On August 6, 2009, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with KGE Group, Limited (“KGE Group”) and certain investors pursuant to which we agreed to sell an aggregate of 17,000,000 shares (the “Shares”) of our common stock to the investors for $1.65 per share for aggregate gross proceeds of approximately $28 million. Pursuant to the Purchase Agreement, we intend to sell and issue the Shares to the investors on or around September 30, 2009, provided that approval from the our stockholders is obtained prior to the sale and issuance of the Shares. Under the Purchase Agreement, we are required to seek, and use our best efforts to obtain stockholders approval of the sale and issuance of the Shares. We intend to seek stockholder approval for the sale and issuance of the Shares at a special meeting of stockholders. If stockholder approval is not obtained for the sale and issuance of the Shares, the Shares will not be sold to the investors. Pursuant to the Purchase Agreement, after the sale of the Shares to the investors, we must maintain a substantial majority of the proceeds from the offering as a cash reserve to fund the Shanghai Nine Dragons Project until such project has reached at least 80% of completion as determined by us and Nine Dragon (Shanghai) Co. Ltd. According to the Purchase Agreement, if as reported in our financial statements at the end of any fiscal quarter, our net assets (excluding normal depreciation) do not at least equal the value of our net assets (excluding normal depreciation) on June 30, 2009, less $2,500,000 (the "Net Assets Threshold"), KGE Group agreed to pay to us an amount equal to the difference between the Net Assets Threshold and the net assets (excluding normal depreciation) as reported for the period in question (the "Net Assets Loss") in cash within six months after the end of the period in which the Net Assets Loss occurred. The provision expires on the earlier of (i) three years from the date of the Purchase Agreement or (ii) the investors no longer holder at least 50% of the Shares sold pursuant to the Purchase Agreement at the end of any fiscal quarter of our company.

On August 6, 2009, and in connection with the Purchase Agreement, we and the holders of our outstanding Bonds and warrants to purchase 300,000 shares of our common stock expiring 2013 (the “2008 Warrants”) entered into an Amendment and Waiver Agreement (the “Waiver”). Pursuant to Waiver, the bondholders and warrantholder agreed to waive their right to a reduction in the conversion price of the Bonds and exercise price of the 2008 Warrants due to our proposed sale of the shares pursuant to the Purchase Agreement at a price per share less than the current conversion prices of the Bonds and exercise price of the 2008 Warrants. The holders of the 2008 Bonds also agreed that no default shall occur under Condition 12(A)(xiv) of the trust deed governing the 2008 Bonds relating to the requirement that KGE Group own at least 45% of our issued and outstanding common stock. Pursuant to the Waiver, we agreed to use a portion of the net proceeds of the sale of the Shares to the investors to pay (i) the interest payments of the Bonds that are outstanding and due for payment in accordance with the terms of the trust deeds governing the Bonds, and (ii) all amounts owed to ABN AMRO Band (China) Co. Ltd., Shenzhen Branch or any other ABN AMRO Bank N.V. affiliate in connection with the Bank Overdraft Facility and any outstanding interest on the facility as the date of payment (collectively, the “Agreed Bondholders Payments”). Such payments must be made no later than the earlier of (i) seven business days after the sale of the Shares and (ii) three months from the date of the Waiver. Remaining net proceeds shall be used to fund our operations. Until the Agreed Bondholders Payments of are made by us after the sale of the Shares, we agreed that we will not use proceeds from the proposed sale of shares to repay or prepay any debt prior to our currently scheduled due date without consent of the bondholders.

Results of Operations

The following table sets forth statements of operations for the three and six months ended June 30, 2009 and 2008 in U.S. dollars (unaudited):

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008

	(in thousands, except for share and per share amounts)

Contract revenues earned	$	30,599		$	41,380		$	66,972		$	66,729

Cost of contract revenues earned		20,647			28,038			48,809			44,942

Gross profit	$	9,952		$	13,342		$	18,133		$	21,787

Selling, general and administrative expenses		6,120			4,590			12,071			7,591

Income from operations	$	3,832		$	8,752		$	6,062		$	14,197

Interest income		46			35			50			42

Interest expenses		(1,472	)		(1,198	)		(2,784	)		(1,532	)

Other income		139			39			160			151

Income before taxes	$	2,545		$	7,629		$	3,489		$	12,858

Income tax		-			70			-			117

Net Earnings	$	2,545		$	7,559		$	3,489		$	12,741

Net (earnings)/loss attributable to noncontrolling interests		(1	)		19			(2	)		11

Net earnings attributable to the Company		2,544			7,578			3,487			12,752

Earnings per share:
Basic	$	0.05		$	0.15		$	0.07		$	0.25
Diluted	$	0.05		$	0.14		$	0.07		$	0.23

Weighted average shares outstanding:
Basic		53,256,874			51,812,477			53,256,874			51,832,946
Diluted		53,256,874			55,549,949			53,256,874			55,550,770

Three Months Ended June 30, 2009 and 2008

Contract revenues earned for the three months ended June 30, 2009 were $30.6 million, a decrease of $10.8 million, or 26%, from the contract revenues earned of $41.4 million for the comparable period in 2008. The primary reason for the decrease in contract revenues earned was due to a reduction of projects by developers and their postponement of project commencement dates.

Cost of contract revenues earned for the three months ended June 30, 2009 was $20.6 million, a decrease of $7.4 million, or 26%, from $28.0 million for the comparable period in 2008. Cost of contract revenues earned consists of the raw materials, labor and other operating costs related to manufacturing. The decrease in costs of contract revenues earned was primarily due to decrease in revenue during the three months ended June 30, 2009.

Gross profit for the three months ended June 30, 2009 was $10.0 million, a decrease of $3.3 million, or 25%, from $13.3 million for the comparable period of 2008. Our gross margin for the three months ended June 30, 2009 was 32.7% as compared with 32.2% for the three months ended June 30, 2008. The slight increase in gross margin was primarily a result of a series of costs cutting and control measures.

Selling, general and administrative expenses were $6.1 million for the three months ended June 30, 2009, an increase of approximately $1.5 million, or 33%, from $4.6 million for the comparable period in 2008. The increase was due to our operational expansion, including the growth in staff, office rental and other costs associated with the expansion of our overseas operations since 2008. Among the selling, general and administrative expenses, payroll and social securities was the single largest expenditure of the group, which accounted for approximately 50% of the expenses. Other major expenses included office administrative expenses and rental expenses.

Interest expenses and finance expenses were $1.5 million for the three months ended June 30, 2009, an increase of $0.3 million, from $1.2 million for the comparable period in 2008. The increase was mainly due to the use of short term bank loan in financing of our purchase of materials.

Income tax expense was nil for the three months ended June 30, 2009 at an effective tax rate of 0%, compared with approximately $70,000 in taxes for the same period of 2008 at an effective tax rate of 0.9%. The primary reason for the decrease was due to zero corporate income tax rate associated with revenues from the Dubai project, our largest ongoing project during 2009.

Net income for the three months ended June 30, 2009 was $2.5 million, a decrease of $5.1 million, or 67%, from $7.6 million for the comparable period in 2008.

Six Months Ended June 30, 2009 and 2008

Contract revenues earned for the six months ended June 30, 2009 were $66.9 million, a slight increase of $0.2 million, or 0.003%, from the contract revenues earned of $66.7 million for the comparable period in 2008.

Cost of contract revenues earned for the six months ended June 30, 2009 was $48.8 million, an increase of $3.9 million, or 8.7%, from $44.9 million for the comparable period in 2008. The increase in costs of contract revenues earned was primarily due to higher raw material, labor and administrative costs.

Gross profit for the six months ended June 30, 2009 was $18.1 million, a decrease of $3.7 million, or 17%, from $21.8 million for the comparable period of 2008. Our gross margin for the six months ended June 30, 2009 was 27.1% as compared with 32.2% for the six months ended June 30, 2008. The decrease in gross margin was primarily a result of higher raw material, labor and administrative costs in Dubai, as well as our domestic market of China.

Selling, general and administrative expenses were $12.1million for the six months ended June 30, 2009, an increase of approximately $4.5million, or 59.2%, from $7.6 million for the comparable period in 2008. The increase was due to our operational expansion, including the growth in staff, office rental and other costs associated with the expansion of our overseas operations since 2008. Among the selling, general and administrative expenses, payroll and social securities was the single largest expenditure of the group, which accounted for approximately 50% of the expenses. Other major expenses included office administrative expenses and rental expenses.

Interest expenses and finance expenses were $2.8 million for the six months ended June 30, 2009, an increase of $1.3 million, from $1.5 million for the comparable period in 2008. The increase was mainly due to the issuance of $20 million convertible bonds in April 2008.

Income tax expense was nil for the six months ended June 30, 2009 at an effective tax rate of 0%, compared with approximately $117,000 in taxes for the same period of 2008 at an effective tax rate of 0.9%. The primary reason for the decrease was due to zero corporate income tax rate associated with revenues from the Dubai project, our largest ongoing project during 2009.

Net income for the six months ended June 30, 2009 was $3.5 million, a decrease of $9.3 million, or 73%, from $12.8 million for the comparable period in 2008.

Liquidity and Capital Resources

At June 30, 2009, we had cash and cash equivalents of $7.0 million.

Prior to October 17, 2006, we financed our business operations through short-term bank loans, cash provided by operations, and credit provided by suppliers. On October 17, 2006, concurrently with the close of our Share Exchange, we received gross proceeds of $3.7 million in a private placement transaction. After commissions and expenses, we received net proceeds of approximately $3.1 million. In October 2007, we completed an initial public offering consisting of 847,550 shares of our common stock. Our sale of common stock, which was sold indirectly by us to the public at a price of $3.50 per share, resulted in net proceeds of approximately $2.0 million.

We have also financed our operations through the issuance of convertible bonds. On April 12, 2007, we completed a financing transaction pursuant to which we issued the 2007 Bonds in the principal amount of $10 million. In September 2008, $2 million worth of bonds were converted into shares of common stock pursuant to which we issued 571,428 shares of common stock. Effective from April 12, 2009, the conversion price was reset from $3.50 to $2.45 per share per the terms of the bonds based on the average trading price of our common stock.

On April 15, 2008, we completed a financing transaction pursuant to which we issued the 2008 Bonds in the principal amount of $20.0 million. The 2008 Bonds bear cash interest at the rate of 12% per annum. According to the terms of the Bonds, interest was payable semi-annually in arrears on April 15 and October 15 of each year commencing October 15, 2008. For the interest payment that was due on April 15, 2009, the bondholders agreed, subject to certain conditions being met, that we may defer an interest payment of $1.2 million of the 2008 bonds. As indicated above, we and the holders of our outstanding Bonds and the 2008 Warrants entered into an Amendment and Waiver Agreement (the “Waiver”) pursuant to which the bondholders and warrantholder agreed to waive their right to a reduction in the conversion price of the Bonds and exercise price of the 2008 Warrants due to our proposed sale of the shares pursuant to the Purchase Agreement at a price per share less than the current conversion prices of the Bonds and exercise price of the 2008 Warrants. Pursuant to the Waiver, we agreed to use a portion of the net proceeds of the sale of the Shares to the investors to pay (i) the interest payments of the Bonds that are outstanding and due for payment in accordance with the terms of the trust deeds governing the Bonds, and (ii) all amounts owed to ABN AMRO Band (China) Co. Ltd., Shenzhen Branch or any other ABN AMRO Bank N.V. affiliate in connection with the Bank Overdraft Facility and any outstanding interest on the facility as the date of payment (collectively, the “Agreed Bondholders Payments”). Such payments must be made no later than the earlier of (i) seven business days after the sale of the Shares and (ii) three months from the date of the Waiver. Remaining net proceeds shall be used to fund our operations. Until the Agreed Bondholders Payments of are made by us after the sale of the Shares, we agreed that we will not use proceeds from the proposed sale of shares to repay or prepay any debt prior to our currently scheduled due date without consent of the bondholders.

If we are required to repurchase all or a portion of the outstanding amount of $28.0 million in bonds and we do not have sufficient cash to make the repurchase, we will be required to obtain third party financing to do so, and there can be no assurances that we will be able to secure financing in a timely manner and on favorable terms, which could have a material adverse effect on our financial performance, results of operations and stock price.

Our subsidiary, Zhuhai King Glass Engineering Co., Limited, borrowed from Bank of East Asia with a condominium as collateral. This facility, which is due October 25, 2011, is subject to a current interest rate of5.832% and interest rate adjusts every 6 months. The amount outstanding as of June 30, 2009 was $nil as fully repaid in May 2009.

Full Art International Limited incurred an automobile capital lease obligation due November 09, 2012 that had an outstanding amount of $145,533 as of June 30, 2009.

On February 19, 2008, we and Techwell Engineering Limited were granted a bond facility by the Hong Kong Branch of ABN AMRO Bank N.V. The facility amount was $10,000,000, at a tenor of up to one year with 2% flat interest rate on the issued amount of bonds such as bank guarantees, performance bonds, advanced payment bonds and standby letters of credit. ABN AMRO required guarantees as follows: (i) an irrevocable and unconditional guarantee executed by Zhuhai King Glass Engineering Co. Limited and (ii) share charge over the shares of us for a minimum value of $5,000,000 or equivalent, executed by KGE Group Limited. On May 2, 2008, the facility was increased to $12,000,000 with additional cash collateral of $2,000,000. This facility is fully utilized.

On March 28, 2008, we, Full Art and Techwell Engineering Limited were granted a bonding facility by the Hong Kong Branch of HSBC. The facility amount was $10,000,000, at a tenor of up to one year with 1% flat interest rate on the issued amount of bonds such as bank guarantees, performance bonds, advanced payment bonds and standby letters of credit. HSBC required guarantees as follows: (i) an unlimited guarantee among China Architectural Engineering, Inc., Full Art International Limited and Techwell Engineering Limited; and (ii) an “all monies” securities deposits with 15% margin. On August 18, 2008, the facility was increased to $20,000,000 with additional cash collateral of $1,500,000. As of June 30, 2009, we have utilized $12 million of the facility.

On July 19, 2008, Zhuhai King Glass Engineering Co., Ltd. (“Zhuhai KGE”), our wholly-owned subsidiary was granted a Bank Accepted Draft facility by the Shenzhen Branch of ABN AMRO Bank N.V. The facility amount is RMB70,000,000 (US$10,218,978). On June 30, 2009, the facility was amended to allow Open Account Financing – Accounts Receivable against invoices from acceptable buyers up to RMB21,000,000 and Overdraft in Current Account up to RMB16,800,000. ABN AMRO requires irrevocable and unconditional guarantee from us and cash collateral of 20% of bank’s acceptance bill issued and Open Account Financing. As of June 30, 2009, Zhuhai KGE utilized RMB nil (US$ nil) of Bank Accepted Draft and RMB 33.6 million (US$4.9 million) of Open Account Financing and Overdraft in Current Account.

We also lease certain administrative and production facilities from third parties. Accordingly, for the six months ended June 30, 2009 and 2008, we incurred rental expenses of $1,601,962 and $856,780, respectively.

Working capital management, including prompt and diligent billing and collection, is an important factor in our results of operations and liquidity. When we are awarded construction project, we work according to the percentage-of-completion method which matches the revenue streams with the relevant cost of construction based on the percentage-of-completion of project as determined based on certain criteria, such as, among other things, actual cost of raw material used compared to the total budgeted cost of raw material and work certified by customers. There is no guarantee that the cash inflow from these contracts is being accounted for in parallel with the cash outflow being incurred in the performance of such contract. In addition, a construction project is usually deemed to be completed once we prepare a final project account, the account is agreed upon by our customers, and all amounts related to the contract must be settled according to the account within three months to a year from the customer’s agreement on the final project account. As there may be different time intervals to reach a consensus on the amount as being accounted for in the projects before the project finalization account is being mutually agreed by each other. We experience an average accounts settlement period ranging from three months to as high as one year from the time we provide services to the time we receive payment from our customers. In contrast, we typically need to place certain deposit with our suppliers on a portion of the purchase price in advance and for some suppliers we must maintain a deposit for future orders. We attempt to maintain a credit policy of receiving certain amounts of deposit from customers before we begin a new project.

We experienced revenue of $66.9 million for the six months ended June 30, 2009 compared to revenue of $66.7 million for the same period in 2008. Construction contract related receivables, including contract receivables and costs and earnings in excess of billings as of June 30, 2009 were $105.3 million, a increase of $17.6 million over construction related receivables of $87.7 million as of December 31, 2008. The increase in such receivables reflected the slow down of payment by the customers.

We provide for bad debts principally based upon the aging of accounts receivable, in addition to collectability of specific customer accounts, our history of bad debts, and the general condition of the industry. We are currently involved in six lawsuits in which we are suing other parties for overdue payments. The total amount involved is approximately $3.2 million. We made additional provision of $0.3 million for doubtful accounts in the six months ended June 30, 2009. As of June 30, 2009, our provision for doubtful accounts was $5.5 million, which was 5.2% of our construction contract related receivables of $105.3 million. We believed our current reserve for doubtful accounts is commensurate to cover the associated credit risk in the portfolio of our construction contract related receivables. Due to the difficulty in assessing future trends, we could be required to further increase our provisions for doubtful accounts. As our accounts receivable age and become uncollectible our cash flow and results of operations are negatively impacted.

As indicated above, we entered into the Framework Agreement in June 2009 with Nine Dragon to undertake the projects at the Nine Dragon Holiday Resort that has been under development in the Yangtze River Delta in China. We also entered into the LOI in August 2009 to purchase land from Zhejiang Nine Dragon Co., a subsidiary of Nine Dragon, for an approximate purchase price equal to $55 million. The Nine Dragon Project will require significant capital resources and it will require us to properly manage the project to avoid a material adverse effect on our operating results, cash flows and liquidity.

We intend to expend a significant amount of capital to purchase materials and serve as deposits for performance bonds for new projects that we have obtained. Additional capital for this objective may be required that is in excess of our liquidity, requiring us to raise additional capital through an equity offering or secured or unsecured debt financing. The availability of additional capital resources will depend on prevailing market conditions, interest rates, and our existing financial position and results of operations.

Net cash from operating activities for the six months ended June 30, 2009 was approximately $2.7 million, as compared to net cash outflow of $7.9 million in the same period in 2008. The change in primarily due to our improvement in cash collection.

Net cash from investing activities was approximately $1.0 million for the six months ended June 30, 2009 compared to approximately $0.4 million used in investing activities for the six months ended June 30, 2008. The change was mainly a result of the release of restricted cash from banks.

Net cash used in financing activities was $6.4 million for the six months ended June 30, 2009 compared to $19.4 million provided by financing activities during the six months ended June 30, 2008. The change was due to repayment of short-term loans, as compared to the issuance of convertible bond in 2008.

Contractual Obligations

The following table describes our contractual commitments and obligations as of June 30, 2009:

	Payments due by period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Operating Lease Obligations	$	4,094,763	$	1,389,094	$	1,587,739	$	1,117,930	$	-
Contingent Liabilities (1)	$	22,243,907	$	18,743,907	$	3,500,000	$	-	$	-
Long-term debt (2)	$	35,391,600	$	-	$	23,322,000	$	12,069,600	$	-

(1)

Includes the $3,500,000 standby guarantee expiring May 2, 2010, $2,121,322 performance bond expiring on September 30, 2009 and $5,578,164 advanced payment bond expiring September 30, 2009, issued by ABN AMRO Bank N.V. Also includes $1,831,411 performance bond expiring December 31, 2009, $5,494,234 advanced payment bond expiring August 6, 2009 and $3,718,776 advanced payment bond expiring September 30, 2009, issued by HSBC.

(2)

Includes the $8 million convertible bond which is required to be redeemed at 150.87% at maturity at April 4, 2012, which may be converted into our common stock after September 28, 2008, accordingly we may re-classify upon conversion. Also includes the $20 million convertible bond which is required to be redeemed at 116.61% at maturity at April 15, 2011, which may be converted into our common stocks after October 15, 2008, accordingly we may re-classify upon conversion.

Off-Balance Sheet Arrangements

None.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues, expenses and allocated charges during the reporting period. Actual results could differ from those estimates.

We describe our significant accounting policies in Note 2, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K as of and for the year ended December 31, 2008. We discuss our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K as of and for the year ended December 31, 2008. Other than as indicated in this quarterly report, there have been no material revisions to the critical accounting policies as filed in our Annual Report for the fiscal year ended December 31, 2008 on Form 10-K as filed with the SEC on March 31, 2009.

Recent Accounting Pronouncements

See Note 2(t) of the accompanying unaudited interim consolidated financial statements included in this Form 10-Q for a discussion of recent accounting pronouncements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

There have been no material changes in market risk from the information provided in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report for the fiscal year ended December 31, 2008 on Form 10-K as filed with the SEC on March 31, 2009.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.

As of the end of the period covered by this Quarterly Report, we conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act). Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures identified certain material weaknesses, as described below, that caused our controls and procedures to be ineffective. Notwithstanding the existence of the material weaknesses described below, management has concluded that the interim consolidated financial statements in this Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows for the periods and dates presented.

These material weaknesses primarily related to one of our material operating subsidiaries, Techwell Engineering Limited. (“Techwell”). On November 6, 2007, we acquired Techwell and its wholly owned subsidiaries, Techwell Building Systems (Shenzhen) Ltd. in China and Techwell International Ltd. in Macau. At the time, Techwell was a privately-held company and its financial systems were not designed to facilitate the external financial reporting required of a publicly held company under the Sarbanes-Oxley Act of 2002. In addition, Techwell’s accounting records were historically maintained using accounting principles generally accepted in the People's Republic of China, its personnel was not fully familiar with accounting principles generally accepted in the United States of America.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected in a timely basis. We identified the following material weaknesses:

Techwell lacked the technical expertise and processes to ensure compliance with our policies and did not maintain adequate controls with respect to (a) timely updating engineering budget and analysis, (b) coordination and communication between Corporate Accounting and Engineering Staffs, and (c) timely review and analysis of corporate journals recorded in the consolidation process.

Techwell did not maintain a sufficient complement of personnel with an appropriate knowledge and skill to comply with our specific engineering financial accounting and reporting requirements and low materiality thresholds. This was evidenced by a number of documents missing or not matching with the records and contributed to the adjustment of financial results. As evidenced by the significant number and magnitude of out-of-period adjustments identified from Techwell during the period-end closing process, management has concluded that the controls over the period-end financial reporting process were not operating effectively. Specifically, controls were not effective to ensure that significant accounting estimates and other adjustments were appropriately reviewed, analyzed, and monitored on a timely basis.

Techwell did not comply with our authorization policy. This was evidenced by a number of expenses incurred without appropriate authorization. This material weakness resulted in an unauthorized and significant increase of expenses, which significantly impacted our operating results.

Remediation of Material Weaknesses

We are in the process of developing and implementing remediation plans to address our material weaknesses. One key change for us going forward will be the design and implementation of internal controls over the accounting and oversight of all subsidiaries, including enhanced accounting systems, processes, policies and procedures. We have taken the following actions to address the material weaknesses and improve our internal controls over financial reporting:

On January 14, 2009, the board of directors of Techwell passed a board resolution to replace management of Techwell. We have appointed a new general manager to Techwell, as well as three experienced project managers to the Dubai Metro project.

Management has initiated a Sarbanes-Oxley Act of 2002 Section 404 Compliance Assistance Project, which is intended to meet all requirements required by SEC in our company and all of our subsidiaries. We have engaged an experienced consulting firm, Protiviti, to assist in our Sarbanes-Oxley Act of 2002 Section 404 Compliance.

We have established a dedicated and qualified internal control and audit team to implement the policies and procedures to the standard of a US public company.

We reorganized and restructured Techwell’s Corporate Accounting by (a) modifying the reporting structure and establishing clear roles, responsibilities, and accountability, (b) hiring skilled technical accounting personnel to address our accounting and financial reporting requirements, and (c) assessing the technical accounting capabilities in the operating units to ensure the right complement of knowledge, skills, and training.

We reorganized and restructured the budgeting process by (a) centralizing the procurement function to our company to ensure budgets and analyses of Techwell are timely prepared and properly reviewed; (b) implementing new policies and procedures to ensure that appropriate communication and collaboration protocols among our Engineering, Procurement and Corporate Accounting departments; and (c) hiring the necessary technical procurement personnel to support complex procurement activities. We have hired two experienced technical procurement managers and expect to increase the headcount in the purchase department in the future if necessary.

We strengthened the period-end closing procedures of our operating subsidiaries by (a) requiring all significant estimate transactions to be reviewed by Corporate Accounting, (b) ensuring that account reconciliations and analyses for significant financial statement accounts are reviewed for completeness and accuracy by qualified accounting personnel, (c) implementing a process that ensures the timely review and approval of complex accounting estimates by qualified accounting personnel and subject matter experts, where appropriate, and (d) developing better monitoring controls at Corporate Accounting and the operating units.

We believe that we are taking the steps necessary for remediation of the material weaknesses identified above, and we will continue to monitor the effectiveness of these steps and to make any changes that our management deems appropriate.

Changes in internal control over financial reporting

Based on the evaluation of our management as required by paragraph (d) of Rule 13a-15 of the Exchange Act, we believe that there were no changes in our internal control over financial reporting that occurred during the second quarter of 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, other than as described above under “Remediation of Material Weaknesses.”

PART II-OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 11(b) of the accompanying unaudited interim consolidated financial statements included in this Form 10-Q for a discussion of our current legal proceedings.

ITEM 1A. RISK FACTORS

Any investment in our common stock involves a high degree of risk. Investors should carefully consider the risks described below and all of the information contained in our public filings before deciding whether to purchase our common stock. Except as set forth below, there have been no material revisions to the “Risk Factors” as filed in our Annual Report on Form 10-K as of and for the year ended December 31, 2008.

Our failure to properly manage the Nine Dragon Project may result in additional costs or claims, which could have a material adverse effect on our operating results, cash flows and liquidity.

The Nine Dragon Project, which we expect will be material to our operations, will involve numerous large-scale and complex projects. The quality of our performance on the Nine Dragon Project depends in large part upon our ability to manage our relationship with Nine Dragon and the project itself and to timely deploy appropriate resources. Our results of operations, cash flows and liquidity could be adversely affected if we miscalculate the resources or time needed to complete the Nine Dragon Project, or the resources or time needed to meet any milestones. Further, any defects or errors, or failures to meet in the project could result in large damage claims against us, and, because of the substantial cost of, and potentially long lead-time necessary to acquire certain of the materials, damage claims may be large and thereby have a material adverse effect on our results of operations.

The Waiver agreement that we entered into with the holders of our outstanding Bonds and the 2008 Warrants impose restrictions on us, and if we are unable to comply with the terms of the Waiver, our results of operations and financial position will be negatively affected.

On August 6, 2009, we and the holders of our outstanding Bonds and warrants to purchase 300,000 shares of our common stock expiring 2013 (the “2008 Warrants”) entered into an Amendment and Waiver Agreement (the “Waiver”). Pursuant to Waiver, the bondholders and warrantholder agreed to waive their right to a reduction in the conversion price of the Bonds and exercise price of the 2008 Warrants due to our proposed sale of the shares pursuant to the Purchase Agreement at a price per share less than the current conversion prices of the Bonds and exercise price of the 2008 Warrants.

Pursuant to the Waiver, we agreed to use a portion of the net proceeds of the sale of the Shares to the investors to pay:

·	the interest payments of the Bonds that are outstanding and due for payment in accordance with the terms of the trust deeds governing the Bonds, and

·	(ii) all amounts owed to ABN AMRO Band (China) Co. Ltd., Shenzhen Branch or any other ABN AMRO Bank N.V. affiliate in connection with the Bank Overdraft Facility and any outstanding interest on the facility as the date of payment (collectively, the “Agreed Bondholders Payments”).

Such payments must be made no later than the earlier of (i) seven business days after the sale of the Shares and (ii) three months from the date of the Waiver. We also agreed that until the Agreed Bondholders Payments of are made by us after the sale of the Shares, we agreed that we will not use proceeds from the proposed sale of shares to repay or prepay any debt prior to our currently scheduled due date without consent of the bondholders.

Should we be unable to comply with the terms and covenants of the Waiver, including meeting the deadlines as indicated or not being able to obtain shareholder approval of the sale of securities, we may be required to reduce the conversion price of the Bonds and the 2008 Warrants, which would have an extensive dilution effect on our common stock and could have a material negative effect our stock trading price. If we are unable to comply with the Waiver, we would also have to make payment of the accrued and payable interest that the bondholders have deferred. If we are unable to make such payments, we would be forced to request further deferment of payment. Any of the foregoing would have a material adverse effect on our results of operation, financial position, cash flows and liquidity.

In connection with the Nine Dragons Resort Project, we intend to enter into the real estate development industry, in which we have no significant experience.

We have no significant real estate development experience. We have historically been engaged only in design and construction of curtain wall systems, roofing systems, steel construction systems, eco-energy saving building conservation systems and related products, for public works and commercial real estate projects. Therefore, we do not have any specific real estate development history from which you can draw conclusions about our ability to execute the Nine Dragons Resort Project or plan to enter the real estate development industry generally. Any failure to successfully purchase, develop, and sell a real estate property could have a material adverse effect on our results of operations. In addition, our proposed entry into the development industry will place increased demands on our operational, managerial and administrative resources. These increased demands could cause us to operate our business less effectively, which, in turn, could cause deterioration in the financial performance of our overall business.

We may not have adequate funding resources to finance land acquisitions or property developments, or to service our financing obligations.

The property development business is capital intensive. In connection with the Nine Dragons Resort Project, we entered into a letter of intent pursuant to which we intend to pay approximately $55 million to purchase a real estate property for development. Generally, we intend to finance our property developments through a combination of securities issuances, borrowings from banks, internal funding, in addition to other methods. There is no guarantee that we will have sufficient cash flow available for land acquisitions or property developments or that we will be able to raise the requisite amount of capital on terms acceptable to us or at all to fund land acquisitions or property developments.

We expect to face significant property development risks before we realize any benefits from a development.

Property developments typically require substantial capital outlays during the construction periods, and it may take months or years before positive cash flows, if any, can be generated by development properties. The time and costs required to complete a property development may increase substantially due to many factors beyond our control, including the shortage, or increased cost of material, equipment, technical skills and labor, adverse weather conditions, natural disasters, labor disputes, disputes with contractors, accidents, changes in government priorities and policies, changes in market conditions, delays in obtaining the requisite licenses, permits and approvals from the relevant authorities and other unforeseeable problems and circumstances. Any of these factors, singly or in aggregate, may lead to a delay in, or the failure of, the completion of a property development and result in costs substantially exceeding those originally budgeted. Failure to complete a property development according to its original plan, if at all, may have an adverse effect on our reputation and could give rise to potential liabilities. As a result, our returns on investments, if any, might not be timely recognized or might be lower than originally expected.

Our business and results of operations may be adversely affected if we fail to obtain, or there are material delays in obtaining, the requisite governmental approvals for a property development.

The real estate industry in the PRC is heavily regulated by the PRC government. Developers must comply with a variety of legal and regulatory requirements, as well as the policies and procedures established by local authorities to implement such laws and regulations. To undertake and complete a property development, a real estate developer must obtain permits, licenses, certificates and other approvals from the relevant administrative authorities at various stages of the property development, including land use rights documents, planning permits, construction permits, and certificates or confirmations of completion and acceptance. Each approval is dependent on the satisfaction of a set of conditions.

We do not have experience in this process and we may experience delays in obtaining such governmental approvals in respect of property developments that would have a material adverse effect on our business or results of operations, and we cannot assure you that we will not encounter significant problems in satisfying the conditions to the approvals, or that we will be able to adapt ourselves to the laws, regulations or policies that may come into effect from time to time with respect to the real estate industry in general or the particular processes related to the granting of the approvals. There may also be delays on the part of the administrative bodies in reviewing our applications and granting approvals. If we fail to obtain, or experience material delays in obtaining, the requisite governmental approvals, the schedule of development and sale of our developments could be substantially disrupted, resulting in a material adverse effect on our business, financial condition and results of operations.

Our sales of developed properties, if any, will be affected if mortgage financing becomes more costly or otherwise less attractive.

We expect that most purchasers of properties will rely on mortgages to fund their purchases. Increases in interest rates may significantly increase the cost of mortgage financing, thus reducing the attractiveness of mortgages as a source of financing for property purchases and adversely impacting the affordability of properties. In addition, the PRC government and commercial banks may also increase the downpayment requirements, impose other conditions or otherwise change the regulatory framework in a manner that would make mortgage financing unavailable or unattractive to potential property purchasers. If the availability or attractiveness of mortgage financing is further reduced or limited, many of our prospective customers may not be able to purchase properties that we may have out for sale. As a result, our business, financial condition and results of operations could be materially and adversely affected.

Potential liability for environmental problems could result in substantial costs.

In entering the real estate development industry, we will become subject to a variety of laws and regulations concerning the protection of health and the environment. The particular environmental laws and regulations that apply to any given development site vary greatly according to the site’s location and environmental condition, the present and former uses of the site and the nature of the adjoining properties. Environmental laws and conditions may result in delays, may cause us to incur substantial compliance and other costs and can prohibit or severely restrict project development activity in environmentally-sensitive regions or areas, which could have a material adverse effect of our results of operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On June 12, 2009, we held our annual meeting of stockholders. Of the 53,256,874 shares eligible to vote, 46,096,716, or 86.6%, votes were returned, formulating a quorum. At the annual stockholders meeting, the following matters were submitted to stockholders for vote: (1) electing seven directors to the board of directors; (2) ratifying the appointment of Samuel H. Wong & Co., LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2009; and (3) approving the China Architectural Engineering, Inc. 2009 Onmibus Incentive Plan.

Proposal I—Election of Directors

The results of voting on these proposals are as follows:

Director	For	Withheld	Elected
Luo Ken Yi	43,413,013	2,683,703	Yes
Tang Nianzhong	43,398,408	2,698,308	Yes
Ye Ning	43,398,408	2,698,308	Yes
Zheng Jinfeng	42,970,674	3,126,042	Yes
Zhao Boa Jiang	42,970,556	3,126,160	Yes
Kelly Wang	42,970,674	3,126,042	Yes
Miu Cheung	43,658,724	2,437,992	Yes

All directors are elected at our annual meeting of stockholders.

Proposal II—Ratification of the appointment of Samuel H. Wong & Co., LLP as our independent auditors for the year ending December 31, 2009.

Proposal II was approved with 43,922,539 shares voted for, 1,341,259 voted against and 832,917 abstained from voting, thereby, ratifying the appointment of Samuel H. Wong & Co., LLP as our independent auditors for the year ending December 31, 2009.

Proposal III—Approval of the China Architectural Engineering, Inc. 2009 Omnibus Incentive Plan, a replacement of the China Architectural Engineering, Inc. 2007 Equity Incentive Plan

Proposal III was approved with 33,448,012 shares voted for, 2,014,425 voted against and 5,770 abstained from voting, thereby, approving the China Architectural Engineering, Inc. 2009 Omnibus Incentive Plan, a replacement of the China Architectural Engineering, Inc. 2007 Equity Incentive Plan. Upon the approval of the China Architectural Engineering, Inc. 2009 Omnibus Incentive Plan, our 2007 Equity Incentive Plan was frozen and no further grants or awards will be made under such plan. However, the 2007 Equity Incentive Plan will continue in effect for so long as and solely to the extent necessary to administer previously-granted awards that remain outstanding under such plan.

ITEM 5. OTHER INFORMATION

We entered into a Framework Agreement of Investment on Marine Park and Holiday Resorts Project (the “Framework Agreement”) with Shanghai Nine Dragon Co. Ltd (“Nine Dragon”) to undertake the projects at the Nine Dragon Holiday Resort that has been under development in the Yangtze River Delta in China. Pursuant to the terms of the Framework Agreement, the projects include, but are not limited to, the construction of a marine park, botanical garden, and other buildings. According to the Framework Agreement, various portions of the overall project are scheduled to commence in the second half of 2009, and projected completion dates for various portions of the project range from 2011 to 2013. We agreed to sign an agreement with Nine Dragons that contained separate terms and conditions for each sub-project, including investment, the size of the construction, and the operation procedures. Further to the Framework Agreement, in August 2009, we signed a Letter of Intent of Land Transfer ("LOI") to purchase land from Zhejiang Nine Dragon Co., a subsidiary of Nine Dragon. The property that is subject to the LOI is a planned construction area of approximately 1.6 million square feet, and, according to the LOI, the purchase price will be equal to approximately US$34 per square foot, for a total purchase price of approximately US$55 million. Pursuant to the terms of the LOI, the parties will sign a definitive agreement and the transaction is intended to close within six months after signing the definitive contract. According to the LOI, the purchased land is expected to be constructed into a mixed-used complex, which will include a residential complex. Pursuant to the LOI, it is expected for construction to occur in 2010 and completion to occur in 2011.

ITEM 6. EXHIBITS

10.1		Framework Agreement of Marine Park and Holiday Resorts Project entered into by and between the Company and Shanghai Nine Dragon Co. Ltd (translated).
31.1		Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CHINA ARCHITECTURAL ENGINEERING, INC. (Registrant)

August 14, 2009	By:	/s/ Luo Ken Yi
		Luo Ken Yi
		Chief Executive Officer and Chairman of the Board

九龙山所处的地理位置优越，有山、海、岛一体的美丽环境，高尔夫、游艇、马会三大俱乐部运营成熟、并拥有会员几千名。酒店、公寓入住在即，有稳定常住人口及快速增加的人流量。结合中央将上海建设成国际“金融中心、物流中心”的目标。双方将以迪拜“帆船酒店”为参照，设计成外形独特的九龙山标志性建筑。该建筑总建筑面积约5万平方米，总投资人民币7亿。整体设计将凌驾帆船酒店之上，贴身服务居住的宾客。顶层如同海景植物生态氧吧，利用风能与太阳能提供动力，入住宾客可利用大楼的独特性能，种植瓜果蔬菜，体验收获乐趣。酒店周边裙楼环绕，用于奢侈品的摆放展示。预计2011年完工，建成后预计收入人民币30亿以上。

Nine Dragon has favourite natural conditions. It is both a mountain and island surrounded by the Sea, where there are three big mature clubs: golf, yacht and jockey, with several thousand members. In addition, there will be steady residential population and rapidly increasing flows of visitors since there will be hotels and apartments ready to be occupied. Given the goal of the Central Government to build Shanghai as an international "finance and logistics center", it is planned to design a landmark building with a unique look by reference to the "sail-shaped hotel" of Dubai. This proposed building will have a gross floor space of around 50,000m2, and its investment fund will be RMB 700 million. Its overall design will surpass that of the sail-shaped hotel, and the guests will be provided with valet-like services. The top floor will be just like an eco botanical oxygen bar with a sea view, and the building will be powered by winds and the sun. By the distinct traits of the building, the guest can grow fruits and vegetables and experience fun of harvest. In the podiums at the perimeter of the hotel will there be luxurious items displayed. This project will bring an estimated annual income of above RMB 3 billion after being completed in 2011 as expected.

2.	日本宫崎海上乐园占地700公顷，呈巨蛋型，是世界最大的海上公园度假胜地。美国乔治亚水族馆乔治亚水族馆是一个集娱乐性，教育性和科研性为一体特点的世界顶级展览中心，它为全世界从事海洋生物研究学者进行经验交流以及为海洋生物& #21457;展的多样性提供了良好的学习交流平台。每年可吸引两百万位以上的游客。

Miyazaki Marine Park in Japan is the biggest marine park resort, covering an area of 700 hectares and showing as a dome-type. Georgia Aquarium in America is the world’s top exhibition center, assembling recreational, educational and scientific research features into one whole. Georgia Aquarium which attracts more than two million tourists every year, provides a good exchange platform for the marine biological researchers who engage in exchanging their experience and for the diversity of marine life’s development.

目前海上乐园项目在中国尚属空白，人们与大海嬉戏只停留在几个单一的项目上，对海洋知识的了解极为贫乏。九龙山具备先天的自然条件，又经后天打造为复合型的度假项目，决心建立一个世界第一的海洋世界。双方决定参照日本宫崎县&# 28023;上乐园及美国乔治亚水族馆等项目兴建水上乐园及海洋科普教育基地，包含各类水上游乐项目、商业配套设施及海洋生物展示，体验不尽的海洋娱乐设施与海底世界的珍奇生物将尽现于人前。该项目总投资10—20亿人民币左右。项目于2009年下半年启动，2011年完工，建成后年人流量达到500万人次，年收入将超过20亿以上。

Currently China is blank of marine park projects. Only several simple marine games are known, and people are scarcely knowledgeable on ocean. In addition to the privileged natural environment and the resorts complex, it is decided to have a world No 1 ocean park built in Nine Dragons. The two parties have decided to create by reference to Seagaia Ocean Dome in Miyazaki of Japan and the American Georgia Aquarium an aquatic park and a marine science base including all kinds of aquatic games, auxiliary commercial facilities and marine creatures display, where people will have great experience through the marine recreation facilities and see the rare submarine creatures. The investment for this project will be around RMB 1 to 2 billion. It is scheduled to start in the second half of 2009 and be completed in 2011. After the completion, it will have 5 million visitors per annum, bringing an annual income of above RMB 2 billion.

3.	投资建造约50万平方米的休闲度假中心，作为地标建筑与海洋公园的配套设施。区内建造风格新颖的空中别墅、特色度假酒店，集疗养、休闲、度假为一体，打造成上海的后花园。客房数量约3000至4000间。建 104;后收入来源于三个方面：1/3的销售收入，1/3的经营收入，1/3的会员卡收入。项目2009年底启动，预计于2013年底完成。按以往案例预计，销售部分在未建成之前即会售罄。预计总收入可达70亿人民币。

An investment will be made to build a resort center of around 500,000m2 as an auxiliary facility for both the landmark building and the ocean park. In the center will there be villas in novel styles and featuring holiday inns for recuperation, entertainment and vacation, which will form a backyard garden of the Shanghai city. The guest rooms will go around 3000 to 4000. After the completion, it will earn one third of its revenue from sales, one third from business operation and one third from membership fare. The project will commence at the end of 2009 and as expected, be completed in 2013. As per our past project experience, the part for sale will be sold out before the completion. The total revenue is estimated to reach RMB 7billion.

六、主要客源：

Main Sources of Tourists/Clients

九龙山位居长江三角洲的中心宝地，据数据显示：0-1小时，有约600万居住人口；1-2小时，有约3600万居住人口。6小时之内，居住人口多达几亿。九龙山ë 58;建成的海洋公园、海洋教育科普基地与休闲度假产业，每年预计接待数以百万的学生和国际游客，同时为老人提供养生养老的一方净土和一个美丽的花园。

Nine Dragons is located at the center of the Yangtze River Delta. As some data show, there are a population of around 6 million within the 0-1 hour's drive, around 36 million people within the 1-2 hours' drive and hundreds of millions within 6 hours' drive. The ocean park, marine science base and resorts center to be built in Nine Dragons Mountain will receive millions of students and overseas tourists per annum and in the mean time, offer a peaceful location and a beautiful garden for senior people to lead their retired life in a healthy way.

七、合作方式 Corporation Mode

1.	由甲方负责与政府相关部门沟通及落实土地、规划指标及交通、基础设施条件，乙方在美国通过资本市场向海外筹资建造。

Party A is responsible to communicate with the relevant departments of Government, execute the guideline of land and layout and create the conditions of traffic and infrastructure. Party B is responsible to raise money for the construction from the Overseas Capital Market in USA.

2.	销售过程中通过银企合作的方式，发行休闲度假卡，筹资滚动开发。

To raise the developing funds through issuing the resort membership card and cooperating with banks and enterprises in the progress of sales

3.	双方利益分配情况，将在协议当中具体明确。

The allocation of benefits between two parties will be defined in the agreement.

八、其他 Others

1.	双方确认每个项目单独签署合作细则，包括投资、建造规模、营运模式等由双方协商解决。

Both the parties agree to sign separate cooperation terms and conditions for each single project, including investment, the size of the construction, and the mode of the operation which will be negotiated by both parties.

2.	本次签订的合作项目尚需报政府获批后正式实施。

The cooperative projects where were signed in the agreement need to be approved by the Government for formal implementation.

3.	本协议一式四份，双方各执二份，双方代表签字、盖章后生效。

There are 4 copies of this agreement and each party will hold two of them. The agreement will become effective immediately upon signature and seal by the representatives of each party.

[SIGNATURE PAGE TO FOLLOW]

(此页无正文)
(Signature page)

甲方：上海九龙山股份有限公司				乙方：大华建设有限公司
Party A: Shanghai Nine Dragon Co. Ltd				Part B: China Architectural Engineering, Inc.

签字代表：				签字代表：
Signature:				Signature:

签约日期：	年	月	日	签约日期：	年	月	日
Date:	year	month	day	Date:	year	month	day

EX-31.1 3 v158024_ex31-1.htm

Exhibit 31.1

CERTIFICATION

I, Luo Ken Yi, certify that:

1. I have reviewed this report on Form 10-Q of China Architectural Engineering, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Luo Ken Yi

Luo Ken Yi

Chief Executive Officer

August 14, 2009

EX-31.2 4 v158024_ex31-2.htm

Exhibit 31.2

CERTIFICATION

I, Li Chengcheng, certify that:

1. I have reviewed this report on Form 10-Q of China Architectural Engineering, Inc.;

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Li Chengcheng

Li Chengcheng

Chief Financial Officer

August 14, 2009

EX-32.1 5 v158024_ex32-1.htm

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the report of China Architectural Engineering, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned, in the capacities and on the dates indicated below, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Luo Ken Yi

Luo Ken Yi

Chief Executive Officer

August 14, 2009

/s/ Li Chengcheng

Li Chengcheng

Chief Financial Officer

August 14, 2009

A signed original of this written statement required by Section 906 has been provided to China Architectural Engineering, Inc. and will be retained by China Architectural Engineering, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

-----END PRIVACY-ENHANCED MESSAGE-----

Delaware (State or other jurisdiction of incorporation or organization)		51-05021250 (I.R.S. Employer Identification No.)

105 Baishi Road, Jiuzhou West Avenue, Zhuhai, People’s Republic of China (Address of principal executive offices)		519070 (Zip Code)

Large accelerated filer ¨	Accelerated filer x	Non-accelerated filer ¨	Smaller reporting company ¨
		(Do not check if a smaller
		reporting company)

	June30, 2009		December 31, 2008
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	7,042,335	$	9,516,202
Restricted cash		6,134,090		7,451,388
Contract receivables, net		83,556,484		71,811,627
Costs and earnings in excess of billings		21,738,634		15,988,920
Job disbursements advances		106,488		2,252,241
Other receivables		13,599,219		18,614,928
Amount due from shareholders		1,468,319		-
Inventories		7,663,118		308,842
Deferred income taxes, current		66,214		3,264
Other current assets		408,397		1,659,307
Total current assets		141,783,298		127,606,719

Non-current assets
Plant and equipment, net		5,000,530		5,852,110
Intangible assets		525,782		50,720
Goodwill		7,995,896		7,995,896
Other non-current asset		-		32,137

TOTAL ASSETS	$	155,305,506	$	141,537,582

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Short-term bank loans	$	4,912,423	$	-
Notes payable		-		10,193,088
Accounts payable		33,681,245		35,510,827
Billings over costs and estimated earnings		21,258,062		5,358,527
Amount due to shareholder		-		924,687
Other payables		6,879,704		7,364,816
Income tax payable		2,391,999		2,318,743
Business and other taxes payable		2,917,781		3,304,522
Other Accrual		3,639,745		1,794,879
Total current liabilities		75,680,959		66,770,089

	June 30, 2009			December 31, 2008
	(unaudited)
Non-current liabilities
Long term bank loans	$	145,533		$	328,285
Convertible bond payable, net		26,330,959			24,907,170

TOTAL LIABILITIES	$	102,157,451		$	92,005,544

STOCKHOLDERS’ EQUITY
Preferred stock, $0.001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding at June 30, 2009 and December 31, 2008; Common stock, $0.001 par value, 100,000,000 shares authorized, 53,256,874 shares issued and outstanding at June 30, 2009 and December 31, 2008	$	53,257		$	53,257
Additional paid in capital		23,043,792			23,043,792
Statutory reserves		3,227,923			3,040,595
Accumulated other comprehensive income		5,597,299			5,443,432
Retained earnings		21,240,374			17,940,421
Total Company shareholders’ equity		53,162,645			49,521,497
Noncontrolling interests		(14,590	)		10,541
Total shareholders’ equity		53,148,055			49,532,038
TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY	$	155,305,506		$	141,537,582

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008

Contract revenues earned	$	30,598,974		$	41,380,189		$	66,942,038		$	66,729,495
Cost of contract revenues earned	（20,647,144)				(28,038,332	)		(48,809,377	)		(44,942,086	)

Gross profit	$	9,951,830		$	13,341,857		$	18,132,661		$	21,787,409

Selling, general and administrative expenses		(6,119,798	)		(4,590,147	)		(12,070,828	)		(7,590,572	)

Income from operations	$	3,832,032		$	8,751,710		$	6,061,833		$	14,196,837

Interest income		46,259			35,242			49,965			42,205
Interest expense		(1,471,835	)		(1,197,889	)		(2,783,568	)		(1,532,026	)
Other income		138,619			39,440			160,456			150,602

Income before taxation	$	2,545,075		$	7,628,503		$	3,488,686		$	12,857,618

Income tax		-			(69,613	)		-			(116,980	)

Net Earnings	$	2,545,075		$	7,558,890		$	3,488,686		$	12,740,638

Net (earnings)/loss attributable to noncontrolling interests		(1,405	)		18,893			(1,405	)		10,863

Net earnings attributable to the Company	$	2,543,670		$	7,577,783		$	3,487,281		$	12,751,501

Earnings per share:
Basic	$	0.05		$	0.15		$	0.07		$	0.25
Diluted	$	0.05		$	0.14		$	0.07		$	0.23

Weighted average shares outstanding:
Basic		53,256,874			51,812,477			53,256,874			51,832,946
Diluted		53,256,874			55,549,949			53,256,874			55,550,770

		Page
PART I - FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS	1

	Unaudited Consolidated Balance Sheet as of June 30, 2009 and December 31, 2008	2

	Unaudited Interim Consolidated Statements of Income for the three and six months ended June 30, 2009 and 2008	4

	Unaudited Interim Consolidated Statements of Cash Flows for the six months ended June 30, 2009 and 2008	5

	Unaudited Consolidated Statements of Stockholders’ Equity from January 1, 2009 to June 30, 2009	6

	Notes to the Unaudited Interim Consolidated Financial Statements	7

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION	21

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	26

ITEM 4.	CONTROLS AND PROCEDURES	27

PART II - OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	29

ITEM 1A.	RISK FACTORS	29

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	31

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	31

ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	31

ITEM 5.	OTHER INFORMATION	32

ITEM 6.	EXHIBITS	32

SIGNATURES		33

	Total Number of shares		Common stock		Additional paid in capital		Statutory reserves		Accumulated other comprehensive income		Retained earnings			Noncontrolling interests			Total

Balance, January 1, 2009		53,256,874	$	53,257	$	23,043,792	$	3,040,595	$	5,443,432	$	17,940,421		$	10,541		$	49,532,038
Net income												3,487,281						3,487,281
Appropriations of retained earnings								187,328				(187,328	)					-
Foreign currency translation adjustment										153,867								153,867
Non-controlling interests															(25,131	)		(25,131	)
Total comprehensive income																		3,616,017
Balance, June 30, 2009		53,256,874	$	53,257	$	23,043,792	$	3,227,923	$	5,597,299	$	21,240,374		$	(14,590	)	$	53,148,055

Name of Company	Place of Incorporation	Attributable Equity interest %
Full Art International Limited	Hong Kong		100
Zhuhai King Glass Engineering Co., Ltd.	PRC		100
Zhuhai King General Glass Engineering Technology Co., Ltd.	PRC		100
King General Engineering (HK) Limited	Hong Kong		100
KGE Building System Limited	Hong Kong		100
KGE Australia Pty Limited	Australia		55
Zhuhai Xiangzhou District Career Training School	PRC		72
Techwell Engineering Limited	Hong Kong		100
Techwell International Limited	Macau		100
Techwell Building System (Shenzhen) Co., Ltd.	PRC		100
CAE Building Systems, Inc.	USA		100
China Architectural Engineering (Shenzhen) Co., Ltd.	PRC		100
Techwell International (SEA) Pte Ltd.	Singapore		100
CAE Building Systems (Singapore) Pte Ltd	Singapore		100

Building	20 years
Machinery and equipment	5 - 10 years
Furniture and office equipment	5 years
Motor vehicle	5 years

	June 30, 2009		December 31, 2008		June 30, 2008
Period end RMB : US$ exchange rate		6.8309		6.8225		6.8591
Average quarterly RMB : US$ exchange rate		6.8296		6.9564		6.9575

	June 30, 2009			December 31, 2008

Contract receivables	$	89,105,076		$	77,027,328
Less: Allowance for doubtful accounts		(5,548,592	)		(5,215,701	)

Net	$	83,556,484		$	71,811,627

Allowance for Doubtful Accounts	June 30, 2009		December 31, 2008

Beginning balance	$	5,215,701	$	215,701
Add: Allowance created		332,891		5,000,000

Ending balance	$	5,548,592	$	5,215,701

	June 30, 2009		December 31, 2008
Raw materials at sites		291,587		308,842
Finished goods		7,371,531		-
	$	7,663,118	$	308,842

	June 30, 2009		December 31, 2008
At cost
Motor vehicle	$	1,480,629	$	1,568,165
Machinery and equipment		2,383,946		3,221,028
Furniture, software and office
equipment		2,295,285		2,443,382
Building		-		311,596
Leasehold improvement		2,368,116		2,198,367
	$	8,527,976	$	9,742,538

Less: Accumulated depreciation
Motor vehicle	$	809,152	$	774,977
Machinery and equipment		1,331,720		1,975,014
Furniture, software and office
equipment		1,068,455		908,591
Building		-		24,538
Leasehold improvement		318,119		207,308
	$	3,527,446	$	3,890,428

	$	5,000,530	$	5,852,110

	June 30, 2009		December 31, 2008

ABN Amro Bank N.V. Bank Overdraft in Current Account		4,912,423		-

	$	4,912,423	$	-

	June 30, 2009		December 31, 2008

Bank of East Asia (China) Ltd., Apartment Mortgage, amount due after one year, at 5.184% per annum, subject to variation every 6 months, last installment due January 4, 2012	$	-	$	141,811
Automobile capital lease obligation (hire purchase),amount due after one year, last installment due November 9, 2012		145,533		186,474
	$	145,533	$	328,285

	June 30, 2009			December 31, 2008

Convertible Bonds Payable	$	28,000,000		$	28,000,000
Less: Interest discount – Warrants		(3,159,903	)		(3,159,903	)
Less: Interest discount – Beneficial conversion feature		(1,737,143	)		(1,737,143	)
Less: Bond discount		(740,000	)		(740,000	)
Accretion of interest discount		3,968,005			2,544,216

Net	$	26,330,959		$	24,907,170

For the 12 months ending June 30,
2010		1,389,094
2011		779,542
2012		808,197
2013 or after		1,117,930
	$	4,094,763