as of May 31, 2010

future lease commitments for the next three years after May 31, 2010 are as

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

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 23 months from June 2010 to April 2012 are as follows:

lease payment

imputed interest

capital lease obligation as of May 31, 2010

current maturity

lease obligation – long-term portion as of May 31, 2010

future lease commitments for the next three years after May 31, 2010 are as

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

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%.

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

A one time processing fee of $407 was paid by the Company related to

The minimum payments for the remaining lease term of 11 months from

June 2010 to May 2011 are as follows:

lease payment

imputed interest

capital lease obligation as of May 31, 2010

current maturity

lease obligation – long-term portion as of May 31, 2010

future lease commitments for the next three years after May 31, 2010 are as

summary of all lease commitments is as follows:

lease payment

imputed interest

capital lease obligation as of 5-31-2010

current maturity

lease obligation – long term portion as of 5-31-2010

summary of future lease commitments for the next three years after May 31, 2010

is as follows:

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

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 May 31, 2010

and 2009, the balance of non-controlling interest was $2,046,212 and $1,210,695,

respectively.

Earnings Per Share

(loss) per share for the years ended May 31, 2009 and 2008 is determined by

dividing net income (loss) for the periods by the weighted average number of

both basic and diluted shares of common stock and common stock equivalents

At May 31, 2009 and 2008, there were no dilutive

ended May 31,

for basic and diluted EPS

Net income from continuing operations

for basic and diluted EPS

Weighted average shares of common stock outstanding

from continuing operations – basic and diluted

Shareholder’s

Reverse Stock

September 28, 2009, the Company effectuated a 1-for-10 reverse stock split of

the Company’s common stock, with no par value (the “Common Stock”) (the “Reverse

Upon the Reverse Stock Split, ten (10) shares of the outstanding Common

Stock were automatically converted into one (1) share of Common Stock.

Reverse Stock Split, however, did not alter the number of shares the Company is

authorized to issue, but only reduced the number of shares of its Common Stock

issued and outstanding.

Any fractional share issued as a result of the reverse

split was rounded up.

Immediately before the Reverse Split there were

15,295,500 shares of Common Stock issued and outstanding.

Immediately after

giving effect to the Reverse Split, there were 1,529,550 shares of Common Stock

issued and outstanding.

All statements are retroactively stated to show the

effects of the Reverse Split as if it had occurred at the beginning of the first

period presented.

Stock Issuance For

October 14, 2009, to provide incentives to the Company’s management and to

adjust the Company’s capital structure, the Company issued 7,031,344 shares of

its common stock to Rui Shen, as a trustee holding the shares for the Company’s

Chief Executive Officer and Chairman Mr.Yang.

The Company has used the closest

share issuance price as the fair market value to calculate the compensation

A total of $27,422,242 in compensation expense was included in selling,

general and administrative expenses.

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

Employee Welfare Plan

Stock Issuance For

October 16, 2009, the Company entered into and consummated the sale of

securities pursuant to a Subscription Agreement with a number of institutional

investors (the “Investors”), providing for the sale to the Investors of an

aggregate of approximately 2,564,108 shares of Common Stock for an aggregate

purchase price of approximately $10,000,000 (or $3.90 per Share).

proceeds of $8,605,626 had been received and recorded as share capital.

connection with the Private Placement, the Company issued to the placement agent

warrants to purchase 153,846 shares of Common Stock exercisable for a period of

five years at an exercise price of $3.90 per share and paid a transaction fee

equal to 8% of the gross proceeds of the Private Placement.

The Company issued

to the placement agent 92,468 shares of Common Stock for the service provided

purely relating to the equity financing.

Additionally, the Company issued

to an advisor in the PRC 288,963 shares of Common Stock and paid a

transaction fee equal to 2.5% of the gross proceeds of the Private Placement for

the service provided purely relating to the equity financing.

issued to a middleman 27,100 shares of Common Stock for the service provided

purely relating to the equity financing.

Thus, the Company paid $1,394,396 in

total and issued 408,531 shares to various parties as fund raising costs.

costs were classified as equity and accounted for as common stock issuance

Company also entered into several covenants in the Subscription Agreement, the

breach of which can result in penalties, which are capped at 15% of the

aggregate purchase price of the Private Placement.

These covenants

the Company’s board of directors to be in compliance with the Nasdaq

Corporate Governance standards;

on a National Securities Exchange within 24 months of the Closing

of a new full-time Chief Financial Officer, subject to the approval of

certain Investors;

of an internal control consultant for Sarbanes-Oxley 404 compliance;

of additional shares of common stock to the Investors on a pro rata basis

for no additional consideration in the event that the Company’s after tax

net income for each of the fiscal years ending May 31, 2010 and 2011 is

less than $14,000,000 and $18,000,000, respectively, subject to certain

adjustments, which number of shares should be equal to the percentage of

variation between the actual net income and the target net

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

connection with the Subscription Agreement, the Company also entered into an

Investor Relations Escrow Agreement with an escrow agent and an investor

representative, wherein the Company agreed to deposit $120,000 of the proceeds

of the Private Placement into an escrow account (the “IR Escrow Funds”) and to

utilize such IR Escrow Funds for a three-year investor relations program (the

“IR Escrow Agreement”).

In accordance with the Subscription Agreement, the

Company shall retain an investor relations firm within 30 days after the Closing

Date, subject to the approval of the investor representative.

The Company is

obligated to replenish the IR Escrow Funds on the second and third anniversaries

of the Closing Date to bring the balance of such funds to $120,000 as of

11, 2010, the Company consummated a private placement pursuant to a Subscription

Agreement dated March 5, 2010 with a number of investors, providing for the sale

to the investors of an aggregate of approximately 1,282,091 shares of common

stock for an aggregate purchase price of approximately $5,000,000 (or $3.90 per

In connection with the private placement, the Company issued to the

placement agent a warrant to purchase 46,154 shares of common stock exercisable

for a period of five years at an exercise price of $3.90 per share and paid a

transaction fee of $240,000.

Additionally, the Company issued to a finder

a warrant to purchase 23,077 shares of common stock exercisable for a

period of five years at an exercise price of $3.90 per share and paid a

transaction fee of $120,000.

The Company paid $371,373 fund raising costs in

total to various parties.

These costs were classified as equity and accounted

for as common stock issuance cost.

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.

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.

will vest over 2 years and no option can be exercised after 5 years from the

vesting date.

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

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

The options will vest over 1 year and no option can be exercised after 3

years from the vesting date.

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

assumptions used in calculating the fair value of options granted using the

Black-Scholes option- pricing model are as follows:

interest rate

life of the options

dividend yield

is a summary of the stock option activity:

is a summary of the status of options outstanding at May 31, 2010:

Outstanding Options

Exercisable Options

Exercise Price

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

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

The Warrants contain standard adjustment provisions upon stock dividend,

stock split, stock combination, recapitalization, and a change of control

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.

warrants carry an exercise price of $3.90 and a 5-year term.

contain standard adjustment provisions upon stock dividend, stock split, stock

combination, recapitalization, and a change of control transaction.

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.

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.

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

Employee Welfare

Company has established its own employee welfare plan in accordance with Chinese

law and regulations.

The Company makes annual contributions of 14% of all

employees' salaries to an employee welfare plan.

The total expense

for the above plan was $221,927 and $23,499 for the years ended May 31, 2009 and

The Company makes contributions to an employee welfare

The total expense for the above plan was $5,970 and $119,436

for the years ended May 31, 2010 and 2009, respectively.

following table reconciles the U.S.

statutory rates to the Company’s effective

tax rate for the years ended May 31, 2010 and 2009:

Statutory rates

income not recognized in USA

income tax exemption

provision for income taxes

People’s Republic of China

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.

the Company is charged at 0% income tax rate because of a special tax exemption

approved by the PRC tax department.

The income tax expenses for the years

ended May 31, 2010 and 2009 are $0.

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%.

There were no significant

book and tax basis differences.

estimated tax savings due to the tax exemption for the years ended May 31, 2010

and 2009 amounted to approximately $3,821,280 and $2,802,334, respectively.

net effect on earnings per share if the income tax had been applied would

decrease the basic and diluted earnings per share for the year ended May 31,

2010 by $0.47 and $0.47, 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 year ended May 31, 2009 by $0.20 and $0.20,

respectively.

Segment Reporting

of Financial Accounting Standards No.

131 (SFAS 131), “Disclosure about Segments

of an Enterprise and Related Information” 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.

management does not disaggregate Company data, the Company has determined that

only one segment exists.

Concentration of Credit Risks and Uncertainties

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

income was $857,170 for the year ended May 31, 2010.

It mainly consists of

$496,816 gain on property, plant and equipment disposal (note 4).

the other income is mainly rental income by renting our equipment to unrelated

third parties.

Other expenses were $0 for the year ended May 31,

income was $0 for the year ended May 31, 2009.

Other expenses were $0 for the

year ended May 31, 2009.

Concentration of Credit Risks

and Uncertainties

Concentration

2 unchanged sentences

material in relation to the Company’s total credit exposure.

company had sales to two major customers, which represented 25% and 12% of the

Company’s total sales for the fiscal year ended May 31, 2009.

And the Company

had sales to one major customer, which represented 17% of the Company’s total

sales for the fiscal year ended May 31, 2008.

customer accounted for 33% of the Company’s accounts receivable balance at May

One customer accounted for 10% of the Company’s accounts receivable

balance at May 31, 2008.

five major vendors account for 50% of the Company’s total cost of revenue for

the fiscal year ended May 31, 2009 with one major vendor representing 23% of the

total cost of revenue.

The top five major vendors account for 45% of the

Company’s total cost of revenue for the fiscal year ended May 31, 2008, with one

major vendor representing 19% of the total cost of revenue.

accounted for more than 10% of the Company’s accounts payable at May 31,

company had sales to one major customer, China Railway Construction Group, that

represented 14% of the Company’s total sales for the fiscal year ended May 31,

And the Company had sales to two major customers, China Railway

Construction Group, and Guangzhou Tianli Construction Group , that represented

25% and 12% of the Company’s total sales for the fiscal year ended May 31,

customers, China Railway Construction Group, and Guangzhou Tianli Construction

Group, accounted for 26% and 10% of the Company’s accounts receivable balance at

May 31, 2010.

One customer, China Railway Construction Group, accounted for 33%

of the Company’s accounts receivable balance at May 31, 2009.

five major vendors account for 26% of the Company’s total inventory purchases

for the fiscal year ended May 31, 2010 with one major vendor representing 8% of

the total purchase.

The top five major vendors account for 50% of the Company’s

total inventory purchases for the fiscal year ended May 31, 2009 with one major

vendor representing 23% of the total purchase.

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

vendor accounted for 11% of the Company’s accounts payable at May 31, 2010.

vendor accounted for more than 10% of the Company’s accounts payable at May 31,

One major vendor accounted for 8% of the Company’s accounts

payable at May 31, 2009.

One major vendor accounted for 24% of the Company’s

accounts payable at May 31, 2008.

Company’s exposure to foreign currency exchange rate risk primarily relates to

2 unchanged sentences

the cash flows, revenues, earnings and financial position of the

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

Fair Value of Financial

of Financial Accounting Standards No.

107 (SFAS 107), “Disclosures about Fair

Value of Financial Instruments” requires disclosure of the fair value of

financial instruments held by the Company.

SFAS 107 defines the fair value of

financial instruments as the amount at which the instrument could be exchanged

in a current transaction between willing parties.

The Company considers the

carrying amount of cash, accounts receivable, other receivables, related party

receivables, accounts payable, accrued expenses and other payables to

approximate their fair values because of the short period of time between the

origination of such instruments and their expected realization and their current

market rate of interest.

Contingencies

6 unchanged sentences

bank failure, causing loss to the Company, is remote.

Recent Accounting Pronouncements

December 2007, the FASB issued SFAS No.

141R, "Business Combinations"

141R amends SFAS 141 and provides

revised guidance for recognizing and measuring identifiable assets and goodwill

acquired, liabilities assumed, and any non-controlling interest in the acquiree.

It also provides disclosure requirements to enable users of the financial

statements to evaluate the nature and financial effects of the business

It is effective for fiscal years beginning on or after

December 15, 2008 and will be applied prospectively.

We are currently

evaluating the impact of adopting SFAS No.

141R on our consolidated

financial statements.

December 2007, the Financial Accounting Standards Board issued SFAS No.

“Non-controlling Interests in Consolidated Financial Statements-an amendment of

160 establishes accounting and reporting standards for the

non-controlling interest in a subsidiary and for the deconsolidation of a

160 will become effective as of the beginning of the

Company's fiscal year beginning after December 15, 2008.

The Company is

currently evaluating the impact that the adoption of SFAS No.

160 will have on

its consolidated financial condition or results of operations.

2008, the FASB issued SFAS No.

163, “Accounting for Financial Guarantee

Insurance Contracts”.

This statement clarifies accounting standards applicable

to financial guarantee insurance contracts and specifies certain disclosures.

This statement is effective for financial statements issued for fiscal years

beginning after December 15, 2008, except certain disclosures are effective for

periods beginning after June 30, 2008.

This statement will be

effective for financial statements issued for fiscal years

beginning after December 15, 2008.

The Company does not expect the

adoption of SFAS 163 will have a material impact on its financial condition or

results of operation.

12, 2009 the FASB issued two statements that amended the guidance for

off-balance-sheet accounting of financial instruments:

166, Accounting for Transfers of

Financial Assets, and SFAS No.

167, Amendments to FASB Interpretation

Lease Commitment

31, 2010, the Company was committed to minimum rentals for the leased land under

long-term non-cancellable operating leases as follows:

Year Ended May 31,

currently have a ten-year lease with annual payment of approximately $48,000,

from March 1, 2008 to February 28, 2018, for our Beijing production base.

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

We also leased two offices in Beijing as our headquarter office.

office lease is from July 11, 2010 to July 10, 2012, with annual payment of

approximately $48,000.

One office lease is from December 15, 2009 to December

14, 2011, with annual payment of approximately $106,000.

INFRASTRUCTURE CONSTRUCTION CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

Accounting Pronouncements (continued)

166 revises SFAS No.

140, Accounting for Transfers and

Servicing of Financial Assets and Extinguishments of Liabilities, and

will require entities to provide more information about sales of securitized

financial assets and similar transactions, particularly if the seller retains

some risk to the assets.

The statement eliminates the concept of a qualifying

special-purpose entity, changes the requirements for the derecognition of

financial assets, and calls upon sellers of the assets to make additional

disclosures about them.

167 amends FASB Interpretation (FIN) No.

46(R), Consolidation of Variable Interest

Entities, by altering how a company determines when an entity that is

insufficiently capitalized or not controlled through voting should be

consolidated.

A company has to determine whether it should provide consolidated

reporting of an entity based upon the entity's purpose and design and the parent

company's ability to direct the entity's actions.

standards will be effective at the start of the first fiscal year beginning

after November 15, 2009.

The guidance will have to be applied for the

second-quarter filing.

issued SFAS No.

168, The FASB Accounting Standards Codification and the

Hierarchy of Generally Accepted Accounting Principles, on June 29, 2009 and, in

doing so, authorized the Codification as the sole source for authoritative U.S.

168 will be effective for financial statements

issued for reporting periods that end after September 15, 2009.

it's effective, it will supersede all accounting standards in U.S.

from those issued by the SEC.

168 replaces SFAS No.

establish a new hierarchy of GAAP sources for non-governmental entities under

the FASB Accounting Standards Codification.

Subsequent Events

no subsequent events.

The Company has evaluated subsequent events

from the balance sheet date through September 2, 2009.

lease expenses amounted to $124,013 and $48,391 for the years ended May 31, 2010

and 2009, respectively.

with Institute of Building Materials (“IBM”)

December 31, 2009, the Company reached a three year agreement with the Institute

of Building Materials (“IBM”), a subsidiary of the China Academy of Building

Research ("CABR").

Under the Agreement, CHNC will work exclusively with the

Institute of Building Materials to obtain technical research,

development and support.

The Institute of Building Materials will also provide

training courses to CHNC employees.

CHNC will feature the Institute of Building

Materials as CHNC’s technological partner in its corporate material.

Institute of Building Materials will use its relationships and brand influence

in the construction industry to assist CHNC in business development.

agrees to pay IBM approximately $51,000 each year.

1, 2010, the Company hired an unrelated party as its consultant and a total of

100,000 restricted shares were issued.

Company has evaluated subsequent events from the balance sheet date through the

date the report is issued.

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 8. Financial Statements and Supplementary Data