10-K 1 v127470_10k.htm Unassociated Document
 
 


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

ANNUAL REPORT
ON FORM 10-K

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

For the Fiscal Year Ended June 30, 2008

Commission File Number 000-51081

CHINA INFRASTRUCTURE INVESTMENT CORPORATION
(Exact name of registrant as specified in its charter)

Nevada
 
88-0484183
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)

Room D, 2F, Building 12, Xinxin Huayuan, Jinshui Road, Zhengzhou, Henan Province, The People’s Republic of China
(Address, including zip code, of principal executive offices)

(011) 86-375-2754377
(Registrants’ telephone number, including area code)

Securities Registered Under Section 12(b) of the Exchange Act: Common Stock, par value $0.001 per share

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.    
Yes x     No ¨

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

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

Large accelerated filer ¨  Accelerated filer ¨  Non-accelerated filer ¨ Smaller Reporting Company x

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

Aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2008 based upon the closing price was approximately $320,000,000.

The number of outstanding shares of the registrant’s Common Stock on September 29, 2008 was 80,000,000.
 
 


 
China Infrastructure Investment Corporation
Annual Report on Form 10-K
For the Year Ended June 30, 2008

Table of Contents

PART I DESCRIPTION OF BUSINESS
1
   
ITEM 1.
Business
1
 
   
ITEM 1A.
Risk Factors
10
     
ITEM 1B.
Unresolved Staff Comments
18
     
ITEM 2.
Properties
18
     
ITEM 3.
Legal Proceedings
18
     
ITEM 4.
Submission of Matters to a Vote of Security Holders
19
     
PART II
 
20
     
ITEM 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
20
     
ITEM 6.
Selected Financial Data
22
     
ITEM 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
22
     
ITEM 7A.
Quantitative and Qualitative Disclosures about Market Risk
31
     
ITEM 8.
Financial Statements and Supplementary Data
31
     
ITEM 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
31
     
ITEM 9A(T).
Controls and Procedures
32
     
ITEM 9B.
Other Information
33
     
PART III
34
   
ITEM 10.
Directors, Executive Officers, and Corporate Governance
34
     
ITEM 11.
Executive Compensation
37
     
ITEM 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
41
     
ITEM 13.
Certain Relationships and Related Transactions, and Director Independence
42
     
ITEM 14.
Principal Accountant Fees and Services
43
     
PART IV
 
45
     
ITEM 15.
Exhibits and Financial Statement Schedules
45

- i -


PART I
DESCRIPTION OF BUSINESS
 
ITEM 1.
Business
 
Forward Looking Statements
 
This Report contains forward-looking statements. Generally, the words “believes”, ”anticipates”, “may”, “will”, “should”, “expect”, “intend”, “estimate”, “continue” and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, including the matters set forth in this report or other reports or documents we file with the SEC from time to time, which could cause actual results or outcomes to differ materially from those projected. Undue reliance should not be placed on these forward-looking statements which speak only as of the date hereof. We undertake no obligation to update these forward-looking statements. It is important to note that actual results could differ materially from historical results or those contemplated in the forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, and include risks associated with our target markets and risks pertaining to competition, other trend information and our ability to successfully enhance our operations. Factors that could cause actual results to differ materially include, but are not limited to, those identified in “Item 1A-Risk Factors” and in other of our filings with the U.S. Securities and Exchange Commission. All references to “China Infrastructure Investment Corporation”, “us”, “we” or the “Company” in this Annual Report on Form 10-K mean China Infrastructure Investment Corporation, a Nevada corporation, and all entities owned or controlled by China Infrastructure Investment Corporation, except where it is made clear that the term only means the parent company.
 
Prior Operations of the Company
 
Learning Quest Technologies, Inc. (n/k/a China Infrastructure Investment Corporation and hereinafter the “Company”) was formed as a Nevada corporation on January 11, 2001, originally under the name of “Learning Quest Technologies, Inc.” We were in the business of developing, licensing and marketing educational products and services. Our business model centered on the development and distribution of high quality, educational tools and solutions for creating, authoring, publishing, presenting and selling education and training materials and content via the Internet. We commenced limited operations but were unsuccessful in fully implementing our business plan. We ceased operations and focused our efforts on seeking a business opportunity. On February 8, 2008, we entered into a Share Exchange Agreement with Color Man Holdings Limited, a British Virgin Islands company (“CMH”) and Joylink Holdings Limited, a British Virgin Islands company and the sole stockholder of CMH (“Joylink”). As a result of the share exchange, we acquired all of the issued and outstanding securities of CMH from Joylink in exchange for 54,400,000 newly –issued shares of our common stock (the “Exchange”). Prior to the Exchange, we were considered a “blank check” company with zero assets and a net loss of approximately $25,000 for the year ending December 31, 2006. As of September 30, 2007, the Company had approximately $27,000 in liabilities.
 
Current Operations of The Company
 
History and Organizational Structure of CMH and Wise On China Limited (“WOC”)
 
CMH was formed on April 11, 2005 as a British Virgin Islands company with authorized capital of US$50,000 divided into 50,000 shares, each having a par value of US$1.00. Upon the consummation of the Exchange, the Company acquired Ten (10) shares of CMH’s capital stock, representing one hundred percent (100%) of the total issued and outstanding shares of capital stock of CMH. WOC was established and incorporated on November 2, 2005 with authorized share capital of HK$10,000 (approximately US$1,279.44) divided into 10,000 shares, each having a par value of HK$1.00 (approximately US$0.13). CMH’s sole business is to act as a holding company for WOC, and WOC’s sole business is to act as a holding company for Ping. CMH owns one (1) share of WOC approximately equal to US$0.13 in registered capital. Neither CMH nor WOC have a Board of Directors, however each company has one (1) Executive Director that serves as the legal representative and which may appoint a General Manager to lead each company’s routine operations. CMH’s current Executive Director is RCD (Nominee) Limited and WOC’s current Executive Director is Siu Choi Fat. Both CMH and WOC have their office located at Room 42, 4F, New Henry House, 10 Ice House Street, Central, Hong Kong.

- 1 -


History of Ping and the Pinglin Expressway
 
In accordance with the PRC’s National Expressway Network Plan formulated by the State and “the Tenth Five-Year Plan” of Henan Province on the Comprehensive Traffic System Development Plan formulated by the Henan government for the purpose of completing the Pingdingshan-Linru portion of the Nanjing-Luoyang expressway (also referred to herein as the “Nanluo Expressway”), Ping competed in and won an open bid to fund, operate and manage such Pingdingshan-Linru portion in early 2003.
 
Thereafter, Pingdingshan Pinglin Expressway Co., Ltd (the “Ping”) was incorporated under the laws of the PRC on May 12, 2003 by four (4) investors, Henan Shengrun Venture Investment Management Co., Ltd. (“HSV”), Henan Pingdingshan Zhongya Road and Bridge Construction Co., Ltd. (“HPZ”), Pingdingshan Expressway Construction Co., Ltd. (“PECC”) and Zhongyuan Trust & Investment Co., Ltd. (“ZTI”). At establishment, the percentage of each party’s equity interest was 46%, 18%, 18% and 18%, respectively. In May 21, 2007, PECC, HPZ and ZTI transferred all of their shares to HSV and Li Xipeng. After the transfer, Ping was held by HSV and Li Xipeng with equity interests of 95% and 5%, respectively. On June 18, 2007 (effective July 30, 2007), HSV and Li Xipeng entered into an equity transfer agreement pursuant to which they transferred all of their shares to WOC. the Company’s approved operation tenure is thirty (30) years.
 
Currently, Ping is wholly-owned by WOC. WOC has contributed RMB 260,000,000 (US$33,090,802) in registered capital of Ping with a total investment equal to RMB 750,000,000 (US$95,454,237). Ping’s office is located at Pinglin Toll Road Station, New District, Pingdingshan City, Henan Province, the PRC.
 
Current Business of Ping
 
Ping was founded with the purpose of providing to society high quality infrastructure services and to promote regional economic development by investing in, constructing, operating and managing an expressway property from the cities of Linru to Pingdingshan in Luoyang-Nanjing, the PRC referred to hereinafter as the “Pinglin Expressway” or the “Expressway” and the rental of petrol stations and service districts along the toll roads thereon.
 
With the approval from Henan Communications Bureau and the State Development and Reform Committee of China [NO. 2003-1784], the Company is permitted to construct and operate the Pinglin Expressway in Henan Province for thirty (30) years from 2003. Pursuant to the permission from Henan Communications Bureau and Henan Development and Reform Committee [NO. 2005-1885], the Company is entitled to operate six (6) toll gates. All the rates applicable to the automobiles are defined by the Henan Communications Bureau and Henan Development and Reform Committee.
 
The location of the Expressway is in Henan Province in central China, and is a hinge terminal of the traffic backbone throughout China. The “five (5) longitudinal roads and seven (7) transverse roads” in the national expressway network plan are intercrossed with each other in Henan, extending more than 1,000 km, and more than sixty percent (60%) of vehicles are those passing through Henan from other provinces.

- 2 -


The Pinglin Expressway is a significant part of the Nanluo Expressway, a national trunk in the expressway network in China. The Nanluo Expressway links the northwestern regions to the southeastern coastal regions of the PRC. The construction of Pinglin Expressway started from October 23, 2003 and completed in two (2) phases. The first phase of the construction which covered the part with a length of approximately 86 kilometers, linking Ruzhou and Pingdingshan in Henan Province, commercially opened on December 31, 2005. On May 31, 2006, the second phase of the construction, with the length of approximately 21 kilometers, linking Pingdingshan and Yexian in Henan Province was completed. With the operation of Pinglin Expressway, the key transport artery, national trunk Nanluo Expressway was entirely opened to traffic.
 
Today, the Pinglin Expressway is a dual carriageway four (4) lane expressway, the toll section of which is 106 km in length. Toll revenue from the passing vehicles through the Expressway’s six (6) toll gates (South Pingdingshan, Pingdingshan New Town, Baofeng, Xiaotun, Ruzhou and Wenquan) is the primary source of the Company’s earnings. The Expressway is also located between two (2) key cities, Luoyang and Luohe. The Expressway extends from east to west, from Shilipu (the end of the Luohe-Pingdingsha expressway), through Yexian and Pingdingshan and then to New Xiying village at the joint of Pingdingshan and Luoyang. The road is lined with the Lianhuo (Lianyungang-Huoerguosi) national highway through the ringroad in Luoyang, and then extends to the southeast of Luohe City and connects with the Beijing-Zhuhai national highway into a network to form a convenient channel between Luoyang and Luohe. In addition to the traffic flow of the line itself, we believe it also attracts the traffic flow from Lianhuo high way to Zhengzhou then to Beijing-Zhuhai national highway to alter to Luoyang-Luohe section of Luonan route. Furthermore, the Expressway extends east to link the highway network of the Jiangsu and Anhui provinces and also links the sea ports, including Shanghai.
 
The Company’s operating income is achieved through toll charges on vehicles passing through the Expressway’s toll gates. The standard of toll charges is approved and set by the provincial price administrative bureau. The Company's revenue equals the relevant standard toll rate of the type of vehicles multiplies the relative miles of travel through the expressway which the Company is operating, and is cleared by the Henan Expressway System Toll Collection Center each month (Henan Expressway has a charges system and clearing center which calculates and allocates toll charge income according to the charge standards and the miles of travel of vehicles in the expressway). The Company is specialized in the operation and management of expressways. The maintenance projects are outsourced to professional road construction enterprises.
 
The Company began generating operating revenue in January 2006. The Company had not yet started full operation of the expressway prior to June 2006, therefore the operating income was at a low level and the growth was moderate; with the full operation of the expressway in June, the operating income sustained rapid growth. With respect to profits, since loan interest was included in the expenses, and the depreciation of fixed assets was accounted for during that period, the Company incurred a temporary loss in June. But with the increase of revenue, the Company crossed the profit and loss balance and achieved an increase in profit. Income in December was the same as in November on the whole, because of the seasonal winter impact on the traffic flow in December.
 
After several months of operations, the social awareness of the expressway gradually increased, and the number of passenger and commercial vehicles increased rapidly. We believe that along with income growth in the future, the profit earning capacity of the Company will improve steadily.

- 3 -


Enterprise Strategy
 
Henan is a province with the largest population in China. However, its urbanization rate is far below the national average level. With rapid economic and social development and the accelerated process of urbanization in Henan, demands for infrastructure, the expressway and other transportation infrastructure, urban facilities such as heating, water supply, and sewage treatment are also growing rapidly. The existing infrastructure can no longer meet the needs of social development.
 
Because the Chinese government’s financial revenue growth is limited, the financial investment of the government alone is unable to build huge infrastructure projects in a relatively short period. In order to attract social funds, local governments are willing to grant to commercial companies the right to invest in the construction and operation of projects, or directly sell the equity of the established enterprise to recover their early input. In addition, the government will also give preferential treatment on charges.
 
To seize the historic opportunity of rapid development of infrastructure of China and Henan, to rapidly strengthen and expand the Company's infrastructure industries, to create certain advantages of scale to further reduce the cost of the Company’s operations, the Company plans to invest in construction or purchase additional expressways, thermoelectricity, water supply or sewage treatment facilities and other infrastructure assets with good profit prospects in the next few years. Because the amount of investment in infrastructure is often relatively large, and the investment funds need to be in position within two (2) or three (3) years, the accumulated capital from the Company’s operation alone cannot meet the demand for investment in the future. The Company desires to actively participate in the capital markets and to use various channels of financing to enhance its ability to raise funds, thus to promote and achieve these long-term development strategies.
 
Based on the operation and management of the Pinglin Expressway, the Company desires to take full advantage of free cash flow and capital market instruments to invest in construction or purchase of infrastructure assets and to exploit all the advantages in management, government relationships and stockholder support to make the Company a professional, continuously-growing infrastructure investment operator.
 
In addition, the Company will energetically push forward the standard management, human-based services, establish an information management platform and continue to improve the road condition and traffic capacity so as to provide the traveler with a smooth, safe and comfortable running environment. With the increasing influence of the Pinglin Expressway on the substitution and division of other transportation lines and the projected continuous and rapid growth in China and the specific area where the roads are located, we believe that the Company’s income from toll and profits will continue to increase.
 
General Overview on Industry and Market
 
General
 
With efforts to advance China’s expressway system out of its developmental stages, the PRC issued a series of polices to lead the development of expressway through increasing the investment amount. China’s main objectives of road construction during the “Tenth Five-Year Plan” are (a) that total road mileage will reach 2.1~2.3 million km in 2010, (b) that the main national highways with “five (5) in longitudinal direction and seven (7) in transverse “ will be built across China, (c) that eight (8) interprovincial roads will be built in the west area where the expressway will connect ninety percent (90%) of the cities with more than 200,000 population and (d) that the expressway network will be formed in the eastern parts of China. In 2020, the PRC estimates that China’s total road mileage will extend more than 70,000 km, connecting all cities with more than 200,000 in population and forming a nationwide expressway network.

- 4 -


Compared with common roads, the expressways have distinct economic and technical characteristics and are a central representation of the advanced productivity in road transportation. According to the Pingdingshan-Linru Expressway Project Feasibility Study Report, although expressways only account for approximately 1.4% and 1.72% of the total road mileage in China, the traffic volume undertaken thereby is a quarter of the total volume. At present, the running speed of China’s motor vehicles in the expressways are two (2) times that of secondary roads; a two-way expressway with four (4) lanes covers an area 2.5 times that of a common secondary road, and its traffic capacity is eight (8) to ten (10) times that of the latter (as such figures are represented in the aforementioned Report). We believe that once the expressways are connected with each other, it will have an immense opportunity for economic growth.
 
We believe that as a result of recent progress in the social and economic development in China, road transportation has taken on an important position among the five (5) areas constituting the comprehensive transportation system (road, railway, airway, watercourse and pipeline). We believe that expressway as a modern traffic infrastructure have become a backbone channel due to their many characteristics such as large traffic volume, high speed, far-reaching influence and extensive penetration, thus establishing its crucial position in China’s comprehensive transportation system. We believe that expressways highlight the road grade standard and running speed and thus effectively improve the “bottleneck” situation with traffic transportation in some areas as well as promote the optimization and upgrade of the road network. Along with national economic development, we believe China’s passenger and freight transportation will continue to rise. We believe that demand for special transportation, land development, regional economic development and an increase in people’s travel demands have resulted from an increase in economic income and a change in life style, and that such demands will require continued development of expressways to satisfy such demands.
 
Socio-Economic Conditions of Henan Province and Pingdingshan
 
Henan Province has the largest population in China and its GDP in 2005 ranked fifth (5th) in the whole country. In 2005, Henan’s GDP growth increased by 13.7% up from the previous year, higher than the national growth rate of 9.9%. Pingdingshan is an important energy base and industrial city in Henan Province, which has abundant coal and salt resources. Coal mining, electricity, chemicals, steel and mechanical industry are the pillar industries of the city. In 2005, Pingdingshan’s GDP ranked sixth (6th) in Henan Province and its growth rate was higher than the average level of the whole province. Pingdingshan had a population of 4.93 million in 2005.
 
The Road Network Conditions of Henan Province and Pingdingshan City
 
Henan Province, which we believe has unique road advantages, is located in the central part of China. There are nine (9) national planned expressways including Lianhuo and Beijing-Hong Kong-Macao, and nine (9) national ways including No.107 and No.310, both of which pass through Henan. At the end of 2005, the total provincial traffic mileage had achieved 79,506 km, of which roads of second grade or above account for 30.8% of the total. The density of the road network reached 47.6 km per hundred square kilometer and with the rapid development of expressways, traffic mileage had reached 2,678 km by the end of 2005, ranking fourth (4th) in the country (these figures have been quoted from the 2005 Annual Report of the PRC listed company Central Expressway (symbol: 600020).
 
According to the PL Report, there are currently two (2) expressways, two (2) national roads and four (4) provincial roads which pass through Pingdingshan. However, the proportion of high-grade roads mileage is very low. The comprehensive technical level of the city road network ranges between level three (3) and level four (4), and it is accompanied with serious problems such as disorderly traffic, accidents and traffic jams. The average speed of the road network is only 37.61 km and the integrated saturation is 1.5, fifty percent (50%) over the normal capacity. As expressways under-construction will be open to traffic in succession, we believe the road network condition will gradually improve.

- 5 -


Main Advantages
 
Geographic Location
 
The infrastructure has a natural characteristic of regional monopolization, and there is no other resource to replace it within a specific region. Therefore, the geographic location decides the market space of infrastructure assets and has a substantial influence on the profit-earning capability of such assets, and so does the expressway industry. The Pinglin Expressway is located between Luoyang and Pingdingshan, two (2) major industrial cities among the city group in central China and Henan Province. In the north, the Expressway connects with the northwest area through the Lianyungang-Huo’erguosi expressway in Luoyang, and in the east connects to Anhui, Jiangsu, Zhejiang and Shanghai through Luohe city. In the south, the Expressway connects with the Beijing-Zhuhai expressway through Luohe City. With the gradual emergence of the effects produced by China’s initialization of its domestic demand policy, we believe the logistics between the coastal areas and inland China will result in further growth.
 
Corporate Governance Structure
 
The Company has a standard and highly effective corporate governance structure. Ping intends to implement a management system of responsibility by the General Manager under the leadership of its Board of Directors and establish an internal control system. Ping currently implements a series of incentive and binding policies to encourage management to create value for its stockholder, thus avoiding the defects commonly encountered in state-owned enterprises such as internally-connected person control and absence of the owners. We believe these standards and practices will ensure that the Company’s operating activities will not deviate from the track of healthy development.
 
Governmental Relationship
 
The operation of the infrastructure industry will not be separated from the support and cooperation of the governmental departments. Whether the infrastructure is working at optimum levels is associated with the integral competitiveness of a city and even a district. Therefore, each local government attaches great importance to the construction and operation of the infrastructure and provides a strategic priority to its development. Henan is located in central China, and has been positioned as an agricultural province for a long time, where the urbanization rate is lower than the average level of the whole country, the infrastructures are backward and the local governments have more eagerness to advance the infrastructure. However, due to certain restrictions on local finance, it is impossible to complete such a significant project only by depending on the investment from the government. During the construction of Pinglin Expressway, the Company experienced many links such as project examination and approval, bank funding, license authorization, charging approval and governmental custody and high efficiency management. As a result, we believe Ping has achieved recognition from the various governmental departments and has established a good cooperative relationship with them. We believe this will also establish a solid basis for long-term development of the Company.
 
Financial Advantages
 
We believe the Company's major financial advantages to be (a) sound operation, (b) stable growth of operating income, (c) low market risk, (d) no cyclical fluctuation, (e) strong capacity of cash flow from operation, (f) large free cash flow and (g) strong solvency and capital accumulation capacity. Furthermore, infrastructure industries are in line with the state’s industrial policy and concessions on charge standards and interest rates on bank loans.

- 6 -


Qualifications
 
The Company entered into that certain Chartered Right Agreement on Pingdingshan-Linru Expressway Project on April 10, 2003 with the Pingdingshan Communications Bureau (authorized by Pingdingshan People’s Government), upon which, the Company is entitled to the rights of construction, operation and toll collection. A copy of such Agreement is attached to this Report as Exhibit 10.2.
 
In accordance with Y. F. G. S. F. [2006] No. 1460 filed jointly by Henan Provincial Development and Reform Commission and Henan Provincial Department of Communications, the toll collection standard of Pingdingshan-Linru expressway was specially increased on Oct. 20, 2006, and the charging standard after the adjustment is as follows:
 
   
Type of Vehicle
 
Charging:
RMB:
Yuan/car km
 
Charging:
USD:
Dollar/car km
Type A
 
Small passenger car, truck loaded below 2 tons
 
0.55
 
0.0759
Type B
 
Middle-sized passenger car, truck loaded 2-5 tons
 
0.75, 0.80
 
0.1035, 0.1104
Type C
 
Large-sized passenger car, truck loaded 5-8 tons
 
1.10, 1.40
 
0.1518, 0.1931
Type D
 
Truck loaded 8-20 tons l
 
1.75
 
0.2414
Type E
 
Truck loaded 20-40 tons
 
2.10
 
0.2897
Type F
 
Truck loaded more than 40 tons
 
RMB0.08/ton. km
 
0.0110/ton.km
 
Technical Information
 
According to the rules in “Road Engineering Technical Standard” issued by Ministry of Communications of PRC, the main technical indexes of Pinglin Expressway are in the table as follows:
 
Construction mileage
107km
Grade of the Road
Dual-carriageway with two (2) lanes each direction
Design Speed
120km/h
Road Surface Type
Asphalt concrete
Design Load for Bridge/Culvert
Automobile - S 20, Trailer-120
Terrain
Plain lightly undulate area

Employees
 
Ping attaches great importance to the cultivation of professional managerial persons and pursues a talent policy of retaining professionals by undertaking an enterprise culture. Through continuously improving its corporate governance structure, management system and talent introduction and incentive system, Ping has created an excellent working atmosphere and development opportunity, which integrates the individual occupational plan with the Company’s development and reduces the turnover of the employees, especially the core technicians, thus forming a relatively stable and high-quality employee team. Figure 1 below sets forth the current institutional structure of Ping:
 
- 7 -

 
 
As of June 30, 2008, we had approximately 373 full-time employees. The number of employees by functions is listed below:

   
Number of Employees
 
% of Total Employees
 
Toll Collection Operations
   
262
   
70.2
 
Maintenance and Operations
   
43
   
11.5
 
Finance and Accounting
   
5
   
1.3
 
Administration
   
52
     
14.0
 
Executive Management
   
11
   
3.0
 
Total
   
373
   
100
 
 
Institutional Structure
 
There are six (6) departments in the Company, and the main function of each department is as follows:
 
Operation and Management Department: This Department is responsible for toll collection management, routine maintenance of operating facilities and statistics of traffic volume.
 
Engineering Maintenance Department: This Department is responsible for the organization of Expressway maintenance, for managing infrastructure and maintenance projects, for coordinating the relationship between the parties participating in the projects, for managing project quality and for selecting and purchasing fixed assets and project materials.
 
Road Administration Department: This Department is responsible for implementing national laws and regulations on the expressways, maintaining road assets and property rights according to the law, supervising and investigating expressway cases and other road administration such as comprehensive management and special treatment and supervising the maintenance work.

- 8 -


Planned Finance Department: This Department is responsible for setting and optimizing the financial system and flow, conducting basic accounting checks, controlling and managing financial matters, managing capital plans, managing contracts, researching and preparing mid and long term development plans, conducting internal audits and other matters related to industry, commerce and taxation.
 
Human Resources Department: This Department is responsible for drafting human resources plans and allocating the staff, organizing and implementing staff training and career development, providing performance and salary management as well as other personnel services.
 
Office Department: This Department is responsible for managing administrative affairs, drafting the Company’s systems and documents, managing the archives, stamps and vehicles and organizing and administrating conference-related matters.
 
Intellectual Property
 
We currently do not own any copyrights, trademarks or patents.
 
Competition
 
Our competition consists of other expressways. As newly-constructed expressways continue to open, the expressway network improves and the density of road network increases, a portion of traffic flow will change whereby travelers will opt for shorter traveling routes, while the expressway network has the clustering effect on traffic flow. Thus, relevant expressways will form competition against each other. The Pinglin Expressway has its competitive advantage in route; according to China’s expressway general plan, it will be the shortest route in the province.
 
Secondly, the common roads have competition between each other. Although on the common roads there are some problems such as low velocity, high oil consumption and low safety, the charges for the vehicle are inexpensive so that some of the traffic flow may be attracted. However, as the economy grows and people’s income rises, we believe time and safety factors will be more of a priority, especially in long distance road transportation, and the advantage of expressways will be prominent.
 
Thirdly, there are competitions from railways and air transportation. The capacity of air-express is limited, and it costs much more than expressways do, so it is restrained in its availability to the general public. The railway transportation has a lower cost, but it is different from the road transportation due to different service objects. Moreover, the total social demand for passenger and freight transportation is increasing, so the increase in the railway transportation capacity can’t completely offset by the growth in demand for expressways.
 
Research and Development

The Company did not incur any expenses on research and development during the fiscal year ended June 30, 2008 or during the fiscal year ended June 30, 2007.

Environmental Laws
 
The Company did not incur any expenses in connection with compliance with environmental laws (federal, state, local and foreign) during the fiscal year ended June 30, 2008.

- 9 -


ITEM 1A.
Risk Factors
 
The financial condition, business, operations, and prospects of the Company involve a high degree of risk. You should carefully consider the risks and uncertainties described below, which constitute the material risks relating to the Company, and the other information in this report. If any of the following risks are realized, the Company’s business, operating results and financial condition could be harmed and the value of the Company’s stock could suffer. This means that investors and stockholders of the Company could lose all or a part of their investment.
 
RISKS RELATING TO THE PEOPLE’S REPUBLIC OF CHINA
 
Certain Political and Economic Considerations Relating to China Could Adversely Affect Our Company.
 
The PRC is transitioning from a planned economy to a market economy. While the PRC government has pursued economic reforms since its adoption of the open-door policy in 1978, a large portion of the PRC economy is still operating under five-year plans and annual state plans. Through these plans and other economic measures, such as control on foreign exchange, taxation and restrictions on foreign participation in the domestic market of various industries, the PRC government exerts considerable direct and indirect influence on the economy. Many of the economic reforms carried out by the PRC government are unprecedented or experimental, and are expected to be refined and improved.
 
Other political, economic and social factors can also lead to further readjustment of such reforms. This refining and readjustment process may not necessarily have a positive effect on our operations or future business development. Our operating results may be adversely affected by changes in the PRC’s economic and social conditions as well as by changes in the policies of the PRC government, such as changes in laws and regulations (or the official interpretation thereof), measures which may be introduced to control inflation, changes in the interest rate or method of taxation, and the imposition of additional restrictions on currency conversion.
 
The Chinese Government Exerts Substantial Influence Over The Manner In Which We Must Conduct Our Business Activities Which Could Adversely Affect Our Company.
 
China only recently has permitted provincial and local economic autonomy and private economic activities. The Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and State ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to toll collection standards, taxation, import and export tariffs, environmental regulations, land use rights, property and other matters. We believe that our operations in China are in material compliance with all applicable legal and regulatory requirements. However, the central or local governments of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations.
 
Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties or joint ventures.

- 10 -


The Chinese Legal System Has Inherent Uncertainties That Could Limit The Legal Protections Available To You.
 
Our contractual arrangements are governed by the laws of the People’s Republic of China. China’s legal system is based upon written statutes. Prior court decisions may be cited for reference but are not binding on subsequent cases and have limited value as precedents. Since 1979, the Chinese legislative bodies have promulgated laws and regulations dealing with economic matters such as foreign investment, corporate organization and governance, commerce, taxation and trade. However, because these laws and regulations are relatively new, and because of the limited volume of published decisions and their non-binding nature, the interpretation and enforcement of these laws and regulations involve uncertainties, and therefore you may not have legal protections for certain matters in China.
 
All Of Our Assets Are Located In China, Any Dividends Of Proceeds From Liquidation Is Subject To The Approval Of The Relevant Chinese Government Agencies.
 
Our assets are located inside China. Under the laws governing foreign invested enterprises in China, dividend distribution and liquidation are allowed but subject to special procedures under the relevant laws and rules. Any dividend payments will be subject to the decision of our Board of Directors and subject to foreign exchange rules governing such repatriation. Any liquidation is subject to both the relevant government agency’s approval and supervision as well the foreign exchange control. This may generate additional risk for our investors in case of dividend payments and liquidation.
 
Future Inflation In China May Inhibit Our Activity To Conduct Business In China.
 
In recent years, the Chinese economy has experienced periods of rapid expansion and high rates of inflation. During the past ten (10) years, the rate of inflation in China has been as high as 20.7% and as low as 2.2%. These factors have led to the adoption by Chinese government, from time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. While inflation has been more moderate since 1995, high inflation may in the future cause Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China and thereby harm our business operations.
 
Currency Conversion And Exchange Rate Volatility Could Adversely Affect Our Financial Condition.
 
The PRC government imposes control over the conversion of Renminbi into foreign currencies. Under the current unified floating exchange rate system, the People’s Bank of China (PBOC) publishes an exchange rate, which we refer to as the PBOC exchange rate, based on the previous day’s dealings in the inter-bank foreign exchange market. Financial institutions authorized to deal in foreign currency may enter into foreign exchange transactions at exchange rates within an authorized range above or below the PBOC exchange rate according to market conditions.
 
Pursuant to the Foreign Exchange Control Regulations of the PRC issued by the State Council which came into effect on April 1, 1996, and the Regulations on the Administration of Foreign Exchange Settlement, Sale and Payment of the PRC which came into effect on July 1, 1996, regarding foreign exchange control, conversion of Renminbi into foreign exchange by Foreign Investment Enterprises (“FIEs”), for use on current account items, including the distribution of dividends and profits to foreign investors, is permissible. FIEs are permitted to convert their after-tax dividends and profits to foreign exchange and remit such foreign exchange to their foreign exchange bank accounts in the PRC. Conversion of Renminbi into foreign currencies for capital account items, including direct investment, loans, and security investment, is still under certain restrictions. On January 14, 1997, the State Council amended the Foreign Exchange Control Regulations and added, among other things, an important provision, which provides that the PRC government shall not impose restrictions on recurring international payments and transfers under current account items.

- 11 -


Enterprises in the PRC (including FIEs) which require foreign exchange for transactions relating to current account items, may, without approval of the State Administration of Foreign Exchange, or SAFE, effect payment from their foreign exchange account or convert and pay at the designated foreign exchange banks by providing valid receipts and proofs.
 
Convertibility of foreign exchange in respect of capital account items, such as direct investment and capital contribution, is still subject to certain restrictions, and prior approval from the SAFE or its relevant branches must be sought.
 
Since 1994, the exchange rate for Renminbi against the United States dollars has remained relatively stable, most of the time in the region of approximately RMB8.28 to US$1.00. However, in 2005, the Chinese government announced that would begin pegging the exchange rate of the Chinese Renminbi against a number of currencies, rather than just the U.S. Dollar. As our operations are primarily in China, any significant revaluation of the Chinese Renminbi may materially and adversely affect our cash flows, revenues and financial condition. For example, to the extent that we need to convert United States dollars into Chinese Renminbi for our operations, appreciation of this currency against the United States dollar could have a material adverse effect on our business, financial condition and results of operations. Conversely, if we decide to convert Chinese Renminbi into United States dollars for other business purposes and the United States dollar appreciates against this currency, the United States dollar equivalent of the Chinese Renminbi we convert would be reduced.
 
The Value Of Our Securities Will Be Affected By The Foreign Exchange Rate Between U.S. Dollars And Renminbi.
 
The value of the Company’s Common Stock will be affected by the foreign exchange rate between U.S. dollars and Renminbi, and between those currencies and other currencies in which our sales may be denominated. For example, to the extent that we need to convert U.S. dollars into Renminbi for our operational needs and should the Renminbi appreciate against the U.S. dollar at that time, our financial position, the business of the Company, and the price of our Common Stock may be harmed. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of declaring dividends on our Common Stock or for other business purposes and the U.S. dollar appreciates against the Renminbi, the U.S. dollar equivalent of our earnings from our China operations would be reduced.
 
You May Experience Difficulties In Effecting Service Of Legal Process, Enforcing Foreign Judgments Or Bringing Original Actions In China Based On United States Or Other Foreign Laws Against Us.
 
We conduct our operations in China and a significant portion of our assets is located in China. In addition, our directors and executive officers reside within China, and substantially all of the assets of these persons are located within China. As a result, it may not be possible to effect service of process within the United States or elsewhere outside China upon those directors or executive officers, including with respect to matters arising under U.S. federal securities laws or applicable state securities laws. Moreover, our Chinese counsel has advised us that China does not have treaties with the U.S. and many other countries that provide for the reciprocal recognition and enforcement of judgment of courts. As a result, recognition and enforcement in China of judgments of a court of the U.S. or any other jurisdiction in relation to any matter may be difficult or impossible.

- 12 -


Our Significant Amount Of Deposits In Certain Banks In China May Be At Risk If These Banks Go Bankrupt During Our Deposit Period.
 
As of June 30, 2008, we had approximately RMB 36.9 million (approximately US$5.8 million) in banks in China, which almost constitute all of our total cash. The terms of these deposits are, in general, up to twelve (12) months. Historically, deposits in Chinese banks are secure due to the state policy on protecting depositors’ interests. However, China promulgated a new Bankruptcy Law in August 2006, which has come into effect on June 1, 2007, which contains a separate article expressly stating that the State Council may promulgate implementation measures for the bankruptcy of Chinese banks based on the Bankruptcy Law. Under the new Bankruptcy Law, a Chinese bank may go bankrupt. In addition, since China’s concession to WTO, foreign banks have been gradually permitted to operate in China and have been severe competitors against Chinese banks in many aspects, especially since the opening of Renminbi business to foreign banks in late 2006. Therefore, the risk of bankruptcy of those banks in which we have deposits has increased. In the event of bankruptcy of one of the banks which holds our deposits, we are unlikely to recover our deposits back in full since we are unlikely to be classified as a secured creditor based on PRC laws.
 
RISKS RELATING TO OUR BUSINESS
 
Because Our Operating History Is Limited And The Revenue And Income Potential Of Our Business And Markets Are Unproven, We Cannot Predict Whether We Will Meet Internal or External Expectations Of Future Performance.
 
We believe that our future success depends on our ability to significantly increase revenue from toll collections, of which we have a limited history. The Expressway marketplace features high investment and a long recovery period. The main market risk in connection with our Company is the future traffic volume less than the predicted amount. Accordingly, our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies with a limited operating history. These risks include our ability to:
 
 
·
offer new and innovative services on the Expressway;
 
 
·
attract advertisers;
 
 
·
attract more travelers;
 
 
·
respond effectively to competitive pressures and address the effects of strategic relationships or corporate combinations;
 
 
·
maintain our current, and develop new, strategic relationships;
 
 
·
increase awareness of the Expressway and continue to build traveler loyalty;
 
 
·
attract and retain qualified management and employees; and
 
 
·
upgrade our technology to support increased traffic and expanded services.

- 13 -


Our Business And Growth Could Suffer If We Are Unable To Hire And Retain Key Personnel That Are In High Demand.
 
We depend upon the continued contributions of our senior management and other key personnel, including Li Xipeng and Zhang Chunxian. The loss of the services of any of our executive officers or other key employees could have a material adverse effect on our business, operations, revenues or prospects. We do not maintain key man insurance on the lives of these individuals at present. As we plan to expand, we will have to attract managerial staff. We may not be able to identify and retain qualified personnel due to our lack of understanding of different cultures and lack of local contacts. This may impede any potential expansion. Our future success will also depend on our ability to attract and retain highly skilled and qualified technical, engineering, managerial, finance, marketing, security and customer service personnel in China. Qualified individuals are in high demand, and we may not be able to successfully attract, assimilate or retain the personnel we need to succeed.
 
If We Need Additional Capital To Fund Our Growing Operations, We May Not Be Able To Obtain Sufficient Capital And May Be Forced To Limit The Scope Of Our Operations.
 
We may experience increased capital needs and we may not have enough capital to fund our future operations without additional capital investments. Our capital needs will depend on numerous factors, including (i) our profitability; (ii) the success of our competitors; (iii) the amount of our capital expenditures; and (iv) new infrastructure project investment. We cannot assure you that we will be able to obtain capital in the future to meet our needs.
 
If we cannot obtain additional funding, we may be required to:
 
 
·
reduce our investments in infrastructure industry;
 
 
·
limit our expansion efforts; and
 
 
·
decrease or eliminate capital expenditures.
 
Such reductions could materially adversely affect our business and our ability to compete. Even if we do find a source of additional capital, we may not be able to negotiate terms and conditions for receiving the additional capital that are acceptable to us. Any future capital investments could dilute or otherwise materially and adversely affect the holdings or rights of our existing stockholders. We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us.
 
Competition With The Railways and Airways in China May Have A Negative Impact On Our Business
 
With the rapid development of the domestic expressway, China is also giving great support to the development of railways and airways. The construction of a special passenger railway and the speed-up of railways in general will be able to greatly improve the transport capacity of passengers and freight by railway and bring about a division of the target clients of the Expressway which could be an impediment to our growth and have a negative impact on our revenues.
 
RISKS RELATING TO OUR COMMON STOCK
 
Our Common Stock Price Is Volatile And Could Decline In The Future.
 
The stock market in general and the market price for other companies based in the PRC have experienced extreme stock price fluctuations. In some cases, these fluctuations have been unrelated to the operating performance of the affected companies. Many companies in the toll road industry have experienced dramatic volatility in the market prices of their common stock. We believe that a number of factors, both within and outside of our control, could cause the price of our Common Stock to fluctuate, perhaps substantially. Factors such as the following could have a significant adverse impact on the market price of our Common Stock:

- 14 -


 
·
announcements of technological innovations by us or our competitors;
 
 
·
our ability to obtain additional financing and, if available, the terms and conditions of the financing;
 
 
·
our financial position and results of operations;
 
 
·
litigation;
 
 
·
period-to-period fluctuations in our operating results;
 
 
·
changes in estimates of our performance by any securities analysts;
 
 
·
new regulatory requirements and changes in the existing regulatory environment;
 
 
·
the issuance of new equity securities in a future offering;
 
 
·
changes in interest rates;
 
 
·
changes in toll road standards;
 
 
·
market conditions of securities traded on the NASDAQ Capital Market;
 
 
·
investor perceptions of us and the toll road industry generally; and
 
 
·
general economic and other national conditions.
 
We May Have Difficulty Raising Necessary Capital To Fund Operations As A Result Of Market Price Volatility For Our Shares Of Common Stock.
 
In recent years, the securities markets in the United States have experienced a high level of price and volume volatility, and the market price of securities of many companies have experienced wide fluctuations that have not necessarily been related to the operations, performances, underlying asset values or prospects of such companies. For these reasons, our shares of Common Stock can also be expected to be subject to volatility resulting from purely market forces over which we will have no control. If our business development plans are successful, we may require additional financing to continue to develop and exploit existing and new technologies and to expand into new markets. The exploitation of our technologies may, therefore, be dependent upon our ability to obtain financing through debt and equity or other means.
 
Our Common Stock Is Considered A “Penny Stock” And As A Result, Related Broker-Dealer Requirements Affect Its Trading And Liquidity.
 
Our Common Stock is considered to be a “penny stock” since it meets one or more of the definitions in Rules 15g-2 through 15g-6 promulgated under Section 15(g) of the Exchange Act. These include but are not limited to the following: (i) the common stock trades at a price less than $5.00 per share; (ii) the common stock is not traded on a “recognized” national exchange; (iii) the common stock is not quoted on the NASDAQ Stock Market, or (iv) the common stock is issued by a company with average revenues of less than $6.0 million for the past three (3) years. The principal result or effect of being designated a “penny stock” is that securities broker-dealers cannot recommend our Common Stock to investors, thus hampering its liquidity.
 
- 15 -

 
Section 15(g) and Rule 15g-2 require broker-dealers dealing in penny stocks to provide potential investors with documentation disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the documents before effecting any transaction in a penny stock for the investor’s account. Potential investors in our Common Stock are urged to obtain and read such disclosure carefully before purchasing any of our shares.

Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives.
 
Compliance with these requirements may make it more difficult for holders of our Common Stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise.
 
Shares Eligible For Future Sale May Adversely Affect The Market Price Of Our Common Stock.
 
From time to time, certain of our stockholders may be eligible to sell all or some of their shares of Common Stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144, promulgated under the Securities Act of 1933, as amended, subject to certain limitations. In general, effective February 15, 2008, pursuant to Rule 144, a stockholder (or stockholders whose shares are aggregated) who has satisfied a six (6) months holding period may, under certain circumstances, sell within any three (3) month period a number of securities which does not exceed one percent (1%) of the then outstanding shares of common stock. In addition, effective February 15, 2008, Rule 144 also permits, under certain circumstances, the sale of securities, without any limitations, by a non-affiliate of our company that has satisfied a one (1) year holding period. Any substantial sale of common stock pursuant to Rule 144 may have an adverse effect on the market price of our Common Stock.
 
One Stockholder Which is 50% Controlled By Our Chief Executive Officer and Chairman of the Board of The Company Exercises Significant Control Over Matters Requiring Stockholder Approval.
 
After giving effect to the issuance of all the shares of Common Stock, Joylink has voting power equal to sixty-eight percent (68%) of our voting securities as of the date of this Report. Moreover, Joylink is fifty percent (50%) controlled by Li Xipeng, the Company’s Chief Executive Officer and Chairman of the Board. As a result, Joylink, and our CEO through such stock ownership, exercises control over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership in Joylink may also have the effect of delaying or preventing a change in control of us that may be otherwise viewed as beneficial by stockholders other than Joylink.

- 16 -


We May Incur Significant Costs To Ensure Compliance With U.S. Corporate Governance And Accounting Requirements.
 
We may incur significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the SEC. We expect all of these applicable rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
 
We May Be Required To Raise Additional Financing By Issuing New Securities With Terms Or Rights Superior To Those Of Our Shares Of Common Stock, Which Could Adversely Affect The Market Price Of Our Shares Of Common Stock.
 
We may require additional financing to fund future operations, including expansion in current and new markets, programming development and acquisition, capital costs and the costs of any necessary implementation of technological innovations or alternative technologies. We may not be able to obtain financing on favorable terms, if at all. If we raise additional funds by issuing equity securities, the percentage ownership of our current stockholders will be reduced, and the holders of the new equity securities may have rights superior to those of the holders of shares of Common Stock, which could adversely affect the market price and the voting power of shares of our Common Stock. If we raise additional funds by issuing debt securities, the holders of these debt securities would similarly have some rights senior to those of the holders of shares of Common Stock, and the terms of these debt securities could impose restrictions on operations and create a significant interest expense for us.
 
Standards For Compliance With Section 404 Of The Sarbanes-Oxley Act Of 2002 Are Uncertain, And If We Fail To Comply In A Timely Manner, Our Business Could Be Harmed And Our Stock Price Could Decline.
 
Rules adopted by the SEC, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require annual assessment of our internal control over financial reporting, and attestation of our assessment by our independent registered public accountants. The standards that must be met for management to assess the internal control over financial reporting as effective are new and complex, and require significant documentation, testing and possible remediation to meet the detailed standards and will impose significant additional expenses on us. We may encounter problems or delays in completing activities necessary to make an assessment of our internal control over financial reporting. In addition, the attestation process by our independent registered public accountants is new and we may encounter problems or delays in completing the implementation of any requested improvements and receiving an attestation of our assessment by our independent registered public accountants. If we cannot assess our internal control over financial reporting as effective, or our independent registered public accountants are unable to provide an unqualified attestation report on such assessment, investor confidence and share value may be negatively impacted.
 
We Do Not Foresee Paying Cash Dividends In The Foreseeable Future.
 
We have not paid cash dividends on our stock and we do not plan to pay cash dividends on our stock in the foreseeable future.

- 17 -


ITEM 1B.
Unresolved Staff Comments
 
 
ITEM 2.
Properties
 
 
All land in China is owned by the State. Individuals and companies are permitted to acquire rights to use land or land use rights for specific purposes. In the case of land used for industrial purposes, the land use rights are granted for a period of fifty (50) years. This period may be renewed at the expiration of the initial and any subsequent terms. Granted land use rights are transferable and may be used as security for borrowings and other obligations.
 
Ping owns land use rights with respect to its office location at Pinglin Toll Road Station, New District, Pingdingshan City, Henan Province, the PRC. Pursuant to the approval from The Ministry of Land and Resources of the PRC [No. 2004-289] dated September 10, 2004, Ping was granted approximately Seven Hundred (700) hectares land use right for construction purpose, among which approximately Eight (8) hectares were used in association with the office and service facilities and the others were used for the construction of toll road infrastructures.
 
CMH and WOC share offices at Room 42, New Henry House, 10 Ice House Street, Central, Hong Kong. This office consists of approximately Three Thousand (3,000) square feet. Each company pays HK$2,500 (US$325) per annum for use of this office. The term of this lease expires on December 31, 2008.
 
We believe that all of our properties and equipment have been adequately maintained, are generally in good condition, and are suitable and adequate for our business.
 
LEGAL PROCEEDINGS
 
ITEM 3.
Legal Proceedings
 
In the normal course of business, we are named as defendant in lawsuits in which claims are asserted against us. In our opinion, the liabilities, if any, which may ultimately result from such lawsuits, are not expected to have a material adverse effect on our financial position, results of operations or cash flows. As of the date hereof, there is no outstanding litigation with the Company.
 
On June 27, 2007, China railway No. 5 bureau, the contractor who won the bid in the Pinglin Expressway No. 2 road connection project, was sued by the subcontractors Hujianting and Hefeiyue for postponing the commencing date of construction for more than 10 months. The total damage claimed in this case was $647,364, and the Company, as the 5th defendant, was brought into this case by the plaintiff. The case is currently ongoing and the Compay believes the claims against them are without substance and they plan to vigorously defend themselves. As such, there is no contingency accrual for this case at June 30, 2008.

- 18 -


The Company entered into an agreement to purchase a land use right from Pingdingshan No. 3 Cement Factory for $1,843,646. However, the Company was not informed that such land use right was pledged as collateral for loans to the cement factory. Pingdingshan No. 3 Cement Factory went bankrupt and the Company that loaned them money then sued the company for the loss of the collateral. On July 13, 2006, judgment was made by the Henan Pingdingshan Intermediary Court in which the Company was required to pay the lending company $485,851. The amount was paid in August 2006 and was netted against Other Income, Net in the statement of income for the year ended June 30, 2007. The Company appealed the ruling to Henan Pingdingshan Intermediary Court again. Pursuant to the final judgement made on April 25, 2008, the compensating claim from the lending company was rejected. Currently, the Company is in the progress of pursuing the amount paid. No receivable for the contingency was recorded as of June 30, 2008.
 
ITEM 4.
Submission of Matters to a Vote of Security Holders
 

- 19 -

 
 
ITEM 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 
COMMON EQUITY AND OTHER STOCKHOLDER MATTERS
 
The Registrant’s Common Stock is traded on the NASDAQ National Capital Market under the symbol “CIIC”. The following table sets forth on a per share basis for the periods shown, the high and low closing bid prices of our Common Stock. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
 
Closing Bid Prices
 
High
 
Low
 
Calendar Year Ended December 31, 2008
         
1st Quarter
 
$
5.10
 
$
4.30
 
2nd Quarter
 
$
5.00
 
$
4.15
 
               
Calendar Year Ended December 31, 2007
         
1st Quarter:
   
NONE
   
NONE
 
2nd Quarter:
   
NONE
   
NONE
 
3nd Quarter:
 
$
0.05
 
$
0.05
 
4rd Quarter (through December 18th prior 1 for 2 reverse split):
 
$
0.05
 
$
0.05
 
4th Quarter (from December 19th after 1 for 2 reverse split):
 
$
0.02
 
$
0.02
 
 
         
Calendar Year Ended December 31, 2006
         
1st Quarter:
   
NONE
   
NONE
 
2nd Quarter:
   
NONE
   
NONE
 
3rd Quarter:
   
NONE
   
NONE
 
4th Quarter:
   
NONE
   
NONE
 
 
When the trading price of the Company’s Common Stock is below $5.00 per share, the Common Stock is considered to be a “penny stock” that is subject to rules promulgated by the SEC (Rule 15-1 through 15g-9) under the Exchange Act. These rules impose significant requirements on brokers under these circumstances, including: (a) delivering to customers the SEC’s standardized risk disclosure document; (b) providing customers with current bid and ask prices; (c) disclosing to customers the brokers-dealer’s and sales representatives compensation; and (d) providing to customers monthly account statements.
 
Holders of Common Equity
 
As of June 30, 2008 and as of this Report, the Company has an aggregate of 80,000,000 shares of its Common Stock issued and outstanding and twenty-five (25) stockholders of record.
 
Dividends

Prior to the closing of the Exchange, the Company effectuated a 2-1 reverse stock split for the issued and outstanding shares of its Common Stock. The effective date for this reverse split was December 3, 2007.

- 20 -


On January 22, 2008, the Company completed a dividend distribution to its shareholders of record as of January 18, 2008 in the amount equal to five percent (5%) (1,250,005 shares) of the then issued and outstanding Common Stock.  Following the dividend distribution and immediately prior to the consummation of the Exchange, the Company had 26,250,005 shares of Common Stock issued and outstanding.
 
The further issuance of dividends, if any, will be contingent upon our revenues and earnings, if any, capital requirements and financial conditions. The payment of dividends, if any, will be within the discretion of the Company’s Board of Directors. The company presently intends to retain all earnings, if any, for use in its business operations and accordingly, the Board does not anticipate declaring any cash dividends for the foreseeable future. We have not paid any cash dividends on our Common Stock.
 
Securities Authorized for Issuance under Equity Compensation Plans

The following table discloses information as of June 30, 2008 with respect to compensation plans (including individual compensation arrangements) under which our equity securities are authorized for issuance.
 
 
 
(a)
 
(b)
 
(c)
 
Plan Category
 
 
Number of securities to be 
issued upon exercise of 
outstanding options, 
warrants and rights
 
 
Weighted-average 
exercise price of 
outstanding options, 
warrants and rights
 
 
Number of securities 
remaining available for 
future issuance under 
equity compensation plans 
(excluding securities 
reflected in column (a)
 
N/A
   
-0-
   
-0-
   
-0-
 
Total
   
-0-
   
-0-
   
-0-
 
 
Options and Warrants
 
As of the date of this Report, we have no outstanding options or warrants.
 
Transfer Agent
 
Interwest Transfer Company, Inc., 1981 East Murray Holladay Road, Suite 100, P.O. Box 17136, Salt Lake City, UT 84117, telephone (801) 272-9294, facsimile (801) 277-3147 currently acts as our transfer agent and registrar.

Performance Graph

Not required for a smaller reporting company.
 
Recent Sales of Unregistered Securities

The Company effectuated a 2-1 reverse split of its Common Stock effective on December 3, 2007 effectively reducing the number of issued and outstanding shares of Common Stock to 25,000,000 shares.

- 21 -


On January 22, 2008, the Company completed a dividend distribution to its shareholders of record as of January 18, 2008 in the amount equal to five percent (5%) (1,250,005 shares) of the then issued and outstanding Common Stock.  Following the dividend distribution and immediately prior to the consummation of the Exchange, the Company had 26,250,005 shares of Common Stock issued and outstanding.
 
On February 8, 2008, pursuant to the terms of the Exchange Agreement, the Company acquired all of the issued and outstanding capital stock of CMH in exchange for the issuance by the Company of 54,400,000 newly-issued shares of Common Stock to the Stockholder (Joylink Holdings, Inc.).

ITEM 6.
Selected Financial Data
 
 
ITEM 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
Forward Looking Statements
 
The following discussion of our financial condition and results of operations is based upon and should be read in conjunction with our consolidated financial statements and their related notes included in this Report. This Report contains forward-looking statements. Generally, the words “believes”, ”anticipates”, “may”, “will”, “should”, “expect”, “intend”, “estimate”, “continue” and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, including the matters set forth in this report or other reports or documents we file with the SEC from time to time, which could cause actual results or outcomes to differ materially from those projected. Undue reliance should not be placed on these forward-looking statements which speak only as of the date hereof. We undertake no obligation to update these forward-looking statements.
 
Business Overview
 
We are engaged in the investment, construction, operation and management of the Expressway toll road and the rental of petrol stations and service districts along the toll roads.
 
With the approval from Henan Communications Bureau and the State Development and Reform Committee of China [NO. 2003-1784], the Company is permitted to construct and operate the Pinglin Expressway in Henan, China for thirty (30) years from 2003. Pursuant to the permission from Henan Communications Bureau and Henan Development and Reform Committee [NO. 2005-1885], the Company is entitled to operate six (6) toll gates. All the rates applicable to the automobiles are defined by the Henan Communications Bureau and Henan Development and Reform Committee.
 
The Pinglin Expressway is a significant part of the national trunk, the Nanjing to Luoyang expressway (also referred to herein as the Nanluo Expressway). The Nanluo Expressway links the north-western regions to the south-eastern coastal regions of the People’s Republic of China (the “PRC”). The construction of Pinglin Expressway started in October 23, 2003 and was completed in two (2) phases. The first phase of the construction which covered the part with a length of approximately 86 kilometers, linking Ruzhou and Pingdingshan in Henan Province, began commercial operations in December 31, 2005. On May 31, 2006, the second phase of the construction, with the length of approximately 21 kilometers, linking Pingdingshan and Yexian in Henan Province was completed. With the operation of Pinglin Expressway, the key transport artery, national trunk Nanluo Expressway was entirely put into operations.

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The Pinglin Expressway is a dual carriageway four (4) lane expressway, the toll section of which is 106 km in length. Toll revenue from the passing vehicles through the Expressway’s six (6) toll gates (South Pingdingshan, Pingdingshan New Town, Baofeng, Xiaotun, Ruzhou and Wenquan) is the primary source of the Company’s earnings. The Expressway is also located between two (2) key cities, Luoyang and Luohe. The Expressway extends from east to west, from Shilipu (the end of the Luohe-Pingdingsha expressway), through Yexian and Pingdingshan and then to New Xiying village at the joint of Pingdingshan and Luoyang. The road is lined with the Lianhuo (Lianyungang-Huoerguosi) national highway through the ringroad in Luoyang, and then extends to the southeast of Luohe City and connects with the Beijing-Zhuhai national highway into a network to form a convenient channel between Luoyang and Luohe. In addition to the traffic flow of the line itself, we believe it also attracts the traffic flow from Lianhuo high way to Zhengzhou then to Beijing-Zhuhai national highway to alter to Luoyang-Luohe section of Luonan route. Furthermore, the Expressway extends east to link the highway network of the Jiangsu and Anhui provinces and also links the sea ports, including Shanghai.
 
The Company’s operating income is achieved through toll charges on vehicles that go through the toll gate. The standard of toll charges is approved and set by the provincial price administrative bureau. The Company's revenue is equal to the relevant standard toll rate for the types of vehicles multiplied by the relative miles of travel through the expressway which the Company is operating, and is cleared by the Henan Expressway System Toll Collection Center each month (Henan Expressway has a charges system and clearing center which calculates and allocates toll charge income according to the charge standards and the miles of travel of vehicles in the expressway). The Company is specialized in the operation and management of expressways. The maintenance projects are outsourced to professional road construction enterprises.
 
The Company began generating operating revenue in January 2006. The Company had not yet started full operation of the expressway prior to June 2006, therefore the operating income was at a low level and the growth was moderate. With the full operation of the Expressway in June 2006, the operating income had sustained rapid growth. With respect to profit, as the loan interest of the Company was included in the expenses, and the depreciation of fixed assets was accounted in the current period, the Company incurred a temporary loss in June. But with the increase of revenue, the Company has generated a profit and has achieved sustained increases in profit for the past several months.
 
After several months of operations, the social awareness of the Expressway gradually increased, and passenger and commercial vehicles is increasing rapidly. We believe that along with income growth in the future, the profit earning capacity of the Company will improve steadily.
 
Enterprise Strategy
 
Henan is a province with the largest population in China. However, its urbanization rate is far below the national average level. With rapid economic and social development and the accelerated process of urbanization in Henan, demands for infrastructure, the expressway and other transportation infrastructure, urban facilities such as heating, water supply, and sewerage treatment are also growing rapidly. The existing infrastructure can no longer meet the needs of social development.
 
Because the Chinese government’s financial revenue growth is limited, the financial investment of the government alone is unable to build huge infrastructure projects in a relatively short period. In order to attract social funds, local governments are willing to grant to commercial companies the right to invest in the construction and operation of projects, or directly sell the equity of the established enterprise to recover their early input. In addition, the government will also give preferential treatment on charges.
 

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To seize the historic opportunity of rapid development of infrastructure of China and Henan, to rapidly strengthen and expand the Company's infrastructure industries, to create advantages on scale, thereby to further reduce the cost of operation, the Company plans to invest in construction of purchase additional expressways, thermoelectricity, water supply or sewage treatment facilities and other infrastructure assets with good profit prospects in the next few years. Because the amount of investment in infrastructure is often relatively large, and the investment funds need to be in position within two (2) or three (3) years, the accumulated capital from the Company’s operation alone cannot meet the demand for investment in the future. The Company desires to actively participate in the capital markets and to use various channels of financing to enhance its ability to raise funds, thus to promote and achieve these long-term development strategies.
 
Based on the operation and management of the Expressway, the Company desires to take full advantage of free cash flow and capital market instruments to invest in construction or purchase of infrastructure assets and to exploit all the advantages in management, government relationship and stockholder support to make the Company a professional, continuously-growing infrastructure investment operator.
 
In addition, the Company intends to energetically push forward the standard management, human-based services, establish an information management platform and continue to improve the road condition and traffic capacity so as to provide the traveler with a smooth, safe and comfortable running environment. With the increasing influence of the Expressway on the substitution and division of other transportation lines and under the great macroeconomic environment providing continuous and rapid growth in China and the specific area where the roads are located, we believe that the Company’s income from toll and profits will continue to increase.
 
Significant Accounting Policies
 
We prepare our financial statements in accordance with generally accepted accounting principles in the United States, which requires us to make estimates and assumptions that affect the reported amounts of our assets and liabilities, to disclose contingent assets and liabilities on the date of the financial statements, and to disclose the reported amounts of revenues and expenses incurred during the financial reporting period. We continue to evaluate these estimates and assumptions that we believe to be reasonable under the circumstances. We rely on these evaluations as the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than other in their application.
 
This section should be read together with the Summary of Significant Accounting Policies included as Note 2 to the consolidated financial statements included herein.
 
We determine the estimated useful lives and related depreciation charges for our toll road infrastructures, property, plant and equipment. This estimate is based on the historical experience of the actual useful lives of toll road infrastructures, property, plant and equipment of similar nature and functions and the practice in similar industry. Toll road infrastructures, property, plant and equipment are carried at cost less accumulated depreciation and amortization. Depreciation and amortization of the toll road infrastructures are calculated to write off their cost, commencing from the date of commencement of commercial operations of the toll roads, based on the ratio of actual traffic volume compared to the total expected traffic volume of the toll roads as estimated by reference to traffic projection reports prepared by an independent PRC organization each year. It could change significantly as a result of technical innovations and competitor actions in response to severe industry cycles. Other properties, plant and equipment are depreciated or amortized over their estimated useful lives, using the straight-line method. We will increase the depreciation charge where useful lives are less than previously estimated lives, or we will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold.
 

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Revenue Recognition
 
The Company’s revenue represents toll revenue net of business tax, and is recognized when all of the following criteria are met:
 
 
·
The amount of revenue can be measured reliably;
 
 
·
It is probable that the economic benefits associated with the transaction will flow to the enterprise;
 
 
·
The costs incurred or to be incurred in respect of the transaction can be measured reliably; and
 
 
·
Collectibility is reasonably assured.
 
Rental income is measured at the fair value of the consideration receivable and represents amounts receivable for services provided in the normal course of business, net of discounts and sales tax.
 
Fair Value of Financial Instruments
 
The Company’s financial instruments include restricted cash, accounts receivable, note receivable, due from related parties, other receivables, other payables and accrued liabilities, short-term bank loans, payable to contractors, other current liabilities and deferred taxes. We estimated that the carrying amount approximates fair value due to their short-term nature. The fair value of the Company’s long-term bank loans and deferred revenue are estimated based on the current rates offered to the Company for debt of similar terms and maturities. The Company’s fair value of long-term bank loans and deferred revenue was not significantly different from the carrying value at June 30, 2008 and 2007.
 
Impairment of Long-Lived Assets
 
We review periodically the carrying amounts of long-lived assets including toll road infrastructures, property, plant and equipment, land use rights, construction in progress, long-term investment and long-term deferred assets with finite useful lives or beneficial periods, to assess whether they are impaired. We evaluate these assets for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable such as a change of business plan or a period of continuous losses. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its projected future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. In determining estimates of future cash flows, significant judgment in terms of projection of future cash flows and assumptions is required. There were no impairments for the years ended June 30, 2008 and 2007.
 
Contingencies
 
In normal course of business, we are subject to contingencies, including, legal proceedings and claims arising out of the business that relate to a wide range of matters. We recognize a liability for such contingency if we determine that it is probable that a loss has incurred and a reasonable estimate of the loss can be made. We may consider many factors in making these assessments, including past history and the specifics of each matter. As we have not become aware of any toll related claim since operations commenced, we have not recognized such a liability for the years ended June 30, 2008 and 2007.
 

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Recent Accounting Pronouncements
 
In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standands (“SFAS”) No. 157, "Fair Value Measurements", which provides enhanced guidance for using fair value to measure assets and liabilities. SFAS No. 157 provides a common definition of fair value and establishes a framework to make the measurement of fair value in generally accepted accounting principles more consistent and comparable. SFAS No. 157 also requires expanded disclosures to provide information about the extent to which fair value is used to measure assets and liabilities, the methods and assumptions used to measure fair value, and the effect of fair value measures on earnings. SFAS No. 157 is effective for financial statements issued in fiscal years beginning after November 15, 2007 and to interim periods within those fiscal years. The Company is currently in the process of evaluating the effect, if any, the adoption of SFAS No. 157 will have on its results of operations, financial position, or cash flows.
 
In February 2007, the FASB issued FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement No. 115 (FAS 159). FAS 159, which becomes effective for the Company on July 1, 2007. This standard permits companies to choose to measure many financial instruments and certain other items at fair value and report unrealized gains and losses in earnings. Such accounting is optional and is generally to be applied instrument by instrument. The Company does not anticipate that election, if any, of this fair value option will have a material effect on the results or operations or financial position.
 
In December 2007, the FASB issued SFAS No. 141 (R), Business Combinations, and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements. SFAS No. 141 (R) requires an acquirer to measure the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired. SFAS No. 160 clarifies that a noncontrolling interest in a subsidiary should be reported as equity in the consolidated financial statements. The calculation of earnings per share will continue to be based on income amounts attributable to the parent. SFAS No. 141 (R) and SFAS No. 160 are effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption is prohibited. The Company has not yet determined the effect on our consolidated financial statements, if any, upon adoption of SFAS No. 141 (R) or SFAS No. 160. We are aware that our accounting for minority interest will change and we are considering those effects now but believe the effects will only be a reclassification of minority interest from mezzanine equity to our stockholder’s equity section in the balance sheet. In any case we do not believe the implementation of SFAS 160 will be material to our financial position. SFAS 141 (R) will significantly affect the accounting for future business combinations and we will determine the accounting as new combinations occur.
 
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities" ("SFAS No. 161"), which amends SFAS No.133 and expands disclosures to include information about the fair value of derivatives, related credit risks and a company's strategies and objectives for using derivatives. SFAS No. 161 is effective for fiscal periods beginning on or after November 15, 2008. The Company is currently in the process of assessing the impact that SFAS No. 161 will have on the disclosures in its financial statements.
 

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Results of Operations
 
Results of Operations for the Fiscal Year Ended June 30, 2008 Compared to the Fiscal Year Ended June 30, 2007
 
The following table sets forth a summary of certain key components of our results of operations for years indicated, in dollars and as a percentage of revenues.
 
 
 
Fiscal Years Ended June 30,
 
Fiscal Years Ended June 30,
 
 
 
2008
 
2007
 
2008
 
2007
 
                   
Revenues
 
$
56,424,236
 
$
38,449,103
   
100
%
 
100
%
Operating costs
   
6,814,079
   
1,353,310
   
12.1
%
 
3.5
%
Depreciation and amortization
   
6,483,911
   
5,811,456
   
11.5
%
 
15.1
%
Gross profit
   
43,126,246
   
31,284,337
   
76.4
%
 
81.4
%
General and administrative expenses
   
3,268,346
   
2,189,499
   
5.8
%
 
5.7
%
Income from operations
   
39,857,900
   
29,094,838
   
70.6
%
 
75.7
%
Interest expense, net
   
23,941,036
   
19,326,104
   
42.4
%
 
50.3
%
Other income, net
   
905,832
   
188,577
   
1.6
%
 
0.5
%
Income from operations before income taxes
   
16,822,696
   
9,957,311
   
29.8
%
 
25.9
%
Income tax expense
   
4,287,907
   
2,489,328
   
7.6
%
 
6.5
%
Net income
   
12,534,789
   
7,467,983
   
22.2
%
 
19.4
%

Revenues
 
Our revenues are derived from the operation of the Pinglin Expressway. Our revenues increased approximately US$18.0 million, or 46.8% from approximately US$38.4 million for the fiscal year ended June 30, 2007 to approximately US$56.4 million for the fiscal year ended June 30, 2008. The increase was mainly attributable to the increase in traffic volumes.
 
On December 26, 2005, the first phase of the Expressway with a length of approximately 86 kilometers was completed and commenced toll operation. On May 31, 2006, with the completion of the remaining part of approximately 21 kilometers, the entire Expressway was put into operation. The key transport artery, national trunk Nanluo Expressway was entirely put into operation as well, which increased the importance of the Expressway to those vehicles passing through. Accordingly, the converted average daily traffic volumes, a guide line to evaluate the operation performance specially used in the toll road industry, increased 3,847 units, or 37.0%, from 10,411 units for the fiscal year ended June 30, 2007 to 14,258 units for the fiscal year ended June 30, 2008.
 
Operating Costs
 
Our operating costs mainly represent the road maintenance cost, road management cost and labor cost associated with the toll operations. For the fiscal year ended June 30, 2008, the operating costs sharply increased approximately US$5.4 million, or 403.5%, to approximately US$6.8 million, compared to approximately US$1.4 million for the fiscal year ended June 30, 2007. This increase is mainly due to the following: (i) along with the increase of traffic volumes, our maintenance cost increased approximately US$5.1 million to approximately US$5.3 million during the fiscal year ended June 30, 2008, and (ii) the increase of the labor cost and welfares approximately amounted to US$0.7 million as the Company hired more employees for toll operation.

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Depreciation and Amortization
 
Our total depreciation and amortization related to toll operations increased approximately $0.7 million, or 11.6%, from approximately $5.8 million for the fiscal year ended June 30, 2007 to approximately $6.5 million for the fiscal year ended June 30, 2008. This increase is mainly due to the increase in the depreciation rate along with the increase of traffic volumes.
 
Depreciation of toll road infrastructures is calculated to write off their cost on a units-of-usage basis whereby the Company depreciated and recorded the depreciation based on the ratio of actual traffic volume incurred during the period compared to the total expected traffic volume of the toll roads during the operation licensing period, as estimated. As analyzed in revenues, the converted average daily traffic volumes grew 37.0% during the comparative periods, which exceeded our original expectation, thereby, we re-estimated our future traffic volumes at the end of the fiscal year ended June 30, 2008. Pursuant to the evaluation report from Henan Transportation Technique Institute, an independent agency who has such special knowledge and license on estimation of traffic volumes, our total future estimated traffic volumes approximately increased 11% compared to our original estimation, which decreased the “usage” of our toll road infrastructures under units-of usage basis. As a result, the depreciation of toll road infrastructures for the fiscal year ended June 30, 2008 only increased 10.6% compared to the fiscal year ended June 30, 2007.
 
Gross Profit
 
Our gross profit increased approximately US$11.8 million, or 37.9%, from approximately US$31.3 million for the fiscal year ended June 30, 2007 to approximately US$43.1 million for the fiscal year ended June 30, 2008. This increase reflected higher net sales and operating efficiencies generally across our expressway business.
 
Gross profit as a percentage of revenues decreased from 81.4% for the fiscal year ended June 30, 2007 to 76.4% for the fiscal year ended June 30, 2008. Such percentage decrease is primarily due to the increased maintenance costs during 2008.
 
General and Administrative Expenses
 
General and administrative expenses increased approximately US$1.1 million, or 49.3%, from US$2.2 million for the fiscal year ended June 30, 2007 to approximately US$3.3 million for the fiscal year ended June 30, 2008. The increase in our administration expenses was mainly attributable to the following: (i) an increase approximately amounted to US$0.1 million in employee payroll, welfare and related education and union fee as a result of the increase in the number of employees associated with our business expansions; (ii) an increase in our land use tax and real estate tax approximately amounted to US$0.2 million, which were imposed by the local tax bureau from the second half of year 2007; (iii) an increase in our consulting fee and audit fee associated with public listing of approximately US$0.3 million; and, (iv) an increase in our overseas traveling expenses to approximately US$0.2 million in association with our public listing.
 
Interest Expense, Net
 
Net interest expense increased approximately US$4.6 million, or 23.9%, from approximately US$19.3 million for the fiscal year ended June 30, 2007 to approximately US$23.9 million for the fiscal year ended June 30, 2008. This increase is primarily due to the increased interest rate of our loans. The People’s Bank of China increased the benchmark of the interest rate for long term loan over five years from 7.2% for the fiscal year ended June 30, 2007 to 7.83% for the fiscal year ended June 30, 2008, accordingly, our lenders increased the interest rate to some degree.

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Income Tax Expense
 
Income tax expense increased approximately US$1.8 million, or 72.3%, from approximately US$2.5 million for the fiscal year ended June 30, 2007 to approximately US$4.3 million for the fiscal year ended June 30, 2008, as a result of the increase in our income. Our effective tax rate was 25% for both the years ended June 30, 2008 and 2007.
 
Net Income
 
Our net income increased approximately US$5.0 million, or 67.8%, from approximately US$7.5 million for the fiscal year ended June 30, 2007 to approximately US$12.5 million for the fiscal year ended June 30, 2008. This increase is primarily attributable to the growth of our toll revenues during the two (2) reporting years and the cumulative effect of other factors aforementioned.
 
Liquidity and Capital Resources
 
We generally finance our operations through, to a substantial extent, operating profit and a combination of borrowings from banks and capital contributions from WOC. During the reporting years, we arranged a number of bank loans to satisfy our financing needs. To date, we have not experienced any difficulty in raising funds by bank loans, and we have not experienced any liquidity problems in settling our payables in the normal course of business and repaying our bank loans when they fall due.
 
The following table sets forth the summary of our cash flows, in dollar, for the years indicated:

   
Fiscal Year Ended June 30,
 
   
2008
 
2007
 
Net cash provided by operating activities
   
14,532,008
   
11,509,085
 
Net cash provided by (used in) investing activities
   
4,196,036
 
 
(20,656,348
)
Net cash (used in) provided by financing activities
   
(16,841,173
)
 
12,241,747
 
Net increase in cash and cash equivalents
   
1,886,871
   
3,094,484
 
Effect of exchange rate changes on cash
   
(1,948,489
)
 
(2,788,362
)
Cash and cash equivalents at beginning of period
   
5,830,962
   
5,524,840
 
Cash and cash equivalents at end of period
   
5,769,344
   
5,830,962
 
 
Operating Activities
 
Net cash provided by operating activities is approximately US$14.5 million for the fiscal year ended June 30, 2008, as compared to US$11.5 million for the fiscal year ended June 30, 2007. The increase is mainly due to the combined result of increased toll receipts, offset in part by operational costs and expenses.
 
Investing Activities
 
Net cash provided by investing activities is approximately US$4.2 million for the fiscal year ended June 30, 2008, as compared to approximately US $20.7 million net cash used in investing activities for the fiscal year ended June 30, 2007. Such change is mainly due to: i) partial receipt of an advance to a related party approximately amounted to US$10.9 million; and, ii) our payment associated with toll road construction reduced in line with the Pinglin Expressway’s opening to the public in May 2006.

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Financing Activities
 
Net cash used in financing activities is approximately US$16.8 million for the fiscal year ended June 30, 2008, as compared to approximately US$12.2 million net cash provided by financing activities for the fiscal year ended June 30, 2007. Such change is mainly due to i) a proceed from notes payable approximately amounted to US$7.6 million was received in association with toll road construction during the fiscal year ended June 30, 2007, most of which came to mature and was repaid during the fiscal year ended June 30, 2008; and, ii) partially we finance our working capital from short-term bank loans previously, net proceeds from short-term bank loans was approximately US$5.2 million during the fiscal year ended June 30, 2007. In line with our growth in toll road business, cash flows from our daily toll road operation can basically fulfill our requirements for working capital, hence we repaid all of our short-term bank loans of approximately amounted to US$11.0 million during the fiscal year ended June 30, 2008.
 
Working Capital
 
Our working capital deficiency decreased by approximately US$7.9 million from approximately US$14.5 million as of June 30, 2007 to approximately US$6.6 million as of June 30, 2008, which primarily due to our increase in other current assets approximately amounted to US$1.0 million and decrease in short-term bank loans, current portion of long-term loans, note payable and payable to contractors approximately amounted to US$10.5 million, US$123.4 million, US$5.3 million and US$2.2 million, respectively, and partly offset by a decrease in restricted cash, accounts receivable, other receivables, notes receivable from related parties and advance to a related party approximately amounted to US$2.6 million, US$0.7 million, US$1.0 million, US$115.9 and US$8.3 million, respectively, and an increase in other payables and accrued liabilities and deferred tax liabilities approximately amounted to US$1.9 million and US$4.0 million, respectively. The decrease in short-term bank loans, note payable and the decrease in restricted cash represented our repayment and the result of our financing arrangement. The decrease in current portion of long-term loans primarily represented the maturity of our long-term loans approximately amounted to US$134 million which have been renewed and extended through May 2022, thus there is no such huge repayment pressure of the Company as of June 30, 2008 and for the foreseeable future. The decrease in current portion of notes receivable from related parties is primarily due to we extended our note receivables from the related companies Tai Ao Expressway Co., Ltd and Xinyang Expressway Co., Ltd approximately amounted to US$139.9 million, in aggregate, to June 29, 2010. The decrease in advance to a related party is primarily due to the repayment from the related party.
 
The Company currently generates its cash flow through operations and the Company believes that its cash flow generated from operations will be sufficient to sustain operations for the next twelve months. Also, from time to time, the Company may come up with new expansion opportunities for which our management may consider seeking external funding and financing.
 
Capital Expenditures
 
We made capital expenditures approximately of US$6.7 million and US$24.7 million for the years ended June 30, 2008 and 2007, respectively. The capital expenditures principally consisted of toll road infrastructures, toll stations and ancillary facilities, communication and monitoring equipments and other equipments related to our toll operations. If we are permitted to construct and operate new toll road or invest other toll road companies, we may require additional funds.
 
Off-Balance Sheet Arrangements
 
We do not have any outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions or foreign currency forward contracts. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit support to us or that engages in leasing, hedging or research and development services with us.

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ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk
 
 
Our exposure to interest rate risk for changes in interest rates relates primarily to the interest expense incurred by the bank loans and the interest income generated by the loans to our related parties or bank deposits. We have not used any derivative financial instruments in our investment portfolio or for cash management purposes. Interest-earning instruments carry a degree of interest rate risk. We have not been exposed nor do we anticipate being exposed to material risks due to changes in interest rates. However, our future interest expense or interest income may increase of expectations due to changes in interest rates in the PRC.
 
Foreign Exchange Risk
 
We do not hold any derivative instruments and do not engage in any hedging activities. Because most of our purchases and sales are made in RMB, any exchange rate change affecting the value of the RMB relative to the U.S. dollar could have an effect on our financial results as reported in U.S. dollars. If the RMB were to depreciate against the U.S. dollar, amounts reported in U.S. dollars would be correspondingly reduced. If the RMB were to appreciate against the U.S. dollar, amounts reported in U.S. dollars would be correspondingly increased.
 
ITEM 8.
Financial Statements and Supplementary Data
 
 
ITEM 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
 

HJ’s report on the Company’s financial statements for the past two (2) fiscal years, as well as the subsequent interim period through May 14, 2008, did not contain an adverse opinion or a disclaimer of opinion, and was not qualified as to uncertainty, audit scope, or accounting principles; however, the report included an explanatory paragraph wherein HJ expressed substantial doubt about the Company’s ability to continue as a going concern.

The resignation of the independent registered public accountants was approved by the Company’s Board of Directors effective May 14, 2008.
 
During the Company’s most recent two (2) fiscal years, as well as the subsequent interim period through May 14, 2008, there were no disagreements on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements if not resolved to their satisfaction would have caused them to make reference in connection with their opinion to the subject matter of the disagreement.

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During the Company’s most recent two (2) fiscal years, as well as the subsequent interim period through May 14, 2008, HJ did not advise the Company of any of the matters identified in Item 304(a)(v)(A) - (D) of Regulation S-K.
 
The Company has requested HJ to furnish a letter addressed to the SEC stating whether it agrees with the statements made by the Company and, if not, stating the respects in which it does not agree. A copy of such letter is attached hereto as Exhibit 16.1.
 
On May 14, 2008, the Board of Directors of the Company approved the engagement of Weinberg & Company, P.A. (“Weinberg”) as its independent registered public accounting firm to audit the Company’s financial statements, effective immediately.  The Company did not consult Weinberg on any matters described in Item 304(a)(2) of Regulation S-K during the Company’s two (2) most recent fiscal years or any subsequent interim period prior to engaging Weinberg

ITEM 9A(T).
Controls and Procedures
 
 
We are required to maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) as appropriate, to allow timely decisions regarding required disclosure.
 
In connection with the preparation of this Form 10-K for the year ended June 30, 2008 our management, under the supervision of the CEO and CFO, conducted an evaluation of disclosure controls and procedures. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of the filing date of this Annual Report

Management’s Annual Report on Internal Control over Financial Reporting
 
Management is responsible for establishing and maintaining adequate internal control structure and procedures over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)) under the Exchange Act. Our management conducted an assessment of the effectiveness of our internal control over financial reporting as of June 30, 2008 based on the framework set forth in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
 
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
Based on that evaluation, our CEO and CFO concluded that our internal control over financial reporting as of June 30, 2008 were effective.

- 32 -


Changes in Internal Control over Financial Reporting
 
Except as disclosed above, there were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
ITEM 9B.
Other Information
 
On May 21, 2008, the Board of Directors of the Company unanimously resolved to amend and restate the Company’s bylaws, and the Company did amend and restate its bylaws, dated as of May 21, 2008, in light of the fact that certain provisions therein were obsolete or required amendments to render the Company’s securities eligible for listing through the Direct Registration System. A copy of the amended and restated bylaws of the Company is referenced hereto as Exhibit 3.3.
 
On May 21, 2008, the Board of Directors of the Company simultaneously rescinded the Company’s Code of Ethics adopted by the Board of Directors in 2001, effective immediately and adopted a new Code of Ethics that applies to the Company's officers, directors and employees. A copy of the Code of Ethics is referenced hereto as Exhibit 14.1.
 
On May 21, 2008, the Board of Directors of the Company also approved the Charters for each of the Audit Committee, the Compensation and the Nominating Committees of the Board. A copy of the Audit Committee Charter, the Compensation Committee Charter and the Nominating Committee Charter are referenced to this Report as Exhibits 99.1, 99.2 and 99.3, respectively.

On August 12, 2008, the Company’s common stock began trading on the NASDAQ Stock Market LLC under the new symbol “CIIC”.

- 33 -


PART III
 
ITEM10.
Directors, Executive Officers, and Corporate Governance
 
 
Set forth below are the names of the Company’s directors and officers, their business experience during the last five (5) years, their ages and all positions and offices that they shall hold with the Company following the expiration of the ten (10) day time period following the mailing of an Information Statement complying with Form 14F-1 under the Exchange Act in connection with the Exchange. The Company has no “significant employees”.
 
Name
 
Age
 
Position(s)
Li Xipeng
 
45
 
Chief Executive Officer and Chairman of the Board
Zhang Chunxian
 
43
 
Chief Financial Officer and Director
Lin Jie
 
47
 
Vice President of Operations
Wu Lei
 
31
 
Vice President of Strategy Development
Wang Feng
 
35
 
Secretary
Sun Jianhao
 
45
 
Director
Huang Yuemin
 
51
 
Director
Xu Huiqing
 
54
 
Director
Li Changlai
 
44
 
Director
Mu Xinjie
 
38
 
Director
 
Family Relationships
 
There are no family relationships between or among the members of the Board of Directors or other executives. None of our directors and officers are directors or executive officers of any company that files reports with the SEC, except that Mu Xinjie previously served as Chief Financial Officer of Jingwei International Limited (JNGW.OB).
 
Biographies (Business Experience)
 
Li Xipeng has served as Chief Executive Officer of the Company and has served as a Director of the Company since the closing date of the Exchange and as Chairman of Ping since May 2003. Prior to that, Mr. Li served as Chairman of HSV in the PRC since May 2001 and prior to that he served as Chairman of Henan Shengrun Real Estate Co., Ltd. in the PRC since May 2000. Mr. Li is also currently the legal representative of Ping. Mr. Li graduated from Zhongnan University of Economics and Law and he earned his EMBA at Cheung Kong Graduate School of Business.
 
Zhang Chunxian has served as Chief Financial Officer of the Company since March 9, 2008 and has served as Chief Financial Officer of Ping since May 2003. Prior to that, Mr. Zhang served as Manager in the Trust and Investment Department of Zhongyuan Trust and Investment Co., Ltd. in the PRC. Mr. Zhang is a Chinese Certified Public Accountant.
 
Lin Jie has served as a Vice President of Operations of the Company since March 9, 2008 and has served as Manager of the Finance Department and as Assistant to the General Manager of Ping since May 2003. Prior to that, Ms. Lin served as Manager of the Finance Department of Henan Shengrun Real Estate Co., Ltd. in the PRC since March 2000.

- 34 -


Wu Lei has served as Vice President of Strategy Development of the Company since March 9, 2008. Ms. Wu earned her BSc. at Wuhan University (Law) in 2000 and her Masters degree in economics in 2006. Ms. Wu has no prior work experience.
 
Wang Feng has served as corporate Secretary of the Company since March 9, 2008 and has served as the corporate Secretary of Ping since May 2007. Prior to that, Mr. Wang served as Investment Manager of Henan Hi-Tech Venture Capital Co., Ltd. in the PRC from March 2006 to May 2007 and as Investment Manager of Zhongyuan Trust and Investment Co., Ltd. in the PRC from November 2003 through February 2006. Prior to that Mr. Wang earned his Masters degree from Beijing Information Science and Technology University and his BSc. at Hunan University. Mr. Wang is a Chinese Certified Public Accountant.
 
Sun Jianhao has served as a Director of the Company since March 9, 2008 and has served as Chairman of Pingdingshan Zhongya Road and Bridge Construction Co., Ltd. in the PRC since November 2004. Prior to that Mr. Sun served as Deputy Director of Pingdingshan Development and Planning Commission in the PRC from September 2004 through October 2004. Prior to that Mr. Sun served as Deputy Director of Pingdingshan New District Management Commission in the PRC from August 1999 through August 2004.
 
Huang Yuemin has served as a Director of the Company since March 9, 2008 and has served as Manager in the International Operations Department, General Manager and Chairman of Zhongyuan Trust and Investment Co., Ltd. in the PRC since March 1990. Prior to that, Mr. Huang served as Director in the Investment Department of Henan Development and Planning Commission in the PRC since August 1984 through February 1990. Mr. Huang earned his Associate’s degree from Tianjin University.
 
Xu Huiqing has served as a Director of the Company since March 9, 2008 and has served as Chairman and General Manager of Pingdingshan High Way Construction Co., Ltd. in the PRC since June 2003. Prior to that, Mr. Xu served as Deputy Director of Pingdingshan Bureau of Communications in the PRC from March 2002 through June 2003. Prior to that, Mr. Xu served as Deputy Director General for Pingdingshan Geography and Mine Bureau in the PRC from May 1994 through March 2002.
 
Li Changlai has served as a Director of the Company since March 9, 2008 and has served as General Manager of Weilan Highway Investment Construction Co., Ltd. since December 2004. Prior to that, Mr. Li served as Chief Engineer of Henan Highway Development Co., Ltd. from June 2002 through December 2004. Prior to that Mr. Li served as Manager of Department of Zhumadian Expressway Managing for Henan Highway Development Co., Ltd. in the PRC from October 2001 through June 2002. Mr. Li earned his Masters degree at Changan University.
 
Mu Xinjie has served as a Director of the Company since March 9, 2008. From April 2007 through December 2007, Mr. Mu served as Chief Financial Officer of Jingwei International Limited (OTCBB: JNGW.OB). Prior to that, Mr. Mu served as Senior Accountant for Geller and Company in the department serving exclusively Bloomberg, LLP from January 2006 through April 2007. Prior to that, Mr. Mu served as Chief Financial Officer of Tongyuan Technology Company from March 2005 through October 2005. Prior to that, Mr. Mu served as Senior Accountant of Flightsafety International, Inc., a wholly-owned subsidiary of Berkshire Hathaway from September 1999 through March 2005. Mr. Mu earned his BCs at Hebei University of Science and Technology (Chemical Engineering) and his MBA at the City University of New York.

- 35 -


Involvement in Certain Legal Proceedings
 
None of the members of the Board of Directors or other executives has been involved in any bankruptcy proceedings, criminal proceedings, any proceeding involving any possibility of enjoining or suspending members of our Board of Directors or other executives from engaging in any business, securities or banking activities, and have not been found to have violated, nor been accused of having violated, any federal or state securities or commodities laws.
 
Promoters and Control Persons

None.

Section 16(a) Beneficial Ownership Reporting Compliance
 
Section 16(a) of the Exchange Act requires our officers and directors, and persons who own more than ten percent (10%) of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than ten percent (10%) stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.
 
Based solely on a review of the copies of such forms furnished to us, we believe that during the year ended June 30, 2008 all officers, directors and ten percent (10%) beneficial owners who were subject to the provisions of Section 16(a) complied with all of the filing requirements during the year, except for the following persons have failed to file the corresponding documents set forth below:
 
 

Name
 
Form Type
 
Type of Holder
Li Xipeng
 
Form 3
 
Chief Executive Officer and Chairman of the Board
Zhang Chunxian
 
Form 3
 
Chief Financial Officer and Director
Lin Jie
 
Form 3
 
Vice President of Operations
Wu Lei
 
Form 3
 
Vice President of Strategy Development
Wang Feng
 
Form 3
 
Secretary
Sun Jianhao
 
Form 3
 
Director
Huang Yuemin
 
Form 3
 
Director
Xu Huiqing
 
Form 3
 
Director
Li Changlai
 
Form 3
 
Director
Mu Xinjie
 
Form 3
 
Director
Joylink Holdings, Inc.
 
Form 3
 
10% Holder

Code of Ethics
 
We have adopted a Code of Ethics, as required by the rules of the SEC and NASDAQ (attached hereto as Exhibit 14.1). This Code of Ethics applies to all of our directors, officers and employees. The Code of Ethics, and any amendments to, or waivers from, the Code of Ethics, is available in print, at no charge, to any stockholder who requests such information.

- 36 -


Committees of our Board of Directors
 
Our Board of Directors has an Audit Committee, a Compensation Committee and a Nominating Committee. A brief description of each committee is set forth below.
 
 
·
Audit Committee – The purpose of the Audit Committee is to provide assistance to our Board of Directors in fulfilling their oversight responsibilities relating to our consolidated financial statements and financial reporting process and internal controls in consultation with our independent registered public accountants and internal auditors. The Audit Committee is also responsible for ensuring that the independent registered public accountants submit a formal written statement to us regarding relationships and services which may affect the auditors’ objectivity and independence. During 2008, members of the Audit Committee were independent directors Huang Yuemin, Xu Huiqing and Mu Xinjie. Our Audit Committee financial expert is Mu Xinjie, an independent director. The Audit Committee met one time during the fiscal year ended June 30, 2008.
 
 
·
Compensation Committee – Independent directors Xu Huiqing, Huang Yuemin and Li Changlai were members of our Compensation Committee during fiscal 2008. The purpose of the Compensation Committee is to review and make recommendations to our Board of Directors regarding all forms of compensation to be provided to the executive officers and directors of our company, including stock compensation and loans, and all bonus and stock compensation to all employees. The Compensation Committee met one time during the fiscal year ended June 30, 2008.
 
 
·
Nominating Committee – Independent directors Li Changlai, Huang Yuemin and Xu Huiqing were members of our Nominating Committee, effective May 21, 2008. The purpose of the Nominating Committee is to review the composition and evaluate the performance of the Board, recommend persons for election to the Board and evaluate director compensation; The nominating committee is also responsible for reviewing the composition of committees of the Board and recommending persons to be members of such committees, and maintaining compliance of committee membership with applicable regulatory requirements. The Nominating Committee met one time during the fiscal year ended June 30, 2008. The Company has not adopted procedures by which security holders may recommend nominees to the Company’s Board of Directors.
 
ITEM 11.
Executive Compensation
 
 
Not required for smaller reporting companies.
 
Summary Compensation Table
 
The following table sets forth certain information with respect to the compensation paid to the Named Executive Officers of the Company during the years ended June 30, 2008, December 31, 2007 and December 31, 2006.

- 37 -

 
 
 
Name And Principal
 Function
 
Year
 
Salary
 
Bonus
 
Employer’s 
Contribution to 
Mandatory Pension 
and other benefits
 
Total
 
(a)
 
(b)
 
($)
(c)
 
($)
(d)
 
($)
 
($)
(j)
 
Li Xipeng,
Chief Executive Officer
(1)
   
2008
2007
2006
   
-0-
-0-
-0-
   
-0-
-0-
-0-
   
- 0 –
- 0 –
- 0 –
   
-0-
-0-
-0-
 
                                 
Zhang Chunxian, Chief
Financial Officer (2)
   
2008
2007
2006
   
15,000
-0-
-0-
   
7,517
-0-
-0-
   
5,730
-0-
-0-
   
28,247
-0-
-0-
 
                                 
Lin Jie,
Vice President of
Operations (3)
   
2008
2007
2006
   
11,706
-0-
-0-
   
5,998
-0-
-0-
   
4,472
-0-
-0-
   
22,176
-0-
-0-
 
                                 
Wu Lei
Vice President of
Strategy Development (4)
   
2008
2007
2006
   
4,713
-0-
-0-
   
1,100
-0-
-0-
   
1,800
-0-
-0-
   
7,613
-0-
-0-
 
                                 
Wang Feng, Secretary (5)
   
2008
2007
2006
   
11,623
-0-
-0-
   
4,619
-0-
-0-
   
4,440
-0-
-0-
   
20,682
-0-
-0-
 

Narrative Disclosure to Summary Compensation Table

In 2007, we paid an aggregate of approximately $205,683 in cash compensation to our management team members, including $109,568 for salary, $54,260 for bonus, and $41,855 for benefits. We paid an aggregate of approximately $78,718 to our senior executive officers, including salary, bonus and benefits. Our senior executive officers are eligible to receive cash bonuses which are paid on the basis of their success in achieving designated individual goals and the Company’s success in achieving specific company-wide goals. The amount of the bonus is determined by our board compensation committee at the end of each fiscal year.

In order to retain experienced and senior level executives, we believe the salary and bonus compensation of our senior executives is one of the highest among local equivalent companies. The Company will continue to provide competitive salary and bonus compensation to retain and recruit high quality executives and employees.

The Company will introduce option and equity based incentive scheme in the near future as compensation for our senior executives and independent directors for the successful operation results.

All senior executives have the standard three-year employment service contracts in accordance with applicable PRC regulations. None of these service contracts provides benefits upon termination. These are standard employment service contracts without any specific terms and duration for any positions that the senior executives are holding. In addition, we did not provide any pension or retirement plans for senior executives other than the mandatory plans required by the PRC government.

- 38 -


The Company currently does not have an equity/option – based compensation plan for senior executives. None of the senior executives has been granted any rights to equity or options.

Grants of Plan-Based Awards
 
None.
 
Outstanding Equity Awards at Fiscal Year-End
 
None.
 
Option Exercises and Stock Vested
 
None.
 
Pension Benefits
 
None.
 
Non-Qualified Deferred Compensation

None.

Potential Payments Upon Termination or Change of Control

None.

Additional Narrative Disclosure

None.

 
The following table sets forth certain information relative to compensation paid to outside directors for the year ended June 30, 2008:
 
Name And Principal
 Function
 
Year
 
Salary
 
Bonus
 
 
other benefits
 
Total
 
(a)
 
(b)
 
($)
(c)
 
($)
(d)
 
($)
 
($)
(j)
 
Huang Yuemin (1)
   
2008
2007
2006
   
-0-
-0-
-0-
   
-0-
-0-
-0-
   
- 0 –
- 0 –
- 0 –
   
-0-
-0-
-0-
 
                                 
Mu Xinjie (2)
   
2008
2007
2006
   
14,211
-0-
-0-
   
-0-
-0-
-0-
   
-0-
-0-
-0-
   
14,211
-0-
-0-
 
                                 
Sun Jianhao (3)
   
2008
2007
2006
   
-0-
-0-
-0-
   
-0-
-0-
-0-
   
-0-
-0-
-0-
   
-0-
-0-
-0-
 
                                 
Xu Huiqing (4)
   
2008
2007
2006
   
-0-
-0-
-0-
   
-0-
-0-
-0-
   
-0-
-0-
-0-
   
-0-
-0-
-0-
 
                                 
Li Changlai (5)
   
2008
2007
2006
   
-0-
-0-
-0-
   
-0-
-0-
-0-
   
-0-
-0-
-0-
   
-0-
-0-
-0-
 

- 39 -


Narrative To Director Compensation Table
 
In 2007, we paid $14,211 to one independent director, Mr. Xinjie Mu, for his financial and accounting expertise on the Audit Committee. Commencing in February 2008, the Company pays him $4,139 (RMB 30,000) per month. We did not have any other compensation arrangement for any other directors in 2007. The Company did not pay salaries or any other bonuses or benefits to other directors. We intend to implement compensation arrangements for independent directors in fiscal year 2009, which will include both cash and stock option plans which may include fees for retainers, committee services, services as chairman of the board or on committees and meeting attendance.

Employee Agreement

We have entered into three-year service contracts with all of our employees in accordance with applicable PRC regulations. None of these service contracts provides benefits upon termination. We were required by PRC law to make monthly contributions in amounts equal to 20.0%, 8.2%, and 10% of our employees’ average monthly salary in the preceding year to a pension plan, a medical insurance plan, and employee housing plan, respectively, each for the benefit of our employees subject to certain statutory limits.
 
Our employees are not subject to any collective bargaining agreement. We have not been involved in any material labor disputes. We believe that we have a good relationship with our employees.

We may terminate his or her employment for cause at any time, with prior written notice, for certain acts of the executive officer, including but not limited to, a conviction of a felony, or willful gross misconduct by the executive officer in connection with his or her employment, and in each case if such acts have resulted in material and demonstrable financial harm to us. An executive officer may, with prior written notice, terminate his or her employment at any time for any material breach of the employment agreement by us that is not remedied promptly after receiving the remedy request from the employee. Furthermore, either party may terminate the employment agreement at any time without cause upon advance written notice to the other party. Upon termination, the executive officer is generally entitled to a severance pay of at least one (1) month but not exceeding twelve (12) months amount of salary.
 
Each executive officer has agreed to hold, both during and subsequent to the terms of his or her agreement, in confidence and not to use, except in pursuance of his or her duties in connection with the employment, any of our confidential information, technological secrets, commercial secrets and know-how.

- 40 -

 

 
 
Name and Address of
Beneficial Owner (1)
 
Amount of
Direct
Ownership
After
Exchange
 
Amount of
Indirect
Ownership After
Exchange
 
Total Beneficial
ownership After
Exchange
 
Percentage of
Class (2)
 
                           
Li Xipeng, Chief Executive Officer and Chairman of the Board
   
0
   
27,200,000
(3)  
 
27,200,000
(3)  
 
34
%
                           
Zhang Chunxian, Chief Financial Officer and Director
   
0
   
5,440,000
(4)
 
5,440,000
(4)
 
6.80
%
                           
Lin Jie, Vice President of Operations
   
0
   
5,440,000
(5)
 
5,440,000
(5)
 
6.80
%
                           
Wu Lei, Vice President of Strategy Development
   
0
   
5,440,000
(6)
 
5,440,000
(6)
 
6.80
%
                           
Wang Feng, Secretary
   
0
   
0
   
0
   
0
%
                           
Sun Jianhao, Director
   
0
   
5,440,000
(7)
 
5,440,000
(7)
 
6.80
%
                           
Huang Yuemin, Director
   
0
   
0
   
0
   
0
%
                           
Xu Huiqing, Director
   
0
   
0
   
0
   
0
%
                           
Li Changlai, Director
   
0
   
0
   
0
   
0
%
                           
Mu Xinjie, Director
   
0
   
0
   
0
   
0
%
                           
ALL DIRECTORS AND OFFICERS AS A GROUP (10 PERSONS):
   
0
   
48,960,000
   
48,960,000
   
61.20
%
                           
Joylink Holdings Limited
Room 42, 4F, New Henry House
10 Ice House Street
Central, Hong Kong
   
54,400,00
   
0
   
54,400,000
   
68
%
                           
Fred Hall
1065 W. 1150 S
Provo, UT 84601
   
21,924,995
   
0
   
21,924,995
   
27.41
%
                           
Shu Hongying
Room 14 Unit 4, 11 Building Sichangdong Street
Zhengzhou, Henan the PRC
   
0
   
5,440,000
(8)
 
5,440,000
(8)
 
6.80
%

(1)
Unless otherwise noted, each beneficial owner has the same address as the Company.
 
- 41 -


(2)
Applicable percentage of ownership is based on 80,000,000 shares of our Common Stock outstanding as of the date of this Report, together with securities exercisable or convertible into shares of Common Stock within sixty (60) days of the date of this Report for each stockholder. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of Common Stock are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Note that affiliates are subject to Rule 144 and Insider trading regulations - percentage computation is for form purposes only.
 
(3)
Li Xipeng, the Company’s Chairman and Chief Executive Officer, owns 50% of Joylink Holdings Limited, which owns 54,400,000 shares of the Company’s Common Stock. Therefore, Li Xipeng may be considered to beneficially own 27,200,000 shares.
 
(4)
Zhang Chunxian, the Company’s Chief Financial Officer and Director, owns 10% of Joylink Holdings Limited, which owns 54,400,000 shares of the Company’s Common Stock. Therefore, Zhang Chunxian may be considered to beneficially own 5,440,000 shares.
 
(5)
Lin Jie, the Company’s Vice President, owns 10% of Joylink Holdings Limited, which owns 54,400,000 shares of the Company’s Common Stock. Therefore, Lin Jie may be considered to beneficially own 5,440,000 shares.
 
(6)
Wu Lei, the Company’s Vice President, owns 10% of Joylink Holdings Limited, which owns 54,400,000 shares of the Company’s Common Stock. Therefore, Wu Lei may be considered to beneficially own 5,440,000 shares.
 
(7)
Sun Jianhao, the Company’s Vice President, owns 10% of Joylink Holdings Limited, which owns 54,400,000 shares of the Company’s Common Stock. Therefore, Sun Jianhao may be considered to beneficially own 5,440,000 shares.
 
(8)
Shu Hongying owns 10% of Joylink Holdings Limited, which owns 54,400,000 shares of the Company’s Common Stock. Therefore, Shu Hongying may be
 
ITEM 13.
Certain Relationships and Related Transactions, and Director Independence
 
 
Ping made loans to two (2) companies (as set forth below) which are also controlled by our Director and proposed Chief Executive Officer and Ping’s Chairman, Li Xipeng. The notes receivable were provided to these companies for their construction working capital. All the notes receivable from the related parties are short term, interest bearing and unsecured.
 
   
June 30, 2008
 
June 30, 2007
 
           
Tai Ao Expressway Co., Ltd
             
Principal
 
$
69,854,502
 
$
46,881,641
 
Interest receivable
(subsequently settled in September 2008)
   
4,935,189
   
8,172,554
 
     
74,789,691
   
55,054,195
 
Xinyang Expressway Co., Ltd
             
Principal
   
70,017,656
   
63,180,005
 
Interest receivable
(subsequently settled in September 2008)
   
5,261,827
   
7,863,939
 
     
75,279,483
   
71,043,944
 
               
Total notes receivable from related parties
   
150,069,174
   
126,098,139
 
               
Less: current portion
   
10,197,016
   
-
 
               
Long-term portion
   
139,872,158
   
126,098,139
 

- 42 -


The notes receivables were provided to these companies for their construction working capital. The notes receivable are interest bearing and unsecured. The interest rate is 7.83% and 6.57% per annum for the years ended June 30, 2008 and 2007, respectively. Interest income was $9,668,217 and $6,571,922 for the years ended June 30, 2008 and 2007, respectively.
 
On June 26, 2008, Tai Ao Expressway Co., Ltd (“Tai Ao”) entered into a renewal agreement with the Company. Pursuant to the agreement, the note receivable to Tai Ao had been extended to June 29, 2010 with a 7.83% interest rate per annum. Interest is paid annually.
 
On June 26, 2008, Xinyang Expressway Co., Ltd (“Xinyang”) entered into a renewal agreement with the Company. Pursuant to the agreement, the note receivable to Xinyang had been extended to June 29, 2010 with a 7.83% interest rate per annum. Interest is paid annually.
 
The repayment schedule for the notes receivable from related parties is as follows:
 
June 30, 2009
 
$
10,197,016
 
June 30, 2010
   
139,872,158
 
Total
 
$
150,069,174
 
 
During the 2008 fiscal year, the Company made advances to suppliers on behalf of Tai Ao for the purchase of construction materials, amounting to approximately $22 million, in order to develop a strategic relationship with such expressway company for the purpose of advancing the future business development of the Company. The balances of $21,733,947 and $29,998,648 at June 30, 2008 and 2007, respectively, are unsecured, interest free and due on demand:
 
   
June 30, 2008
 
June 30, 2007
 
           
Tai Ao Expressway Co., Ltd
 
$
21,733,471
 
$
29,998,648
 
 
Agreements With Promoters and Certain Control Persons
 
None.
 
Director Independence

The following directors are independent: Sun Jianhao, Huang Yuemin, Xu Huiqing, Li Changlai and Mu Xinjie. The following directors are not independent: Li Xipeng and Zhang Chunxian.
 
ITEM 14.
Principal Accountant Fees and Services
 
Audit Fees
 
During the fiscal year ended June 30, 2008, the fees for our principal accountant were approximately $265,000, representing services for quarterly reviews and the year end audit.
 
Audit-Related Fees
 
During the fiscal year ended June 30, 2008, our principal accountant did not render audit related services reasonably related to the performance of the audit or review of financial statements.

- 43 -


Tax Fees
 
During the fiscal year ended June 30, 2008, our principal accountant did not render tax compliance, tax advice and tax planning services.
 
All Other Fees
 
During the fiscal year ended June 30, 2008, there were no fees billed for products and services provided by the principal accountant other than those set forth above.
 
Audit Committee Pre-Approval
 
The policy of the Audit Committee is to pre-approve all audit and non-audit services provided by the independent accountants. These services may include audit services, audit-related services, tax fees, and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is subject to a specific budget. The Audit Committee has delegated pre approval authority to certain committee members when expedition of services is necessary. The independent accountants and management are required to periodically report to the full Audit Committee regarding the extent of services provided by the independent accountants in accordance with this pre-approval delegation, and the fees for the services performed to date. All of the services described above in this Item 14 were approved in advance by the Audit Committee during the fiscal year ended June 30, 2008.

- 44 -


PART IV
 
ITEM 15.
Exhibits and Financial Statement Schedules
 
(a)
Financial Statements and Schedules
 
The financial statements are set forth under Item 8 of this Annual Report on Form 10-K. Financial statement schedules have been omitted since they are either not required, not applicable, or the information is otherwise included.
 
(b)
Exhibits
 
EXHIBIT NO.
 
DESCRIPTION
 
LOCATION 
         
3.1
 
 
Articles of Incorporation of Learning Quest Technologies, Inc.
 
 
Incorporated by reference to Exhibit 3.01 to the Company’s Form 10-SB as filed with the SEC on December 17, 2004.
 
3.2
 
 
Amended and Restated Bylaws of China Infrastructure Investment Corporation, dated as of May 21, 2008.
 
 
Incorporated by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K as filed with the SEC on May 22, 2008.
 
3.3
 
 
Certificate of Incorporation of Color Man Holdings Limited
 
 
Incorporated by reference to that Company’s Current Report on Form 8-K as filed with the SEC on February 11, 2008.
 
3.4
 
 
Certificate of Incorporation of Wise On China Limited
 
 
Incorporated by reference to that Company’s Current Report on Form 8-K as filed with the SEC on February 11, 2008.
 
3.5
 
 
Certificate of Incorporation of Pingdingshan Pinglin Expressway Co., Ltd.
 
 
Incorporated by reference to that Company’s Current Report on Form 8-K as filed with the SEC on February 11, 2008.
 
3.6
 
 
Company Charter of Color Man Holdings Limited (Memorandum of Association and Articles of Association
 
 
Incorporated by reference to that Company’s Current Report on Form 8-K as filed with the SEC on February 11, 2008.
 
3.7
 
 
Company Charter of Wise On China Limited
 
 
Incorporated by reference to that Company’s Current Report on Form 8-K as filed with the SEC on February 11, 2008.
 
3.8
 
 
Articles of Association of Pingdingshan Pinglin Expressway Co., Ltd.
 
 
Incorporated by reference to that Company’s Current Report on Form 8-K as filed with the SEC on February 11, 2008.
 
- 45 -


EXHIBIT NO.
 
DESCRIPTION
 
LOCATION 
         
10.1
 
 
Share Exchange Agreement, dated February 8, 2008, by and among Learning Quest Technologies, Inc., Color Man Holdings Ltd. and Joylink Holdings Ltd.
 
 
Incorporated by reference to that Company’s Current Report on Form 8-K as filed with the SEC on February 11, 2008.
 
10.2
 
 
Chartered Rights Agreement on Pingdingshan-Linru Expressway Project, dated April 10, 2003, by and between Pingdingshan Pinglin Expressway Co., Ltd. and Pingdingshan Bureau of Communications
 
 
Incorporated by reference to that Company’s Current Report on Form 8-K as filed with the SEC on February 11, 2008.
 
10.3
 
 
Loan Contract of the Year 2004, dated December 28, 2004, by and between the China Development Bank and Pingdingshan Pinglin Expressway Co., Ltd.
 
 
Incorporated by reference to that Company’s Current Report on Form 8-K as filed with the SEC on February 11, 2008.
 
10.4
 
 
Loan Contract of the Fixed Assets (No. YBZ No. 0054, 2005), dated July 29, 2005, by and between The Pingdingshan Branch of Industrial and Commerical Bank of China and Pingdingshan Pinglin Expressway Co., Ltd.
 
 
Incorporated by reference to that Company’s Current Report on Form 8-K as filed with the SEC on February 11, 2008.
 
10.5
 
 
Loan Contract, dated February 25, 2005, by and between the Agricultural Bank of China, Xinhua Branch of Pingdingshan City and Pingdingshan Pinglin Expressway Co., Ltd.
 
 
Incorporated by reference to that Company’s Current Report on Form 8-K as filed with the SEC on February 11, 2008.
 
10.6
 
 
Loan Contract of the Year 2007, dated September 28, 2007, by and between the China Development Bank and Pingdingshan Pinglin Expressway Co., Ltd.
 
 
Incorporated by reference to that Company’s Current Report on Form 8-K as filed with the SEC on February 11, 2008.
 
10.7
 
 
Loan Contract, dated June 7, 2005, by and between the Agricultural Bank of China, Xinhua Branch of Pingdingshan City and Pingdingshan Pinglin Expressway Co., Ltd.
 
 
Incorporated by reference to that Company’s Current Report on Form 8-K as filed with the SEC on February 11, 2008.
 
10.8
 
 
General Loan Contract, dated November 29, 2004, by and between the China Development Bank and Pingdingshan Pinglin Expressway Co., Ltd.
 
 
Incorporated by reference to that Company’s Current Report on Form 8-K as filed with the SEC on February 11, 2008.
 
10.9
 
 
Loan Contract of the Fixed Assets (No. YBZ No. 0051, 2005), dated July 29, 2005, by and between The Pingdingshan Branch of Industrial and Commerical Bank of China and Pingdingshan Pinglin Expressway Co., Ltd.
 
 
Incorporated by reference to that Company’s Current Report on Form 8-K as filed with the SEC on February 11, 2008.
 
- 46 -


EXHIBIT NO.
 
DESCRIPTION
 
LOCATION 
         
14.1
 
 
Code of Ethics
 
 
Provided herewith
 
16.1
 
 
Auditor Letter
 
 
Provided herewith
 
31.1
 
 
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
Provided herewith
 
31.2
 
 
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
Provided herewith
 
32.1
 
 
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
Provided herewith
 
32.2
 
 
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
Provided herewith
 
99.1
 
 
Audit Committee Charter of the Company
 
Incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K as filed with the SEC on May 22, 2008
 
99.2
 
 
Compensation Committee Charter of the Company
 
Incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K as filed with the SEC on May 22, 2008
 
99.3
 
 
Corporate Governance and Nominating Committee Charter of the Company
 
Incorporated by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K as filed with the SEC on May 22, 2008
 
- 47 -


SIGNATURES
 
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on our behalf by the undersigned, thereunto duly authorized.
 
 
CHINA INFRASTRUCTURE INVESTMENT 
CORPORATION
Date: September 29, 2008
 
 
 
 
By:
/s/Li Xipeng
 
 
Li Xipeng
 
 
Chief Executive Officer, Principal Executive 
Officer and Chairman of the Board
     
 
 
/s/Zhang Chunxian
 
 
Zhang Chunxian
 
 
Chief Financial Officer, Principal Financial and 
Accounting Officer and Director
 
In accordance with the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the dates indicated.

Signatures
 
Title
 
Date
         
/s        Li Xipeng
Li Xipeng
   
Chief Executive Officer,
Principal Executive Officer and
Chairman of the Board
 
September 29, 2008
         
/s/        Zhang Chunxian
Zhang Chunxian
   
 
Chief Financial Officer,
Principal Financial and
Accounting Officer and
Director
 
September 29, 2008
         
/s/        Sun Jianhao
Sun Jianhao
 
Director
 
September 29, 2008
 
 
     
/s/        Huang Yuemin
Huang Yuemin
 
Director
 
September 29, 2008
 
 
     
/s/        Xu Huiqing
Xu Huiqing
 
Director
 
September 29, 2008
 
 
     
/s/        Li Changlai
Li  Changlai
 
Director
 
September 29, 2008
         
/s/        Mu Xinjie
Mu Xinjie
 
Director
 
September 29, 2008
 
- 48 -

CHINA INFRASTRUCTURE INVESTMENT CORPORATION
(FORMERLY LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
 
TABLE OF CONTENTS
 
Page
 
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS
F-2 – F-3
 
CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2008 AND 2007
F-4 – F-5
 
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME FOR THE YEARS ENDED JUNE 30, 2008 AND 2007
F-6
 
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED JUNE 30, 2008 AND 2007
F-7
 
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2008 AND 2007
F-8 – F-9
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2008 AND 2007
F-10 – F-26
 
F-1


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Shareholders of:
China Infrastructure Investment Corporation and Subsidiaries

We have audited the accompanying consolidated balance sheet of China Infrastructure Investment Corporation (formerly Learning Quest Technologies, Inc.) and subsidiaries (the “Company”) as of June 30, 2008 and the related consolidated statements of income and comprehensive income, shareholders’ equity and cash flows for the year then ended. 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 audit.

We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

We were not engaged to examine management’s assertion about the effectiveness of the Company’s internal control over financial reporting as of June 30, 2008 included in the Company’s Item 9A(T) “Controls and Procedures” in the Annual Report on Form 10-KSB and, accordingly, we do not express an opinion thereon.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of China Infrastructure Investment Corporation and subsidiaries as of June 30, 2008, and the consolidated results of their operations and their cash flows for the year then ended in conformity with accounting policies generally accepted in the United States of America.

/s/ Weinberg & Company, P.A.

Weinberg & Company, P.A.

Boca Raton, Florida
September 16, 2008

F-2

 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Shareholders of:
China Infrastructure Investment Corporation

We have audited the accompanying balance sheet of China Infrastructure Investment Corporation, (the “Company”) as of June 30, 2007 and the related statement of income and comprehensive income, changes in shareholders’ equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that were 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of China Infrastructure Investment Corporation, as of June 30, 2007 and the result of its operation and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ K.P. Cheng & Co.
 
K.P. Cheng & Co.
 
Certified Public Accountants
Hong Kong, China
February 8, 2008
 
F-3

 
CHINA INFRASTRUCTURE INVESTMENT CORPORATION
(FORMERLY LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
ASSETS
 
           
   
June 30, 2008
 
June 30, 2007
 
           
CURRENT ASSETS
             
Cash and cash equivalents
 
$
5,769,344
 
$
5,830,962
 
Restricted cash
   
29,104
   
2,631,475
 
Note receivable
   
776,936
   
656,556
 
Accounts receivable
   
2,006,848
   
2,721,057
 
Other receivables
   
419,642
   
1,389,579
 
Notes receivable from related parties, current
   
10,197,016
   
126,098,139
 
Advance to a related party
   
21,733,471
   
29,998,648
 
Other current assets
   
991,768
   
138,742
 
Total current assets
   
41,924,129
   
169,465,158
 
               
Toll road infrastructures, net
   
443,672,007
   
398,701,246
 
Plant and equipment, net
   
15,943,451
   
14,754,523
 
Land use rights, net
   
49,066,392
   
46,068,301
 
Long-term investment
   
1,455,223
   
1,313,111
 
Notes receivable from related parties, long-term
   
139,872,158
   
-
 
Deferred taxes
   
6,059,721
   
6,170,156
 
Total long-term assets
   
656,068,952
   
467,007,337
 
               
TOTAL ASSETS
 
$
697,993,081
 
$
636,472,495
 
 
See accompanying notes to the consolidated financial statements.
 
F-4


CHINA INFRASTRUCTURE INVESTMENT CORPORATION
(FORMERLY LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
           
   
June 30, 2008
 
June 30, 2007
 
           
CURRENT LIABILITIES
             
Other payables and accrued liabilities
 
$
4,840,299
 
$
2,932,841
 
Short-term bank loans
   
-
   
10,504,891
 
Current portion of long-term loans
   
10,678,425
   
134,047,666
 
Note payable
   
-
   
5,262,951
 
Payable to contractors
   
24,224,039
   
26,411,885
 
Deferred taxes
   
8,556,534
   
4,604,522
 
Other current liabilities
   
225,915
   
157,426
 
Total current liabilities
   
48,525,212
   
183,922,182
 
               
LONG-TERM LIABILITIES
             
Long-term bank loans
   
466,512,413
   
299,279,102
 
Deferred revenue
   
6,627,828
   
6,041,304
 
Total long-term liabilities
   
473,140,241
   
305,320,406
 
               
TOTAL LIABILITIES
   
521,665,453
   
489,242,588
 
               
CONTINGENCIES
             
               
SHAREHOLDERS’ EQUITY
             
Common stock, $.001 par value, 150,000,000 shares authorized,
80,000,000 shares and 54,400,000 shares issued and outstanding as of June 30, 2008 and 2007, respectively
   
80,000
   
54,400
 
Additional paid-in capital
   
140,573,673
   
140,662,392
 
Accumulated other comprehensive income
   
26,818,531
   
10,192,480
 
Retained earnings (deficit)
   
8,855,424
   
(3,679,365
)
Total Shareholders’ Equity
   
176,327,628
   
147,229,907
 
               
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
 
$
697,993,081
 
$
636,472,495
 

See accompanying notes to the consolidated financial statements.
 
F-5

 
CHINA INFRASTRUCTURE INVESTMENT CORPORATION
(FORMERLY LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
 
   
YEARS ENDED JUNE 30,
 
   
2008
 
2007
 
           
REVENUES
 
$
56,424,236
 
$
38,449,103
 
               
OPERATING COSTS
   
6,814,079
   
1,353,310
 
               
DEPRECIATION AND AMORTIZATION
   
6,483,911
   
5,811,456
 
               
GROSS PROFIT
   
43,126,246
   
31,284,337
 
               
General and administrative expenses
   
3,268,346
   
2,189,499
 
               
INCOME FROM OPERATIONS
   
39,857,900
   
29,094,838
 
               
OTHER INCOME (EXPENSES)
             
               
Interest expense, net
   
(23,941,036
)
 
(19,326,104
)
               
Other income, net
   
905,832
   
188,577
 
               
INCOME FROM OPERATIONS BEFORE INCOME TAXES
   
16,822,696
   
9,957,311
 
               
INCOME TAX EXPENSE
   
(4,287,907
)
 
(2,489,328
)
               
NET INCOME
   
12,534,789
   
7,467,983
 
               
OTHER COMPREHENSIVE INCOME
             
               
Foreign currency translation gain
   
16,626,051
   
6,730,246
 
               
OTHER COMPREHENSIVE INCOME, NET
   
16,626,051
   
6,730,246
 
               
COMPREHENSIVE INCOME
 
$
29,160,840
 
$
14,198,229
 
               
WEIGHTED AVERAGE SHARES OUTSTANDING, BASIC AND DILUTED
   
64,472,131
   
54,400,000
 
               
NET INCOME PER COMMON SHARE, BASIC AND DILUTED
 
$
0.19
 
$
0.14
 
 
See accompanying notes to the consolidated financial statements.
 
F-6


CHINA INFRASTRUCTURE INVESTMENT CORPORATION
(FORMERLY LEARNING QUEST TECHNOLOGIES, INC.) AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED JUNE 30, 2008 AND 2007

   
Common Stock
     
Accumulated Other
         
   
Number of
shares
 
Par value
 
      Additional      
Paid-in Capital
 
Comprehensive
Income
 
(Deficit) Retained
Earnings
 
Total
 
                           
BALANCE AT JULY 1, 2006
   
54,400,000
 
$
54,400
 
$
136,818,973
 
$
3,462,234
 
$
(11,147,348
)
$
129,188,259
 
                                       
Capital contribution
   
-
   
-
   
3,843,419
   
-
   
-
   
3,843,419
 
                                       
Foreign currency translation gain
   
-
   
-
   
-
   
6,730,246
   
-
   
6,730,246