UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-K





x ANNUAL REPORT UNDER
SECTION 13 OR 15(d) OF THE


SECURITIES
EXCHANGE ACT OF 1934





For
the Fiscal Year Ended December 31, 2009





OR





oTRANSITION REPORT UNDER SECTION 13
OR 15(d) OF THE


SECURITIES
EXCHANGE ACT OF 1934





For
the transition period ____________ to__________





Commission
File Number 0-52870





CAVICO
CORP.


(Name
of Issuer in its charter)





Delaware
              
              20-4863704(
      State of other
      jurisdiction of incorporation or organization)
              
              (I.R.S.
      Employer Identification No.)17011
      Beach Blvd., Suite 1230,
                Huntington
      Beach, California
              
              92647(Address
      of principal executive offices)
              
              (Zip
      Code)





Issuer's telephone
number:   714-843-5456


Copies
to:


Gregory
Sichenzia, Esq.


Peter
DiChiara, Esq.


Sichenzia
Ross Friedman Ference LLP


61
Broadway


New York,
New York 10006


Tel:
(212) 930-9700


Fax:
(212) 930-9725





Securities
Registered Pursuant to Section 12(b) of the Act: None





Securities
Registered Pursuant to Section 12(g) of the Exchange Act:





Common Stock, par value
$.001


Title
of Class





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o  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 o  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 (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.    Yes x    No
o





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. o





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




Large
      accelerated filer o
            Accelerated
      filer o
            Non-accelerated
      filer o
            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 o    No
x





As of
June 30, 2009, the aggregate market value of the registrant’s common stock held
by non-affiliates of the registrant was $16,000,870.





The
number of shares outstanding of the registrant’s Common Stock, $0.001 par value,
was 3,047,795 as of March 31, 2010.





TABLE
OF CONTENTS




PagesPART IItem
      1. Description of Business
                          1Item
      1A. Risk Factors
                          12Item
      1B. Unresolved Staff Comments
                          20Item
      2. Description of Property
                          20Item
      3. Legal Proceedings
                          22Item
      4. Reserved
                          22PART IIItem
      5. Market Price of and Dividends on the Registrant's Common Equity and
      Related Stockholder Matters
                          23Item
      6.  Selected Financial Data
                          24Item
      7. Management's Discussion and Analysis of Financial Condition and Results
      Of Operations
                          24Item
      7A. Quantitative and Qualitative Disclosures about Market
    Risk
                          34Item
      8. Financial Statements and Supplementary Data
                          35-63Item
      9. Changes in and Disagreement with Accountants on Accounting and
      Financial Disclosures.
                          64Item
      9A. Controls and Procedures
                          64Item
      9B.  Other Information
                          65PART IIIItem
      10. Directors, Executive Officers, and Corporate
Governance
                          66Item
      11. Executive Compensation
                          69Item
      12. Security Ownership of Certain Beneficial Owners and
      Management
                          69Item
      13. Certain Relationships and Related Transactions.
                          70Item
      14. Principal Accountant Fees and Services
                          71PART IVItem
      15. Exhibits and Financial Statement Schedules
                          72Signatures
                          73










PART
I





CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS





This Form
10-K contains forward-looking statements and information relating to Cavico
Corp. (“Cavico” or “the Company”).  Cavico Corp. intends to identify
forward-looking statements in this annual report by using words such as
"believes," "intends," "expects," "may," "will," "should," "plan," "projected,"
"contemplates," "anticipates," "estimates," "predicts," "potential," "continue,"
or similar terminology. These statements are based on the Company’s beliefs as
well as assumptions the Company made using information currently available to
us. The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events, or otherwise. Because these statements reflect the Company’s current
views concerning future events, these statements involve risks, uncertainties,
and assumptions. Actual future results may differ significantly from the results
discussed in the forward-looking statements.





ITEM 1.
            BUSINESS





History





We were
incorporated in Delaware on September 13, 2004 under the name Laminaire Corp. On
November 9, 2004, the name of the Company was changed to Agent 155 Media Group,
Inc. On May 2, 2006, our name was changed to Cavico Corp.  Our website
may be found at www.cavicocorp.com
..  Our executive offices are located at 17011 Beach Blvd., Suite 1230,
Huntington Beach, California, 92647.  Our telephone number is (714)
843-5456.




During
2006 and 2007, we acquired Cavico Vietnam Company Limited (formerly, Cavico
Vietnam Joint Stock Company Limited), a corporation organized under the laws of
Vietnam (“Cavico Vietnam”) as our wholly owned subsidiary. As a result of legal
restrictions on the foreign ownership of Vietnamese entities imposed by the
Vietnamese government, the acquisition of Cavico Vietnam occurred in multiple
steps, as follows:




●
            On April 18, 2006, we entered
      into an asset purchase agreement with Cavico Vietnam. Under the terms of
      the agreement, Cavico purchased all of the assets of Cavico Vietnam in
      consideration for the issuance to Cavico Vietnam of 1,975,000 shares of
      our common stock. Cavico Vietnam subsequently transferred 1,501,555 of
      these shares to the former shareholders of Cavico Vietnam in return for
      their shares of Cavico Vietnam stock. An additional 473,445 shares
      were deposited with Cavico Vietnam for the use of that entity’s
      management, of which 123,445 shares were distributed to Cavico Vietnam’s
      management in 2006 (of which 2,238 were returned by employees) and 125,000
      shares were sold to employees in 2008 for $300,000 at a price of $2.40 per
      share.  The remaining 227,147 shares owned by our wholly owned
      subsidiary, Cavico Vietnam, are for sale or issuance to employees or to
      third-parties by that entity’s management.  Pursuant to Delaware
      General Corporation Law, shares owned by Cavico Vietnam are not entitled
      to vote on any matters at a meeting of stockholders.  The shares
      owned by Cavico Vietnam, therefore, are not considered to be outstanding
      shares, similar to shares of treasury
  stock.





●
            Following our purchase of Cavico
      Vietnam’s assets, and pending the grant of the requisite approval by a
      Vietnamese government agency of the acquisition of Cavico Vietnam, as
      required under Vietnamese law, Cavico Vietnam continued to use its assets
      subject to our control. Government approval of the acquisition of Cavico
      Vietnam was granted in January 2007. Following the grant of this approval
      and our subsequent acquisition of Cavico Vietnam to become our
      wholly-owned subsidiary, all assets previously purchased from Cavico
      Vietnam by the Company in April 2006 were transferred back to Cavico
      Vietnam.




We
operate nationwide in Vietnam through our subsidiaries, serving almost
exclusively public sector clients.  Our wholly-owned subsidiary, Cavico
Vietnam, conducts its operations through a number of subsidiaries. Some of these
entities are wholly owned while others are partially owned by Cavico Vietnam.
The officers and directors of Cavico Vietnam also hold positions on the boards
of these subsidiaries. During 2007 and 2008, we permitted some of our
subsidiaries to sell shares to third parties for the purpose of raising funds
for expanded operations, thereby reducing our percentage held in those entities.
Cavico Vietnam's consolidated ownership percentage changed through either the
purchase or sale of securities, from December 31, 2008 to December 31, 2009 as
follows: Cavico Hydropower Construction JSC decreased from 71.80% to 71.74%;
Cavico Tower decreased from 33.79% to 33.21%; Cavico Industry & Tech Service
decreased from 64.64% to 62.08%; Cavico Stone & Mineral increased from
35.50% to 44.93%;  Cavico Transport JSC decreased from 73.84% to
68.90%;Cavico Manpower JSC increased from 30.0% to 39.5%; Luong Son
International Tourist increased from 90.90% to 92.16%; and Cavico Land increased
from 13.35% to 15.25%.  These Vietnamese companies do not have
authorized shares. Any sale or issuance of shares must be approved by the
shareholders of the Vietnamese subsidiaries. We do not plan to sell any
additional shares in any of our subsidiaries. In addition, to the extent that
any of the subsidiaries are publicly traded in Vietnam, Vietnamese securities
regulations limit foreign ownership of these subsidiaries to 49%.





Our
website may be found at www.cavicocorp.com.


1





Business
Strategy





We are a
major infrastructure construction, infrastructure investment and natural
resources company headquartered in Hanoi, Vietnam.  We provide
construction and engineering services for large civil construction
infrastructure projects in Vietnam, including the construction of tunnels,
roads, highways, bridges, mines and dams.  In addition, we are
currently making investments in hydropower electric plants, cement production
plants, mining operations and urban developments in Vietnam and
Laos.  During the year ended December 31, 2009, we generated
approximately 86% of our revenues from tunnel construction for hydroelectric
plants and dam construction.




Our
fundamental objective is to increase long-term shareholder value by focusing on
consistent profitability from controlled revenue growth. In our view,
shareholder value is measured by the appreciation of the value of our common
stock over a period of years and, eventually, a return through dividends. We
consider the following to be key factors in our ability to achieve this
objective:





Position Our Business for Future
Infrastructure Spending - As a result of strong economic expansion, there
is a growing awareness of the need to build, reconstruct and repair Vietnam’s
infrastructure, especially its network of roads to enable transportation as well
as in the area of power supply. Significant funds have been authorized for
investments in these areas. We will continue to build on our expertise in the
civil construction market for transportation and water infrastructure, to
develop new capabilities to service these markets and to maintain our human and
capital resources to effectively meet required demand.




Employee Development - We
believe that our employees are a key to the successful implementation of our
business strategies. Significant resources are employed to attract, nurture and
retain extraordinary talent and fully develop each employee’s
capabilities.  We sponsor events with our employees in order to
nurture employees to maximize in our growth potential.  We are
building a strong company culture through various activities, including company
newsletters and music which fosters the pride within our employees and for the
Company’s accomplishments.


Brand
Building– We are trying
to affirm and maintain the brand of“Cavico – Always
Growing”by promptly
completing projects, while ensuring their quality and safety, to gain the trust
of customers and potential customers and investors.  Cavico Bridge and
Underground Construction and Cavico Mining and Construction received in 2008 a
Vietnamese Golden Star award from the Vietnam Association of Young Entrepreneurs
which recognized Cavico as one of the top brands in Vietnam. In 2009,
Cavico Vietnam, was ranked 167 of
the Top 500 Vietnamese largest non-state owned enterprises, also known as
VNR500.  Also in 2009, we were awardedthe Class III Labor Medal issued by
office of the President of Vietnam to acknowledge the outstanding contributions
of individuals or entities that have contributed towards the building of
Vietnam.


Infrastructure Construction
Focus - We concentrate our core competencies on this segment of the
construction industry, which includes the building of tunnels, roads, highways,
bridges and dams.




Continue Adding Construction
Capabilities - By adding capabilities that are complementary to our core
civil construction competencies, we are able to improve gross margin
opportunities, more effectively compete for contracts as well as compete for
contracts that might not otherwise be available to us. We continue to
investigate opportunities to integrate additional services and products into our
business.




Alternative Energy - We are
actively engaged in a variety of alternative energy projects, including
producing electricity from hydropower plants and wind farms.




Expansion into Countries other than
Vietnam – We intend to expand our operations into other Pacific Rim
countries such as Laos.  On January 22, 2009 our majority-owned
subsidiary, Cavico Bridge and Underground Construction (“Cavico Bridge”), was
awarded a $6.2 million contract by Cooperativa Muratori e Cementisti – CMC di
Ravenna (“CMC”), a leading Italian construction company, for tunnel construction
work at Theun HinBoun Expansion Project in Laos.  Also, on April 22,
2009, our wholly-owned subsidiary, Cavico Vietnam entered into an agreement with
Laos Ministry of Planning and Investment to explore and exploit copper, gold,
and other ores in Muang Hom district, Vientiane province, Laos.  In
September 2009, we received approval from the Laos Ministry of Planning and a
certificate of investment for a copper mine in Laos.




Operations





Tunnel
Construction. We
apply what we believe to be the latest tunnel engineering methods such as New
Austria Tunnel Method (“NATM”), a tunneling method that involves sequential
excavation using blasting procedures and mechanical methods, and advanced Tunnel
Boring Machines (“TBM”) for the construction of highways, hydropower plants and
civil infrastructure. Cavico Vietnam has constructed an extensive network of
tunnels that are used for government hydropower plants
including:


2




Project
            
            Subsidiary (Ownership Interest in subsidiary)
            
            Tunnel SizeBuon Kuop(1)
            
            Cavico-Vietnam
      (100% owned)
            
            280MW;
      length of 5180m, diameter of 8mBan Ve(2)
            
            Cavico
      Transport JSC (69% owned)
            
            320MW;
      length, of 1720m, diameter of 8mBac Binh(3)
            
            Cavico-Vietnam
      (100% owned)
            
            33MW;
      length of 2644m, diameter of 5.2mDong
      Nai 4
            
            Cavico-Vietnam
      (100% owned)
            
            340MW;
      length of 2926m, diameter of 5.5m to 9.2mDong
      Nai 3
            
            Cavico-Vietnam
      (100% owned)
            
            180MW;
      length of 1305m, diameter of 8m to 9.2mNam
      Chien
            
            Cavico-Vietnam
      (100% owned)
            
            210MW;
      length of 9126m, diameter of 3.8mBao Loc(4)
            
            Cavico-Vietnam
      (100% owned)
            
            24.5MW;
      length of 960m, diameter of 4.8mA
      Luoi
            
            Cavico-Vietnam
      (100% owned)
            
            170MW;
      length of 12800m, diameter of 4.5m to 6.5mDak
      Mi 4
            
            Cavico
      Power and Resource JSC (76% owned)
            
            190MW;
      length of 3355m, diameter of 7.6mZa Hung(5)
            
            Cavico-Vietnam
      (100% owned)
            
            30MW;
      length of 1500m, diameter of 6mDasiat(6)
            
            Cavico-Vietnam
      (100% owned)
            
            13.5MW;
      length of 2512m, diameter of 2.5mSong
      Tranh 2
            
            Cavico
      Bridge and Underground (66% owned)
            
            190MW;
      length of 1200m, diameter of 9.9mSong
      Giang 2
            
            Cavico
      Hydropower Construction(72% owned)
            
            37MW;
      length of 3900m &2 sub-tunnel of 650m, diameter
2.5mDak
      Sin 1
            
            Cavico
      –Vietnam(100% owned)
            
            28.4MW;
      tunnel length of 800m, diameter of 2.5mDakdrinh
            
            Cavico
      Transport (69% owned)
            
            125MW;
      length of 7500m, diameter of 4.5mThuong
      Kon Tum
            
            Cavico
      Bridge and Underground (66% owned)
            
            220MW;
      length of 1800m, diameter of 6.5mHua
      Na
            
            Cavico
      Power and Resource JSC (76% owned)
            
            180MW;
      length of 4500m, diameter of 7.5mSong
      Bac
            
            Cavico
      Vietnam (100% owned)
            
            42MW;
      lengthe of 4243m, diameter of 7.6m





(1)
Completed in October 2009


(2)
Completed in December 2009


(3)
Completed in June 2009


(4)
Completed in September 2009


(5)
Completed in June 2009


(6)
Completed in July 2009





We
believe that Cavico Vietnam is the first company to use TBM tunnel technology in
Vietnam, in the Dai Ninh Hydropower plant construction.




To
maximize the use of water for hydropower, tunnels are often needed to move water
to electric turbines. Usually, the electric turbines are located in a lower
elevation in relation to the elevation of the reservoir. Water is brought from
the reservoir to the turbines via a system of open channels or underground
tunnels depending on geographic conditions. A headrace tunnel is the main tunnel
to connect from the reservoir to the inclined penstock, a big steel pipe
installed and inclined outside on a hill or installed inclined inside in a
tunnel excavated in a mountain, to bring water from headrace tunnel to the
turbines. Surge shafts and surge tanks, both vertical tunnels connected to the
headrace tunnel with an opening to the surface, are used to moderate the flow
and pressure of the water that runs through the headrace tunnel to the inclined
penstock to turbines. We have expertise in construction of shafts and tunnels,
including  surge shafts and inclined penstocks to regulate the flow of
water for hydropower plants applying the different boring machines and
boring methods.




Within
the civil construction field, tunnel construction is one of the most complicated
areas. It requires special technique to apply comprehensive methodology from the
design stage to the time of delivery of the finished product. It involves
experienced managers, engineers and other manpower, working together with
synchronized equipment to carry out complicated subterranean construction
projects (under mountain, river, even under the sea). There are few companies
that have the requisite expertise to execute a tunnel construction project from
beginning to end. As a result of  the “state of art” methods such as
NATM and TBM that we employ, we believe that we have the requisite
expertise.




Tunnels
are widely used in the construction of Hydropower Plant (“HP”) to collect and
divert water resources to run turbine rotary engines that produce
electricity.  They are also used in the construction of highways that cross
through the mountain or under water. In addition, tunnels are used for
underground mining, underground water supply, irrigation, agriculture and
environmental purposes.




Most of
our tunnel projects have been built in connection with the construction of
hydropower plants. We anticipate seeing the strongest growth in that area until
the year 2020 since the Vietnamese government has committed to increase power
supply to meet the demand for electricity to sustain the economic expansion that
is currently underway in Vietnam. According to a directive by the Vietnamese
Prime Minister issued on July 18, 2007, the government plans to implement a
power development plan that at the most basic level anticipates annual growth of
17% until 2015 and the construction of 75 hydropower plants, some of which are
scheduled to have a greater than 100 MW capacity.




Specifically,
based on discussions with government officials, we anticipate future growth in
tunnel construction for roads and highways, especially in the large metropolitan
areas of Hanoi, Hochiminh, Haiphong and Danang. Although we may have an
opportunity to bid on such projects, we do not have any current agreements for
any of this future work.


3




Our
largest hydropower assignment is the A Luoi Hydropower located on the A Sap
River, 70 km from Hue City. This is a Grade II hydropower project, the second
most productive grade, with the valley area of 331 square kilometers and
the total capacity of reservoir of 60.2 million cubic meters. The constructed
project which has the entire investment of Vietnamese Dong 3,234.7 billion
($180.3 million) composes of 2 units with the total installed capacity of
170 MW and the annual power output of 686.5 million kwh/year. As estimated, the
project will be finished and put into operation in 2010.  Cavico
Vietnam, our wholly-owned subsidiary, has been awarded two contracts for $58
million, and will be paid on completion of the various construction stages that
began in 2007. The tunnel is around 11.6km long and 4m to 6m wide, and will also
include a surge tank, will take 40 months to complete.




In
January 2009, our majority-owned subsidiary, Cavico Hydropower Construction
(“Cavico Hydropower”), was awarded a $9.6 million construction contract by Song
Giang 2 Hydropower Joint Stock Company (“Song Giang”). Cavico Hydropower will be
responsible for the construction of a 3,900 meter long headrace tunnel to bring
water to the hydropower plant, two sub tunnels of total 650 meters in length,
and a 42 meter tall surge tank. The sub tunnels allow us to excavate the
headrace tunnel more efficiently. Cavico Hydropower expects to complete the
construction within a period of 20 months.  Upon completion, the 37
megawatt hydropower plant is expected to generate 141 million kilowatt-hour of
electricity annually. The plant will be connected to the national grid to help
to ease the shortage of electricity supply in the country. The Song Giang 2
hydropower plant has a total estimated value of approximately $50 million and is
considered to be one of the largest hydropower projects in the Khanh Hoa
province.




Also in
January 2009, our majority-owned subsidiary, Cavico Bridge, was awarded a $6.4
million contract by a leading Italian construction company, for tunnel
construction work at the Theun HinBoun Expansion Project in Laos as described
more fully below.




In March
2009, Cavico Power and Resource JSC was awarded a $11.3 million
contract  for the Hua Na Hydropower plant. Cavico will be responsible
for constructing a diversion tunnel and coffer dam at the Hua Na Hydropower
plant. Upon completion, the Hua Na Hydropower plant will generate 180 MW of
power and will supply 706 million KW hours annually. This twin turbine plant
will require an investment of approximately $250 million and will help ease the
electricity shortage issues currently faced and thereby contributing to the
growth of Central Vietnam provinces. Cavico expects the project to be completed
in five years




In August
2009, Cavico Transport was awarded a contract for the 125 megawatt
hydropower plant, owned by Dakdrinh Hydropower Company, which is funded with
$212 million capital investment. Cavico’s portion of this project is $16 million
with the construction expected to be completed within 60
months.  Cavico Transport will construct a 7.5 kilometers long and 4.5
meters wide water tunnel and tunnel Sections No.3, No.4, and No.5. Cavico
Transport has recently signed two separate contracts with Dakdrinh Hydropower
for Phases I and II of the Dakdrinh Hydropower Pplant project totaling $13.4
million to extract, process, and transport stones.




In
September 2009, Cavico Bridge and Underground was awarded a $12
million contract for the Thuong Kon Tum hydropower plant which is a 240 Megawatt
hydropower plant with a capital investment of $300 million. The plant, expected
to be completed in five years, will supply 1070 million kilowatt-hours per year
to this region. For Phrase I, Cavico will excavate a 1.8 kilometer long, 6.5
diameters wide, and 7.5 diameters high service access tunnel and construct and
improve the road around the plant. In Phrase II, Cavico will be responsible for
pouring concrete for the tunnel.




In
November 2009, Cavico was awarded an Engineering, Procurement and Construction
contract at Dak Sin Hydropower Plant withexpected
revenue of contract to be at $18.8 million.
Cavico will be responsible for constructing the main dam, a spillway dam, an
overpass bridge, a water-intake portal, a headrace tunnel, a water diversion
tunnel ((800 meters long and 2.5 meters wide, Contract Value: $1.8 million), a
coffer dam, a vertical surge sharp tank and the service roads of the
construction site. Cavico expects to complete its scope of work in 27
months.




. Hydroelectric
Plants and Dam Construction - Generally, hydropower is built based on the
principle of bringing high-pressure water stream to turn turbines for generating
electricity. Tropical country like Vietnam has a lot of rain during a large part
of the year. Building dams and reservoirs prevents flooding and allows operators
to use the water for electricity turbines and to provide water for agricultural
use. Cavico Vietnam’s experience in dam construction for hydropower plants is
diverse, ranging from dams with earth and stones, to concrete dams with
curvilinear surfaces. Curvilinear surfaces are a design feature of concrete dam
designed with many curved lines to stabilize the dam.




Cavico
Vietnam has current dam construction projects for hydropower plants in Buon Tua
Srah ( 86MW; dam length of 1037m, dam height of 492m; water reservoir volume of
430 million cubic meters ), Ngan Truoi Water Reservoir (20MW, dam and a flood
spillway with a diameter of seven meters and a length of 287 meters),
Dambri  (75MW; 55 meters in height, 214 meters in length) and Ta Trach
(dam length 1187m, dam high 60m, water reservoir volume 700 million cubic meters
).


4




Highway
Construction - Cavico Vietnam has designed and built a large variety of
highways from small to large, and from simple to complex, both in urban centers
and in rural settings. We help clients find innovative ways to finance, deliver
and manage highways and have been involved in flagship design/build (“DB”) and
build-operate-transfer (“BOT”) projects. Our highway projects
include:




●
              Improvement
      of national route 1A sponsored and financed in part by the Asian
      Development Bank and the World Bank. We are undertaking a project that
      includes, among other things, repavement, widening the surface from six to
      12 meters, adding a layer of asphalt, digging drainage systems and
      constructing retaining walls;




●
            Ho Chi Minh route, we have been
      awarded contract packages (i.e. segments of a highway construction
      project) for the following locations: Tan ky (Nghe an), Khe co (Ha Tinh),
      A Luoi (Hue), Phuoc son (Quang nam), Dac zon - Dackpet
      (Kontum);




●
            Construction of a number of roads
      in Sonla Province; and




●
            Construction
      of roads in connection with the construction and operation of hydropower
      plants.




Urban
Development - Cavico Vietnam provides one-stop shopping for residential
and commercial buildings, from permitting to design, and from construction
management to operations and maintenance. Cavico Vietnam can provide
comprehensive services through the life of a project, working as a team member,
acting as a program manager, or leading an entire building project. Cavico
Vietnam is currently developing a 27 floor office building in Hanoi, developing
a Chieng Ngan 400 hectare new urban area in Son La and developing a Ngo Sai 10.4
hectare new urban area in Ha Noi. To date, we have not generated any revenues
from these development projects.




The
company is in the process of applying for an investment permit for Luong Son’s
new tourism zone of 353.53 hectares which is a part of master plan developed by
the Province of Hoa Binh to upgrade Luong Son town during the next 10 years.
This project will include a feasibility study to construct a tourist resort,
including villas that may be offered for sale.




Our
minority-owned subsidiary, Cavico Tower, has commenced construction of the APEX
Tower.  The APEX tower, which was designed by RDC Design, upon
completion, will be a 27-story tower covering 14,960 square feet of land on Pham
Hung Street, Tu Liem district in Hanoi. The state-of-the-art tower will consist
of three floors for parking, eight elevators, and three stairways.  We
plan to occupy seven floors of the tower for our headquarters and subsidiary
offices and lease or sell the remaining 20 floors of the tower. The APEX Tower
is located near the National Convention Center, which hosted the APEC 14 (Asia
Pacific Economic Cooperation).




Expansion into
Laos – Cavico Bridge is responsible for constructing a 1000 meter long
tunnel and a 45 meters deep shaft. We expect to complete the construction in 24
months and the first phase of the project involved road preparation to transport
Tunnel Boring Machine (“TBM”), which was completed in August
2009.  Theun HinBoun Power Company (“THPC”) is the owner and operator
of the existing 220-Megawatt Theun HinBoun hydropower, which is currently in
operation in Bolikhamsai province. In September 2008, THPC contracted CMC as the
main contractor for Theun HinBoun Expansion Project after receiving approval
from the Laos government to construct an additional hydropower plant in the same
area of the existing plant. Electricity generated from this plant will be sold
to the neighboring country, Thailand.




Wind Farms
– In October 2008, Cavico Transport, our majority-owned subsidiary, received
approval from the officials of Lam Dong province to study and evaluate different
areas in the province for possible wind farms. The province will use the results
of these studies as part of its windpower planning. For its contribution to the
studies, we are being given a priority to invest and participate in windpower
projects in the province according to its financial capability. We have
researched and identified a few potential sites for wind farm development along
the country. Our study has concluded that the coastal areas of southern and
south-central Vietnam, where the proposed site is located, show exceptional
promise for wind energy.  In this first phase, we are studying the
construction of a 30 megawatt (“MW”) wind farm, which will connect to the
national grid upon completion. The feasibility study at the site is expected to
be completed over a period of one year and will involve collection of wind data
and detailed analysis to determine the scope and size of the wind turbines.
Prior to the completion of the study, we plan to begin construction of
connecting roads and other site preparations. In September 2009, Cavico and
Altus AG, Germandeveloper of renewable energy projects, signed a contract which Altus
AG will provide consultancy and services of wind measurement and valuate the
results and other feasible studies and in selecting areas for setting the
posts.




Subsidiaries





Our
wholly-owned subsidiary, Cavico Vietnam, conducts its operations through a
number of subsidiaries. Some of these entities are wholly owned while others are
partially owned by Cavico Vietnam. The directors of Cavico Vietnam also hold
positions on the Boards of these subsidiaries.


5




During
2007 we permitted some of our subsidiaries to sell shares to third parties for
the purpose of raising funds for expanded operations, thereby reducing our
percentage held in those entities. As of December 31, 2009, through either the
purchase and sale of securities, Cavico Vietnam's consolidated ownership
percentage from December 31, 2008 to December 31, 2009 in: Cavico Hydropower
Construction JSC decreased from 71.80% to 71.74%; Cavico Tower decreased from
33.79% to 33.21%; Cavico Industry & Tech Service decreased from 64.64% to
62.08%; Cavico Stone & Mineral increased from 35.50% to 44.93%; Cavico
Transport JSC decreased from 73.84% to 68.90%;Cavico Manpower JSC increased from
30.0% to 39.5% ; Luong Son International Tourist increased from 90.90% to
92.16%; and Cavico Land increased from 13.35% to 15.25%.  These
Vietnamese companies do not have authorized shares. Any sale or issuance of
shares must be approved by the shareholders of the Vietnamese subsidiaries. Even
though we do not plan to sell any additional shares in any of our
subsidiaries,as a result of investments
in and purchases and sales of shares of our subsidiaries, our ownership
percentage may change from time to time.





In
addition, to the extent that any of the subsidiaries are publicly traded in
Vietnam, Vietnamese securities regulations limit foreign ownership of these
subsidiaries to 49%.





The
following table sets forth for our principal operating subsidiaries, a summary
of their main activities, Cavico Vietnam’s percentage of ownership and their
revenues as a percentage of the combined company’s construction revenues for the
year ended December 31, 2009.




Name
                        
                        Principal Activity
                        
                        Percentage
                          Owned
      as of
                          December
                          31,
      2009
                        
                        
                        Percentage of
                          Construction
                          Revenues of
                          Combined
                          CompanyCavico
      Bridge and Underground Construction JSC
                        
                        Civil
      construction, specializing in tunnel and bridge construction, frequently
      in conjunction with hydropower construction projects
                        
                        
                        65.71
                        %
                        
                        
                        31.61
                        %Energy
      Construction JSC
                        
                        Civil
      construction, specializing in hydropower construction
    projects
                        
                        
                        37.57
                        %
                        
                        
                        11.31
                        %Cavico
      Hydropower Construction JSC
                        
                        Civil
      construction, specializing in hydropower construction
    projects
                        
                        
                        71.74
                        %
                        
                        
                        14.67
                        %Cavico
      Infrastructure Construction JSC
                        
                        Civil
      construction, specializing in infrastructure development and construction
      projects
                        
                        
                        68.83
                        %
                        
                        
                        8.99
                        %Cavico
      Transport JSC
                        
                        Civil
      construction, with an emphasis on road construction.
                        
                        
                        68.90
                        %
                        
                        
                        5.66
                        %Cavico
      Construction Trading JSC
                        
                        Trading
      of machinery, equipment and materials for civil construction
      industry.
                        
                        
                        63.19
                        %
                        
                        
                        -Cavico
      Power and Resource JSC
                        
                        Civil
      construction, focus on power installation.
                        
                        
                        75.96
                        %
                        
                        
                        8.68
                        %Cavico
      Tower
                        
                        Office
      for leases
                        
                        
                        33.21
                        %(1)(2)
                        
                        
                        -Cavico
      Industry & Tech Service
                        
                        Steel
      fabrication production
                        
                        
                        62.08
                        %(1)
                        
                        
                        -Cavico
      Manpower
                        
                        Labor
      supply for projects
                        
                        
                        39.50
                        %(1)
                        
                        
                        12.30
                        %Cavico
      Stone & Mineral
                        
                        Production
      of white stone.
                        
                        
                        44.93
                        %(1)
                        
                        
                        -Cavico
      PHI Cement
                        
                        Cement
      factory operation
                        
                        
                        80.63
                        %(1)(2)
                        
                        
                        -Luong
      Son International Tourist
                        
                        Operation
      of tourism zone
                        
                        
                        92.16
                        %(1)(2)
                        
                        
                        -Cavico
      Land
                        
                        Land
      investment and development
                        
                        
                        15.25
                        %(1)(2)
                        
                        
                        -Cavico
      Son La JSC
                        
                        Stone
      exploitation
                        
                        
                        100
                        %(3)(2)
                        
                        
                        -





(1)
            This
      subsidiary was added to the consolidation in
  2008.


(2)
            This
      subsidiary had no operations in 2009 and
2008.


(3)
            This
      subsidiary was added to the consolidation in
  2009.


6





Cavico
Mining and Construction JSC




Cavico
Vietnam Mining and Construction Joint Stock Company formerly known as Cavico
Vietnam Mining and Construction Limited, was established on March 26, 2002 with
principal activities in mining construction and civil construction, especially
in connection with mining and dam construction, equity investments in mines,
power supply plants and land development projects. On June 13,
2006,  Cavico Vietnam Mining and Construction Company Limited was
changed to joint stock company following Business registration Certificate
issued by Hanoi Department of Planning and Investment. Cavico Mining’s share
capital as stated in its Business Registration Certificate is VND 80,610,060,000
(approximately $4.5 million).Currently,
Cavico Mining shares are traded over the Hochiminh City Stock
Exchange.


In accordance with current rules
promulgated by the Vietnam State Security Committee relating to foreign
ownership of publicly traded Vietnamese entities, we had to reduce our ownership
in this entity to 50.16% in 2006. In 2008, our percentage of ownership was
reduced to 25.55% with total equity amount of $1,315,704 from 39.13% as of
December 31, 2007 due to additional sale of ownership.





We
accounted for the investment in Cavico Mining by the equity method in the
accompanying financial statements for the year ended December 31, 2009 and
2008.





On
December 11, 2009, Cavico Corp., Cavico Vietnam and Cavico Mining and
Construction JCS (“Cavico Mining”) entered into a Stock Purchase Agreement,
pursuant to which the Company and its subsidiaries agreed to purchase from
Cavico Mining a total of 4,000,000 ordinary shares of Cavico Mining at
Vietnamese Dong 16,894 per share (approximately $0.94 per share based on current
exchange rates) in exchange for debt owed to the Company and its subsidiaries by
Cavico Mining. At the conclusion of transactions contemplated by the Stock
Purchase Agreement, we will own 50.2% of the total issued and outstanding
ordinary shares of Cavico Mining. The purpose of the acquisition of an
additional 4,000,000 shares of Cavico Mining to own over 50% of Cavico Mining’s
common stock is to enable us to include Cavico Mining in our consolidated
financial statements on a going forward basis. On January 12, 2010, Cavico
Mining’s shareholders approved the proposal to purchase 4,000,000 of Cavico
Mining’s ordinary shares. Pursuant to the Stock Purchase Agreement, the purchase
of the Shares shall take place on the tenth business day following the
shareholder approval or on such later date as the parties involved agree in
writing.On February
11, 2010, this Stock Purchase Agreement was consummated.





Investment





Approximately
86% of our revenues are from civil construction projects where we are the
contractor or subcontractor.  We may from time to time continue to act
as a passive investor in projects for which we serve as the
contractor.  After construction, these projects will be managed by
unrelated parties.  Projects that we have invested in include
hydropower projects, cement plants, petroleum and land development projects in
urban and tourist areas. We are expanding our investment in wind
power.  We have also been carrying on the exploration study of a
copper mine in Vietnam, and copper and a tin mine in Laos. These above mentioned
investment are targeted investments as we have substantial expertise and
experiences in these fields.




Customers




Our
customers are found primarily in the public sector. Our largest customer is
Electricity of Vietnam, a state owned utility.   During the years ended
December 31, 2009 and December 31, 2008, contracts with this entity represented
approximately 34% and 56%, respectively, of our revenue.




Suppliers




Our raw
materials consist of fuel, steel and concrete. The most significant raw material
cost is for steel which represents approximately 24% of total material costs,
cement and concrete mixed which represents approximately 14% of our total
material costs and fuel which represents approximately 18% of total material
costs. Most of these raw materials are purchased directly from suppliers and
manufacturers pursuant to simple purchase orders. We do not have long term
contracts with any of our suppliers. All of the raw materials used in our
construction projects are commodities that may be purchased from any sources if
any of our suppliers would cease to sell to us for any reason. We source our raw
material purchases to suppliers located in the area of our projects. As a
result, no supplier accounted for more than 10% of total material costs for the
year ended December 31, 2009.




Backlog




Our
backlog includes the total value of awarded contracts that have not been
completed, including our proportionate share of unconsolidated joint venture
contracts.  Our backlog was approximately $273.5 million excluding
Cavico Mining at December 31, 2009.  Approximately $72.6 million of
this backlog is expected to be completed during 2010.  We include a
construction project in our backlog at such time as a contract is awarded and
funding is in place. Substantially all of the contracts in our backlog may be
canceled or modified at the election of our customers.  We have not,
however, been materially adversely affected by contract cancellations or
modifications in the past.


7


Marketing




We have
an extensive network of contacts within various levels of the Vietnamese
national and local governments and are not currently engaged in any significant
marketing efforts. We are usually  granted contracts based on the
high-level quality of our work provided for the prior construction
projects.




Contract
Provisions and Subcontracting




Our
contracts with our customers include “fixed unit price” or “fixed price” and
“adjustment contracts”.  Under fixed unit price contracts which
represent approximately 4% of our total contracts and may change from time to
time, we are committed to provide materials or services required by a project at
fixed unit prices (for example, dollars per cubic yard of concrete poured or
cubic yard of earth excavated). While the fixed unit price contract shifts the
risk of estimating the quantity of units required for a particular project to
the customer, any increase in our unit cost over the expected unit cost in the
bid, whether due to inflation, inefficiency, faulty estimates or other factors,
is borne by us unless otherwise provided in the contract. Fixed price contracts
are priced on a lump-sum basis under which we bear the risk of performing all
the work for the specified amount. Our contracts are generally obtained through
competitive bidding in response to advertisements by local government agencies
and private parties. Less frequently, contracts may be obtained through direct
negotiations with private owners. Our contract risk mitigation process includes
identifying risks and opportunities during the bidding process, review of bids
fitting certain criteria by various levels of management and, in some cases, by
the executive committee of our Board of Directors.




There are
a number of factors that can create variability in contract performance and
results as compared to a project’s original bid. The most significant of these
include the completeness and accuracy of the original bid, costs associated with
added scope changes, extended overhead due to owner changes and weather delays,
subcontractor performance issues, changes in productivity expectations, site
conditions that differ from those assumed in the original bid (to the extent
contract remedies are unavailable), the availability and skill level of the
workers in the geographic location of the project and a change in the
availability and proximity of equipment and materials. All of these factors can
impose inefficiencies on contract performance, which can drive up costs and
lower profits. Conversely, if any of these or other factors mentioned are more
positive than the assumptions in our bid, project profitability can improve. The
ability to realize improvements on project profitability is more limited than
the risk of lower profitability. Design/build projects carry other risks such as
the risk inherent in estimating quantities and prices before the project design
is completed and design error risk, including additional construction costs due
to any design errors, liability to the contract owner for the design of the
project and right-of-way and permit acquisition costs. Although we manage this
additional risk by adding contingencies to our bid amounts, obtaining errors and
omissions insurance and obtaining indemnifications from our design consultants
where possible, there is no guarantee that these risk management strategies will
always be successful.




For the
last five years, as a leading company in Vietnamese Hydropower (“HP”)
construction, we have been granted preferred construction contracts by the
Government. State agencies have been using adjustment contracts for most large
HPs in the hope of expediting the completion of HP projects. Under adjustment
contracts, completion of work certifications are based on actual work completion
in accordance with site inspections performed by engineers. Payments are made
based on the price of local construction labor and materials and adjusted for
inflation. The Government periodically issues new rates and guidelines that
apply to HP projects to cover additional work as well as additional cost
incurred in connection with the projects to provide incentives to the
contractors to accelerate completion of HP projects. As a result, our risk of
cost overruns is reduced. However, the procedures to get rate guidelines
approved may take from three to six months. Therefore, we must often carry large
quantities of work in progress on our balance sheet.




All
government contracts and most of our other contracts provide for termination of
the contract for the convenience of the contract owner, with provisions to pay
us for work performed through the date of termination. We have not been
materially adversely affected by these provisions in the past.  Many
of our contracts contain provisions that require us to pay liquidated damages if
specified completion schedule requirements are not met and these amounts can be
significant. Generally, however, when contract conditions change, we are able to
negotiate modifications to the contract which mitigates this risk.




We act as
prime contractor on most of the construction projects we undertake. We
accomplish the majority of our projects with our own resources and subcontract
for more specialized activities such as electrical and mechanical work. As prime
contractor, we are responsible for the performance of the entire contract,
including any subcontract work. Thus, we may be subject to increased costs
associated with the failure of one or more subcontractors to perform as
anticipated. We manage this risk by reviewing the size of the subcontract, the
financial stability of the subcontractor and other factors and, based on this
review, determine whether to require that the subcontractor furnish a bond or
other type of security that guarantees their performance. Some of our
subcontractors may not be able to obtain surety bonds or other types of
performance security.


8


Equipment





The
Company believes that it owns through its subsidiaries the largest private fleet
of heavy construction equipment in Vietnam. The total value of all vehicles and
pieces of machinery and equipment after depreciation at December 31, 2009, was $
13,096,820  and includes the following equipment:




Type
                    
                    UnitsTunnel
      Drill Machines 1 boom to 3 booms; for Tunnel Diameter from 8m2 to
      80m2
                    
                    23Tunnel
      Wheel Loaders capacity from 2m3 to 3m3
                    
                    31Tunnel
      Dump Trucks capacity from 20 tons to 30 tons
                    
                    24Bulldozers
      capacity from 130hp to 385 hp
                    
                    21Excavators
      and wheel loaders capacity from 0.7m3 to 10m3
                    
                    45Off-Highway
      Dump Trucks capacity over 50 tons ( 32 m3 )
                    
                    30Light
      and medium Dump Trucks Capacity up to 15 tons
                    
                    72Open
      cut Drilling Rigs Dia 89mm - 225mm
                    
                    20Electronic
      Construction Survey Sets/Stations
                    
                    36Concrete
      Batching Plants capacity from 60 to 120m3/hour
                    
                    10Aggregate
      Crushing Plants/Stations capacity from 60 to 180 tons/hour
                    
                    9Concrete
      Pumps capacity up to 100m3/hour
                    
                    118Crawer
      Cranes capacity up to 100 tons
                    
                    19Site
      service cars
                    
                    82Other
      construction machinery and Equipments ( Generator sets, Air compressors,
      Transformers, shotcretes, pumps, Graders, Road Rollers, lift cars,
      Concrete mixer Trucks, sliding forms, etc )
                    
                    496Total
                    
                    1,036





We
believe that ownership of equipment is generally preferable to leasing because
ownership ensures the equipment is available as needed and normally results in
lower equipment costs. We regularly lease or rent equipment on a short-term
basis to supplement existing equipment and respond to construction activity
peaks. We are able to purchase used equipment and maintain repair facilities
which keep the equipment in good working order. Most of our equipment brands are
Caterpillar, Komatsu, Tamrock and Atlascopco. A large
part of our equipment was purchased from the year 2000 to 2005 at prices less
than the current replacement cost.  Depreciation of this equipment has been
recorded over five years.  Although much of the equipment is fully
depreciated, the equipment presently is in good working
order.




Competition




Factors
influencing our competitiveness include price, reputation for quality, the
availability of aggregate materials, machinery and equipment, financial
strength, knowledge of local markets and conditions, and project management and
estimating abilities. Although some of our competitors are larger than we are
and may possess greater resources, we believe that we compete favorably on the
basis of the foregoing factors. Although the construction business is highly
competitive, we believe we are well positioned to compete effectively in the
markets in which we operate.




We
believe that we are the only company executing construction projects in Vietnam
utilizing Tunnel Boring Machines. This technology is the most advanced
engineering method of tunnel construction. It enables excavation and finishing
of underground concrete structures in the most time efficient manner. This
technique is also applied for long tunnels, weak ground conditions and complex
geological conditions. For example, the traffic tunnel that connects England and
France was constructed utilizing this method.




Our areas
of strength include modern technology, advanced management, and professionally
executed quality projects.




In
Vietnam, we are aware of four other companies with expertise in our area of
construction, namely Song Da Corporation, Vinaconex Corporation,
Hydro-construction No. 4 Corporation and Agriculture Electric-mechanical
construction Corporation. Cavico and Song Da are the two largest companies in
the area of hydropower construction. Currently, we are the principalcontractors
in Vietnam for more than 60 % of the total quantity of tunnel construction
works; 20-30% dam construction works. We have stakes in approximately 90%
of hydropower construction projects. During the years 2000 and 2003 we
participated in construction of the National high way No1 and Ho Chi Minh road,
the two longest national roads along the country. From 2003 to date,
we participated in a limited number of road constructions, but we
have been focusing our efforts on construction
for hydropower projects which we have expertise and
face very few competitors compared to road works. Within Vietnam, we
believe we have a good reputation in the industry and the advantage of expertise
in the construction of modern and complex projects.


9




We are
also diversifying our efforts in other construction and services fields such as
steel fabrication and mechanical products/services exported to Australia and
overseas.




During
the past five years, we have acted as subcontractors for several large Japanese
construction companies like Kumagai Gumi, Kajima, and Maeda. This has resulted
in additional involvement in large projects overseas (e.g., a manpower
sub-contract to construct tunnels of highway in Algeria (Granted to us by
Kajima) or a tunnel construction contract for Theun Hinboun hydropower project
in Laos).




Government
Regulation




Our
operations are subject to compliance with the requirements of local Vietnamese
government agencies and authorities, including regulations concerning workplace
safety, labor relations and disadvantaged businesses. Additionally, all of our
operations are subject to local laws and regulations relating to the
environment, including those relating to discharges to air, water and land, the
handling and disposal of solid and hazardous waste, the handling of underground
storage tanks and the cleanup of properties affected by hazardous substances.
Certain environmental and other laws impose substantial penalties for
non-compliance. We continually evaluate whether we must take additional steps at
our locations to ensure compliance with environmental and other
laws.




While
compliance with applicable regulatory requirements has not materially adversely
affected our operations in the past, there can be no assurance that these
requirements will not change and that compliance will not adversely affect our
operations in the future. In addition, our operations require operating permits
granted by governmental agencies.  We believe that, based on
statements from government officials, tighter regulations for the protection of
the environment and other factors will make it increasingly difficult to obtain
new permits and renewal of existing permits may be subject to more restrictive
conditions than currently exist.




Environmental




Our
operations are subject to environmental regulation in Vietnam. Environmental
regulation, established by The Law on Environmental Protection, passed on
December 12, 2005, is still evolving in Vietnam and it is expected to evolve in
a manner which may require stricter standards and enforcement, increased fines
and penalties for non-compliance, more stringent environmental assessments of
proposed projects and a heightened degree of responsibility for companies and
their officers, directors and employees.




As a
contractor in Vietnam, environmental regulations do not affect our work as we
only follow the specifications established by the project developer. Our
customers are charged with the environmental protection duties and this duty
stipulated in their investment license for each project.  To obtain an
investment license for any project, our customers and its consultants have to
submit an environmental impact analysis report to the relevant government
authorities and receive approval from relevant authorities.




If there
are future changes in environmental regulation, they could impede our current
and future business activities and negatively impact the profitability of
operations.




Employees




As of
December 31, 2009, we have, with our subsidiaries, 3,409 full time employees, of
which approximately 818 are engineers. Most of our employees are located
throughout Vietnam and 503 employees in Algeria. All of our employees
are represented by labor unions. If and when the need arises, we intend to hire
additional employees to meet the demand of a certain project.




It is our
goal to focus on building a dynamic and professional labor force by utilizing
the following methods:




●
            Regular salary adjustments
      commensurate with cost of living and inflation trends in the Vietnamese
      labor market;


●
            Payment of incentive and
      performance bonuses;


●
            Improvement
      of labor conditions for our
workers;


●
            Continuous
      professional training; and


●
            Build a company culture through
      various activities, including company newsletters, music and other
      promotions to instill feelings of pride with our
      accomplishments.





The
majority of our work is done through employees governed by our collective labor
agreement with the Labor Union of Cavico Vietnam. The agreement was signed on
January 20, 2009. The original term of the agreement expires on January 20, 2012
but it may be extended for one year if both parties agree. Pursuant to the
collective labor agreement, each employee signs an employment contract with us.
We believe that our relationships with all our employees, both union and
non-union, are satisfactory. We have not experienced a strike or
lockout.


10




Reverse
Stock Split





Our Board
of Directors and shareholders approved a proposal to grant discretionary
authority to our Board of Directors to amend our Certificate of Incorporation to
effect a reverse stock split of our issued and outstanding common stock at any
time before April 27, 2010 at any whole number ratio between a 20-for-1 reverse
stock split and 60-for-1 reverse stock split , with the exact exchange ratio and
timing of the reverse stock split to be determined at the discretion of the
Board of Directors (the “Reverse Stock Split”), without decreasing the number of
our authorized capital stock. The reverse stock split of 40-for-1 was completed
on August 19, 2009.


The
Reverse Stock Split was affected simultaneously for all our then-existing common
stock (the “Old Shares”) and the exchange ratio is the same for all of our
shares of issued and outstanding common stock. The Reverse Stock Split affected
all of our shareholders uniformly and did not affect any shareholder’s
percentage ownership interests in us, except to the extent that the Reverse
Stock Split resulted in any of our shareholders owning a fractional share. If
this occurred, the fractional shares were rounded up to the next whole share,
including fractional shares that were less than one share. Shares of common
stock issued pursuant to the Reverse Stock Split (the “New Shares”) remain fully
paid and non-assessable.




Reports
to Security Holders




We are
subject to the filing and reporting requirements of the Exchange Act. These
requirements include the filing of annual reports that include audited financial
statements as well as quarterly reports and current reports that will be filed
upon the occurrence of certain significant events. We are also subject to the
proxy rules under the Exchange Act and its insiders are required to file reports
disclosing their beneficial ownership of our securities. It is estimated that
the annual cost of compliance with the Exchange Act reporting requirements will
be approximately $400,000.




The
public may read and copy any materials we file with the SEC at the SEC's Public
Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. Additionally, the SEC maintains an Internet site that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC, which can be found at
http://www.sec.gov
..


11





ITEM 1A.
            RISK
      FACTORS





Risks Associated with Our
Business




If
we are unable to accurately estimate the overall risks or costs when we bid on a
contract, we may achieve a lower than anticipated profit or incur a loss on the
contract.




A portion
of our revenues and contract backlog are typically derived from fixed unit price
contracts. Fixed unit price contracts require us to perform the contract for a
fixed unit price irrespective of our actual costs. As a result, we realize a
profit on these contracts only if we successfully estimate our costs and then
successfully control actual costs and avoid cost overruns. If our cost estimates
for a contract are inaccurate, or if we do not execute the contract within our
cost estimates, then cost overruns may cause us to incur losses or cause the
contract not to be as profitable as we expected. This, in turn, could negatively
affect our cash flow, earnings and financial position.  During the
year ended December 31, 2009 and 2008, 4% and 14%, respectively, of our revenue
was generated from fixed unit price contracts of which we have not experienced
any losses due to cost overruns.




The costs
incurred and gross profit realized on those contracts can vary, sometimes
substantially, from the original projections due to a variety of factors,
including, but not limited to:




●
            on-site conditions that differ
      from those assumed in the original
bid;


●
            delays caused by weather
      conditions;


●
            contract modifications creating
      unanticipated costs not covered by change
  orders;


●
            changes in availability,
      proximity and costs of materials, including steel, concrete, aggregate and
      other construction materials (such as stone, gravel and sand), as well as
      fuel and lubricants for our
equipment;


●
            availability and skill level of
      the workers in the geographic location of a
  project;


●
            our suppliers’ or subcontractors’
      failure to perform;


●
            fraud or theft committed by our
      employees;


●
            mechanical problems with our
      machinery or equipment;


●
            citations issued by a
      governmental authority;


●
            difficulties in obtaining
      required governmental permits or
  approvals;


●
            changes in applicable laws and
      regulations; and


●
            claims or demands from third
      parties alleging damages arising from our work or from the project of
      which our work is part.


●
            claims
      relating to construction deficiency





We
attempt to shift construction risks to its customers. We, however, provide a
warranty period of two to three year after completion of the construction
contract. Our customers generally keep the retention of 5 to 15 percent of the
contract amount until the warranty period expires. Due to this retention period,
our receivables can be significantly delayed and may adversely impact our cash
flow. In accordance with SOP 81-1 (ASC 605)we continually review contract
performance and any anticipated additional costs that might be associated with
contract performance and modify contract income accordingly.  Our
practice in many instances has been to supersede these terms with an agreement
to obtain insurance covering both the customer and ourselves. In cases where
insurance is not obtained, our experience has often been that public sector
customers have been willing to negotiate equitable adjustments in the contract
compensation or completion time provisions if unexpected circumstances arise. If
we are unable to obtain insurance, and if public sector customers seek to impose
contractual risk-shifting provisions more aggressively, we could face increased
risks, which may adversely affect our cash flow, earnings and financial
position.




Economic
downturns or reductions in government funding of infrastructure projects, or the
cancellation of significant contracts, could reduce our revenues and profits and
have a material adverse effect on our results of operations.




Our
business is highly dependent on the amount of infrastructure work funded by
various governmental entities, which, in turn, depends on the overall condition
of the economy, the need for new or replacement infrastructure, the priorities
placed on various projects funded by governmental entities and federal, state or
local government spending levels. Decreases in government funding of
infrastructure projects could decrease the number of civil construction
contracts available and limit our ability to obtain new contracts, which could
reduce our revenues and profits.




Due to
the global downturn in the financial markets, Vietnam may not be able to
maintain its recent growth rates mainly due to the lack of demand of exports to
countries that are in recessions. Our earnings may become unstable if Vietnam’s
domestic growth slows significantly and our public sector clients are unable to
fund infrastructure projects. Contracts that we enter into with governmental
entities may usually be canceled at any time by them with payment only for the
work already completed. In addition, we could be prohibited from bidding on
certain governmental contracts if we fail to maintain qualifications required by
those entities. A sudden cancellation of a contract or our debarment from the
bidding process could cause our equipment and work crews to remain idled for a
significant period of time until other comparable work became available, which
could have a material adverse effect on our business and results of
operations.


12




The loans that
finance our construction are renewable each year and classified as short-term
loans creating a working capital deficit.  Our banks’
failure to renew such loans or our failure to repay our loans could impact our
operations.




At
December 31, 2009, we had $60,115,212 construction loans of which $54,740,704
are classified as short-term construction loans with interest rates ranging 10%
to 17%.  We obtain these short-term construction loans to finance our
civil construction and mining projects.  Each time we begin a
construction project, we obtain a loan from one of several banks to purchase
equipment and supplies and to mobilize our employees and materials to the
worksite.  As we complete a percentage of each construction project,
our customer certifies our work in process and our customer, or its financing
source, pays us for our completed work, less a retention percentage (which we
will collect at the end of the warranty period), and we repay the bank from
which we borrowed funds for each project.  Construction contracts
include a two to three year warranty period that is part of the construction
contract.




It is the
general practice of Vietnamese banks to give short term loans such as these for
each construction contract and make the loans renewable every year until the
construction contract is completed.  As a result, the loans are
classified as current liabilities.  Our retention receivables and a
portion of our work in process, however, are classified as long-term
assets.  As a result, our working capital deficit as of December 31,
2009 was $23,628,581. As of December 31, 2009, long-term retention
receivables and long-term work in process totaled $14,455,193.




We expect
to renew these loans with the banks and repay the balances as we complete our
projects.  In the year 2009, we made $73,634,129 of payments on our
notes payable.  We also needed to draw down $82,185,846 from our notes
payable to finance our construction projects.




Although
a substantial majority of our loans are not secured by our assets other than our
work in process and receivables, our banks’ decision not to renew these loans or
our failure to repay these loans could have important consequences including the
following:




●
            it may limit our ability to
      borrow money or issue equity to finance our working capital, construction
      projects or capital projects or other
  purposes;


●
            it may limit our flexibility in
      planning for, or reacting to, changes in our operations or
      business;


●
            a substantial portion of our cash
      flow from operations could be dedicated to the repayment of our
      indebtedness and would not be available for other
      purposes;


●
            there would be a material adverse
      effect on our business and financial condition if we were unable to
      service our indebtedness or obtain additional financing, as needed;
      and


●
            It may result in the banks
      repossessing up to $21,000,000 of our equipment and other
      assets.





Our
operations are currently focused in Vietnam, and any adverse change to the
economy or business environment in Vietnam could significantly affect our
operations, which would lead to lower revenues and reduced
profitability.




Our
operations are currently concentrated in Vietnam. Because of this concentration
in a specific geographic location, we are susceptible to fluctuations in our
business caused by adverse economic or other conditions in this region,
including natural or other disasters. A stagnant or depressed economy in Vietnam
generally, or in any of the other markets that we serve, could adversely affect
our business, results of operations and financial condition.




Our
business is subject to significant political and economic uncertainties and may
be affected by political, economic and social developments in Vietnam. Over the
past several years, the government of Vietnam has pursued economic reform
policies. Changes in policies, laws and regulations or in their interpretations
or the imposition of confiscatory taxation, restrictions on currency conversion,
restrictions or prohibitions on dividend payments to stockholders, or
devaluations of currency could cause a decline in the price of our common stock,
should a market for our common stock ever develop.




Our
industry is highly competitive, with a variety of larger companies with greater
resources competing with us, and our failure to compete effectively could reduce
the number of new contracts awarded to us or adversely affect our margins on
contracts awarded.




Most
contracts on which we bid are awarded through a competitive bid process, with
awards generally being made to the lowest bidder, but sometimes recognizing
other factors, such as shorter contract schedules or prior experience with the
customer. Within our markets, we compete with many national, regional and local
construction firms. Some of these competitors have achieved greater market
penetration than we have in the markets in which we compete, and some have
greater financial and other resources than we have. In addition, there are a
number of national companies in our industry that are larger than we are and
that, if they so desired, could establish a presence in our markets and compete
with us for contracts. As a result, we may need to accept lower contract margins
in order to compete against these competitors. If we are unable to compete
successfully in our markets, our relative market share and profits could be
reduced.


13




Our
dependence on subcontractors and suppliers of materials, including
petroleum-based products, could increase our costs and impair our ability to
complete contracts on a timely basis or at all, which would adversely affect our
profits and cash flow.




We rely
on third-party subcontractors to perform certain work on some of our contracts.
We do not bid on contracts unless we have the necessary subcontractors committed
for the anticipated scope of the contract and at prices that we have included in
our bid. Therefore, to the extent that we cannot engage subcontractors, our
ability to bid for contracts may be impaired. In addition, if a subcontractor is
unable to deliver its services according to the negotiated terms for any reason,
including the deterioration of its financial condition, we may suffer delays and
be required to purchase the services from another source at a higher price. This
may reduce the profit to be realized, or result in a loss, on a
contract.




We also
rely on third-party suppliers to provide all of the materials, including fuel,
aggregates (sand and gravel), concrete, steel and pipe, for our contracts. We do
not own any quarries, and there are no naturally occurring sources of aggregates
in Vietnam. We do not bid on contracts unless we have commitments from suppliers
for the materials required to complete the contract and at prices that we have
included in our bid. Thus, to the extent that we cannot obtain commitments from
our suppliers for materials, our ability to bid for contracts may be impaired.
In addition, if a supplier is unable to deliver materials according to the
negotiated terms of a supply agreement for any reason, including the
deterioration of its financial condition, we may suffer delays and be required
to purchase the materials from another source at a higher price. This may reduce
the profit to be realized, or result in a loss, on a contract.




Diesel
fuel and other petroleum-based products are utilized to operate the equipment
used in our construction contracts. Decreased supplies of those products
relative to demand and other factors can cause an increase in their
cost.




Future
increases in the costs of fuel and other petroleum-based products used in our
business, particularly if a bid has been submitted for a contract and the costs
of those products have been estimated at amounts less than the actual costs
thereof, could result in a lower profit, or a loss, on a contract.




Our
contracts may require us to perform extra or change order work, which can result
in disputes and adversely affect our working capital, profits and cash
flows.




Our
contracts generally require us to perform extra work or change order work as
directed by the customer even if the customer has not agreed in advance on the
scope or price of the extra work to be performed. This process may result in
disputes over whether the work performed is beyond the scope
of the work included in the original project plans and specifications or, if the
customer agrees that the work performed qualifies as extra work, the
price that the customer is willing to pay for the extra work. These disputes may
not be settled to our satisfaction. Even when the customer agrees to pay for the
extra work, we may be required to fund the cost of that work for a lengthy
period of time until the change order is approved by the customer and we are
paid by the customer.




To the
extent that actual recoveries with respect to change orders or amounts subject
to contract disputes or claims are less than the estimates used in our financial
statements, the amount of any shortfall will reduce our future revenues and
profits, and this could have a material adverse effect on our reported working
capital and results of operations. In addition, any delay caused by the extra
work may adversely impact the timely scheduling of other project work and our
ability to meet specified contract milestones.




Our
failure to meet schedule or performance requirements of our contracts could
adversely affect us.




In most
cases, our contracts require completion by a scheduled acceptance date. Failure
to meet any such schedule could result in additional costs being incurred,
penalties and liquidated damages being assessed against us, and these could
exceed projected profit margins on the contract. Performance problems on
existing and future contracts could cause actual results of operations to differ
materially from those anticipated by us and could cause us to suffer damage to
our reputation within the industry and among our customers.




Timing
of the award and performance of new contracts could have an adverse effect on
our operating results and cash flow.




At any
point in time, a substantial portion of our revenues may be derived from a
limited number of large construction contracts. It is generally very difficult
to predict whether and when new contracts will be offered for tender, as these
contracts frequently involve a lengthy and complex design and bidding process,
which is affected by a number of factors, such as market conditions, financing
arrangements and governmental approvals. Because of these factors, our results
of operations and cash flows may fluctuate from quarter to quarter and year to
year, and the fluctuation may be substantial.


14




The
uncertainty of the timing of contract awards may also present difficulties in
matching the size of work crews with contract needs. In some cases, we may
maintain and bear the cost of a ready work crew that is larger than currently
required, in anticipation of future employee needs for existing contracts or
expected future contracts. If a contract is delayed or an expected contract
award is not received, we would incur costs that could have a material adverse
effect on our anticipated profit.




In
addition, the timing of the revenues, earnings and cash flows from our contracts
can be delayed by a number of factors, including adverse weather conditions such
as prolonged or intense periods of rain, storms or flooding, delays in receiving
material and equipment from suppliers and changes in the scope of work to be
performed. Those delays, if they occur, could have an adverse effect on our
operating results for a particular period.




Our
dependence on a limited number of customers could adversely affect our business
and results of operations.




Due to
the size and nature of our construction contracts, one or a few customers have
in the past and may in the future represent a substantial portion of our
consolidated revenues and gross profits in any one year or over a period of
several consecutive years. Similarly, our contract backlog frequently reflects
multiple contracts for individual customers; therefore, one customer may
comprise a significant percentage of contract backlog at a certain point in
time. For the year ended December 31, 2009, Electricity of Vietnam accounted for
approximately 34% of our revenues. The loss of business from these entities
could have a material adverse effect on our business or results of operations.
Because we do not maintain any reserves for payment defaults, a default or delay
in payment on a significant scale could materially adversely affect our
business, results of operations and financial condition.




We
may incur higher costs to acquire and maintain equipment necessary for our
operations, and the market value of our equipment may decline.




We have
traditionally owned most of the construction equipment used to build our
projects, and we do not bid on contracts for which we do not have, or cannot
quickly procure (whether through acquisition or lease), the necessary equipment.
To the extent that we are unable to buy construction equipment necessary for our
needs, either due to a lack of available funding or equipment shortages in the
marketplace, we may be forced to rent equipment on a short-term basis, which
could increase the costs of completing contracts. In addition, our equipment
requires continuous maintenance for which we maintain our own repair facilities.
If we are unable to continue to maintain the equipment in our fleet, we may be
forced to obtain third-party repair services, which could increase our
costs.




The
market value of our equipment may unexpectedly decline at a faster rate than
anticipated. Such a decline would reduce the borrowing base under our
construction business credit facility, thereby reducing the amount of credit
available to us and impeding our ability to expand our business consistent with
historical levels.




Unanticipated
adverse weather conditions may cause delays, which could slow completion of our
contracts and negatively affect our revenues and cash flow.




Because a
part of our construction projects are built outdoors, work on our contracts is
subject to unpredictable weather conditions. Lengthy periods of wet weather will
generally interrupt construction, and this can lead to under-utilization of
crews and equipment, resulting in less efficient rates of overhead recovery.
While revenues can be recovered following a period of bad weather, it is
generally impossible to recover the efficiencies, and hence, we may suffer
reductions in the expected profit on contracts.




Our
operations are subject to hazards that may cause personal injury or property
damage, thereby subjecting us to liabilities and possible losses, which may not
be covered by insurance.




Our
workers are subject to the usual hazards associated with providing services on
construction sites. Operating hazards can cause personal injury and loss of
life, damage to, or destruction of, property, plant and equipment and
environmental damage. We self-insure our workers’ compensation claims, subject
to stop-loss insurance coverage. We also maintain insurance coverage in amounts
and against the risks that we believe are consistent with industry practice, but
this insurance may not be adequate to cover all losses or liabilities that we
may incur in our operations.




Insurance
liabilities are difficult to assess and quantify due to unknown factors,
including the severity of an injury, the determination of our liability in
proportion to other parties, the number of incidents not reported and the
effectiveness of our safety program. If we were to experience insurance claims
or costs above our estimates, we might also be required to use working capital
to satisfy these claims rather than to maintain or expand our operations. To the
extent that we experience a material increase in the frequency or severity of
accidents or workers’ compensation claims, or unfavorable developments on
existing claims, our operating results and financial condition could be
materially and adversely affected.


15




Environmental
and other regulatory matters could adversely affect our ability to conduct our
business and could require expenditures that could have a material adverse
effect on our results of operations and financial condition.




Our
operations are subject to various environmental laws and regulations relating to
the management, disposal and remediation of hazardous substances and the
emission and discharge of pollutants into the air and water. As a contractor,
however, our customers are primarily responsible for environmental
protection.  Nevertheless, we could be held liable for the
contamination created not only by our own activities but also by the historical
activities of others on our project sites or on properties that we
acquire.




Our
operations are also subject to laws and regulations relating to workplace safety
and worker health, which, among other things, regulate employee exposure to
hazardous substances. Violations of those laws and regulations could subject us
to substantial fines and penalties, cleanup costs, third-party property damage
or personal injury claims.




In
addition, these laws and regulations have become, and are becoming, increasingly
stringent. Moreover, we cannot predict the nature, scope or effect of
legislation or regulatory requirements that could be imposed, or how existing or
future laws or regulations will be administered or interpreted, with respect to
products or activities to which they have not been previously applied.
Compliance with more stringent laws or regulations, as well as more vigorous
enforcement policies of the regulatory agencies, could require us to make
substantial expenditures for, among other things, pollution control systems and
other equipment that we do not currently possess, or the acquisition or
modification of permits applicable to our activities.




If
we fail to obtain additional financing we will be unable to execute our business
plan.




We may
need additional funds to finance our capital projects. Should such needs arise,
we intend to seek additional funds through public or private equity or debt
financing, strategic transactions and/or from other sources.  There
are no assurances that future funding will be available on favorable terms or at
all. If additional funding is not obtained, we will need to reduce, defer or
cancel development programs, planned initiatives or overhead expenditures, to
the extent necessary. The failure to fund our capital requirements would have a
material adverse effect on our business, financial condition and results of
operations.




We
may face potential dilution of our ownership interest in our
subsidiaries.




We
operate nationwide in Vietnam through our subsidiaries, serving almost
exclusively public sector clients.  Our wholly-owned subsidiary, Cavico
Vietnam, conducts its operations through a number of subsidiaries. Some of these
entities are wholly owned while others are partially owned by Cavico Vietnam.
The officers and directors of Cavico Vietnam also hold positions on the Boards
of these subsidiaries. The profit/loss generated from the entities in which we
have less than fifty percent ownership shares was $103,831 as loss and $93,716
as profit for the year ended December 31, 2009 and 2008,
respectively.




Some of
our subsidiaries were able to raise working capital by selling their shares to
independent third parties.  During 2007 and 2008, we permitted some of
our subsidiaries to sell shares to third parties for the purpose of raising
funds for expanded operations, thereby reducing our percentage held in those
entities.  As of December 31, 2009, through either the purchase and
sale of securities, Cavico Vietnam's consolidated ownership percentage from
December 31, 2008 to December 31, 2009 in: Cavico Hydropower Construction JSC
decreased from 71.80% to 71.74%; Cavico Tower decreased from 33.79% to 33.21%;
Cavico Industry & Tech Service decreased from 64.64% to 62.08%; Cavico Stone
& Mineral increased from 35.50% to 44.93%; Luong Son International Tourist
increased from 90.90% to 92.16%; and Cavico Land increased from 13.35% to
15.25%.  We do not plan to sell additional shares in any of our
subsidiaries.  If we do sell additional shares in our subsidiaries or
if the subsidiaries sell additional shares to third parties, our ownership
interest in our subsidiaries could be diluted and we would potentially recognize
less income from our subsidiaries.





We
will be unsuccessful if we fail to attract and retain qualified
personnel.




We depend
on a core management team. The loss of any of these individuals could prevent us
from achieving our business objective of commercializing our product candidates.
Our future success will depend in large part on our continued ability to attract
and retain other highly qualified management team,
engineers,  technical operators, skilled labors with expertise in our
construction field. We face competition for personnel from other companies,
universities, public and private research institutions, government entities and
other organizations. If our recruitment and retention efforts are unsuccessful,
our business operations could suffer.


16


Risks Associated with Our
Capital Structure




Insiders
have substantial control over the company, and issuance of shares of Common
Stock pursuant to our incentive plan will dilute your ownership and voting
rights and allow insiders to control the direction of the Company.




Our
executive officers and directors, beneficially owned as of March 15,
2010  in the aggregate, approximately 527,609 shares of our
outstanding common stock , which constitutes approximately 17.3% of our
outstanding shares.  Our officers and directors ownership percentage
will increase as a result of any shares issued under our incentive plan under
which we can issue 1,250,000 shares to our officers, directors, employees and
consultants.








Our
common stock does not have a vigorous trading market and you may not be able to
sell your securities when desired.




We have a
limited active public market for our common shares. We cannot assure you that a
more active public market will ever develop, allowing you to sell large
quantities of shares or all of your holdings. Consequently, you may not be able
to liquidate your investment in the event of an emergency or for any other
reason.




Our
common stock could be subject to extreme volatility.




The
trading price of our shares has fluctuated widely from time to time and may be
subject to similar fluctuations in the future. The trading price of our common
stock may be affected by a number of factors, including events described in the
risk factors set forth in this annual report, as well as our operating results,
financial condition, announcements of construction projects, general conditions
in Vietnam, Southeast Asia, overall country-wide development, and other events
or factors. In recent years, broad stock market indices, in general, and smaller
capitalization companies, in particular, have experienced substantial price
fluctuations. In a volatile market, we may experience wide fluctuations in the
market price of our common stock. These fluctuations may have a negative effect
on the market price of our common stock.  In addition, the securities
market has from time to time experienced significant price and volume
fluctuations that are not related to the operating performance of particular
companies. These market fluctuations may also materially and adversely affect
the market price of our stock.




We
have never paid dividends and have no plans to in the future.




Holders
of shares of our common stock are entitled to receive such dividends as may be
declared by our Board of Directors. To date, we have paid no cash dividends on
our shares of common stock and we do not expect to pay cash dividends on our
common stock in the foreseeable future. We intend to retain future earnings, if
any, to provide funds for operations of our business. Therefore, any return
investors in our common stock may have will be in the form of appreciation, if
any, in the market value of their shares of common stock.




Our
common stock may be subject to “penny stock” rules of the Securities and
Exchange Commission, which may make it more difficult for stockholders to sell
our common stock.




Under the
rules of the Securities and Exchange Commission, if the price of our securities
is below $5.00 per share and our securities are not listed on the Nasdaq
Capital Market or another national securities exchange, our securities will come
within the definition of a “penny stock.” In that case, our securities may
become subject to the “penny stock” rules and regulations. Broker-dealers who
sell penny stocks to certain types of investors are required to comply with the
Commission's regulations concerning the transfer of penny stock. These
regulations require broker-dealers to:




•
            Make a suitability determination
      prior to selling penny stock to the
  purchaser;


•
            Receive the purchaser's written
      consent to the transaction;
and


•
            Provide certain written
      disclosures to the
purchaser.


17





These
requirements may restrict the ability of broker/dealers to sell our securities,
and may affect the ability to resell our securities.




Ifwefailtomaintainaneffectivesystemofinternalcontrol,wemaynotbeabletoaccuratelyreportourfinancialresultsorpreventfraud.




We are
subject to reporting obligations under the U.S. securities laws. The SEC, as
required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules
requiring every public company to include a management report on such company’s
internal controls over financial reporting in its annual report, which contains
management’s assessment of the effectiveness of our internal controls over
financial reporting.  Our reporting obligations as a public company
will place a significant strain on our management, operational and financial
resources and systems for the foreseeable future. Effective internal controls,
particularly those related to revenue recognition, are necessary for us to
produce reliable financial reports and are important to help prevent fraud. As a
result, our failure to achieve and maintain effective internal controls over
financial reporting could result in the loss of investor confidence in the
reliability of our financial statements, which in turn could harm our business
and negatively impact the trading price of our stock. We are in the process of
implementing and monitoring our internal control procedures throughout the
Company and improving the areas of weakness.




Our
management identified  material weaknesses in internal control during
its assessment of internal controls over financial reporting as of December 31,
2009.  We lack an effective and efficient period end close the books
process to timely prepare for audits and financial reporting deadlines.
Management determined that we did not fully implement our transition to United
States Generally Accepted Accounting Principles (“US GAAP”) which are different
from the accounting principles used in Vietnam.  As a result, we were
required to record material adjustments to the December 31, 2009 and 2008
financial statements to bring them into compliance.  In an effort to
remediate the identified material weakness and to further enhance our internal
controls, we are in the process of identifying and retaining a consultant who
can work with our Vietnamese accounting team to indentify US GAAP related issues
and help evaluate and address such issues before they present problems in
reporting in the United States.




If
we fail to remain current in our reporting requirements, our securities could be
removed from the NASDAQ Capital Market, which would limit the ability of
broker-dealers to sell our securities and the ability of stockholders to sell
their securities in the secondary market.




Companies
trading on the NASDAQ Capital Market must be reporting issuers under Section 12
of the Exchange Act, and must be current in their reports under Section 13, in
order to maintain price quotation privileges on the NASDAQ Capital Market. If we
fail to remain current on our reporting requirements, we could be removed from
the NASDAQ Capital Market. As a result, the market liquidity for our securities
could be severely adversely affected by limiting the ability of broker-dealers
to sell our securities and the ability of stockholders to sell their securities
in the secondary market.




We
may need additional capital, and the sale of additional shares or other equity
securities could result in additional dilution to our stockholders.




We
believe that our current cash and cash equivalents, anticipated cash flow from
operations and the net proceeds from this financing will be sufficient to meet
our anticipated cash needs for the foreseeable future. We may, however, require
additional cash resources due to changed business conditions or other future
developments, including any investments or acquisitions we may decide to pursue.
If our resources are insufficient to satisfy our cash requirements, we may seek
to sell additional equity or debt securities or obtain a credit facility. The
sale of additional equity securities could result in additional dilution to our
stockholders. The incurrence of indebtedness would result in increased debt
service obligations and could result in operating and financing covenants that
would restrict our operations. We cannot assure you that financing will be
available in amounts or on terms acceptable to us, if at all.




The
implementation of our stock-based incentive plan may dilute your percentage
ownership interest and may also result in downward pressure on the price of our
stock.




Our Board
has adopted a stock-based incentive plan, which was approved at a special
shareholders’ meeting on April 27, 2009.  Under the incentive plan, we
can grant 1,250,000 shares to our officers, directors, employees and
consultants.  Shareholders would experience a dilution in ownership
interest, assuming the maximum issuance of 1,250,000 shares from stock options
or awards of restricted stock under the plan.  In addition, the
existence of a significant amount of stock and stock options that would be
issuable upon the adoption and approval of our stock-based incentive plan may be
perceived by the market as having a dilutive effect, which could lead to a
decrease in the price of our common stock.


18


Risks Related to Doing
Business in Vietnam
  Adverse changes
in political and economic policies of the Vietnamese government could have a
material adverse effect on the overall economic growth of Vietnam, which could
reduce the demand for our products and materially and adversely affect our
competitive position.
  Our
business, financial condition, results of operations and prospects are affected
significantly by economic, political and legal developments in Vietnam. The
Vietnamese economy differs from the economies of most developed countries in
many respects, including:
  •     the amount of government
involvement;
 •     the level of
development;
 •     the growth rate;
 •     the control of foreign
exchange; and
 •     the allocation of
resources.
 
 While the
Vietnamese economy has grown significantly in the past 20 years, the growth
has been uneven, both geographically and among various sectors of the economy.
The Vietnam government has implemented various measures to encourage
economic growth and guide the allocation of resources. Some of these measures
benefit the overall Vietnamese economy, but may also have a negative effect on
us. For example, our financial condition and results of operations may be
adversely affected by Vietnamese government control over capital investments or
changes in tax regulations that are applicable to us.
  The
Vietnamese economy has been transitioning from a planned economy to a more
market-oriented economy. Although in recent years the Vietnamese government
has implemented measures emphasizing the utilization of market forces for
economic reform, the reduction of state ownership of productive assets and the
establishment of sound corporate governance in business enterprises, a
substantial portion of the productive assets in Vietnam is still owned by the
Vietnam government. The continued control of these assets and other aspects of
the national economy by the Vietnamese government could materially and
adversely affect our business. The Vietnam government also exercises
significant control over Vietnamese economic growth through the allocation of
resources, controlling payment of foreign currency-denominated obligations,
setting monetary policy and providing preferential treatment to particular
industries or companies. Efforts by the Vietnam government to slow the pace
of growth of the Vietnamese economy could result in decreased capital
expenditure by the government, which in turn could reduce demand for our
services.
  Any
adverse change in the economic conditions or government policies in Vietnam
could have a material adverse effect on the overall economic growth and the
level of energy and infrastructure investments and expenditures in Vietnam,
which in turn could lead to a reduction in demand for our products and
consequently have a material adverse effect on our businesses.
  Restrictions on
currency exchange may limit our ability to receive and use our revenues
effectively.
  All of
our revenues and most of our expenses are denominated in the Vietnamese Dong. If
our revenues denominated in the Vietnamese Dong increase or expenses denominated
in Vietnamese Dong decrease in the future, we may need to convert a portion of
our revenues into other currencies to meet our foreign currency obligations,
including, among others, payment of dividends declared, if any, in respect of
our ordinary shares.
  19
  Our
operations and assets in Vietnam are subject to significant political and
economic uncertainties.
  Government
policies are subject to rapid change and the Vietnam government may adopt
policies which have the effect of hindering private economic activity and
greater economic decentralization. There is no assurance that the Vietnam
government will not significantly alter its policies from time to time without
notice in a manner with reduces or eliminates any benefits from its present
policies of economic reform. In addition, a substantial portion of productive
assets in Vietnam remains government-owned. For instance, all lands are state
owned and leased to business entities or individuals through governmental
granting of state-owned land use rights. The granting process is typically based
on the government policies at the time of granting, which could be lengthy and
complex. This process may adversely affect our business. The Vietnam government
also exercises significant control over Vietnam’s economic growth through the
allocation of resources, controlling payment of foreign currency and providing
preferential treatment to particular industries or companies. Uncertainties may
arise with changing of governmental policies and measures. In addition, changes
in laws and regulations, or their interpretation, or the imposition of
confiscatory taxation, restrictions on currency conversion, imports and sources
of supply, devaluations of currency, the nationalization or other expropriation
of private enterprises, as well as adverse changes in the political, economic or
social conditions in Vietnam, could have a material adverse effect on our
business, results of operations and financial condition.
  A
downturn in the economy of Vietnam may slow our growth and
profitability.
  The
growth of the Vietnamese economy has been uneven across geographic regions and
economic sectors. There can be no assurance that growth of the Vietnamese
economy will be steady or that any downturn will not have a negative effect on
our business.
  It will be
extremely difficult to acquire jurisdiction and enforce liabilities against our
officers, directors and assets based in Vietnam.
  Substantially
all of our assets are located in Vietnam and the majority of our officers and
present directors reside outside of the United States.  As a result, it may
not be possible for United States investors to enforce their legal rights, to
effect service of process upon our directors or officers or to enforce judgments
of United States courts predicated upon civil liabilities and criminal penalties
of our directors and officers under Federal securities laws. Moreover, we have
been advised that Vietnam does not have treaties providing for the reciprocal
recognition and enforcement of judgments of courts with the United States.
Further, it is unclear if extradition treaties now in effect between the United
States and Vietnam would permit effective enforcement of criminal penalties of
the Federal securities laws.
 
 ITEM
1B.     UNRESOLVED STAFF COMMENTS.
 
 Not
applicable
 
 ITEM
2.       PROPERTIES
  Our
principal executive offices are located at 17011 Beach Blvd., Suite 1230,
Huntington Beach, CA 92647. These offices consist of approximately 200 square
feet leased on a month to month basis included in $2,000 per month of management
fees. These offices are made available to us under the terms of a Management
Services Agreement dated May 15, 2006, with PHI Group, Inc. Other services
provided by Providential under the terms of this agreement include secretarial
and receptionist services, office and computer equipment, and bookkeeping for
the company’s U.S. operations. The agreement has a terms of two years that is
automatically renewable for one-year periods, unless either party notifies the
other of its desire to terminate the agreement at least 60 days prior to the end
of the agreement, or any renewal thereto.
  Cavico's
subsidiary, Cavico Vietnam, maintains its corporate headquarters in Hanoi,
Vietnam, where it leases approximately 10,230 square feet of office space, and
in other cities and townships throughout the country, where additional
operations are conducted, equipment is maintained and stored, and research
and/or development is conducted. Combined monthly lease payments for these
locations amount to approximately $41,400.
  We have a
long term land lease commitment for a period of 50 years with respect to 14,960
square feet of land in Hanoi. We  intend to build an office building
of 27 floors with a total of 280,000 square feet available to us and our
subsidiaries. We intend to rent some of the space to commercial
tenants.
  20
  We have a
long term land handed-over (70 years as per the current land law) in Son La
consisting of an area of 160 hectares that we intend to convert into a new urban
area, including office buildings, commercial centers, super markets,
condominiums and apartment buildings. Vietnam does not recognize land ownership.
Rather, parcels of land are leased from and land use rights are granted by the
Government. In general, land use rights may be exercised by the user in
accordance with the purpose for which the land was designated as specified in
the certificate of land use, and includes the right to develop the land. Land
use rights certificate issued by the Government to the user specify the land is
a) land lease to the user or b) land hand-over to user. Land use rights may be
assigned, lease, sub-leased, bequeathed and mortgaged. Grantees of land use
rights are also entitled to compensation in the event the State recovers the
land prematurely.  Such compensation consists of either money having
the same value as the land taken by the state prematurely or another land use
grant for similar property.
  The Son
La parcel of land was granted to us in payment for its development of the Chieng
Ngan 400 hectare urban area in Son La. The services provided include planning
and building out of the local infrastructure. Provided we exercise the land use
rights respecting this area in accordance with the government approved master
plan, there are no restrictions on our land use rights. To date, we have not
generated any revenues from this project.
  We own
additional offices and dormitories totaling 232,878 square feet and workshops
totaling 311,917 square feet at construction sites owned by the us and our
subsidiaries. These properties were built us on sites recorded as our property
for use for a period of three to ten years depending on the life of the
construction contracts/projects. Upon completion of the construction contracts,
we may relinquish our right to the property or sell the properties to the
project owner/local entities.
  The
following table contains a summary of the Company’s properties owned and leased
on a long term basis by its subsidiaries in Vietnam in square feet.
  Name of company
                                                            
                                                            Long-term
                                                              Land Leased
                                                            
                                                            Office
                                                              Lease
                                                              in Hanoi
                                                            
                                                            Offices Built
                                                              at Sites
                                                            
                                                            Workshops Built
                                                              at Sites
                                                            
                                                            LocationCavico
      Vietnam CompanyLimited
                                                            
                                                            
                                                            
                                                            
                                                            10,230
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            Song
      Da Building,Pham Hung, My Dinh, Ha NoiCavico
      Trading Joint Stock Company
                                                            
                                                            
                                                            
                                                            
                                                            1,507
                                                            
                                                            
                                                            
                                                            
                                                            8,611
                                                            
                                                            CT3.2
      Building, Me Tri Ha, Ha NoiCavico
      Bridge & Underground Construction Joint Stock Company
                                                            
                                                            
                                                            
                                                            
                                                            5,683
                                                            
                                                            
                                                            82,688
                                                            
                                                            76,284
                                                            
                                                            CT4
      Building, My Dinh, Ha NoiCavico
      Vietnam Tower Joint Stock Company
                                                            
                                                            
                                                            14,960
                                                            
                                                            926
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            CHP
      Building, Me Tri Ha,Tu Liem, Ha NoiChieng
      Ngan Urban Area
                                                            
                                                            
                                                            17,222,257
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            Chieng
      Ngan,Thi xa Son La, Son LaCavico
      Energy Construction Joint Stock Company
                                                            
                                                            
                                                            
                                                            
                                                            2,662
                                                            
                                                            
                                                            28,255
                                                            
                                                            96,821
                                                            
                                                            Song
      Da Building,Pham Hung, My Dinh,Ha NoiCavico
      Transportation Joint Stock Company
                                                            
                                                            
                                                            
                                                            
                                                            2,883
                                                            
                                                            
                                                            12,917
                                                            
                                                            8,611
                                                            
                                                            Song
      Da Building,Pham Hung, My Dinh,Ha NoiCavico
      Infrastructure Investment and Construction Joint Stock
    Company
                                                            
                                                            
                                                            
                                                            
                                                            3,143
                                                            
                                                            
                                                            15,446
                                                            
                                                            8,073
                                                            
                                                            Song
      Da Building,Pham Hung, My Dinh,Ha NoiCavico
      Hydropower Construction  Joint Stock Company
                                                            
                                                            
                                                            
                                                            
                                                            2,085
                                                            
                                                            
                                                            11,474
                                                            
                                                            26,361
                                                            
                                                            Song
      Da Building,Pham Hung, My Dinh,Ha NoiCavico
      Power and Resource Joint Stock Company
                                                            
                                                            
                                                            
                                                            
                                                            2,852
                                                            
                                                            
                                                            46,694
                                                            
                                                            6,103
                                                            
                                                            Song
      Da Building,Pham Hung, My Dinh,Ha NoiCavico
      Industry & Tech Service Joint Stock Company
                                                            
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            
                                                            23,681
                                                            
                                                            My
      Dinh 2 Urban Zone, Tu Liem, Ha NoiCavico
      Manpower Joint Stock Company
                                                            
                                                            
                                                            
                                                            
                                                            10,979
                                                            
                                                            
                                                            31,215
                                                            
                                                            53,820
                                                            
                                                            CT4
      Building, My Dinh, Ha NoiCavico
      Stone and Mineral Joint Stock Company
                                                            
                                                            
                                                            
                                                            
                                                            1,851
                                                            
                                                            
                                                            4,187
                                                            
                                                            3,552
                                                            
                                                            CT3.1
      Building, Me Tri Ha, Ha NoiLuong
      Son International Tourist Investment Joint Stock Company
                                                            
                                                            
                                                            
                                                            
                                                            544
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            Song
      Da Building,Pham Hung, My Dinh,Ha NoiCavico
      Land Investment & Development JSC
                                                            
                                                            
                                                            
                                                            
                                                            1,593
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            Song
      Da Building,Pham Hung, My Dinh,Ha NoiTotal
                                                            
                                                            
                                                            17,237,217
                                                            
                                                            46,938
                                                            
                                                            
                                                            232,876
                                                            
                                                            311,917
  21
  ITEM
3.       LEGAL PROCEEDINGS
  We are
party to certain legal actions arising out of the normal course of business. In
management’s opinion, none of these actions will have a material effect on our
operations, financial condition or liquidity. No form of proceedings has been
brought, instigated or is known to be contemplated against us by any
governmental agency.
 
 ITEM
4.       RESERVED
  22
 
 PART II
  ITEM
5.       MARKET FOR REGISTRANT’S COMMON
EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
 
 Our common stock was first
quoted on the OTC Bulletin Board in April 2008 under the symbol “CVIC.OB.” Our
symbol was changed to “CAVO” on August 19, 2009 when 40 for 1 reverse stock
split became effective. The prices, as presented below adjusted to
reflect the 40-for-one reverse stock split, represent the  highest and
lowest intra-day prices for our common stock as quoted on the OTC Bulletin Board
through September 17, 2009 and high and low sales prices on the NASDAQ Capital
Market thereafter. Such over-the-counter market quotations may reflect
inter-dealer prices, without markup, markdown or commissions and may not
necessarily represent actual transactions. Our common stock was approved for
listing on the NASDAQ Capital Market under the symbol “CAVO” and commenced
trading on such exchange on September 18, 2009.
  High
                        
                        
                        LowFirst
      Quarter 2008
                        
                        $
                        75.20
                        
                        
                        $
                        21.20Second
      Quarter 2008
                        
                        $
                        70.00
                        
                        
                        $
                        8.40Third
      Quarter 2008
                        
                        $
                        11.60
                        
                        
                        $
                        6.00Fourth
      Quarter 2008
                        
                        $
                        6.80
                        
                        
                        $
                        2.20First
      Quarter 2009
                        
                        $
                        5.20
                        
                        
                        $
                        3.60Second
      Quarter 2009
                        
                        $
                        7.40
                        
                        
                        $
                        4.00Third
      Quarter 2009
                        
                        $
                        12.99
                        
                        
                        $
                        4.50Fourth
      Quarter 2009
                        
                        $
                        9.24
                        
                        
                        $
                        4.24First
      Quarter 2010
                        
                        $
                        4.99
                        
                        
                        $
                        3.96
  Number
of Stockholders
  As of
December 31, 2009, there were approximately 900 holders of record of our common
stock.
  Dividend
Policy
  Holders
of our Common Stock are entitled to receive dividends if and when declared by
our Board of Directors out of funds legally available for distribution. Any such
dividends may be paid in cash, property or shares of our common
stock.
  We have
has not paid any dividends since its inception, and it is not likely that any
dividends on its Common Stock will be declared in the foreseeable future. Any
dividends will be subject to the discretion of our Board of Directors, and will
depend upon, among other things, our operating and financial condition and our
capital requirements and general business conditions.
  Securities
Authorized for Issuance under Equity Compensation Plans
  In March
2009, the Board approved the Cavico Corp. Stock Award and Incentive Plan which
was subsequently approved by at a special meeting of shareholders on April 27,
2009.  The purpose of the Cavico Corp. Stock Award and Incentive Plan
is to give us a competitive advantage in attracting, retaining, and motivating
officers, employees, directors, and consultants and to provide us with an
incentive plan that gives officers, employees, directors, and consultants
financial incentives directly linked to shareholder value.
  The
maximum number of shares that may be issued pursuant to incentive stock options
granted under the plan is 1,250,000.  The maximum number of shares of our
common stock that may be issued per individual pursuant to awards granted under
the Cavico Stock Award and Incentive Plan is 125,000.
  As of the
date hereof, there are no awards granted under the Cavico Stock Award and
Incentive Plan.
  23
  ITEM
6.       SELECTED FINANCIAL DATA
 
 Years Ended December 31,2009 (2)
                                    
                                    
                                    2008 (1)Net
      sales
                                    
                                    $
                                    61,090,722
                                    
                                    
                                    $
                                    51,936,936Income
      (loss) from operations
                                    
                                    
                                    (1,564,796
                                    )
                                    
                                    
                                    961,872Net
      other income (expense)
                                    
                                    
                                    (3,218,461
                                    )
                                    
                                    
                                    (1,938,893
                                    )Net
      income (loss )
                                    
                                    
                                    (4,761,994
                                    )
                                    
                                    
                                    631,816Net
      income ( loss ) per share
                                    
                                    
                                    (1.56
                                    )
                                    
                                    
                                    0.21Total
      assets
                                    
                                    $
                                    115,864,982
                                    
                                    
                                    $
                                    99,500,890Total
      liabilities
                                    
                                    $
                                    106,609,682
                                    
                                    
                                    $
                                    86,540,479
 
 (1)
              During the year 2008, we added
      Cavico Tower, Cavico ITS, Cavico Manpower, Cavico Stone & Mineral,
      Cavico PHI, Cavico Luong Son and Cavico
  Land.
 (2)
              During the year 2009, we added
      Cavico Son La.
 
 ITEM
7.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Forward-Looking
Statements
 
 The
information in this report contains forward-looking statements. All statements
other than statements of historical fact made in report are forward looking. In
particular, the statements herein regarding industry prospects and future
results of operations or financial position are forward-looking statements.
These forward-looking statements can be identified by the use of words such as
“believes,” “estimates,” “could,” “possibly,” “probably,” anticipates,”
“projects,” “expects,” “may,” “will,” or “should” or other variations or similar
words. No assurances can be given that the future results anticipated by the
forward-looking statements will be achieved. Forward-looking statements reflect
management’s current expectations and are inherently uncertain. Our actual
results may differ significantly from management’s expectations.
 
 The
following discussion and analysis should be read in conjunction with our
financial statements, included herewith. This discussion should not be construed
to imply that the results discussed herein will necessarily continue into the
future, or that any conclusion reached herein will necessarily be indicative of
actual operating results in the future. Such discussion represents only the best
present assessment of our management.
 
 Background
  Cavico
Corp. (the “Company,” “Cavico” or “we”) was incorporated in Delaware on
September 13, 2004 under the name Laminaire Corp. On November 9, 2004, the name
of the Company was changed to Agent 155 Media Group, Inc. On May 2, 2006, the
Company’s name was changed to Cavico Corp.
  During
2007 and 2006, as described below, we acquired Cavico Vietnam Joint Stock
Company, a corporation organized under the laws of Vietnam (“CVJSC”) as our
wholly owned subsidiary. As a result of legal restrictions on the foreign
ownership of Vietnamese entities imposed by the Vietnamese government, the
acquisition of CVJSC occurred in multiple steps, as follows:
  ·
                On April 18, 2006, we entered
      into an asset purchase agreement with CVJSC. Under the terms of the
      agreement, Cavico purchased all of the assets of CVJSC  in
      consideration for the issuance to CVJSC of 1,975,000 shares of our common
      stock. CVJSC subsequently transferred 1,501,555 of these shares of our
      common stock to the former shareholders of CVJSC in return for their
      shares of CVJSC stock. An additional 473,445 shares of our common
      stock were deposited into a CVJSC bonus plan for that entity’s management,
      of which 123,445 shares were distributed to CVJSC’s management in
      2006.
  ·
                Following our purchase of the
      CVJSC assets, and pending the grant of the requisite approval of the
      acquisition of CVJSC by a Vietnamese government agency as required under
      Vietnamese law, CVJSC continued to use the assets subject to our control.
      Government approval of the acquisition of CVJSC was granted in January
      2007. Following the grant of this approval and our subsequent acquisition
      of CVJSC to become our wholly-owned subsidiary, all assets previously
      purchased from CVJSC by the Company in April 2006 were transferred back to
      CVJSC. Also, at that time, CVJSC changed its name to Cavico Vietnam
      Company Limited.
  24
 
 The
transaction was accounted for as a reverse acquisition under the purchase method
of accounting since the shareholders of Cavico Vietnam Company Limited obtained
control of the consolidated entity. Accordingly, the merger of the two companies
is recorded as a recapitalization of Agent 155 Media Group, Inc., with Cavico
Vietnam Company Limited being treated as the continuing entity. The historical
financial statements to be presented are those of Cavico Vietnam Company
Limited, our wholly-owned subsidiary.
 
 Critical
Accounting Policies
 
 Principles
of Consolidation
 
 The
consolidated financial statements include the accounts of the Company, its
wholly owned subsidiaries, majority owned subsidiaries and entities in which the
Company has less than fifty percent ownership that are variable interest
entities in which Cavico Vietnam is the primary beneficiary. Per GAAP, the
Company has majority ownership in Cavico Energy JSC, Cavico Tower JSC, Cavico
Manpower JSC and Cavico Stone and Mineral JSC with inclusion of ownership by
related parties and will absorb more than 50% of expected losses and residual
returns from all of these five less than fifty percent owned entities. The
Company has the power to control the majority of the voting interest through its
ownership and agreements with other stockholders.   The Company
exercises significant control over all of its consolidated entities though
shared management, guarantees of indebtedness, inter-company credit lines,
shared use of assets and control of major contracts. Some of these
consolidated entities were able to raise working capital by selling the shares
to independent third parties without affecting the benefits the Company
received from these entities.
 The
assets in the consolidated financial statements are increased by $23,688,887 or
26% from $92,176,095 to $115,864,982, liabilities are increased by $19,071,976,
or by 22% from $87,537,706 to $106,609,682, total revenues are increased by
$11,254,156 or 23% from $49,836,566 to $61,090,722 and the net loss attributable
to the Company was increased by $103,831 or by 2% from $4,915,106  to
$5,018,937 by the entities in which the Company has less than fifty percent
ownership shares Net loss before minority interest  generated from the
entities in which the Company has less than fifty percent ownership shares was
6% of total net loss before minority interest for the year ended December 31,
2009.
 
 The
consolidated financial statements include the accounts of the parent company,
Cavico Corp., and its following subsidiaries:
  % of OwnershipSubsidiary
                              
                              12/31/09
                              
                              
                              12/31/08Cavico
      Vietnam Company Limited
                              
                              
                              100
                              %
                              
                              
                              100
                              %Cavico
      Bridge and Underground Construction JSC
                              
                              
                              66
                              %
                              
                              
                              66
                              %Cavico
      Trading JSC
                              
                              
                              63
                              %
                              
                              
                              63
                              %Cavico
      Construction and Infrastructure Investment JSC
                              
                              
                              69
                              %
                              
                              
                              69
                              %Cavico
      Power and Resource JSC
                              
                              
                              76
                              %
                              
                              
                              76
                              %Cavico
      Transport JSC
                              
                              
                              69
                              %
                              
                              
                              74
                              %Cavico
      Hydropower Construction JSC
                              
                              
                              72
                              %
                              
                              
                              72
                              %Cavico
      Energy Construction JSC
                              
                              
                              38
                              %
                              
                              
                              38
                              %Cavico
      Tower JSC
                              
                              
                              33
                              %
                              
                              
                              34
                              %Cavico
      Industry and Technical Service JSC
                              
                              
                              62
                              %
                              
                              
                              65
                              %Cavico
      Manpower JSC
                              
                              
                              40
                              %
                              
                              
                              30
                              %Cavico
      Stone and Mineral JSC
                              
                              
                              45
                              %
                              
                              
                              36
                              %Cavico
      PHI Cement JSC
                              
                              
                              81
                              %
                              
                              
                              81
                              %Cavico
      Luong Son JSC
                              
                              
                              92
                              %
                              
                              
                              91
                              %Cavico
      Land JSC
                              
                              
                              15
                              %
                              
                              
                              13
                              %Cavico
      Son La JSC
                              
                              
                              100
                              %
                              
                              
                              -
 
 Cavico
Vietnam Company has a control in the management and decision making of all these
subsidiaries.  All significant intercompany accounts and transactions
have been eliminated.
  Cavico
Mining and Construction JSC
  Cavico
Vietnam Mining and Construction Joint Stock Company formerly known as Cavico
Vietnam Mining and Construction Limited, was established on March 26, 2002 with
principal activities in mining construction and civil construction, especially
in connection with mining and dam construction, equity investments in mines,
power supply plants and land development projects. On June 13,
2006,  Cavico Vietnam Mining and Construction Company Limited was
changed to joint stock company following Business registration Certificate
issued by Hanoi Department of Planning and Investment. The Company’s share
capital as stated in its Business Registration Certificate is VND
80,610,060,000(approximately $4.5 million).Currently,
Cavico Mining shares are traded over the Hochiminh City Stock
Exchange.
  25
 
 We
reduced our ownership in Cavico Mining to 50.16% in 2006. In 2008, our
percentage of ownership was reduced to 25.55% with total equity amount of
$1,315,704 from 39.13% at December 31, 2007 due to additional sale of
ownership.
 
 Our
employees comprise a majority of Cavico Mining's Board of Directors and we can
control the vote of Cavico Mining's Board of Directors. All major contracts were
either provided by the Company or are directly controlled by the Company as the
prime contractor. The Company obtained the contracts by utilizing its market
advantages such as its well-known trademarks, positive track record and
favorable relationships with its customers and suppliers. The Company obtained
the contracts and, due to backlog and planning considerations, subcontracted the
work to Cavico Mining or negotiated with its customers to enter into contracts
directly with Cavico Mining. Cavico Mining's operations are interwoven into the
operations of the Company and its subsidiaries with significant services offered
to Cavico Mining by the Company and its subsidiaries.
 
 During
the review of the Company’s registration filing by SEC, the consolidation for
the Company’s subsidiaries with less than 50% ownership was evaluated under ASC
Topic 810. The Company did not meet the criteria to be a primary beneficiary of
Cavico Mining under ASC Topic 810. Therefore, the financial statements have been
stated to exclude Cavico Mining from consolidation and account for the
investment in Cavico Mining by the equity method.
 
 On
December 11, 2009, Cavico Corp., Cavico Vietnam and Cavico Mining and
Construction JCS (“Cavico Mining”) entered into a Stock Purchase Agreement,
pursuant to which the Company and its subsidiaries agreed to purchase from
Cavico Mining a total of 4,000,000 ordinary shares of Cavico Mining at
Vietnamese Dong 16,894 per share (approximately $0.94 per share based on current
exchange rates) in exchange for debt owed to the Company and its subsidiaries by
Cavico Mining. At the conclusion of transactions contemplated by the Stock
Purchase Agreement, we will own 50.2% of the total issued and outstanding
ordinary shares of Cavico Mining. The purpose of the acquisition of an
additional 4,000,000 shares of Cavico Mining to own over 50% of Cavico Mining’s
common stock is to enable us to include Cavico Mining in our consolidated
financial statements on a going forward basis. On January 12, 2010, Cavico
Mining’s shareholders approved the proposal to purchase 4,000,000 of Cavico
Mining’s ordinary shares. Pursuant to the Stock Purchase Agreement, the purchase
of the Shares shall take place on the tenth business day following the
shareholder approval or on such later date as the parties involved agree in
writing. This Stock Purchase Agreement was consummated on February 11,
2010.
 
 Estimates
  The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Such estimates may be materially different from actual financial
results. Significant estimates include the recoverability of long-lived assets
and the collectability of accounts receivable. The Company’s consolidation of
the entities with less than 50% ownership, such as Cavico Energy, Cavico
Manpower, Cavico Tower, Cavico Land and Cavico Stone and Mineral was based on an
assumption that these entities are variable interest entities in which the
Company is the primary beneficiary and will absorb more than 50% of expected
losses and residual returns and has the ability to make economic decisions on
behalf of  the variable interest entities.
  Cash
and Cash Equivalents
  For
purposes of the statement of cash flows, we consider all cash and highly liquid
investments with initial maturities of three months or less to be cash
equivalents.
  Investment
in Marketable Securities
  Investments
with original maturities of less than 90 days are considered cash equivalents,
and all other investments are classified as short-term investments.
  Inventories
  Inventories
are stated at the weighted-average method. Market value for raw materials is
based on replacement cost and for work-in-process on net realizable
value.
  26
  Accounts
Receivable
  We grant
credit to customers within Vietnam and do not require collateral. Our ability to
collect receivables is affected by economic fluctuations in the geographic areas
and industries that we serve. Our main customers were project management units
established by Electricity of Vietnam, which accounts for 51% of all accounts
receivable. Reserves for uncollectable amounts, which management believes are
sufficient, are based on past experience and a specific analysis of the
accounts. As of December 31, 2009, we had a reserve for doubtful accounts of
$751,940.
  Property
and Equipment
  Property
and equipment, including renewals and betterments, are stated at cost. Assets
held under capital leases are recorded at lease inception at the lower of the
present value of the minimum lease payments or the fair market value of the
related assets. We follow the practice of capitalizing property and equipment
purchased over $600. The cost of ordinary maintenance and repairs is charged to
operations while renewals and replacements are capitalized. Depreciation and
amortization are computed on the straight-line method over the estimated useful
lives of the related assets, which range from two to twenty five
years.
  Long-Lived
Assets
  Our management assesses the recoverability of its long-lived assets by
determining whether the depreciation and amortization of long-lived assets over
their remaining lives can be recovered.  The amount of long-lived
asset impairment if any, is measured based on fair value and is charged to
operations in the period in which long lived assets impairment is determined by
management.
  Real
Estate Activities
  Cavico
Tower’s, one of our subsidiaries,  principal business activities
consist of civil and industrial construction; internal and external fitting out;
land leveling and surface improvement; building leasing; real estate business;
restaurants and supermarkets operation; real estate consulting; machine and
equipment leasing; materials, machinery and equipment trading for construction,
transport, hydropower; dealers for buying and selling goods, construction
materials trading. During the year 2009, our major activities included capital
expenditures related to building construction in the amount of
$1,066,299.
  Fair
Value of Financial Instruments
  The
carrying amount of cash, cash equivalents, investment securities, notes payable,
accounts receivable, accounts payable and accrued expenses are considered to be
representative of their respective fair values because of the short-term nature
of these financial instruments. The carrying amount of the notes payable and
long-term debt are reasonable estimates of fair value as the loans bear interest
based on market rates currently available for debt with similar
terms.
  Revenue
Recognition
  We
recognize revenues from construction projects based upon work that is
periodically certified as completed by our customers or which is virtually
complete. Production costs, including materials, labor and subcontractor costs
are allocated to revenue based upon the ratio of total costs incurred to date
compared to total work  to date.  Costs related to work
performed but not completed are included in work in progress. Customer-furnished
materials, labor, and equipment, and in certain cases subcontractor materials,
labor, and equipment are included in revenues and cost of revenue when
management believes that we are responsible for the acceptability of the project
by client. Contracts are not segmented between types of services such as
engineering and construction, and accordingly, gross margin is recognized under
construction services.
  We
recognized uncollectible work in process as a contract loss in the period it is
determined to be not collectible. Claims against customers are recognized as
revenue upon settlement. Revenues recognized in excess of amounts billed are
classified as current assets under work-in-progress. Amounts billed to clients
in excess of revenues recognized to date are classified as current liabilities
under advances from customers.
  We
recognize revenues from sale of finished goods at the time when goods are
delivered and accepted by the buyer, i.e. all significant risks and rewards
relating to the ownership of the goods have been passed to the
buyer.
  Other
Comprehensive Income
  We report
and display comprehensive income and its components in a full set of
general-purpose financial statements. The Company’s unrealized loss of $641,095
and $1,093,320 for the year ended December 31, 2009 and 2008, respectively
relate to the translation of financial statements from Vietnamese Dong to US
Dollars. The Company also recorded an unrealized gain of $2,420,224 and
unrealized loss of $6,352,628 on investments available for sale for the years
ended December 31, 2009, and 2008, respectively.
  27
 
 Results
of Operations
 
 Results
of Operations for the year ended December 31, 2009 compared to the year ended
December 31, 2008.
 
 Net
Sales
  We
generated $61,090,722 in net sales during the year ended December 31, 2009
compared to $51,936,936 during the year ended December 31, 2008, mostly from
construction projects. The Company’s net sales  from civil
construction increased by $5,074,288 or 11% to $52,575,960 for the year ending
December 31, 2009 from $47,501,672 for the year ending December 31,
2008.  This increase was due to net sales from several new projects
such as Ta Trach, Thern Hinbun, Dambri, Song Giang and Ngan Truoi projects as
the progress billings upon completion on these projects are made and ALuoi and
Algeri projects. The Company’s net sales from other operations (leasing
machinery and equipment, selling materials, steel fabrication) increased by
$4,079,498 or 92% to $8,514,762 for the year ending December 31, 2009 from
$4,435,264 for the year ending December 31, 2008. This was primarily due an
increase in demand of construction materials as Vietnam’s economy is
recovering.
  The
revenues, costs of goods sold and profit margins from our major projects from
civil construction except Algeri which is a service contract in the year ended
December 31, 2009 compared to the year ended December 31, 2008 are as
follows:
 
 Song Tranh
                    
                    
                    A Luoi
                    
                    
                    Dambri
                    
                    
                    Dong Nai 4
                    
                    
                    Algeri2009Revenue
                    
                    $
                    4,235,761
                    
                    
                    $
                    10,704,117
                    
                    
                    $
                    2,944,312
                    
                    
                    $
                    3,035,603
                    
                    
                    $
                    5,499,524Cost
      of goods sold
                    
                    
                    4,060,590
                    
                    
                    
                    8,659,942
                    
                    
                    
                    2,876,293
                    
                    
                    
                    2,439,291
                    
                    
                    
                    4,292,510Gross
      Profit
                    
                    
                    175,171
                    
                    
                    
                    2,044,175
                    
                    
                    
                    68,020
                    
                    
                    
                    596,312
                    
                    
                    
                    1,207,014Gross
      Profit %
                    
                    
                    4
                    %
                    
                    
                    19
                    %
                    
                    
                    2
                    %
                    
                    
                    20
                    %
                    
                    
                    22
                    %2008Revenue
                    
                    $
                    2,526,709
                    
                    
                    $
                    7,966,166
                    
                    
                    $
                    278,918
                    
                    
                    $
                    2,795,571
                    
                    
                    $
                    1,852,385Cost
      of goods sold
                    
                    
                    2,062,523
                    
                    
                    $
                    6,279,033
                    
                    
                    $
                    342,980
                    
                    
                    
                    2,346,072
                    
                    
                    
                    1,374,671Gross
      Profit
                    
                    
                    464,186
                    
                    
                    
                    1,687,133
                    
                    
                    
                    (64,061
                    )
                    
                    
                    449,500
                    
                    
                    
                    477,713Gross
      Profit %
                    
                    
                    18
                    %
                    
                    
                    21
                    %
                    
                    
                    (23
                    )%
                    
                    
                    16
                    %
                    
                    
                    26
                    %Contract
      Amount
                    
                    
                    11,727,953
                    
                    
                    
                    49,032,632
                    
                    
                    
                    30,921,808
                    
                    
                    
                    17,258,565
                    
                    
                    
                    14,469,530Contract
      period
                    
                    
                    2007-2010
                    
                    
                    
                    2007-2011
                    
                    
                    
                    2007-2010
                    
                    
                    
                    2005-2010
                    
                    
                    
                    2008-2011
  Comparisons
for Major Projects
 
 A
Luoi Tunnel
 
 The
revenues from the A Luoi Tunnel Project increased by $2,737,951 or 34% to
$10,704,117 for the year ended December 31, 2009 compared to the year 2008. The
cost of goods sold from A Luoi Tunnel project increased by $2,380,909 or 38% for
the year ended December 31, 2009 compared to 2008. The percentage of cost of
goods sold to sales for this project increased to 81% for the year ended
December 31, 2009 compared to 79% for the year 2008. The gross profit from A
Luoi Tunnel increased by $357,042 in the year ended December 31, 2009 or 21%
over the same period in 2008. The gross profit percentage for this project
decreased from 21% to 19%. The Company encountered 900 meters long of tunnel
excavation with poor geological conditions. The lower production caused
lower revenue and increased higher cost of goods sold rate per revenue. The
Company recognizes the revenue of the project based on the previous unit rate of
tunnel excavation while submitting to the project owner the new rate for
additional quantity of work related to the geological changes.
 
 Algeri
Project
 
 The
revenues from Algeri Project increased by $3,647,139 or 197% for the year ended
December 31, 2009 compared to the year 2008. The cost of goods sold from Algeri
project increased by $2,917,839 or 212% for the year ended December 31, 2009
compared to the year 2008. The percentage of cost of goods sold to sale for this
project was increased to 78% in 2009 compared to 74% in 2008. The gross profit
from Algeri project increased by $729,301 or 153% in the year ended December 31,
2009 compared to the year 2008. This increase in gross profit is due to an
increase in revenue in the year ended December 31, 2009 since this project
started in 2008. The gross profit percentage to sales for Algeri project
decreased from 26% to 22% in the year ended December 31, 2009 compared to the
year 2008.
  28
 
 Song
Tranh Project
 
 The
revenues from Song Tranh Project increased by $1,709,052 or 68% for the year
ended December 31, 2009 compared to the year 2008. The revenue for 2009 included
the revenue generated from tunnel concrete lining and as well as tunnel
excavation work compared to revenue from tunnel excavation in
2008.  The cost of goods sold for Song Tranh project increased by
$1,998,067 or 97% for the year ended December 31, 2009 compared to the year
2008. The percentage of cost of good sold to sale for this project was increased
to 96% in 2009 compared to 82% in 2008. This increase of the cost of goods sold
to sale in 2009 was caused by the extra volume of concrete lining needed on
an excavated tunnel, due to bad geological conditions, for which we
have not been compensated from the customer yet.  The gross
profit from Song Tranh project decreased by $289,015 or 62% in the year ended
December 31, 2009 compared to the year 2008. The gross profit percentage to
sales for Song Tranh project decreased from 18% to 4% in the year ended December
31, 2009 compared to the year 2008.
 
 Dong
Nai 4
 
 The
revenues from Dong Nai 4 Project increased by $240,032 or 9% for the year ended
December 31, 2009 compared to the year 2008. The cost of goods sold from Dong
Nai 4 project increased by $93,219 or 4% for the year ended December 31, 2009
compared to the year 2008. The percentage of cost of goods sold to sale for this
project was decreased to 80% for the year ended December 31, 2009 compared to
84% in 2008. The gross profit from Dong Nai 4 project was increased by $146,813
or 33% in the year ended December 31, 2009 compared to the year 2008. The gross
profit percentage to sales for Dong Nai 4 project increased from 16% to 20% in
the year ended December 31, 2009 compared amounts received to the year
2008. This increase in gross profit percentage to sales is due amounts received
 from the Customer.
 
 Dambri
 
 The
revenues from Dambri Project increased by $2,665,394 or 956% for the year ended
December 31, 2009 compared to the year 2008. The cost of goods sold from Dambri
project increased by $2,533,313 or 739% for the year ended December 31, 2009
compared to the year 2008. The percentage of cost of goods sold to sale for this
project was decreased to 98% in 2009 compared to 123% in 2008. The gross profit
from Dambri project increased by $132,081 to $68,020 in the year ended December
31, 2009 compared to $64,061 as a loss in the year 2008. This increase in gross
profit is due to an increase in revenue in the year ended December 31, 2009 as
the project progressed compared to a small operation as the project started in
2008. As a result, the gross profit percentage to sales for Dambri project also
increased from (23%) to 2% in the year ended December 31, 2009 compared to the
year 2008.
 
 Cost of
production
 
 Costs of
Goods sold were $55,303,582 and $44,402,887 for the year ended December 31, 2009
and 2008, respectively.  Cost of Goods sold includes capitalization of
interest expenses of $3,592,974 and $5,219,334 for the year ended December 31,
2009 and 2008, respectively.
 
 Cost of
Goods sold (without capitalization of interest expenses) increased by
$12,527,054 or 32% to $51,710,607 for the year ending December 31, 2009 from
$39,183,553 for the year ending December 31, 2008. Cost of Goods sold excluding
capitalization of interest expenses as a percentage of sales increases by 10% to
85% for the year ended December 31, 2009 from 75% of sales for the year ended
December 31, 2008.
 
 Company’s
cost of production from civil construction for the year ended December 31, 2009
was $47,871,074, of which as a percentage of sales increased by 6% to 91%,
compared to the year ended December 31, 2008. Company’s cost of production from
other operations (i.e. leasing machinery and equipment, selling steel
fabrication) for the year ended December 31, 2009 was $7,432,507, of which as a
percentage of sales decreased  by 2% to 87% for the year ended
December 31, 2009 from 89% for the year ended December 31, 2008. The increase of
cost of production from other operation as a percentage of sales was due to
decrease of demand in trading which result in smaller sales price increase
compared to cost increase.
  29
 
 Gross
Profit
 
 The gross
profit for the year ended December 31, 2009 was $5,787,140 or 9% of sales
compared to $7,534,049 or 15% of sales for the year ended December 31, 2008. The
decrease in gross profit was primarily due to lower rate of increase in sales by
$9,153,786 in comparison to an increase in cost of goods sold by
$10,900,695.
 
 The
decrease in gross profit was primarily from civil construction which decreased
by $2,345,011 from $7,049,897 to $4,704,886 . The gross profit percentage for
net sales in civil construction decreased to 9% in the year ended December 31,
2009 compared to 15% in 2008. These decreases in gross profit percentages
resulted from decreases in the gross profit percentages of our major projects as
explained above and completion of several projects which the costs of sales were
much higher than revenue recognized at the completion stage due to costs of
withdrawing machinery and completing engineering work. For those projects
competed in 2009, revenues in the year 2009 decreased compared to the last year
whereas the cost of goods sold of these projects increased significantly
compared to the same period last year. This caused the material decreases in
overall profit margin for in 2009 compared to 2008.The gross profit from
commercial activities increased by $598,103 to $1,082,255 in the year ended
December 31, 2009 compared to $484,152 in 2008, as a percentage to sale
increased from 11% in 2008 to 13% in 2009. This increase is mainly due to an
increase in demand of construction materials as Vietnam’s economy is
recovering.
  Operating
expenses
 
 The
company’s operating expenses in 2009 was $7,351,937 compared to $6,572,177 in
2008 with an increase of $779,760. The increase in operating expenses was mainly
resulted from increased in the size of our support facilities as we prepare for
the future growth of the Company and its subsidiaries, noted as
follows:
 
 •
                Rent expenses increased by
      $62,421 to $483,112 for the year ended December 31, 2009 from $420,691 for
      the year ended December 31,
2008.
 
 •
                Payroll expenses increased by
      $191,892 to $2,505,291 for the year ended December 31, 2009 from
      $2,313,399 for the year ended December 31,
  2008.
 
 •
                Other administration cost of
      other subsidiaries increased by $317,816 to $2,585,347 for the year ended
      December 31, 2009 from $2,267,531 for the year ended December
      31, 2008.
 
 •
                Administrative cost of corporate
      office (mainly audit fees, legal fees and consulting fees) increased by
      $115,544 to $1,394,493 for the year ended December 31, 2009 from
      $1,278,949 for the year ended December 31,
  2008.
 
 •
                Selling expenses were increased
      by $210,964 to $289,743 for the years ended December 31, 2009 from $78,779
      for the year ended December 31,
2008.
  The
Company also recorded a bad debt expense of $128,748 and $212,828 for the year
ended December 31, 2009 and 2008, respectively.
  Other Income
(expenses)
 
 The total
other expenses increased by $1,279,568 to $3,218,461 for the year ended December
31, 2009 from $1,938,893 for the year ended December 31, 2008. This increase in
other expense in 2009 is mainly due to another-than-temporary impairment losses
on  available-for-sale securities of $975,724 for the year ended
December 31, 2009 compared to none in 2008. The Company recognized losses on
available-for-sale securities for Habubank and PHI Group, Inc. (formerly,
providential Holdings Inc.) as their reduced values were determined as other
than temporary.  Other income also includes gain from disposal of
fixed assets of $160,395 for the year ended December 31, 2009 compared to
$44,345 in gain in 2008. Other income during the year ended December 31, 2009
was $304,194 compared to $45,258 in 2008. In addition, loss on foreign currency
exchange of $232,270 was recorded for the year ended December 31, 2009 compared
to $97,061 in the year 2008. This relates to re-measurement of debts in
different currencies. Loss from investment in Cavico Mining during the year
ended December 31, 2009 was $141,477 compared to an income of $130,131 for the
year 2008.
 
 Interest
expense excluding capitalized interest increased by $69,624 to $2,603,686 for
the year ended December 31, 2009 from $2,534,062 for the year ended December 31,
2008. The increase was mainly due to increase in the interest rate in
2009.
  The
Company’s income before interest, depreciation and amortization, income tax and
non-controlling interest for the years ended December 31, 2009 and 2008 was $
5,179,445 and $11,000,716, respectively. These amounts do not include other
income and expenses.
  30
  Net
Income
 
 The
Company had net loss of $4,761,994 for the year ended December 31, 2009,
compared to $631,816 net income for the year ended December 31, 2008. Included
in the net income and loss was the tax expenses of $447,295 in the year ended
December 31, 2009 compared to the tax benefit of $2,392,347 in 2008. The net
loss for the Company excluding net loss attributable to non-controlling interest
was $5,230,552 compared to net income of $1,415,326 for the year 2008. Other
factor of the significant decrease in net income for the year ended December 31,
2009 compared to 2008 was the reduction of the gross profit of $1,746,908. This
reduction of gross profit was caused by the higher costs of goods sold expenses
recorded for several projects completed during 2009, material write-off of
work-in-process due to uncertainty of future realization of revenue and
recognition of project loss on the projects for which the future expected
revenue was lower than the costs.
  The
effective rate in Vietnam was 25% and 28% of taxable profits for 2009 and 2008,
respectively.
  During
2008 Vietnamese government equivocated  its position on taxation for
gain on sale of securities. As a result, the tax charged in 2007 on the gain
from the Company’s securities trading activities was reversed during the year
ended December 31, 2008.   Subsequently, the Vietnamese government
reinstated the tax on marketable securities, retroactively effective to January
1, 2009.
 
 The net
loss per share for the year ended December 31, 2009 was $1.56 compared to $0.21
as income for the year period ended December 31, 2008.  The increase
in unrealized gains of $8,772,852 in investments available for sale resulted
from an unrealized gain of $2,420,224 in 2009 and an unrealized loss
of  $6,352,628 in 2008.  The cost and current fair value of
the marketable securities as of December 31, 2009 were $2,988,206 and
$2,711,912, respectively.  The majority of marketable securities are
invested in Vietnamese companies.
 
 Liquidity
and Capital Resources
 
 Our
working capital deficit as of December 31, 2009 increased to $(23,628,581)
compared to $(19,554,563) as of December 31, 2008 as current assets increased
less than the increase in current liabilities. The major
factors contributed to this decrease in working capital in 2009 compared to
2008 were a increase of $8,321,376 in current construction work in process
compared to an increase of $7,927,559 in current notes payable and an increase
of $7,520,401 in trade account payable. Generally in Vietnam, bank loans are
granted on a yearly basis and renewed each year. The Company has
$54,740,704  in maturing debts in 2010.
 
 As of
December 31, 2009, we had $2,391,316 in cash, current accounts receivable of
$15,809,989, an inventory of $4,114,075, a construction WIP of $25,881,123 and
net fixed assets of $28,249,396. Our current accounts receivable was increased
by $4,279,401 from the prior year end. Our accounts receivable increase was due
to an increase in sales from completed projects. Our current construction WIP
for the current year was increased by $8,321,376 from the prior year end. We
anticipate our accounts receivable and inventory will continue to increase in
2010 as we completed and added more new projects.
 
 We have
current receivables, long-term receivables and work in process with the
following characteristics:
  December 31, 2009
                    
                    
                    December 31, 2008Accounts
      receivable -trade- net
                    
                    $
                    15,809,989
                    
                    
                    $
                    11,530,588Receivable
      - other
                    
                    
                    10,550,284
                    
                    
                    
                    7,088,229Work
      in process
                    
                    
                    25,881,123
                    
                    
                    
                    17,559,747Receivables
      and advances from related parties
                    
                    
                    984,684
                    
                    
                    
                    1,048,854Long-term
      retention receivables
                    
                    
                    11,400,629
                    
                    
                    
                    14,042,107Long-term
      work in process
                    
                    
                    3,054,564
                    
                    
                    
                    3,579,799
 
 Accounts receivable - trade
are generated from civil construction projects as well as from our other
commercial activities. We receive payment on our accounts receivable for major
projects after two certificates are received.  The first certificate,
a “certificate of completed work,” is a certificate received from the customer
we perform the work and the work has passed the customer’s technical quality
examination.  The second certificate, a “certificate of payment,” is a
certificate that the customer issues to approve payment.  Depending on
the project, payment is made within 30 days to 105 days after receiving the
certificates.
  At
December 31, 2009, the balance of accounts receivable-trade that was outstanding
for more than six months was $4,769,787, $3,358,763 of this amount was from the
Buonkuop, Daksrong, Dakmi 4 and Buon tuasha projects.  $153,838 of the
balances from these projects was collected by March 31, 2010 and additional
$703,994 was collected on other accounts receivable accounts aged more than six
months.  The remaining balance in the accounts receivable –trade
outstanding for more than six months of $3,911,955 is expected to be paid by the
end of year.  Management believes reserves for uncollectable amounts,
which are provided based on past experience and a specific analysis of the
accounts, are sufficient. Although we expect to collect amounts due, actual
collections may differ from the estimated amounts. As of December 31, 2009, we
had a reserve for doubtful accounts of $751,940.  We do not have liens
or collateral rights on these projects but these projects have the support and
financial backing of the Government of Vietnam.
  31
  Receivable – other consists
of $1,364,426 of advances, $8,298,235 of prepayments to suppliers and $887,623
of other short-term receivables. These receivables are generated from civil
construction and mining construction projects as well as from our other
commercial activities. Advances include monies advanced for miscellaneous
expenses such as business travel costs, selling costs and material purchases. As
of December 31, 2009, the entire balance is expected to be collected or expensed
within the year. Advances and prepayments  to our supplies are for
works to be performed on our contracts. The execution of the work and the
approval by the necessary Vietnamese agencies can take up to a year. We expect
to collect all amounts due and this expectation is supported by past collection
history.
  Work in process and Long-term work in process
includes the costs of production such as materials, labor, overhead and interest
cost on projects not yet recognized as revenue.  The revenue is
recognized when the work is completed and the customer certifies
completion.  There are no contractual provisions that prevent our work
in process from being collected.  As of December 31, 2009, the balance
of work in process was $28,935,687 of which approximately $11,322,648 was over 6
month from various projects.  These amounts are billed or expected to
be billed as follows: billed and collected $1,965,948 by March 31, 2010,
expected to bill $6,674,228 by December 31, 2010.   The largest
work in process balances are for the Ban Ve Hydropower Project, the Buon Tua
Srah Hydropower Project, Song Tranh Hydropower project and A Luoi
Hydropower  project, which totals approximately
$12,329,160.  As of December 31, 2009, we had reserved $640,616
against work in process balances.
  Included
in the current work in process over six months old are (1) work completed but
the examined by consultant to grant a certificate  of completion for
payment (2)preparation and temporary facility work for whole project which is
included in the unit rate which will be paid gradually by every certificate of
payment to the end of the project (3)additional work performed based on the
instruction and agreement with the customer but waiting for the approval of the
payment rate from the customer.  Long-term work in process is
$3,054,564 as of December 31, 2009. The long-term work in process will be billed
and collected after the project owner certifies the work. We are not currently
aware of any factors that would cause the ultimate timing of collections to
change. We have determined that the reserves against work in process were
sufficient for both short term and long term work in process.
  Receivables and advances from
related parties include advances to management and employees include
miscellaneous expenses such as business travel costs, selling costs and material
purchases. Our policy is to receive expense reports for these amounts and move
them to the appropriate expense account. If an expense report is not turned in,
these advances can be deducted from the salary of the related individuals. These
loans were made with no interest, not secured and due on demand. We had loans
receivable in the amounts of $194,634 and advances of $790,049 as of December
31, 2009.
  Long term retention
receivable has a balance of $11,400,629 at December 31, 2009. We attempt
to shift our construction risks to our customers. We do, however, provide a
warranty period of two to three year after completion of the construction
contract. Long-term retention receivables are typically paid within two years
after the completion of a construction project.  The amounts
outstanding for more than two years have not been paid pursuant to the payment
terms of the Company’s contracts.  We expect to collect these amounts
within two years after the completion of the applicable construction contract.
Our customers generally keep the retention of 5 to 15 percent of the contract
amount until the warranty period expires. The largest long-term retention
receivable balances are for the Dai Ninh Hydropower Project, the Buon Kuop
Hydropower Project, ALuoi Hydropower Project and the Buon Tua Srah Hydropower
Project. All three projects are current in their payments and there are no known
disputes regarding the work performed to date. For example, our construction
contract for Buon Kuop hydro power was completed in October 2009. Our
accumulated revenue at Buon Kuop from June 2004 to June 2009 is approximately
$20 million. Since 5% of the revenue is held by as long-term retention, $1
million is held by the customer as long-term retention. This $1 million and any
other long-term retention balance associated with this project is expected
to be paid in June 2011. When paid, a portion of the long-term retention
receivable will be seven years old but will still be paid in accordance with the
contractual terms of the contract. We believe that the Buon Kuop long-term
retention receivable, along with our other long-term retention receivables will
be collected when due under each contract’s terms.  We have received
100% of the retention from the contracts completed upon the expiration of
warranty periods such as 2B Hai Van project or A Loid Road project.
  Current liabilities-Our total
current liabilities as of December 31, 2009 were $89,517,730 which was increased
by $21,607,748 from the prior year end. The current liabilities were represented
mainly accounts payable of $16,441,988, accrued expenses of $6,722,643, advances
from customers of $6,887,558, and short term loans, including loans from related
parties of $54,960,795. Advances from customers increased mainly due to Ta
Trach project for which we received approximately $2.8 million, Song Giang HP
project for which we received approximately $0.5 million, Thanh Ha project for
which we received approximately $0.4 million, Ngan Truoi project for which we
received approximately $1.8 million, HuaNa project for which we received
approximately $0.4 million during the year ended
December 31, 2009. Current Notes payable including loans from related parties
increased by $7,938,983 from the prior year end. This increase is mainly due to
an increase in financial needs for new projects such as A Luoi HP, Ta Trach Dam,
Song Giang HP, Dakmi 4 HP, Ngan Truoi Dam. At December 31, 2009, the Company's
current liabilities exceeded current assets by $23,628,581.
  32
  Construction loans-At
December 31, 2009, we had $60,115,212 in construction loans, of which
$54,740,704 are classified as short-term construction loans with annual interest
rates ranging from 10% to 17%. We obtain these short-term construction loans to
finance our civil construction and mining projects. Most of these loans are
unsecured except a few loan secured by equipment, but the bank controls the
disbursement of funds in the following manner. These construction loans are made
by the banks for a specific project.
 Disbursements
on these construction loans are designed to pay for expenses of a project as the
work progresses. Banks will typically only disburse funds under these
construction loans for equipment, supplies and other expenses for the specific
project. In most instances, the bank will allow us to pay only to the supplier
or subcontractor that the bank approves for payment. No funds are disbursed for
other corporate purposes. The amount of outstanding construction loans secured
by equipment and other assets, which are mostly major construction equipment, at
December 31, 2009 was approximately $21,000,000, 35% of total construction
loans.
  These
loans mature from January 2010 through September 2013. Each time we begin a
construction project, we obtain a loan from one of several banks to purchase
equipment supplies and mobilize our employees and materials to the
worksite.  As we complete a percentage of each construction project, our
customer certifies our work in process and every month, our customer
or its financing source, pays us the interim payment for our completed
work, less a retention percentage (which we will collect at the end of the
warranty period). When the payment is received, it is put into the deposit
account which was set up with the bank upon signing the construction loan and
from which we repay the bank for monthly interest and principal when
due. The remaining balance of this account will be used by the company
for expenses related to this contract or corporate purposes.
 When we need to pay to the suppliers or sub-contractors and other
expenditures related to the contract, we submit to the bank documents
such as supply contracts, subcontractor contract, invoices or demand letters.
Upon approval of our submission, the bank issues Indebtedness Certificate. After
this process, the bank transfers the funds to our bank account so that the
payments can be made to our suppliers or sub-contractors.
  Events
that may prevent us from obtaining additional funding from the banks include:
(i) use of presently borrowed funds borrowed for unauthorized purposes, (ii)
cash flows from the relevant construction contract being significantly lower
than estimated, and (iii) a material downturn in our overall financial
position.
  We
maintain lines of credit with various banks and as of December 31, 2009, the
outstanding balance was $33.6 million and available balances were $45.3 million
as of December 31, 2009. The banks do not have any financial covenants. Since
these lines of credits are linked to construction contracts, however, our
ability to draw down on these lines of credit is controlled by the
banks.
  It is the
general practice of Vietnamese banks to give short term loans for each
construction contract and make the loans renewable every year until the
construction contract completed. As a result, the loans are classified as
current liabilities. Our retention receivables and a portion of our work in
process, however, are classified as long-term assets. As a result, our working
capital deficit as of December 31, 2009 was $23,628,581. As of December 31,
2009, long-term retention receivables and long-term work in process totaled
$14,455,193.
  We expect
to renew these loans with the banks and repay the balances as we complete our
projects. During the year 2009, we made $73,634,129 of payments on our notes
payable. We also needed to draw down $82,185,846 from our notes payable to
finance our construction projects.
  Although
a substantial majority of our loans are not secured by our assets other than our
work in process and receivables, our banks decision not to renew these loans or
our failure to repay these loans could have important consequences including the
following:
  •
              it may limit our ability to
      borrow money or issue equity to finance our working capital, construction
      projects or capital projects or other
  purposes;
 •
              it may limit our flexibility in
      planning for, or reacting to, changes in our operations or
      business;
 •
              a substantial portion of our cash
      flow from operations could be dedicated to the repayment of our
      indebtedness and would not be available for other
      purposes;
 •
              there would be a material adverse
      effect on our business and financial condition if we were unable to
      service our indebtedness or obtain additional financing, as needed;
      and
 •
              It may result in the banks
      repossessing up to $21,000,000 of our equipment and other
      assets.
 
 Cash
flows
  The
Company used cash of $2,108,335 in operating activities for the year ended
December 31, 2009 compared to $3,229,173 from operating activities for the year
ended December 31, 2008. The major reasons are a decrease in advances from
customer of $3,494,487 in 2009 compared to $9,756,039 in 2008, an increase in
construction WIP of $8,676,361 in 2009 compared to $2,439,873 in 2008, an
increase in account payable and accrual expenses in the amount of $11,510,988
and a decrease of $1,421,419 during the year ended December 31, 2009 and 2008,
respectively and due to a decrease in account receivable and other current
assets of $7,714,909 in 2009 from $16,231,078 in 2008.
  33
  In
investing activities, we used net cash of $6,565,973 for the year ended December
31, 2009 to purchase property, equipment and investments in other entities. The
Company spent $7,111,171 for the purchase of fixed assets, which primarily
included vehicles, equipment, machinery and intangible assets. The Company also
received $819,721 in proceeds from disposal of fixed assets. Additionally, the
Company purchased investments in other entities during the December 31, 2009 in
the amount of $441,344 and received $166,821 from sale of
investments.  The Company used net cash of $12,213,120 for the year
ended December 31, 2008 in purchase of property, equipment and investments in
other entities. The Company spent $11,856,498 for the purchase of fixed assets,
which primary include for the purchase of vehicles, equipment, machinery and
intangible assets. The Company also received $363,128 in proceeds from disposal
of fixed assets. Also, the Company’s investments in other entities during the
year 2008 increased by $935,001 and proceeds from sales of investment were
$165,563.
  During
the year ended December 31, 2009, the Company generated cash flows of $8,201,058
from financing activities, which included $82,280,541 from loan proceeds and
repayments of loans in the amount of $73,704,963. The Company also received
$275,607 proceeds from additional investments by minority interests during the
year ended December 31, 2009. During the year ended December 31, 2008, the
Company generated cash flows of $17,228,642 from financing activities, which
included $300,000 from common shares issued, and $78,863,350 from loan proceeds
and repayments for loans of $63,388,539. The Company also received $1,891,800
proceeds from additional investments by minority interests during the year ended
December 31, 2008.
 
 The
Company generated net loss of $4,761,994 and net income of $631,816 for the
year ended December 31, 2009 and 2008, respectively.
 
 As of
December 31, 2009, the Company has approximately $273.5 million for contract
backlog. We intend to meet our liquidity requirements, including capital
expenditures related to the purchase of equipment, purchase of materials, and
the expansion of our business, through cash flow provided by operations and
funds raised through cash investments. We may also use short term loans bank
loans to meet our liquidity requirements. There is no assurance, however, that
without funds we will ultimately be able to carry out our business.
 
 Off-Balance
Sheet Arrangements
 
 The
Company has guaranteed a loan with line of credit for approximately $3.8 million
and $5.6 million for Cavico Mining, an equity investment entity, as of December
31, 2009 and December 31, 2008, respectively. The loan balances as of December
31, 2009 and December 31, 2008 were $3,337,129 and $2,128,859, respectively. The
Company also had a receivable from Cavico Mining for $7,070,665 and $3,826,533
as of December 31, 2009  and December 31, 2008, respectively and
payable due to Cavico Mining for $1,190,716 and $155,347 as of December 31,
2009  and December 31, 2008, respectively.
  ITEM
      7A.
              QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
 
 The
following discussion about Cavico Corp’s market risk involves forward-looking
statements. Actual results could differ materially from those projected in the
forward-looking statements.
  Currency
Fluctuations and Foreign Currency Risk
  Substantially
all of our operations are conducted in Vietnam.  All of our sales and
purchases are conducted in Vietnamese Dong, which is the official currency of
Vietnam.  As a result, the effect of the fluctuations of exchange
rates is considered minimal to our business operations.
  Substantially
all of our revenues and expenses are denominated in Dong.  However, we
use the United States dollar for financial reporting
purposes.   Exchange rate fluctuations may adversely affect the
value, in U.S. dollar terms, of our net assets and income derived from its
operations in Vietnam.
  Interest
Rate Risk
  We do not
have significant interest rate risk, as most of our debt obligations are
primarily short-term in nature, with fixed interest rates.
  Credit
Risk
  We have
not experienced significant credit risk, as our major customers are government
related and have good payment records.  Our receivables are monitored
regularly by our credit managers.
  Inflation
Risk
  Vietnam
is currently experiencing high inflation. The average inflation rate for the
year ended December 31, 2009 was 6.9%.
 
 34
  ITEM
      8.
              FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA
 
 CAVICO
CORP. AND SUBSIDIARIES
 FINANCIAL
STATEMENTS
 December
31, 2009 and 2008
 Contents
 
 PageReport
      of Independent Registered Public Accounting Firm
                      
                      36Financial
      Statements:Consolidated
      Balance Sheets as of December 31, 2009 and 2008
                      
                      37Consolidated
      Statements of Operations and Comprehensive Income for Years Ended December
      31, 2009 and 2008
                      
                      38Consolidated
      Statement of Shareholders’ Equity for the Years Ended December 31, 2009
      and 2008
                      
                      39Consolidated
      Statements of Cash Flows for the Years Ended December 31, 2009 and
      2008
                      
                      40Notes
      to Consolidated Financial Statements
                      
                      41-63
  35
  REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the
Board of Directors
  Cavico
Corp. and Subsidiaries
  We have
audited the accompanying consolidated balance sheet of Cavico Corp. and
Subsidiaries (“the Company”) as of December 31, 2009 and 2008, and the related
consolidated statements of operations and comprehensive income, stockholders’
equity and cash flows for the years 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 audits.
  We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits 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 audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
  In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Cavico Corp.
and Subsidiaries at December 31, 2009 and 2008, and the results of its
operations, stockholders’ equity and its cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.
  /s/ PMB
Helin Donovan, LLP
  PMB Helin
Donovan, LLP
  Certified
Public Accountants
  Dallas,
Texas
  April 13,
2010
  36
  CAVICO
CORP. AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
 December
31, 2009 and 2008
 2009
                                                              
                                                              
                                                              2008ASSETSCurrent
      Assets:Cash
                                                              
                                                              $
                                                              2,391,316
                                                              
                                                              
                                                              $
                                                              3,002,239Investments,
      available for sale
                                                              
                                                              
                                                              2,711,912
                                                              
                                                              
                                                              
                                                              1,820,406Equity
      method investment in Cavico Mining
                                                              
                                                              
                                                              1,239,851
                                                              
                                                              
                                                              
                                                              1,461,292Accounts
      receivable -trade- net
                                                              
                                                              
                                                              15,809,989
                                                              
                                                              
                                                              
                                                              11,530,588Receivable
      - other
                                                              
                                                              
                                                              10,550,284
                                                              
                                                              
                                                              
                                                              7,088,229Inventory
                                                              
                                                              
                                                              4,114,075
                                                              
                                                              
                                                              
                                                              3,420,382Work
      in process
                                                              
                                                              
                                                              25,881,123
                                                              
                                                              
                                                              
                                                              17,559,747Receivables
      from and advances to  related parties
                                                              
                                                              
                                                              984,684
                                                              
                                                              
                                                              
                                                              1,048,854Other
      current assets
                                                              
                                                              
                                                              2,205,915
                                                              
                                                              
                                                              
                                                              1,423,682Total
      current assets
                                                              
                                                              
                                                              65,889,149
                                                              
                                                              
                                                              
                                                              48,355,419Fixed
      Assets:Land
      and building development costs
                                                              
                                                              
                                                              11,018,893
                                                              
                                                              
                                                              
                                                              8,709,525Temporary
      housing assets
                                                              
                                                              
                                                              266,632
                                                              
                                                              
                                                              
                                                              249,962Machinery
      and equipment
                                                              
                                                              
                                                              24,355,935
                                                              
                                                              
                                                              
                                                              22,837,606Vehicles
                                                              
                                                              
                                                              7,268,114
                                                              
                                                              
                                                              
                                                              6,905,688Office
      and computer equipment
                                                              
                                                              
                                                              727,362
                                                              
                                                              
                                                              
                                                              715,37543,636,936
                                                              
                                                              
                                                              
                                                              39,418,156Less
      accumulated depreciation
                                                              
                                                              
                                                              (15,387,540
                                                              )
                                                              
                                                              
                                                              (12,050,937
                                                              )Net
      fixed assets
                                                              
                                                              
                                                              28,249,396
                                                              
                                                              
                                                              
                                                              27,367,219Intangible
      Assets:Goodwill
                                                              
                                                              
                                                              727,073
                                                              
                                                              
                                                              
                                                              767,004Licenses
      - net
                                                              
                                                              
                                                              255,875
                                                              
                                                              
                                                              
                                                              301,884Net
      intangible assets
                                                              
                                                              
                                                              982,948
                                                              
                                                              
                                                              
                                                              1,068,888Other
      Non Current Assets:Investments,
      cost method
                                                              
                                                              
                                                              2,495,536
                                                              
                                                              
                                                              
                                                              2,599,592Long-term
      retention receivables
                                                              
                                                              
                                                              11,400,629
                                                              
                                                              
                                                              
                                                              14,042,107Prepaid
      expenses
                                                              
                                                              
                                                              1,606,973
                                                              
                                                              
                                                              
                                                              1,725,660Long-term
      work in process
                                                              
                                                              
                                                              3,054,564
                                                              
                                                              
                                                              
                                                              3,579,799Long-term
      advances related parties
                                                              
                                                              
                                                              55,738
                                                              
                                                              
                                                              
                                                              58,903Other
      assets
                                                              
                                                              
                                                              2,130,049
                                                              
                                                              
                                                              
                                                              703,303Total
      other assets
                                                              
                                                              
                                                              20,743,489
                                                              
                                                              
                                                              
                                                              22,709,364TOTAL
      ASSETS
                                                              
                                                              $
                                                              115,864,982
                                                              
                                                              
                                                              $
                                                              99,500,890LIABILITIESCurrent
      Liabilities:Accounts
      payable
                                                              
                                                              $
                                                              16,432,092
                                                              
                                                              
                                                              $
                                                              8,911,691Accounts
      payable – related parties
                                                              
                                                              
                                                              9,896
                                                              
                                                              
                                                              
                                                              17,876Accrued
      expenses
                                                              
                                                              
                                                              6,722,643
                                                              
                                                              
                                                              
                                                              4,203,965Advances
      from customers
                                                              
                                                              
                                                              6,887,558
                                                              
                                                              
                                                              
                                                              3,762,026Payable
      to employees
                                                              
                                                              
                                                              4,215,547
                                                              
                                                              
                                                              
                                                              3,890,975Notes
      payable - current
                                                              
                                                              
                                                              54,740,704
                                                              
                                                              
                                                              
                                                              46,813,145Notes
      payable - related parties
                                                              
                                                              
                                                              220,091
                                                              
                                                              
                                                              
                                                              208,667Current
      portion of capital lease obligations
                                                              
                                                              
                                                              289,199
                                                              
                                                              
                                                              
                                                              101,637Total
      current liabilities
                                                              
                                                              
                                                              89,517,730
                                                              
                                                              
                                                              
                                                              67,909,982Long-Term
      Debt:Long-term
      advances from customer
                                                              
                                                              
                                                              10,858,809
                                                              
                                                              
                                                              
                                                              10,652,992Capital
      lease obligations – long-term
                                                              
                                                              
                                                              858,635
                                                              
                                                              
                                                              
                                                              254,020Long-term
      debt
                                                              
                                                              
                                                              5,374,508
                                                              
                                                              
                                                              
                                                              7,723,485Total
      long-term debt
                                                              
                                                              
                                                              17,091,952
                                                              
                                                              
                                                              
                                                              18,630,497TOTAL
      LIABILITIES
                                                              
                                                              
                                                              106,609,682
                                                              
                                                              
                                                              
                                                              86,540,479Commitments
      and Contingencies (See Note 15)
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              -Stockholders'
      Equity:Preferred
      stock:$.001 par value - 25,000,000 authorized, none issued and
      outstanding
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              -Common
      stock, $.001 par value; 300,000,000 shares authorized; 3,274,942 shares
      issued and 3,047,795 shares outstanding
                                                              
                                                              
                                                              3,048
                                                              
                                                              
                                                              
                                                              3,048Additional
      paid-in capital
                                                              
                                                              
                                                              13,619,865
                                                              
                                                              
                                                              
                                                              13,619,865Accumulated
      deficit
                                                              
                                                              
                                                              (11,400,322
                                                              )
                                                              
                                                              
                                                              (6,638,329
                                                              )Accumulated
      other comprehensive income (loss)
                                                              
                                                              
                                                              (1,388,509
                                                              )
                                                              
                                                              
                                                              (3,739,401
                                                              )Total
      Cavico Corp. stockholders' equity
                                                              
                                                              
                                                              834,082
                                                              
                                                              
                                                              
                                                              3,245,183Non-controlling
      interest
                                                              
                                                              
                                                              8,421,218
                                                              
                                                              
                                                              
                                                              9,715,228Total
      stockholders’ equity
                                                              
                                                              
                                                              9,255,300
                                                              
                                                              
                                                              
                                                              12,960,411TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                                                              
                                                              $
                                                              115,864,982
                                                              
                                                              
                                                              $
                                                              99,500,890
  The
accompanying notes are an integral part of these consolidated financial
statements.
  37




CAVICO
CORP. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
 For
the Years Ended December 31, 2009 and 2008
 2009
                    
                    
                    2008Revenues:Civil
      construction
                    
                    $
                    52,575,960
                    
                    
                    $
                    47,501,672Commercial
      activities
                    
                    
                    8,514,762
                    
                    
                    
                    4,435,264Total
      revenue
                    
                    
                    61,090,722
                    
                    
                    
                    51,936,936Cost
      of Goods Sold:Civil
      construction
                    
                    
                    47,871,074
                    
                    
                    
                    40,451,775Commercial
      activities
                    
                    
                    7,432,507
                    
                    
                    
                    3,951,112Total
      cost of goods sold
                    
                    
                    55,303,581
                    
                    
                    
                    44,402,887Gross
      Profit
                    
                    
                    5,787,141
                    
                    
                    
                    7,534,049Operating  Expenses:Selling
      expenses
                    
                    
                    289,744
                    
                    
                    
                    78,779General
      & administrative expenses
                    
                    
                    6,933,445
                    
                    
                    
                    6,280,570Bad
      debt expense
                    
                    
                    128,748
                    
                    
                    
                    212,828Total
      operating expenses
                    
                    
                    7,351,937
                    
                    
                    
                    6,572,177Total
      income (loss) from operations
                    
                    
                    (1,564,796
                    )
                    
                    
                    961,872Other
      income (expenses):Gain
      on disposal of assets
                    
                    
                    160,395
                    
                    
                    
                    44,345Other
      income (expense)
                    
                    
                    304,194
                    
                    
                    
                    45,258Income
      (loss) from investment in Cavico Mining
                    
                    
                    (141,477
                    )
                    
                    
                    130,131Other-than-temporary
      impairment losses on  available-for-sale
      securities
                    
                    
                    (975,724
                    )
                    
                    
                    -Loss
      on sales of marketable securities
                    
                    
                    (143,634
                    )
                    
                    
                    (439,934
                    )Loss
      on foreign currency exchange
                    
                    
                    (232,270
                    )
                    
                    
                    (97,061
                    )Interest
      income
                    
                    
                    413,741
                    
                    
                    
                    912,430Interest
      expense
                    
                    
                    (2,603,686
                    )
                    
                    
                    (2,534,062
                    )Total
      other income ( expense)
                    
                    
                    (3,218,461
                    )
                    
                    
                    (1,938,893
                    )Loss
      before income taxes and non-controlling interest
                    
                    
                    (4,783,257
                    )
                    
                    
                    (977,021
                    )Income
      taxes benefit (expense)
                    
                    
                    (447,295
                    )
                    
                    
                    2,392,347Income
      (loss) before non-controlling interest
                    
                    
                    (5,230,552
                    )
                    
                    
                    1,415,326Net
      income (loss) attributable to non-controlling interest
                    
                    
                    (468,558
                    )
                    
                    
                    783,510Net
      income (loss) attributable to Cavico Corp.
                    
                    $
                    (4,761,994
                    )
                    
                    $
                    631,816Other
      comprehensive income:Unrealized
      gain(loss) on  investments available for sale
                    
                    
                    2,420,224
                    
                    
                    
                    (6,352,628
                    )Foreign
      currency translation adjustment
                    
                    
                    (641,095
                    )
                    
                    
                    (467,881
                    )Comprehensive
      income (loss)
                    
                    $
                    (3,451,423
                    )
                    
                    $
                    (5,405,183
                    )Less
      comprehensive income(loss) attributable to the non-controlling
      interest
                    
                    
                    547,412
                    
                    
                    
                    (783,510
                    )Comprehensive
      income(loss) attributable to Cavico Corp
                    
                    $
                    (2,904,011
                    )
                    
                    $
                    (6,188,693
                    )Per
      Share Information:Weighted
      average number of common shares outstanding-basic and
    diluted
                    
                    
                    3,047,795
                    
                    
                    
                    2,941,726Net
      income(loss) per common share-basic and diluted
                    
                    $
                    (1.56
                    )
                    
                    $
                    0.21
  The
accompanying notes are an integral part of these consolidated financial
statements.


38


CAVICO
CORP. AND SUBSIDIARIES


Consolidated Statement
of Stockholders'
Equity


For
the Years Ended December 31, 2009 and 2008





AccumulatedCommon Stock
                
                
                Additional
                  Paid-in
                
                
                Accumulated
                
                
                other
                  Comprehensive
                
                
                Total Cavico Corp
                  Stockholders’
                
                
                Non-controlling
                
                
                Total
                  Stockholders’Shares
                
                
                Amount
                
                
                Capital
                
                
                Deficit
                
                
                Income(loss)
                
                
                Equity
                
                
                Interest
                
                
                EquityBalance,
      December 31, 2007
                
                
                2,919,045
                
                
                $
                2,919
                
                
                $
                13,235,244
                
                
                $
                (7,051,005
                )
                
                $
                3,081,108
                
                
                $
                9,268,266
                
                
                $
                5,600,977
                
                
                $
                14,869,243Shares
      issued for services
                
                
                3,750
                
                
                
                4
                
                
                
                84,746
                
                
                
                -
                
                
                
                -
                
                
                
                84,750
                
                
                
                
                
                
                
                84,750Shares
      issued for cash
                
                
                125,000
                
                
                
                125
                
                
                
                299,875
                
                
                
                -
                
                
                
                -
                
                
                
                300,000
                
                
                
                
                
                
                
                300,000Sale
      of shares from non-controlling interest
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1,891,800
                
                
                
                1,891,800Dividends
      paid to non-controlling interest
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (372,492
                )
                
                
                (372,492
                )Foreign
      currency translation adjustment
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (467,881
                )
                
                
                (467,881
                )
                
                
                (625,439
                )
                
                
                (1,093,320
                )Unrealized
      loss on securities available for sale
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (6,352,628
                )
                
                
                (6,352,628
                )
                
                
                
                
                
                
                (6,352,628
                )Consolidation
      of additional subsidiaries
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (219,140
                )
                
                
                -
                
                
                
                (219,140
                )
                
                
                2,436,871
                
                
                
                2,217,731Net
      income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                631,816
                
                
                
                -
                
                
                
                631,816
                
                
                
                783,510
                
                
                
                1,415,326Balance,
      December 31, 2008
                
                
                3,047,795
                
                
                $
                3,048
                
                
                $
                13,619,865
                
                
                $
                (6,638,329
                )
                
                $
                (3,739,401
                )
                
                $
                3,245,183
                
                
                $
                9,715,228
                
                
                $
                12,960,411Sale
      of shares from non-controlling interest
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                275,607
                
                
                
                275,607Dividends
      paid to non-controlling interest
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (529,295
                )
                
                
                (529,295
                )Reclassification
      of unrealized loss from non-controlling interest in the prior
      year
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                492,910
                
                
                
                492,910
                
                
                
                (492,910
                )
                
                
                -Foreign
      currency translation adjustment
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (124,825
                )
                
                
                (124,825
                )
                
                
                (516,270
                )
                
                
                (641,095
                )Unrealized
      gain on securities available for sale
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                1,982,807
                
                
                
                1,982,807
                
                
                
                437,416
                
                
                
                2,420,224Net
      loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (4,761,994
                )
                
                
                -
                
                
                
                (4,761,994
                )
                
                
                (468,558
                )
                
                
                (5,230,552
                )Balance,
      December 31, 2009
                
                
                3,047,795
                
                
                $
                3,048
                
                
                $
                13,619,865
                
                
                $
                (11,400,322
                )
                
                $
                (1,388,509
                )
                
                $
                834,082
                
                
                $
                8,421,218
                
                
                $
                9,255,300




The
accompanying notes are an integral part of these consolidated financial
statements.


39


CAVICO
CORP. AND SUBSIDIARIES


Consolidated
Statement of Cash Flows


For
the Years Ended December 31, 2009 and 2008





2009
                
                
                2008Cash Flows
      From Operating Activities:Net income (loss)
                
                $
                (5,230,552
                )
                
                $
                1,415,326Adjustments to reconcile net
      income to net cash used in operating activities:Depreciation and
      amortization
                
                
                4,986,536
                
                
                
                4,820,554Change in provisions for
      uncollectible receivables
                
                
                (157,843
                )
                
                
                212,828Gain on sale of fixed
      assets
                
                
                (160,395
                )
                
                
                (44,345
                )Other-than-temporary
      impairment losses on  available-for-sale
      securities
                
                
                975,724
                
                
                
                -Loss from other investment
      activities
                
                
                143,634
                
                
                
                439,934Income(loss)
      from investment in Cavico Mining
                
                
                141,477
                
                
                
                (130,131
                )Stock issued for services
                
                
                -
                
                
                
                84,750Changes in assets and
      liabilities:Increase in accounts receivable
      and other current assets
                
                
                (7,714,909
                )
                
                
                (16,231,078
                )Increase in inventory
                
                
                (755,100
                )
                
                
                (1,160,044
                )Increase in  work in
      progress
                
                
                (8,676,361
                )
                
                
                (2,439,873
                )Increase in other assets
                
                
                (1,226,651
                )
                
                
                (510,937
                )Increase in advances from
      customer
                
                
                3,494,487
                
                
                
                9,756,039Increase in payable to
      employees
                
                
                560,630
                
                
                
                1,979,223Increase(decrease)  in
      accounts payables and accrued expenses
                
                
                11,510,988
                
                
                
                (1,421,419
                )Net Cash Used in Operating
      Activities
                
                
                (2,108,335
                )
                
                
                (3,229,173
                )Cash Flows
      from Investing Activities:Purchase of property, equipment
      and intangible assets
                
                
                (7,111,171
                )
                
                
                (11,856,498
                )Cash acquired in
      consolidation  of new entities
                
                
                -
                
                
                
                49,688Proceeds from withdrawals of
      investments in nonconsolidated companies
                
                
                166,821
                
                
                
                165,563Purchase of investments in
      nonconsolidated companies and joint stock company
                
                
                (441,344
                )
                
                
                (935,001
                )Proceeds from sales of fixed
      assets
                
                
                819,721
                
                
                
                363,128Net Cash Used in Investing
      Activities
                
                
                (6,565,973
                )
                
                
                (12,213,120
                )Cash Flow From
      Financing Activities:Proceeds from contribution by
      noncontrolling interests
                
                
                275,607
                
                
                
                1,891,800Payments
      of dividends to noncontrolling interests
                
                
                (529,295
                )
                
                
                (372,492
                )Proceeds from shares
      issued
                
                
                -
                
                
                
                300,000Proceeds from notes
      payable
                
                
                82,185,846
                
                
                
                76,202,548Proceeds from notes payable -
      related parties
                
                
                94,695
                
                
                
                2,660,802Payments of
      notes  payable- others
                
                
                (73,634,129
                )
                
                
                (60,463,105
                )Payments of notes payable-
      related parties
                
                
                (70,834
                )
                
                
                (2,925,434
                )Payments of capital leases
      obligations
                
                
                (120,832
                )
                
                
                (65,477
                )Net Cash Provided By Financing
      Activities
                
                
                8,201,058
                
                
                
                17,228,642Increase(decrease) in Cash
                
                
                (473,250
                )
                
                
                1,786,349Cash at Beginning of
      period
                
                
                3,002,239
                
                
                
                1,357,390Effect of foreign currency
      translation
                
                
                (137,673
                )
                
                
                (141,500
                )Cash at End of
      period
                
                $
                2,391,316
                
                
                $
                3,002,239Supplemental Cash Flow
      Information:Interest paid
                
                $
                5,589,041
                
                
                $
                7,951,821Taxes paid
                
                $
                41,059
                
                
                $
                43,836Non-CashInvesting and
      Financing Activities:Assets acquired under capital
      lease
                
                $
                1,251,691
                
                
                $
                509,482Non cash changes to assets and
      liabilities due to the consolidation of  subsidiaries previously
      accounted for as cost method investments:Accounts receivable and other
      current assets
                
                $
                -
                
                
                $
                2,257,815Inventory
                
                
                -
                
                
                
                4,718Construction work in
      progress
                
                
                -
                
                
                
                325,832Other assets
                
                
                -
                
                
                
                108,753Accounts payable & accrued
      expenses
                
                
                -
                
                
                
                640,476Payable to employees
                
                
                -
                
                
                
                537,963




The
accompanying notes are an integral part of these consolidated financial
statements.


40


NOTE
1 – ORGANIZATION AND BASIS OF PRESENTATION




The
Company




Cavico
Corp. and Subsidiaries, (the Company) was organized as a Delaware corporation on
September 13, 2004, to engage in any lawful act or activity for which
corporations may be organized. At the time of incorporation, the Company was
named Laminaire Corp. and in November 2004 the name was changed to Agent 155
Media Group, Inc. In April 2006, the Company entered into an “Asset Purchase
Agreement” with Cavico Vietnam Joint Stock Company, a joint stock company duly
organized and existing under the laws of Socialist Republic of Vietnam. Under
this purchase agreement, Agent 155, the buyer, transferred 1,975,000 shares of
the Company’s common shares for all assets and liabilities of Cavico Vietnam
Joint Stock Company (“CVJSC”) following a 300-to-1 reverse stock split of Agent
155 common stock. On May 2, 2006, following the consummation of the Asset
Purchase Agreement, the name of the Company was changed to Cavico
Corp.




The
merger of Agent 155 Media Group, Inc. with CVJSC was accounted for as a reverse
acquisition under the purchase method of accounting since the shareholders of
CVJSC obtained control of the consolidated entity. Accordingly, the merger of
the two companies is recorded as a recapitalization of Agent 155 Media Group,
Inc., with CVJSC being treated as the continuing entity. The historical
financial statements to be presented are those of CVJSC.




Cavico
Vietnam Joint Stock Company in Hanoi, Vietnam Construction and Investment
Vietnam Joint Stock Company’s main operations include the following:
constructing power projects up to 35KV, shoveling mine soil and stone,
constructing transport and irrigation works, industrial and civil construction,
leasing machines and equipment, trading production and consumption materials,
machines and equipment for construction, transport, irrigation, and power
projects installation.




On August
19, 2009, the Company affected a reverse stock split on a 40-for-1
basis.




Principles
of Consolidation




The
accompanying consolidated financial statements include the accounts of the
Company, its wholly owned subsidiaries, majority owned subsidiaries and all
entities in which the Company has less than fifty percent ownership that are
variable interest entities in which the Company is the primary beneficiary.
Cavico Energy Construction, Cavico Tower, Cavico Manpower, Cavico Stone and
Mineral and Cavico Land are considered to be variable interest entities in which
the Company is the primary beneficiary. The Company is the primary beneficiary
because the Company expects to absorb more than 50% of expected losses and
residual returns from all of these five less than fifty percent owned entities.
The Company exercises significant control over all of its consolidated entities
though shared management, guarantees of indebtedness, inter-company credit
lines, shared use of assets and control of major contracts. Some of these
consolidated entities were able to raise working capital by selling the shares
to independent third parties without affecting the benefits received from these
entities.  Loss generated from the entities in which the Company has
less than fifty percent ownership shares was $103,831 and income of $93,716 for
the year ended December 31, 2009 and 2008, respectively.





All
significant intercompany accounts and transactions have been
eliminated.  The consolidated financial statements include the
accounts of the parent company, Cavico Corp., and its following
subsidiaries:




% of OwnershipSubsidiary
                  
                  12/31/09
                  
                  
                  12/31/08Cavico
      Vietnam Company Limited
                  
                  
                  100
                  %
                  
                  
                  100
                  %Cavico
      Bridge and Underground Construction JSC
                  
                  
                  66
                  %
                  
                  
                  66
                  %Cavico
      Trading JSC
                  
                  
                  63
                  %
                  
                  
                  63
                  %Cavico
      Construction and Infrastructure Investment JSC
                  
                  
                  69
                  %
                  
                  
                  69
                  %Cavico
      Power and Resource JSC
                  
                  
                  76
                  %
                  
                  
                  76
                  %Cavico
      Transport JSC
                  
                  
                  69
                  %
                  
                  
                  74
                  %Cavico
      Hydropower Construction JSC
                  
                  
                  72
                  %
                  
                  
                  72
                  %Cavico
      Energy Construction JSC
                  
                  
                  38
                  %
                  
                  
                  38
                  %Cavico
      Tower JSC
                  
                  
                  33
                  %
                  
                  
                  34
                  %Cavico
      Industry and Technical Service JSC
                  
                  
                  62
                  %
                  
                  
                  65
                  %Cavico
      Manpower JSC
                  
                  
                  40
                  %
                  
                  
                  30
                  %Cavico
      Stone and Mineral JSC
                  
                  
                  45
                  %
                  
                  
                  36
                  %Cavico
      PHI Cement JSC
                  
                  
                  81
                  %
                  
                  
                  81
                  %Cavico
      Luong Son JSC
                  
                  
                  92
                  %
                  
                  
                  91
                  %Cavico
      Land JSC
                  
                  
                  15
                  %
                  
                  
                  13
                  %Cavico
      Son La JSC
                  
                  
                  100
                  %
                  
                  
                  -


41


During
the years ended December 31, 2009 and 2008, the following entities were added in
the consolidation.




Name of Entity
                                      
                                      Consolidation Date
                                      
                                      Percentage of ownership
                                      
                                      
                                      Description of businessCavico
      Tower
                                      
                                      April
      01, 2008
                                      
                                      
                                      33
                                      %
                                      
                                      Office
      for leasesCavico
      ITS
                                      
                                      April
      01, 2008
                                      
                                      
                                      62
                                      %
                                      
                                      Steel
      fabrication productionCavico
      Manpower
                                      
                                      April
      01, 2008
                                      
                                      
                                      40
                                      %
                                      
                                      Labor
      supply for projectsCavico
      Stone & Mineral
                                      
                                      July
      01, 2008
                                      
                                      
                                      45
                                      %
                                      
                                      Production
      of white stoneCavico
      PHI
                                      
                                      July
      01, 2008
                                      
                                      
                                      81
                                      %
                                      
                                      Cement
      factory operationCavico
      Luong Son JSC
                                      
                                      July
      01, 2008
                                      
                                      
                                      92
                                      %
                                      
                                      Operation
      of tourism zoneCavico
      Land JSC
                                      
                                      July
      01, 2008
                                      
                                      
                                      15
                                      %
                                      
                                      Land
      investment and developmentCavico
      Son La JSC
                                      
                                      January
      6, 2009
                                      
                                      
                                      100
                                      %
                                      
                                      Stone
      exploitation




Cavico
Mining and Construction JSC




Cavico
Vietnam Mining and Construction Joint Stock Company (Cavico Mining) formerly
known as Cavico Vietnam Mining and Construction Limited, was established on
March 26, 2002 with principal activities in mining construction and civil
construction, especially in connection with mining and dam construction, equity
investments in mines, power supply plants and land development projects. On June
13, 2006 Cavico Vietnam Mining and Construction Company Limited was changed to
joint stock company following Business registration Certificate issued by Hanoi
Department of Planning and Investment. The Company’s share capital as stated in
its Business Registration Certificate is VND 80,610,060,000 (approximately $4.5
million).Currently,
Cavico Mining shares are traded over the Hochiminh City Stock
Exchange.




In
accordance with current rules promulgated by the Vietnam State Security
Committee relating to foreign ownership of publicly traded Vietnamese entities,
the Company had to reduce the ownership in this entity to 50.16% in 2006. In
2008, the Company’s percentage of ownership was reduced to 25.55% with total
equity amount of $1,315,704 from 39.13% due to additional sale of
ownership.





On
December 11, 2009, Cavico Corp., Cavico Vietnam and Cavico Mining entered into a
Stock Purchase Agreement, pursuant to which the Company and its subsidiaries
agreed to purchase from Cavico Mining a total of 4,000,000 ordinary shares of
Cavico Mining at Vietnamese Dong 16,894 per share (approximately $0.94 per share
based on current exchange rates) in exchange for debt owed to the Company and
its subsidiaries by Cavico Mining. The purpose of the acquisition of an
additional 4,000,000 shares of Cavico Mining to own over 50% of Cavico Mining’s
common stock was to enable the Company to include Cavico Mining in the
consolidated financial statements on a going forward basis. On February 11,
2010, this Stock Purchase Agreement was consummated and Cavico Mining will be a
consolidated subsidiary starting for the period ending March 31,
2010.





NOTE 2-
            SUMMARY OF
      SIGNIFICANT ACCOUNTING
POLICIES





Estimates




The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Such estimates may be materially different from actual financial
results. Significant estimates include the recoverability of long-lived assets
and the collectability of accounts receivable. The Company’s consolidation of
the entities with less than 50% ownership, such as Cavico Energy, Cavico
Manpower, Cavico Tower, Cavico Land and Cavico Stone and Mineral was based on an
assumption that these entities are variable interest entities in which the
Company is the primary beneficiary and will absorb more than 50% of expected
losses and residual returns and has the ability to make economic decisions on
behalf of  the variable interest entities.




Cash
and Cash Equivalents




The
Company maintains the majority of its cash at commercial banks and as cash on
hand. The total cash balances in the commercial banks are insured by the state
bank of Vietnam. The Company’s bank account in United States at times may
exceed federally insured limits. The Company has not experienced any losses on
such accounts. For purposes of the statement of cash flows, the Company
considers all cash and highly liquid investments with initial maturities of
three months or less to be cash equivalents.


42


Investment
in Marketable Securities




Management
determines the appropriate classification of investments at the time of purchase
and reevaluates such designation as of each balance sheet
date.  Marketable securities that are actively traded in the near term
are classified as trading securities and are reported at fair value, with
unrealized gains and losses recognized in earnings. Available-for-sale
investments are stated at fair value with net unrealized gains or losses
reported in stockholders’ equity as other comprehensive income
(loss).  Investments classified as held-to-maturity are carried at
amortized cost in the absence of any other than temporary decline in
value.  Realized gains and losses, and declines in value judged to be
other than temporary are included in other income.  The cost of
securities sold is computed using the specific identification
method.




Equity
Method Investment


Investment
in Cavico Mining, a joint stock company is accounted for by the equity method.
Under the equity method of accounting, an investee company’s accounts are not
reflected within the Company’s balance sheets or statements of operations;
however, the Company’s share of the earnings or losses of the investee company
is reflected in the caption “Income (loss) from investment in Cavico Mining” in
the statements of operations. The Company’s carrying value in an equity method
joint stock company is reflected in the caption “Equity method investment in
Cavico Mining” in the Company’s balance sheets.


Accounts
Receivable




The
Company grants credit to customers within Vietnam and does not require
collateral. The Company’s ability to collect receivables is affected by economic
fluctuations in the geographic areas and industries served by the Company.
Reserves for uncollectable amounts are provided, based on past experience and a
specific analysis of the accounts, which management believes are
sufficient.The Company
reserves balances as follows; 100% reserve: Accounts over 365 days with no
activities during the year, 15% reserve for account over 365 days with
activities during the year , 10% reserve for accounts balances over 271-365
days, and  5% reserve for accounts balances in 180-270 days.Although the
Company expects to collect amounts due, actual collections may differ from the
estimated amounts. As of December 31, 2009, the Company had a reserve for
doubtful accounts of $751,940. As of December 31, 2008, the Company had a
reserve for doubtful accounts of $597,349.




Advances




The
Company advances to employees for salaries and business expenses. Since the
employees traditionally choose to defer their salary payments to a later date,
the Company pays the advances to employees throughout the year.  When
the salary advances are not paid back, the Company has a right to offset against
the salary payable amount. The advances not paid back within the agreed date are
expensed or offset against the salaries payable. The advances for business
expenses are charged to expenses when the employees turn in the expense report
within one months from the date of expense incurred. If the advance amounts are
not collectible, the Company can offset against employee payable. Advances are
included in Receivable-Other. During the year ended December 31, 2009 the
Company expensed $107,247 from this account as uncollectable.




Prepayments
to Suppliers




Prepayments
to supplies include the prepayments to contractors and suppliers. The prepayment
amounts are normally expensed in a short period of time as the expenses incur.
The prepayments are included in receivable-other account.




Other
Short Term Receivable




Other
short term receivables included in Receivable-Other account consist of
receivable from short term loans and deposits amounting $887,623.  The
Company evaluates the collectability of these receivables and writes off the
balance if it is determined to be non-collectible. As of December 31, 2009, the
Company expensed $15,810 from this account as bad debt. As of December 31, 2009
and 2008, the Company has not accrued any interest on these loans.




Inventories




Inventories
consist of supplies and raw materials. Supplies, such as fuel and spare parts,
are carried at the weighted average cost. Raw materials are valued at lower of
cost or market. The Company regularly reviews it inventory for presence of
obsolescence attributed to age, seasonality, and quality. Inventories that are
considered obsolete are written off or adjusted to the carrying
value.


43


Work
in Process




Work in
process includes the costs of production such as materials, labor, overhead and
interest cost on projects not yet recognized as revenue.  The interest
costs included in work in process were $3,133,416 and $3,160,983 at December 31,
2009 and 2008, respectively. The Company had $3,054,564 and $3,579,799 in long
term work in process at December 31, 2009 and 2008, respectively, which will be
recorded as cost of goods sold when certified revenue is recognized. Reserves
for uncollectible amounts are provided and are periodically reviewed for
collectability and any costs not expected to have future value are written off.
The Company recorded losses of $255,816 and $-0- for the years ended December
31, 2009 and 2008, respectively related to contracts for which the costs of
production is higher than projected revenue.   As of December 31,
2009 and 2008, the reserves against work in process were $640,616 and $843,494,
respectively.  This reduction of reserves was due to write-off of
uncollectible balances at December 31, 2009. The Company adjusted $332,937 as
other income to account for the reduction of  reserve from the prior
year. The Company determined these reserves were sufficient for both short term
and long term work in process.




Property
and Equipment




Property
and equipment, including renewals and betterments, are stated at cost. Assets
held under capital leases are recorded at lease inception at the lower of the
present value of the minimum lease payments or the fair market value of the
related assets. The Company follows the practice of capitalizing property and
equipment purchased over $600. The cost of ordinary maintenance and repairs is
charged to operations while renewals and replacements are capitalized.
Depreciation and amortization are computed on the straight-line method over the
following estimated useful lives of the related assets, which range from three
to ten years, and are as follows:




Temporary
      housing assets
            5
      yearsMachinery
      and Equipment
            5
      to 7 yearsVehicles
            3
      to 10 yearsOffice
      Equipment
            3-8
      yearsComputer
      software
            5
      years





Certain
machinery and equipment was collateralized for the bank notes (Note 15). The
total carrying value of the collateralized machinery and equipment amounted
$20,703,225 and $23,603,040 as of December 31, 2009 and 2008,
respectively.


Depreciation
expense for the years ended December 31, 2009 and 2008 was $4,986,536 and
$4,820,554, respectively, of which $3,151,267 and $4,919,510 were included in
the cost of goods sold, respectively.




Land
and Building Development




Land and
building development is stated at cost and includes the cost of construction and
other direct costs attributable to the construction of Cavico Tower, a high rise
commercial building in Hanoi which is expected to be completed at the end of
2011, and land development costs attributable to Chieng Ngan which is an urban
development project in Vietnam. No provision for depreciation is made on land
development until such time as the relevant assets are completed and put into
use.




Long-Lived
Assets




The
Company’s management assesses the recoverability of its long-lived assets by
determining whether the depreciation and amortization of long-lived assets over
their remaining lives can be recovered. The amount of long-lived asset
impairment if any, is measured based on fair value and is charged to operations
in the period in which long lived assets impairment is determined by management.
At December 31, 2009 and 2008, the Company’s management believes there was no
impairment of its long-lived assets. There can be no assurance however, that
market conditions will not change or demand for the Company’s services will
continue, which could result in impairment of long-lived assets in the
future.




Intangible
Assets




The
Company reviews annually for impairment of intangible assets in accordance with
ASC Topic 360, Accounting for Impairment on Disposed of Long lived Assets. In
accordance with ASC 360, an impairment loss will be recognized if carrying
amount of the intangible asset is not recoverable and its carrying amount
exceeds its value. As of December 31, 2009 and 2008, no impairment was
recorded.




Goodwill




The
Company performs the impairment tests annually during the fourth quarter and
more frequently when events and circumstances occur that indicate a possible
impairment of goodwill. In determining whether there is an impairment of
goodwill, the Company calculates the estimated fair value of the reporting unit.
The Company then compares the resulting fair value to the net book value of the
reporting unit, including goodwill. If the net book value of a reporting unit
exceeds its fair value, the Company measures and records the amount of the
impairment loss by comparing the implied fair value of the reporting unit’s
goodwill with the carrying amount of that goodwill. As of December 31, 2009 and
2008, no impairment of goodwill was recorded.


44


Real
Estate Activities




Cavico
Tower’s, one of our subsidiaries,  principal business activities
consist of civil and industrial construction; internal and external fitting out;
land leveling and surface improvement; building leasing; real estate business;
restaurants and supermarkets operation; real estate consulting; machine and
equipment leasing; materials, machinery and equipment trading for construction,
transport, hydropower; dealers for buying and selling goods, construction
materials trading. During the year 2009 and 2008, the major activities of the
Company were capital expenditures related to building construction in the amount
of $1,066,299 and $1,431,912, respectively.




Fair
Value of Financial Instruments




The
carrying amount of cash, cash equivalents, investment securities, notes payable,
accounts receivable, accounts payable and accrued expenses are considered to be
representative of their respective fair values because of the short-term nature
of these financial instruments. The carrying amount of the notes payable and
long-term debt are reasonable estimates of fair value as the loans bear interest
based on market rates currently available for debt with similar
terms.





Effective
January 1, 2008, the Company reports the financial assets and liabilities
at fair value as categorized in one of the following types of investments based
upon the methodology for determining fair value.





Level 1 -
Quoted prices in active markets for identical assets or
liabilities.




Level 2 -
Observable inputs other than Level 1 prices such as quoted prices for similar
assets or liabilities; quoted prices in markets that are not active; or other
inputs that are observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilities.




Level 3 -
Unobservable inputs that are supported by little or no market activity and that
are significant to the fair value of the assets or liabilities.




The
Company utilizes various approaches to measure fair value for available-
for-sale securities.




Long-term
Retention Receivable




Construction
contracts include a two to three year warranty period that is part of the
construction contract. The Company has recorded $11,400,629  and
$14,042,107 as long term retention receivable at December 31, 2009 and 2008,
respectively. The retention receivable is reviewed each month (at minimum each
quarter) to determine if any account needs to be reserved when the collection of
receivable is doubtful or when the future realization of WIP on the project into
revenues is uncertain. The Company reserved for doubtful accounts of $57,157 and
$369,590 as of December 31, 2009 and 2008.  Based on the collection
history, the reserve for doubtful account was reduced at December 31, 2009 to
approximately 0.5% of total balance. To date, the Company has not incurred any
warranty costs.




Restricted
Cash




The
restricted cash represents deposits made by the Company while bidding on
contracts.  Deposits are held at a Bank in the Company’s  name
and returned to the Company whether or not contract is awarded. The restricted
cash amounting $604,360 and $438,672 as of December 31, 2009 and 2008,
respectively were recorded in other assets.




Income
Taxes




The
Company recognizes the deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Deferred income taxes are recognized for the tax
consequences in future years of differences between the tax bases of assets and
liabilities and their financial reporting amounts at each period end based on
enacted tax laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.


45


VAT
assessed on revenues-purchases




The
Company records and pays value added tax calculated under Vietnamese tax law.
The amount of tax recorded in receivable and payable amount at December 31, 2009
were $378,912 and $4,197,421, respectively and $280,959 and $2,539,800 at
December 31, 2008.  VAT rates for major activities are as follows:
construction 10%, machine or equipment leasing 10%, ctone trading
10%,  materials trading 5%.





Concentration
of Credit Risk




The
Company invests its excess cash in government bonds and other highly liquid debt
instrument of financial institutions and corporations with strong credit
ratings. The Company has established guidelines relative to diversification and
maturities to safely maintain an adequate level of liquidity.




Concentration
of Debts




The
Company  finances a majority of its construction projects through
financing arrangements  with banks in Vietnam. The banks in Vietnam
are controlled by the Vietnamese government through the Ministry of Finance. The
Company has good financial ratings and strong relationships with the financial
institutions.




Concentration
of Market




The
Company’s operations are currently in the Socialist Republic of Vietnam which is
a highly centralized operating environment that is tightly controlled by the
Vietnamese government. Because of this concentration in a specific geographic
location, the Company is susceptible to fluctuations in its business by economic
or other conditions in the country. The Company is considering expanding its
operations to other countries such as Laos and Algeria.




Country
Risk




As the
Company's principal operations are conducted in Vietnam, the Company is subject
to special considerations and significant risks not typically associated with
companies in the US. These risks include, among others, risks associated with
the political, economic and legal environments and foreign currency exchange
limitations encountered in Vietnam. The Company's results of operations may be
adversely affected by changes in the political and social conditions in Vietnam,
and by changes in governmental policies with respect to laws and regulations,
among other things.




In
addition, all of the Company's transactions undertaken in Vietnam are
denominated in Vietnamese Dong (VND), which must be converted into other
currencies before remittance out of Vietnam may be considered. Both the
conversion of VND into foreign currencies and the remittance of foreign
currencies abroad require the approval of the Vietnamese
government.




Labor
Union




Effective
January 20, 2009, the Company’s management and employees joined in the
Collective Labor Agreement pursuant to Labor Code of the Socialist Republic of
Vietnam for  three year term. This agreement can be extended for one
year if both parties agree. This Collective  Agreement is registered in Hanoi
Department of Labor. In accordance with the collective agreement, each employee
signs on the employment contract with the Company. As of December 31, 2009, the
Company had no labor disputes.




Major Customers and Suppliers




The
Company generated 54% and 73% of total revenues from major customers, in the
years ended December 31, 2009 and 2008, respectively. During the years ended
December 31, 2009, the Company had two major customers. The Company generated
$17,588,952 from Electricity of Vietnam and $10,463,694 from Mien Trung HP JSC
under civil construction in 2009. During the year ended December 31, 2008, the
Company had two major customers. The Company generated $27,200,837 from
Electricity of Vietnam and $7,896,737 from Mien Trung HP JSC under civil
construction. Electricity of Vietnam was our major customer since 2003. As a
civil contractor, the Company can provide civil construction work to any
customer without relying on current major customer. However, based on the
government plan of power development, the market of hydro power
construction is expected to be in demand for next 10 years.  The
accounts receivable balance for these customers at December 31, 2009 and 2008
was $14,637,061 and $12,179,055, respectively. The Company did not have
long-term contracts with any of its suppliers for the years ended December 31,
2009 and 2008.


46


Revenue
Recognition




The
Company recognizes revenues from construction projects based upon work that is
periodically certified as completed by the customer or which is virtually
complete. The Company considers the title to work performed passes to the
customer upon certification by the customer. Production costs, including
materials, labor and subcontractor costs are allocated to revenue based upon the
ratio of total costs incurred to date compared to total work to date. Costs
related to work performed but not completed are included in work in progress.
Any losses from damages to work in process are generally covered by the
customer. Customer-furnished materials, labor, and equipment, and in certain
cases subcontractor materials, labor, and equipment are included in revenues and
cost of goods sold when management believes that we are responsible for the
acceptability of the project by client. Contracts are not segmented between
types of services such as engineering and construction, and accordingly, gross
margin is recognized under construction services.


The
Company recognizes uncollectible work-in- process as a contract loss in the
period it is determined to be not collectible. Claims against customers are
recognized as revenue upon settlement. The Company had $3,054,564 and $3,579,799
for the claims included in work-in-progress as of December 31, 2009 and 2008,
respectively. In most of these claims, the work has been completed based on
specification, but the pricing was not approved by the customer. During the
years ended December 31, 2009 and 2008, the Company recognized $3,810,647 and
$3,641,465, respectively as revenue. Revenues recognized in excess of amounts
billed are classified as current assets under contract work-in-progress. Amounts
billed to clients in excess of revenues recognized to date are classified as
current liabilities under advances from customers.





The zero
profit method permits the recognition of work performed (uncertified) as revenue
at zero profit. Under this method, the Company would recognize the current
increases in work in process as revenue and cost of goods sold with zero profit.
The Company would recognize additional revenue and expenses at zero profit of
$8,321,376 and $-0-, respectively as of December 31, 2009 and 2008.





Sales
revenue from commercial activities, such as sales of construction materials or
steel fabrication, is recognized at the date when goods are delivered and
accepted by the buyer and all significant risks and rewards relating to the
ownership of the goods have been passed to the buyer.




Other
Comprehensive Income




The
Company reports and displays comprehensive income and its components in a full
set of general-purpose financial statements. The Company’s unrealized losses of
$641,095 and $1,093,320 for the years ended December 31, 2009 and 2008,
respectively relate to the translation of financial statements from Vietnamese
Dong to US Dollars. The Company also recorded an unrealized gain of $2,420,224
and unrealized loss of $6,352,628 on investments available for sale for the year
ended December 31, 2009 and 2008, respectively. During the year ended December
31, 2009 and 2008, the Company realized $975,724 and $-0-, respectively as
impairment loss for securities available for sale.





Foreign
Currency Translation




All
assets and liabilities were translated at the exchange rate on the balance sheet
date, stockholder's equity are translated at the historical rates and statement
of operations items are translated at the weighted average exchange rate for the
year. The resulting translation adjustments are reported under other
comprehensive income gains and losses resulting from foreign currency
transactions are reflected in the income statement.





Earnings
(Loss) Per Share of Common Stock




Net
earnings (loss) per share of common stock are computed by dividing the net loss
by the weighted average number of shares of common stock outstanding during the
period. Diluted loss per share is determined using the weighted average number
of common shares outstanding during the period, adjusted for the dilutive effect
of common stock equivalents, consisting of shares that might be issued upon
exercise of common stock options. In periods where losses are reported, the
weighted average number of common shares outstanding excludes common stock
equivalents, because their inclusion would be anti-dilutive. There were no
common stock equivalents during the years ended December 31, 2009 and
2008.




Reclassifications




Certain
prior year items have been reclassified to conform to the current year
presentation. These reclassifications had no impact on our consolidated
financial statements.


47


Recent
Pronouncements




In
February 2008, the Financial Accounting Standards Board (“FASB”) issued an
accounting standard update that delayed the effective date of fair value
measurements accounting for all non-financial assets and non-financial
liabilities, except for items that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually), until the
beginning of the first quarter of 2009. The Company adopted this accounting
standard update effective January 1, 2009. The adoption of this update to
non-financial assets and liabilities, as codified in ASC 820-10, did not have
any impact on the Company’s consolidated financial statements.





The
Company’s non-financial assets, such as goodwill, intangible assets, and
property, plant and equipment, are measured at fair value when there is an
indicator of impairment and recorded at fair value only when an impairment
charge is recognized. No impairment indicators were present during the three and
nine month periods ended September 30, 2009. When impairment indicators are
present, the Company utilizes various methods to determine the fair value of its
non-financial assets. For example, to value property plant and equipment, we
would use the cost method for determining fair value; for goodwill we would use
a combination of analyzing the Company’s market capitalization based on the
market price of the Company’s common stock and a determination of discounted
cash flows of the Company’s operations.





Effective
January 1, 2009, the Company adopted an accounting standard that requires
unvested share-based payments that entitle employees to receive nonrefundable
dividends to also be considered participating securities, as codified in ASC
260. The adoption of this accounting standard had no impact on the calculation
of our earnings per share because the Company has not issued participating
securities.





Effective
April 1, 2009, the Company adopted three accounting standard updates which were
intended to provide additional application guidance and enhanced disclosures
regarding fair value measurements and impairments of securities. They also
provide additional guidelines for estimating fair value in accordance with fair
value accounting. The first update, as codified in ASC 820-10-65, provides
additional guidelines for estimating fair value in accordance with fair value
accounting. The second accounting update, as codified in ASC 320-10-65, changes
accounting requirements for other-than-temporary-impairment for debt securities
by replacing the current requirement that a holder have the positive intent and
ability to hold an impaired security to recovery in order to conclude an
impairment was temporary with a requirement that an entity conclude it does not
intend to sell an impaired security and it will not be required to sell the
security before the recovery of its amortized cost basis. The third accounting
update, as codified in ASC 825-10-65, increases the frequency of fair value
disclosures. These updates were effective for fiscal years and interim periods
ended after June 15, 2009. The adoption of these accounting updates did not have
any impact on the Company’s consolidated financial statements.





Effective
April 1, 2009, the Company adopted a new accounting standard for subsequent
events, as codified in ASC 855-10. The update modifies the names of the two
types of subsequent events either as recognized subsequent events (previously
referred to in practice as Type I subsequent events) or non-recognized
subsequent events (previously referred to in practice as Type II subsequent
events). In addition, the standard modifies the definition of subsequent events
to refer to events or transactions that occur after the balance sheet date, but
before the financial statements are issued (for public entities) or available to
be issued (for nonpublic entities). It also requires the disclosure of the date
through which subsequent events have been evaluated. The update did not result
in significant changes in the practice of subsequent event disclosures, and
therefore the adoption did not have any impact on the Company’s consolidated
financial statements.





Effective
July 1, 2009, the Company adopted the “FASB Accounting Standards Codification”
and the Hierarchy of Generally Accepted Accounting Principles (“ASC 105”). This
standard establishes only two levels of U.S. GAAP, authoritative and
non-authoritative. The FASB Accounting Standards Codification (the
“Codification”) became the source of authoritative, nongovernmental GAAP, except
for rules and interpretive releases of the SEC, which are sources of
authoritative GAAP for SEC registrants. All other non-grandfathered, non-SEC
accounting literature not included in the Codification became non-authoritative.
The Company began using the new guidelines and numbering system prescribed by
the Codification when referring to GAAP in the third quarter of 2009. As the
Codification was not intended to change or alter existing GAAP, it did not have
any impact on the Company’s consolidated financial statements.





In
October 2009, the FASB issued Update No. 2009-13, “Multiple-Deliverable Revenue
Arrangements—a consensus of the FASB Emerging Issues Task Force” (“ASU
2009-13”). It updates the existing multiple-element revenue arrangements
guidance currently included under ASC 605-25, which originated primarily from
the guidance in EITF Issue No. 00-21, “Revenue Arrangements with Multiple
Deliverables” (“EITF 00-21”). The revised guidance primarily provides two
significant changes: 1) eliminates the need for objective and reliable evidence
of the fair value for the undelivered element in order for a delivered item to
be treated as a separate unit of accounting, and 2) eliminates the residual
method to allocate the arrangement consideration. In addition, the guidance also
expands the disclosure requirements for revenue recognition. ASU 2009-13 will be
effective for the first annual reporting period beginning on or after June 15,
2010, with early adoption permitted provided that the revised guidance is
retroactively applied to the beginning of the year of adoption. The Company is
currently assessing the future impact of this new accounting update to its
consolidated financial statements.


48


In
October 2009, the FASB issued Update No. 2009-14, “Certain Revenue Arrangements
that Include Software Elements—a consensus of the FASB Emerging Issues Task
Force” (“ASU 2009-14”). ASU 2009-14 amends the scope of pre-existing software
revenue guidance by removing from the guidance non-software components of
tangible products and certain software components of tangible products. ASU
2009-14 will be effective for the first annual reporting period beginning on or
after June 15, 2010, with early adoption permitted provided that the revised
guidance is retroactively applied to the beginning of the year of adoption. The
Company is currently assessing the future impact of this new accounting update
to its consolidated financial statements.





In
December 2009, the Financial Accounting Standards Board (“FASB”) issued an
accounting standard update for improvements to financial reporting by
enterprises involved with Variable Interest Entities.  The subsections
clarify the application of the General Subsections to certain legal entities in
which equity investors do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for the legal entity
to finance its activities without additional subordinated financial support [FIN
46(R), paragraph 1, sequence 55.1] or, as a group, the holders of the equity
investment at risk lack any one of the following three characteristics: [FIN
46(R), paragraph 1, sequence 55.2]




a.
              The
      power, through voting rights or similar rights, to direct the activities
      of a legal entity that most significantly impact
      the   entity’s economic performance [FIN 46(R), paragraph
      1, sequence 55.2.1]




b.
            The
      obligation to absorb the expected losses of the legal entity [FIN 46(R),
      paragraph 1, sequence 55.2.2]




c.
            The
      right to receive the expected residual returns of the legal entity. [FIN
      46(R), paragraph 1, sequence
55.2.3]




The
amendments in this update to the Accounting Standards Codification are the
result of FASB Statement No. 167, Amendments to FASB Interpretation No.
46(R).  The adoption of this update to improving the financial
reporting by enterprises involved with Variable Interest Entities, as codified
in ASC 810, did not have any impact on the Company’s financial
statements.




In
December 2009, the Financial Accounting Standards Board (“FASB”) issued an
accounting standard update, Transfers and Servicing (Topic 860) Accounting for
Transfers of Financial Assets.  The amendments in this update to the
Accounting Standards Codification are the result of FASB Statement No. 166,
Accounting for Transfers of
Financial Assets. The adoption of this update did not have any impact on
the Company’s financial statements.




Other
recent accounting pronouncements issued by the FASB, the American Institute of
Certified Public Accountants ("AICPA"), and the SEC did not or are not believed
by management to have a material impact on the Company's present condensed
consolidated financial statements.





In
January 2010, the Financial Accounting Standards Board (“FASB”) issued an
accounting standard update, Fair Value Measurements and Disclosures (Topic 820),
Improving Disclosures about Fair Value Measurements.  The Update would
affect all entities that are required to make disclosures about recurring and
nonrecurring fair value measurements.  The Board concluded that users
will benefit from improved disclosures in this Update and that the benefits of
the increased transparency in financial reporting will outweigh the costs of
complying with the new requirements.  The new disclosures and
clarifications of existing disclosures are effective for interim and annual
reporting periods beginning after December 15, 2009, except for the disclosures
about purchases, sales, issuances, and settlements in the roll forward of
activity in Level 3 fair value measurements.  Those disclosures are
effective for fiscal years beginning after December 30, 2010, and for interim
periods within those fiscal years.  The adoption of this update for
improving disclosures about fair measurements, as codified in ASC 820 did not
have any impact on the Company’s financial statements.




In
January 2010,  the Financial Accounting Standards Board (“FASB”)
issued an accounting standard update to address implementation issues related to
the changes in ownership provisions in the Consolidation—Overall Subtopic
(Subtopic 810-10) of the FASB
Accounting Standards CodificationTM, originally issued as FASB Statement
No. 160, Noncontrolling
Interests in Consolidated Financial Statements.Subtopic 810-10
establishes the accounting and reporting guidance for noncontrolling interests
and changes in ownership interests of a subsidiary. An entity is required to
deconsolidate a subsidiary when the entity ceases to have a controlling
financial interest in the subsidiary. Upon deconsolidation of a subsidiary, an
entity recognizes a gain or loss on the transaction and measures any retained
investment in the subsidiary at fair value. The gain or loss includes any gain
or loss associated with the difference between the fair value of the retained
investment in the subsidiary and its carrying amount at the date the subsidiary
is deconsolidated. In contrast, an entity is required to account for a decrease
in its ownership interest of a subsidiary that does not result in a change of
control of the subsidiary as an equity transaction.




While
Subtopic 810-10 provides general guidance on accounting for the decreases in
ownership of a subsidiary, including a deconsolidation, some constituents raised
concerns that the guidance appears to conflict with the gain or loss treatment
or derecognition criteria of other U.S. generally accepted accounting principles
(GAAP), such as the guidance for sales of real estate, transfers of financial
assets, conveyances of oil and gas mineral rights, and transactions with equity
method investees.


49


Some
constituents also questioned whether the Board intended for the decrease in
ownership provisions of Subtopic 810-10 to apply to all entities because a
subsidiary is defined as an entity, including an unincorporated entity such as a
partnership or trust, in which another entity, known as its parent, holds a
controlling financial interest. Those constituents were concerned that such an
interpretation could result in the accounting for a transaction being driven by
its form rather than its substance. For example, different accounting might be
applied to a transaction involving the same underlying assets depending on
whether those assets were transferred in asset or entity form.” The amendments
in this update are effective beginning in the period that an entity adopts
Statement 160 (now included in Subtopic 810-10).  If an entity has
previously adopted Statement 160 as of the date of the amendments in this update
are included in the Accounting Standards Codification, the amendments in this
update are effective beginning in the interim or annual reporting period ending
on or after December 31, 2009.  The amendments in this update should
be applied retrospectively to the first period that an entity adopted
160.  The adoption of this update for the changes in the accounting
and reporting guidance for noncontrolling interests and changes in ownership
interests of a subsidiary, as codified in ASC 810-10, did not have any impact on
the Company’s financial statements.





Other
recent accounting pronouncements issued by the FASB, the American Institute of
Certified Public Accountants ("AICPA"), and the SEC did not or are not believed
by management to have a material impact on the Company's present condensed
consolidated financial statements.





NOTE 3-
            RECEIVABLE –
      OTHER





Other
receivables at December 31, 2009 and 2008 by major classification were comprised
of the following:




2009
                
                
                2008Advances
                
                $
                1,364,426
                
                
                $
                2,934,532Prepayments
      to suppliers
                
                
                8,298,235
                
                
                
                2,169,684Other
      short-term receivable
                
                
                887,623
                
                
                
                1,984,013Total
                
                $
                10,550,284
                
                
                $
                7,088,229





The
advances to employees consist of salary advances to employees, loans to
employees, and advances to employees for business related expenses.  Under
Vietnamese culture, some wages to employees are paid during the national
holidays and other times of year. As of December 31, 2009 and December 31, 2008,
the related payables to employees were $4,215,547 and $3,890,975. For many of
Cavico’s construction employees, accrued wages are paid at the national holidays
when workers can return home.  Salary advances area made to these employees
during the year for living expenses.




The
amount of prepayment to suppliers has significantly increased at December 31,
2009 compared to 2008. The Company commenced new construction contracts that
require the Company to pay its suppliers in advance during the year 2009. As the
contract progresses, the prepayments are expensed over the contract
term.





NOTE 4-
            INVENTORY




Inventories
at December 31, 2009 and 2008 by major classification, were comprised of the
following:




2009
                    
                    
                    2008Goods
      in transit
                    
                    $
                    589,122
                    
                    
                    $
                    593,574Material
      and supplies
                    
                    
                    2,456,457
                    
                    
                    
                    2,456,948Tools,
      instruments
                    
                    
                    106,666
                    
                    
                    
                    49,356Merchandises
                    
                    
                    968,585
                    
                    
                    
                    495,842Inventory
      reserve
                    
                    
                    (6,755
                    )
                    
                    
                    (175,338
                    )Inventory
      – net
                    
                    $
                    4,114,075
                    
                    
                    $
                    3,420,382




The
reserve for inventory was evaluated as of December 31, 2009 based on the
analysis of aging and movement of inventory. As a result, the reserve for
inventory was reduced by $168,583 as less than 1% of the inventory is over 180
days old.  The Company determined that the reserve for inventory is
adequate at December 31, 2009.


50


NOTE
5- OTHER CURRENT ASSETS




Other
current assets at December 31, 2009 and  2008 by major classifications
were comprised of the following:




2009
                
                
                2008Prepaid
      loan interest
                
                $
                15,373
                
                
                $
                282,690Other
      prepaid expenses
                
                
                608,295
                
                
                
                216,781Tools
      and instruments
                
                
                679,313
                
                
                
                400,256Deductible
      Value Added Tax
                
                
                382,132
                
                
                
                280,962Other
      current assets
                
                
                520,802
                
                
                
                242,993TOTAL
                
                $
                2,205,915
                
                
                $
                1,423,682




Tools and
instruments which do not meet the accounting policy to be classified in property
and equipment are included in other current assets and amortized over 12 months.
These amounts were $1,054,078 and $1,015,569 for the year ended December 31,
2009 and, 2008, respectively and are amortized over 2 to 4 years. The remaining
non-current prepaid expenses of $552,875 and $710,092 as of December 31, 2009
and 2008 are amortized over 2 to 4 years based on the benefiting periods. The
Company recognized amortization expenses of $1,435,806 and $891,285 from these
non-current prepaid expenses for the year ended December 31, 2009 and 2008,
respectively.




NOTE
6 – INVESTMENTS IN NON-CONSOLIDATED COMPANIES AND JOINT STOCK
COMPANYIES




Equity MethodInvestment —Cavico Mining and Construction
JSC




The
Company’s investment amount is $1,239,851 and $1,461,292 as of December 31,
2009 and 2008, respectively. The Company’s share of income and losses is 25.55%
as of December 31, 2009 and 2008. During the years ended December 31, 2009
and 2008, the Company recorded loss of $141,477 and income of $130,131,
respectively as its proportionate share of income (loss) in the joint stock
company.


The
following is the condensed financial position and results of operations of
Cavico Mining as of and for the years ended presented below:


December 31,
                              
                              
                              December 31,2009
                              
                              
                              2008Financial
      position:Current
      assets
                              
                              $
                              15,375,000
                              
                              
                              $
                              11,795,000Property
      and equipment, net
                              
                              $
                              3,444,000
                              
                              
                              $
                              4,538,000Total
      assets
                              
                              $
                              22,314,000
                              
                              
                              $
                              19,078,000Liabilities
                              
                              $
                              14,938,000
                              
                              
                              $
                              11,440,000Equity
                              
                              $
                              7,376,000
                              
                              
                              $
                              7,638,,000Operations:Net
      revenue
                              
                              $
                              8,987,000
                              
                              
                              $
                              9,042,000Expenses
                              
                              $
                              (8,740,000
                              )
                              
                              $
                              (8,162,000
                              )Interest
      income
                              
                              $
                              317,000
                              
                              
                              $
                              138,000Net
      income
                              
                              $
                              495,000
                              
                              
                              $
                              569,000




The above
financial information does not include any inter-company adjustments and
adjustments required under US GAAP related to reserves for uncollectible assets
in the amount of $1,000,618 and $21,215 for the year ended December 31, 2009 and
2008, respectively.


51


Investment
in companies, cost method;




Investee
companies not accounted for under the consolidation or the equity method of
accounting are accounted for under the cost method. Under this method, the
Company’s share of the earnings or losses of such investee companies is not
included in the consolidated balance sheet or statement of operations. However,
impairment changes are recognized in the consolidated statement of operations.
The Company classifies as “Investments, cost method” in which the Company has
less than a 20% interest and in which it does not have the ability to exercise
significant influence over the investee. These investments are in private
companies, which are carried at the lower of cost or net realized value. The
estimated aggregate fair value of these investments approximated their carrying
amount. The fair value of these investments were estimated based on a
combination of the most recent financing and securities transactions and on
other pertinent information, including financial condition and operating results
of the investees. These investments are initially recorded at cost and reviewed
at the end of each quarter for other than temporary impairment and discloses the
impairment when the fair value of the investment is less than 95% of the
amortized cost and has been in a continuous unrealized loss position for more
than 12 months or at any time when immediate impairment is apparent. The review
for impairment procedures include review of the financial reports, discussion
with the investee’s officers, on-site visit, trends and prospects, relevant
economic factors and review of investee company operations on website, if
available. The Company determined that the impairment was temporary for some
investments whose fair values were measured below the cost. Therefore, as of
December 31, 2009 and 2008, no impairment was necessary. The Company invested
$386,111and $131,591
in various companies during 2009 and 2008, respectively.




During
the year ended December 31, 2009, the Company withdrew its investments of
$67,739 in Agriculture Construction Corporation, $80,422 in Nam Viet Investment
and Consultant JSC,  $19,545 in Lilamavico Joint Venture and recorded
$28,561 loss on the sale of the investments. During the year ended December 31,
2009, one of our investees, Vietnam Power Investment and Development JSC became
public and was reclassified to available for sale security.During the
year ended December 31, 2008, we withdrew our investment of $124,116 in
Vietravico as this company was not formed and received our investment back.
There was no sale of investments during the year ended December 31,
2008.




The cost
basis at December 31, 2009 and 2008 and the fair value at December 31, 2009
consisted of the following:




2009
                        
                        
                        2008
                        
                        
                        FairValue at
                          Dec 31,20091.
      Agriculture Construction Corporation
                        
                        $
                        -
                        
                        
                        $
                        67,739
                        
                        
                        $
                        
                        (a)2.
      Tour Zones Investment and Construction JSC  *
                        
                        
                        553,436
                        
                        
                        
                        581,610
                        
                        
                        
                        385,312
                        (b)(e)3.
      Vietnam Power Investment and Development JSC *
                        
                        
                        -
                        
                        
                        
                        238,3894.
      Mai Son Cement Joint Stock Company
                        
                        
                        434,758
                        
                        
                        
                        459,445
                        
                        
                        
                        539,870
                        (b)5.
      Van Chan Hydropower Company
                        
                        
                        27,869
                        
                        
                        
                        29,452
                        
                        
                        
                        (a)6.
      Ha Tay Investment and Development JSC
                        
                        
                        13,377
                        
                        
                        
                        14,137
                        
                        
                        
                        (a)7.
      Businessman Culture Development JSC
                        
                        
                        27,869
                        
                        
                        
                        29,452
                        
                        
                        
                        (a)8.
      Vietnam Media Financial JSC
                        
                        
                        108,037
                        
                        
                        
                        114,172
                        
                        
                        
                        108,162
                        (b)9.
      Vietnam Industry Investment and Construction JSC
                        
                        
                        55,738
                        
                        
                        
                        58,903
                        
                        
                        
                        (a)10.
      Nam Viet Investment and Consultant JSC
                        
                        
                        -
                        
                        
                        
                        80,422
                        
                        
                        
                        (a)11.
      Sao Mai-Ben Dinh Petrolium Investment JSC
                        
                        
                        557,383
                        
                        
                        
                        589,032
                        
                        
                        
                        674,203
                        (b)12.
      IDICO Industry Zone Investment Development JSC
                        
                        
                        8,361
                        
                        
                        
                        8,835
                        
                        
                        
                        (a)13.
      Vietnam Power Development JSC
                        
                        
                        55,738
                        
                        
                        
                        58,903
                        
                        
                        
                        (a)14.
      IDICO Long Son Petroleum Industry Zone Investment
                        
                        
                        111,477
                        
                        
                        
                        117,806
                        
                        
                        
                        179,206
                        (b)15.
      Nhan Tri JSC
                        
                        
                        13,935
                        
                        
                        
                        14,726
                        
                        
                        
                        (a)16.
      North and South Investment Development JSC
                        
                        
                        5,574
                        
                        
                        
                        5,890
                        
                        
                        
                        (a)17.
      Lilamavico Joint Venture
                        
                        
                        -
                        
                        
                        
                        19,545
                        
                        
                        
                        (a)18.
      Vietnam Design JSC
                        
                        
                        15,049
                        
                        
                        
                        15,904
                        
                        
                        
                        (a)19. Song
      Tranh Hydropower JSC
                        
                        
                        2,787
                        
                        
                        
                        2,945
                        
                        
                        
                        (a)20. Kasvina
      JSC
                        
                        
                        102,124
                        
                        
                        
                        75,526
                        
                        
                        125,524
                        (c)21. Vietnam
      Anti-counterfeit and trading promotion JSC
                        
                        
                        11,148
                        
                        
                        
                        11,781
                        
                        
                        
                        (a)22. Song
      Thanh Hydropower JSC
                        
                        
                        27,869
                        
                        
                        
                        -23. MuongHom
      Mining JSC
                        
                        
                        354,848
                        
                        
                        
                        -
                        
                        
                        
                        (d)24. Ha
      An Trading Industry Ltd
                        
                        
                        3,394
                        
                        
                        
                        -25.
      Others
                        
                        
                        4,765
                        
                        
                        
                        4,977
                        
                        
                        
                        (a)TOTAL
                        
                        $
                        2,495,536
                        
                        
                        $
                        2,599,592


* Related entity by common
directors.




(a) For
investments under $100,000, the Company reviews all available general financial
information to determine
if impairment isnecessary.  It
was not practical to measure the fair value.




(b)
Fair value was calculated using average PE ratios and expected income estimated
based on average rate of return on assets and discounted at 40% in comparable
public companies in the same industry in Vietnam as these companies were in
various stages of startup.


52




(c) Fair
value was calculated using average PE ratios and expected income estimated based
on average rate of return on equity discounted at 40% in comparable public
companies in the same industry in Vietnam as this company is in the development
phase. Using average rate of return on assets in the comparable companies
resulted in higher fair value.




(d) It
was not practical to measure the fair value of this company since the financial
statements were not available as the company is in the process of
formation.




(e) The
decrease in fair value less than 95% of investment, using average PE ratios and
expected income based on average rate of return on assets from comparable
companies, was less than 6 months. Using net present value of expected cashflow,
the fair value is estimated to be $569,295.





NOTE
7- INVESTMENTS, AVAILABLE FOR SALE




Assets
measured at fair value on a recurring basis are summarized below. The Company
has no financial liabilities measured at fair value on a recurring
basis.




December
      31, 2009
                
                Level 1
                
                
                Level 2
                
                
                Level 3
                
                
                TotalAvailable-for-sale
      securities
                
                $
                1,062,433
                
                
                $
                1,649,479
                
                
                $
                -
                
                
                $
                2,711,912





Available-
for- sale securities consisted of the following at December 31,
2009:




Common Stock:
                
                Number of
                  shares
                
                
                Cost
                
                
                Fair Value
                
                
                Accumulated
                  unrealized
                  gain/(loss)PHI
      Group, Inc. (formerly Providential Holdings, Inc.)
                
                
                2,000,000
                
                
                $
                60,000
                
                
                $
                120,000
                
                
                $
                60,000Habubank
      Stock*
                
                
                659,995
                
                
                
                574,735
                
                
                
                459,837
                
                
                
                (114,898
                )Vinavico*
                
                
                470,200
                
                
                
                632,511
                
                
                
                786,244
                
                
                
                153,733Vietnam
      Growth Investment Fund (VF2)*
                
                
                2,000,000
                
                
                
                1,131,487
                
                
                
                869,181
                
                
                
                (262,306
                )Military
      Bank Stock
                
                
                215,332
                
                
                
                363,893
                
                
                
                320,460
                
                
                
                (43,433
                )Vietnam PowerInvestmentand
      Development**
                
                
                389,194
                
                
                
                225,580
                
                
                
                156,190
                
                
                
                (69,390
                )Total
      Securities
                
                
                
                
                
                $
                2,988,206
                
                
                $
                2,711,912
                
                
                $
                (276,294
                )


*
Collateral for notes payable




**This
company became public in July 2009, quoted under symbol VPC at UPCOM – HaNoi
Stock Exchange.




The
Company’s short-term investments comprise equity and debt securities, all of
which are classified as available-for-sale securities. These securities are
carried at their fair market value based on either quoted market prices of the
securities, and/or trading prices of over the counter market. VF2 securities
were measured by HSBC Bank at December 31, 2009.  Net realized gains
and losses are included in net earnings while unrealized gains and losses are
included in other comprehensive income for available for sale securities. For
purpose of determining realized gains and losses, the cost of securities sold is
based on specific identification. The Company reviews the securities for
possible other than temporary impairment when the fair value of security is less
than 95% of the amortized cost and has been in a continuous unrealized loss
position for more than 12 months.  If the investment market value has
been less than 75% of cost longer than 12 months, impairment will be recognized
to reduce the value of investment to the market value unless immediate
impairment is apparent. For PHI Group, Inc., the market value of these
securities had declined by 40% and due to poor financial results  it was
determined that Company’s would not recover its original cost of the investment
at December 31, 2009.  In addition, Habubank Stock had a significant
decline in the market value by 61% and due to poor finance industry market in
Vietnam, the recovery of the original cost of the investment was not anticipated
at December 31, 2009. Based on the evaluation of the securities’ fair
value, the Company wrote down $40,000 for PHI Group, Inc. and $935,724 for
Habubank Stock as these reductions appeared to be other than temporary as these
securities were in unrealized loss position for more than 12 months. These
impairment changes were recognized in the consolidated statement of
operations.  The Company’s determination for impairment
on  the available-for-sale securities are based on evaluations of
performance indicators of the underlying assets in the securities, industry
analyst reports, volatility of the securities’ fair value and other relevant
information.





During
the year ended December 31, 2009, the Company sold 300,000 shares of Military
Bank and 29,995 shares of Habubank. The company recorded $143,634 loss on
the sale of the securities using average cost method. The Company purchased
159,525 shares of Military Bank during the year ended December 31,
2009.


53





Available-for-sale
securities consisted of the following at December 31, 2008:




Common Stock:
                
                Number of
                  shares
                
                
                Cost
                
                
                Fair Value
                
                
                Accumulated
                  unrealized
                  gain/(loss)Providential
      Holdings, Inc.
                
                
                2,000,000
                
                
                $
                100,000
                
                
                $
                40,000
                
                
                $
                (60,000
                )Habubank
      Stock
                
                
                630,000
                
                
                
                1,549,155
                
                
                
                332,230
                
                
                
                (1,216,925
                )Vinavico
                
                
                470,200
                
                
                
                668,427
                
                
                
                340,223
                
                
                
                (328,204
                )Vietnam
      Growth Investment Fund (VF2)
                
                
                2,000,000
                
                
                
                1,195,735
                
                
                
                685,553
                
                
                
                (510,182
                )Military
      Bank Stock
                
                
                355,807
                
                
                
                828,589
                
                
                
                296,724
                
                
                
                (531,865
                )Military
      Bank Bond
                
                
                150,700
                
                
                
                133,145
                
                
                
                125,676
                
                
                
                (7,469
                )Total
      Securities
                
                
                
                
                
                $
                4,475,051
                
                
                $
                1,820,406
                
                
                $
                (2,654,645
                )





The
Company recorded $439,934 loss using average method on sales of marketable
securities during the year ended December 31, 2008.





NOTE
8 – INTANGIBLE ASSETS




Intangible
assets consist of goodwill and licenses for land use rights.  Net
intangible assets at December 31, 2009 and 2008 are as follows:




2009
                
                
                2008Goodwill
                
                $
                727,073
                
                
                $
                767,004Amortizable
      Intangible Assets:Licenses
      for land use rights
                
                
                313,149
                
                
                
                330,930Less
      Accumulated amortization
                
                
                (57,274
                )
                
                
                (29,046
                )Amortizable
      Intangibles, net
                
                
                255,875
                
                
                
                301,884Total
      Intangible Assets
                
                $
                982,948
                
                
                $
                1,068,888




The
Company recorded goodwill when the Company purchased stock at a premium from the
minority shareholders in its subsidiaries, These stock purchases were accounted
for using purchase  method. The changes in goodwill was resulted in
fluctuation of  foreign exchange rates between 2008 and 2009. The
Company has license for land use rights from Hanoi Home Investment and
Development Department and City of Hanoi. The land use rights are amortized over
a period of 50 years. Amortization expenses for the Company’s intangible assets
for the years ended December 31, 2009 and 2008 were $26,675 and $32,065,
respectively.




NOTE
9- OTHER ASSETS




Other
assets consist of deposits and other assets. Other assets at December 31, 2009
and 2008 are as follows:




2009
                        
                        
                        2008Deposits
                        
                        $
                        604,360
                        
                        
                        $
                        438,672Other
      long-term receivable
                        
                        
                        1,525,689
                        
                        
                        
                        264,631Total
                        
                        $
                        2,130,049
                        
                        
                        $
                        703,303





The
increase in other assets in 2009 mainly due to an increase in long-term loans
receivable reclassified from advances by $693,801.Deposits made by the Company
for bidding on contracts are held at a Bank  in the
Company’s  name and returned to the Company whether or not contract is
awarded. The restricted cash amounting $604,360 and $438,672 as of December 31,
2009 and 2008, respectively were recorded in other assets.




NOTE
10 – ACCRUED EXPENSES




Accrued
expenses consisted of the following at December 31, 2009 and
2008:


54




2009
                
                
                2008Accrued
      interest
                
                $
                647,906
                
                
                $
                546,409Accrued
      taxes
                
                
                5,610,411
                
                
                
                3,481,356Other
      accrued Expenses
                
                
                464,326
                
                
                
                176,200TOTAL
                
                $
                6,722,643
                
                
                $
                4,203,965




NOTE
11 – ADVANCES FROM CUSTOMERS




Advances
from customers represent the payments received from customers on the contract on
which the work has not been performed or reduced by billed amount. As of
December 31, 2009 and 2008, the Company had current balances of $6,887,558 and
$3,762,026, respectively and long-term amount of $10,858,809 and $10,652,992 as
of December 31, 2009 and 2008, respectively.




NOTE
12 – PAYABLE TO EMPLOYEES




It is
customary in Vietnam that some wages to employees are paid during the national
holidays and other times a year. As of December 31, 2009 and 2008, the payable
to employees were $4,215,547 and $3,890,975.  The Company recorded
payroll expenses for salaries and wages of $2,505,291 and $2,313,399 in
administration expenses and of $10,207,140 and $5,832,455 in cost of goods sold
for the years ended December 31, 2009 and 2008, respectively.




NOTE 13- CAPITAL LEASE
OBLIGATIONS




The
Company is a lessee of certain equipment under capital leases that expire on
various dates through September 2014. Terms of the leases call for quarterly
payments from $1,944 to $10,407 at implicit interest rates of 12% per annum (the
incremental borrowing rate).  The assets and liabilities under capital
leases are recorded at lease inception at the lower of the present value of the
minimum lease payments or the fair market value of the related
assets.  The assets are depreciated over their estimated useful
lives.




Minimum
future lease payments under current lease agreements at December 31, 2009 are as
follows:




2010
              
              $
              435,5402011
              
              
              401,1762012
              
              
              325,5182013
              
              
              220,7922014
              
              
              73,774Total
      minimum lease payments
              
              
              1,456,800Less:
      amount representing interest
              
              
              (308,966
              )Present
      value of net minimum lease payments
              
              
              1,147,834Less:
      current portion
              
              
              (289,199
              )Long-term
      portion
              
              $
              858,635





The
following is an analysis of the equipment under capital leases as of December
31, 2009 and 2008, which is included in property and equipment:




2009
                
                
                2008Equipment
      and vehicles
                
                $
                1,653,823
                
                
                $
                489,405Less
      accumulated depreciation
                
                
                (153,845
                )
                
                
                (24,345
                )Net
                
                $
                1,499,978
                
                
                $
                465,060





Depreciation
expenses on the equipment under capital leases for the years ended December 31,
2009 and 2008 were $129,500 and $36,575 respectively.


55


NOTE
14 – RENTAL OF VEHICLES




The
Company generated income from rental of vehicles. The vehicles rented of
available for rental as of December 31, 2009 and 2008 are as
follows:




2009
                
                
                2008Vehicles
                
                $
                47,477
                
                
                $
                50,173Less
      accumulated depreciation
                
                
                (38,622
                )
                
                
                (33,648
                )Net
                
                $
                8,855
                
                
                $
                16,525





The
company and its subsidiaries did not have any rental revenue from non-cancelable
leases.




Cancelable
rentals included in income for the years ended December 31, 2009 and 2008
are $7,110 and $4,961, respectively.




NOTE
15 - COMMITMENTS AND CONTINGENCIES





Operating
Rental Leases




The
Company leases its office and warehouse facilities in Hanoi, Vietnam from
various lessors under operating leases that require minimum monthly payments of
approximately $41,400.  The leases, which require the Company to pay
property taxes and maintenance,  expire on December 31, 2010, January
23, 2011, October 25, 2011, November 1, 2011 and April 15, 2016. For the years
ended December 31, 2009 and 2008, building rent expenses were $483,112 and
$420,691, respectively.




The
Company’s principal executive offices in the United States are leased on a month
to month basis which is included in a monthly management fee of $2,000 which
includes use of office space, equipment and administrative services. These
offices are made available to the Company under the terms of a Management
Services Agreement dated May 15, 2006, with PHI Group, Inc. For the years ended
December 31, 2009 and 2008, the Company recorded management fees
of  $24,000 for each year.




Future
minimum operating lease payments for long term operating leases are as
follows:




Year Ending December 31,
                      
                      Total Lease2010
                      
                      $
                      497,1122011
                      
                      $
                      82,4452012
                      
                      
                      48,0002013
                      
                      
                      48,0002014
                      
                      
                      48,000Thereafter
                      
                      
                      62,000Total
                      
                      $
                      785,557





Long
term land lease




Cavico Tower, a subsidiary of the
Company has a land lease agreement which expires year 2055 in
Hanoi.  The annual lease payment is $2,953.  Future minimum  lease
payments relating to this lease are as follows:




Year Ending December 31,
                  
                  Total Lease2010
                  
                  
                  2,9532011
                  
                  
                  2,9532012
                  
                  
                  2,9532013
                  
                  
                  2,9532014
                  
                  
                  2,953Thereafter
                  
                  
                  121,073Total
                  
                  $
                  135,838





Environmental
Remediation Costs




The
Company had no environmental remediation obligation under the current regulation
in Vietnam as of December 31, 2009 and 2008.


56




Tax
Liabilities




The
Company filed its tax returns based on the subsidiaries’ income and loss. The
final tax liability will be determined by the tax authority of
Vietnam.




Litigation




The
Company may be involved from time to time in various claims, lawsuits, and
disputes with third parties, actions involving allegations or discrimination or
breach of contract actions incidental in the normal operations of the business.
The Company is currently not involved in any such litigation which management
believes could have a material adverse effect on its financial
position.




Credit Limit on Notes




The
Company maintains approximately $45.3 million in short term lines of credit with
various banks. The average interest rate on these lines of credit is 11.4%,
although it may vary based on market conditions. These credit lines mature
throughout 2009 and management expects to renew and extend its credit lines as
they become due. As of December 31, 2009 and 2008, the outstanding balances were
$33,606,015 and $27,213,250, respectively.




Contract
under Guarantee




The
Company has several contracts under guarantee.  These guarantees are
made through the banks to meet certain conditions under the contracts with
customers. The Company pays the guarantee fees to banks, normally 1.0% to 2%
annually of guaranteed amount. These fees are recorded in general and
administrative expenses. For the years ended December 31, 2009 and 2008, these
fees totaled $321,639 and $347,168, respectively.




The
Company has guaranteed a loan with line of credit for approximately $3.8 million
and $5.6 million for Cavico Mining, an equity investment entity, as of December
31, 2009 and December 31, 2008, respectively. The loan balances as of December
31, 2009 and December 31, 2008 were $3,337,129 and $2,128,859, respectively. The
Company also had a receivable from Cavico Mining for $7,070,665 and $3,826,533
as of December 31, 2009  and December 31, 2008, respectively and
payable to Cavico Mining for $1,190,716 and $155,347 as of December 31,
2009  and December 31, 2008, respectively.




NOTE
16 - NOTES PAYABLE


Notes
payable consisted of the following at December 31, 2009 and 2008:




2009
                          
                          
                          2008Notes
      payable to Hanoi Building Commercial Joint Stock Bank*, unsecured, annual
      interest rates ranging from 10.5% to 12%, maturity dates ranging from
      January 21, 2010 to  December 31, 2010.
                          
                          $
                          5,570,194
                          
                          
                          $
                          5,721,798Notes
      payable to Hanoi Building Commercial Joint Stock Bank, secured by
      machinery and equipment, annual interest rate of 10.5%, matures on August
      15, 2010 and June 25, 2012
                          
                          
                          125,132
                          
                          
                          
                          1,452,718Notes
      payable to Agribank - Eastern Hanoi Branch*, unsecured, annual interest
      rate of 10.5% and 11.5%, matures on August 31, 2010 and September 28,
      2012.
                          
                          
                          3,728,889
                          
                          
                          
                          3,571,408Notes
      payable to Agribank - Tu Liem Branch*, unsecured, annual interest rates
      ranging from 10.5% to 12%, maturity dates ranging from January 11, 2010 to
      November 22, 2010.
                          
                          
                          5,501,474
                          
                          
                          
                          5,359,843Notes
      payable to Agribank - Tu Liem Branch, secured by machinery and equipment,
      annual interest rate of 12%, matures on April 16, 2012
                          
                          
                          780,001
                          
                          
                          
                          830,801Notes
      payable to Military Commercial Joint Stock Bank*, secured by machinery,
      equipment, annual interest rate of 10.5%, matures on June 28, 2010
      and July 14, 2010.
                          
                          
                          1,011,468
                          
                          
                          
                          837,859Notes payable toMilitary Commercial Joint Stock Bank, secured by machinery, equipment, annual
      interest rates ranging from 10.5% to 15%, maturity dates ranging from
      December 31, 2010 to  May 17, 2017
                          
                          
                          2,715,668
                          
                          
                          
                          3,187,975Notes
      payable to North Asia Commercial Joint Stock Bank - Nghe An Branch,
      secured by VF2 Fund Certificate, annual interest rate of 12.75%, matures
      on December 31, 2009, Currently negotiating to extend maturity date to
      June 30, 2010
                          
                          
                          1,950,839
                          
                          
                          
                          2,061,612Notes
      payable to Agribank - Northern Hanoi Branch*, unsecured, annual interest
      rates ranging from 10.5% to 12%,  maturity dates ranging from
      January 22, 2010 to October 29, 2010.
                          
                          
                          9,841,978
                          
                          
                          
                          9,679,137


57




Notes
      payable to Agribank - Northern Hanoi Branch, secured by machinery and
      equipment, interest rate of 10.5% and 11.5%, maturity dates ranging from
      October 25, 2010  to September 11, 2013.
                  
                  
                  1,091,268
                  
                  
                  
                  1,103,440Notes
      payable to Agribank - Southern Hanoi Branch, secured by machinery and
      equipment, annual interest rate of 18%, matures on December 17,
      2009.
                  
                  
                  -
                  
                  
                  
                  493,756Notes
      payable to BIVD – Son La Branch*,unsecured, annual interest rate of 12%,
      matures on September 21, 2010.
                  
                  
                  26,369
                  
                  
                  
                  186,085Notes
      payable to BIVD – Son La Branch, secured by machinery and equipment,
      annual interest rate of 10.5%, matures on August 8, 2010.
                  
                  
                  38,627
                  
                  
                  
                  77,576Notes
      payable to Agribank - Hoang Mai Branch*, unsecured,  annual
      interest rate of 10.5%, matures on April 24, 2010 and June 30,
      2010
                  
                  
                  4,867,475
                  
                  
                  
                  3,715,132Notes
      payable to Agribank-Hoang Mai Branch, secured by machinery and equipment,
      annual interest rate of 10.5%, matures on September 7,
    2012.
                  
                  
                  2,166,399
                  
                  
                  
                  1,938,877Notes
      payable to Saigon Commercial JS Bank, secured by machinery and equipment,
      annual interest rate of 13.2%, matured on November 1, 2009, paid off on
      February 5, 2010.
                  
                  
                  62,892
                  
                  
                  
                  125,366Notes
      payable to BIDV - North Hanoi Branch, secured by machinery and equipment,
      annual interest rate of 10.5%, matures on March 25, 2012
                  
                  
                  514,666
                  
                  
                  
                  676,423Notes
      payable to VID Public Bank*, unsecured, annual interest rate of 10.5%,
      matures on June 10, 2010
                  
                  
                  2,787
                  
                  
                  
                  8,835Notes
      payable to Housing Development Bank*, unsecured, annual interest rate of
      10.5%, matures on September 14, 2012
                  
                  
                  26,113
                  
                  
                  
                  37,845Notes
      payable to Vinashin Financial Company*, unsecured, annual interest rate of
      10.5%, matured on January 7, 2010, paid off on April 5,
    2010.
                  
                  
                  557,383
                  
                  
                  
                  589,032Notes
      payable to Petroleum Financial Company*, unsecured, annual interest rate
      of 10.8%, matured on December 31, 2008..
                  
                  
                  -
                  
                  
                  
                  543,264Notes
      payable to Petroleum Financial Company , secured by machinery and
      equipment, annual interest rate of 10.5%, matures on March 18, 2010.
      Currently negotiating to extend maturity date to June 30,
      2010.
                  
                  
                  40,277
                  
                  
                  
                  127,693Notes
      payable to Vietnam Development Bank - Thua Thien Hue Branch, secured by
      machinery and equipment, annual interest rate of 10.08%, matures on April
      23, 2010.
                  
                  
                  1,672,148
                  
                  
                  
                  1,178,064Notes
      payable to Thang Long Securities JSC, secured by stock of subsidiaries,
      annual interest rate of 17.4%, matures on March 18, 2010
                  
                  
                  65,034
                  
                  
                  
                  618,484Notes
      payable to Agribank – Hoang Quoc Viet branch*, unsecured, annual interest
      rate ranging from 10.5% to 12%, maturity dates ranging from January 8,
      2010 to November 30, 2010.
                  
                  
                  5,733,534
                  
                  
                  
                  4,492,027Notes
      payable to Agribank – Hoang Quoc Viet branch, secured by machinery and
      equipment, annual interest rate of 10.5%, matures on December 31, 2011 and
      July 31, 2012.
                  
                  
                  932,966
                  
                  
                  
                  1,269,198Notes
      payable to Agribank - Muong La branch*, unsecured, annual interest rate of
      10.5%, matures on June 23, 2010
                  
                  
                  389,792
                  
                  
                  
                  200,271Notes
      payable to Global Petrolium JS Bank, secured by machinery and equipment,
      annual interest rate of 10.5%, matured on December 16, 2009, paid off on
      March 29, 2010.
                  
                  
                  40,620
                  
                  
                  
                  47,123Notes
      payable to Techcombank, secured by machinery and equipment, annual
      interest rate of 10.5% and 15.2%, matures on October 27, 2011 and April 3,
      2012.
                  
                  
                  69,208
                  
                  
                  
                  84,781Notes
      payable to AnBinh JS bank, secured by machinery and equipment, annual
      interest rate of 10.5%, matures on July 20, 2011
                  
                  
                  28,751
                  
                  
                  
                  14,726Notes  payable
      to SEA bank – Dong Da branch, secured by machinery and equipment, annual
      interest rate of 10.5%, matures on June 1, 2012.
                  
                  
                  57,768
                  
                  
                  
                  -Notes  payable
      to Vietnam-Russia JV Bank, unsecured, annual interest rate of 10.5%,
      matures on February 23, 2009 and June 26, 2010. Currently negotiating to
      extend maturity date to April 30, 2010.
                  
                  
                  1,835,140
                  
                  
                  
                  -


58




Notes  payable
      to Eastern Bank – Khanh Hoa, unsecured, annual interest rate of 10.5%,
      matures on January 21, 2010
                          
                          
                          282,660
                          
                          
                          
                          -Notes  payable
      to VietinBank – Ha noi, secured by machinery, annual interest rate of
      10.5%, matures on July 4, 2010 and September 23, 2012
                          
                          
                          176,969
                          
                          
                          
                          -Notes  payable
      to VIB – Lam Dong, unsecured, annual interest rate of 10.5%, matures on
      December 31, 2010
                          
                          
                          274,529
                          
                          
                          
                          -Notes
      payable to various individuals, unsecured, annual interest rates ranging
      from 12% to 16.8%, matures on December 31, 2010 and December 31,
      2012
                          
                          
                          7,936,194
                          
                          
                          
                          4,305,481Total
      Notes Payable
                          
                          $
                          60,115,212
                          
                          
                          $
                          54,536,630ST
      Note payable and current portion of LT notes, weighted average interest
      rates of 11.4% for 2009 and 15.7% for 2008
                          
                          $
                          54,740,704
                          
                          
                          $
                          46,813,145Long-term
      Notes Payable
                          
                          $
                          5,374,508
                          
                          
                          $
                          7,723,485




*  The
bank must approve all funding and controls the use of funds.




Future
maturities on long-term debt as of December 31 are as follows:


2010
                
                $
                54,740,7042011
                
                
                2,424,9802012
                
                
                1,580,7792013
                
                
                520,1602014
                
                
                263,085Thereafter
                
                
                585,504$
                60,115,212




As of
December 31, 2009, the amounts of long-term and short term notes
payable are stated at contract amounts which approximate fair value based
on current interest rates of Vietnam.




NOTE
17 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS




The
Company had loans receivable in the amounts of $194,634 and $334,196, short term
advances of $790,049 and $714,658 and long-term advances of $55,738 and $0 from
various officers and directors of the Company as of December 31, 2009 and 2008,
respectively. The loans to officers were made with no interest, not secured and
due on demand.




The
Company had other payables of $9,896 and $20,520 to officers and directors of
the Company as of December 31, 2009 and 2008, respectively.




The
Company had loans payable to officers and directors of $220,091 and $208,667 as
of December 31, 2009 and 2008, respectively. These loans are unsecured, and due
on demand with annual interest from 12% to 24%.




The
Company has investments, which are accounted for on the cost method, in Vietnam
Power Investment and Development, JSC and Tour Zones Investment and Construction
JSC (Note 6). These entities share common directors with the
Company.




The
Company has guaranteed a loan with line of credit for approximately $3.8 million
and $5.6 million for Cavico Mining, an equity investment entity, as of December
31, 2009 and December 31, 2008, respectively. The loan balances as of December
31, 2009 and December 31, 2008 were $3,337,129 and $2,128,859, respectively. The
Company also had a receivable from Cavico Mining for $7,070,665 and $3,826,533
as of December 31, 2009  and December 31, 2008, respectively and
payable due to Cavico Mining for $1,190,716 and $155,347 as of December 31,
2009  and December 31, 2008, respectively.




NOTE
18 - STOCKHOLDERS’ EQUITY




On August
19, 2009, the Company affected a reverse stock split on a 40-for-1 basis. The
effect has been reflected retroactively in the historical financial
statements.




59




Preferred
Stock




The
Company has 25,000,000 authorized shares of blank check Preferred
Stock with $0.001 par value. As of December 31, 2009 and 2008, no shares of
Preferred Stock were issued and outstanding.




Common
Stock




The
Company has 300,000,000 authorized shares of Common Stock with $0.001 par value.
As of December 31, 2009 and 2008, 3,274,942 shares were issued, 3,047,795 shares
were outstanding.




The
Company accounts for the issuance of equity instruments to acquire goods and
services based on the fair value of the goods and services or the fair value of
the equity instrument at the time of issuance, whichever is more reliably
measurable.




During
the year ended December 31, 2008, the Company issued 1,250 shares of common
stock for legal services and 2,500 shares of common stock for consulting
services. The total fair market value of these shares on date of issuance was
$84,750.




During
the year ended December 31, 2008, the Company sold 125,000 shares of common
stock for cash at a price of $2.40 per share and received
$300,000.




2008
Stock Compensation Plan




In March
2009, the Board approved the 2008 Stock Award and Incentive Plan which was
subsequently approved by at a special meeting of shareholders on April 27,
2009.  The purpose of this Stock Award and Incentive Plan is to give
the Company a competitive advantage in attracting, retaining, and motivating
officers, employees, directors, and consultants and to provide us with an
incentive plan that gives officers, employees, directors, and consultants
financial incentives directly linked to shareholder value.




The
maximum number of shares that may be issued pursuant to incentive stock options
granted under the plan is 1,250,000.  The maximum number of shares of our
common stock that may be issued per individual pursuant to awards granted under
the Stock Award and Incentive Plan is 125,000. Options may be of two types:
Incentive Stock Options and Nonqualified Options. The Award Agreement for an
Option shall indicate whether the Option is intended to be an Incentive Stock
Option or a Nonqualified Option; provided,that any Option
that is designated as an Incentive Stock Option but fails to meet the
requirements, and any Option that is not expressly designated as intended to be
an Incentive Stock Option will be treated as a Nonqualified Option. The option
exercise price per share will be determined by the Committee and set forth in
the applicable Award Agreement, and will not be less than the Fair market value
of a share of the Common Stock on the applicable grant date.  The term
of each option will be fixed by the Committee, but will not exceed 10 years from
the grant date.  Options will be exercisable at terms and conditions
determined by the Committee.




The
Committee can issue Restricted Stock certificates to participant with an
appropriate legend referring to the terms, conditions, and restrictions
applicable to such Award with a condition for the vesting or transferability of
an Award of Restricted Stock upon the continued service of the applicable
participant or the attainment of performance goals. The conditions for grant,
vesting, or transferability and the other provisions of Restricted Stock Awards
need not be the same with respect to each participant. The participantwill have, with respect to Shares of Restricted Stock, all of the rights
of a shareholder of the Company holding the class or series of Common Stock that
is the subject of the Restricted Stock, including, if applicable, the right to
vote the shares and the right to receive any dividends and other
distributions.




As of the
issuance date of the report, there are no awards granted under the Stock Award
and Incentive Plan.




NOTE
19- INCOME TAX




Pursuant
to the tax laws of Vietnam, general enterprises are subject to income tax at an
effective rate of 25%. Each subsidiary files a separate tax return in
Vietnam.




In
addressing the realizability of deferred tax assets, management considers
whether is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences are deductible.




60




The
principal components of the Company’s income tax provision at December 31, 2009
and 2008 are as follows:




2009
                                          
                                          
                                          2008Current
      Taxes:US
      Federal
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -US
      State
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Vietnam
                                          
                                          
                                          447,295
                                          
                                          
                                          
                                          (2,392,347
                                          )Total
                                          
                                          $
                                          447,295
                                          
                                          
                                          $
                                          (2,392,347
                                          )Deferred
      Taxes:US
      Federal
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -US
      State
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Vietnam
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Total
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -




The
principal components of the Company’s deferred tax assets at December 31, 2009
and 2008 are as follows:




2009
                            
                            
                            2008U.S.
      operations loss carry forward at statutory rate
                            
                            $
                            1,049,976
                            
                            
                            $
                            626,590Non-U.S.
      operations loss carry forward at statutory rate
                            
                            
                            1,694,393
                            
                            
                            
                            1,318,920Total
                            
                            $
                            2,744,369
                            
                            
                            $
                            1,945,510Less
      Valuation Allowance
                            
                            
                            (2,744,369
                            )
                            
                            
                            (1,945,510
                            )Net
      Deferred Tax Assets
                            
                            $
                            -
                            
                            
                            $
                            -Change
      in Valuation allowance
                            
                            $
                            798,860
                            
                            
                            $
                            65,077




A
reconciliation of the statutory federal and state tax in the United States and
Vietnam income tax rates to the Company’s effective tax rates is as
follows:




2009
                
                
                2008Tax
      on income/loss using federal income tax rate
                
                $
                (1,713,668
                )
                
                $
                (332,187
                )Foreign
      tax rate difference
                
                
                453,618
                
                
                
                58,621Permanent
      difference
                
                
                2,506,205
                
                
                
                844,624PY
      accrual reversed in CY
                
                
                -
                
                
                
                (2,898,328
                )Change
      in valuation allowance
                
                
                (798,860
                )
                
                
                (65,077
                )Total
                
                $
                447,295
                
                
                $
                (2,392,347
                )




At
December 31, 2009 and 2008, the Company had net operating loss carry forwards
from US operation of $3,088,164 and $1,842,911, respectively. Since the Internal
Revenue Code limits the availability of net operating losses that arose prior to
certain cumulative changes in a corporation’s ownership resulting in a change of
control of the Company, the Company reserved 100% of the losses from US
operation as this tax asset will not be realized.




At
December 31, 2009 and 2008, the Company had net operating loss carry forwards
from Vietnam of approximately $6,777,574 and $4,710,427, respectively, which
were derived from subsidiaries with operating losses and will be available to
offset future taxable income.




These net
operating loss carry forwards expire through year 2015. The Company has
established a valuation allowance against its deferred tax asset, due to the
uncertainty of the realization of the asset. Management periodically evaluates
the recoverability of the deferred tax asset. At such time as it is determined
that it is more likely than not that deferred tax assets are realizable, the
valuation allowance will be reduced.




During
the year ended December 31, 2008, the Vietnamese tax authorities determined that
the Company’s tax obligation was lower than the Company’s originally estimated
amount. The Company estimates the tax obligation based on 28% under Vietnamese
law. During 2008, the Company recorded a tax benefit of $2,898,328 which was
offset against the 2008 tax expense of $551,396. The Company uses a gross method
to estimate the Company’s tax obligation assessed by Vietnam governmental
authorities on sales in the income statement.




NOTE
20- SEGMENT REPORTING




The
management approach model is based on the way a company’s management organizes
segments within the company for making operating decisions and assessing
performance.  Reportable segments are based on products and services,
geography, legal structure, management structure, or any other manner in which
management disaggregates a company.




61


Following
is a summary of segment information for the year ended December 31,
2009:




Civil
                
                
                CommercialConstruction
                
                
                Activities
                
                
                Unallocated
                
                
                TotalSales
                
                $
                52,575,960
                
                
                $
                8,514,762
                
                
                $
                -
                
                
                $
                61,090,722Operating
      income/(loss)
                
                
                (81,055
                )
                
                
                139,758
                
                
                
                (1,623,499
                )
                
                
                (1,564,796
                )Total
      Assets
                
                
                86,352,883
                
                
                
                6,926,933
                
                
                
                22,585,166
                
                
                
                115,864,982Capital
      Expenditure
                
                
                6,742,507
                
                
                
                356,094
                
                
                
                12,570
                
                
                
                7,111,171Interest
      Income
                
                
                -
                
                
                
                -
                
                
                
                413,741
                
                
                
                413,741Interest
      Expense
                
                
                169,108
                
                
                
                600,778
                
                
                
                1,833,800
                
                
                
                2,603,686Depreciation/Amortization
                
                
                4,695,724
                
                
                
                60,847
                
                
                
                229,965
                
                
                
                4,986,536





Following
is a summary of segment information for the year ended December 31,
2008:





Civil
                  
                  
                  CommercialConstruction
                  
                  
                  Activities
                  
                  
                  Unallocated
                  
                  
                  TotalSales
                  
                  $
                  47,501,672
                  
                  
                  $
                  4,435,264
                  
                  
                  $
                  -
                  
                  
                  $
                  51,936,936Operating
      income/(loss)
                  
                  
                  3,750,877
                  
                  
                  
                  (80,161
                  )
                  
                  
                  (2,708,844
                  )
                  
                  
                  961,872Total
      Assets
                  
                  
                  47,157,104
                  
                  
                  
                  4,686,363
                  
                  
                  
                  47,657,423
                  
                  
                  
                  99,500,890Capital
      Expenditure
                  
                  
                  9,539,869
                  
                  
                  
                  289,119
                  
                  
                  
                  2,036,510
                  
                  
                  
                  11,856,498Interest
      Income
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  912,430
                  
                  
                  
                  912,430Interest
      Expense
                  
                  
                  63,032
                  
                  
                  
                  436,532
                  
                  
                  
                  2,034,498
                  
                  
                  
                  2,534,062Depreciation/Amortization
                  
                  
                  4,633,894
                  
                  
                  
                  77,997
                  
                  
                  
                  108,663
                  
                  
                  
                  4,820,554




NOTE
21 – OFFERING




On
January 12, 2009, the Company engaged Rodman & Renshaw, LLC as the Company’s
exclusive advisor in connection with the proposed Offering or any other debt or
equity financing for a term of 12 months. The Offering consists
of  sale of approximately $15 million worth of common stock of the
Company. The Underwriting Agreement provides that the Company will grant to
Rodman an option, exercisable within 45 days after the closing of the Offering
to acquire up to an additional 15% of the total number of shares to be offered
by the Company in the Offering to cover over-allotments. The Company paid
$25,000 advance which will be applied against the non-accountable expense
allowance equal to 1% of the public offering price. In addition, Rodman is
entitled to the delivery of $100 option, if requested, at closing to purchase
additional shares of common stock equal to 5% of the total number of shares sold
pursuant to the Offering. The Underwriter’s option will be exercisable during
the four year period commencing one year from the closing at the price per share
equal to 125% of the public offering price per share at the Offering. The
Underwriter’s warrant will provide for registration rights and customary
anti-dilution provisions. As of this date, the Offering has not been
closed.




NOTE
22 – SUBSEQUENT EVENT




On
February 11, 2010, the Securities Purchase Agreement between the Company, Cavico
Vietnam, the Company’s wholly-owned subsidiary, and Cavico Mining and
Construction JSC (“Cavico Mining”), to purchase a total of 4,000,000 shares of
Cavico Mining at VND16,894 per share, which is approximately $0.94 per share
based on current exchange rates, in exchange for debt owed to Cavico and its
subsidiaries by Cavico Mining,  was consummated. The purpose of the
acquisition of an additional 4,000,000 shares of Cavico Mining to own over 50%
of Cavico Mining’s common stock was to enable the Company to include Cavico
Mining in the consolidated financial statements on a going forward
basis.




The
following table presents summary unaudited pro forma consolidated financial data
for the years ended December 31, 2009 and 2008 that give effect to the purchase
of a controlling interest in Cavico Mining . The unaudited pro forma
consolidated statement of operations data for the year ended December 31, 2009
and 2008 give effect to the Cavico Mining Acquisition as if it had occurred at
the beginning of the respective years, and the unaudited pro forma consolidated
balance sheet data at December 31, 2009 give effect to the Cavico Mining
Acquisition as if it had occurred on December 31, 2009.




62




Pro Forma Statement of Operations
Data Summary:




Pro Forma
                        Year
      Ended
                        December
      31,
                        2009
                      
                      
                      Year
      Ended
                        December 31,
                        2009
                      
                      
                      Pro- Forma
                        Year Ended
                        December 31,
                        2008
                      
                      
                      Year
      Ended
                        December 31,
                        2008(unaudited)
                      
                      
                      
                      
                      
                      (unaudited)Sales
                      
                      $
                      62,895,075
                      
                      
                      $
                      61,090,722
                      
                      
                      $
                      58,006,269
                      
                      
                      $
                      51,936,936Cost
      of sales
                      
                      
                      56,185,961
                      
                      
                      
                      55,303,582
                      
                      
                      
                      48,712,916
                      
                      
                      
                      44,402,887Gross
      Profit
                      
                      
                      6,709,114
                      
                      
                      
                      5,787,141
                      
                      
                      
                      9,293,353
                      
                      
                      
                      7,534,049Operating
      Expenses
                      
                      
                      8,502,442
                      
                      
                      
                      7,351,936
                      
                      
                      
                      6,980,042
                      
                      
                      
                      6,572,177Income
      (loss) from operations
                      
                      
                      (1,793,328
                      )
                      
                      
                      (1,564,796
                      )
                      
                      
                      2,313,311
                      
                      
                      
                      961,872Net
      Income (loss)
                      
                      
                      (4,639,821
                      )
                      
                      
                      (4,761,994
                      )
                      
                      
                      769,630
                      
                      
                      
                      631,816




Pro Forma Balance Sheet Data
Summary;




Pro Forma, as adjusted
                    December 31, 2009
                  
                  
                  December 31, 2009
                  
                  
                  December 31, 2008(unaudited)Assets
                  
                  $
                  127,438,682
                  
                  
                  $
                  115,864,982
                  
                  
                  $
                  99,500,890Liabilities
                  
                  
                  113,233,173
                  
                  
                  
                  106,609,682
                  
                  
                  
                  86,540,479Noncontrolling
      Interest
                  
                  
                  12,792,890
                  
                  
                  
                  8,421,218
                  
                  
                  
                  9,715,228Cavico
      Corp.’s Stockholders’ Equity
                  
                  
                  1,412,619
                  
                  
                  
                  834,082
                  
                  
                  
                  3,245,183Total
      Stockholders' Equity
                  
                  
                  14,,205,509
                  
                  
                  
                  9,255,300
                  
                  
                  
                  12,960,411Liabilities,
      Noncontrolling Interest and Stockholders’ Equity
                  
                  $
                  127,438,682
                  
                  
                  $
                  115,864,982
                  
                  
                  $
                  99,500,890




63




ITEM
9.        CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES





On April
15, 2008, we dismissed Jaspers + Hall PC (“Jaspers + Hall”) as our independent
certified public accountant. Effective April 15, 2008, we engaged PMB Helin
Donovan, LLP (“PMBHD”), as our independent certified public accountant. Our
decision to dismiss Jaspers + Hall and retain the PMBHD was approved by our
Board of Directors on April 15, 2008. In October 2008, the PCAOB revoked
the registration of Jaspers + Hall.  As a result, the financial
statements for the fiscal year ended December 31, 2007 were re-audited by PMBHD
to be included in our filing with the Commission.





We did
not consult with PMBHD regarding the application of accounting principles to a
specific transaction, either completed or proposed, or the type of audit opinion
that might be rendered on our financial statements, and no written or oral
advice was provided by PMBHD that was a factor considered in reaching our
decision as to the accounting, auditing or financial reporting
issues.




ITEM
9A.      CONTROLS AND PROCEDURES





(a)           Evaluation of
Disclosure Controls and Procedures





We have
adopted and maintain disclosure controls and procedures (as such term is defined
in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)) that are designed to ensure that information
required to be disclosed in our reports under the Exchange Act, is recorded,
processed, summarized and reported within the time periods required under the
SEC’s rules and forms and that the information is gathered and communicated to
our management, including our Chief Executive Officer (Principal Executive
Officer) and Chief Financial Officer (Principal Financial Officer), as
appropriate, to allow for timely decisions regarding required
disclosure.





Management,
together with our CEO and CFO, evaluated the effectiveness of our disclosure
controls and procedures (as defined in Exchange Act Rule 13a-15(e) as of the end
of the period covered by this report. As a
result of material adjustments to our financial statements for the years covered
by this report, our CEO and CFO concluded that our disclosure controls and
procedures were not effective as of the end of the period covered by this
report.




This
annual report does not include an attestation report of the Company’s registered
accounting firm regarding internal control over financial reporting.
 Management’s report was not subject to attestation by the Company’s
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission.





MANAGEMENT'S
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act. Our internal control over financial reporting
is designed 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.  Our internal control over financial reporting includes those
policies and procedures that:




1.
            Pertain to the maintenance of
      records that in reasonable detail accurately and fairly reflect the
      transactions and dispositions of our
  assets;


2.
            Provide reasonable assurance that
      transactions are recorded as necessary to permit preparation of
      financial  statements in accordance   with U.S.
      GAAP, and that our receipts and  expenditures are being made
      only
      in  accordance  with  the  authorization  of
      our  management  and directors;
    and


3.
            Provide reasonable assurance
      regarding prevention or timely detection of unauthorized acquisition, use
      or disposition of our assets that could have a material effect on the
      financial statements.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  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.




Management
assessed the effectiveness of our internal control over financial reporting as
of December 31, 2009.  Based on this assessment, management concluded
that the Company did not maintain effective internal controls over financial
reporting as a result of the identified material weakness in our internal
control over financial reporting described below.  In making this
assessment, management used the framework set forth in the report entitled
Internal Control—Integrated Framework issued by the
Committee of   Sponsoring Organizations of the Treadway
Commission, or COSO. The COSO framework summarizes each of the components of a
company's internal control system, including (i) the
control  environment,  (ii)
risk  assessment,  (iii)  control  activities,  (iv)
information and communication,  and (v) monitoring.  This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial
reporting.  Management's report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permits us to provide only management's report in
this annual report.




64


IDENTIFIED
MATERIAL WEAKNESS





A
material weakness in our internal control over financial reporting is a
control  deficiency,  or  combination  of
control deficiencies,  that  results  in more than
a remote  likelihood  that a material
misstatement  of
the  financial  statements  will not
be  prevented or detected.





Management
identified the following material weakness during its assessment of internal
controls over financial reporting as of December 31, 2009:





·
            We
      lack an effective and efficient period end close the
      books  process to timely prepare for audits and financial
      reporting deadlines.


·
            We
      lack an effective period-end financial statement reconciliation process to
      transition from Vietnamese Accounting Standards to U.S. Generally Accepted
      Accounting Principles (“GAAP”).


·
            We
      lack   formal guidance or checklist of procedures to
      facilitate the reconciliation of the financial statements reported under
      Vietnamese accounting standards to
GAAP.


·
            We
      lack sufficient  accounting personnel that have appropriate
      knowledge of GAAP to fully implement  our transition to GAAP and
      we were required to record material adjustments to the December 31, 2009
      and 2008 financial statements to bring them into
    compliance.





MANAGEMENT'S
REMEDIATION INITIATIVES





We are
undertaking the remedial measures to establish effective disclosure controls and
procedures and internal control over financial reporting, including improving
the supervision and training of our accounting staff to understand and implement
accounting requirements, policies and procedures for the accounting of variable
interest entities.    We are reviewing the qualifications of
qualified GAAP consultants who can work with the Company’s Chief Financial
Officer and Vietnamese accounting team to indentify GAAP related issues and help
evaluate and address such issues before they present problems in reporting in
the United States.  We are planning to utilize a qualified consultant
on an on-going basis. We also appointed an
independent director who is knowledgeable in US GAAP to our board of directors
and as an audit committee member and he will be involved in monitoring the
internal audit functions within the Company.





In light
of the identified material weaknesses, management, performed (1) significant
additional substantive review of those areas described above, and (2) performed
additional analyses, including but not limited to a detailed balance sheet and
statement of operations analytical review that compared changes from the prior
period's financial statements and analyzed all significant differences. These
procedures were completed so management could gain assurance that the financial
statements and schedules included in this Form 10-K fairly present in all
material respects the Company's financial position, results of operations and
cash flows for the periods presented.





(b)  Changes
In Internal Control Over Financial Reporting





There was
no change in our internal control over financial reporting during the most
recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.




ITEM
9B.     OTHER INFORMATION





None.




65





PART
III





ITEM
10.      DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE
GOVERNANCE





Directors
and Executive Officers




The
following table sets forth the names and ages of the members of our Board of
Directors and our executive officers and the positions held by
each.





Name
                    
                    Age
                    
                    Current
      Position/Office
                    
                    Position
      Held SinceHa
      Quang Bui
                    
                    46
                    
                    CEO/Chairman
                    
                    April
      28, 2006Hung
      Manh Tran
                    
                    47
                    
                    Executive
      Vice-President/Director
                    
                    April
      28, 2006Timothy
      Pham
                    
                    43
                    
                    Vice-President/Director
                    
                    April
      28, 2006Hieu
      Van Phan
                    
                    45
                    
                    Vice-President
                    
                    April
      28, 2006Hai
      Thanh Tran
                    
                    47
                    
                    Vice-President
                    
                    April
      28, 2006Giang
      Linh Bui
                    
                    38
                    
                    Vice-President
                    
                    April
      28, 2006Tuan
      Duong Hoang
                    
                    46
                    
                    Director
                    
                    May
      2007Thanh
      Binh Huynh
                    
                    54
                    
                    Director
                    
                    May
      2007Madhava
      Rao Mankal
                    
                    59
                    
                    Director
                    
                    October
      2007June
      Kim
                    
                    54
                    
                    Chief
      Financial Officer
                    
                    September
      3, 2009Philip
      Bolles
                    
                    66
                    
                    Director
                    
                    November
      13, 2009





Set forth
below is a brief description of the background and business experience of each
of our executive officer and directors for the past five years.




Ha Quang Bui. From May 2003 to
present, Ha Quang Bui has served as chairman of the board of directors and Chief
Executive Officer of Cavico Vietnam and as chairman of the board of directors of
Cavico Tower Company.  Mr. Bui became the Chief Executive Officer and
Chairman of the Board of Directors of Cavico Corp. on April 28, 2006. He
currently is Chief Executive Officer and Chairman of Cavico
Corp.  From March 2001 to May 2003, Ha Quang Bui served as Vice
President of Lung Lo Construction Company. He is a director of Energy Investment
Company and a director of Mai Son Concrete Company. He graduated from the
Military Technology Institute, Department of Defense, in 1986 with a degree in
engineering.




Hung Manh Tran. Hung Manh Tran
has been a director and Executive Vice President of Cavico Corp. since 2006 and
2007, respectively (and Vice President from 2006 to 2007) to the present
time.  From March 2001 to March 2002, Hung Manh Tran served as
president of an affiliate of Cavico. From 2002, he has been Vice
President and director of Cavico Vietnam. In addition, he has been chairman of
Cavico Mining (since 2006), chairman of VFMC (since 2007), chairman of Luong son
international tourism JSC (since 2007), director of v-power (since 2006),
director of Cavico construction machinery (since 2007), and a director of Cavico
Australia (since 2005). Hung Manh Tran graduated from Hanoi University in 1986
with a degree in nuclear physics. He also did course work in law at Hanoi
University during 1992-1996. Mr. Tran also holds a degree in international trade
from Hanoi International Trade University in 1991.




Timothy Dac Pham . Timothy Dac
Pham has been a Vice President and director of Cavico Corp. since June
2006.  Since that time he has worked as an independent consultant for
Providential Holdings, Inc. and as a registered representative and life
insurance agent for Richave Financial Inc.  During 2004, he worked as
a registered representative at Golden Beneficial Securities Corp. From 2002
through 2003, Mr. Pham was a registered representative at NT Securities in
Chicago, Illinois. Mr. Pham graduated in 1991 from the University of California
at Berkeley with a degree in Business Administration in the fields of Finance
and Marketing.




Hieu Van Phan
..  Hieu Van Phan became a Vice-President and Director of Cavico Corp.
on April 28, 2006.  He resigned as a director of Cavico Corp. in April
2009.  From July 2003 to present, Hieu Van Phan has been a vice
president and a director of Cavico Vietnam.  Hieu Van Phan is
currently Chief Operating Officer of Cavico Vietnam, chairman of the board of
directors of Cavico Power Installation Construction Co. and a Director of Cavico
Mining and Energy Construction Co.  From 2001 to July 2003, Hieu Van
Phan served as president of Power Installation Company. Hieu Van Phan graduated
from the Military Technology Institute, Department of Defense, in 1986 with a
degree in engineering.




Hai Thanh Tran . Hai Thanh
Tran became a Vice-President and Director of Cavico Corp. on April 28,
2006.  He resigned as a director of Cavico Corp. in April
2009.  From July 2003 to present, he has been a director and vice
president of Cavico Vietnam.  He currently is Chief Executive Officer
of Cavico Vietnam, chairman of the Board of Directors of CAVICO Hydropower
Construction Co.  From April 2002 to July 2003, Hai Thanh Tran was
president of Bridge and Underground Construction Cavico Company.  From
March 2001 to April 2002, Hai Thanh Tran worked as an assistant at the Planning
Department of 25/3 Lung lo Construction Co - MOD. He graduated from the Military
Technology Institute, Department of Defense, in 1986 with a degree in
engineering.




66


Giang Linh Bui.
  Giang Linh Bui became a Vice-President and Director of Cavico Corp.
on April 28, 2006.  He resigned as a director of Cavico Corp. in April
2009.  Giang Linh Bui is currently a director of Nam Chien Hydropower
Company, Director of CAVICO PHI Cement Construction Co., and chairman of the
Board of Directors of CAVICO Infrastructure Construction Co.  Mr. Bui
is also a director of Cavico Vietnam.  From March 2001 to November
2002, Giang Linh Bui worked in the Projected Technology Department at Lung lo
Construction Company.  Giang Linh Bui graduated from Hanoi University
of Architecture in 1994 with a degree in architecture.




Tuan Duong Hoang. Tuan Duong
Hoang has been a director of Cavico Corp. since May 2007. Mr. Hoang has been
Professor of Education at The University of New South Wales since 2003. From
1999 to 2003, he was an associate professor in the Department of Electrical and
Computer Engineering at the Toyota Technical Institute, Nagoya, Japan. He holds
a masters degree and a Ph.D. from the University of Odessa in the
Ukraine.




Thanh Binh Huynh. Thanh Binh
Huynh has been a director of Cavico Corp. since May 2007. Mr. Huynh has been
Vice President of the Tuan Chao Joint Stock Company since 2003. From 2001 to
2003 he was a consultant at Edwards, Wynn & Associates LLP. During
that same period he was also Chairman and President of Raycorp.com
LLC.




Madhava Rao Mankal. Madhava
Rao Mankal has been a director of Cavico Corp. since October 2007. He has been
Chief Financial Officer and Secretary and a Director of Medina International
Holdings, Inc., a manufacturer of boats since November 2004. Also, Mr. Mankal
has been Chief Financial Officer, Secretary and Treasurer of Genesis Companies
Group, Inc., Company formed to develop Laser stripping equipment since March
2006. Mr. Mankal served as President of Force Protection Inc., manufacturer of
mine detecting vehicles, from January 2002 to September 2003 and Chief
Financial Officer from May 1999 until September 2003.  In
addition, he served on the Board of Directors of that entity from
December 2001 to September 30, 2004. He has over 30 years experience in finance
and accounting and holds accounting certifications from India and the
United States. He has a Bachelors Degree in commerce from Bangalore
University.




June Kim. June Kim has been
the Chief Financial Officer of Cavico Corp. since September 2009 after serving
as a director and member of the audit committee from April 2009 to August
2009.  Prior to accepting the position of Chief Financial Officer, she
worked for PHI Group, Inc. (formerly Providential Holding, Inc.) from July 2007
to August 2009 as a consultant. She prepared annual and quarterly SEC filings
for public companies and assisted auditors for audits and
reviews.  Prior to joining PHI Group, Inc., she worked for Stonefield
Josephson, a CPA firm, as audit manager from August 2005 through March 2007 and
Kabani & Company, Inc., a CPA firm, as a full time audit manager from
February 2000 to June 2005.  She is a Certified Public Accountant and
holds CPA licenses in the state of Washington and California. She graduated with
a Bachelor of Science in accounting degree in 1980 from California State
University.




Philip Bolles. Philip Bolles
has been a director of Cavico Corp. since November 2009.  He has been
a consultant providing services related to business combinations, financial
reconstructions, and GAAP and SEC reporting compliance to a variety of public
companies and private companies preparing to register as public companies for
the past fifteen years,.From
2007 to 2008 he served as Chief Financial Officer for Retail Pro,
Inc.  Mr. Bolles holds a Bachelor of Science degree in Accounting,
with Honors from the University of San Diego.




Messrs.
Ha Quang Bui and Giang Linh Bui are brothers.




Director
Compensation





Effective
March 9, 2009, each board member is entitled to receive $2,500 per quarter for
director fee, $500 per meeting fee and $300 per telephone meeting fee. A
chairman of the board is entitled to receive $10,000 per quarter. Each chairman
of committee will receive $2,000 per quarter.





The
following table provides information concerning the compensation of our
non-executive directors for the year ended December 31, 2009.




Name
                  
                  Fees earned or
                    paid in cash($)
                  
                  
                  Stock Awards
                    ($)
                  
                  
                  Option Awards ($)
                  
                  
                  Total ($)Tuan
      Duong Hoang
                  
                  $
                  13,500
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  13,500Thanh
      Binh Huynh
                  
                  $
                  13,500
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  13,500Madhava
      Rao Mankal
                  
                  $
                  14,400
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  14,400Philip
      Bolles
                  
                  $
                  2,500
                  *
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  2,500






67




During
the year 2008, Madhava Rao Mankal received 1,250 shares of the Company’s common
stock valued at $9,750 for his service.


Employment
Agreements




Each of
our executives has entered into an employment agreement with us. Each agreement
is on at will basis subject to termination upon 30 day notice. The executives
are entitled to vacation and personal and sick days as well as standard health
benefits and insurance available to all of our employees. Each agreement
contains standard confidentiality provisions.




Compensation
under the employment agreements for each is as follows:




Name
                    
                    Current Position/Office
                    
                    Annual CompensationHa
      Quang Bui
                    
                    Chief
      Executive Officer/Chairman
                    
                    $
                    76,924
                    (1)June
      Kim
                    
                    Chief
      Financial Officer
                    
                    $
                    123,600
                    (5)Hung
      Manh Tran
                    
                    Executive
      Vice-President/Director
                    
                    $
                    62,549
                    (2)Hieu
      Van Phan
                    
                    Vice-President
                    
                    $
                    44,479
                    (3)Hai
      Thanh Tran
                    
                    Vice-President
                    
                    $
                    48,195
                    (3)Giang
      Linh Bui
                    
                    Vice-President
                    
                    $
                    26,198
                    (3)Timothy
      Pham
                    
                    Vice-President/Director
                    
                    $
                    60,000
                    (4)(5)




(1)
            $70,000
      payable by Cavico Corp and $6,924 payable by Subsidiaries of Cavico Corp.
      He is also entitled to receive $10,000 per quarter for board chairmanship
      fees effective March 9, 2009.


(2)
            $40,000
      payable by Cavico Corp and $22,549 payable by Subsidiaries of Cavico Corp.
      He is also entitled to receive $2,500 per quarter for director fee
      effective March 9, 2009.


(3)
            Payable
      by Subsidiaries of Cavico Corp.


(4)
            He
      is also entitled to receive $2,500 per quarter for director fee effective
      March 9, 2009.


(5)
            Payable
      by Cavico Corp.





Incentive
Plans





In March
2009, the Board approved the Cavico Corp. Stock Award and Incentive Plan which
was subsequently approved by at a special meeting of shareholders on April 27,
2009. The purpose of the Cavico Corp. Stock Award and Incentive Plan is to give
us a competitive advantage in attracting, retaining, and motivating officers,
employees, directors, and consultants and to provide us with an incentive plan
that gives officers, employees, directors, and consultants.




The
maximum number of shares that may be issued pursuant to incentive stock options
granted under the plan is 1,250,000. The maximum number of shares of our common
stock that may be issued per individual pursuant to awards granted under the
Cavico Stock Award and Incentive Plan is 125,000. As of the date hereof, there
are no awards granted under this the Cavico Stock Award and Incentive
Plan.





Committees
of the Board




Our Board
of Directors has established an Audit Committee, Compensation Committee, a
Nominating Committee and Governance Committee.





The
functions of the Audit Committee are: (i) to recommend the engagement of the
Company's independent auditors and review with them the plan, scope and results
of their audit for each year; and (ii) to consider and review other matters
relating to the financial and accounting affairs of the Company. The Audit
Committee consists of Messrs. Madhava Rao Mankal (Chairman and considered
independent under the Nasdaq rules), Tuan Duong Hoang and Philip
Bolles.





The
functions of the Compensation Committee are: (i) reviewing and approving the
amounts and types of compensation to be paid to the Company's executive officers
and the non-employee directors; (ii) reviewing and approving all bonus and
equity compensation to be paid to other Company employees; and (iii)
administering the Company's stock-based compensation plans. The Compensation
Committee consists of Messrs. Thanh Binh Huynh (Chairman and considered
independent under the Nasdaq rules Tuan Duong Hoang and Philip
Bolles.





The
functions of the Nominating Committee are: (i) leading the search for,
screening, evaluating and recommending to the Board qualified candidates or
nominees for election or appointment as directors, consistent with the Board's
Director Nomination Policy; (ii) recommending the number of members that shall
serve on the Board; and (iii) reviewing the processes and performance of the
Board in order to identify areas of concern or potential issues relating to
Board and committee processes, performance and effectiveness and to assess and
evaluate the overall effectiveness of individual directors. The Nominating
Committee consists of Messrs. Tuan Duong Hoang (Chairman and considered
independent under the Nasdaq rules), Thanh Binh Huynh and Madhava Rao
Mankal.




68





Code
of Ethics




On July
31, 2009,  we have adopted a "Code of Business Conduct and Ethics", a
code of ethics that applies to all directors and executive officers, which
includes the Chief Executive Officer, Chief Financial Officer and Principal
Accounting Officer or Controller.  A copy of our Code of Business
Conduct and Ethics is filed as an exhibit to this Form 10-K and is available at
www.cavicocorp.com,
our website.





ITEM
11.      EXECUTIVE COMPENSATION





The
following table sets forth compensation information for the Company’s Chief
Executive Officer for the years ended December 31, 2009, 2008 and 2007. Under
the rules of the Securities and Exchange Commission no other individual is
required to be included in the table.




SUMMARY
COMPENSATION TABLE*





Name andprincipal
                                position
                              
                              Year
                              
                              Salary ($)
                              
                              
                              Bonus ($)
                              
                              
                              Stock Awards
                                ($)
                              
                              
                              Option Awards($)
                              
                              
                              All Other
                                Compensation ($)
                              
                              
                              Total ($)Ha
      Quang Bui
                                Chief
      Executive
                                Officer/Chairman
                              
                              2009
                              
                              $
                              76,924
                              
                              
                              
                              15,424
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              
                              
                              $
                              92,3482008
                              
                              $
                              77,246
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              
                              
                              $
                              77,2462007
                              
                              $
                              75,398
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              
                              
                              $
                              75,398June
      Kim
                                Chief
      Financial Officer
                              
                              2009
                              (a)
                              $
                              41,200
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              $
                              41,200





* In
accordance with the rules of the Securities and Exchange Commission, this table
omits columns that are not relevant.


(a)
Started September 2009




ITEM 12.    
 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT





The
following table sets forth the beneficial ownership of Common Stock of the
Company as of December 31, 2009 for the following: (i) each person or entity who
is known to the Company to beneficially own more than 5% of the outstanding
shares of the Company's Common Stock; (ii) each of the Company's Directors;
(iii) the Company's Chief Executive Officer and each of the other executive
officers; and (iv) all Directors and executive officers of the Company as a
group.




The
number and percentage of shares beneficially owned is determined under rules of
the Securities and Exchange Commission ("SEC"), and the information is not
necessarily indicative of beneficial ownership for any other purpose. Under such
rules, beneficial ownership includes any shares as to which the individual has
sole or shared voting power or dispositive power and also any shares that the
individual has the right to acquire within sixty days of the Record Date through
the exercise of any stock option or other right. Unless otherwise indicated in
the footnotes, each person has sole voting and dispositive power (or shares such
power) with respect to the shares shown as beneficially owned.




69




Name And Address Of Beneficial Owner
                      
                      Amount And
                        Nature Of
                        Beneficial
                        Ownership
                      
                      
                      Percent Of
                        Class (1)Ha
      Quang Bui
                        Group
      10, Ward Tu Lien, Tay Ho District,
                        Ha
      Noi, Vietnam
                      
                      
                      252,095
                      (2)
                      
                      
                      8.3
                      %Hung
      Manh Tran
                        14A
      Alley 123A, Thuy Khue Street
                        Thuy
      Khue Ward, Tay Ho District
                        Ha
      Noi, Vietnam
                      
                      
                      73,690
                      (3)
                      
                      
                      2.4
                      %Hieu
      Van Phan
                        No.
      304, 24T2, Trung Hoa Nha Chinh Ward
                        Cau
      Giay District, Ha Noi, Vietnam
                      
                      
                      54,665
                      (4)
                      
                      
                      1.8
                      %Hai
      Thanh Tran
                        34
      Alley 178/1, Tay Son Square
                        Trung
      Liet Ward, Dong Da District
                        Ha
      Noi, Vietnam
                      
                      
                      48,373
                      (5)
                      
                      
                      1.6
                      %Timothy
      Dac Pham
                        14721
      Wilson Street
                        Midway
      City, CA 92647
                      
                      
                      7,675
                      (6)
                      
                      
                      *Giang
      Linh Bui
                        No.
      1103, 17T1, Trung Hoa Nha Chinh Ward
                        Cau
      Giay District, Ha Noi, Vietnam
                      
                      
                      64,093
                      (7)
                      
                      
                      2.1
                      %Tuan
      Duong Hoang
                        26
      Warwick St., Killara, NSW 2071,Australia
                      
                      
                      20,768
                      
                      
                      
                      *Thanh
      Binh Huynh
                        262
      Beach Road
                        Bay
      Farm Island, CA 94502
                      
                      
                      5,000
                      (8)
                      
                      
                      *Madhava
      Rao Mankal
                        7476
      Sungold Ave.
                        Corona,
      California 92880
                      
                      
                      1,250
                      
                      
                      
                      *All
      Officers and Directors as a group
                      
                      
                      527,609
                      
                      
                      
                      17.3
                      %




*   Less
than one percent.




(1)
            Based upon 3,047,795shares
      outstanding as of December 31,
2009.


(2)
            Includes 109,535 shares held by
      Mr. Bui’s wife.


(3)
            Includes 6,300 shares held by Mr.
      Tran’s wife.


(4)
            Includes 5,000 shares held by Mr.
      Phan’s wife.


(5)
            Includes 9,183 shares held by Mr.
      Tran’s wife.


(6)
            Shares held by Mr. Pham’s
      wife.


(7)
            Includes 9,353 shares held by Mr.
      Bui’s wife.


(8)
            Shares held by Mr. Huynh’s
      wife.





ITEM
      13.
            CERTAIN
      RELATIONSHIPS AND RELATED
TRANSACTIONS





Except as
set forth below, since January 1, 2006, there has been no transaction, and there
is no currently proposed transaction with any executive
officer, director or 5% or greater stockholder of the Company or any affiliate
or immediate family member of any such person in which the Company was or is to
be a participant and the amount involved exceeds $120,000.





Cavico
Vietnam, our wholly-owned subsidiary, had a loan payable to Mr. Ha Quang Bui,
our Chief Executive Officer, a balance of $87,249 at December 31, 2009. The loan
was originated in January 2008 and renewed for second times a one-year term in
January 2010. The highest loan balance owed by Cavico Vietnam to Mr. Bui was
$458,673 on March 31, 2008. This loan had an annual interest rate of 12%. Cavico
Vietnam, our subsidiary, borrowed on December 1, 2006 from Ms. Ty Thi Pham,
vice-chairman of Cavico Vietnam, at an interest rate of 12%. The highest loan
balance owed by Cavico Vietnam to Ms. Pham was $1,246,883, as of December 31,
2006. This loan was paid off during the year ended December 31, 2007 with
interest payment of $132,551.





Our
subsidiaries made advances of $790,049 and $714,658 to their officers and
directors as of December 31, 2009 and December 31, 2008, respectively. Advances
to management and employees include miscellaneous expenses such as business
travel costs, selling costs and material purchases. Our policy is to receive
expense reports for these amounts and move them to the appropriate expense
account. If an expense report is not turned in, these advances can be deducted
from the salary of the related individuals. Our subsidiaries had other payables
of $9,896 and $20,520 to their officers and directors as of December 31, 2009
and December 31, 2008, respectively.





70




We had
loans receivable of $194,634 and $334,196 from their officers and directors as
of December 31, 2009 and December 31, 2008, respectively.
These loans were made with no interest, not secured and due on
demand.





Our
subsidiaries had loans payable to their officers and directors of $220,091 and
$208,667 as of December 31, 2009 and December 31, 2008, respectively. These
loans are unsecured, and due on demand with annual interest from 12% to
24%.




We had
investments, which are accounted for on the cost method, in Vietnam Power
Investment and Development, JSC and Tour Zones Investment and Construction JSC.
These entities share common directors with the Company. Tour Zones Investment
and Construction JSC owns 6.4% of Cavico Luong Son JSC, a subsidiary of which
Cavico Vietnam owns the remaining 93.6%.





The
Company has guaranteed a loan with line of credit for approximately $3.8 million
and $5.6 million for Cavico Mining, an equity investment
entity, as of December 31, 2009 and December 31, 2008, respectively. The loan
balances as of December 31, 2009 and December 31, 2008 were $3,337,129 and
$2,128,859, respectively. The Company also had a receivable from Cavico Mining
for $7,070,665 and $3,826,533 as of December 31, 2009 and December 31, 2008,
respectively and payable due to Cavico Mining for $1,190,716 and $155,347 as of
December 31, 2009 and December 31, 2008, respectively.





ITEM
      14.
            PRINCIPAL
      ACCOUNTANT FEES AND SERVICES





Accounting
Fees





The
following table sets forth fees billed to us by PMB Helin Donavan, LLP for
professional services rendered for 2009 and 2008:




2009
                      
                      
                      2008Audit
      Fees (including interim 404 audit fees in 2009 and quarterly
      reviews)
                      
                      $
                      286,000
                      
                      
                      $
                      410,000All
      Other Fees
                      
                      $
                      164,000
                      
                      
                      $
                      -Total
                      
                      $
                      450,000
                      
                      
                      $
                      410,000





These
fees were approved by audit committee.





Audit Fees





This
category includes the aggregate fees billed for professional services rendered
for the audits of our consolidated financial statements for fiscal years 2009
and 2008, for the reviews of the financial statements included in our quarterly
reports on Form 10-Q and for services that are normally provided by PMB Helin
Donavan, LLP in connection with regulatory filings or engagements for the
relevant fiscal years.




All
Other Fees





This
category includes the aggregate fees billed during the fiscal year 2009, for
services by PMB Helin Donavan, LLP related to filing of our registration
statements.





Policy for Approval of Audit and
Non-audit Services





The
chairman of the audit committee, who is delegated by our audit committee, has
the authority to grant pre-approvals of non-audit services provided by PMB Helin
Donavan, LLP. The audit committee has adopted an approval policy which describes
the procedures and the conditions pursuant to which the audit committee may
grant general pre-approval for services proposed to be performed by our
independent accountants.




In
determining whether to approve a particular audit or non-audit service, the
audit committee will consider, among other things, whether such service is
consistent with maintaining the independence of the independent accountant. The
audit committee will also consider whether the independent accountant is best
qualified to provide the most effective and efficient service to our
company.





During
fiscal year 2009, PMB Helin Donavan, LLP did not utilize any personnel in
connection with the audit other than its full-time, permanent
employees.




71




PART
IV





ITEM
      15.
            EXHIBITS
      AND FINANCIAL STATEMENT SCHEDULES





Financial
Statements





The
following consolidated financial statements of Cavico Corp. and its subsidiaries
are included:




Consolidated
      Balance Sheets
              —
      December 31, 2009 and 2008Consolidated
      Statements of Operations and Comprehensive Income
              —
      For the  years ended December 31, 2009 and
      2008Consolidated
      Statements of Cash Flows
              —
      For the years ended December 31, 2009 and 2008Consolidated
      Statements of Stockholders’ Equity
              —
      For the  years ended December 31, 2009 and
      2008Notes
      to Consolidated Financial Statements.Report
      of Independent Registered Public Accounting Firm





Index
to Exhibits*





Exhibit No.
              Description1.1
              Form
      of Underwriting Agreement(2)2.1
              Asset
      Purchase Agreement, dated April 18, 2006(1)3.3
              Bylaws(1)3.4
              Amended
      and Restated Certificate of Incorporation (3)3.5
              Certificate
      of Designation of Series A Preferred Stock (7)3.6
              Certificate
      of Amendment to the Amended and Restated Certificate of Incorporation
      (5)10.2
              Employment
      Agreement dated January 8, 2007 between the Company and Giang Linh
      Bui(1)10.3
              Employment
      Agreement dated January 8, 2007 between the Company and Ha Quang
      Bui(1)10.4
              Employment
      Agreement dated January 8, 2007 between the Company and Hai Thanh
      Tran(1)10.5
              Employment
      Agreement dated January 8, 2007 between the Company and Hieu Van
      Phan(1)10.6
              Employment
      Agreement dated January 8, 2007 between the Company and Hung Manh
      Tran(1)10.7
              Employment
      Agreement dated April 28, 2007 between the Company and Timothy
      Pham(1)10.8
              Management
      Service Agreement dated May 15, 2006 between Cavico Corp. and Providential
      Holdings, Inc.(1)10.9
              Loan
      Agreements with Thi Ty Pham (3)10.10
              Loan
      Agreement with Ha Quang Bui (3)10.11
              Revised
      Loan Agreement with Ha Quang Bui (4)10.12
              Employment
      Agreement, dated September 3, 2009, between the Company and June Kim
      (6)14.1
              Code
      of Ethics*21
              Subsidiaries*




* Filed
herewith.




(1)
            Incorporated by reference to the
      Company’s Registration Statement on Form 10-SB filed October 23,
      2007.




(2)
            Incorporated by reference to the
      Company’s Registration Statement on Form S-1 filed May 22,
      2009.




(3)
            Incorporated by reference to the
      Company’s Amendment No.1 to the Registration Statement on Form S-1 filed
      July 9, 2009.




(4)
            IncorporatedbyreferencetotheCompany’sAmendmentNo.2totheRegistrationStatementonFormS-1filedAugust6,2009.




(5)
            Incorporated by reference to the
      Company’s Current Report on Form 8-K filed August 19,
      2009.




(6)
            Incorporated by reference to the
      Company’s Current Report on Form 8-K filed September 4,
      2009.




(7)
            IncorporatedbyreferencetotheCompany’sAmendmentNo.4toRegistrationStatementonFormS-1filedSeptember28,
  2009




72




SIGNATURES




Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized on April 15, 2010.





CAVICO
      CORP.By:
              /s/ Ha Quang BuiHa Quang Bui, Chairman
      and Chief Executive Officer
                Principal Executive Officer





Pursuant
to 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 and on the date indicated:




Pursuant to the
requirements of the Securities Act of 1933, this report has been signed below by
the following persons in the capacities and on the date indicated.




Name
                  
                  Title
                  
                  Date/s/ Ha Quang Bui
                  
                  Chairman and Chief Executive Officer
                    Principal Executive Officer
                  
                  April
      15, 2010Ha Quang BuiChief
      Financial Officer/s/ June Kim
                  
                  Principal Financial Officer
                  
                  April
      15, 2010June
      Kim/s/ Bao Quoc Tran
                  
                  Principal
      Accounting Officer
                  
                  April
      15, 2010Bao
      Quoc Tran/s/ Hung Manh Tran
                  
                  Executive
      Vice-President/Director
                  
                  April
      15, 2010Hung
      Manh Tran/s/ Timothy Pham
                  
                  Vice-President/Director
                  
                  April
      15, 2010Timothy
      Pham/s/ Madhava Rao Mankal
                  
                  Director
                  
                  April
      15, 2010Madhava
      Rao Mankal/s/ Tuan Duong Hoang
                  
                  Director
                  
                  April
      15, 2010Tuan
      Duong Hoang/s/ Thanh Binh Huynh
                  
                  Director
                  
                  April
      15, 2010Thanh
      Binh Huynh




73