SecProbe.io

CORRESP
1
filename1.htm

    Unassociated Document

    CHINA
INFRASTRUCTURE CONSTRUCTION CORPORATION

    C915
Jia Hao International Business Center

    116
Zizhuyuan Road Haidan District

    Beijing,
China 100097

    Tel.
86-10-5170-9287

    Fax 86-10-8844-8198

    December
24, 2009

    Mr.
Ernest Greene

    Division
of Corporation Finance

    U.S.
Securities and Exchange Commission

    100 F
Street, N.E.

    Washington,
D.C. 20549

                    RE:

                    China
      Infrastructure Construction Corporation

                    Form
      10-K for Fiscal year Ended May 31, 2009

                    File No. 333-146758

    Dear Mr.
Greene:

    Reference is made to your comment
letter, dated October 1, 2009, relating to the subject Form 10-K (the “Comment
Letter”).  Set forth below are the comments contained in the
Comment Letter followed by our response thereto:

    Managements Discussion and
Analysis of Financial Condition and Results of Operations

    Results of
Operations

    Fiscal Year Ended May 31,
2009 Compared to Fiscal Year Ended May 31, 2008, page 22

              2.

              Please
      Expand/revise your discussion under results of operations for all periods
      to:

              ·

              Quantify
      the extent to which material increases in sales are attributable to
      changes in prices, volume or amount of goods being sold, or changed in
      product mix. For example, you explain on page 27 the increase in sales is
      attributable to the successful development of your customers’ network the
      extent to which your network has resulted in additional
    sales;

              ·

              Provide
      a robust explanation for the changes in the line items within your
      statements of operations. For example, you indicated that your gross
      margin in the fiscal year ended May 31, 2009 was approximately 19.5%,
      which was higher than the 15.9% in the same period last year without
      further explanations as to why your gross margin was higher than in the
      prior fiscal year; and

    Mr. Ernst Greene

    U.S. Securities and Exchange Commission

    December 24, 2009

    Page 2

              ·

              Quantify
      each factor you cite as impacting your operations. Fr example, you
      disclose the increase in general and administrative expenses was primarily
      due to the consummation of the Share Exchange Agreement and related legal
      and professional expenses. However, you have not quantified the impact of
      these items.

    This is
not meant to represent an all-inclusive list of there your MD&A should be
improved. We encourage you to provide quantification of amounts and further
clarification throughout your discussion. See item 303(a)(3) of Regulation
S-K.

    Response:

    We will
revise our results of operations as follows:

    “Results
of Operations

    Fiscal
Year Ended May 31, 2009 Compared to Fiscal Year Ended May 31, 2008

    Sales
Revenues

    Sales for
the fiscal year ended May 31, 2009 were $66,778,296 as compared to $39,302,543
for the same period last year, an increase of 70%. The increase in sales
revenues is attributable to the increased demand of concrete due to government’s
stimulus plan in infrastructure and real estate industry and is mainly due to
the increase of average unit sales price. Increase of average sales price is due
to change to higher profit product mix and in line with the increase of costs of
raw materials, oil, and labor. Higher profit products C30 and C35 series
accounted for approximately 10% more of the total finished goods sales revenue
for the fiscal year ended May 31, 2009 compared to the same period last
year.

    Costs of
Goods Sold

    Cost of
goods sold for the fiscal year ended May 31, 2009 was $54,186,509 as compared to
$33,050,443 for the same period last year, an increase of 64%. The increase in
cost of goods sold is mainly attributable to the increase of costs of raw
materials, oil, and labor during this period.

      Mr. Ernst Greene

      U.S. Securities and Exchange Commission

      December 24, 2009

      Page 3

    Gross
Profit

    Gross
profit for the fiscal year ended May 31, 2009 was $12,591,787, an increase of
approximately 101%, as compared to $6,252,100 for the fiscal year ended May 31,
2008. The increase in gross profit is attributable to the increase of sales
revenue.

    Gross
profit margin

    Gross
profit margin for the fiscal year ended May 31, 2009 was 18.9%, compared to
15.9% for the same period in 2008. The increased gross profit margin is mainly
due to the increased unit selling prices. The average unit selling prices
increased a higher percentage than the increase of the average unit
cost.

    Selling
and General and Administrative Expenses

    Selling,
general and administrative expenses for the fiscal year ended May 31, 2009 were
$1,521,758 as compared to $1,129,126 for the same period last year, an
increase of $392,632, or approximately 35%. The increase of the selling, general
and administrative expenses was primarily due to increase in professional
services and donation expenses. Approximately $223,544 was donated to rebuild
homes lost in earthquake during the year ended May 31, 2009.

    Operating
Income

    Our
operating income for the fiscal year ended May 31, 2009 was $11,070,029, an
increase of approximately 116% as compared to $5, 122,974 for the fiscal year
ended May 31, 2008. The increased operating income was mainly due to the
increased sales revenue.

    Income
Taxes

    During
the fiscal year ended May 31, 2009, our business operations were solely
conducted by our subsidiaries incorporated in the PRC and we are governed by the
PRC Enterprise Income Tax Laws.  PRC enterprise income tax is
calculated based on taxable income determined under PRC GAAP. In accordance with
the Income Tax Laws, a PRC domestic company is subject to enterprise income tax
at the rate of 25%.

    However,
the respective tax authorities consider our PRC subsidiary a resource
multipurpose utilization enterprise, which qualifies it for an exemption from
income tax until December 31, 2010.

    Net
Income

    Net
income was $10,461,209 for the fiscal year ended May 31, 2009, compared to
$4,802,337 in the last fiscal year, an increase of $5,658,872 or approximately
118%. The increase was primarily due to the increased sales.

      Mr. Ernst Greene

      U.S. Securities and Exchange Commission

      December 24, 2009

      Page 4

    Liquidity
and Capital Resources

    As of May
31, 2009, we had cash and cash equivalents of $921,841. We have historically
funded our working capital needs from operations, advance payments from
customers, bank borrowings, and capital from shareholders. Our working capital
requirements are influenced by the level of our operations, the numerical and
dollar volume of our project contracts, the progress of our contract execution,
and the timing of accounts receivable collections.

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

                        12 Months Ended

                        May 31

                        2009

                        2008

                        Net
      cash provided by operating activities

                        $

                        2,277,902

                        $

                        4,870,154

                        Net
      cash (used in) investing activities

                        (2,375,085)

                        (810,357)

                        Net
      cash provided by (used in) financing activities

                        123,861

                        (3,494,350)

                        Effect
      of exchange rate change on cash and cash equivalents

                        58,185

                        89,840

                        Net
      increase in cash and cash equivalents

                        84,863

                        655,287

                        Cash
      and cash equivalents, beginning balance

                        836,978

                        181,691

                        Cash
      and cash equivalents, ending balance

                        921,841

                        836,978

    Operating
Activities

    Net cash
provided by operating activities for the year ended May 31, 2009 was $2,277,902,
a decrease of 53.23%, or $2,592,252, from $4,870,154 provided by operating
activities for the same period in 2008. The decrease of net cash provided by
operating activities was due to the following factors. Accounts receivable
increased to $16,117,557 in 2009 from $2,485,354 in 2008 due to the sales
increase. The sales increased from $39,302,543 for the year ended May 31, 2008
to $66,778,296 for the year ended May 31, 2009. We typically had long term
annual and multi year contracts with our major customers. We entered into
varying payment terms with our customers ranging from payment before delivery,
payment on delivery or up to 2 years after the project completion. As of May 31,
2009, we had experienced a bad debt ratio of less than 0.1% of sales. The
increase in receivables was partially offset by increase in accounts payable,
other payable and a decrease in inventory. Accounts payable increased to
$4,539,958 in 2009 from $1,942,866 in 2008 due to the expansion of business.
Other payables increased to $1,152,541 in 2009 from $423,612 in 2008 due to the
expansion of business. However, the Inventories increased by $449,959 in 2009 as
compared to a decrease of $75,262 in 2008.

      Mr. Ernst Greene

      U.S. Securities and Exchange Commission

      December 24, 2009

      Page 5

    Investing
Activities

    Net cash
used in investing activities for the year ended May 31, 2009 was $2,375,085, an
increase of 193.09%, or $1,564,728 from $810,357 used in investing activities
for the same period in 2008. The increase of net cash used in investing
activities resulted from more deposits for acquisition of fixed
assets.

    Financing
Activities

    Net cash
provided by financing activities for the year ended May 31, 2009 was $123,861,
an increase of 103.54%, or $3,618,211 from $3,494,350 used in the financing
activities for the same period in 2008. The increase of net cash provided by
financing activities is mainly because the Company has fewer payments of
dividends and less payment of notes payable for the year ended May 31, 2009 than
for the year ended May 31, 2008.”

    Liquidity and Capital
Resources

    Operating Activities, page
24

              3.

              Net
      cash provided by operating activities was $2.3 million for the fiscal year
      ended May 31, 2009 compared to $4.9 million for the fiscal year ended May
      31, 2008. You disclose that the net cash reflects the revenues generated
      by the operations of Beijing Concrete. However, you have not identified
      the components that resulted in the decrease in your cash flows from
      operations. Please expand this disclosure to discuss the components that
      resulted in the decrease in cash flows from operations as well as the
      underlying reasons for changes in these components, with specific
      discussions for accounts receivable, inventories, accounts payable and
      other payables.

    Response: We will revise as
follows:

    The
decrease of net cash provided by operating activities was due to the following
factors. Accounts receivable increased to $16,117,557 in 2009 from $2,485,354 in
2008 due to the sales increase. The sales increased from $39,302,543 for the
year ended May 31, 2008 to $66,778,296 for the year ended May 31, 2009. We
typically had long term annual and multi year contracts with our major
customers. We entered into varying payment terms with our customers ranging from
payment before delivery, payment on delivery or up to 2 years after the project
completion. As of May 31, 2009, we had experienced a bad debt ratio of less than
0.1% of sales. The increase in receivables was partially offset by increase in
accounts payable, other payable and a decrease in inventory. Accounts payable
increased to $4,539,958 in 2009 from $1,942,866 in 2008 due to the expansion of
business. Inventories increased to $449,959 in 2009 from $75,262 in 2008 due to
the expansion of business. Other payables increased to $1,152,541 in 2009 from
$423,612 in 2008 due to the expansion of business.

      Mr. Ernst Greene

      U.S. Securities and Exchange Commission

      December 24, 2009

      Page 6

    Financial Statements and
Supplementary Data, Page 25

              4.

              Please
      revise your selected financial data to include basic and diluted earnings
      per share for each period.

    Response: We have revised Item
8. Financial Statements and Supplementary Data as follows:

    The
Company's consolidated audited financial statements for the fiscal years ended
May 31, 2009 and 2008, together with the report of the independent certified
public accounting firm thereon and the notes thereto, are presented beginning at
page F-1.

    Financial
Statements

    Consolidated Statements of
Operations and Comprehensive Income, page F-2

              5.

              Please
      disclose in your footnotes the types of amounts included in the other
      (expense) line item for each period presented and also disclose in your
      MD&A the business reasons for changes between
  periods.

    Response: We have revised our
income statement and reclassified and removed the amount previously included in
“other (expense)” into selling and general and administration expense for the
year ended May 31, 2009 and 2008. At the same time, we have combined selling
expenses and general and administrative expenses. Reclassified income statement
is as follow. The reclassification has no effect on net income.

                          Year ended May 31, 2009

                          Year ended May 31, 2008

                          Sales
      revenues

                        $
                        66,778,296

                        $
                        39,302,543

                          Cost
      of goods sold

                        54,186,509

                        33,050,443

                          Gross
      profit

                        12,591,787

                        6,252,100

                          Selling
      and general and administrative expenses

                        1,521,758

                        1,129,126

                          Net
      operating income

                        11,070,029

                        5,122,974

                          Other
      income (expense):

                          Interest
      (expense)

                        (2,097
                        )

                        (40,312
                        )

                          Other
      (expense)

                        -

                        -

                          Total
      other income (expense)

                        (2,097
                        )

                        (40,312
                        )

                          Net
      income before income taxes

                        11,067,932

                        5,082,662

                          Income
      taxes

                        -

                        -

                          Net
      income before minority interests

                        11,067,932

                        5,082,662

                          Minority
      interests

                        606,723

                        280,325

                          Net
      income

                        $
                        10,461,209

                        $
                        4,802,337

                          Foreign
      currency translation adjustment