UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549




FORM
20-F




oREGISTRATION
STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF
1934




OR




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




For
the fiscal year endedDecember 31, 2009




OR




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




OR




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




For
the transition period from _____________ to _______________




Commission
file number 000-53786









CNC
DEVELOPMENT LTD.




(Exact
Name of Registrant as Specified in Its Charter)









British
Virgin Islands





(Jurisdiction
of Incorporation or Organization)





c/o
WHI, Inc.


410
South Michigan Ave., Suite 620


Chicago,
Illinois 60605


(312)
957-4172





(Address,
including zip code, and telephone number, including area code, of registrant’s
principal executive offices)





William
C. Morro, Chief Executive Officer


2918
Fifth Avenue South, Suite 209


San
Diego, California 92103


(619)
298-9883





(Name,
Telephone, E-mail and/or Facsimile Number and Address of Company Contact
Person)





Copies
to:





Christopher
S. Auguste


Kramer
Levin Naftalis & Frankel LLP


1177
Avenue of the Americas


New
York, New York 10036


Telephone:
(212) 715-9100


Fax:
(212) 715-8000







Securities
registered or to be registered pursuant to Section 12(b) of the
Act:




Title of Each Class
                
                Name of Exchange of Which
      RegisteredCommon
      Shares, Par Value US$0.0001
                
                OTC
      Bulletin BoardClass
      A Preferred Shares, Par Value US$0.0001
                
                OTC
      Bulletin BoardClass
      B Preferred Shares, Par Value US$0.0001
                
                OTC
      Bulletin Board




Securities
registered or to be registered pursuant to Section 12(g) of the Act:
None





Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None




Indicate
the number of outstanding shares of each of the issuer’s classes of capital or
common stock as of the close of the period covered by the annual report: 21,206,254 Common Shares, US$
0.0001 par value and 6,744,079Class
A Preferred Shares, US$ 0.0001 par value.




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
þ




If this
report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.




Yes þ                      No
o




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 o                      No
o




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).




Yes o                      No
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. (Check
one)




Large
accelerated filer o                  Accelerated
filer o                  Non-accelerated
filer þ




Indicate
by check mark which basis of accounting the registrant has used to prepare the
financial statements included in this filing:




U.S. GAAP
þ




International
Financial Reporting Standards as issued by the International Accounting
Standards Board




Other
o




If
“Other” has been checked in response to the previous question, indicate by check
mark which financial statement item the registrant has elected to
follow:




Item 17
o                           Item
18 o




If this
is an annual report, indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).




Yes o                      No
o









Table of
Contents





PART
      I
                    
                    
                    
                    PageITEM
      1.
                    IDENTITY
      OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
                    
                    5ITEM
      2.
                    OFFER
      STATISTICS AND EXPECTED TIMETABLE
                    
                    5ITEM
      3.
                    KEY
      INFORMATION
                    
                    5ITEM
      4.
                    INFORMATION
      ON OUR COMPANY
                    
                    20ITEM
      4A.
                    UNRESOLVED
      STAFF COMMENTS
                    
                    27ITEM
      5.
                    OPERATING
      AND FINANCIAL REVIEW AND PROSPECTS
                    
                    27ITEM
      6.
                    DIRECTORS,
      SENIOR MANAGEMENT AND EMPLOYEES
                    
                    45ITEM
      7.
                    MAJOR
      SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
                    
                    51ITEM
      8.
                    FINANCIAL
      INFORMATION
                    
                    51ITEM
      9.
                    THE
      OFFER AND LISTING
                    
                    51ITEM
      10.
                    ADDITIONAL
      INFORMATION
                    
                    52ITEM
      11.
                    QUANTITATIVE
      AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
                    
                    61ITEM
      12.
                    DESCRIPTION
      OF SECURITIES OTHER THAN EQUITY SECURITIES
                    
                    61PART
      IIITEM
      13.
                    DEFAULTS,
      DIVIDEND ARREARAGES AND DELINQUENCIES
                    
                    61ITEM
      14.
                    MATERIAL
      MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERSAND
      USE OF PROCEEDS
                    
                    61ITEM
      15.
                    CONTROLS
      AND PROCEDURES
                    
                    61ITEM
      16.
                    RESERVEDITEM
      16A.
                    AUDIT
      COMMITTEE FINANCIAL EXPERT
                    
                    62ITEM
      16B.
                    CODE
      OF ETHICS
                    
                    62ITEM
      16C.
                    PRINCIPAL
      ACCOUNTANT F EES AND SERVICES
                    
                    62ITEM
      16D.
                    EXEMPTIONS
      FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
                    
                    63ITEM
      16E.
                    PURCHASES
      OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
    PURCHASERS
                    
                    63ITEM
      16F.
                    CHANGE
      IN REGISTRANT’S CERTIFYING ACCOUNTANT
                    
                    63PART
      IIIITEM
      17.
                    FINANCIAL
      STATEMENTS
                    
                    63ITEM
      18.
                    FINANCIAL
      STATEMENTS
                    
                    63ITEM
      19.
                    EXHIBITS
                    
                    64




2


CERTAIN
INFORMATION





Unless
otherwise indicated and except where the context otherwise requires, in this
Annual Report on Form 20-F references to:





·
            “CNC”,
      “we,” “us”, “our” or “company” refer to CNC Development Ltd.
      (together with its subsidiaries and affiliated
  entities);




·
            “IAG”
      refers to InterAmerican Acquisition Group,
Inc.;




·
            “Sing
      Kung” refers to Sing Kung Ltd.;




·
            “Century
      City” refers to Century City Infrastructure Co.,
  Ltd.;




·
            “SNC”
      refers to Shanghai New Century City Development,
  Ltd.;




·
            “Group”
      refers to CNC Development Ltd. together with SNC for periods prior to its
      acquisition by Sing Kung;




·
            “BVI”
      refers to the British Virgin
Islands;




·
            “PRC”
      or “China” refer to the People’s Republic of
  China;




·
            “stock
      purchase agreement” refers to that certain stock purchase agreement dated
      as of May 15, 2008 between IAG and Sing Kung, as
  amended;




·
            “Sing
      Kung acquisition” refers to the transaction contemplated by the stock
      purchase agreement.




·
            “U.S.
      GAAP” refers to generally accepted accounting principles in the United
      States;




·
            all
      references to “RMB” and “Renminbi” are to the legal currency of
      China,  and all references to “dollars” or “$” refer to the
      legal currency of the United
States.




CNC was established under the laws of BVI on August 8, 2008, as a
subsidiary of IAG, a blank check company that was formed as a vehicle for an
acquisition of an operating business.  CNC’s purpose was to merge with
IAG for purposes of changing domicile and, as the surviving company in the
merger, to hold a 100% interest in Sing Kung upon the completion of the Sing
Kung acquisition (a reverse acquisition transaction).   Upon
consummation of the merger, each outstanding share of IAG common stock
automatically converted into common and preferred shares of CNC and each
outstanding IAG warrant automatically converted into one CNC warrant and each
outstanding IAG unit automatically converted into one CNC unit.





WHI Inc.
of 410 South Michigan Ave., Suite 620, Chicago, IL 60605 (tel: 312-957-4172) is
our U.S. agent. Our BVI registered address is Sea Meadow House, Kingston
Chambers, P.O. Box 173, Road Town, Tortola, British Virgin Islands. Our
principal executive offices are located at Suite 1405,Huiyang Bld 6,No.1139 Pu Dong
Avenue, Shanghai,200135 in the PRC
and our telephone number is (86) 21-13321992177.





FORWARD-LOOKING
STATEMENTS





This
Annual Report on Form 20-F constitutes forward-looking statements within the
definition of the Private Securities Litigation Reform Act of 1995. These
statements relate to, among other matters:





·
            our
      future business development, results of operations and financial
      condition;




·
            our
      projected revenues, profits, earnings and other estimated financial
      information;




·
            our
      anticipated levels of capital expenditures during the next
      year;




·
            our
      belief that we have sufficient liquidity through the end of the current
      fiscal year; and




·
            our
      anticipated operating strategies.




You can
generally identify these forward-looking statements by words such as “will’
“may,” “expect,” “anticipate,” “contemplate,” “believe,” “estimate,” “intends,”
and “continue”, or other and similar expressions regarding future periods or the
negative of such expressions. We have based these forward-looking statements
largely on our current expectations and projections about future events and
financial trends that we believe may affect our financial condition, results of
operations, business strategy and financial needs. The accuracy of these
statements may be affected by inaccurate assumptions we might have made or by
known or unknown risks, uncertainties or other factors, including the risk
factors described under Item 3.D, “Key Information —Risk
Factors,” of this Annual Report on Form 20-F, which may cause our actual
results to differ materially from the from those anticipated or implied by the
forward-looking statements. The following are among the key risks and other
factors to consider in evaluating our forward-looking statements:




3




·
            general
      economic conditions, including China’s overall economic
      conditions;




·
            changes
      in government policy;




·
            outcomes
      of government reviews, inquiries, investigations and related
      litigation;




·
            continued
      compliance with government
regulations;




·
            legislation
      or regulatory environments, requirements or changes adversely affecting
      business and infrastructure development in
  China;




·
            inadequacies
      of our management resources;




·
            deficiencies
      in our internal controls;




·
            our
      business strategy and plans, including without limitation our decision to
      suspend infrastructure development operations in
  China;




·
            our
      limited liquidity and capital resources and the results of future
      financing efforts.




You are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date of this Annual Report.




All
forward-looking statements included herein attributable to us are expressly
qualified in their entirety by the cautionary statements contained or referred
in this section. Except to the extent required by applicable laws and
regulations, we do not undertake any obligation to update these forward-looking
statements to reflect events or circumstances after the date of this Annual
Report or to reflect the occurrence of unanticipated events.




This
Annual Report should be read in conjunction with our audited financial
statements and the accompanying notes thereto, which are included in Item 18 of
this Annual Report.




4





PART
I





ITEM
1.             IDENTITY
OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS





Not
required.





ITEM
2.             OFFER
STATISTICS AND EXPECTED TIMETABLE





Not
required.




ITEM
3.             KEY
INFORMATION




A.  Selected
Financial Data.





The
following selected consolidated financial data as of December 31, 2009 and 2008
and for the years ended December 31, 2009, 2008 and for the period from January
18, 2007 (inception) through December 31, 2007 have been derived from the
audited consolidated financial statements of the Company included in this Annual
Report beginning on page F-1.  This information is only a summary and
should be read together with the consolidated financial statements, the related
notes, the section entitled “Operating and Financial Review and Prospects” and
other financial information included in this Annual Report.




The
consolidated financial statements are prepared and presented in accordance with
U.S. GAAP and the Sing Kung acquisition is therefore accounted for using
accounting principles applicable to a recapitalization with Sing Kung being
treated as the accounting parent (acquirer) and the Company, the legal parent,
being treated as the accounting acquiree. In a recapitalization, all accounting
history, prior to the reverse merger date, becomes that of the accounting
acquirer (Sing Kung). Accordingly, all historical information presented in the
following selected financial data the date of the Sing Kung acquisition is that
of Sing Kung.   The results of operations of the Company in any
period may not necessarily be indicative of the results that may be expected for
any future period. See “Risk
Factors” included elsewhere in this Annual Report.




5


CNC
Development Ltd.


Selected
Consolidated Financial Data


(in
U.S. Dollars, except for share amounts)





Selected
      Consolidated Statement of Operations Data (1)
                
                For the year ended December 31,
                
                
                For the period fromJanuary 18, 2007(inception) throughDecember 31,2009
                
                
                2008
                
                
                2007Contract
      revenue
                
                $
                -
                
                
                $
                4,892,204
                
                
                $
                -Cost
      of revenue
                
                
                -
                
                
                
                (304,386
                )
                
                
                -Gross
      profit
                
                
                -
                
                
                
                4,587,818
                
                
                
                -Operating
      (loss)/income
                
                
                (5,137,149
                )
                
                
                3,667,895
                
                
                
                (9,961
                )Net
      (loss)/income
                
                
                (4,285,174
                )
                
                
                3,770,139
                
                
                
                (9,961
                )Other
      comprehensive income(foreign
      currency translation adjustment)
                
                
                284,589
                
                
                
                278,593
                
                
                
                -Comprehensive
      (loss)/income
                
                $
                (4,000,585
                )
                
                $
                4,048,732
                
                
                $
                (9,961
                )Net
      (loss)/income per share:Basic
                
                $
                (0.20
                )
                
                $
                0.18
                
                
                nilDiluted
                
                $
                (0.20
                )
                
                $
                0.16
                
                
                nilWeighted
      average number of shares outstanding: (2)Basic
                
                
                21,009,038
                
                
                
                20,919,480
                
                
                
                20,919,480Diluted
                
                
                21,009,038
                
                
                
                23,834,480
                
                
                
                20,919,480Cash
      dividend per share:
                
                
                -
                
                
                
                -
                
                
                
                -




Notes:


1)
            We
      had no discontinued operations during the periods
  reported.


2)
            Weighted average
      shares outstanding and earnings per share reflects the retroactive
      restatement of CNC’s
      shareholders’ equity to account for the effect of the Sing Kung
      acquisition.




As of December 31,Selected Consolidated
      Balance Sheet Data
                
                2009
                
                
                2008
                
                
                2007Total
      assets
                
                $
                25,431,358
                
                
                $
                53,487,750
                
                
                $
                5,349Stockholders
      (deficiency)/equity (net assets)
                
                $
                (5,373,231
                )
                
                $
                4,039,271
                
                
                $
                (9,960
                )Common
      stock
                
                $
                2,121
                
                
                $
                2,092
                
                
                $
                2,092Number
      of common shares issued and outstanding
                
                
                21,206,254
                
                
                
                20,919,480
                
                
                
                20,919,480




Note:
            Shares
      outstanding reflect the retroactive restatement of CNC’s shares to account
      for the effect of the Sing Kung
acquisition





Exchange Rate Information




Not
required





B.  Capitalization
and Indebtedness




Not required





C.  Reasons
for the Offer and Use of Proceeds




Not
required





D.  Risk
Factors





An
investment in our securities involves risk. The discussion of risks related to
our business contained in this Annual Report on Form 20-F comprises material
risks of which we are aware and you should consider these risks carefully. If
any of the events or developments described actually occurs, our business,
financial condition or results of operations would likely suffer and the value
of our stock would likely decline.  You should pay particular
attention to the fact that CNC is a holding company domiciled in the BVI with
almost all of its assets in China. As a result, we are subject to legal and
regulatory environments that differ in many respects from those of the U.S. The
discussion of risks related to our business contained in this Annual Report
on Form 20-F also includes forward-looking statements, and our actual results
may differ substantially from those discussed in these forward-looking
statements. See “Cautionary Note Regarding Forward-Looking
Statements.”


6


Risks
relating to our business and operations


Our
infrastructure business in the PRC has been suspended and may be discontinued
altogether if sufficient resources and personnel cannot be assembled to restart
operations prior to the end of 2010, with the result that we may be required to
identify an alternative business and some or all of the value of our assets may
be lost.


In order
to reduce costs and maintain the existence of the company within the limits of
our financial resources, we terminated all of our operating and management
personnel in the PRC and transferred the projects in-progress to unrelated third
parties who would assume the related liabilities. We are continuing our efforts
to collect on our BT Project receivables (Net Investment in BT Projects) and to
raise alternative financing sufficient to restart and support ongoing
operations. However, it is likely that we will not be able to do either of these
things in time to preserve our position in the market or reasonably assure its
success as a BT Project developer. If our board determines that continuation in
the infrastructure development business is not viable, then we will have to seek
an alternative business strategy and there is no assurance that we will be able
to do so or that we will have the resources to implement a new business plan. As
a result, the company may have to liquidate and investors could suffer a total
loss of their investment.


Our
municipal government customers may be unable or unwilling to meet their
contractual obligations to pay us, and if collection of our BT Project
receivables is delayed, we are unlikely to be able to resort to litigation to
enforce our contractual rights.





Many
municipal governments in China, including our BT Project customers, are fiscally
constrained and lack liquidity to timely meet all of their obligations. Our
rights under our BT Contracts are not unambiguously clear, security interests
intended to be granted by the contracts are not perfected and we have discovered
that informal agreements and deficiencies in performance of the contracts by
prior management may undermine the written contract terms. Furthermore, the
legal framework in China is unfavorable to actions by private parties bringing
actions against government entities and the outcome of such matters is often
susceptible to influence of political and other forces. Consequently, we are
unlikely to be able to successfully litigate to enforce payment of our completed
BT Project contracts if we encounter collection problems or delays. In such
case, the net realizable value of our BT Project receivables could be reduced or
eliminated altogether.





BT
Project cash flow has been negative since our inception, even though accounting
rules applicable to our infrastructure development business resulted in positive
reported earnings during 2008, and therefore access to significant incremental
funding in excess of our current resources would be required to restart the
business.





U.S. and
GAAP accounting separates cash flow from earnings due to applicable conventions
regarding revenue recognition. As a result, although our accounting earnings may
be positive, our cash flow may be negative and we may not have sufficient
working capital to meet our ongoing requirements or fund new business growth.
Our management has not established, and our historical contract documentation
does not support, reliable credit facilities or other mechanisms such as selling
receivables that allow us to convert receivables on incomplete projects or
long-term assets into cash to overcome this problem. Consequently, any reported
earnings and financial statement net worth may not be indicative of our ability
to meet our contractual obligations or to sustain ourselves as a going concern
if we pursue resumption of this business. There can be no assurance that we will
have access to working capital from credit or equity markets that is sufficient
to allow us to restart the infrastructure development business.





The
downsizing of our principal office in China and the termination of all managers
located there may adversely affect our ability to effectively monitor the
residual business, maintain relationships with historical customers who owe us
money and collect BT Project receivables.





Currently,
our sole officer is resident outside of the PRC and is not able to actively
maintain business relationships with customers for whom BT Projects have been
completed and to monitor factors that could hamper collection of BT Project
payments still owed to the Company.   The necessity of having to
travel internationally or to work in different time zones puts an additional
burden on our management and utilizes scarce financial resources with the result
that customer management may be inefficient or insufficient to ensure that
collections are maximized. Solicitation of new business is also precluded, as a
practical matter, by the lack of proximity to customers.


7
  While
our infrastructure development business is suspended, competition, including
potential competition from our former employees, may increase to the point that
it is not possible for us to restart the business.


New
competition may reduce our growth prospects or its level of profitability.
Competitors may attempt to copy or replicate our business model and our former
employees are not restricted from assisting competitors or potential competitors
from doing so or pursing business with our former customers. We think it is
likely that our former employees will affiliate themselves with our competitors.
This could have an adverse effect on our ability to successfully restart our
infrastructure development business.


If
we elect to resume the infrastructure development business in China we will
probably have to do so without the benefit of the historical relationship
between Century City’s key managers and the key personnel at each of Tsinghua
and Tongji Universities.





The
managers of our PRC subsidiaries who have been terminated had established
strategic partnerships with key personnel affiliated with each of China’s top
research and urban planning institutions in the field of new city planning and
design. These institutions include Tsinghua University in Beijing, Tongji
University in Shanghai, and University of China Technology & Science in
Anhui. Staff from each of these institutions has a long history of consulting
for the Chinese government at the central, provincial, and municipal level on
new city planning and economic development. Certain of the Company’s personnel,
who are no longer affiliated with us, collaborated on planning projects with
university staff members and built trust and relationships with the municipal
leaders that were identified as potential customers. These relationships were
considered important to guiding us to tailor our bids to precisely meet client
needs, selecting qualified consortium partners that are trusted by prospective
clients to perform the contracts, and accessing capital resources to finance and
manage these projects. It is unlikely that these relationships can be
reinstituted if we elect to pursue a restart of the infrastructure development
business and their loss will likely make future project awards more difficult to
win and less profitable.





The
infrastructure development business is difficult to manage and adverse
deviations in performance from expected results are likely.


Successful
management of BT Projects is challenging to achieve and performance failures
that could adversely affect our results if we choose to restart this line of
business could arise from many factors, some of which will be outside of our
control:


·
              Failure
      to properly estimate costs of engineering, materials, equipment or
      labor;


·
              Unanticipated
      technical problems with the structures, materials, or services being
      supplied by us, which may require that we spend our own money to remedy
      the problem;


·
              Project
      modifications creating unanticipated
costs;


·
              Changes
      in the costs of equipment, materials, labor, not specific to the
      sub-contractors;


·
              Our
      suppliers’ or subcontractors’ failure to
  perform;


·
              Difficulties
      by our customers to obtain required governmental permits or
      approvals;


·
              Changes
      in local laws and regulations;


·
              Delays
      caused by local weather conditions;
and


·
              Exacerbation
      of any one or more of these factors as projects grow in size and
      complexity.


The
infrastructure development business in the PRC is highly competitive and
customer contracts are awarded through a public bidding processes based on price
and other terms and the acceptance of certain risks, and contract awards to our
competitors may prevent us from successfully restarting this
business.





CNC
competed in the infrastructure development business in the PRC with other
general and specialty contractors, including large foreign-invested companies
with international capabilities and small local contractors. Even if we are able
to engage new management and attract the financing to pursue this line of
business, we could be prevented from obtaining contracts for which we have bid
due to price, greater perceived reputation, financial strength and resources of
our competitors and/or perceived technology advantages. Even if we are awarded
contracts, we face additional risks that could affect whether, or when, work
will begin. For example, some contracts on which we may bid are subject to
relocation of people using the land and other contingencies that may delay or
result in termination of projects. Predicating future contracts or the
geographic location of work is difficult because we bid on work throughout
China, a large and diverse geographic area.




8




Because
BT Projects are large and the Company will be able to perform few in number if
it elects to restart this business, the risks of variability in month-to-month
business performance, or performance from plan, is substantial.





If the
Company restarts its infrastructure development business in the PRC, the number
of projects in progress that it will be able to sustain is small and each
project is likely to be large relative to the size of our business. Therefore,
the risks of revenue volatility are high as activity on the few projects in
progress ebbs and flows and project completions occur irregularly. In addition,
delays or problems encountered on any single project can have a large impact on
overall business performance and can lead to significant deviations in
month-to-month revenue and earnings and results as compared with
plans.





Project
delays could stem from a wide variety of sources that are outside of the
Company’s ability to control and could even be due to a municipality or BT
consortium partner’s inability or unwillingness to honor a contract. Variability
in the company’s financial performance, particularly if it is unanticipated,
would have a negative impact on our stock value.





If
we resume the infrastructure development business in China, we will be subject
to a number of additional risks as a company in the infrastructure development
industry, which include:





·
            Lack
      of reliable and up-to-date information about property market conditions in
      the districts where new town developments are located. Inaccurate
      information may adversely affect the business decisions and results of
      operations and financial
operations.




·
            The
      relocation of incumbent residents and businesses on the sites where
      projects are built may result in delay. There is no guarantee that the
      relocation of incumbent residents will proceed smoothly and any delay may
      have an adverse effect on the financial position of the
      business.




·
            The
      Chinese national government has traditionally encouraged local
      decision-making and incentivized local bureaucrats to pursue growth
      opportunities. As a result, each city and new urban area creates the
      challenges of varying development
policies.




·
            The
      national government ultimately determines the local level of autonomy.
      Growth might be slowed in certain urban areas if the national government
      restricts favorable development policies or imposes restrictions on
      development.




·
            China
      might choose to pursue a concentrated urbanization model and create
      multiple “supercities” of over 20 million inhabitants. If this policy is
      pursued, tighter land policies might be implemented and the growth of less
      developed urban areas would be
slowed.




·
            Future
      growth and development will be slowed if the Chinese government fails to
      invest in transportation and other necessary
    infrastructure.




·
            Public
      funding shortages for infrastructure are predicted to increase and might
      have an adverse effect on business
revenues.




·
            Continued
      urbanization will require an increasing amount of resources thereby
      driving up the cost of continued growth and potentially reducing our
      profit margins.




·
            China’s
      municipalities have enjoyed considerable historical success in obtaining
      approval form the land resources authorities to grant land use rights that
      result in revenue to the municipalities. This revenue source has allowed
      the cities to build needed infrastructure and thereby encourage more
      development. The development environment would be adversely impacted if
      cities’ access to new land resources were to
  change.




We
are subject to the risks of litigation and are currently a defendant in one
lawsuit that could have a material adverse impact on our business or that could
cause us to commence restructuring of or liquidate one or more of PRC
subsidiaries or CNC.


In the
normal course of business, we are subject to legal proceedings and claims. In
June 2010, one of the Company’s subsidiaries based in the PRC was served with a
lawsuit related to the failure of a supplier to pay the party bringing the suit.
The Company intends to defend itself vigorously against this action and any
other actions that may be brought against us. However, there can be no assurance
that we will prevail in our defense. Given our weak financial condition, an
adverse ruling in the pending litigation claim, or any other claim that may be
brought against us, could jeopardize the viability of our business, cause us to
restructure one or more of our subsidiaries or liquidate.





Our
ability to be successful in our business will be dependent upon the efforts of
our chief executive officer, William C. Morro, who may not continue with us and
who has no minimum obligation to work for us or to refrain from competitive
activities while serving as our chief executive officer.





All of
our personnel involved in our infrastructure development business in the PRC
have been terminated and William C. Morro, our chief executive officer, is our
sole officer and only employee familiar with our history and operations. Our
ability to successfully restart our infrastructure business or enter a new line
of business will be totally dependent upon the efforts of Mr. Morro until
additional personnel can be retained. Although it is anticipated that Mr. Morro
will remain associated with CNC, his ultimate willingness to do so will depend
on the company being able to obtain access to adequate financial resources to
implement its business strategy and reaching satisfactory agreements with the
board of directors of the company regarding compensation, responsibilities and
other such matters.


9


Our
sole officer and directors will allocate their time to other
businesses thereby causing conflicts of interest in their determination as
to how much time to devote to our affairs. This conflict of interest could have
a negative impact on our ability conduct business and could reduce the value of
our shares.





Our sole
officer and our directors are not required to commit their full time to our
affairs, which may result in a conflict of interest in allocating their time
between our operations and other businesses. We do not currently and do not
intend to have any full time employees. Our sole executive officer is engaged in
several other business endeavors and is not obligated to contribute any specific
number of hours to our affairs. If our executive officer’s other business
affairs requires him to devote substantial amounts of time to such affairs, it
could limit his ability to devote time to our affairs and could have a negative
impact on our business, collection efforts, capital-raising efforts and
investigation of alternative business strategies if it proves not viable to
resume the infrastructure development business. We cannot assure you that these
conflicts will be resolved in our favor.





Our
sole officer, directors and their affiliates may in the future become affiliated
with entities engaged in business activities similar to those intended to be
conducted by us and accordingly, may have conflicts of interest in determining
which entity a particular business opportunity should be presented
to.


None of
our directors, officer or their affiliates has been a principal of, or
affiliated or associated with, another infrastructure development company and
none of such individuals is currently affiliated with any such entity. However,
we may enter new lines of business if we decide to permanently discontinue our
infrastructure development business and our officers and directors may be
affiliated with entities that are competitors or have conflicts with such new
line of business. In the future they may become affiliated with entities engaged
in business activities similar to those then conducted by us. Additionally, our
officers and directors may become aware of business opportunities which may be
appropriate for presentation to us as well as the other entities to which they
owe fiduciary duties. Accordingly, they may have conflicts of interest in
determining to which entity a particular business opportunity should be
presented. We cannot assure you that these conflicts will be resolved in our
favor.


CNC
has not been able to retain or recruit adequate management personnel to operate
its infrastructure business in the PRC and if it seeks to hire such personnel to
restart the business, or to pursue an alternative business it may not be able to
do so.


CNC’s
success as an operating business is dependent, to a large extent, on its ability
to retain the services of qualified executive management personnel, who can
drive its growth and expansion. Because of the requirement to suspend operations
and terminate key managers to lower costs, there is no continuity of key
personnel to carry on the business. In particular recruitment of personnel to
replace Mr. Zhaosheng Wu and Professor Zhu may be difficult and could preclude
the successful restart of operations. Moreover, increased competition for
qualified personnel in China could result in an increase in wages or a shortage
of project-managers that would limit the number of projects on which CNC could
work or reduce its ability to profitably compete.


We
do not currently have an operations management team and, as is likely, if we are
unable to retain new management with the necessary relationships, it would
impair future growth and business viability.


As a BT
developer, future growth of the business depends on the ability to hire
managerial talent for critical operational positions. CNC does not currently
have an operations management team and must recruit one or bring back terminated
managers to adequately operate any new projects. If the cost of recruiting new
management is high or qualified personnel are unavailable, CNC may not operate
efficiently or have the capacity to expand rapidly. The supply of experienced
engineers, project managers, field supervisors, and other skilled workers may
not be sufficient to meet current or expected demand. The commencement of new,
large-scale infrastructure projects, or increased demand for workers available
to us, could affect our business, even if we are not awarded such projects. If
we are unable to hire employees with the requisite skills, we may also be forced
to incur significant training expenses. The occurrence of any of the foregoing
could have an adverse effect on our business, operating results, financial
condition, and value of our stock.
  10


Risks
relating to our weak financial condition


Our
ability to continue as a going concern likely depends on our ability to raise
additional capital and we may not be able to do so, with the result that our
business and operations being materially and adversely affected and we may be
forced to liquidate.


The
viability of our BT Project development business or our entry into a new line of
business depends primarily on our access to capital. Our ability to raise
additional capital depends on new equity or debt financing conditions in China
and in international debt or equity markets. The costs of debt or equity capital
may make projects unfeasible or less profitable and may not be acceptable.
Borrowing from Chinese banks remains difficult and is generally only available
at low levels of leverage and with long lead times. Government policy changes
may also restrict the availability of bank loans because the Chinese authorities
actively use policy to manage the economy. Our BT Project contracts do not meet
the standards typically required by lenders in China or internationally to
constitute collateral for a loan. Access to the international debt and equity
markets remains unpredictable. If we cannot raise equity or monetize our assets
through debt, working capital will continue to be constrained and this could
adversely impact the value of our shares, preclude us from entering a new line
of business or force us to liquidate.
  To avoid
incurring liabilities in the PRC that could not be met with available cash, the
Company has scaled back its expenses, negotiated deferred payment arrangements
with those vendors and creditors whose payment obligations were not contingent
on collections related to BT Projects and entered into term financing
arrangements that extend beyond the dates when initial BT Project collections
are expected.


We
may issue debt securities to fund our business that could cause a default and
foreclosure on our assets if our operating revenues and net income are
insufficient to pay our debt obligations.




We have
limited capital resources and are likely to raise debt to support our activities
in the event that we decide to continue operations. If we issue debt securities
to fund our operations, it could result in:




·
            the
      need to make high debt service payments that reduce the value of existing
      shareholders’ equity or that reduce earnings available to
      shareholders




·
            default
      and foreclosure on our assets if our operating revenues after a business
      combination are insufficient to pay our debt
  obligations;




·
            acceleration
      of our obligations to repay the indebtedness even if we have made all
      principal and interest payments when due if the debt security contains
      covenants that require the maintenance of certain financial ratios or
      reserves and any such covenant is breached without a waiver or
      renegotiation of that covenant;




·
            our
      immediate payment of all principal and accrued interest, if any, if the
      debt security is payable on demand;
and




·
            our
      inability to obtain additional financing, if necessary, if the debt
      security contains covenants restricting our ability to obtain additional
      financing while such security is
outstanding.




We cannot
assure you that debt financing would be available to us on acceptable terms, if
at all. None of our officers, directors or stockholders is required to provide
any financing to the Company. To the extent that additional financing proves to
be unavailable when needed, we would be compelled to restructure the company or
liquidate, possibly resulting in substantial or total loss to
shareholders.





Holders
of shares of IAG’s common stock at the time of the stock purchase with Sing Kung
who purchased their units in the IPO and who did not convert their shares into
cash may have rights to rescind their purchases and assert a claim for damages
against CNC, which actions would further constrain the company’s financial
position.


The
company does not have adequate financial resources to fund rescissions of its
securities or defend itself against in litigation of claims for rescission or
damages. If such claims are brought against the company and the amounts are
material, it would jeopardize the Company’s viability and we might be forced to
liquidate, resulting in substantial or total loss to shareholders.


Risks
associated with operating in a foreign jurisdiction





If
social unrest, acts of terrorism, regime changes, changes in laws and
regulations, political upheaval, or policy changes or enactments occur in the
BVI, where we are domiciled, or in China, where we have operations, it may
result in a negative impact on our business.





Political
events in the BVI or China may significantly affect our business, assets or
operations. Social unrest, acts of terrorism, regime changes, changes in laws
and regulations, political upheaval, and policy changes or enactments in either
the BVI or China could negatively impact our business, the value of our assets
and our share price. Because most of our business operations and assets are
located in China, we are particularly susceptible to a wide range of political,
legal and other uncertainties in that country. These uncertainties encompass
changes or interpretation of national, state and local governmental regulations,
including environmental, labor, waste management, health and safety matters and
product and engineering specifications. We are also subject to laws and
regulations in the PRC governing our relationship with our employees, including:
wage and hour requirements, working and safety conditions, citizenship
requirements, work permits and travel restrictions. These include local labor
laws and regulations, which may require substantial resources for compliance. In
addition, our PRC subsidiaries are subject to significant government regulation
with regard to property ownership and use in connection with their BT Contracts
in China, currency restrictions, licensing restrictions and other areas of
regulation, all of which impact its profits and operating results and could
adversely impact our share price.


11


Because
China has difficult and unpredictable legal systems and underdeveloped laws and
regulations that are unclear and subject to corruption and inexperience, it may
adversely impact our results of operations and financial condition.





China is
notable of having an unpredictable legal systems and underdeveloped laws and
regulations that are unclear and subject to corruption and inexperience. Our
ability to seek and enforce legal protections, including with respect to
contract, intellectual property and other property rights, or to defend
ourselves with regard to legal actions taken against us in the PRC, may be
difficult or impossible, which could adversely impact our operations, assets or
financial condition. Chinese rules and regulations are often ambiguous or open
to differing interpretation by responsible individuals and agencies at the
municipal, state, regional and federal levels. The attitudes and actions of such
individuals and agencies are often difficult to predict and inconsistent. Delay
with respect to the enforcement of particular rules and regulations, including
those relating to customs, tax, environmental and labor, could cause serious
disruption to operations abroad and negatively impact our results.





Because
Chinese law governs a majority of CNC’s material agreements, we may not be able
to enforce our legal rights within the PRC or elsewhere, which could result in a
significant loss of business, business opportunities, or capital.





Chinese
law governs a majority of the material agreements of CNC. Our PRC subsidiaries
may not be able to enforce their material agreements, and remedies may not be
available outside of the PRC. The system of laws and the enforcement of existing
laws in the PRC may not be as certain in implementation and interpretation as in
the U.S. The Chinese judiciary relies on judicial interpretation on a
case-by-case basis and therefore the enforcement of corporate and commercial law
may lead to a higher degree of uncertainty as to the outcome of any litigation
than would be expected for matters litigated in the United States. The inability
to enforce or obtain a remedy under any of our future agreements could result in
a significant loss of business, business opportunities or capital.





The
Chinese government could change its policies toward, or even nationalize,
private enterprise, which could reduce or eliminate the interests we hold in the
PRC.





Over the
past several years, the Chinese government has pursued economic reform policies,
including the encouragement of private economic activities and decentralization
of economic regulation. The Chinese government may not continue to pursue these
policies or may significantly alter them to our detriment from time to time
without prior notice. Changes in policies by the Chinese government that result
in a change of laws, regulations, their interpretation, or the imposition of
high levels of taxation, restrictions on currency conversion or sources of
supply could materially and adversely affect our business and operating results.
Current PRC statutes provide that there be compensation paid to owners in the
event of nationalization or other expropriation of private enterprises by the
Chinese government, or the reintroduction of restrictions on private or foreign
involvement with infrastructure development or private or foreign financing of
municipal government entities, however, it is impossible to determine when such
compensation would be paid or whether it would be sufficient to offset the
partial or total loss of our investment in China. Therefore, investors cannot be
assured of any recovery under such circumstances.





If
the PRC does not continue its policy of economic reforms, it could result in
restrictions on services CNC and its PRC subsidiaries produce or
sell.





The PRC
government has been reforming its economic system since the late 1970s. The
economy of the PRC has historically been a nationalistic, “planned economy,”
meaning it has functioned and produced according to governmental plans and
pre-set targets, policy priorities or quotas.





However,
in recent years, the PRC government has implemented measures emphasizing the
utilization of market forces for economic reform and the reduction of state
ownership in business enterprises and acceptance of private- and foreign-company
participation in previously restricted sectors. The business of the Company’s
PRC subsidiaries has benefited greatly from that new outlook. Although we
believe that the changes adopted by the PRC government have had a positive
effect on the economic development of the PRC, additional changes still need to
be made. For example, a substantial portion of productive assets in the PRC are
still owned by government entities and they often receive preferential
opportunities to undertake work in the sectors in which the Company historically
operated. Additionally, governments continue to play a significant role in
regulating industrial development, setting priorities for urban development and
dictating pricing for goods and services supplied to government entities. We
cannot predict the timing or extent of any future economic reforms that may be
proposed.




12




A recent
positive economic change has been the PRC’s entry into the World Trade
Organization, the global international organization dealing with the rules of
trade between nations. Many observers believe that the PRC’s entry will
ultimately result in a reduction of tariffs for industrial products, a reduction
in restrictions on activities in which foreign-owned companies can participate
and an increase in international trade with China. However, the PRC has not yet
fully complied with all of obligations that it must meet prior to being admitted
as a full member of the WTO, including fully opening its markets to goods and
services from other countries, currency exchange requirements and other measures
designed to ease the current imbalances in trade matters that China has with
many of its trading partners. If the scheduled actions to rectify these problems
are not completed, trade relations between China and some of its trading
partners may be strained. While the majority of our business currently is
conducted solely within China, this may have a negative impact on China’s
economy generally, which would adversely affect infrastructure development. It
could also reduce or eliminate any benefits that we might achieve if we are able
to expand the scope of our business in China.





Because
our business operations exclusively utilized the Renminbi, we may experience a
decrease in U.S. dollar earnings because of the fluctuation of the Renminbi
against the dollar or other currencies.





The value
of the Renminbi, the main currency used in the PRC, fluctuates and is affected
by, among other things, changes in the PRC’s political and economic conditions
and Chinese government policy. The conversion of Renminbi into foreign
currencies such as the dollar has been generally based on rates set by the
People’s Bank of China, and such rates are subject to adjustment on a daily
basis. While the official exchange rate had remained stable over the past
several years, the PRC recently adopted a floating rate with respect to the
Renminbi, with permitted ranges of fluctuation. Almost all of the Company’s
assets are denominated in RMB and fluctuations of the Renminbi/U.S. dollar
exchange rate could have various adverse effects on our business or the
valuation of our assets. We do not hedge such exposures.





Foreign
exchange regulations in the PRC may affect our ability to borrow on or sell our
financial assets or pay dividends in foreign currency or conduct other foreign
exchange business.





Chinese
currency is not presently a freely convertible currency, and the restrictions on
currency exchanges may limit our ability to use revenues generated in RMB to
fund our business activities outside the PRC or to borrow on or sell financial
assets in international markets or make dividends or other payments in U.S.
dollars. The PRC government, through the State Administration for Foreign
Exchange (“SAFE”), regulates conversion of RMB into foreign currencies.
Currently, Foreign Invested Enterprises (such as Century City) are required to
apply for “Foreign Exchange Registration Certificates” and to renew those
certificates annually. However, even with that certification, conversion of
currency in the “capital account” (e.g. for capital items such as direct
investments or loans) still requires the approval of SAFE. There is no assurance
that SAFE approval will be obtained, and if it is not, it could impede our
liquidity and business activities.





We
are subject to restrictions on dividend and other payments from its PRC
subsidiaries.





We must
rely on dividends and other distributions from our subsidiaries located in the
PRC to provide us with cash flow and to meet our other obligations. Current
regulations in China would permit our subsidiaries domiciled in the PRC to us
only out of the accumulated distributable profits, if any, determined in
accordance with Chinese accounting standards and regulations. The payment of
management and other fees to us by our subsidiaries will be limited by other
applicable regulations including currency exchange regulations. In addition, if
the PRC subsidiaries incur debt on their own behalf in the future, the
instruments governing the debt may restrict their ability to pay dividends or
make other payments to us.





A
return to more stringent profit repatriation controls may further limit the
ability of our PRC subsidiaries to pay dividends and would reduce the
attractiveness of investing in Chinese business opportunities.





Chinese
law allows enterprises owned by foreign investors to remit their profits,
dividends, and bonuses earned in China to other countries, and the remittance
does not require prior approval by the State Administration of Foreign Exchange,
or SAFE. SAFE regulations require extensive documentation and reporting, some of
which is burdensome and slows payments. If there is a return to payment
restrictions and reporting, the ability of a PRC company to attract investors
will be reduced. In addition, current investors may not be able to obtain the
benefits of the profits of the business generated in China for other
reasons.





It is
possible that China tax authorities may require changes in determining income of
the company that would limit its ability to pay or the desirability of paying
dividends and make other distributions. Chinese law requires companies to set
aside a portion of after-tax income to fund certain reserves, which amounts are
not distributable as dividends. These rules and possible changes could restrict
us from repatriating funds and ultimately make distributions to its stockholders
as dividends.


13


We
are a BVI company and, because the rights of shareholders under BVI law differ
from those under U.S. law, our shareholders may have fewer protections than
shareholders of U.S. corporations.





Our
corporate affairs will be governed by our Memorandum and Articles of
Association, the Business Companies Act of the BVI and the common law of the
BVI. The rights of shareholders to take action against the directors, actions by
minority shareholders and the fiduciary responsibility of the directors under
BVI law are governed by the Act and the common law of the BVI. The common law of
the BVI is derived in part from comparatively limited judicial precedent in the
BVI as well as from English common law, which has persuasive, but not binding,
authority on a court in the BVI. The rights of our shareholders and the
fiduciary responsibilities of our directors under BVI law are not as clearly
established as they would be under statutes or judicial precedent in some
jurisdictions in the United States. In particular, the BVI has a less
prescriptive body of securities laws as compared to the United States, and some
states (such as Delaware) have more fully developed and judicially interpreted
bodies of corporate law.





If
U.S. stockholders sought to sue CNC officers or directors, it may be difficult
to obtain jurisdiction over the parties and access to the assets located in the
BVI or the PRC.





Because
most of our officers and directors will reside outside of the U.S., it may be
difficult, if not impossible, to acquire jurisdiction over these persons in the
event a lawsuit is initiated against us and/or our officers and directors by
stockholders in the U.S. It also is unclear if extradition treaties now in
effect between the U.S. and the BVI or the PRC would permit effective
enforcement of criminal penalties of the Federal securities laws. Furthermore,
because substantially all of our assets are located in the BVI or the PRC, it
would also be extremely difficult to access those assets to satisfy an award
entered against us in U.S. court. Moreover, we have been advised that the PRC
does not have treaties with the U.S. providing for the reciprocal recognition
and enforcement of judgments of courts. As a result, it may not be possible for
investors in the U.S. to enforce their legal rights, to effect service of
process upon our directors or officers or to enforce judgments of U.S. courts
predicated upon civil liabilities and criminal penalties of our directors and
officers under Federal securities laws.




Because
we are domiciled in the BVI, our shareholders may not be able to initiate
shareholder derivative and other actions, thereby depriving shareholders of the
ability to protect their interests.





As a BVI
company, our United States shareholders may not have standing to initiate a
shareholder derivative action involving us in a federal court of the United
States. The circumstances in which any such action may be brought, and the
procedures and defenses that may be available in respect to any such action, may
result in the rights of shareholders of a BVI company being more limited than
those of shareholders of a company organized in the United States. Accordingly,
shareholders may have fewer alternatives available to them if they believe that
corporate wrongdoing has occurred. The BVI courts are also unlikely to recognize
or enforce against us judgments of courts in the United States based on certain
liability provisions of U.S. securities law; and to impose liabilities against
us, in original actions brought in the BVI, based on certain liability
provisions of U.S. securities laws that are penal in nature. Although there is
no statutory enforcement in the BVI of judgments obtained in the United States,
the courts of the BVI will recognize a foreign judgment as the basis for a claim
at common law in the BVI under limited circumstances.





Under the
laws of the BVI, there are some statutory provisions for the protection of
minority shareholders under the Act. The principal protection under the Act is
that shareholders may bring an action to enforce our Memorandum and Articles of
Association. The Act sets forth the procedure to bring such a claim.
Shareholders are entitled to have the affairs of the company conducted in
accordance with the general law and the Memorandum and Articles of Association.
Pursuant to our constitutional documents, the company is obliged to hold an
annual general meeting and provide for the election of directors. Companies are
not obligated to appoint an independent auditor and shareholders are not
entitled to receive the audited financial statements of the
company.





There are
common law rights for the protection of shareholders that may be invoked,
largely dependent on English company law, since the common law of the BVI for
business companies is limited. Under the general rule pursuant to English
company law known as the rule in Foss v. Harbottle, a court will generally
refuse to interfere with the management of a company at the insistence of a
minority of its shareholders who express dissatisfaction with the conduct of the
company’s affairs by the majority or the board of directors. However, every
shareholder is entitled to have the affairs of the company conducted properly
according to law and the constituent documents of the corporation. As such, if
those who control the company have persistently disregarded the requirements of
company law or the provisions of the company’s memorandum or articles of
association, then the courts will grant relief. Generally, the areas in which
the courts will intervene are the following: (i) an act complained of which is
outside the scope of the authorized business or is illegal or not capable of
ratification by the majority, (ii) acts that constitute fraud on the minority
where the wrongdoers control the company, (iii) acts that infringe on the
personal rights of the shareholders, such as the right to vote, and (iv) where
the company has not complied with provisions requiring approval of a special or
extraordinary majority of shareholders, which are more limited than the rights
afforded minority stockholders under the laws of many states in the United
States.


14


Risks
relating to our legal and capital structure


The
public “float” of CNC’s common shares was significantly reduced by the
repurchase of shares at the time of the redomestication merger with IAG with the
result that the small number of beneficial holders of our securities and
concentration of their holdings limits trading in our securities and, unless the
ownership base is expanded, precludes obtaining a listing on Nasdaq or any other
national securities exchange.


Stock
repurchases and shareholder elections to convert their shares in conjunction
with the Sing Kung acquisition reduced our shareholder base to fewer than 100
shareholders from more than 250 and concentrated control of 95% of the
outstanding common shares in the hands of the top 13 shareholders and 95% of the
outstanding Class A Preferred shares in the hands of the top 16 holders. This
base of shareholders is too small to generate active trading in the Company’s
common or Class A Preferred shares.


Our
concentrated share base and the board and voting rights of the Class A Preferred
shares makes it likely that a few stockholders with aligned interests could
obtain control of sufficient common or Class A Preferred shares to take or
prevent certain types of corporate actions, to the detriment of other
stockholders.


Although
there is currently no majority stockholder in CNC, the share purchase
transaction and the exchange offer increased the possibility that a conglomerate
of stockholders forms a majority stake and attempts to control CNC’s
decision-making power. Accordingly, these stockholders may exercise significant
influence over all matters requiring stockholder approval, including the
election of a majority of the directors and the determination of significant
corporate actions. This concentration could also have the effect of delaying or
preventing a change in control that could otherwise be beneficial to our
stockholders.


Our
outstanding warrants may have an adverse effect on the market price of common
stock and make it more difficult to raise capital.





In
connection with its initial public offering (“IPO”), IAG issued warrants to
purchase 5,750,000 shares of common stock as part of the units offered in the
IPO. The potential for the issuance of substantial numbers of additional shares
upon exercise of these  warrants will increase the number of issued
and outstanding shares of our common stock and reduce the value of the.
Accordingly, our warrants may make it more difficult to effectuate future fund
raising. Additionally, the sale, or even the possibility of sale, of the shares
underlying the warrants could have an adverse effect on the market price for our
securities or on our ability to obtain future financing and it could induce
current stockholders to vote against the proposed transaction and to seek
redemption of their shares. If and to the extent the above-mentioned warrants
are exercised, our stockholders will experience dilution to their
holdings.


The
rights of Company security holders who are entitled to rescind their purchases
of CNC shares, units or warrants and assert a claim for damages against us and
our current or former officers and directors may be adversely affected because
the Company and many of the persons potentially liable upon such claims are not
residents of the United States.


The
prospectus issued by IAG in its IPO did not disclose that funds in the trust
account might be used to purchase shares of IAG common stock, units or warrants
from holders thereof who have indicated their intention to vote against the
stock purchase with Sing Kung and convert their shares into cash. Consequently,
such use of the funds in the trust account might be grounds for a holder of our
common and Class A Preferred shares to seek rescission of the purchase of such
shares if he or she acquired them through purchase of IAG units in IAG’s initial
public offering and still held the IAG shares or units at the time of the Sing
Kung stock acquisition without seeking to convert them into cash or voting in
favor of the Sing Kung acquisition. A successful claimant for damages under
federal or state law could be awarded an amount to compensate for the decrease
in value of his or her shares caused by the alleged violation (including,
possibly, punitive damages), together with interest, while retaining the shares.
As IAG no longer exists as a result of the redomestication merger with CNC, such
claims might be brought against us, our directors and officers and the former
directors and officers of IAG. However, because the Company and most of such
persons are not residents of the United States and have no assets in the United
States, enforcing any award for damages may be difficult or
impossible.


The
founding stockholders of IAG, including our chief executive officer, together
with some of our  directors and a small number of Class A Preferred
shareholders, control a substantial voting interest in us and thus may influence
certain actions requiring a stockholder vote.





Our board
of directors is divided into multiple classes, one class of which is appointed
by the Class A Preferred Shareholders (the “Class A directors”) and currently
comprises a majority of the board, and three classes of directors which are
elected by the common shareholders (“common directors”), each of which will
generally serve for a term of two years with only one class of common directors
being elected in each year. As a consequence of our ‘‘staggered’’ board of
directors, only a minority of the board of directors will be considered for
election annually. As long as the Class A Preferred directors are entitled to
hold a majority of board seats, the IAG founding stockholders, including our
Chief executive officer and as few as three other Class A shareholders will have
the ability to elect a majority of our board members. Accordingly, our founding
stockholders will continue to exert control at least until the consummation of a
business combination. In addition, the IAG founding stockholders and their
affiliates and relatives are not prohibited from purchasing our shares in the
open market. If they do, we cannot assure you that the IAG founding stockholders
will not have considerable additional influence upon the votes affecting the
value of shares held by other shareholders.




15




Provisions
of CNC’s Memorandum and Articles of Association may have the effect of
preventing an acquisition or tender offer that might be viewed by stockholders
to be in their best interests.





Certain
provisions of CNC’s Memorandum and Articles of Association may have the effect
of discouraging a tender offer or other attempt to gain control of CNC in a
transaction that is not approved by the board of directors. However, to the
extent these provisions successfully discourage the acquisition of control of
CNC or tender offers for all or part of CNC’s capital stock, they may have the
effect of preventing an acquisition or tender offer which might be viewed by
stockholders to be in their best interests. Tender offers or other non-open
market acquisitions of stock will generally be made at prices above the
prevailing market price of CNC’s stock and may cause the market price of the
stock to reach levels that are higher than would otherwise be the case.
Provisions that discourage such purchases may thereby deprive stockholders of an
opportunity to sell their stock at a temporarily higher price. Thus, these
provisions may decrease the likelihood that a tender offer will be made, and, if
made, will be successful. As a result, the provisions may adversely affect those
stockholders who would desire to participate in a tender offer. These provisions
may also serve to insulate incumbent management from change and to discourage
not only sudden or hostile takeover attempts, but also any attempts to acquire
control that are not approved by the board of directors.





Being
a foreign private issuer exempts us from certain Securities and Exchange
Commission requirements that provide stockholders the protection of information
that must be made available to stockholders of United States public
companies.





We are a
foreign private issuer within the meaning of the rules promulgated under the
Securities Exchange Act of 1934. As such, we will be exempt from certain
provisions applicable to United States public companies including:





·
            The
      rules requiring the filing with the SEC of quarterly reports on Form 10-Q
      or current reports on Form 8-K;




·
            The
      sections of the Securities Exchange Act regulating the solicitation of
      proxies, consents or authorizations with respect to a security registered
      under the Securities Exchange Act;




·
            Provisions
      of Regulation FD aimed at preventing issuers from making selective
      disclosures of material information;
and




·
            The
      sections of the Securities Exchange Act requiring insiders to file public
      reports of their stock ownership and trading activities and establishing
      insider liability for profits realized from any “short swing” trading
      transactions (i.e., a purchase and sale, or a sale and purchase, of the
      issuer’s equity securities within less than six
  months).




Because
of these exemptions, our stockholders will not be afforded the same protections
or information generally available to investors holding shares in public
companies organized in the United States.





Risks
related to governance and internal controls





Our
directors may not be considered ‘‘independent’’ and we thus may not have the
benefit of independent directors examining our financial statements and the
priority of expenses incurred on our behalf subject to
reimbursement.





Although
some of our directors own shares of our common stock, no salary or other
compensation is being paid to our directors for services rendered by them on our
behalf. Accordingly, we believe our non-executive directors would be considered
‘‘independent’’ as that term is commonly used. However, under the policies of
the North American Securities Administrators Association, Inc., an international
organization devoted to investor protection, because some of our directors own
shares of our securities and may receive reimbursement for out-of-pocket
expenses incurred by them in connection with activities on our behalf such as
identifying potential target businesses and performing due diligence on suitable
business combinations, state securities administrators could take the position
that all of such individuals are not ‘‘independent.’’ If this were the case,
they would take the position that we would not have the benefit of any
independent directors examining the propriety of expenses incurred on our behalf
and subject to reimbursement. Additionally, there is no limit on the amount of
out-of-pocket expenses that could be incurred and there will be no review of the
reasonableness of the expenses by anyone other than our board of directors,
which would include persons who may seek reimbursement, or a court of competent
jurisdiction if such reimbursement is challenged. Although we believe that all
actions taken by our directors on our behalf will be in our best interests,
whether or not they are deemed to be ‘‘independent,’’ we cannot assure you that
this will actually be the case. If actions are taken, or expenses are incurred
that are actually not in our best interests, it could have a material adverse
effect on our business and operations.




16




Our
internal controls over financial reporting do not currently meet all of the
standards contemplated by Section 404 of the Sarbanes-Oxley Act, and failure to
achieve and maintain effective internal controls over financial reporting in
accordance with Section 404 of the Sarbanes-Oxley Act could have a material
adverse effect on its business.





Our
internal controls over financial reporting do not currently meet all of the
standards contemplated by Section 404 of the Sarbanes-Oxley
Act  (“SOX”). CNC intends to address its internal controls
deficiencies but their can be no assurance that we will be successful in doing
so. If we resume the infrastructure development business in China, or enter a
new line of business, we will have to address the requirements of SOX in order
to do so and be compliant. If CNC is not able to implement the requirements of
SOX, its independent registered public accounting firm may not be able to
certify as to the adequacy of its internal controls over financial reporting.
Matters impacting CNC’s internal controls may cause it to be unable to report
its financial information on a timely basis and thereby subject it to adverse
regulatory consequences, including sanctions by the SEC or violations of
applicable stock exchange listing rules. There could also be a negative reaction
in the financial markets due to a loss of investor confidence in CNC and the
reliability of its financial statements. Confidence in the reliability of CNC’s
financial statements could also suffer if the Company or its independent
registered public accounting firm were to report a material weakness in its
internal controls over financial reporting. This could materially adversely
affect CNC and lead to a decline in the price of its registered equity
securities.





We
have had difficulty establishing adequate management, legal and financial
controls in the PRC, which could have resulted in misconduct and non-compliance
with applicable laws and requirements, the effects of which are not yet known to
us but could be materially adverse.





As a
privately held company with all of its subsidiaries operating exclusively in the
PRC, Sing Kung was not historically focused on establishing Western-style
management and financial reporting concepts and practices, as well as modern
banking, computer and other internal control systems. Subsequent to the
acquisition we have determined that sound management practices were not
consistently used and there is uncertainty about whether or not the Company’s
management of the BT Projects completed could subject it to tax or other
liabilities in the future, cause difficulties in collecting BT Project
receivables because of claims the government customers or others may have
against Century City or SNC or their prior owners or managers or blunt its
defenses against erroneous claims of against those companies. For example, we do
not have complete financial or project records, historical financial data or
complete corporate records that meet Western standards or
standards.





A
committee of our board, with assistance from outside legal counsel and other
consultants is investigating conduct and practices of prior management and
potential claims against the Sing Kung shareholders related to the stock
purchase agreement.




Our Board
has commenced a review of certain past payments and contract arrangements of
Sing Kung and its subsidiaries made to third parties, and parties related to its
Sing Kung’s former shareholders. The investigation is being supported by
independent legal counsel and other independent consultants.  The internal
investigation is ongoing and the Company expects to incur material expenses to
complete it. There is no assurance that the findings of the investigation will
not lead to a requirement to make historical financial statement adjustments,
which could be material.





Tax
risks





We
are subject to various tax regimes, so any change in tax laws and regulations in
any one of the relevant jurisdictions may result in reduced profitability and an
increase in tax liabilities.





We have
operations in the BVI and the PRC, and to the extent we elect to expand to other
emerging markets we would have operations in other tax jurisdictions as well. We
will be subject to the tax regimes of the countries where we have operations or
subsidiaries. Any change in tax laws and regulations or the interpretation or
application thereof, either internally in one of those jurisdictions or as
between those jurisdictions, may adversely affect our profitability and tax
liabilities.





The
“Enterprise Income Tax Law” of the PRC may have a material adverse effect on our
financial condition and results of operations.





In March
2007, China National People’s Congress adopted the Enterprise Income Tax Law
(the “New Tax Law”), which became effective on January 1, 2008. According to the
New Tax Law, for dividends made in the year 2008 or after, foreign investors
will be subject to a withholding tax on the dividends derived from a source
within China. The New Tax Law prescribes a statutory withholding tax rate of
20%; however, China’s taxation authority may subsequently reduce or exempt such
tax or adjust it in accordance with applicable bilateral tax treaties that may
be negotiated in the future. In addition, a lower withholding tax rate may be
applied if the foreign investor is domiciled in a country or place that has an
Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal
Evasion with respect to Taxes on Income with China. Since the New Tax Law has
only been adopted recently and detailed regulations on the New Tax Law have not
been published there is uncertainty as to how the New Tax Law should be
interpreted or implemented. Any discontinuation of preferential tax treatment
and any increase of the enterprise income tax rate applicable to Sing Kung, or
the loss of the exemption on dividend tax, could have a material adverse effect
on Sing Kung’s financial condition and results of operations.




17




There
is a risk that CNC could be treated as a United States domestic corporation for
United States federal income tax purposes.





Section
7874 of the Internal Revenue Code of 1986, as amended (the “Code”), provides
that if, pursuant to a plan (or a series of related transactions), a foreign
corporation acquires substantially all of the assets of a United States
corporation, and after the acquisition 80% or more of the stock (by vote or
value) of the foreign corporation (excluding stock issued in a public offering
related to the acquisition) is owned by former shareholders of the United States
corporation by reason of their ownership of the United States corporation, the
foreign corporation will be considered a United States corporation for United
States federal income tax purposes. If Section 7874 were to apply to the
redomestication merger of IAG, then CNC, as the surviving entity, would be
subject to United States federal income tax on its worldwide taxable income
following the redomestication merger and stock purchase as if CNC were a United
States corporation. Based on the advice of our counsel, the CNC common stock
simultaneously issued to Sing Kung stockholders pursuant to the stock purchase
agreement should be taken into account for purposes of Section 7874 and,
accordingly, CNC should not be treated as a United States corporation for United
States federal income tax purposes. However, because there is no direct
authority on how the rules of Section 7874 applied to the redomestication merger
of IAG with CNC and the Sing Kung acquisition, this result is not entirely free
from doubt. As a result, stockholders are urged to consult their own tax
advisors on this issue.





We
believe that we were classified as a passive foreign investment company with
respect to our 2009 taxable year, which could result in adverse U.S. federal
income tax consequences to U.S. holders of our common shares.




A
non-U.S. corporation will be considered a passive foreign investment company, or
PFIC, for U.S. federal income tax purposes for any taxable year if either (1) at
least 75% of its gross income is passive income or (2) at least 50% of the value
of its assets is attributable to assets that produce or are held for the
production of passive income. Because we and our subsidiaries had interest
income (which is passive income) in 2009, but we believe neither we nor our
subsidiaries had any non-passive income in 2009 due to our lack of operating
activity, we believe we will not satisfy the income test described
above.  As a result, we believe that we, and one or more of our
subsidiaries, will be classified as a PFIC with respect to our 2009 taxable
year.  We must make a separate determination at the close of each
taxable year as to whether we are a PFIC. Thus we may continue to be a PFIC for
2010 or any future year if we do not resume the infrastructure development
business in China. Absent a special election, U.S. persons who hold stock in a
PFIC may be subject to additional U.S. federal income taxes on gain recognized
with respect to the ordinary shares and on certain distributions, plus an
interest charge. In addition, if we were treated as a PFIC for any taxable year
during which a U.S. person held our shares, dividends paid by us in that year or
the following taxable year will not be eligible for the reduced rate of taxation
applicable to non-corporate U.S. investors, including
individuals.  See Section 10E. Additional Information, Taxation —U.S. Federal Income Taxation of
U.S. Holders.”





Other
risks





We
are unlikely to pay cash dividends, so the liquidity of a stockholder’s
investment depends on his or her ability to sell the stock at an acceptable
price, and the market price of the stock may fluctuate greatly.





Other
than a return of capital to a small percentage of IAG common shareholders,
previously referred to as a “closing dividend”,  who did not vote
against the Sing Kung acquisition and did not otherwise waive or forfeit their
rights to such distribution, we have never declared or paid any cash dividends
on our common stock or Class A Preferred stock, and we have no plans or
expectations of  doing so in the future, other than as may be
stipulated in our Memorandum and Articles of Association with respect to our
Class A Preferred Shares. Instead, we expect to apply earnings toward the
further expansion and development of our business. Thus, the liquidity of your
investment is dependent upon your ability to sell our stock at an acceptable
price, rather than receiving an income stream from it. The price of our stock
can go down as well as up, and fluctuations in market price may limit
stockholders’ ability to realize any value from their investment, including
recovering the initial purchase price





You
might not be able to resell your holdings of our securities at or above the
price you have paid or at all because our shares trade infrequently, volumes are
small and the price is volatile.





The price
at which our common shares had traded has been highly volatile, with a high and
low sales price of US$1.86 and US$0.20, respectively, from January 1, 2010
through August 12, 2010. You might not be able to sell the shares of our common
shares at or above the price you have paid. The stock market has experienced
extreme volatility that often has been unrelated to the performance of its
listed companies. Moreover, only a limited number of our shares are traded each
day, which could increase the volatility of the price of our shares. These
market fluctuations might cause our share price to fall regardless of our
performance. The market price of our common shares might fluctuate significantly
in response to many factors, some of which are beyond our control, including the
following:




·
            actual
      or anticipated fluctuations in our operating
  results;




·
            announcements
      by us of significant collections of existing contracts, new contracts,
      acquisitions, strategic partnerships, joint ventures or capital
      commitments;




·
            regulatory
      developments in China and our other target markets affecting us or our
      municipal government customers;




18




·
            conditions
      and trends in our industry;




·
            general
      market, economic, industry and political
  conditions;




·
            changes
      in market values of comparable companies, particularly those that focus on
      the China market;




·
            additions
      or departures of key personnel;




·
            stock
      market price and volume fluctuations attributable to inconsistent trading
      volume levels;




·
            future
      sales of equity or debt securities, including sales which dilute existing
      investors; and




·
            fluctuations
      in the exchange rate between the U.S. dollar and
  RMB.




Our
common stock is subject to the Securities and Exchange Commission’s penny stock
rules and broker-dealers may experience difficulty in completing customer
transactions and trading activity in our securities may be adversely
affected.





Because
our common stock has a market price per share of less than $5.00, transactions
in our common stock is subject to the “penny stock” rules promulgated under the
Securities Exchange Act of 1934, as amended. Under these rules, broker-dealers
who recommend such securities to persons other than institutional accredited
investors must:





•
            make
      a special written suitability determination for the
    purchaser;




•
            receive
      the purchaser’s written agreement to a transaction prior to
      sale;




•
            provide
      the purchaser with risk disclosure documents that identify certain risks
      associated with investing in “penny stocks” and that describe the market
      for these “penny stocks” as well as a purchaser’s legal remedies;
      and




•
            obtain
      a signed and dated acknowledgment from the purchaser demonstrating that
      the purchaser has actually received the required risk disclosure document
      before a transaction in a “penny stock” can be
  completed.




As a
consequence of being subjected to these rules, broker-dealers may find it
difficult to effectuate customer transactions and trading activity in our
securities may be adversely affected. As a result, the market price of our
securities may be depressed, and holders of our securities may find it more
difficult to sell such securities


Our
securities are quoted on the OTC Bulletin Board, which may limit the liquidity
and price of our securities more than if our securities were quoted or listed on
the Nasdaq stock market or another national exchange.





Our
securities are traded in the over-the-counter market and are quoted on the OTC
Bulletin Board, an NASD-sponsored and operated inter-dealer automated quotation
system for equity securities not included on The Nasdaq Stock Market. Quotation
of our securities on the OTC Bulletin Board may limit the liquidity and price of
our securities more than if our securities were quoted or listed on The Nasdaq
Stock Market or another national exchange. We cannot assure you that our
securities will continue to be traded on the OTC Bulletin Board in the future.
If the Company were to lose the right to have its securities traded on the OTC
Bulletin Board, we could face significant material adverse consequences,
including a:





•
            more
      limited availability of market quotations for our
    securities;




•
            determination
      that our common stock is a “penny stock,” which would require brokers
      trading in our common stock to adhere to more stringent rules and possibly
      resulting in a reduced level of trading activity in the secondary trading
      market for our common stock;




•
            more
      limited amount of news and analyst coverage for our
    Company;




•
            decreased
      ability to issue additional securities or obtain additional financing in
      the future; and




•
            decreased
      ability of our stockholders to sell their securities in certain
      states.





We
are not currently eligible for a listing on the Nasdaq stock exchange and as
long as this remains the case, it may prevent improvements in the active, liquid
trading market for our common stock, and the liquidity and trading price for our
common stock may be adversely affected.





Our
common stock is currently traded on the Over the Counter Bulletin Board and we
are not currently eligible to apply for a listing on any major national stock
exchange in the United States, including the Nasdaq Stock Market, due to
deficiencies in our market capitalization, number of shareholders, share price
and internal control deficiencies under the Sarbanes-Oxley Act. Until corrected,
and there can be no assurance that we will be able to effect the necessary
corrections, we cannot list our securities on a major national exchange.
Consequently, our security holders will continue to face the possibility of
limitations on their ability to trade our common stock, units, Class A Preferred
stock, units and warrants and the price that can be obtained for our
securities.




19


ITEM
      4.
                INFORMATION
      ON THE COMPANY


A.  History
and Development of the Company





CNC was
established under the laws of the BVI on August 8, 2008, as a subsidiary of IAG,
a blank check company that was formed as a vehicle for an acquisition of an
operating business.  CNC’s purpose was to merge with IAG for purposes
of changing domicile and, as the surviving company in the merger, to hold a 100%
interest in Sing Kung upon the completion of the Sing Kung acquisition (a
reverse acquisition transaction).    As further discussed
below, most of the shares of IAG were repurchased or converted upon consummation
of the merger. Those IAG securities that remained outstanding were converted to
securities of CNC as follows:





·
            each
      outstanding share of IAG common stock automatically converted into common
      and preferred shares of CNC;




·
            each
      outstanding IAG warrant automatically converted into one CNC warrant;
      and




·
            each
      outstanding IAG unit automatically converted into one CNC unit comprised
      of one CNC warrant and





On
September 9, 2009, contemporaneous with the consummation of the redomestication
merger, CNC acquired 94.9% of the common shares of Sing Kung pursuant to the
stock purchase agreement. Between September 9, 2010 and October 2, 2010, CNC
acquired all of the remaining common shares and Preferred shares of Sing Kung
pursuant to an exchange agreement, giving it 100% ownership of the equity of
Sing Kung.





History
Prior to the Sing Kung acquisition




IAG was a
blank check corporation organized under the laws of the State of Delaware on May
10, 2005, under the name “InterAmerican Acquisition Group, Inc.”  IAG
was formed to effect a business combination with an unidentified operating
business.   In September 2007, IAG successfully consummated a
private placement and an initial public offering of its equity securities from
which it derived aggregate net proceeds of approximately $42.9 million.
Approximately $42.2 million of the net proceeds was placed in a trust account
and was released to the Company upon consummation of the Sing Kung acquisition.
The balance of the net proceeds from the initial public offering plus interest
earned on the trust account of approximately $1.0 million was used by IAG to pay
the expenses incurred in its pursuit of a business combination. IAG formed CNC
as required by the stock purchase agreement with Sing Kung and in contemplation
of consummating the Sing Kung acquisition. Other than its initial public
offering and the pursuit of a business combination, IAG and CNC did not engage
in any business.




The
Sing Kung Acquisition




On May
15, 2008, IAG entered into a stock purchase agreement with Sing Kung Limited,
its largest shareholder, Cho Kwan and certain other of its common shareholders.
Sing Kung, through subsidiaries, was engaged in providing services to
municipal-government customers to integrate project design, implementation and
financing for Build-Transfer ("BT") infrastructure projects for municipal
government customers in the PRC.





The stock
purchase agreement with Sing Kung specifically contemplated the formation of
CNC, the redomestication to the BVI and the purchase of 100% of the Sing Kung
shares either directly or pursuant to the exchange agreement. The stock purchase
agreement also provided for the original Sing Kung shareholders to receive
additional shares in future years based on achievement of specified after-tax
operating profits (the “earn-out”). The stock purchase agreement was twice
amended to reflect below-plan operating performance of Sing Kung and market
conditions. With each amendment, the share purchase and exchange ratios were
adjusted, resulting in the final ratios described above. The final amendment
also adjusted the terms of the earn-out to provide for the original stockholders
of Sing Kung to be issued up to 10,300,000 shares of CNC common stock, if, on a
consolidated basis, the Company has net operating profit after-taxes (calculated
in accordance with U.S. GAAP and excluding any profit from an acquisition by CNC
that involves the issuance of securities that has a dilutive effect on the
holders of common stock of CNC). The target net operating profits for CNC and
schedule of additional shares issuable to Sing Kung stockholders upon achieving
the net operating profit for such fiscal year are:




20




Year ending December 31,
                        
                        Net Operating Profit(after tax)
                        
                        
                        Additional Common SharesIssuable2009
                        
                        $
                        15,000,000
                        
                        
                        
                        2,000,0002010
                        
                        $
                        19,500,000
                        
                        
                        
                        2,000,0002011
                        
                        $
                        25,350,000
                        
                        
                        
                        2,100,0002012
                        
                        $
                        32,955,000
                        
                        
                        
                        2,100,0002013
                        
                        $
                        42,841,500
                        
                        
                        
                        2,100,000




The net
operating profit target for fiscal 2009 was not met and no earn-out shares were
issued.





Corporate
Structure Summary and Development History




The
following chart illustrates our corporate structure as of December 31, 2009 and
as of the date of this filing:









Sing Kung. Sing Kung
is the sole subsidiary of CNC and has no current business purpose other than to
hold the shares of the Chinese operating subsidiaries. Sing Kung was
incorporated in the BVI on January 18, 2007 as a limited liability
company.




Century City. Century
City is registered as a foreign-invested enterprise and is the principal
corporate entity among CNC’s subsidiaries operating in China. It was formed on
December 26, 2007 by Sing Kung in Changchun, the People's Republic of China as a
limited liability company. On December 27, 2007, Century City entered into a
management, stock pledge and purchase rights agreement with SNC that provided
Century City with a substantial degree of control over SNC and conveyed to
Century City the right to acquire a 100% ownership interest in SNC. Based on the
substance of these agreements, Century City entered the infrastructure
development business and SNC is regarded as a predecessor company (although it
was not consolidated for accounting purposes based on the facts and
circumstances of the agreements). Together, SNC and Century City carried on the
Company’s infrastructure development business in China until operations were
suspended in January 2010. The approved registered capital of Century City was
originally $30 million, but this was reduced effective December 31, 2009 to
about $12 million because sufficient funds were not available within the
prescribed time frame to utilize the full $30 million
authorization.





SNC. SNC was
organized in Shanghai, the PRC on July 11, 2005 as a limited liability company.
It has registered capital of RMB 30 million (approximately $4.4
million)  SNC was engaged in the infrastructure development business,
integrating BT Development projects from its formation until operations were
suspended in January 2010. However, SNC only undertook and completed one such
project and it was the originator of one other project ultimately completed by
CCI during 2008.




21




Jioahe Century Urban
Construction Co. Ltd. (“Jiaohe Project Co”). Jiaohe Project Co. was
established on March 3, 2009 to be the transferee of the contract rights of
Century City related to one project performed for the municipality of Jiaohe in
Jilin Province (the “Jiaohe Project”). The Jiaohe Project contract rights were
never transferred and the Jiaohe Project Co. has remained inactive since its
formation.





Recent
Corporate and Commercial Developments – Suspension of Business in the
PRC





Due to a
lack of liquidity with which to carry on its operations in China, the Company
began scaling back staff to reduce expenses in August 2009 and about the same
began exploring the transfer of its ongoing BT Projects to third parties to
avoid execution failures and to limit liabilities to BT Project subcontractors.
By the end of November 2009 our Chinese subsidiaries had ceased pursuing new
business and the remaining staff was focused on contract renegotiations and
transfers for projects in progress and expediting collections for projects
recently completed. Our board formally approved the full suspension of
infrastructure development business operations in January 2010 and the
termination of the lease for our principle offices in Shanghai. With the
exception of the minimal staff required to pursue collections, resolve open
contract issues and handle required administrative and accounting matters, all
personnel involved in the infrastructure development business were terminated.
The chief financial officer, Young Xu resigned at the end of January 2010 and
his accounting duties have been outsourced to a third-party accounting firm
based in Shanghai, Shanghai Long Term CPAS. We are currently renting smaller
office space from an affiliate of Shanghai Long Term CPAS on a month-to-month
basis as a cost-saving measure. As a consequence of the inability to fund
completion of BT Projects in-progress during 2009 and thereafter, no revenue
from the infrastructure development business was realized during 2009 and none
is anticipated during 2010. A final determination of whether or not to restart
the infrastructure business in the PRC will be made before the end of 2010 based
on the availability of capital and the company’s success collecting amounts due
from or expected to be paid in 2010 by our municipal government customers. At
this point the Company has developed no plans to enter an alternative line of
business, although there can be no assurance that we will not do
so.





B.  Business
Overview





Introduction




Until the
suspension of business operations, the Group was engaged until late 2009 in
providing services to municipal-government customers to integrate project
design, implementation and financing for BT projects in the PRC. Although there
can be no assurance that the BT project development business will be resumed, in
recognition of the fact that it was the sole business of the Company during the
period covered by this annual report and the possibility that the we may resume
that business, the discussion that follows describes that business and the scope
of our activities.





BT is a
form of project development wherein a private entity contracts with the public
(government) sector to take control of and develop, on a turnkey basis, a
municipal infrastructure project, typically consisting of basic elements such as
roads, utilities (such as sanitary and storm sewer lines, underground electric
distribution lines) and general site preparation work necessary for further
development of real estate. Upon completion and acceptance of the project,
control over the project site is transferred back to the municipal-government
customer. Scope of work and terms of payment for each individual project are a
matter of contract between the municipal-government customer and the
Company.





The
BT model for urban development




The
former management of Sing Kung implemented a public-private partnership (“PPP”)
business model tailored to the specific opportunities and risks of municipal
infrastructure development in China. As noted above, BT refers to a form of
project execution wherein a private entity such as one of the Company’s PRC
subsidiaries receives a contract from a municipality or public sector entity to
do engineering design, fully finance, and construct, on a turnkey basis, a
specified project. During construction or upon completion, the private developer
then transfers control over the improvements specified in the project agreement
to the public-sector customer in exchange for fixed payments over a specified
period of time (usually 6 to 8 years in the case of the contracts entered into
by SNC and Century City). In addition to transferring the burden of project
planning and execution to a private-sector counterparty, the BT model places
primary responsibility for organizing financing with the developer. This is
particularly useful for government project sponsors in situations such as those
prevailing in China, where there is no organized municipal financing market and
the process for arranging direct government funding or budget approval is often
long and fraught with political challenges. However, such situations create
substantive challenges and risks for private-sector BT counterparties, which is
the basis for the high operating margins implicit in the projects.





Members
of Sing Kung’s management began experimenting with the BT model on ad hoc
projects before this form of PPP was officially accepted in the PRC. With very
limited capital resources, however, SNC was forced to initiate BT projects in
partnership with independent private capital sources or well capitalized
construction company consortium partners who received the substantial majority
of revenues under the consortium agreements. Despite receiving only a small
allocation of revenue, however, prior to the acquisition by CNC, Sing Kung’s
management and staff were able to demonstrate the feasibility and benefits
of:




22




·
            working
      actively and closely with top-level university planning teams on economic
      and strategic aspects of multiple municipal planning
    projects;




·
            building
      a network of forward-thinking municipal
leaders;




·
            building
      relationships with established engineering and construction contractors
      who could participate in future BT consortia;
  and




·
            precedent
      agreements pursuant to which investors and contractor-partners could be
      solicited to contribute capital for the BT
  project.




Under the
BT model, capital intensity for developers is high. Based on the limited
information available for these projects in China, we believe that the
historical long-term risk-adjusted returns are at the upper end of the
international norms for this type of project due to capital-market
inefficiencies in China, risks in enforcing contracts rights there, and intense
pressures to quickly implement urban infrastructure projects. We also believe
that margins in the sector may decline over time and this will be a factor
considered by our board in deciding whether or not to reenter the business. As
in most countries utilizing PPP models, if the BT developer can effectively
finance a meaningful fraction of the investment at low cost and accelerate the
ultimate payout or efficiently monetize the municipal counterparty obligations,
its returns can be robust.





The
market and industry drivers





China’s
urbanization process




Unprecedented
socio-economic forces are powering dynamic growth and important changes in Sing
Kung’s market – municipal infrastructure development in the PRC. Diverse sources
and Sing Kung’s own analysis indicate that the next 20 years will see
acceleration of China’s urbanization trends, and further concentration of its
fixed investment in urban areas. During that time, urban populations in China
are expected to swell by an incremental 350 million, more than the total current
population of the United States. This wave of urban population increase is
expected to be dominated by the migration of more than 240 million people into
existing urban centers in the next 20-year period, almost double the migration
rate of the last two decades. Consequently, local governments in China are
entering a new era in land resource and fiscal management. They will not be able
to fund municipal expansion to the same degree through land sales to private
developers because “new” land is not available. Consequently the cost and
complexity of urban development is rapidly rising for city and provincial
governments, stretching already limited municipal resources. This situation is
particularly acute for smaller and mid-sized government entities, the Company’s
historical target customers, many of which are simultaneously struggling to
finance the increased level of services required by growing migrant populations
and lack the depth of technical and management resources to handle the range of
city development issues facing them.





Government urban development
policies and regulation




The
political framework governing provincial and municipal development projects in
the PRC is highly complementary to the BT Project model. Advancement of
government officials at the local and provincial level within China is closely
tied to implementation of state policy objectives and achievement of tangible
economic growth that leads to enhanced regional productivity, job creation,
increased local tax revenue, and generation of other municipal fees. This
includes generation of VAT taxes which tend to rise proportionally with
increases in the size of the local or regional economy.





The
Company’s strategic approach to urban development, described further below, was
designed to be in harmony with policy priorities and was welcomed by city
officials working with limited resources who are looking for fresh ideas to
quickly promote economic growth and community viability and land resource
management. In some cases, the use of the BT structure can cut a year or more
off of the time frame for a city’s project implementation because the city does
not have to obtain firm project financing commitments through bureaucratic
government or state-lending channels before project commencement. Municipal
leaders have also found that their decisions to champion BT Projects, such as
those performed by the Group, have been positive factors in their own career
development because of the rapid impact the projects have had on achievement of
city economic goals. These outcomes lead to favorable references for successful
BT Project developers within the close-knit Chinese bureaucracy and were
believed to have the potential to create a virtuous circle of growth
opportunities for the Company.





The PRC
regulatory framework has only recently evolved to support PPP projects. Being
mindful of the urbanization trends and the overwhelming demands that they will
create on government resources at the state, provincial, and municipal level,
the PRC State Council has accepted that private capital sources will have to
play a major role in financing and otherwise supporting the development of urban
infrastructure and many services. After several years of “looking the other way”
while individual cities experimented with public-private development
partnerships, in July 2004 the State Council on Reforming the Investment System
formally endorsed the use of private investment for municipal projects, a
declaration consistent with the application of PPP concepts that are widely used
elsewhere in developing economies, such as BT and BOT (Build-Operate-Transfer)
models. Use of the BT development framework has grown steadily ever since and it
is now widely accepted and employed by many developers and construction
contractors.




23




Operational
Components of the Business




The
Company’s BT development business was designed to respond to the massive urban
growth in China by providing an integrated, turnkey solution, primarily to
second and third tier cities under severe pressures to accommodate their rapidly
rising populations. The business model, as fully implemented by the Group, had
two key components: (1) urban planning, and (2) basic infrastructure
construction through management of a consortium pursuant to a BT contact. The
dynamics of each of these components is further described below.  While we
were operating the company performed only a few projects in a single line of
business (the BT Project development business described herein) in a single
geographic area (Eastern China). Therefore we do not break down historical
revenues.  The business was seasonal to the extent that work could not
reliably proceed during all winter months on projects performed in northern
China.





Municipal
strategic planning/urban planning




For
historical and policy reasons, urban planning in China is performed largely
through the state-funded university system, either directly with faculty-led
teams or teams led by staff of university-affiliates. In general, both municipal
leaders and the university-based planners have been narrowly focused on the
engineering aspects of urban planning. The Company endeavored to use the
experience, technology and high-level personnel resources of its senior managers
to bring a strategic and economic perspective to this important function. It
sought to apply an integrated and comprehensive approach its design to elevate
the economic and social impact of municipal development initiatives, lower
project risk and shorten the cash generation cycle of its local government
clients. This approach was intended to provide a solid foundation for the
development of detailed urban development plans. These capabilities may be among
the most difficult to replace if the Company elects to restart its
infrastructure development business in China and there is no assurance that it
can be successful.




To
facilitate implementation of projects and identify new project opportunities,
the Company has established close working relationships with selected faculty
and staff at China’s top research institutions in the field of city planning and
design. Each of the institutions with which the Group maintained relationships
has a long history of consulting for the Chinese government at the central,
provincial, and municipal level on city planning and of winning approvals from
the NDRC. The collaborations of Company personnel with the NDRC and university
project teams allowed it to participate actively in the all-important
preparation of specific project plans from the earliest stages that gives the
organization visibility of a large universe of potential development projects
that will be implemented over the coming 3 to 5 years. This perspective was
intended to position the Company to propose selectively on attractive projects
that come to bid in the BT mode with municipalities that it deems to be well
managed, advantaged by geography, policy priority or other factors and fiscally
sound. We believe that success factors in the planning component of the business
are as follows:





Opportunity
generation.The
Group relied extensively on its urban planning activities as the engine for
driving the creation of attractive project opportunities. Participation in the
first stage economic and strategic analysis performed by the
university-affiliated teams, coupled with the detailed city planning work
fostered the building of relationships of trust and credibility with municipal
officials. This process will have to be restarted if the Company elects to
restart the business.




Project
risk assessment.Beyond information available on a handful of major municipalities, China
lacks a reliable public source of information on the financial health of its
municipalities and provinces. Also, there is no recognized private rating agency
comprehensively covering this universe of potential counterparties that would be
the equivalent of those operating in developed countries whose ratings are
widely accepted by the international finance community. Consequently, the
development of proprietary information and access to fragmented and
difficult-to-compile government information is critical to being able to make an
objective assessment of municipal financial risk. Former members of Group
management had access to significant amounts of proprietary information that
were could be applied to project risk assessment. In restarting the business,
development of replacement sources of such information will be necessary.
Current board members have the relationships and experience to assist with this
process, but there is no assurance that they will remain involved or be able to
do so.




Role of
universities.PRC urban planning often takes place through the urban planning and
architecture departments in China’s state-run university system. Because of
historical policies promoting specialization among China’s universities, there
are only a few internationally recognized urban planning and architectural
departments that execute most of the detailed designs for important new urban
areas, infrastructure and other high-priority projects. The Group’s former
executive management had long-standing relationships with senior staff members
in the principal urban planning departments of notable specialist institutions
such as Tongji University in Shanghai, Tsinghua University in Beijing, and
University of China Technology & Science in Anhui Province. These or similar
relationships would likely have to be replaced if the company restarts its
infrastructure development business and there is no assurance that can be
accomplished successfully.


24





Competition
in planning and design




Competitors
in the urban planning segment of our business include personnel from leading
university and university-affiliated design centers. In addition, we believe
that at least 300 planning consultant organizations and specialized engineering
and construction firms in China have capabilities in this arena, although they
tend to be narrowly focused on routine projects or specific engineering designs
for structures or infrastructure components. To our, none of these competitors
integrates municipal strategic planning with turnkey project construction and
financing in the same manner as did the Group.




Licensing




In China,
wholly-foreign-owned enterprises are presently prohibited from undertaking
municipal infrastructure planning projects unilaterally. Consequently, our
relationships with university and institutional license-holders were critical to
the establishment and maintenance of municipal client relationships for
comprehensive urban planning projects. To mitigate risk of not having access to
requisite licenses, the Company does have an agreement with Pan China
Construction Company, Ltd. (as further described below under the heading “Infrastructure construction
management – Licensing”) under which the Company’s PRC subsidiaries, for
a pre-agreed participation interest, can include Pan China as a consortium
member in a role that will satisfy the licensing requirements. In addition to
construction licenses, Pan China also holds planning and design licenses of the
sort that are often required on projects of the sort that comprised our
business.





Infrastructure
construction management





The
implementation phase of each project involves contract bidding and the
integration and oversight of construction services as further described
below:





Contract
bidding process.BT contracts are not subject to public bid as a matter of PRC law or
regulation (although local and provincial requirements can differ). However, the
initial BT contracts awarded to the consortiums led by our PRC subsidiaries were
sometimes subject to a public bid process, and in such cases the contracts and
terms of the award are a matter of public record, to the extent permitted by PRC
and local regulations. In general, the bid process (if it occurs) is short, 30
days or less, and bidders must meet the requirements of the municipal project
specification. Following the award, there is usually a process of public
notification wherein the winner of the award and its general terms are announced
in accordance with local regulations. Bid specifications often include, in
addition to job requirements, qualifications that bidders must meet. These
qualifications may include relevant past work experience, references, financial
capability and usually a substantial bid deposit. Change orders and follow-on
work on awarded contracts may be awarded by municipalities without new
competitive bidding, depending on local regulations and the terms of the
original bid, and subject to the provision that the project parameters and
overall cost remain within those approved by the NDRC. The Group endeavored to
identify situations where it would have an advantage in the bidding process and
where its ability to offer more complete or effective service would allow it to
avoid bidding solely on price. Developing the capability to identifying such
situations in the future will be an important success factor in any attempt to
restart the Company’s BT Project business.




Formation
of consortia.Based on its first-hand
project experience, the former management of the Group cultivated close working
relationships with a handful of engineering and construction companies over a
period of years. These relationships provided perspective on evolving cost norms
for completing projects and on best practices in use in China’s enormous and
highly fragmented construction industry. They also constituted reliable go-to
resources for formation of competitive bidding consortia that could perform work
in multiple regions of the country. Some of the Group’s execution partners were
at least partially state-owned and were cooperative and experienced in utilizing
local resources that would allow municipal project sponsors to “recirculate”
project revenues into their local communities in the form of wages and
sub-contract revenues. New execution partners of similar caliber and having
similar capabilities will have to be identified in any restart of the business
and there is no assurance that this will be possible. New execution partners
will also need to have financial strength and access to both direct financing
and bonding that ensures their ability to finish projects they undertake and to
participate in providing a substantial fraction of project working
capital.





Structure
of BT contracts.Under the regulations that permit PPP arrangements such as BT contracts,
the BT developer takes dominion over the property being developed during the
development process. As such, the developer has the rights of an owner to
control access to and perform work on the project site (but not the right to
transfer or realize economic benefit from the property) during the development.
The fees charged for the infrastructure construction are generally set with
reference to regulatory guidelines. Additional fees can be levied (as part of
the contract price) for the use of the developer’s capital and for other
services that the developer is providing to the municipality. Collectively,
these are all bundled in the overall project fee. Each BT contract between the
Group and its municipal clients was different and was tailored to the
circumstances and the project. Notwithstanding this, a few elements were common
to all of the Group’s contracts and that is expected to be the case if the
Company elects to restart its infrastructure development
business:


25





·
              One
      of our PRC subsidiaries is the development consortium leader and has power
      to negotiate with the municipality on all contract
  matters.




·
            The
      project must be approved/accepted by the municipality and there are strict
      timelines and dispute resolution mechanisms for this
    process.




·
            Capital
      contributions by the Company and/or its project partners to fund project
      expenses are delineated in the contract with the municipality or ancillary
      contracts with the consortium partners. Project execution responsibilities
      are clearly divided among consortium partners and delineated in the
      contracts, and distinctions between joint and several performance
      accountabilities to the municipal client are documented; in keeping with
      this principle, the allocation of project revenue among the consortium
      partners is also delineated in the set of contracts for each
      project.




·
            As
      a result of collateralization provisions, the Group member executing the
      contract maintains specified rights to underlying or ancillary asset value
      or sources or cash for repayment, in addition to having the contractual
      right to receive payments from the municipal
  government.




Flow of
liability.One
of the unique aspects of the Group’s BT contracts performed prior to the end of
April 2008 is that they did not create direct liability for the company for all
elements of a project. Unlike typical Western-style construction management
contracts, SNC’s historical BT contracts apportioned project accountability, and
therefore liability, directly to the contracting partners in the construction
consortium. The result of this structure was that SNC had limited liability
under these BT contracts and accounted for them under the Net Method of revenue
recognition. It also is the reason that the contractor-partner expenses and
revenues did not run through SNC’s income statements. The opportunity to
continue this limited liability structure on future contracts, should we restart
the business, depends on market competitive dynamics and the priorities of
municipal counterparties.





In later
contracts (the Jiaohe Project being the only completed contract of this type)
Company management believed it was to its economic advantage to act as the
principal and ultimate financial backer for the projects. Therefore the Jiaohe
Project had, and it is expected future projects will have (if we elect to
restart the business) a more conventional general contractor structure wherein
the company is responsible to the consortium partners for payment and receives
and recognizes all project revenues in accordance with the Gross Method of
revenue recognition. (Refer to the section below titled “Management’s Discussion
And Analysis Of Financial Condition And Results of Operations” under the heading
“Key Accounting Policies – Revenue Recognition”.)  If available contract
terms continue to justify the additional risk involved and it has adequate
access to capital resources, we would expect to undertake most BT contracts on
the basis that the Company functions as the contract principal. However, if we
restart the business, in all likelihood, our project portfolio will include
multiple forms of BT contracts.





Competition
in construction.Primary competitors in the construction and BT development segment of the
business are licensed China-based construction companies. We estimate that there
are thousands of these in China, including international enterprises. The
largest and most capable Chinese construction contractors tend to be at least
partially owned by government units and many have attained a scale and level of
capability that ranks with the largest competitors from developed countries.
Some of these competitors have been the Group’s consortium partners. With the
comprehensive planning capability that it had, we believe the Company had an
advantage over many competitors that functioned solely as construction
contractors because, to our knowledge, none of these competitors integrated
municipal strategic planning with turnkey project construction and financing in
the same manner as the Company. There is no assurance that this advantage could
be maintained if we restart the business.




Licensing.Aspects of infrastructure
design and construction that are often included in Sing Kung’s BT contracts
require the construction contractor to hold an applicable license to perform
such work. This requirement is fulfilled for the consortium if a consortium
member is licensed to perform each element of work requiring a license. Because
no company within the Group was licensed for infrastructure construction, it has
formed a strategic relationship with Pan China Construction Company, Ltd. Under
this agreement, we may, at our discretion and for specified fees, include Pan
China as a consortium partner if we cannot find another consortium partner or
partners that hold requisite licenses. In 2007, the PRC Construction Ministry
lifted its prohibition on wholly-foreign-owned enterprises obtaining a license
to undertake infrastructure construction and if we elect to restart the
business, we would seek to obtain our own license for this important function as
soon as practicable.




On-the-ground
management teams.Successful management of the construction component of the business
requires on-the-ground project managers to guide each project through
completion. Such project managers are typically responsible to oversee the work
of the consortium members, monitor the progress of each phase of the project,
and manage the Company’s relationships with municipal leaders. A core of such
project managers would need to be hired to restart the business and there is no
assurance that this will be possible on acceptable terms.


26





Customers/Backlog




Through
2009, the Group had four BT Project customers, development zones in the
municipalities of Changchun, Jiaohe, Zhengding and Weng Yuan. BT Projects were
completed for Changchun and Jiaohe. Because of the resource constraints
discussed above and other considerations, the Company has negotiated the
transfer of the New District Phase of the Jiaohe Project and the Zhengding and
Weng Yuan Projects to third parties in consideration for them assuming the
liabilities to project subcontractors. The company currently has no active
customers and no backlog. It is maintaining relationships with Changchun and
Jiaohe for the sole purpose of collecting amounts due for completed projects.
For details, refer to Item 5. “Operating and Financial Review and Prospects”
under the heading “Overview”.





Employees




At
year-end 2009, we had a total of 15 full-time employees working in three primary
categories: administration and management (6), urban planning (7), and urban
infrastructure construction management (2). All but one, located in Changchun
and serving that project and the Jiaohe Project, were based in Shanghai. This
employee total was reduced from approximately 29 at mid-year divided among the
categories as follows: administration and management (12), urban planning (11),
and urban infrastructure construction management (6). Of these, all but 5 were
located in Shanghai with the remained assigned to our project locations as
needed.   As of the filing date hereof, the employee count has been
reduced to two to limit costs following the suspension of the infrastructure
development business in January 2010.   One of these employees is
located in our project office in Changchun and the other is based in Shanghai at
our principal office location.




Legal
Proceedings




In June
2010, one of the Company’s subsidiaries based in the PRC was served with a
lawsuit related to the failure of a supplier to pay the party bringing the suit.
The Company intends to defend itself vigorously against this action and any
other actions that may be brought against us. However, there can be no assurance
that we will prevail in our defense.





C. 
Organization and Structure




On
September 9, 2009, we acquired Sing Kung a reverse acquisition transaction Sing
Kung became our wholly owned subsidiary. See Item 4.A. “History and Development of the
Company” above.





D. 
Property, Plant and Equipment




Subsequent
to suspension of our infrastructure development business, we terminated the
leases at our headquarters office in Shanghai and on a design studio adjacent to
Tongji University where the Group’s urban planning personnel were located.
Except for a single-year lease in Changchun, the remainder of our facilities
commitments are on a month-to-month basis. Because of the nature of our business
we do not have or need ownership interests in any other properties other than
transitory space at project sites that is typically granted to it as a developer
pursuant to its BT Contracts, should we decide to restart that business. Our
equipment is limited to a small amount of office equipment.





ITEM
      4A.
            UNRESOLVED
      STAFF COMMENTS





None





ITEM
      5.
            OPERATING
      AND FINANCIAL REVIEW AND PROSPECTS





The
following discussion of our financial condition and results of operations is
based upon and should be read in conjunction with our consolidated financial
statements and their related notes included in this Annual Report on Form 20-F.
This Annual Report on Form 20-F contains forward-looking statements. See “Forward-Looking
Information.” In evaluating our business, you should carefully consider
the information provided in Item 3.D, “Key Information - Risk
Factors,” of this Annual Report on Form 20-F. We caution you
that our businesses and financial performance are subject to substantial risks
and uncertainties.





OVERVIEW





CNC
Development Ltd. (“CNC” or the “Company”), was established under the laws of the
British Virgin Islands (“BVI”) on  August 8, 2008, as a subsidiary of
InterAmerican Acquisition Group, Inc. (“IAG”).  CNC’s purpose was to merge
with IAG for purposes of redomestication and to hold a 100% interest in Sing
Kung Limited (“Sing Kung”) upon the completion of a reverse acquisition
transaction  (the “Sing Kung Acquisition”).  Sing Kung is a holding
company incorporated in the British Virgin Islands in 2007. Sing Kung owns a
100% interest in Jiaohe Century Urban Construction Co., Ltd., a company that was
formed on March 3, 2009 and that has remained inactive since its
formation.  Sing Kung also owns a 100% interest in Century City
Infrastructure Co., Ltd. (“Century City”), a company that it formed in the PRC
in 2007 and that is registered as a foreign-invested enterprise.  On
December 27, 2007, Century City entered into a series of agreements (the
“Operating Agreements”) to acquire Shanghai New Century City Development, Ltd
(“SNC”) and it consummated the acquisition of 100% of the equity of SNC on
December 9, 2008.  The Operating Agreements provided Century City with
total operating control over and a 100% economic interest in the net income and
activities of SNC while the acquisition was pending.  Although the facts
and circumstances at the time did not support consolidation of SNC as a Variable
Interest Entity in accordance with ASC 810 “Consolidation”, SNC is deemed a
predecessor company and the following discussion and analysis of the financial
condition and results of operations includes the results of SNC for the year
ended December 31, 2007.  The term “Group” is used herein to refer to CNC
and all of its subsidiaries including SNC. The term “PRC Subsidiaries” is used
herein to refer to Century City and SNC collectively.


27




SNC was
formed in the PRC in 2005 to plan and implement infrastructure projects for
local governments, a business also carried out directly by Century City
following its formation. Until operations were suspended in January 2010 (as
further discussed below), the PRC Subsidiaries partnered with, or employed as
sub-contractors, various specialist firms in consortiums to provide city
planning, infrastructure development, urban land improvement, and older-city
redevelopment in China. In this way, the PRC Subsidiaries delivered turnkey
solutions to municipalities seeking to implement new development zones, expand
existing developments, or redevelop underutilized urban resources. As discussed
in detail in Item 4. – “Information About the Company”, under the heading “BT Model for Urban
Development”, the PRC Subsidiaries (sometimes together with consortium
partners) fully financed these development projects (“BT projects”) for their
municipal clients.  The Group’s BT Project contract terms called for the
PRC Subsidiaries to receive payment over a period that could range up to 8
years.




The PRC
Subsidiaries outsourced almost all construction and project implementation
activities other than overall project supervision. The Group’s experience is
that some BT Project contracts did not create direct liability to the
contracting Group member for all elements of the project. Unlike a typical
construction management contract involving a general contractor and
sub-contractors, such BT contracts apportioned project revenue and performance
accountability (and associated liability) directly to the members of the
construction consortium. The result of this structure is that Group members have
historically had limited liability under certain BT contracts. In such cases
contractor-partner expenses and revenues are not included in the Group-member
income statements and may cause Group operating margins to appear substantially
higher than normally observed for construction firms because they reflect only
the high value-added role performed directly by the contracting member of the
Group, i.e. developing project strategy, forming the development consortium and
arranging project financing. This treatment is consistent with US GAAP as
further described below in this section under the heading “Key accounting
policies”.




The
opportunity to employ the limited-liability structure depends on market
competitive dynamics and the willingness of municipal counterparties to accept
the allocation of risk associated with non-performance by one or more members of
the BT consortium. The contracts for which work was performed subsequent to
January 1, 2008 did not enjoy the limited-liability structure described above
because the applicable government counterparties would not agree to those
limitations.  For these contracts, full responsibility for contract cost
and performance rested with Century City.   All project costs for the
projects performed during 2008 and not transferred to others (as described
below) have been recognized in the Group’s BT Project payables account at
December 31, 2009 and 2008 in accordance with CNC’s accounting policies. 
Because of limitations on Century City’s responsibilities for construction
management, the BT project work completed during 2008 was accounted for using
the Net Method and subcontractor costs are not recognized in reported revenue
and cost of revenue for the year ended December 31, 2008.  Because no
project work was performed during the year ended December 31, 2009 and no
acceptances occurred during that year, no revenue or cost of revenue was
reported.  This treatment is consistent with the requirements of US GAAP as
further described below in this section under the heading “Key accounting
policies”.





From its
formation through December 31, 2009, all of the Group’s revenue was
generated from allocated interests in BT contracts. The company recognizes
revenue on its BT contracts under the provisions applicable to sales-type leases
as described below under the heading “Key accounting
policies”.   Application of this accounting policy results in
recognition of revenue when a project has been completed and accepted by the
municipal customer. The procedures for customer inspection and acceptance are
typically contained in the contracts. The initial inspection and acceptance is
monthly or quarterly during the contract performance period as specified in the
contract.  It encompasses verification of physical progress or milestone
achievement and adherence to project specifications and work quality. A final
acceptance is received upon completion of the project, subject to schedule
requirements generally set forth in the contracts.





Notwithstanding
the two-phase (initial and final) acceptance process described in the preceding
paragraph, the Group’s BT contracts have always been subject to warranty
provisions, typically of one-year duration (plus an additional period applicable
to rectification work) beginning on the date of final project acceptance. A
specified fraction of the project payable is held back by the client
through the term of the warranty period and is subject to forfeiture if
rectification is not completed in accordance with the warranty provisions of the
contracts. Addressing all issues that arise during the warranty period
represents fulfillment of all of the Group’s obligations under the contracts.
Because of the nature of the BT Contracts, the customers do not have the right
to return the project or the improvements that the Group has made to the
property during the course of performing the contract. On the only two contracts
completed by the Group (the Changchun  Project and the Jiaohe - Renewal
Phase Project), warranty claims have been settled by the municipal
customers.  The status of Changchun warranty claims is further described
below in this section under the heading “Key accounting policies — Warranty
costs and reserves”.  Furthermore, the Group’s financial exposure to costs
of rectifying warranty claims is mitigated by the indemnification it received
from its subcontractors. Therefore, as further discussed below under the heading
“Key accounting
policies” it does not include any provision to reduce revenue recognition
for prospective claims of its municipal clients during the warranty period nor
does it currently reflect any reserves in its financial statements for future
warranty-related costs. Notwithstanding the fact that the warranty period has
passed for completed projects, if a warranty claim were to be made in the future
by a municipal client and if we agree to perform the rectification and the
related cost is not fully covered by subcontractor indemnity, the Group would
recognize the associated expense of rectification in the period during which it
occurs.


28




Because
contracts begun in one fiscal year are typically completed in the following
fiscal year or later, the revenue recognized in a particular year is not, by
itself, the best indicator that the Group’s business is expanding. Normally the
size of project backlog should also be considered. As historically reported by
the Company, Project backlog represents the amount of unrealized revenue to be
earned by the Group and its consortium partners from the contracts they have
been awarded. By considering the revenue realized during a fiscal year (or other
reporting period) and the project backlog in existence as of the end of that
period, the rate of growth in the Group’s business can be better understood,
since backlog represents contractual amounts that are expected to be converted
to realized revenue and allocated among the Company’s PRC Subsidiaries and other
consortium members (without duplication) once the contract is fully
performed.





Year Ended December 31,2007
                  
                  
                  2008
                  
                  
                  2009Number
      of contracts awarded during period, net of (transfers)
                  
                  
                  1
                  
                  
                  
                  2
                  
                  
                  
                  (2
                  )Total
      size of contracts awarded (transferred) during period
                  
                  
                  43.9
                  
                  
                  
                  439.5
                  
                  
                  
                  (440.9
                  )Contract
      progress by project origination year (estimate):2007
                  
                  
                  -
                  
                  
                  
                  42.5
                  
                  
                  
                  -2008
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -2009
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Total
      estimated contract progress at end of year
                  
                  
                  -
                  
                  
                  
                  42.5
                  
                  
                  
                  -Total
      amount of project backlog as of the end of the period
                  
                  
                  43.9
                  
                  
                  
                  440.9
                  
                  
                  
                  0.0





Notes:




Contracts
      are denominated in RMB.  All conversions are made at the exchange
      rate of 6.83 to simplify presentation of historical project awards and
      completion and analysis of backlog trend.  Amounts may not match
      backlog amounts reported in U.S. dollars during other
    periods.





Project
      progress is an estimate of work completed under the contract and differs
      from revenue recorded by the Group during the periods
    shown.





Suspension
of operations




The
elimination of backlog by December 31, 2009 reflects the Company’s determination
in late 2009 that that the Group lacked the resources to successfully complete
projects in progress and the decision of its management, unanimously ratified by
the Company’s board in January 2010, to transfer the projects in progress to
third parties that would assume the Group’s obligations to customers and
subcontractors.  The final arrangements for transfer of projects in
progress are still being negotiated as of the date hereof, but the Company’s
consolidated balance sheet and backlog as of December 31, 2009 reflects the
informal agreements reached as of that date to transfer ongoing BT Projects and
related BT Project payables to others.  Such transfers constitute a
temporary suspension of our business.   A final determination of
whether or not to resume the BT Project business will be made by the Company
before December 31, 2010 based on the availability of funds from collections
related to completed projects and other factors such as PRC government policies
prevailing at the time.  While operations are suspended, all PRC personnel
except the minimum number required to handle administrative requirements and
pursue collections have been laid off to conserve financial resources.  Key
functions such as accounting have been outsourced.  Employees in the PRC
have been reduced to a total of two.





Key
Accounting Policies





A
company’s accounting policies form the basis for preparation of its financial
statements. Those financial statements in turn are an essential factor in
understanding a company’s operations. Our accounting policies are fully
described in the notes to the audited consolidated financial statements included
in attachment F hereto and for convenience of reference, a summary of those key
accounting policies are also set forth below.


29





Principles
of consolidation




The
reverse acquisition of Sing Kung on September 9, 2009, is accounted for using
accounting principles applicable to recapitalization (rather than as a business
combination) with Sing Kung being treated as the accounting parent (acquirer)
and the Company, the legal parent, being treated as the accounting acquiree.
This treatment is in accordance with ASC 805, “Business Combinations”, pursuant
to which the entity with a controlling financial interest in the combined
business is generally deemed the acquirer. Upon the consummation of the Sing
Kung acquisition the shareholders of Sing Kung, an operating business, obtained
a majority voting interest in CNC, a non-operating shell company with limited
assets comprised of cash and current receivables.  The Company also
considered a number of additional factors to determine the acquirer for
accounting purposes, including the effect of the exchange offer and which
company’s stockholders control the Board of Directors of the combined
business.





In a
recapitalization, all accounting history, prior to the reverse merger date,
becomes that of the accounting acquirer (Sing Kung).  The only adjustment
necessary under recapitalization accounting is to retroactively adjust Sing
Kung’s legal capital to that of the Company.  The consolidated financial
statements, after the recapitalization, include all accounts of the Company and
its subsidiaries.  All material inter-company balances and transactions
have been eliminated.





Our
audited consolidated financial statements presented in attachment F reflect a
100% economic ownership interest in Sing Kung and its subsidiaries from the date
of the reverse acquisition by CNC on September 9, 2009.  The audited
balance sheet for the Company as of December 31, 2008 consolidates the assets,
liabilities and equity of  SNC as a result of the acquisition of SNC by
Sing Kung on December 9, 2008.





Going
concern




The
consolidated financial statements have been prepared assuming that the Company
will continue as a going concern and, accordingly, do not include any
adjustments that might result from the outcome of this uncertainty. The Company
has temporarily ceased its operation and its business plan is uncertain, as
further discussed in Item 4 – Information on the Company under the heading
“Recent Corporate and
Commercial Developments, Suspension of Business in the PRC”.  As
further discussed below in this Item 5, subsection B under the heading
“Liquidity and capital resources”,  we are dependent upon additional
financings or collection of BT Project receivables (Net Investment in BT
Projects) to fund our business.





Revenue
recognition




The
Company’s long term BT contracts do not dispositively transfer risk of loss to
the customer prior to contract completion and acceptance. Specifically, the
customer does not make progress payments typical in most construction-type
contracts and there is ambiguity in the contracts about the customer’s
contractual liability for damage or loss prior to project acceptance and
completion.  Furthermore, the legal framework of state land ownership
creates uncertainty about the Company’s ability to enforce collateral or lien
rights that might otherwise secure its right to payment prior to
acceptance.  As a result, the BT contracts have the substantive
characteristics of sales-type leases.  Specifically the contracts give rise
to a profit by the company for execution of the project; ownership of the
project is transferred to the customer prior to receipt of the final payment;
the present value of the payment under the contract exceeds 90% of the project’s
fair value; collectability is reasonably predictable; and no important
uncertainties surround the amount of unreimbursable costs yet to be incurred by
the Company following acceptance of the project.  Therefore, in accordance
with ASC 840, “Accounting for Leases”, revenue is recognized upon final project
acceptance by the customer.  Final acceptance of the project by the
customer occurs following completion and inspection, including a determination
that all project requirements have been met.  Following acceptance, a
settlement of the final project price is determined by the contract parties
based on the pricing parameters of the contract.  The determination of the
final project price typically involves an audit by the customer of preliminary
acceptances generated as the project progresses and aggregation of the amounts
reflected therein together with adjustments, if any.  Preliminary
acceptances are based on periodic multi-party review and documented approval of
completed work among the Company key sub-contractor(s) and the customer. 
 The differences in the cumulative value of preliminary acceptances and the
final project price, if any, are reflected by the Company in revenue recognized
during the period in which the final acceptance occurs.




In
accordance with ASC 605, the Company records revenue upon project acceptance
based on:




i.      the
aggregate contract value (the “Gross Method”) when it:




–
            is
      responsible for project fulfillment including the acceptability of the
      project to the customer




–
            has
      reasonable latitude to establish the project price with the
      customer




–
            has
      discretion in subcontractor
selection




–
            holds
      the primary risk of collection for the project as a result of a
      non-contingent requirement to pay subcontractors for their
      work




ii.
            the
      value of its allocated share of contract revenue (the “Net Method)” when
      its role as BT Consortium leader is substantively that of an agent
      construction manager, e.g.:




–
            the
      Company does not have direct responsibility for all key aspects of project
      fulfillment




–
            the
      contract specifies that the Company is entitled to receive only an
      allocated fraction of the contract
value




–
            the
      Company is required to pay subcontractors only if and when it receives
      payment from the customer.


30




The
Company considers the relevant facts and circumstances in its evaluation to
determine if revenue is to be recorded under the Gross or Net Method, including
the relative strength of each indicator.  None of the indicators alone is
considered presumptive or determinative.




Essential
conditions set by the Company for recognition of revenue earned pursuant to BT
contracts is that written contracts exist among the parties and collection of
such revenue is determinable and reasonably assured.





Provisions
for estimated losses on uncompleted contracts, if any, are made in the period in
which such losses are determined.





The
Changchun Wukeshu contract, (the “Changchun Project”), completed by SNC prior to
the start of fiscal year 2007, was consistent with the requirements of and was
recorded under the Net Method.  The initial phase of the Jiaohe contract
(performed beginning January 1, 2008) that was completed and accepted during
2008 was consistent with the requirements of and was recorded under the Net
Method.  The Gross Method was applicable to the second phase of the Jiaohe
contract and the Zhengding Project that was commenced in 2008, however, both of
those projects have now been transferred to others and no revenue will be
recognized.




In
determining whether to apply the Gross or Net Method, the Group considers the
relevant facts and circumstances in its evaluation, especially the relative
strength of each indicator. None of the indicators alone is considered
presumptive or determinative.




Essential
conditions set by the Group for recognition of revenue earned pursuant to BT
contracts are that written contracts exist among the parties and that collection
of such revenue is reasonably predictable, as required by ASC 840.





Interest/valuation
adjustments to accounts receivable and payable




The
nature of the Group’s business is that it accepts payments from its customers
over many years (eight years in the case of the Jiaohe Project) and maintains
both current and long-term payables with its subcontractors in connection with
the performance of BT projects. In accordance with the requirements of ASC 840
and ASC 835, the Company makes adjustments in the value of its Net investment in
BT projects and in other long-term accounts receivable and payable obligations
with fixed durations exceeding one year in those cases where the obligations do
not bear interest at what it deems to be a market rate.




Net
Investments in BT projects recorded in the financial statements, as well as
payables to consortium partners that are linked to the collection of such
receivables bear interest, as applicable, at the variable long- or medium-term
(five years & over five years) loan rate set by state-owned banks.  The
accrual of such interest is reflected in the company’s financial statements, net
of reserves that it deems appropriate under the circumstances.  Municipal
receivables of this sort are not traded in an open market in the PRC. The
Company believes that the interest rates payable by our BT project customers is
on par with the rate at which the municipality can obtain financing from other
sources after taking into consideration its credit standing, the payment terms
and other relevant factors. No discount or premium is applied to the face amount
of BT project receivables or related payables that bear market interest rates;
the face amounts of such receivables and payables are deemed to reasonably
represent their present value; there is no unearned income
component.





Should
such municipal receivables and payables accrue interest at rates that differ
materially from the applicable municipal borrowing rates, it is the Company’s
policy to discount or apply premiums to their face value based on the scheduled
or expected payment periods and the then-applicable short- medium- or long-term
rates set by state-owned banks, adjusted as deemed appropriate for the credit
standing of such municipalities if circumstances warrant.  No such
adjustments were deemed to be warranted by management for the Net investment in
BT projects related to the Changchun or Jiaohe Projects.




Contract
costs/Construction in-progress




The
Group’s contracts with consortium members/subcontractors for the performance of
BT contracts generally stipulate that they accrue compensation for services on
the same percentage-of-completion basis as the Company uses to accrue revenue,
with the difference being that subcontractors and consortium members are
compensated at a rate that is a stipulated fraction of the project value
completed.  This structure benefits the company by insulating it from the
impact of project cost overruns by its subcontractor(s) since they are fully
responsible for the costs of construction, but their share of revenue is
fixed.  This structure was used on the Changchun Project (where the SNC was
entitled to a specified percentage of the revenue earned by the consortium) and
on each version of the Jiaohe Project contract to which SNC and CENTURY CITY
respectively were parties.


31





For the
original BT Contracts arranged by SNC (i.e. the Changchun Wukeshu and the
original Jiaohe Contract) the company further mitigated its risks (but garnered
smaller profits) by establishing itself as an agent rather than a project
principal.  Those early project contracts specifically recognized the
consortium composition, designated SNC as the consortium agent and, in the
contracts with other consortium members, tied their payment to the receipt of
payments from the municipality.  Pursuant to the policies described above
under the heading “Revenue Recognition,” revenue from those contracts was
recorded using the Net Method.  Until transferred to others in 2009,
subsequent project contracts placed the principal risk and construction
management responsibility with our PRC subsidiaries and the Gross Method
applied.  When the Gross Method is applicable, we record amounts all
payable to subcontractors under contracts and all expenses related to
subcontractor costs are recognized during the same period as revenue is
recognized.  Under both the Gross and Net Methods, the unpaid liability to
contractors and consortium partners respectively is recorded on the balance
sheet as a Project payable, in the later case reflecting the Company’s
obligation as payment agent and the requirement that it pay consortium members
following receipt of the contract payment(s) from the municipal customer. 
Advances made by members of the Group to the consortium for prepaying vendors or
to meet other costs on behalf of the customer are reimbursable at cost under the
BT contracts.  Such advances are not recognized as expenses or revenue, but
are reflected on the balance sheet as part of Construction in-progress or, if
the project has received final acceptance, in the Net investment in BT
projects.  To the extent that BT Project contracts and related
subcontractor liabilities have been transferred to third parties,
construction-in-progress and related obligations to subcontractors have been
eliminated from the balance sheet.  To the extent that obligations to pay
subcontractors have not been assumed by the project transferees (including
obligations still under negotiation), those obligations continue to be recorded
on the balance sheet.




Operating
cycle




For
projects performed by the Group while it was operating, BT contract execution
typically spanned 6 to 12 months from the start of contract performance. 
However, because of the acceptance process, it was not possible to determine the
acceptance date (and the start of interest accrual on the investment in BT
projects) for each contract (or contract phase) with precision prior to
completion and acceptance.  Prior to project acceptance, all assets and
liabilities related to contracts in progress are carried at cost until a
schedule for payment and interest accrual can be reasonably determined. 
Subject to the triggering of early payment requirements or indications from
customers that they intend to prepay, the Company’s policy is to allocate
amounts for advances, prepayments and project work in-progress between current
and long-term as dictated by the contract payment terms, estimated date of
project completion and undertakings of the municipal customers regarding the
prospect for prepayment. The classification of the related project liabilities
between current and long term follows the same classification of the assets if
the payment amounts are required to be made ratably and contemporaneously with
collection of receivables, as is the case for the Changchun Project assets and
liabilities.  Otherwise the classification of project liabilities is made
in accordance with the timing of payments set forth in contracts with consortium
members.




Warranty
costs and reserves




In light
of the expectation that there will be some rectification work required during
contract warranty periods, the Group’s policy is to accrue additional project
expense to the extent that associated costs are reasonably determinable. 
Final settlement of warranty claims related to the Changchun Project has been
resolved through negotiation, but documentation is still pending.  The
warranty claim period for the Jiaohe Renewal Project has passed without any
claims being asserted by the municipality.  Because of the suspension of
businesses and the transfer of all remaining projects in progress, no
rectification work is applicable to other projects performed by the Group. 
The limited amount of historical data provided by the two projects that have
been completed and passed the warranty period does not provide a sound and
objective basis for extrapolating future warranty costs.  Reference to the
experience of other enterprises in the same business does not provide a reliable
reference point for the type of work that the Group performs because the work is
unique for each project and contract.  Moreover, the company’s financial
risk is mitigated by indemnity arrangements with its subcontractors that call
for them to rectify defects in their work during the warranty period. These
indemnifications from subcontractors are further supported by deferred payment
arrangements extending through the full term of the warranty period that equal
or exceed the company’s maximum warranty exposure.  In accordance with ASC
450 “Contingencies”, until circumstances change and the Group can reasonably
estimate warranty cost, the actual warranty cost incurred that is in excess of
amounts indemnified by subcontractors is recorded as an expense during the
period when it is incurred.




Under the
current contract terms, the maximum loss exposure as a result of warranty claims
is limited to the holdback amount (5% of the contract price). The Company does
not defer revenue recognition for the warranty holdback amount because the
Preliminary Acceptance (as discussed above under the heading “Revenue
Recognition”) is confirmation (unless hidden defects become apparent during the
warranty period) that the work completed meets applicable specifications.
Therefore, the Group expects to receive payment in full for completed work,
assuming that it meets its obligations for the specified time (one year from
Final Acceptance) to rectify hidden defects. The Company considers the holdback
amount, which is typical for government contracts in the PRC, to be a financial
inducement for it to meet rectification obligations and not an indication of
contingent loss.  SNC did not recognize revenue in connection with the
holdback amount withheld by the Changchun municipality because, under its
contracts relating to the project, it had no financial interest in the holdback
amount or any recovery thereof.


32




Business
and income taxes




CNC and
its subsidiary Sing Kung are incorporated in the British Virgin Islands, the
laws of which do not require either company to pay any income taxes or other
taxes based on revenue, business activity or assets.




The
consolidated PRC Subsidiaries are subject to taxes in the PRC, and include a
statutory business tax on applicable revenue at a rate of 5.25% (which is
included in cost of sales) and statutory income tax at a rate of 25% of
operating income as determined under applicable national codes, as modified by
applicable local regulations and negotiated concessions. The Group estimates the
effective tax rate for the current year after taking into account any applicable
local regulations and concessions.  Such concessions typically apply on a
project basis.  After applying the local tax concessions applicable to the
Jiaohe project work as recently negotiated, the effective business tax rate,
including surcharges was negotiated to be 2.65% of revenue and the effective tax
rate on net income earned was determined to be 2.5% on net operating
income.  These rates were lower than the rates applied when accruing taxes
in 2008 and resulted in an adjustment to taxes payable at December 31,
2009.   Although there was no revenue recognized on BT Projects during
2009, the change in accrued tax is recorded  in the Statement of Operations
and Comprehensive Income for 2009.  For the Group’s projects, related tax
payments are generally triggered by cash collections and thus do not accrue
prior to recognition of the revenue, notwithstanding any interim work that may
be performed on projects in-progress.  Refer to footnotes to the financial
statements presented in attachment F for additional discussion regarding the
calculation of tax provisions for specific historical periods.




Foreign
currency translation




All of
the revenues and all of the costs of SNC and Century City are denominated in the
Chinese Renminbi, as are most of the Group’s cash holdings together with BT
contract receivables and payables related to those contracts.. As a result,
changes in the exchange rate of Renminbi to the U.S. dollar affect the Group's
sales, cost of sales, and operating margins and could result in exchange losses.
The impact of future exchange rate fluctuations on the Group's results of
operations cannot be accurately predicted.




The
consolidated financial statements of the Company are presented in United States
Dollars ("US$"). Transactions in foreign currencies during the period are
translated into US$ at the exchange rates prevailing at the transaction dates.
Assets and liabilities denominated in foreign currencies at the balance sheet
date are translated into US$ at the exchange rates prevailing at that date. All
transaction differences are recorded in the equity section of the balance sheet
as accumulated other comprehensive income.




Consequently
the exchange rates applicable to the Balance Sheet and Statement of Operations
and Comprehensive Income can be materially different in periods of rapidly
changing exchange rates. As result, the value of working capital assets (such as
unbilled costs and estimated revenue) recognized at the end of an accounting
period can differ materially from the revenue recorded during the period that
gave rise to the receivables. This differential is amplified if the collection
period for working capital assets is long, as in the case of amounts accrued in
connection with the Group’s BT Contracts.





RMB is
not a fully convertible currency to US$. All foreign exchange transactions
involving RMB must take place either through the Peoples Bank of China (the
"PBOC") or other institutions authorized to buy and sell foreign exchange. The
exchange rates adopted for the foreign exchange transactions are the rates of
exchange quoted by the PBOC, which are determined by supply and demand and
policy priorities of the PRC central government.  The PBOC administers and
regulates the exchange rate of US dollar against RMBtaking into account
demand and supply of RMB, as well as domestic and foreign economic and financial
conditions.





Use
of estimates




The
preparation of the financial statements requires management to make a number of
estimates and assumptions relating to the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the period. Significant items subject to such estimates and assumptions
include the recording of contract revenues and costs, the amount of construction
in-progress and project payables, and the cost of rectification during the
project warranty period (“warranty costs”) in accordance with policies described
above.  Other key estimates for the Group are the recoverability of the
impairment of long-lived assets and the carrying amount and valuation allowances
for receivables and their classification into current and non-current
categories, both of which topics are discussed in more detail below. 
Actual results could differ from estimates.




Impairment
of long-lived assets




Long-Lived
assets, principally property and equipment, are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable, but no less often than annually. If the carrying amount
of an asset exceeds its estimated future cash flows, an impairment charge is
recognized in the amount by which the carrying amount of the asset exceeds the
fair value of the asset.


33




As of
December 31, 2009, the Group recognized significant impairments of goodwill and
another asset as follows:




–
            Goodwill. 
      Impairment of $1,474,102 was recognized in connection with the
      redomestication merger and impairment of $808,443 was recognized related
      to the reassessment of the fair-value of net assets acquired from SNC in
      2008.




–
            Prepaid contract
      value.  Impairment of the full value of a long-term consulting
      contract of $872,685 was recognized upon determination that no future
      services were realizable under the
contract.




Based on
the Company’s assessment, there have been no events or circumstances that would
indicate any additional impairment of other long-lived assets.





Collectability
of accounts





Net
investment in BT projects





The
balance of Net investment in BT projects represents the balance of payments due
for projects or project phases that have received final acceptance by the
customer and for which income has been recognized.  As of December 31,
2009, Net investment in BT projects totaled $24.2 million and was comprised of
obligations of two municipalities, Changchun and Jiaohe:





Changchun BT
Contract





·
            $7.9
      million was recorded as Net investment in BT project completed for
      Changchun Modern Agricultural Industry Construction Co. Ltd., a
      corporation owned by the plenipotentiary of Changchun Economic and
      Technological Development Zone. This receivable was acquired in the
      acquisition of SNC by Sing Kung in 2008 and includes advances of
      approximately $4.3 million made to the consortium by SNC for project costs
      incurred prior to the acquisition. These advances are reimbursable by the
      customer as part of the project receivable. Approximately 81% of the total
      project value was paid by the customer on an accelerated basis prior to
      the acquisition of SNC.  Subsequently, we have determined that final
      payment was being held up, in part, pending resolution of warranty and
      business tax offset claims by the municipal customer in which we have no
      financial interest and that we previously believed to be resolved. 
      To facilitate settlement of those claims, we have extended our previous
      interest waiver offer to the Changchun municipality if they will confirm
      payment of the outstanding balance prior to the end of 2010.  We
      believe that all outstanding disputes related to the project have now been
      settled, although documentation is still
  pending.





·
            The
      Changchun municipality has applied for and obtained a development bank
      loan commitment sufficient to repay all of the remaining principal amount
      due under the Changchun Project contract and has indicated that it is
      likely to draw down the commitment and pay the full remaining balance due
      under the contract to SNC prior to the expiration of the loan commitment
      at the end of 2009.  Based on the existence of the commitment,
      settlement of pending disputes and communications with the municipality,
      the Company deems it probable that the recent settlement negotiations and
      extended interest waiver offer will lead to an accelerated payment of the
      full BT project receivable amount, although there is no assurance that
      this will occur and the municipality may have economic incentives to delay
      payment until required under the
contract.





·
            The
      table below compares scheduled and actual payments (enabled by development
      bank financing) that resulted in accelerated payment of approximately 81%
      of the total contract amounts due to the consortium. Although not
      contractually required to do so, Company management directed all
      accelerated payments received in 2007 to its consortium partners rather
      than retaining its pro rata share. This accommodation was made to induce
      the consortium partners to make sufficient new commitments to another
      project (the Jiaohe Project) to permit SNC to pursue that project. 
      However, the level of financial support received from this initiative was
      insufficient for SNC to independently commence the project, a situation
      that ultimately led to the sale of SNC to Century City/Sing Kung. 
      The Changchun Project payments made and remaining are summarized
      below:


34




Amount
      in RMB millions2007
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2011
                  
                  
                  2012
                  
                  
                  2013
                  
                  
                  2014
                  
                  
                  2015Original
      payment schedule (January of year shown)
                  
                  
                  -
                  
                  
                  
                  34.4
                  
                  
                  
                  34.4
                  
                  
                  
                  34.4
                  
                  
                  
                  34.4
                  
                  
                  
                  34.4
                  
                  
                  
                  34.4
                  
                  
                  
                  34.4
                  
                  
                  
                  34.4Amount
      paid  (August 2007)
                  
                  
                  222.4
                  
                  
                  
                  -
                  
                  
                  
                  -Resulting
      payment schedule to:Consortium
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  3.8
                  
                  
                  
                  7.0SNC
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  14.9
                  
                  
                  
                  27.4





·
            Based
      on (i) the payment history and the municipality’s access to development
      bank financing described above, (ii) the fact that Changchun Wukeshu
      is a taxing authority and therefore has a reliable source of revenue 
      and (iii) the municipality’s revenue is supplemented by the central
      government that supplement its own tax revenues, we believe that the
      Changchun municipality has funds available to meet its payment obligations
      related to the Changchun Project and to others, and that the 
      collectability of the Net Investment in the Changchun BT Project is
      reasonably predictable.  Moreover, the conditional terms of the
      Company's payment obligations to other consortium members in connection
      with the project, and to the former SNC owners (if there is a shortfall in
      receivables from the project) provide additional protections against
      collection deficiencies related to amounts shown in the accompanying
      financial statements in attachment
F.





Jiaohe
BT Contract





·
            $16.3
      million was recorded as Net investment in BT project completed for the
      municipality of Jiaohe, including accrued interest of approximately $1.1
      million.  The amount due is for one sub-phase of the Jiaohe project
      that was completed and finally accepted.  Jiaohe City is a
      municipality in the PRC province of Jilin. The BT Contract with Jiaohe
      City was originally entered into by SNC in March 2007. The first phase was
      substantially complete as of August 2008 and entails construction of
      roads, sewer and water pipelines and electricity and other utility
      connections in two sub-phases, the Renewal Project and the New District
      Project.  Final acceptance of the Renewal Project was completed on
      October 4, 2008 and the final settlement value of approximately RMB 103
      million, or $15.2 million was determined in April, 2009.  The
      settlement amount of the Renewal Project was recorded as of December 31,
      2008 and 2009 as a Net investment in BT Projects.   The work in
      progress on the second sub-phase (the New District Project) was assigned
      by the company and the related Construction in progress and BT project
      payables have been eliminated from the balance sheet as of December 31,
      2009 with no impact on revenue or
expense.





·
            The
      contract terms specify that if circumstances are not met that would
      accelerate payment, payment from the customer of the contract amount will
      be in 8 equal installments together with accrued interest, with the
      initial payment to be made on the first January 10th
      following the one-year anniversary of the acceptance date of each phase
      (or sub-phase if applicable).  Payment of subsequent installments,
      together with accrued interest thereon, is due on January 10th
      of succeeding years.  Given the actual acceptance date for the first
      sub-phase of Phase I (the Renewal Project) and the anticipated acceptance
      date for the second sub-phase (the New District Project), the resulting
      principal payment schedule is as
follows:


35





Principal repayment amounts from customer in RMB millionsPayment dates are January 10th of year shown2010
                    
                    
                    2011
                    
                    
                    2012
                    
                    
                    2013
                    
                    
                    2014
                    
                    
                    2015
                    
                    
                    2016
                    
                    
                    2017
                    
                    
                    2018Renewal
      Project (*)
                    
                    
                    15.9
                    
                    
                    
                    15.9
                    
                    
                    
                    15.9
                    
                    
                    
                    15.9
                    
                    
                    
                    15.9
                    
                    
                    
                    15.9
                    
                    
                    
                    15.9
                    
                    
                    
                    15.9New
      District Project (+)
                    
                    
                    -
                    
                    
                    
                    23.9
                    
                    
                    
                    23.9
                    
                    
                    
                    23.9
                    
                    
                    
                    23.9
                    
                    
                    
                    23.9
                    
                    
                    
                    23.9
                    
                    
                    
                    23.9
                    
                    
                    
                    23.9Total
                    
                    
                    15.9
                    
                    
                    
                    39.8
                    
                    
                    
                    39.8
                    
                    
                    
                    39.8
                    
                    
                    
                    39.8
                    
                    
                    
                    39.8
                    
                    
                    
                    39.8
                    
                    
                    
                    39.8
                    
                    
                    
                    23.9





Based on
actual acceptances/settlements  (*) and estimated acceptance
date/preliminary acceptance quantities (+) Payment dates are January 10th of
year shown





·
            The
      payment schedule is subject to acceleration if the Jiaohe Municipality
      refinances the project or transfers or pledges the project assets in
      connection with use agreements or a long-term refinancing.  Interest,
      set at a floating rate based on the Bank of China medium-term note rate,
      is applicable to the outstanding contract payment balance and begins to
      accrue as of the final acceptance date for each phase of the project (or
      sub-part if applicable).  Because the interest rate is variable, the
      amount of interest receivable on each payment date is not currently
      determinable but it will remain a market rate. Acceptance procedures and a
      timetable are specified in the
contract.





·
            The
      Jiaohe Contract includes a limited warranty for one year from the
      acceptance date of each phase. The warranty provisions subject the Company
      to forfeiture of up to 5% of the settlement amount if we fail to correct
      defects in elements of the project work after identification of such
      defects by the municipality. The warranty period has now passed without
      claims and the municipality has provided written confirmation that it owes
      the full balance of the settlement
amount.





·
            Collectability
      of amounts due pursuant to the Jiaohe contract is deemed to be reasonably
      predictable because Jiaohe is a taxing authority and therefore has a
      reliable source of revenue for payment of its obligations to the Company
      and others. It also receives revenues from the central government that
      supplement its own tax revenues, and it has guaranteed to include annual
      contract payment amounts and interest in its annual budget approved by the
      Standing Committee of the National People’s Congress.  We believe
      that the municipality is also access to financing from Chinese development
      banks that could constitute another source of payment and has applied for
      (but not yet received approval of) a development-bank loan that would
      trigger accelerated payment of project revenues.  Moreover, the
      Jiaohe municipality has an established record of timely payment of its
      obligations to others, and we have no reason to believe that it will fail
      to meet its obligations under the Jiaohe Contract. In addition to having a
      reasonable expectation that the municipality has the intent and will have
      the cash flow to timely meet its payment obligations, the Jiaohe Contract
      is enforceable against the Jiaohe municipality under Chinese law. 
      Moreover, the Jiaohe Contract grants us enforceable collateral
      interests.  These include an assignable right to receive funds from
      the government fiscal authority that are budgeted to meet the contractual
      payment obligations of the municipality and the right to a security
      interest in the project (or substitute collateral) for as long as the
      contract price remains unpaid. The Company’s right to receive budgeted
      funds from the fiscal authority has received the anticipated approval of
      the Standing Committee of the National People’s Congress and this has been
      properly documented. In conjunction with its collateral security interest
      in the project (or substitute collateral) we also have rights under the
      Jiaohe Contract to control access to the Jiaohe Project or dispose of
      Jiaohe Project assets to ensure payment in the event of a payment
      default.  Our legal counsel has advised us that such contractual lien
      rights are enforceable under PRC law, however, as a practical matter they
      are expected to have limited economic benefit and the grant of a security
      interest in the project property is not as yet perfected.  As a
      matter of prudence, the company is pursuing perfection of its security
      interest because without it, there is little likelihood of the company
      being able to exercise control over the property in the event of a payment
      default.  Notwithstanding the above, the Company’s classification of
      the collectability of Jiaohe Contract payments as reasonably predictable
      depends primarily on the municipality’s sound financial standing and the
      absence of any default to date, secondarily on the rights to enforce the
      contract under PRC law against a creditworthy counterparty, thirdly on its
      recorded rights to receive budgeted funds from the local government fiscal
      authority,  and only incidentally and as a last recourse to the
      exercise of collateral rights, if and when
  perfected.


36





Construction
in-progress




Construction
in-progress represents costs related to work certified for projects in-progress
and advances. The amounts recorded in Construction in-progress have not been
billed to the customers and do not bear interest prior to project acceptance by
customer.  Most of the amounts recorded in Construction in-progress as of
December 31, 2008 and the related BT Project Payables were eliminated following
the transfer of the second sub-phase of the Jioahe Project (the New District
Phase) and the Zhengding Projects to others as a result of our suspension of
operations in China.  The amounts remaining in Construction in progress as
of December 31, 2009 reflect advances paid related to those projects that we
expect to recover upon project completion and acceptance or amounts still owed
to subcontractors that we are negotiating to assign to the parties who have
taken over the projects.  We do not expect to recognize any revenue or
expense in connection  with the remaining Construction
in-progress.




Recently issued accounting
pronouncements




In
August 2009, the FASB issued Accounting Standards Updates (“ASU”)
No. 2009-05 (“ASU 2009-05”), Fair Value Measurements and Disclosures (Topic
820) — Measuring Liabilities at Fair Value. ASU 2009-05 amends ASC Subtopic
820-10, Fair Value Measurements and Disclosures — Overall, for the fair value
measurement of liabilities. It provides clarification that in circumstances in
which a quoted price in an active market for the identical liability is not
available, a reporting entity is required to measure the fair value using
(1) a valuation technique that uses the quoted price of the identical
liability when traded as an asset or quoted prices for similar liabilities or
similar liabilities when traded as assets or (2) another valuation
technique that is consistent with the principles of Topic 820. It also clarifies
that when estimating the fair value of a liability, a reporting entity is not
required to include a separate input or adjustment to other inputs relating to
the existence of a restriction that prevents the transfer of the liability
and that both a quoted price in an active market for the identical liability at
measurement date and that the quoted price for the identical liability when
traded as an asset in an active market when no adjustments to the quoted price
of the asset are required are Level 1 fair value measurements. The provisions of
ASU 2009-05 are effective for the first reporting period (including interim
periods) beginning after issuance. Early application is permitted.




In
September 2009, the FASB issued ASU No. 2009-12 (“ASU 2009-12”), Fair
Value Measurements and Disclosures (Topic 820) — Investments in Certain Entities
That Calculate Net Asset Value per Share (or Its Equivalent). ASU 2009-12 amends
ASC Subtopic 820-10, Fair Value Measurements and Disclosures—Overall, to permit
a reporting entity to measure the fair value of certain investments on the basis
of the net asset value per share of the investment (or its equivalent) if the
net asset value of the investment (or its equivalent) is calculated in
a manner consistent with the measurement principles of Topic 946 —
Financial Services — Investment Companies, as of the reporting entity’s
measurement date. It also requires new disclosures, by major category of
investments, about the attributes includes of investments within the scope
of this amendment to the ASC. The provisions of ASU 2009-12 is effective for
interim and annual periods ending after December 15, 2009. Early
application is permitted. The Group is currently evaluating the impact of
adoption on its consolidated financial statements.




In
December 2009, the FASB issued ASU No. 2009-16 (“ASU 2009-16”),
Transfers and Servicing (Topic 860) — Accounting for Transfers of Financial
Assets, which formally codifies FASB Statement No. 166, Accounting for
Transfers of Financial Assets into the Accounting Standards Codification
(“ASC”), issued by the FASB in June 2009. ASU 2009-16 represents
a revision to the provisions of former FASB Statement No. 140,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities. The amendments in this ASU eliminate the exceptions for
qualifying special-purpose entities from the consolidation guidance and the
exception that permitted sale accounting for certain mortgage securitizations
when a transferor has not surrendered control over the transferred financial
assets. In addition, the amendments require enhanced disclosures about the risks
that a transferor continues to be exposed to because of its continuing
involvement in transferred financial assets. ASU 2009-16 is effective for annual
and interim periods beginning after November 15, 2009. Additionally, the
recognition and measurement provisions of this ASU should be applied to
transfers that occur on or after the effective date. Early application is not
permitted.





In
December 2009, the FASB issued ASU No. 2009-17 (“ASU 2009-17”),
Consolidations (Topic 810) - Improvements to Financial Reporting by Enterprises
Involved with Variable Interest Entities which amends the FASB Accounting
Standards Codification for the issuance of FASB Statement No. 167,
Amendments to FASB Interpretation No. 46(R), issued by the FASB in
June 2009. The amendments in this ASU replace the quantitative-based risks
and rewards calculation for determining which reporting entity, if any, has a
controlling financial interest in a variable interest entity with an approach
primarily focused on identifying which reporting entity has the power to
direct the activities of a variable interest entity that most significantly
impact the entity’s economic performance and (1) the obligation to absorb
the losses of the entity or (2) the right to receive the benefits from the
entity. ASU 2009-17 also requires additional disclosure about a reporting
entity’s involvement in variable interest entities, as well as any significant
changes in risk exposure due to that involvement. ASU 2009-17 is effective for
annual and interim periods beginning after November 15, 2009. Early
application is not permitted.


37


In
January 2010, the FASB issued ASU No. 2010-06 (“ASU 2010-06”),
Improving Disclosures About Fair Value Measurements. The ASU amends ASC 820
(formerly Statement No. 157, Fair Value Measurements) to add new
requirements for disclosures about transfers into and out of Levels 1 and 2 and
separate disclosures about purchases, sales, issuances, and settlements relating
to Level 3 measurement on a gross basis rather than as a net basis as currently
required. ASU 2010-06 also clarifies existing fair value disclosures about the
level of disaggregation and about inputs and valuation techniques used to
measure fair value. ASU 2010-06 is effective for annual and interim periods
beginning after December 15, 2009, except for the requirement to provide
the level 3 activity of purchases, sales, issuances, and settlements on a gross
basis, which will be effective for annual and interim periods beginning after
December 15, 2010. Early application is permitted and in the period of
initial adoption, entities are not required to provide the amended disclosures
for any previous periods presented for comparative purposes.





Management
does not believe that any recently issued, but not yet effective, accounting
standards, if currently adopted, would have a material effect on the
accompanying financial statements.





A. 
 RESULTS OF OPERATIONS





The
comparison of balance sheets during the Years ended December 31, 2008 and 2009
are based on the results of the accounting acquirer, Sing Kung, and reflect the
reverse acquisition transaction with CNC as a recapitalization as of the date of
its consummation.  The only adjustment made was to retroactively adjust
Sing Kung’s legal capital to that of the CNC from the earliest period
shown.  Because we deem SNC to be a predecessor company, the comparison of
operations for the years ended December 31, 2009, 2008 and 2007 reflects the
results of operations for the accounting acquirer in the reverse acquisition
transaction and also incorporates the results of SNC on a pro forma basis for
the calendar year 2007 and for the period in 2008 prior to its acquisition by
Sing Kung. When pro forma information is used for comparison, we refer to the
results as being the results of the Group.





Comparison
of Year Ended December 31, 2009 and 2008




Operating
revenues




For the
twelve months ended December 31, 2009, total revenues were nil  for CNC as
compared with $4.9 million for the twelve months ended December 31, 2008 for the
Group. No revenue was recorded during the year ended December 31, 2009 because
no project received final acceptance during that period.  During the year
ended December 31, 2008 the Renewal sub-phase of the Jiaohe Project was
completed and accepted.  Because of the lack of funds, no BT Project work
was performed during 2009 and all projects in-progress have now been assigned to
others in conjunction with our suspension of operations.





Project
revenue backlog




Because
of our inability to perform BT projects in progress, all such projects were
assigned to other parties and the backlog at December 31, 2009 was nil, as
compared with a reported backlog of about $441 million at December 31,
2008.




Cost
of revenues




For the
twelve months ended December 31, 2009 CNC and recorded a nil cost of revenue
because no revenue was recognized during the year.  This compares with the
year ending December 31, 2008 when the Group recorded cost of revenue  for
the Renewal phase of the Jiaohe Project (under the Net Method) of $0.3 million.
All costs associated with overseeing projects in progress during the year ended
December 31, 2008 were accumulated to Construction in-progress.  No project
work occurred and no Construction in progress was recorded during the year ended
December 31, 2009. Costs of administrative personnel not specifically allocated
by Sing Kung or the SK Group to project-related activities are charged to
general and administrative expense as discussed below. The Group recognized no
anticipated losses were identified or recognized during the years ended December
31, 2009 and 2008 for the projects in-progress.





Gross
margin





In the
absence of revenue or costs associated therewith, the Company recorded no gross
margin during the year ended December 31, 2009 as compared with $4.6 million for
the year ended December 31, 2008.




Operating
expenses





General
and administrative expenses




General
and administrative expenses mainly include payroll and employee welfare
benefits, traveling and other expenses of administrative departments, such as
planning and financial, information systems and human resources. Costs of
administrative personnel were not allocated by the Group between project-related
activities and general and administrative functions and all such costs are
reflected in its general and administrative costs discussed in this section.
General and administrative expenses for the Company amounted to approximately
$2.0 million for the year ended December 31, 2009 as compared with $0.9 million
for the Group for the year ended December 31, 2008, an increase of 116%. 
The increase in operating expense reflects increased payroll and expense, as
well as expense related to our public filings and increased legal fees and
administrative expense following the Sing Kung acquisition.


38





Impairments


In the
year ended December 31, 2009, the Company recognized impairments of $3.2
million, of which $2.3 million reflected write-offs of goodwill recorded in
connection with the Sing Kung acquisition and the SNC acquisition.  In
addition a $0.9 million impairment was recognized in connection with the
determination by management that no future benefits could be derived from a
multi-year prepaid services contract with Dehai Cashmere Co. Ltd. booked in 2008
and purporting to provide business development and other services related to BT
Projects in the Western provinces of the PRC.  There were no impairments of
long-term assets recorded during the year ended December 31, 2008.





(Loss)/income
from operations




During
year ended December 31, 2009 we lost  ($5.1 million) from operations as
compared with income from operations of $3.7 million that was recorded by the
Group during the year ended December 31, 2008.  The difference of $8.8
million from 2009 to 2008 was caused by the absence of revenue and gross margin
during 2009 due to the fact that no BT Projects were completed and accepted as
well as to an increase in general and administrative expense and the recording
or impairments during 2009 as compared with 2008.





Interest
income




The
Company recorded $1.0 million in interest income for the year ended December 31,
2009 as compared with $0.3 million for the year ended December 31, 2008 for the
Group.  This increase is mainly due to the accrued interest income
recognized from the Net investment in BT project (Jiaohe).  Interest
accrued on this project receivable for the full year ended year ended December
31, 2009 as compared with approximately 4 months during the year ended December
31, 2008 following the acceptance of the project in October of that year. 
To reflect the contingency associated with the interest waiver related to the
Changchun BT project the Group established a 100% valuation allowance for the
interest accrued on that project.  As a result, no interest income was
recognized in connection with the Net investment in BT Projects (Changchun)
during years ended December 31, 2009 or 2008.





Finance
and other costs




For the
year ended December 31, 2009 our finance and other costs totaled $109,965 as
compared to $69,525 for the year ended December 31, 2008 for the Group, an
increase of 62%.  This increase resulted primarily from the amortization
during the year ended December 31, 2009 of 12 months of deferred finance expense
incurred connection with the Sing Kung preferred stock issuance in April, 2008
as compared with only about 8 months of such amortization during the year ended
December 31, 2008.





Income
tax provision




The
income tax provision for the Company was $7,750 for the year ended December 31,
2009 as compared with $114,695 for year ended December 31, 2008.  The
reduction of $106,945 was due to the absence of revenue during the year ended
December 31, 2009 and the small amount of other taxable income realized by the
Company’s various subsidiaries.  During year ended December 31, 2008, the
larger amount of income tax was accrued in connection with the operating income
realized during that year from the Jiaohe Project.





Net(
loss)/income




For the
year ended December 31, 2009, the Company’s net loss amounted to ($4.2 million)
as compared with net income for the Group for the prior year of $3.7 million, a
difference of $7.9 million. The year-over-year difference was attributable to
the absence of revenue and gross margin during the year ended December 31, 2009
because no BT Projects were completed by the Company during that year, as well
as to increased general and administrative expense, and impairments as compared
with year ended December 31, 2008.





Foreign
currency translation adjustment and comprehensive (loss)/income




For the
year ended December 31, 2009, the Company’s Comprehensive loss amounted to ($4.0
million) as compared with  comprehensive income of $3.8 million for the
Group for year ended December 31, 2008. Comprehensive (loss)/income for the
Company reflects the effects of foreign currency translation adjustments on the
value of the Group’s assets and these adjustments offset the net loss for the
year ended December 31, 2009 by $284,569 and increased the net income the year
ended December 31, 2008 by $278,593.  The foreign currency translation
adjustments combined to increase the year-to-year swing in comprehensive
(loss)/income to $8.0 million for the years ending December 31, 2009 and
2008.


39





Comparison of Years Ended
December 31, 2008 and 2007 for the Group





Operating
revenues




For the
year ended December 31, 2008, total revenues amounted to $4.9 million, an
increase of $4.9 over the year ending December 31, 2007.  The increase was
due solely to the revenue recognized from the Renewal phase of the Jiaohe
project, which was completed and accepted in 2008.  The Net Method was
applicable to all revenue recognized on the Jiaohe project during 2008 because
of joint liability with consortium members for completion of the project and
limitations on the Company’s direct responsibility for key aspects of project
fulfillment and management.  During 2007, the Group recognized no revenue
because Sing Kung had not yet commenced operations and SNC had no active
projects in progress due to lack of financial resources.




Project
revenue backlog




An
important measure of the stability and growth of the Group’s business is the
size of its backlog, which represents the total amount of unrecognized revenue
associated with the existing contracts won. Any deferral of revenue recognition
and the amount of newly won contracts are reflected in backlog as of the period
end. With the availability of additional capital and other resources in 2008,
the Group began to commit to multiple multi-year projects that allowed it to
achieve dramatic growth in project backlog as compared with 2007. This is seen
in the 10-fold  increase from approximately $43.9 million as of December
31, 2007 to about $441 million at December 31, 2008.  As with the increase
in revenue, this increase in project backlog was a direct result of the
developing capability and reputation of the Group to successfully bid on and
execute larger projects.




Cost
of revenues




The
Group’s cost of revenue includes all costs associated with overseeing projects
in progress and business tax calculated on revenue. Because the Net Method was
applicable to revenue recognized during 2008 the costs of subcontractors is not
reflected in cost of revenue.  The total cost of revenues for the year
ended December 31, 2008 amounted to $304,386, an increase of $304,386 compared
to nil in the prior year when no revenue, and therefore no cost of revenue was
recognized by the Group. The Group had no projects in progress during 2007 on
which losses could be recognized and no losses were recognized from warranty or
other claims on projects previously completed.





Gross
profit and margin




As a
percentage of total revenues, the overall gross profit of $4.6 million resulted
in a gross margin of 93.8% for the year ended December 31, 2008.  This high
margin is due to the application of the Net Method of revenue recognition and is
not indicative of total margin earned by the consortium on the project phase
completed.  Because there was no revenue recognized by the Group for the
year ended December 31, 2007, the calculation of gross margin was not
applicable.




Operating
expenses




General
and administrative expenses




General
and administrative expenses for the Group amounted to approximately $1.28
million for the year ended December 31, 2008, an increase of approximately $0.86
million compared to approximately $417,217 in the prior year. This increase of
206%was the result of the need to add personnel and make other expenditures to
handle the Group’s increased level of business activity. For the year ended
December 31, 2008, the general and administrative expenses as a percentage of
revenue were 26.1%.  The percentage was higher than would normally be
expected if the Group were reporting revenue under the Gross Method. As there
was no revenue in 2007, such a ratio was not applicable for the year ended
December 31, 2007.





Income/loss
from operations




Income
from operations increased significantly by approximately $3.6 million, from a
loss of $0.42 million for the year ended December 31, 2007 to $3.2 million for
the year ended December 31, 2008.  This was the result of increases of $4.9
million in total revenues, $304,386 in cost of revenues and an increase of
$925,964 in general and administrative expenses. As a percentage of total
revenue, the operating income for the year ended December 31, 2008 was
66.3%.  Because revenue was recognized using the Net Method, the operating
margin was higher than would normally be expected if the Group were reporting
under the Gross Method.  There was no revenue in 2007 and operation margin
was therefore not calculable for the year ended December 31, 2007.





Interest
income




Interest
income was $335,561 for the year ended December 31, 2008 compared to interest
income of $30,662 for the year ended December 31, 2007. The increase of $304,899
in interest income in 2008 was due to the interest accrued on Net investment in
BT (Jiaohe) project.  To reflect the contingency associated with the
interest waiver offer, the Company has established a 100% valuation allowance
for the interest accrued on that project.  As a result, no interest income
was recognized in connection with the Net investment in BT Projects (Changchun)
during 2008.


40





Securities
trading profit/loss




For the
year ended December 31, 2008, the Group recognized a trading loss of $16,855, a
decrease of $799,122 from a $782,267 profit for the prior year.  The Group
discontinued its trading activity in the first fiscal quarter of 2008 and
incurred the loss on liquidation of securities held for trading.  During
the year ended December 31, 2007, SNC actively utilized available cash to buy
and sell new IPO shares in the Chinese stock market.  SNC typically held a
trading position for no more than two weeks.  As the Chinese stock market
reached an all-time high in 2007, this strategy generated commensurate
profits.  Because of the frequency of trading, cumulative purchases and
sales of securities during 2007 greatly exceeded the Company’s average cash
balances.  Securities purchased and sold during 2008 and 2007 were
approximately $0.86 million and $1.55 million respectively.





Finance
and other costs




The Group had no finance costs in the
year ended December 31, 2007 as compared with $68,333 for the year ended
December 31, 2008.  The finance costs incurred during 2008 are related to
amortization of costs of the preferred stock issuance in April 2008. Other costs
related to maintenance of its accounts were $297 for the year ended December 31,
2008 and $382 for the ended December 31, 2007 respectively.





Income
tax provision




No income
taxes are applicable to the Group in the British Virgin Islands. All income
taxes for the Group during the years ended December 31, 2008 and 2007 were
related to taxes imposed by the applicable taxation authorities within the PRC.
The provision for income tax for the year ended December 31, 2008 was $114,695,
an effective tax rate of 3.2%, less than the statutory national tax rate of 25%,
reflecting the special tax status enjoyed by the Group for income earned in
connection with the Jiaohe Project.  The effective tax rate for 2008 was
lower than the 6.5% effective rate for the year ended December 31, 2007, during
which the applicable income tax provision was $25,519. The lower effective
overall tax rate for 2008 resulted mainly from the more favorable PRC tax code
put into effect in 2008 in the jurisdictions and sectors in which the Group was
operating.   There can be no assurance that the favorable tax rates
applicable to the Group during 2007 and 2008 will continue and it should be
presumed that the national statutory rates then in effect will apply to the
Company’s PRC subsidiaries during future periods.





Net
income




For the
year ended December 31, 2008, the net income of the Group amounted to $3.45
million, an increase of $3.08 million compared to $0.37 million for the prior
year, or about 832%. This increase was attributable primarily to the completion
of one phase of the Jiaohe project in 2008 and recognition of income and gross
profit in connection with that project.  The increase in net income of from
2007 was less than the increase in operating income because the year-over-year
change in net income was mitigated by a $0.80 decrease in trading profit as
compared with the year ended December 31, 2007.





Foreign
currency translation adjustment and comprehensive income




For the
year ended December 31, 2008, the Company’s Comprehensive loss amounted to $3.8
million as compared with comprehensive income of $0.8 million for the Group for
year ended December 31, 2007. Comprehensive income for the Group reflects the
effects of foreign currency translation adjustments on the value of the Group’s
assets and these adjustments increased the net income for the year ended
December 31, 200 by $278,593 and increased the net income the year ended
December 31, 2007 by $391,662.





B. 
LIQUIDITY AND CAPITAL RESOURCES





The Group
has never collected any cash from any BT Projects completed.  From
inception through December 31, 2009, the Group has financed operations primarily
through equity financing and increases in accounts payable to consortium
partners during periods when it had BT projects in-progress.  From the
inception of SNC in 2005 through the consummation of the Sing Kung acquisition,
the combination of these two capital funding sources has combined to provide the
Group with adequate liquidity and working capital to grow the scope and scale of
operations.  With the turmoil in capital markets that was manifested 2008,
the Company’s ability to raise new funding has been constrained as compared with
its past experience.  At the same time, its needs for capital increased
from historical levels because of commitments made to fund portions of multiple
projects simultaneously.  As a result, the Company faces a severe liquidity
shortfall that caused it to assign all projects in-progress to others during the
year ended December 31, 2009 and to suspend all operating activities in January
2010.


41


In
conjunction with the redomestication merger IAG entered into privately
negotiated agreements with individual shareholders to repurchase 4,352,690 of
its common shares for $35,387,938 at prices ranging from $7.79 per share to
$8.86 per share.  In addition, IAG was obligated to paid out $8,950,549
($7.81 per share) to holders of 1,146,037 shares who made conversion elections
pursuant to IAG’s IPO prospectus.  In conjunction with the consummation of
the Sing Kung acquisition, IAG also declared a dividend of $4.85 payable to
qualifying of holders of its shares who did not (i) vote against the Sing Kung
acquisition and elect to convert their shares, (ii) enter into repurchase
agreements or (iii) waive their rights to the dividend or (iv) otherwise forfeit
their rights to the dividend.  70,291 shares qualified for the dividend,
obligating IAG to pay out $340,911.  As a result of these actions, net
funds derived from the redomestication merger and Sing Kung acquisition were
$479,948, an amount insufficient to address the capital needs of the Group at
the time of the Sing Kung acquisition or to prevent suspension of
operations.





On
February 8, 2010, Sing Kung, Century City and SNC entered into a credit facility
with a private individual for RMB 24.0 million (approximately $3.5 million) at
an annual interest rate of 18% to meet critical payment obligations to BT
Project creditors that were not contingent on receipt of collections. 
Interest on the credit facility accrues semi-annually and the final maturity
date is February 8, 2011, at which time principal and interest will be due in a
single payment.  The loan is non-recourse to the Company, but SNC, Century
City and Sing Kung are all obligors under the loan agreement, and SNC’s
interests in the Changchun Project were pledged as collateral for the
loan.  RMB 18.0 million (approximately $2.6 million) was drawn on the
facility in February 2010, and all proceeds were used to pay obligations to
Jiaohe Project creditors.  Final settlement with the subcontractor is still
being negotiated, but the Company expects resolution prior to the maturity date
of the credit facility and believes that the remaining availability under the
credit facility will be sufficient to satisfy its obligation to the
subcontractor.  The receipt of the first installment of the Jiaohe contract
or a payment from the Changchun project is expected to be received prior to the
maturity date of the credit facility, and the Company intends to utilize the
proceeds to satisfy its obligations under the facility.





On
February 22, 2010 the Company received the initial subscription of a $600,000
credit facility that was fully subscribed and funded by certain of the Company’s
Class A Preferred Shareholders.  The term of the financing ends on the
earliest to occur of (i) the first anniversary of the initial funding of the
loan (February 22, 2010); (ii) the collection of US$4,000,000 or more of BT
Project Receivables (net of costs and related payments) by its subsidiaries;
(iii) an event of default; or (iv) the consummation of an acquisition of a
business enterprise having a value greater than US$10 million or a merger
transaction.  The loan amount is convertible by each Lender into Class B
Preferred shares at any time and conversion is mandatory under certain
circumstances.  The loan accrues interest at the rate of 3% per month. In
conjunction with the authorization of the Working Capital Facility, the
requisite majority of the Company’s Board also approved amendments to the
Company’s Memorandum and Articles of Association that increased the authorized
common shares from 100,000,000 to 175,000,000 and increased the authorized
Preferred Shares from 25,000,000 to 35,000,000, including 10,000,000 shares of a
newly authorized class of Preferred Shares,  the “Class B Preferred Shares”
having a liquidation preference pari pasu with the Company’s Class A Preferred
shares  and a conversion ratio of 10 common shares for each Class B
Preferred Share. No holders of the convertible notes have converted them into
Class B shares.




As of the
date of this filing on Form 20-F, the Company’s actions to suspend operations,
terminate personnel and curtail costs, together with the liquidity that is
available under the credit facilities arranged in 2010, were judged to be
sufficient to allow us to sustain the Company beyond December 31,
2010.




Sing
Kung’s management is working actively to address its working capital deficit and
liquidity shortfall and believes it can meet its needs through one or a
combination of the following: (i) an infusion of equity capital (including
through the closing of the business combination with IAG, (ii) the establishment
of a credit or borrowing facility, (iii) sales or factoring of receivables
assets, (iv) the acceleration of payment on receivables or project investments
that are presently classified as long-term or (v) renegotiation of deferral
arrangements with consortium partners/subcontractors.  Sing Kung’s
management is exploring all such options, but its only commitment in this regard
is to conclude the business combination with IAG (which is subject to requisite
shareholder approval) and may not provide the combined company with sufficient
capital to meet its needs.  If the capital available from the business
combination with IAG (which is unlikely to exceed $15 million after taking into
account the dividend that is planned to be paid upon consummation of the
acquisition) is insufficient to resolve Sing Kung’s liquidity deficit, the
company is at risk of losing its rights to perform one or more of the projects
in progress and in backlog and it will be unable to take on new
revenue-producing projects until it generates capital from other
sources.




Working
capital




Working
capital as of December 31, 2009 was $1.6 million as compared with a working
capital deficit of ($16.3 million) as of December 31, 2008.





Total
current assets as of December 31, 2009 amounted to $11.6 million an increase of
approximately $3.7 million compared to $7.9 million at as of December 31,
2008.  The increase was attributable primarily to the reclassification of
$10.9 million in BT Project receivables from non-current to current in
reflection of amounts expected to be collected during 2010, offset by reductions
in cash of approximately $6.8 million.





Total
current liabilities amounted to $10.0 million at December 31, 2009, in
comparison to $24.2 million at December 31, 2008. This decrease of $14.2 million
is primarily attributable to the elimination of approximately $14.6 million of
BT project payables, classified as current as of December 31, 2008, in
conjunction with assignments of BT projects in-progress to others during 2009
and payment of some BT project payables, offset by increases in other current
accounts payable and accrued liabilities.


42




Our
current ratio increased to 1.15 at December 31, 2009 from 0.33 at December 31,
2008.  This increase was primarily due to the increase in current assets
resulting from reclassification of BT Project receivable to current from long
term and the reduction of current liabilities from the elimination of BT Project
payables as a result of the assignment of BT Projects in-progress to third
parties.  We had cash of $381,361 at December 31, 2009.





Cash
flow




Cash flow
from operations has been provided primarily by BT contract consortium partners
who performed their obligations under the contracts on the basis that they would
receive payment on a deferred basis. For work on the Changchun Project, the
consortium partners agreed to accept payment as and when our applicable PRC
subsidiary, as consortium leader, received payment from the municipal clients.
For contracts in-progress subsequent to January 1, 2008, the Jiaohe and
Zhengding Projects, the consortium partners agreed to extended, but not
contingent, payment terms.  Satisfying these payment requirements as they
mature would have led to negative cash flow from operations during 2009 and
beyond and was deemed unsustainable.  Therefore, we assigned the projects
in-progress to third parties to mitigate the expected negative cash flow and
suspended operations.  Nevertheless, our ability to continue to meet our
immediate cash flow requirements beyond December 31, 2010 can only be met
through one or a combination of the following:  (i) an additional infusion
of equity capital, (ii) the establishment of additional or replacement credit or
borrowing facilities, (iii) sales or factoring of receivables assets, (iv) the
collection of receivables classified as current, and (v) acceleration of payment
on receivables or project investments that are presently classified as
long-term.





The
following table sets forth historical information with respect to statements of
cash flows for the Group:





Years Ended December 31,(amountsin$millions)2009
                
                
                2008
                
                
                2007Net
      cash used in operating activities
                
                $
                (7.6
                )
                
                $
                (4.1
                )
                
                $
                (0.5
                )Net
      cash provided by/(used in) investing activities
                
                
                -
                
                
                
                (3.8
                )
                
                
                1.1Net
      cash provided by/(used in) financing activities
                
                
                0.5
                
                
                
                14.4
                
                
                
                (0.5
                )Effect
      of foreign exchange translation
                
                
                0.3
                
                
                
                0.3
                
                
                
                0.4Net
      increase/(decrease) in cash and cash equivalents
                
                $
                (6.8
                )
                
                $
                6.8
                
                
                $
                0.5





The
Comparison of the Years Ended December 31, 2009 and 2008


Net cash
used in operating activities totaled $7.6 million for the twelve months ended
December 31, 2009 as compared to $4.1 million net cash used in operating
activities for the twelve months ended December 31, 2008. This increase in
negative cash flow of $3.5 million resulted from a reduction in net income of
$8.1 million (form a net income of $3.7 million for the year ended December 31,
2008 to a net loss of $4.3 million for the year ended December 31, 2009),
combined with the following changes in the operating assets and
liabilities:





·
            $20.0
      million decrease in construction in
  progress


·
            $2.3
      million decrease in prepayments other assets and
  goodwill


·
            $0.9
      million increase in net investments in BT
  projects


·
            $0.7
      million increase in accrued liabilities and other
  payables


·
            $25.1
      million decrease in BT project
payables


·
            $0.2
      million decrease in taxes payable





The
transfer of assignment of projects in progress during the year ended December
31, 2009 reduced the net cash applied to construction in-progress as compared
with the year ended December 31, 2008, a period when project activity levels
were high and the Jiaohe project was ramping up.  With the project
assignments during 2009, most of the BT project payables were also transferred
to the assignees, resulting in the reduction in this balance.  However,
cash payments of approximately $.1 million were also made on BT Project payables
during the year ending December 31, 2009, accounting for the incremental use of
funds over the transfers.  None of the net investment in BT projects
carried over from the year-ended 2008 was collected as of December 31, 2009 and
the changes in the net investment in BT projects accounts were a result
primarily of the accrual of non-cash interest income on the Jioahe Project,
which represented a use of funds.  The year-over-year change in accrued
liabilities and other payables reflects the assumption of net liabilities from
CNC that occurred as a result of the Sing Kung acquisition.  The reduction
in taxes payable was attributable primarily to a change in the tax rates
applicable to the Jiaohe project and an adjustment to the tax payable rather
than cash payment of taxes.


43





Net cash
used in investing activities, for limited office equipment purchases, was $1,746
for the twelve months ended December 31, 2009, compared to net cash utilized in
investments during 2008 of $3.8 million, that was used primarily to fund the
purchase SNC.  The cash used for equipment purchases in the year ended
December 31, 2008 was $4,241.





Net cash
provided in financing activities for the year ended December 31, 2009 amounted
to $0.5 million related to the recapitalization of CNC.  This compares with
$14.4 million provided from the sale of preferred stock during the year ended
December 31, 2008.





Comparison of year ended
December 31, 2008 and 2007 for the Group




For the
Group, net cash used by operating activities totaled $4.1 million for the year
ended December 31, 2008, an increase in negative cash flow by $3.6 million
compared to $0.51 million of net cash used in the prior year. This increase was
the result of following changes in the operating assets and liabilities, offset
by the $3.1 million increase in net income to $3.5 million for the year ended
December 31, 2008 from $0.4 million for the year ended December 31,
2007:





·
            $20.5
      million increase in construction in
  progress


·
            $1.46
      million increase in deposits, prepayments and other accounts
      receivable


·
            $44
      million increase in net investments in BT
  projects


·
            $316,245
      increase in accrued liabilities and other
  payables


·
            $57.8
      million increase in BT project
payable


·
            $425,453
      increase in taxes payable




The
increase in construction in progress reflects accumulation of costs for
projects-in-progress as of the end of 2008.  During 2007, no projects were
construction and as a result there was no accumulation of project costs for the
year ended December 31, 2007.





The major
fluctuation in net investments in BT projects from 2007 to 2008 occurred because
acceptance of the initial phase of the Jiaohe project increased net investments
in BT projects by $15.5 million during 2008.  In contrast, no projects were
completed during 2007 and so no increases in the net investment in BT projects
balance occurred.  The year over year difference was amplified by the
prepayment by the Changchun municipal government of net investment in BT
projects during 2007 in the amount of $28.1 million in 2007.  No
collections related to net investments in BT project occurred during
2008.





The $57.8
million year-over year difference in the change to the project payables arises
because of the same events. BT project payables were reduced by $28.2 million
during 2007 at the time of the prepayment by Changchun and no additions to the
project payables account were made during that year because no projects were
in-progress.  In 2008, there was a net increase in the project payables
balance of $29.6 million as net operating cash flow was provided to the company
by subcontractors who were actively engaged on the Jiaohe and Zhengding projects
and were not being paid currently for their work.




Net cash
used in investing activities was $3.8 million for the year ended December 31,
2008, compared with net cash provided by investing activities of $1.1 million
for the year ended December 31, 2007. Net cash used in investing activities
during the year ended December 31, 2008 was for payments made to consummate the
SNC acquisition plus $58,859 of fixed asset purchase offset by net proceeds of
$72,642 from the sale of the securities trading portfolio.  Net cash
provided by investing activities during the year ended December 31, 2007 was
from collection of a shareholder advance ($383,615) and sales of trading
securities ($1.6 million) offset by purchases of trading securities ($0.86
million).




Cash flow
provided by financing activities was $14.4 million for the year ended December
31, 2008 compared to $0.5 million used financing activities for the year ended
December 31, 2007. For the year ended December 31, 2008, the Company obtained
net proceeds of $14.4 million from its issuance of preferred shares and
$499 from its issuance of common shares.  For the year ended December 31,
2007, the company used $0.53 million to pay back its shareholder.




C. 
RESEARCH AND DEVELOPMENT




Not
applicable


44





D. 
TREND INFORMATION




We have
suspended operations and we no longer have any business backlog, as reflected in
the backlog summary included in the overview at the beginning of this Item
5.  Under the circumstances, trends in our business are not applicable to
the evaluation of our business situation.




E. 
OFF-BALANCE SHEET ARRANGEMENTS




We have
not entered into any financial guarantees or other commitments to guarantee the
payment obligations of any third parties as of December 31, 2009. We have not
entered into any foreign currency forward contracts, nor do we have any other
off-balance sheet arrangements as of December 31, 2009, except for the
contractual obligations and commitments set forth in ITEM 5 – F below. 
Consequently there are no off-balance sheet arrangements that have or are
reasonably likely to have a material effect on its financial condition, changes
in financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources.





F.
TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS




The
following sets forth our contractual obligations as of December 31, 2009 (in
U.S. dollars):





PaymentsduebyperiodTotal
                    
                    
                    Lessthan1
                      year
                    
                    
                    1-3years
                    
                    
                    3-5years
                    
                    
                    Morethan
                      5yearsOperating
      lease obligations
                    
                    $
                    1,288
                    
                    
                    $
                    1,288
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -





Although
the Company does not have long-term arrangements to accommodate its
administration and other operational needs, management believes that it can find
suitable office accommodations on a short-term basis.





G.
SAFE HARBOUR




See
“FORWARD-LOOKING INFORMATION” at the beginning of this Annual Report on Form
20-F.





ITEM
      6.
            DIRECTORS,
      SENIOR MANAGEMENT AND EMPLOYEES




Directors
and Senior Management




The
following table lists our current directors and senior management:




Name
            
            Age
            
            PositionWilliam
      C. Morro
            
            57
            
            Chief
      Executive Officer and DirectorZhaosheng
      Wu
            
            73
            
            DirectorDaniel
      P. Beharry
            
            56
            
            DirectorSteve
      Klein
            
            46
            
            DirectorDavid
      Miller
            
            47
            
            DirectorQiping
      Gao
            
            66
            
            DirectorMingtang
      Zhang
            
            60
            
            Director





William C. Morrohas served
as a director and as chief executive and sole officer since September 2009.
Since November 2001, Mr. Morro has been a partner with the InterAmerican Group,
an advisory and investment firm focusing on cross-border transactions. In
October 1996, Mr. Morro founded the U.S. Merchant Bank for the Bank of Montreal
Group of Companies – BMO Nesbitt Burns Equity Group (US), Inc. and was its
president until October 2001. From 1991 to 1996, Mr. Morro was employed by
Heller Financial, Inc., and from June 1994 to October 1996 served as president
of its SBIC, Heller Investments, Inc. (“HII”). Since 1991, Mr. Morro has
accumulated experience with the acquisition and management of middle-market
companies, having participated as an investment principal in 55 acquisition or
divestiture transactions including several businesses operating in the PRC.
Prior to joining HII, Mr. Morro was a principal and shareholder of the general
management consulting firm, Cresap, McCormick and Paget (now owned by Towers,
Perrin). Before joining Cresap, Mr. Morro worked for two years as a Development
Engineer for Union Carbide Corporation and he earned a Masters degree from the
Kellogg Graduate School of Management at Northwestern University. His
undergraduate degree is from Dartmouth College, where he studied chemistry and
engineering.


45





Zhaosheng Wuhas served as a
director since September 2009. Mr. Wu is the CEO of Sing Kung and its
subsidiaries. Prior to that time, he served as Executive Director of China
Investment Consultation Ltd. (“CICL”), a financial advisory firm he founded in
2005 and whose primary shareholder is the China Investment Association. He
remains a member the CICL board of directors and he also currently serves as an
independent director of Beijing Zhongxing Huayuan Ltd., a subsidiary of the
state-owned China Investment Association, a government agency that conducts
research and provides investment information, policy advice, comprehensive
planning and feasibility analysis to all levels of government about large scale
investment and infrastructure projects. Mr. Wu retired from the China
Development Bank as a Bureau Chief in 1998 and continued to serve the
institution as Assistant Chairman and Executive Director of the Senior Advisory
Board. Previously he served for 33 years as member of the National Development
Reform Committee (“NDRC”), retiring from as Deputy Bureau Head. The NDRC is an
important central government agency responsible for formulating, among other
matters, urban and infrastructure development plans and policies at the national
level and approving plans and priorities of local governments. Mr. Wu recently
retired as chairman of the board of Shangxi Jingjin Environment Protection
Investment and Development Ltd., a construction products equipment
manufacturer.





Daniel P. Beharryhas served
as a director since January 2009. Mr. Beharry was formerly a member of Sing
Kung’s board of directors from 2008. He is a member and managing director of
Chardan Capital, LLC, a position he has held since Chardan’s inception in 2003.
Chardan Capital, LLC focuses on identifying and finding capital for successful
and profitable private Chinese companies. Affiliates of Chardan Capital, LLC
have organized four “specified purpose acquisition companies,” or SPACs, for the
purpose of raising capital in the public markets so that these blank check
companies could acquire companies with their principal operations in China.
These Chardan-affiliated SPACs–Chardan China Acquisition Corp. (which acquired
Origin Agritech Ltd. (Nasdaq: SEED), Chardan North China Acquisition Corp.,
which acquired HLS Systems International Ltd. (Nasdaq: HOLI), Chardan South
China Acquisition Corp., which acquired A-Power Energy Generation Systems, Ltd.
(Nasdaq: APower Energy Generation Systems, Ltd.) and Chardan 2008 China
Acquisition Corp., which continues to seek a target for a business combination.
, He is also secretary of Chardan China Management, LLC, the manager of Chardan
China Investments, LLC, which has invested approximately $60 million in private
Chinese companies in the past two years, including Sing Kung.





Steven Klein has served as a
director since December 2009. Mr. Klein is a Partner with Apple Core Holdings, a
privately held investment company.   Mr. Klein also holds the position
of Chief executive officer for Apple Core Hotels, a chain of hotels in mid-town
Manhattan controlled by Apple Core Holdings. Mr. Klein also serves on the boards
of directors of other Apple Core Holdings investments and currently holds two
such directorships with Jumpnode Systems, LLC and Meaningful Machines IP, LLC.
He is the producer of the movie version of the Broadway play Passing Strange.
Prior to joining Apple Core Holdings Mr. Klein was employed as an attorney
practicing real estate law at Skadden, Arps, Meagher and Flom LLP. Mr. Klein
holds a J.D. from Boston University and a Masters degree in tax law from New
York University. Mr. Klein is a U.S. citizen.





David Miller has served as a
director since December 2009. Mr. Miller is a Partner with Apple Core Holdings,
a privately held investment company. Mr. Miller also holds the position of
Corporate Counsel and Chief Financial Officer for Apple Core Hotels, a chain of
hotels in mid-town Manhattan controlled by Apple Core Holdings. Mr. Miller also
serves on the boards of directors of other Apple Core Holdings investments and
currently holds two such directorships with Jumpnode Systems, LLC and Meaningful
Machines IP, LLC. Prior to joining Apple Core, Mr. Miller was employed as an
attorney practicing corporate and transactional law at Williams, Caliri, Miller
and Otley LLP, a firm specializing in representing financial services clients.
He received a B.S. in Economics from Wharton School of Business at the
University of Pennsylvania and a J.D. from Duke University. Mr. Miller is a U.S.
citizen.





Qiping Gaohas served as
director since September 2009. Mr. Gao is currently the Chairman (non-executive)
of the board of directors of Sing Kung. Mr. Gao is recognized as a distinguished
senior manager within the PRC and an expert on infrastructure development and
financing. Mr. Gao retired in 2005 from the China Development Bank (“CDB”) as
the Assistant Governor, where he worked from 1994 to 2005. Mr. Gao was a member
of the senior leadership team with other six people. Prior to his appointment as
Assistant Governor, he had served CDB as head of the following departments:
Comprehensive Planning, Investment Banking, Administration, Finance and
Accounting and the Management Information Center. The China Development Bank is
one of three central government banks in China with primary responsibility for
financing urban development initiatives of local governments. After retiring,
Mr. Gao has continued to serve the China Development Bank as an advisor. During
his career of more than 40 years, he applied his professional engineering
training on major infrastructure development within China and participated in
the preparation of three 5-year plans related to infrastructure development
matters and provided input to national economic policy. He maintains a close
relationship with senior policy makers in the central government. Other than
consulting and advisory assignments for the China Development Bank, Mr. Gao has
not assumed any other corporate board or government positions since
retiring.


46


Mingtang Zhang has served as
a director since January 2009. Mr. Zhang is a citizen of the People's Republic
of China and resides in Beijing. He is also currently Vice Chairman of 
National Energy Coal Investment Co., Ltd.;  Vice Chairman of National
Energy Shenzhou Mining & Resources Investment (Beijing) Co., Ltd.; Vice
Chairman of Guodian Huaqiu (Beijing) Electric Power  Equipment Co., Ltd.
and Chairman of Puluotai International Bio-tech Co., Ltd.  Mr.
Zhang holds a Bachelor degree from Mengcheng University in Anhui
Province (PRC).  From 2002 - 2005 Mr. Zhang was employed as General Manager
of Puluojin International Bio-medicine Co., Ltd.  Prior to that Mr. Zhang
held management positions in various commercial, communications and technology
companies.





Compensation
of Directors and Senior Management





The
following table presents all compensation we paid to all of our directors and
senior management as a group for the year ended December 31, 2009.  The
table does not include any amounts we paid to reimburse any of such persons for
costs incurred in providing us with services during this period. The amounts set
forth below reflect amounts committed to by Sing Kung, and assumed by us
following our acquisition of Sing Kung.




Name
                          
                          Salary($)William
      C. Morro
                          
                          nilMoulong
      Zhu
                          
                          nilZhaosheng
      Wu
                          
                          $
                          11,713Daniel
      P. Beharry
                          
                          nilSteve
      Klein
                          
                          nilDavid
      Miller
                          
                          nilQiping
      Gao
                          
                          
                          14,641Mingtang
      Zhang
                          
                          nilYong
      Xu (CFO)
                          
                          
                          24,000Total
                          
                          $
                          50,354




Mr. Xu
resigned as our chief financial officer in January 2010. Mr. Xu’s replacement
has not yet been named. Costs for pension and employee benefits for the years
ended December 31, 2009, 2008 and 2007 were $2,018, $1,549 and $0,
respectively.




The
Company has no other obligation to make payments in respect of retirement
benefits of its employees.





Board
Practices





We are
authorized to have up to 7 directors. Our board of directors consists of 7
directors. The board of directors retains all the powers in running our company
that are not specifically granted to the shareholders. The board may make
decisions to borrow money for our company, and may set aside reserves out of our
profits, for whatever purposes it thinks fit.





The board
may pass a resolution when a quorum is present, and each resolution must be
passed by a vote of at least a majority of the directors present when the
resolution is put to vote and voting thereon. According to our Articles of
Association, unless otherwise unanimously decided by our board of directors
including no less than one-half of the then appointed Class A Preferred
Directors, a quorum of directors is at least one-third of the total number of
directors with a minimum of two (2) including no less than one-half of the then
appointed Class A Preferred Directors. Our board of directors may elect one
director to serve as the chairman of the board to preside at the meetings of the
board of directors, and may also remove such director as chairman. Minutes of
the meetings are recorded and kept at our offices.





We do not
provide benefits to directors upon termination of employment.





Independent
Directors




Mr.
Qiping Gao, Mr. Daniel P. Beharry, Mr. Steven Klein, Mr. David Miller and Mr.
Mingtang Zhang currently serve as our independent directors.





Audit
Committee




Mr.
Daniel P. Beharry, Mr. Steve Klein, and Mr. David Miller serve as members of our
Audit Committee.


47




The primary purpose of the Audit Committee is to oversee
the accounting and financial reporting processes of the Company and the audits
of the Company’s financial statements.  The Audit Committee
shall also review the qualifications, independence and performance, and approve
the terms of engagement of the Company’s independent auditor and prepare any
reports required of the Audit Committee under rules of the Securities and
Exchange Commission (“SEC”).





The Audit
Committee shall comprise three or more directors selected by the board of
directors, each of whom shall satisfy the independence and experience
requirements of the Nasdaq Stock Market, provided that one director who does not
meet the independence criteria of Nasdaq, but is not a current employee or
officer, or an immediate family member of an employee or officer, may be
appointed to the Committee, subject to the approval of the board pursuant to,
and subject to the limitations under, the “exceptional and limited
circumstances” exceptions as provided under the rules of Nasdaq.





Each
member of the Audit Committee must be able to read and understand fundamental
financial statements, including a balance sheet, income statement and cash flow
statement. In addition, at least one member shall have past employment
experience in finance or accounting, professional certification in accounting,
or other comparable experience or background resulting in the individual being
financially sophisticated, which may include being or having been a chief
executive, chief financial or other senior officer with financial oversight
responsibilities.





The
duties of the Audit Committee include:





·
            Periodically
      reviewing and discussing with the independent auditor (i) the matters
      required to be discussed by Statement on Auditing Standards No. 61,
      as amended, and (ii) any formal written statements received from the
      independent auditor consistent with and in satisfaction of Independence
      Standards Board Standard No. 1, as amended, including without limitation,
      descriptions of all relationships between the independent auditor and the
      Company, any disclosed relationships or services that may impact the
      independent auditor’s objectivity and independence and whether any of the
      Company’s senior finance personnel were recently employed by the
      independent auditor.





·
            Review
      and discuss with management and the independent auditor the Company’s
      financial reporting and any certification, report, opinion or review
      rendered by the independent auditor, and recommend to the Board whether
      the audited financial statements should be included in the Company’s
      reports.





·
            Review
      with management its assessment of the effectiveness and adequacy of the
      Company’s internal control structure and procedures for financial, review
      with the independent auditor the attestation to and report on the
      assessment made by management, and consider with management and the
      independent auditor whether any changes to the internal controls are
      appropriate in light of management’s assessment or the independent
      auditor’s attestation.





·
            To
      the extent that it deems appropriate, review with management its
      evaluation of the Company’s procedures and controls designed to assure
      that information required to be disclosed in its periodic public reports
      is recorded, processed, summarized and reported in such reports within the
      time periods specified by the SEC for the filing of such reports
      (“Disclosure Controls”), and consider whether any changes are appropriate
      in light of management’s evaluation of the effectiveness of such
      Disclosure Controls.





·
            Establish
      procedures for the receipt, retention and treatment of complaints received
      by the Company regarding accounting, internal accounting controls or
      auditing matters, and the confidential, anonymous submission by employees
      of the Company of concerns regarding questionable accounting or auditing
      matters. Adopt, as necessary, appropriate remedial measures or actions
      with respect to such complaints or
concerns.





·
            As
      requested by the board of directors, review and investigate conduct
      alleged by the board to be in violation of the Company’s Code of Conduct,
      and adopt as necessary or appropriate, remedial, disciplinary, or other
      measures with respect to such
conduct.





Audit
Committee Financial Expert




Mr.
Daniel P. Beharry serves as our designated audit committee financial
expert.





Independent
Auditors’ Fees





For the Year Ended December 312009
                      
                      
                      2008Audit
      Fees
                      
                      $
                      32,000
                      
                      
                      $
                      62,000Audit
      – Related Fee
                      
                      $
                      41,500
                      
                      
                      $
                      66,000


48




Tax
Fees




During
2009, the Company did not make any payments to its auditing firm for tax
services.





Remuneration
of Directors





The
purpose of the compensation committee of the board of directors of the Company
is to discharge the board’s responsibilities relating to compensation of the
Company’s directors and executive officers. The members of the Compensation
Committee are Mr. Daniel P. Beharry, Mr. Gao Qiping, and Mr. Zhang Mingtang.
Directors’ remuneration requires the approval of the audit committee followed by
approval of the board of directors.





The
committee shall be comprised of three or more directors each of whom (i) meets
the independence requirements of The Nasdaq Stock Market (“Nasdaq”), provided
that the Board may elect to take advantage of any exception from such
requirements provided in the Nasdaq rules, (ii) meets the requirements for a
“Non-Employee Director” contained in Rule 16b-3 under the Securities Exchange
Act of 1934, as amended, and (iii) meets the requirements for an “outside
director” for purposes of Section 162(m) of the Internal Revenue Code of 1986,
as amended. Determinations as to whether a particular director satisfies the
requirements for membership of the Committee shall be made by the
Board.





The
duties of the compensation committee include:





·
            Evaluate
      and recommend to the full Board appropriate compensation for the Company’s
      directors, including compensation and expense reimbursement policies for
      attendance at Board and committee
meetings.




·
            Review
      and monitor the Company’s employee and management compensation and review
      and approve the compensation of the Company’s executive
      officers.




·
            Review,
      approve and make recommendations to the Board regarding the Company’s
      compensation plans, including with respect to incentive-compensation
      plans, policies and programs.




·
            Review
      trends in management compensation, and, when necessary or desirable,
      oversee the development of new compensation plans and approve the revision
      of existing plans.




The
company’s directors do not currently receive any cash compensation for their
services on the board. Any amounts paid to date were committed by Sing Kung
prior to the acquisition.





Code
of Conduct




The
Company has adopted a formal code of ethics statement.





Employees





At
year-end 2009, we had a total of 15 full-time employees working in three primary
categories: administration and management (6), urban planning (7), and urban
infrastructure construction management (2). All but one, located in Changchun
and serving that project and Jiaohe, were based in Shanghai. This employee total
was reduced from approximately 29 at mid-year divided among the categories as
follows: administration and management (12), urban planning (11), and urban
infrastructure construction management (6). Of these, all but 5 were located in
Shanghai with the remained assigned to our project locations as needed. 
 As of the filing date hereof, the employee count has been reduced to two
to limit costs following the suspension of the infrastructure development
business in January 2010.   One of these employees is located in our
project office in Changchun and the other is based in Shanghai at our principal
office location.





We and
our employees are not parties to any collective bargaining
agreements.





Share
Ownership




The
following table sets forth information, as of August 15, 2010, based on
information obtained from the persons named below, with respect to the
beneficial ownership of shares of the voting stock of the Company by (i) each
director and executive officer and (ii) all directors and executive officers as
a group. Except as indicated in the footnotes to the table, the persons named in
the table have sole voting and investment power with respect to all shares of
common stock shown as beneficially owned by them.


49





Name and address of Beneficial Holder
                          
                          Amount and nature of
                            Beneficial Ownership
                          
                          
                          
                          
                          Percent of
                            Beneficial
                            InterestHuang/Shi
      Group (2)
                          
                          
                          9,201,426
                          
                          (1
                          )
                          
                          
                          32.9
                          %Ms.
      Cho Kwan (3)
                          
                          
                          5,824,967
                          
                          (1
                          )
                          
                          
                          20.8
                          %Platinum
      Partners Value Arbitrage Fund, L.P. (4)
                          
                          
                          1,428,618
                          
                          (5
                          )
                          
                          
                          5.1
                          %William
      C. Morro (Director and CEO) (5)
                          
                          
                          765,824
                          
                          (7
                          )
                          
                          
                          2.7
                          %Steven
      Klein (Director) (6)
                          
                          
                          350,118
                          
                          (9
                          )
                          
                          
                          1.3
                          %David
      Miller* (Director) (8)
                          
                          
                          -
                          
                          
                          
                          
                          
                          -Qiping
      Gao* (Director) (10)
                          
                          
                          -
                          
                          
                          
                          
                          
                          -Zhaosheng
      Wu* (Director) (10)
                          
                          
                          -
                          
                          
                          
                          
                          
                          -Mingtang
      Zhang* (Director) (10)
                          
                          
                          -
                          
                          
                          
                          
                          
                          -Daniel
      P. Beharry* (Director) (10)
                          
                          
                          -
                          
                          
                          
                          
                          
                          -All
      officers and directors as a group
                          
                          
                          
                          
                          
                          
                          
                          
                          4.0
                          %





Notes:
            * 
         Person beneficially owns less than one percent of the
      class


1)
            Common
      shares


2)
            Five
      nominee companies are believed by the Company to be under common control
      of Ms. Yongjan Huang and her spouse, Jianjun Shi, the former CEO of Sing
      Kung; mailing address is Room 2801, Shui On Centre No. 6-8 Harbour Road,
      Wanchai, Hong Kong


3)
            Although
      Cho Kwan is an individual person and citizen of Canada, shares are
      believed to be under the common control of Ms. Yongjan Huang and her
      spouse, Jianjun Shi, the former CEO of Sing Kung; 2ndFl,
      Abbott Building, Road Town, VG1110, Tortola, British Virgin
      Islands


4)
            Mailing
      address is 152 West 57thStreet,
      4thFloor,
      New York, NY 
 10019


5)
            Platinum
      Partners owns 66,667 common shares and 1,400,472 Class A Preferred
      shares


6)
            c/o
      WHI Inc., 410 South Michigan Ave., Suite 620, Chicago, IL 
      60605


7)
            Mr.
      Morro is deemed the beneficial owner of 132,360 common shares and 633,464
      Class A Preferred Shares, which includes 33,924 common shares and 162,365
      Class A Preferred shares owned by InterAmerican Capital Partners II, which
      is 60% owned and under the voting control of Mr.
      Morro.


8)
            Mailing
      address is 1450 Broadway, 40thFloor,
      New York, NY 
10018


9)
            Mr.
      Klein is the trustee for and has voting control over 350,118 Class A
      Preferred Shares owned by the Irene Horn
    Trust.


10)
            c/o
      CNC Development Ltd. 970 Dalian Rd., Suite 909, Shanghai  900092,
      P.R.C.





Stock
Option Plan




Sing
Kung 2008 Equity Plan




On
August 11, 2008, shareholders approved and adopted the Sing Kung 2008 Equity
Plan. The Sing Kung 2008 Equity Plan, sometimes referred to as the “2008 Stock
Plan” reserves 5,500,000 shares of the Company common stock for issuance in
accordance with the plan’s terms. Sing Kung’s stockholders approved the adoption
of the 2008 Stock Plan on August 11, 2008 and approved certain amendments to the
plan on September 25, 2008. The Company has not granted any options under the
2008 Stock Plan as of the date of this 20-F. The IntraAmerican Acquisition Group
Inc. (“IAG”) board of directors and shareholders also approved the 2008 Stock
Plan. Under the plan of merger between IAG and the Company, the 2008 Stock Plan
will survive the redomestication merger and be administered by the Company’s
compensation committee.





The
Company compensation committee will fix the term of each stock option. However,
an incentive stock option may be granted only within the ten-year period
commencing from the effective date of the plan and may only be exercised within
ten years from the date of grant, or five years from the date of grant in the
case of a participant who at the time the stock option is granted owns more than
10% of the total combined voting power of all of our classes of voting
securities.





The
purpose of the stock option plan is to enable the Company to offer its
employees, officers, directors and consultants whose past, present and/or
potential contributions to the Company have been, are or will be important to
the success of the Company, an opportunity to acquire a proprietary interest in
the Company. The various types of incentive awards that may be provided under
the stock option plan will enable the Company to respond to changes in
compensation practices, tax laws, accounting regulations and the size and
diversity of its business.





There are
approximately 7 persons who will be eligible to be granted awards, including
directors, officers, employees and consultants of the Company and its
subsidiaries. No allocations of shares that may be subject to awards have been
made in respect of the executive officers or any other group. All awards will be
subject to the recommendations of management and the compensation committee and
approval by the board of directors or the stock option committee.




50




Ordinary shares
                                            reserved
                                            for option grants
                                          
                                          
                                          
                                          Options
                                            outstanding
                                          
                                          Weighted
                                            average
                                            exercise price5,500,000
                                          
                                          
                                          
                                          
                                          5,500,000
                                          
                                          
                                          $
                                          N/A





ITEM
      7.
            MAJOR
      SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS





7.A. 
Major Shareholders




See Item
6.E., “Share Ownership,” for a description of our major
shareholders.




7.B. 
Related Party Transactions




Convertible
loan to the Company





On March
24, 2010, CNC announced that it entered into loan agreements with certain of its
Preferred Shareholders or their designees (“Lenders”) pursuant to which the
Lenders agreed to advance a total of US$600,000 to the Company for a term equal
to the earliest to occur of (i) the first anniversary of the initial funding of
the loan; (ii) the collection of US$4,000,000 or more of BT Project Receivables
(net of costs and related payments) by its subsidiaries; (iii) an event of
default; or (iv) the consummation of an acquisition of a business enterprise
having a value greater than US$10 million or a merger transaction.  The
loan amount is convertible by each Lender at any time at such Lender’s option
into Class B Preferred shares having an initial liquidation preference value
equal to three times the loan principal amount.  At CNC’s election,
conversion of the loan by each lender into Class B Preferred shares is mandatory
in the event that the Company’s subsidiaries collect US$10 million of BT Project
receivables (net of costs and related payments). If any Class B Preferred shares
are issued as a result of a conversion by any Lender, the issuance of Class B
Preferred shares would trigger a reset of the conversion ratio of the Class A
Preferred shares.  Such a reset would be dilutive to the Company’s common
shareholders.





7.C. 
Interests of Experts and Counsel




Not
applicable.




ITEM
      8.
            FINANCIAL
      INFORMATION





Consolidated
Statements and Other Financial Information




The
financial statements required by this item may be found at the end of this
report on 20-F.




ITEM
      9.
            THE
      OFFER AND LISTING




9.A.  Offer
and Listing Details


Our
common shares, units and warrants began trading on the OTC Bulletin Board
following the IPO of InterAmerican Acquisition Group Inc. on September 10, 2007
under the symbols “IAQG”, “IAQGU” and “IAGGW” respectively.  Our
shares continued to trade under “IAQG” symbols following the redomestication
merger with CNC until new symbols could be approved.  On October 29,
2009, the securities of CNC, including the Class A Preferred shares began
trading under the symbols “CDLKF”, “CDLVF”, “CDLUF”, “CDLWF” representing our
Class A Preferred shares, common shares, units and warrants
respectively.  The table following table presents the OTC Bulletin
Board closing prices for the periods shown and do not reflect inter-dealer
prices, are without retail markup, markdowns or commissions, and may not
represent actual transactions.
  Class
      A Preferred Shares
              
              
              Common
      Shares
              
              
              Units
              
              
              WarrantsHigh
              
              
              Low
              
              
              High
              
              
              Low
              
              
              High
              
              
              Low
              
              
              High
              
              
              LowAnnual
      High and Low2007
              
              n.a.
              
              
              n.a.
              
              
              $
              7.28
              
              
              $
              7.17
              
              
              $
              8.60
              
              
              $
              8.00
              
              
              $
              1.35
              
              
              $
              1.002008
              
              n.a.
              
              
              n.a.
              
              
              $
              7.85
              
              
              $
              6.80
              
              
              $
              9.85
              
              
              $
              7.00
              
              
              $
              2.28
              
              
              $
              0.132009
              
              $
              2.55
              
              
              $
              1.50
              
              
              $
              1.86
              
              
              $
              1.86
              
              
              $
              8.25
              
              
              $
              4.75
              
              
              $
              0.20
              
              
              $
              0.052010
              
              $
              1.50
              
              
              $
              0.25
              
              
              $
              1.86
              
              
              $
              0.20
              
              
              $
              5.00
              
              
              $
              1.01
              
              
              $
              0.20
              
              
              $
              0.04Quarterly
      High and Low20081st
      Quarter
              
              n.a.
              
              
              n.a.
              
              
              $
              7.55
              
              
              $
              7.24
              
              
              $
              9.80
              
              
              $
              8.28
              
              
              $
              2.28
              
              
              $
              1.112nd
      Quarter
              
              n.a.
              
              
              n.a.
              
              
              $
              7.85
              
              
              $
              7.33
              
              
              $
              9.26
              
              
              $
              8.70
              
              
              $
              2.05
              
              
              $
              1.403rd
      Quarter
              
              n.a.
              
              
              n.a.
              
              
              $
              7.80
              
              
              $
              7.35
              
              
              $
              9.85
              
              
              $
              8.50
              
              
              $
              2.25
              
              
              $
              1.154th
      Quarter
              
              n.a.
              
              
              n.a.
              
              
              $
              7.35
              
              
              $
              6.80
              
              
              $
              8.10
              
              
              $
              7.00
              
              
              $
              1.10
              
              
              $
              0.1320091st
      Quarter
              
              n.a.
              
              
              n.a.
              
              
              $
              7.65
              
              
              $
              7.25
              
              
              $
              7.80
              
              
              $
              6.80
              
              
              $
              0.34
              
              
              $
              0.182nd
      Quarter
              
              n.a.
              
              
              n.a.
              
              
              $
              7.56
              
              
              $
              7.45
              
              
              $
              8.00
              
              
              $
              7.26
              
              
              $
              0.30
              
              
              $
              0.103rd
      Quarter
              
              n.a.
              
              
              n.a.
              
              
              $
              2.45
              
              
              $
              14.59
              
              
              $
              8.40
              
              
              $
              4.75
              
              
              $
              0.25
              
              
              $
              0.104th
      Quarter
              
              $
              2.55
              
              
              $
              1.50
              
              
              $
              1.86
              
              
              $
              1.86
              
              
              $
              5.00
              
              
              $
              1.01
              
              
              $
              0.20
              
              
              $
              0.0520101st
      Quarter
              
              $
              1.50
              
              
              $
              1.00
              
              
              $
              1.86
              
              
              $
              0.70
              
              
              $
              5.00
              
              
              $
              4.00
              
              
              $
              0.17
              
              
              $
              0.052nd
      Quarter
              
              $
              1.00
              
              
              $
              0.71
              
              
              $
              0.75
              
              
              $
              0.60
              
              
              $
              5.00
              
              
              $
              5.00
              
              
              $
              0.20
              
              
              $
              0.053rd
      Quarter  (through August 12)
              
              
              0.71
              
              
              
              0.25
              
              
              
              0.60
              
              
              
              0.20
              
              
              No
      trade
              
              
              No
      trade
              
              
              $
              0.05
              
              
              $
              0.04Monthly
      High and Low2010January
              
              $
              1.50
              
              
              $
              1.00
              
              
              $
              1.86
              
              
              $
              1.00
              
              
              $
              5.00
              
              
              $
              4.00
              
              
              $
              0.17
              
              
              $
              0.05February
              
              $
              1.00
              
              
              $
              1.00
              
              
              $
              1.00
              
              
              $
              0.70
              
              
              $
              5.00
              
              
              $
              5.00
              
              
              $
              0.14
              
              
              $
              0.07March
              
              $
              1.00
              
              
              $
              1.00
              
              
              $
              0.75
              
              
              $
              0.70
              
              
              $
              5.00
              
              
              $
              5.00
              
              
              $
              0.07
              
              
              $
              0.07April
              
              $
              1.00
              
              
              $
              0.71
              
              
              $
              0.75
              
              
              $
              0.60
              
              
              $
              5.00
              
              
              $
              5.00
              
              
              $
              0.20
              
              
              $
              0.07May
              
              $
              0.71
              
              
              $
              0.71
              
              
              $
              0.60
              
              
              $
              0.60
              
              
              $
              5.00
              
              
              $
              5.00
              
              
              $
              0.07
              
              
              $
              0.05June
              
              $
              0.71
              
              
              $
              0.71
              
              
              $
              0.60
              
              
              $
              0.60
              
              
              $
              5.00
              
              
              $
              5.00
              
              
              $
              0.05
              
              
              $
              0.05July
              
              $
              0.71
              
              
              $
              0.25
              
              
              $
              0.60
              
              
              $
              0.20
              
              
              $
              5.00
              
              
              $
              5.00
              
              
              $
              0.05
              
              
              $
              0.05August
      (through August 12)
              
              $
              0.25
              
              
              $
              0.25
              
              
              $
              0.60
              
              
              $
              0.60
              
              
              $
              5.00
              
              
              $
              5.00
              
              
              $
              0.05
              
              
              $
              0.04
 
 Dividends.   Other
than the closing dividend paid to eligible shareholders of IAG in conjunction
with the redomestication merger and  Sing Kung acquisition, we have
not paid any dividends on our common shares and we do not anticipate doing so in
the foreseeable future.  Any dividends will be paid solely as
determined by our Board of Directors.




9.B. 
Plan of Distribution




Not
Applicable.




9.C. 
Markets


Our
securities are traded on the OTC Bulletin Board under the following symbols for
each registered class of security:
  Security
              SymbolClass A Preferred
      shares:
              CDLKFCommon
    shares:
              CDLVFUnits:
              CDLUFWarrants:
              CDLWF


9.D. 
Selling Shareholders




Not
Applicable.




9.E. 
Dilution




Not
Applicable.


51


9.F. 
Expenses of the Issuer




Not
Applicable.




ITEM
      10.
            ADDITIONAL
      INFORMATION





ITEM
      10A.
            SHARE
      CAPITAL




Authorized/Issued
Capital




Since
March 22, 2010, on which date we amended our memorandum and articles of
association, we are authorized to issue 210,000,000 shares of US$0.0001 par
value each divided into three classes of shares as follows: (1) 175,000,000
Common Shares; and (2) 25,000,000 Class A Preferred Shares. At formation we
authorized 1,000 Common Shares. On July 24, 2009 we authorized 100,000,000
Common Shares and 25,000,000 Class A Preferred Shares both at par value
$0.0001.




Shares
Not Representing Capital




Not
Applicable.




Shares
Held By Company




Not
Applicable.




Resolutions/Authorizations/Approvals




On March
24, 2010, CNC announced that it entered into loan agreements with certain of its
Preferred Shareholders or their designees (“Lenders”) pursuant to which the
Lenders agreed to advance a total of US$600,000 to the Company. The loan amount
is convertible by each Lender at any time at such Lender’s option into Class B
Preferred shares having an initial liquidation preference value equal to three
times the loan principal amount.  At CNC’s election, conversion of the loan
by each lender into Class B Preferred shares is mandatory in the event that the
Company’s subsidiaries collect US$10 million of BT Project receivables (net of
costs and related payments). If any Class B Preferred shares are issued as a
result of a conversion by any Lender, the issuance of Class B Preferred shares
would trigger a reset of the conversion ratio of the Class A Preferred
shares.  Such a reset would be dilutive to the Company’s common
shareholders





The
Company has outstanding 5,750,000 warrants resulting from IAG’s IPO, each of
which entitles the holder to purchase from the Company 0.1850734 share of its
common stock and 0.8857955 share of CNC Preferred Stock at an exercise price of
$5.00.  The outstanding warrants expire September 4, 2011. No warrants have
been exercised as of the date hereof.





ITEM
      10B.
            MEMORANDUM
      AND ARTICLES OF ASSOCIATION





Charter





Our
charter documents consist of our amended and restated memorandum of association
and our amended and restated articles of association, or the memorandum and
articles of association. We may amend our memorandum and articles of association
generally by a resolution of directors or members.




The
following description of certain provisions of our memorandum and articles of
association does not purpose to be complete and is qualified in its entirety by
our memorandum and articles of association included as Exhibit 1.1 to this
report.




Corporate
Powers




Pursuant
to our memorandum of association, the objects for which we were established are
unrestricted and we have full power and authority to carry out any objects not
prohibited by the BVI Business Companies Act, 2004,  as the same may be
revised from time to time, or any other law of the BVI, except that we have no
power to carry on banking or trust business, business as an insurance or
reinsurance company, insurance agent or insurance broker, the business of
company management, the business of providing the registered office or the
registered agent for companies incorporated in the BVI, or business as a mutual
fund, mutual fund management or mutual fund administrator, unless we obtain
certain licenses under the laws of the BVI. Our objects and purposes may be
found in the Section 5 of the memorandum and articles.


52





Board
Composition




Pursuant
to our memorandum and articles of association, the business of our company is
managed by our board of directors. Commencing with the first annual meeting of
the shareholders, directors are elected for a term of office to expire at the
end of one year. Each director holds office until the expiration of his or her
term of office and until his or her successor has been elected and qualified, or
until the earlier of his or her disqualification under Section 111 of the Act,
death, resignation or removal by resolution of directors members or, in the case
of the Class A Preferred Directors, by resolution by the Class A Preferred
shareholders.





Class A
Preferred shareholders may elect up to four directors. The balance of other
directors will be elected by resolution of the members. Class A and Class B
preferred shareholders will be entitled to vote on the remaining directors on an
as-converted basis. The number of directors elected by Class A Preferred
shareholders will be determined by the percentage of total equity market value
Class A Preferred Stock represents of the total Company. The number of directors
Class A Preferred shareholders are entitled to elect is as follows, if the
percentage of total equity market value of Class A Preferred stock is: 
≥50% then 4 directors; 49%-35% then 3 directors; 34%-20% then 2 directors;
19%-10% then 1 director; and less than 10% then Class A Preferred shareholders
will lose the right to appoint any directors. Once reduced, the number of
directors that may be appointed by Class A Preferred shareholders shall not
increase.





There is
cumulative voting by shareholders of Class A Preferred Shares for the election
of the number of directors allocated to Class A Preferred Share holders. We do
not have any age-based retirement requirement and we do not require our
directors to own any number of shares to qualify as a director.




Board
Meetings




Board
meetings may be held at the discretion of the directors at such times and in
such manner as the directors may determine upon with at least three days notice
for all directors. Decisions made by the directors at meetings shall be made by
a majority of the directors. There must be at least one-third of the total
number of directors with a minimum of two (2), including no less than one-half
of the then appointed Class A Preferred Directors, at each meeting.




Directors
Interested in a Transaction and Other Director Matters




A
director must, immediately after becoming aware of the fact that he is
interested in a transaction entered into or to be entered into by us, disclose
such interest to the board of directors. A director who is interested in a
transaction entered into, or to be entered into, by the company, may vote on a
matter related to the transaction, attend a meeting of directors at which a
matter relating to the transaction arises and be included among the directors
present at the meeting for the purposes of a quorum and sign a document on
behalf of the company, or do any other thin in his capacity as a director, that
relates to the transaction. A director is not required to disclose his interest
in a transaction or a proposed transaction to our board of directors if the
transaction or proposed transaction is between the director and us and the
transaction or proposed transaction is or is to be entered into the ordinary
course of our business and on usual terms and conditions.




The
directors may exercise all powers of our company to borrow money, mortgage or
charge our undertakings and property, issue debentures, debenture shares and
other securities whenever money is borrowed or as security for any debt,
liability or obligation of the company or of any third party.





Compensation
of directors may be fixed by resolution of directors or members in respect of
services rendered or to be rendered in any capacity to us.




A
director may attend and speak at any meeting of the shareholders and at any
separate meeting of the holders of any class of our shares.




Rights
of Shares




We are
currently authorized to issue 210,000,000 shares of US$0.0001 par value each
divided into three classes of shares as follows: (1) 175,000,000 Common Shares;
(2) 25,000,000 Class A Preferred Shares; and 10,000,000 Class B Preferred
Shares.





Common
Shares





Each
Common Share confers on the holder:





(i) right
to an equal share in any dividend paid by the Company in accordance with the
Act, subject to the preferred dividend rights attached to the Class A Preferred
Shares. However, as long as there are 2,000,000 or more Class A Preferred Shares
in issuance, no dividends shall be distributed among the holders of the Common
Shares, unless a majority of the Class A Preferred Directors consent to such
payment;


53





(ii) the
right to one vote on any Resolution of Members except that the holders of the
Common Shares shall not be entitled to vote with respect to the election of any
Class A Preferred Directors; and





(iii) the
right to an equal share in the distribution of the surplus assets of the
Company, subject to the liquidation preference of the Class A Preferred
Shares.





Class
A Preferred Shares





Each
Class A Preferred Share confers on the holder:





(i) the
right to receive an equal share in a cumulative dividend prior to payment by the
Company of any dividends to holders of the Common Shares, calculated at an
annual rate of 7% of the Liquidation Preference Value, with the adjustments in
the rate indexed to changes in the $US-RMB exchange rate in effect on the last
U.S. business day of the quarter. Base exchange rate = RMB 6.8340/$1.00. Such
dividends will accrue quarterly and if payment is declared by the board of
directors, shall be paid in cash within 10 business days following the end of
each calendar quarter;





(ii)
the right to one vote on any resolution of members as if the Class A Preferred
Shares had been converted into Common Shares; and





(iii) the
right to a preference over the holders of the Common Shares in the distribution
of the surplus assets of the Company in the event of a Liquidation Event (as
defined therein) in an amount specified therein;





(iv)
subject to applicable law, the holders of the Class A Preferred Shares may elect
at their sole option to request the redemption of some or all of their Class A
Preferred Shares:





(A) in
the event that the Company undergoes a Fundamental Change (as defined therein)
at the higher of the Liquidation Preference Value (as defined therein) or value
as converted; and





(B) at
any time after the fourth anniversary of the consummation of the IAG Transaction
(as defined therein) at the Liquidation Preference Value, if certain conditions
specified therein are met.





(v) the
Class A Preferred Shares may be redeemed in whole or in part by the Company at
its sole option, under certain circumstances specified therein.





Class
B Preferred Shares





Each
Class B Preferred Share confers on the holder:





(i) the
right to receive an equal share in a cumulative dividend prior to payment by the
Company of any dividends to holders of the Common Shares, calculated at an
annual rate of 7% of the Liquidation Preference Value, with the adjustments in
the rate indexed to changes in the $US-RMB exchange rate in effect on the last
U.S. business day of the quarter. Base exchange rate = RMB 6.8340/$1.00. Such
dividends will accrue quarterly and if payment is declared by the board of
directors, shall be paid in cash within 10 business days following the end of
each calendar quarter;





(ii) the
right to one vote on any resolution of members as if the Class B Preferred
Shares had been converted into Common Shares;





(iii) the
right to a preference (ranking pari passu with the Preferred Distribution
enjoyed by the holders of the Class A Preferred Shares) over the holders of the
Common Shares in the distribution of the surplus assets of the Company in the
event of a Liquidation Event in an amount specified therein.





(iv)
subject to applicable law, the holders of the Class B Preferred Shares may elect
at their sole option to request the redemption of some or all of their Class B
Preferred Shares:





(A) in
the event that the Company undergoes a Fundamental Change at the higher of the
Liquidation Preference Value or value as converted; and





(B) at
any time after the fourth anniversary of the consummation of the IAG Transaction
at the Liquidation Preference Value, if certain conditions therein are
met.


54





(v) and
the Class B Preferred Shares may be redeemed in whole or in part by the Company
at its sole option, under certain circumstances specified therein.





The
rights attached to any class (unless otherwise provided by the terms of issue of
the shares of that class) may, whether or not the Company is being wound up, be
varied only with the consent in writing of the holders of not less than a
majority of the issued shares of that class and the holders of not less than a
majority of the issued shares of any other class of shares which may be affected
by such variation. There are no limitations on the rights to own
securities.





Shareholders Meetings




Under
our memorandum and articles of association, we are required to hold an annual
meeting of shareholders each year at such date and time determined by our
directors. Meetings of shareholders may be called pursuant to board resolution
or the written request of shareholders holding more than 30% of the votes of our
outstanding voting shares. Written notice of meetings of shareholders must be
given to each shareholder entitled to vote at a meeting not fewer than 7 days
prior to the date of the meeting, with certain limited exceptions. The written
notice will state the place, time and business to be conducted at the meeting.
The shareholders listed in our share register on the date the notice is given
shall be entitled to vote at the meeting, unless the notice provides a different
date for determining the shareholders who are entitled to vote.




A meeting
of shareholders held without proper notice will be valid if shareholders holding
90% majority of the total number of shares entitled to vote on all matters to be
considered at the meeting, or 90% of the votes of each class or series of shares
where shareholders are entitled to vote thereon as a class or series, have
waived notice of the meeting and, for this purpose, presence of a shareholder at
the meeting is deemed to constitute a waiver. The inadvertent failure of the
directors to give notice of a meeting to a shareholder, or the fact that a
shareholder has not received notice, will not invalidate a meeting.




Shareholders
may vote in person or by proxy. No business may be transacted at any meeting
unless a quorum of shareholders is present. A quorum consists of the presence in
person or by proxy of holders entitled to exercise at least 50% of the voting
rights of the shares of each class or series of shares entitled to vote as a
class or series thereon and the same proportion of the votes of the remaining
shares entitled to vote thereon.





ITEM
      10C.
            MATERIAL
      CONTRACTS





On
September 9, 2009, CNC completed the acquisition of 94.9% of the common stock of
Sing Kung pursuant to an Amended and Restated Stock Purchase Agreement, dated as
of May 15, 2008, as amended on November 28, 2008 and July 17, 2009 (the
“Stock Purchase Agreement”).  Concurrent with that stock purchase, IAG was
merged with and into CNC.




As a
consequence of the merger with IAG, CNC succeeded to a number of definitive
agreements entered into by IAG, including the agreements governing the warrants
issued by IAG. Such warrants will now be exercisable for 0.1850734 common
shares of CNC and 0.8857955 Class A Preferred shares of CNC, in lieu of one
share of IAG common stock.  The form of amended and restated warrant
agreement has been filed as an exhibit to CNC’s Form 8-A (File No. 000-53786)
filed with the SEC on September 15, 2009.  Each of the other agreements has
been previously filed by IAG as an exhibit to its periodic reports filed with
the SEC.





ITEM
      10D.
            EXCHANGE
      RULES





British
Virgin Islands





There are
no exchange control regulations imposed on us or our shareholders under British
Virgin Islands law.




The
PRC




China
regulates foreign currency exchanges primarily through the following rules and
regulations:




·
            Foreign
      Currency Administration Rules of 1996, as amended;
  and





·
            Administrative
      Rules of the Settlement, Sale and Payment of Foreign Exchange of
      1996.




As we
have disclosed in the risk factors above, Renminbi is not a freely convertible
currency at present. Under the current PRC regulations, conversion of Renminbi
is permitted in China for routine current-account foreign exchange transactions,
including trade and service related foreign exchange transactions, payment of
dividends and service of foreign debts. Conversion of Renminbi for most
capital-account items, such as direct investments, investments in PRC securities
markets and repatriation of investments, however, is still subject to the
approval of SAFE.


55


Pursuant
to the above-mentioned administrative rules, foreign-invested enterprises, such
as our PRC subsidiaries, Century City, may buy, sell and/or remit foreign
currencies for current account transactions at banks in China with authority to
conduct foreign exchange business by complying with certain procedural
requirements, such as presentment of valid commercial documents. For
capital-account transactions involving foreign direct investment, foreign debts
and outbound investment in securities and derivatives, approval from SAFE is a
pre-condition. Capital investments by foreign-invested enterprises outside China
are subject to limitations and requirements in China, such as prior approvals
from the PRC Ministry of Commerce or SAFE.





ITEM
      10E.
            ADDITIONAL
      INFORMATION: TAXATION





Taxation




The
following summary of the material British Virgin Islands, PRC and U.S. tax
consequences of an investment in our ordinary shares is based upon laws and
relevant interpretations thereof in effect as of the date hereof, all of which
are subject to change, possibly with retroactive effect. The discussion is not
intended to be, nor should it be construed as, legal or tax advice to any holder
and is not exhaustive of all possible tax considerations. This summary does not
deal with all possible tax consequences relating to ownership of our ordinary
shares, such as the tax consequences under state, local, non-U.S., non-PRC, and
non-British Virgin Islands tax laws. You should consult your own tax advisors
with respect to the consequences of the acquisition, ownership and disposition
of our ordinary shares.




British
Virgin Islands Taxation




All
dividends, interests, rents, royalties, compensations and other amounts paid by
us are exempt from all forms of taxation in the British Virgin Islands and any
capital gains realized with respect to any of our shares, debt obligations, or
other securities are not subject to any form of taxation in the British Virgin
Islands. No estate, inheritance, succession or gift tax, rate, duty, levy or
other charge is payable under BVI law by persons who are not persons resident in
the British Virgin Islands with respect to any of our shares, debt obligation or
other securities. There are currently no withholding taxes or exchange control
regulations in the British Virgin Islands applicable to us or our shareholders.
Currently, there is no income tax treaty, convention or reciprocal tax treaty
regarding withholdings currently in effect between the United States and the
British Virgin Islands.  We will only be liable to pay payroll tax with
respect to employees employed and working in the British Virgin Islands. 
We do not currently have, and do not intend to have in the near future, any
employees in the British Virgin Islands.




People’s
Republic of China Taxation




Under the
former Income Tax Law for Enterprises with Foreign Investment and Foreign
Enterprises, any dividends payable by foreign-invested enterprises to non-PRC
investors were exempt from PRC withholding tax. In addition, any dividends
payable, or distributions made, by us to holders or beneficial owners of our
shares would not be subject to any PRC tax, provided that such holders or
beneficial owners, including individuals and enterprises, were not deemed to be
PRC residents under the PRC tax law and were not otherwise subject to PRC
tax.




On March
16, 2007, the PRC National People’s Congress approved and promulgated a new PRC
Enterprise Income Tax Law, which took effect as of January 1, 2008. Under the
new tax law, enterprises established under the laws of non-PRC jurisdictions but
whose “de facto management body” are located in China are considered “resident
enterprises” for PRC tax purposes. Under the implementation regulations issued
by the State Council relating to the new tax law, “de facto management body” is
defined as the body that has material and overall management control over the
business, personnel, accounts and properties of an enterprise. In April 2009,
the PRC State Administration of Taxation promulgated a circular to clarify the
definition of “de facto management body” for enterprises incorporated overseas
with controlling shareholders being PRC enterprises.  It remains unclear
how the tax authorities will treat an overseas enterprise invested or controlled
by another overseas enterprise and ultimately controlled by PRC individual
residents as is in our case. We are currently not treated as a PRC resident
enterprise by the relevant tax authorities. Since substantially all of our
management is currently based in China and may remain in China in the future, we
may be treated as a “resident enterprise” for the PRC tax purposes, in which
case, we will be subject to PRC income tax as to our worldwide income at a
uniform income tax rate of 25%. In addition, the new tax law provides that
dividend income between qualified “resident enterprises” is exempt from income
tax.




Moreover,
the new tax law provides that an income tax rate of 10% is normally applicable
to dividends payable for earnings derived since January 1, 2008 to non-PRC
investors who are “non-resident enterprises,” to the extent such dividends are
derived from sources within China. We are a British Virgin Islands holding
company and substantially all of our income is derived from dividends, if any,
we receive from our operating subsidiaries located in China. Thus, dividends
payable to us by our subsidiaries in China may be subject to the 10%
withholding tax if we are considered as a “non-resident enterprise” under the
new tax law.


56




Under the
currently available guidance of the new tax law, dividends payable by us to our
shareholders should not be deemed to be derived from sources within China and
therefore should not be subject to withholding tax at 10%, or a lower rate if
reduced by a tax treaty or agreement. However, what will constitute income
derived from sources within China is currently unclear. In addition, gains on
the disposition of our shares should not be subject to PRC withholding
tax.  However, these conclusions are not entirely free from doubt. In
addition, it is possible that these rules may change in the future, possibly
with retroactive effect.




U.S.
Federal Income Taxation




The
following is a discussion of the material U.S. federal income tax considerations
that may apply to a holder of our ordinary shares with respect to the
acquisition, ownership and disposition of our ordinary shares. This discussion
does not purport to address all of the tax consequences of owning our ordinary
shares with respect to all categories of holders of our ordinary shares, some of
which (such as financial institutions, regulated investment companies, real
estate investment trusts, tax-exempt organizations, insurance companies, persons
holding our ordinary shares as part of a hedging, integrated, conversion or
constructive sale transaction or a straddle, traders in securities that have
elected the mark-to-market method of accounting for their securities, persons
liable for alternative minimum tax, persons who are investors in pass-through
entities, grantor trusts, persons who own, directly or indirectly under
applicable constructive ownership rules, 10% or more (by voting power) of our
ordinary shares, certain former citizens and long-term residents of the United
States, dealers in securities or currencies and holders whose functional
currency is not the U.S. dollar) may be subject to special rules. This
discussion deals only with holders who purchase our ordinary shares and hold
such ordinary shares as a capital asset (generally, for investment). Moreover,
this discussion is based on laws, regulations and other authorities in effect as
of the date hereof, all of which are subject to change, possibly with
retroactive effect. You should consult your own tax advisors regarding the tax
consequences arising in your own particular situation under U.S. federal, state,
local or foreign law with respect to the ownership of our ordinary
shares.




For
purposes of this discussion, the term “U.S. Holder” means a beneficial owner of
our ordinary shares that is, for United States federal income tax purposes, (i)
an individual U.S. citizen or resident, (ii) a corporation (or other entity
taxable as a corporation) created or organized under the laws of the United
States or any political subdivision thereof, or the District of Columbia, (iii)
an estate the income of which is subject to U.S. federal income taxation
regardless of its source, or (iv) a trust if either (x) a court within the
United States is able to exercise primary jurisdiction over the administration
of the trust and one or more U.S. persons have the authority to control all
substantial decisions of the trust, or (y) the trust has a valid election in
effect under applicable Treasury Regulations to be treated as a U.S. person. A
beneficial owner of our ordinary shares (other than a partnership) that is not a
U.S. Holder is referred to below as a “Non-U.S. Holder.”




If a U.S.
partnership, or an entity treated for U.S. federal income tax purposes as a
partnership, such as a U.S. limited liability company, holds our ordinary
shares, the tax treatment of a partner will depend on the status of the partner
and upon the activities of the partnership. If you are a partner in such a
partnership holding our ordinary shares, you should consult your tax
advisor.




U.S.
Federal Income Taxation of U.S. Holders




Tax
Consequences If We Are A Passive Foreign Investment Company




We will
be a passive foreign investment company (a “PFIC”) if either:




·
            75%
      or more of our gross income in a taxable year consists of “passive income”
      (including dividends, interest, gains from the sale or exchange of
      investment property and certain rents and royalties);
  or




·
            at
      least 50% of our assets in a taxable year (averaged over the year and
      generally determined based upon value) produce or are held for the
      production of passive income.




If we own
(directly or indirectly) at least 25% by value of the stock of another
corporation, we will be treated for purposes of the foregoing tests as owning
our proportionate share of that other corporation’s assets and as directly
earning our proportionate share of that other corporation’s income. If we are a
PFIC, any non-U.S. entity that is classified as a corporation for U.S. federal
income tax purposes in which we own (directly or indirectly) an interest may
also be treated as a PFIC.




Due to
our lack of operating activity in 2009, we believe that we and one or more
of our subsidiaries were a PFIC for our 2009 taxable year. However, because PFIC
status is based on the composition of our income and assets for the entire
taxable year and because of uncertainties regarding our future business
operations, it is not possible at this time to determine whether we or any
of our subsidiaries will be a PFIC for our 2010 taxable year until after the
close of the taxable year. Therefore, we and one or more of our
subsidiaries may also be a PFIC for our 2010 taxable year or any future taxable
year.




57


If, as we
believe will be the case, we are classified as a PFIC for U.S. federal income
tax purposes, U.S. Holders could be subject to increased tax liability upon the
sale or other disposition of our shares (including gifts and pledges as security
for a loan) or upon the receipt of distributions treated as ‘‘excess
distributions.’’ In general, an excess distribution is the amount of
distributions received during a taxable year that exceed 125% of the average
amount of distributions received by a U.S. Holder in respect of our shares
during the preceding three taxable years, or if shorter, during the U.S.
Holder’s holding period prior to the taxable year of the distribution. Under
these rules, the excess distribution and any gain on the disposition of the
shares would be allocated ratably over the U.S. Holder’s holding period. The
amount allocated to the current taxable year and any taxable year prior to the
first taxable year in which we were a PFIC would be taxed as ordinary
income. The amount allocated to each of the other taxable years would be subject
to tax at the highest marginal rate in effect for the applicable class of
taxpayer for that taxable year, and an interest charge for the deemed tax
deferral benefit would be imposed on the resulting tax liability as if such tax
liability had been due with respect to such taxable years. The tax liability
with respect to the amounts allocated to taxable years prior to the year of
disposition or distribution cannot be offset by net operating losses. In
addition, holders of stock in a PFIC may not receive a ‘‘step-up’’ in basis on
shares acquired from a decedent.


We will
generally be treated as a PFIC with respect to any U.S. Holder if we are treated
as a PFIC for any taxable year during the U.S. Holder’s holding period for our
shares. However, if we cease to satisfy the requirements for PFIC classification
in any taxable year, a U.S. Holder may avoid the consequences of our PFIC
classification for subsequent taxable years by making an election to recognize
gain based on the U.S. Holder’s unrealized appreciation in our shares through
the close of the last taxable year in which we are a PFIC. The gain recognized
would be subject to the excess distribution rules described above.


The PFIC
rules described above will not apply to a U.S. Holder if the U.S. Holder makes
an election to treat us as a qualified electing fund, or QEF, with respect to
the U.S. Holder’s shares in the first taxable year the U.S. Holder owns our
shares. A U.S. Holder may make a QEF election only if we furnish the U.S. Holder
with certain tax information. Upon written request by a U.S. Holder, we intend
to make available the PFIC annual statement currently required by the IRS, which
provides information necessary for a U.S. Holder to comply with the reporting
requirements applicable to the QEF election. If the U.S. Holder does not make
the QEF election in the first taxable year the U.S. Holder owns our shares, the
U.S. Holder may later make a “purging election.”  A purging election
creates a deemed sale of the shares. The gain recognized as result of the deemed
sale would be subject to the special tax and interest charge rules, treating the
gain as an excess distribution, as described above. As a result of the purging
election, the U.S. Holder would have a new basis and holding period in the
shares for purposes of the PFIC rules.


As noted
above, if we are a PFIC, any non-U.S. entity that is classified as a corporation
for U.S. federal income tax purposes in which we own (directly or indirectly) an
interest may also be treated as a PFIC. We intend to cause any of our
subsidiaries that are treated as PFICs to provide information that is necessary
for a U.S. Holder that owns our shares to make a QEF election with respect to
such entity. However, we may not be able to cause such entity to provide such
information if we do not have a controlling interest in such entity, in which
case a QEF election with respect to such entity generally will not be available.
If a QEF election is not made with respect to such an entity, the general PFIC
rules described above will apply to direct and indirect dispositions of
(including a U.S. Holder’s disposition of our shares), and excess distributions
by, such entity.


A U.S.
Holder that has in effect a QEF election is required for each taxable year in
which we are a PFIC to include in its income a pro rata share of our and our
PFIC subsidiaries’ ordinary earnings as ordinary income and a pro rata share of
our and our PFIC subsidiaries’ net capital gain as long-term capital gain,
subject to a separate election to defer payment of taxes, which deferral is
subject to an interest charge. Any income inclusion will be required whether or
not such U.S. Holder owns our shares for an entire taxable year or at the end of
our taxable year; however, such income inclusion generally is required only with
respect to the portion of the taxable year in which our shares are held by the
U.S. Holder. The amount so includable will be determined without regard to our
prior year losses or the amount of cash distributions, if any, received from us.
A U.S. Holder’s basis in our shares will increase by any amount included in
income and decrease by any amounts not included in income when distributed
because such amounts were previously taxed under the QEF rules. So long as a
U.S. Holder’s QEF election is in effect with respect to the entire holding
period for our shares, any gain or loss realized by such holder on the
disposition of our shares held as a capital asset generally should be capital
gain or loss.


The QEF
election is made on a shareholder-by-shareholder basis, applies to all shares
held or subsequently acquired by an electing U.S. Holder and can be revoked only
with the consent of the IRS. A U.S. Holder makes a QEF election by attaching a
completed IRS Form 8621, including the PFIC annual information statement, to a
U.S. federal income tax return filed on or before the due date, including
extensions or, if no federal income tax return is required to be filed, by
filing such form with the IRS. The election may also be attached to an amended
return, so long as the amended return is filed before the due date, including
extensions, of the federal income tax return.  Even if a QEF election is
not made, a U.S. Holder in a PFIC must generally file a completed IRS Form 8621
every year.


58


As an
alternative to making the QEF election, a U.S. Holder of PFIC stock which is
“marketable stock” may in certain circumstances avoid certain of the tax
consequences generally applicable to holders of stock in a PFIC by electing to
mark the stock to market. As a result of such an election, in any taxable year
that we are a PFIC, a U.S. Holder would generally be required to report gain or
loss to the extent of the difference between the fair market value of our shares
at the end of the taxable year and such U.S. Holder’s tax basis in our shares at
that time. It is not entirely clear whether a mark-to-market election made with
respect to us would be applicable to subsidiaries or other entities in which we
acquire (directly or indirectly) an interest and that are PFICs. Our shares are
not currently marketable stock for these purposes, thus the mark-to-market
election is not currently available.


The
rules dealing with PFICs and with the QEF and mark-to-market elections are very
complex and are affected by various factors in addition to those described
above. As a result, U.S. Holders of our shares are strongly encouraged to
consult their tax advisers about the PFIC rules in connection with their
acquisition, ownership or disposition of our shares.




Tax
Consequences If We Are Not A Passive Foreign Investment Company




Distributions




If we
were not a PFIC, as describe above, distributions made by us with respect to our
ordinary shares to a U.S. Holder would generally constitute dividends to the
extent of our current or accumulated earnings and profits, as determined under
U.S. federal income tax principles. Distributions in excess of our earnings and
profits would be treated first as a nontaxable return of capital to the extent
of the U.S. Holder’s tax basis in our ordinary shares, and thereafter as capital
gain. Because we are not a U.S. corporation, U.S. Holders that are corporations
would not be entitled to claim a dividends-received deduction with respect to
any distributions they receive from us. Amounts taxable as dividends are
generally treated as foreign source “passive income” for U.S. foreign tax credit
purposes.





Subject
to the discussion of PFICs above, dividends paid on our ordinary shares that are
received by U.S. Holders that are individuals, estates or trusts would be taxed
at the rate applicable to long-term capital gains (a maximum rate of 15% for
taxable years beginning on or before December 31, 2010), provided that such
dividends meet the requirements of "qualified dividend income." For this
purpose, qualified dividend income generally includes dividends paid by a
non-U.S. corporation if certain holding period and other requirements are met,
and the stock of the non-U.S. corporation with respect to which dividends are
paid is readily tradable on an established securities market in the U.S. 
Dividends that fail to meet such requirements, and dividends received by
corporate U.S. Holders, are taxed at ordinary income rates. No dividend received
by a U.S. Holder will be a qualified dividend (i) if the U.S. Holder held the
ordinary share with respect to which the dividend was paid for less than 61 days
during the 121-day period beginning on the date that is 60 days before the
ex-dividend date with respect to such dividend, excluding for this purpose,
under the rules of  Code Section 246(c), any period during which the U.S.
Holder has an option to sell, is under a contractual obligation to sell, has
made and not closed a short sale of, is the grantor of a deep-in-the-money or
otherwise nonqualified option to buy, or has otherwise diminished its risk of
loss by holding other positions with respect to, such ordinary share (or
substantially identical securities); or (ii) to the extent that the U.S. Holder
is under an obligation (pursuant to a short sale or otherwise) to make related
payments with respect to positions in property substantially similar or related
to the ordinary share with respect to which the dividend is paid.  For any
taxable year for which we are considered to be a PFIC, as described above,
dividends paid on our ordinary shares in such year or in the following taxable
year would not be qualified dividends.  In addition, a non-corporate U.S.
Holder would be able to take a qualified dividend into account in determining
its deductible investment interest (which is generally limited to its net
investment income) only if it elected to do so; in such case the dividend would
be taxed at ordinary income rates.




Sale,
Exchange or Other Disposition of Ordinary Shares




If we
were not a PFIC, as described above, a U.S. Holder would recognize taxable gain
or loss upon a sale, exchange or other taxable disposition of our ordinary
shares in an amount equal to the difference between the amount realized by the
U.S. Holder from such disposition and the U.S. Holder’s tax basis in such stock.
Such capital gain or loss would generally be treated as U.S. source income or
loss, as applicable, for U.S. foreign tax credit purposes. Such gain or loss
would be treated as long-term capital gain or loss if the U.S. Holder’s holding
period is greater than one year at the time of the disposition. Long-term
capital gains of non-corporate U.S. Holders are eligible for reduced rates of
taxation. A U.S. Holder’s ability to deduct capital losses is subject to certain
limitations.





U.S.
Federal Income Taxation of Non-U.S. Holders




Non-U.S.
Holders will not be subject to U.S. federal income tax or withholding tax on
dividends received from us on our ordinary shares unless the income is
effectively connected with the conduct by the Non-U.S. Holder of a trade or
business in the United States (“effectively connected income”) (and, if an
income tax treaty applies, the income is attributable to a permanent
establishment maintained by the Non-U.S. Holder in the United States or, in the
case of an individual, the income is attributable to a fixed place of
business).


59




Non-U.S.
Holders will not be subject to U.S. federal income tax or withholding tax on any
gain realized upon the sale, exchange or other disposition of our ordinary
shares, unless either:




·
            the
      gain is effectively connected income (and, if a treaty applies, the gain
      is attributable to a permanent establishment maintained by the Non-U.S.
      Holder in the United States or, in the case of an individual, the item is
      attributable to a fixed place of business);
or





·
            the
      Non-U.S. Holder is an individual who is present in the United States for
      183 days or more during the taxable year of disposition and certain other
      conditions are met.




Effectively
connected income will generally be subject to regular U.S. federal income tax in
the same manner as discussed in the section above relating to the taxation of
U.S. Holders if we are not a PFIC, unless exempt under an applicable income tax
treaty. In addition, effectively connected income of a corporate Non-U.S. Holder
may be subject to an additional branch profits tax at a rate of 30%, or at a
lower rate as may be specified by an applicable income tax treaty.




Non-U.S.
Holders may be subject to tax in jurisdictions other than the United States on
dividends received from us on our ordinary shares and on any gain realized upon
the sale, exchange or other disposition of our ordinary shares. Non-U.S. Holders
should consult with their own tax advisors regarding such other
jurisdiction.




Backup
Withholding and Information Reporting




U.S.
Holders (other than exempt recipients such as corporations) generally are
subject to information reporting requirements with respect to dividends paid in
the United States on, or proceeds from the disposition of, our ordinary shares.
In addition, a U.S. Holder may be subject, under certain circumstances, to
backup withholding at a rate of up to 28% with respect to dividends paid on, or
proceeds from the disposition of, our ordinary shares unless the U.S. Holder
provides proof of an applicable exemption or correct taxpayer identification
number and otherwise complies with applicable requirements of the backup
withholding rules. A U.S. Holder of our ordinary shares who provides an
incorrect taxpayer identification number may be subject to penalties imposed by
the IRS.





Non-U.S.
Holders generally are not subject to information reporting or backup withholding
with respect to dividends paid on, or proceeds from the disposition of, our
ordinary shares, provided that the Non-U.S. Holder provides its taxpayer
identification number, certifies to its foreign status, or establishes another
exemption to the information reporting or back-up withholding
requirements.





ITEM
      10F.
            DIVIDENDS
      AND PAYING AGENTS





The
Company has no current plans to pay dividends. The Company does not currently
have a paying agent.





ITEM
      10G.
            STATEMENT
      BY EXPERTS





The
consolidated financial statements of the Company as of December 31, 2009, and
2008 and for the fiscal periods ended December 31, 2009, and 2008, included
herein, have been audited by UHY Vocation HK CPA Limited, independent registered
public accounting firm, as stated in their report appearing herein, and is
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing and their consent and
authorization.





ITEM
      10H.
            DOCUMENTS
      ON DISPLAY





The
Company’s documents can be viewed at the location of its United States agent for
service of process, located at: WHI, Inc., 410 South Michigan Ave., Suite 620,
Chicago, IL 60605. The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended, and will file reports,
registration statements and other information with the SEC. The Company’s
reports, registration statements and other information can be inspected on the
SEC’s website at www.sec.gov and such information can also be inspected and
copies ordered at the public reference facilities maintained by the SEC at the
following location: 100 F Street NE, Washington, D.C.  20549.





ITEM
      10I.
            SUBSIDIARY
      INFORMATION





Not
Applicable.


60


ITEM
      11.
            QUANTIATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Currency
Risk





Our
PRC-based assets, and our ongoing infrastructure business, should we decide to
restart it, is exposed to currency risk because the business is carried out in
RMB and the Company maintains RMB denominated financial assets (cash and
receivables).  Unfavorable changes in the exchange rate between RMB and
United States dollars may result in a material effect on the cumulative
translation adjustment recorded as a charge in shareholder’s equity. We do not
use derivative instruments to reduce its exposure to foreign currency risk. In
addition, the RMB is not a freely convertible currency. The Company’s
subsidiaries are allowed to pay outstanding current account obligations in
foreign currency but must present the proper documentation to a designated
foreign exchange bank. There is no certainty that all funds collected in RMB can
be repatriated.





ITEM
      12.
            DESCRIPTION
      OF SECURITIES OTHER THAN EQUITY
SECURITIES





Not
Applicable.




PART
II





ITEM
      13.
            DEFAULTS,
      DIVIDEND ARREARAGES AND
DELINQUENCIES




Prior to
consummation of the re-domestication merger of IAG and the Company and the
acquisition of Sing Kung, IAG declared a dividend of $4.85 per common share
payable to its shareholders who voted in favor of the acquisition with Sing Kung
and who did not waive or otherwise forfeit their rights to receive the
dividend.  The Company has determined that holders of 70,291 IAG shares
were eligible for the dividend resulting in a total dividend declared of
$340,911.  The obligation to pay the dividend was assumed by the Company in
the re-domestication merger and became payable after the date thereof.  As
of December 31, 2009, $80,040 of the dividends payable remained unpaid since an
uncertainty exists about payee eligibility.  The Company expects to resolve
outstanding dividend claims and to pay out the full amount of the remaining
dividends payable before the end of 2010.





ITEM
      14.
            MATERIAL
      MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
      PROCEEDS





Not
Applicable.





ITEM
      15.
            CONTROLS
      AND PROCEDURES





A.
            Disclosure
      Controls and Procedures




An
evaluation was performed under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
regarding the effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the December 31, 2009. Based on that
evaluation, our management, including our Chief Executive Officer and Chief
Financial Officer, have concluded that our disclosure controls and procedures as
of December 31, 2009 were effective.




Disclosure
controls and procedures are designed to insure that information required to be
disclosed by us in reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms.





This
annual report does not include a report of management’s assessment regarding
internal control over financial reporting or an attestation report of the
company’s registered public accounting firm due to a transition period
established by rules of the Securities and Exchange Commission for newly public
companies.





B.
            Management’s
      Annual Report on Internal Control Over Financial
  Reporting




The
management of CNC Development, Ltd. (the “Company”) is responsible for
establishing and maintaining adequate internal control over financial reporting.
The Company’s 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
Management conducted an evaluation of the effectiveness of the internal controls
over financial reporting based on the framework in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to
financial statement preparation and presentation. 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.
  61




Management
assessed the effectiveness of the Company’s internal control over financial
reporting as of December 31, 2009.  Based on management’s assessment
and those criteria, management believes that the internal control over financial
reporting as of December 31, 2009 was not effective in the following
regard:
  The
Company did not establish and maintain adequate segregation of duties without
appropriate alternative controls, particularly in the areas of its accounting
system which enabled transaction deletion and changes after-the-fact, and the
accountant was administrator of the accounting application.
  Management’s
internal control report was not subject to attestation by the Corporation’s
independent registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the Corporation to provide only
management’s report.
 
 The
company has formulated a plan to remediate the deficiencies noted, which include
acquiring an upgrade to the accounting system that corrects the material
weakness identified above.




C.
            Attestation
      Report of the Registered Public Accounting
Firm




Not
required





D.
            Changes
      in Internal Controls Over Financial
Reporting




There
were no changes in our internal control over financial reporting (as defined in
Rule 13a-15(f) of the Exchange Act) that occurred during the year ended December
31, 2009 that have materially affected, or are reasonably likely to materially
affect, our internal controls over financial reporting.




It should
be noted that while our management believes that our disclosure controls and
procedures provide a reasonable level of assurance; our management does not
expect that our disclosure controls and procedures or internal financial
controls will prevent all errors or fraud. A control system, no matter how well
conceived or operated, can provide only reasonable, not absolute, assurance that
the objectives of the control system are met.





ITEM
      16.
            [RESERVED]





ITEM
      16A.
            AUDIT
      COMMITTEE FINANCIAL EXPERT





The
Company’s board of directors has determined that Mr. Daniel P. Beharry is the
audit committee financial expert. Mr. Beharry is also one of our independent
directors.





ITEM
      16B.
            CODE
      OF ETHICS





The
Company’s board of directors has adopted a Code of Ethics that applies to the
chief executive officer, chief financial officer and controller.





ITEM
      16C.
            PRINCIPAL
      ACCOUTANT FEES AND SERVICES





Audit
Fees





Year Ended December 31,2008
                
                2009Services
      Rendered
                
                Fees
                
                
                FeesAudit
      (1)
                
                $
                62,000
                
                
                $
                32,000





Audit-Related
Fees





Year Ended December 31,2008
                
                2009Services
      Rendered
                
                Fees
                
                
                FeesAudit-Related
      Fees
                
                $
                66,000
                
                
                $
                41,500


62




Tax
Fees




During
2009 and 2008, the Company did not make any payments to its auditing firm for
tax services.





All
Other Fees




During
2009 and 2008, the Company did not make any payments to its auditing firm for
any services outside of the ones disclosed above.





ITEM
      16D.
            EXEMPTIONS
      FROM THE LISTING STANDARDS FOR AUDIT
COMMITTEES





Not
Applicable.





ITEM 16E.
            PURCHASES
      OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
    PURCHASERS




Not
Applicable.




ITEM
      16F.
            CHANGE
      IN REGISTRANT’S CERTIFYING
ACCOUNTANT





In
September 2009, our board of directors approved the engagement of UHY Vocation CPA HK Limited
(“UHY”) as our independent registered public accounting firm for the year
ending December 31, 2009.




McGladrey
& Pullen, our former independent registered accounting firm, resigned
because they did not have the overseas capability to audit PRC
companies.




The
report of McGladrey &
Pullen on the financial statements of the Company as of December 31, 2008
did not contain an adverse opinion or disclaimer of opinion and was not
qualified or modified as to uncertainty, audit scope or accounting
principles.




In
connection with the audit of our financial statements for the period ended
December 31, 2008, there were no disagreements with McGladrey & Pullen on any
matters of accounting principles or practices, financial statement disclosure,
or auditing scope and procedures which, if not resolved to the satisfaction
of McGladrey &
Pullen, would have caused McGladrey & Pullen to make
reference to the matter of such disagreements in their reports.




We
engaged UHY as our new independent registered public accounting firm as of
September 2009. During our two most recent fiscal years neither our company nor
anyone on its behalf has consulted with UHY regarding either: (a) the
application of accounting principles to a specified transaction, either
completed or proposed; or the type of audit opinion that might be rendered on
our financial statements, and neither a written report was provided to us nor
oral advice was provided by UHY that was an important factor considered by us in
reaching a decision as to any accounting, auditing or financial reporting issue;
or (b) any matter that was the subject of a disagreement, as that term is
defined by SEC regulations, or a reportable event, as that term is defined by
SEC regulations.





ITEM
      16G.
            CORPORATE
      GOVERNANCE





Not
applicable





Part
III





ITEM
      17.
            FINANCIAL
      STATEMENTS





Not
applicable.





ITEM
      18.
            FINANCIAL
      STATEMENTS





The
consolidated financial statements and related notes required by this item are
contained on pages [F-1 through F-33].




63




ITEM
      19.
            EXHIBITS





Exhibit Number
                  
                  Exhibit Table2.1
                  
                  Amended
      and Restated Stock Purchase Agreement, as amended (included as Annex A in
      the Proxy Statement/Prospectus contained in Registration Statement
      333-152977 and incorporated by reference herein)2.2
                  
                  Form
      of Plan of Merger between IAG and Registrant (incorporated by reference
      from exhibit 2.2 to Registration Statement No.
  333-152977)3.1
                  
                  Amended
      and Restated Memorandum and Articles of Association of Registrant
      (Incorporated by reference to the Company’s Form 6-K, filed with the SEC
      on March 24, 2010.)4.1
                  
                  Form
      of Amended and Restated Warrant Agreement between Continental Stock
      Transfer & Trust Company and the Registrant (Incorporated by reference
      to the Company’s Form 8-A, filed with the SEC on September 15,
      2009.)4.2
                  
                  Specimen
      Warrant Certificate (Incorporated by reference to the Company’s Form 8-A,
      filed with the SEC on September 15, 2009.)10.1
                  
                  Sing
      Kung 2008 Equity Plan (included as Annex D of the Proxy
      Statement/Prospectus included in Registration Statement No. 333-152977 and
      incorporated by reference herein)10.2
                  
                  Registration
      Rights Agreement (filed as an exhibit to Registration Statement 333-12558
      and incorporated by reference herein)10.3
                  
                  Convertible
      Note Subscription Agreement, dated March 24, 2010, by and among Sing Kung
      Ltd., Century City Infrastructure Ltd., Shanghai New Century City
      Infrastructure Co. Ltd., and Luo Huijun (Incorporated by reference to the
      Company’s Form 6-K, filed with the SEC on March 24,
  2010.)12.1
                  
                  Certification
      by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 200213.1
                  
                  Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 200214
                  
                  Code
      of Ethics (included as Annex F to the Proxy Statement/Prospectus contained
      in Registration Statement 333-152977 and incorporated by reference
      herein)21
                  
                  Subsidiaries
      (Incorporated by reference to the Company’s Form 8-K, filed with the SEC
      on September 15,
2009.)


64


SIGNATURE




The
registrant hereby certifies that it meets all of the requirements for filing on
Form 20-F and that it has duly caused and authorized the undersigned to sign
this annual report on its behalf.





CNC
DEVELOPMENT LTD





By:
              /s/ William C. MorroName:
              William
      C. MorroTitle:
              Chief
      Executive OfficerDate:
              August
      19, 2010
  65


CNC
DEVELOPMENT LTD.





CONSOLIDATED
FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008 AND


FOR
THE PERIOD FROM JANUARY 18, 2007 (INCEPTION)


TO
DECEMBER  31, 2007





CNC
DEVELOPMENT LTD.


CONSOLIDATED
FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2009


AND


FOR
THE PERIOD FROM JANUARY 18, 2007 (INCEPTION)


TO DECEMBER 31, 2007 (Restated)




CONTENTS





PagesReport
      of Independent Registered Public Accounting Firm
              F-1Consolidated
      Balance Sheets
              F-2Consolidated
      Statements of Operations and Other Comprehensive
    Income/(Loss)
              F-3Consolidated
      Statements of Changes in Shareholders' Equity
              F-4Consolidated
      Statements of Cash Flows
              F-5Notes
      to the Consolidated Financial Statements
              F-6
      - F-39





Report
of Independent Registered Accounting Firm





TO
THE BOARD OF DIRECTORS AND SHAREHOLDERS OF


CNC
DEVELOPMENT LTD. AND SUBSIDIARIES





We have
audited the accompanying consolidated balance sheets of CNC Development Ltd.
(the “Company”) and its subsidiaries as of December 31, 2009 and 2008, and the
related consolidated  statements of operations and other comprehensive
income/(loss), changes in shareholders' equity and cash flows for the years
ended December 31, 2009 and 2008 and for the period from January 18, 2007
(inception) to December 31, 2007. The Company's management is responsible for
these consolidated financial statements. 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 financial position of CNC Development Ltd. and its
subsidiaries as of December 31, 2009 and 2008, and the results of its operations
and its cash flows for the years ended December 31, 2009 and 2008 and for the
period from January 18, 2007 (inception) to December 31, 2007, in conformity
with accounting principles generally accepted in the United States of
America.





The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has only $1,551,560 of working
capital as of December 31, 2009 and is dependent on obtaining additional
financing to execute its business plan. These conditions raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
regarding these matters are also described in Note 2 to the consolidated
financial statements. These consolidated financial statements do not i elude any
adjustments that might result from the outcome of this uncertainty





/s/ UHY VOCATION HK CPA
Limited





UHY
VOCATION HK CPA Limited


Certified
Public Accountants


Hong
Kong, the People’s Republic of China
  F-1


CNC
DEVELOPMENT LTD.


CONSOLIDATED
BALANCE SHEETS


(Amounts
in U.S. Dollars)





December
      31,2009
                                                  
                                                  
                                                  2008 (a)ASSETSCurrent
      assetsCash
                                                  
                                                  $
                                                  381,361
                                                  
                                                  
                                                  $
                                                  7,160,720Prepaid
      expenses and other assets
                                                  
                                                  
                                                  114,295
                                                  
                                                  
                                                  
                                                  701,156Net
      investment in BT projects
                                                  
                                                  
                                                  10,926,363
                                                  
                                                  
                                                  
                                                  -Tax
      refund receivable
                                                  
                                                  
                                                  189,026
                                                  
                                                  
                                                  
                                                  -Total
      current assets
                                                  
                                                  
                                                  11,611,045
                                                  
                                                  
                                                  
                                                  7,861,876Non-current  assetsConstruction
      in progress
                                                  
                                                  
                                                  497,587
                                                  
                                                  
                                                  
                                                  20,526,812Net
      investment in BT projects
                                                  
                                                  
                                                  13,275,347
                                                  
                                                  
                                                  
                                                  23,332,313Property
      and equipment, net
                                                  
                                                  
                                                  47,379
                                                  
                                                  
                                                  
                                                  53,954Prepaid
      expenses and other assets, net of current portion
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  904,352Goodwill
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  808,443Total
      non-current assets
                                                  
                                                  
                                                  13,820,313
                                                  
                                                  
                                                  
                                                  45,625,874Total
      assets
                                                  
                                                  $
                                                  25,431,358
                                                  
                                                  
                                                  $
                                                  53,487,750LIABILITIES
      AND SHAREHOLDERS' (DEFICIENCY)/EQUITYCurrent
      liabilitiesAccounts
      payable and accrued expenses
                                                  
                                                  $
                                                  1,187,596
                                                  
                                                  
                                                  $
                                                  552,373BT
      project payables
                                                  
                                                  
                                                  5,985,026
                                                  
                                                  
                                                  
                                                  20,790,155Dividend
      payable
                                                  
                                                  
                                                  80,040
                                                  
                                                  
                                                  
                                                  -Other
      payable
                                                  
                                                  
                                                  2,766,676
                                                  
                                                  
                                                  
                                                  2,770,453Income
      and business taxes payable
                                                  
                                                  
                                                  40,147
                                                  
                                                  
                                                  
                                                  40,304Total
      current liabilities
                                                  
                                                  
                                                  10,059,485
                                                  
                                                  
                                                  
                                                  24,153,285Non-current
      liabilitiesBT
      project payables
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  10,344,767Income
      and business taxes payable
                                                  
                                                  
                                                  278,238
                                                  
                                                  
                                                  
                                                  375,427Preferred
      stock subject to redemption
                                                  
                                                  
                                                  20,231,737
                                                  
                                                  
                                                  
                                                  14,575,000Accumulated
      dividends - preferred stock
                                                  
                                                  
                                                  235,129
                                                  
                                                  
                                                  
                                                  -Total
      non-current liabilities
                                                  
                                                  
                                                  20,745,104
                                                  
                                                  
                                                  
                                                  25,295,194Total
      liabilities
                                                  
                                                  
                                                  30,804,589
                                                  
                                                  
                                                  
                                                  49,448,479Shareholders'
      (deficiency)/equityCommon
      stock (par value of $0.0001 per share)Authorized
      — 175,000,000 shares 21,206,254 shares and 20,914,480 shares issued and
      outstanding  at December 31, 2009 and 2008
      respectively
                                                  
                                                  
                                                  2,121
                                                  
                                                  
                                                  
                                                  2,092Additional
      paid-in capital
                                                  
                                                  
                                                  499
                                                  
                                                  
                                                  
                                                  499Accumulated
      (deficit)/retained earnings, net of dividends
                                                  
                                                  
                                                  (5,939,033
                                                  )
                                                  
                                                  
                                                  3,758,087Accumulated
      other comprehensive income
                                                  
                                                  
                                                  563,182
                                                  
                                                  
                                                  
                                                  278,593Total
      shareholders' (deficiency)/equity
                                                  
                                                  
                                                  (5,373,231
                                                  )
                                                  
                                                  
                                                  4,039,271Total
      liabilities and shareholders’ (deficiency/)equity
                                                  
                                                  $
                                                  25,431,358
                                                  
                                                  
                                                  $
                                                  53,487,750





(a)  Represents
the consolidated balance sheet of Sing Kung Ltd., the Accounting
Acquirer.




See
notes to consolidated financial statements.


F-2




CNC
DEVELOPMENT LTD.




CONSOLIDATED
STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE


INCOME/(LOSS)


(Amounts
in U.S. Dollars except weighted average shares)





For the
                  Year-ended
                  December 31,
                  2009
                
                
                For the
                  Year-ended
                  December 31,
                  2008 (a)
                
                
                For the Period
                  from January 18,
                  2007 (inception) to
                  December 31, 2007
                  (a)Contract
      revenue
                
                $
                -
                
                
                $
                4,892,204
                
                
                $
                -Cost
      of revenue
                
                
                -
                
                
                
                (304,386
                )
                
                
                -Gross
      Profit
                
                
                -
                
                
                
                4,587,818
                
                
                
                -ExpensesGeneral
      and administrative expenses
                
                
                (1,981,919
                )
                
                
                (919,923
                )
                
                
                (9,961
                )Goodwill
      and other impairment charges
                
                
                (3,155,230
                )
                
                
                -
                
                
                
                -Total
      expenses
                
                
                (5,137,149
                )
                
                
                (919,923
                )
                
                
                (9,961
                )Operating
      (Loss)/Income
                
                
                (5,137,149
                )
                
                
                3,667,895
                
                
                
                (9,961
                )Interest
      income
                
                
                969,690
                
                
                
                286,463
                
                
                
                -Finance
      and other costs
                
                
                (109,965
                )
                
                
                (69,524
                )
                
                
                -(Loss)/Income
      before provision for income taxes
                
                
                (4,277,424
                )
                
                
                3,884,834
                
                
                
                (9,961
                )Provision
      for income taxes
                
                
                (7,750
                )
                
                
                (114,695
                )
                
                
                -Net
      (Loss)/Income
                
                
                (4,285,174
                )
                
                
                3,770,139
                
                
                
                (9,961
                )Other
      Comprehensive Income:Effects
      of foreign currency translation adjustment
                
                
                284,589
                
                
                
                278,593
                
                
                
                -Comprehensive
      (Loss)/Income
                
                $
                (4,000,585
                )
                
                $
                4,048,732
                
                
                $
                (9,961
                )(Loss)/Earnings
      per share:Basic
                
                $
                (0.20
                )
                
                $
                0.18
                
                
                nilDiluted
                
                $
                (0.20
                )
                
                $
                0.16
                
                
                nilWeighted
      Average common shares outstanding:Basic
                
                
                21,009,038
                
                
                
                20,919,480
                
                
                
                20,919,480Diluted
                
                
                25,009,038
                
                
                
                23,834,480
                
                
                
                20,919,480





a)
            Represents
      the consolidated statements of operations and comprehensive income/loss of
      of Sing Kung Ltd., the Accounting
Acquirer.





See
notes to consolidated financial statements


F-3




CNC
DEVELOPMENT LTD.


CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS' (DEFICIENCY)/EQUITY


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008 AND FOR THE PERIOD FROM


JANUARY
18, 2007 (INCEPTION) TO DECEMBER 31, 2007


(Amounts
in U.S. Dollars except number of shares)





Common
      Stock
                                      $0.0001
      par value
                                    
                                    
                                    Additional
                                    
                                    
                                    Accumulated
                                      (Deficit)/
                                    
                                    
                                    Accumulated
                                      other
                                    
                                    
                                    Shareholders’Number
      of
                                      Shares
                                    
                                    
                                    Amount
                                    
                                    
                                    Paid-in
                                      Capital
                                    
                                    
                                    Retained
                                      Earnings
                                    
                                    
                                    Comprehensive
                                      Income
                                    
                                    
                                    (Deficiency)/
                                      EquityBalance
      at January 18, 2007 (inception)
                                    
                                    
                                    20,919,480
                                    
                                    
                                    $
                                    2,092
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    (2,091
                                    )
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    1Net
      loss
                                    
                                    
                                    
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (9,961
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (9,961
                                    )Balance,
      December 31, 2007
                                    
                                    
                                    20,919,480
                                    
                                    
                                    $
                                    2,092
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    (12,052
                                    )
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    (9,960
                                    )Share
      redesignation
                                    
                                    
                                    
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    499
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    499Comprehensive
      income:Net
      income
                                    
                                    
                                    
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    3,770,139
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    3,770,139Foreign
      currency translation gain
                                    
                                    
                                    
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    278,593
                                    
                                    
                                    
                                    278,593Balance,
      December 31, 2008
                                    
                                    
                                    20,919,480
                                    
                                    
                                    $
                                    2,092
                                    
                                    
                                    $
                                    499
                                    
                                    
                                    $
                                    3,758,087
                                    
                                    
                                    $
                                    278,593
                                    
                                    
                                    $
                                    4,039,271Shares
      issued to former shareholders of CNC Development Ltd. as part of
      recapitalization
                                    
                                    
                                    286,774
                                    
                                    
                                    
                                    29
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (3,296,271
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (3,296,242
                                    )Effect
      of exchange of Sing Kung Preferred Shares for CNC Class A Preferred
      Shares
                                    
                                    
                                    
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (1,539,635
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (1,539,635
                                    )Comprehensive
      income:Net
      loss
                                    
                                    
                                    
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (4,285,174
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (4,285,174
                                    )Foreign
      currency translation gain
                                    
                                    
                                    
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    284,589
                                    
                                    
                                    
                                    284,589Common
      dividends declared
                                    
                                    
                                    
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (340,911
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (340,911
                                    )Preferred
      dividends accrued
                                    
                                    
                                    
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (235,129
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (235,129
                                    )Balance,
      December 31, 2009
                                    
                                    
                                    21,206,254
                                    
                                    
                                    $
                                    2,121
                                    
                                    
                                    $
                                    499
                                    
                                    
                                    $
                                    (5,939,033
                                    )
                                    
                                    $
                                    563,182
                                    
                                    
                                    $
                                    (5,373,231
                                    )





See
notes to consolidated financial statements.


F-4




CNC
DEVELOPMENT LTD


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(Amounts
in U.S. Dollars)





For the
                                      Year-ended
                                      December 31,
                                      2009
                                    
                                    
                                    For the
                                      Year-ended
                                      December 31,
                                      2008 (a)
                                    
                                    
                                    For the Period
                                      from January 18,
                                      2007 (Inception)
                                      to December 31,
                                      2007 (a)Cash
      flows from operating activities:Net
      (loss)/ income
                                    
                                    $
                                    (4,285,174
                                    )
                                    
                                    $
                                    3,770,139
                                    
                                    
                                    $
                                    (9,961
                                    )Adjustments
      to reconcile (loss)/income to net cash (used in)/provided by operating
      activities:Depreciation
      and amortization
                                    
                                    
                                    8,288
                                    
                                    
                                    
                                    73,238
                                    
                                    
                                    
                                    -Changes
      in operating assets and liabilities:Prepaid
      expenses and receivables including taxes
                                    
                                    
                                    2,299,656
                                    
                                    
                                    
                                    (1,348,926
                                    )
                                    
                                    
                                    (1,119
                                    )Net
      investment in BT projects (current and long term)
                                    
                                    
                                    (869,397
                                    )
                                    
                                    
                                    (15,437,420
                                    )
                                    
                                    
                                    -Construction
      in-progress
                                    
                                    
                                    20,029,225
                                    
                                    
                                    
                                    (20,526,812
                                    )
                                    
                                    
                                    -Accrued
      liabilities and other payables
                                    
                                    
                                    711,485
                                    
                                    
                                    
                                    (113,731
                                    )
                                    
                                    
                                    15,309BT
      project payables (current and long-term)
                                    
                                    
                                    (25,149,896
                                    )
                                    
                                    
                                    29,535,873
                                    
                                    
                                    
                                    -Taxes
      payable (current and long-term)
                                    
                                    
                                    (286,370
                                    )
                                    
                                    
                                    384,308
                                    
                                    
                                    
                                    -Net
      cash (used in)/provided by operating activities
                                    
                                    
                                    (7,542,183
                                    )
                                    
                                    
                                    (3,663,331
                                    )
                                    
                                    
                                    4,229Cash
      flows from investing activities:Payment
      for purchase of SNC, net of cash acquired
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (3,830,029
                                    )
                                    
                                    
                                    -Purchases
      of fixed assets
                                    
                                    
                                    (1,746
                                    )
                                    
                                    
                                    (4,241
                                    )
                                    
                                    
                                    -Net
      cash used in investing activities
                                    
                                    
                                    (1,746
                                    )
                                    
                                    
                                    (3,834,270
                                    )
                                    
                                    
                                    -Cash
      flows from financing activities:Proceeds
      from issuance of convertible preferred stock
                                    
                                    
                                    
                                    
                                    
                                    
                                    14,575,000
                                    
                                    
                                    
                                    -Issuance
      cost
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (200,000
                                    )
                                    
                                    
                                    -Net
      proceeds from recapitalization
                                    
                                    
                                    479,948Proceeds
      from share redesignation
                                    
                                    
                                    -
                                    
                                    
                                    
                                    499
                                    
                                    
                                    
                                    1Net
      cash provided by financing activities
                                    
                                    
                                    479,948
                                    
                                    
                                    
                                    14,375,499
                                    
                                    
                                    
                                    1Effect
      of foreign exchange rate changes
                                    
                                    
                                    284,622
                                    
                                    
                                    
                                    278,592
                                    
                                    
                                    
                                    -Net
      (decrease)/increase in cash
                                    
                                    
                                    (6,779,359
                                    )
                                    
                                    
                                    7,156,490
                                    
                                    
                                    
                                    4,230Cash
      at beginning of period
                                    
                                    
                                    7,160,720
                                    
                                    
                                    
                                    4,230
                                    
                                    
                                    
                                    -Cash
      at end of period
                                    
                                    $
                                    381,361
                                    
                                    
                                    $
                                    7,160,720
                                    
                                    
                                    $
                                    4,230Supplemental
      disclosure of cash flow and non-cash information:Income
      tax paid
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -Interest
      paid
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    1,191
                                    
                                    
                                    $
                                    -





a)
            Represents
      the consolidated statement of cash flows of Sing Kung Ltd., the Accounting
      Acquirer.




See
notes to consolidated financial statements


F-5


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)




1.   
Organization and Principal Activities





CNC
Development Ltd. (“CNC” or the “Company”), was established under the laws of the
British Virgin Islands (“BVI”) on  August 8, 2008, as a subsidiary of
InterAmerican Acquisition Group, Inc. (“IAG”).  CNC’s purpose was to
merge with IAG and to hold a 100% interest in Sing Kung Limited (“Sing Kung”)
upon the completion of a reverse acquisition transaction  (the “Sing
Kung Acquisition”), as described in Note 5 to the consolidated financial
statements.  As of December 31, 2009, details of the Company’s subsidiaries
are as follows:




Place
      of
                                  
                                  Date
      of
                                  
                                  Ownership
                                  
                                  
                                  Principal
      BusinessName of Company
                                  
                                  Incorporation
                                  
                                  Incorporation
                                  
                                  Interest
                                  
                                  
                                  ActivitySing
      Kung Limited
                                  
                                  British
      Virgin Islands
                                  
                                  January
      18, 2007
                                  
                                  
                                  100
                                  %
                                  
                                  Investment
      HoldingCentury
      City Infrastructure Co., Ltd.
                                  
                                  PRC
                                  
                                  December
      26, 2007
                                  
                                  
                                  100
                                  %
                                  
                                  Infrastructure
      ConstructionShanghai
      New Century Urban Infrastructure Construction Co., Ltd.
                                  
                                  PRC
                                  
                                  July
      11, 2005
                                  
                                  
                                  100
                                  %
                                  
                                  Infrastructure
      ConstructionJiaohe
      Century Urban Construction Co. Ltd.
                                  
                                  PRC
                                  
                                  March
      3, 2009
                                  
                                  
                                  100
                                  %
                                  
                                  Inactive




Sing Kung
Limited ("Sing Kung") was incorporated in the British Virgin Islands ("BVI") on
January 18, 2007 as a limited liability company.  In April 2008, the
initial sole shareholder of Sing Kung, Cho Kwan, effected a share redesignation
in conjunction with a capital contribution and transferred 72.2% of her share
interests to unrelated third parties.  Cho Kwan and those unrelated
third parties in turn exchanged their common share interests in Sing Kung
(representing 100% of the common shares outstanding) for 19,843,412 common
shares of the Company on September 9, 2009 pursuant to the stock purchase
agreement and 1,076,068 common shares of the Company by October 2, 2009 pursuant
to share exchange agreements (Note 16).




On
December 26, 2007, Sing Kung established Century City Infrastructure Co., Ltd.
(“CCI”), which was organized in Changchun, the People's Republic of China as a
limited liability company.  Until January 2010 (when ongoing
operations were temporarily discontinued, (Note 27a)), CCI was principally
engaged in providing services to municipal-government customers to integrate
project design, implementation and financing for Build-Transfer ("BT") projects
in the PRC. BT is a form of project development wherein a private entity
contracts with the public (government) sector to develop, on a turnkey basis, a
municipal project, typically consisting of roads, utilities (such as sanitary
and storm sewer lines, underground electric distribution lines) and general site
preparation work necessary for further development of real estate. Upon
completion and acceptance of the project, control over the project site is
transferred back to the municipal-government customer.  Terms of
payment for the project are a matter of contract between the
municipal-government customer and CCI.




On
December 27, 2007, CCI entered into a management, stock pledge and purchase
rights agreement with Shanghai New Century Urban Infrastructure Construction
Co., Ltd. (SNC) that provided CCI with a substantial degree of control over SNC
by CCI and conveyed to CCI the right to acquire a 100% ownership interest in
SNC.  Based on the substance of these agreements, and the fact that
SNC was in the same line of business as CCI, it is regarded as a predecessor
company but was not consolidated as a VIE prior to the consummation of its
acquisition by CCI on December 9, 2008.  SNC was not actively carrying
on BT projects during 2007 or 2008 but it was the originator of one project
ultimately completed by CCI.  SNC was organized in Shanghai, the
People's Republic of China ("PRC") on July 11, 2005 as a limited liability
company.


F-6


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)




The
Company and its subsidiaries are collectively referred to as the
"Group".




2. Going
concern and management’s plans




These
consolidated financial statements have been prepared assuming that the Company
will continue as a going concern and, accordingly, do not include any
adjustments that might result from the outcome of this
uncertainty.  For the year ended December 31, 2009, the Company
incurred a net loss of $4,285,174 and it used $7,542,183 of cash for operating
activities.  The Company has ceased its operation and its business
plan, as further discussed below, and depends upon additional financings or
collection of BT Project receivables (Net Investment in BT Projects) in order to
continue to operate.




Additionally,
as of December 31, 2009, the Company’s current assets exceeded its current
liabilities by $1,551,560 and the due date of most current liabilities of the
subsidiaries located in the PRC are linked to our realization of collections of
current receivables (Net Investments in BT Projects).  Nevertheless,
the Company’s cash balances both within the PRC and outside are
limited.  To avoid incurring liabilities in the PRC that could not be
met with available cash, the Company has scaled back its expenses, negotiated
deferred payment arrangements with those vendors and creditors whose payment
obligations were not contingent on collections related to BT Projects and
entered into term financing arrangements that extend beyond the dates when
initial BT Project collections are expected (Note 27(b)).  Outside the
PRC, the Company has taken similar steps to curtail current expenses and
negotiate deferred payment arrangements with its creditors.  In
addition, on February 23, 2010 the Company entered into a term financing
arrangement for $600,000 due in February 2011 (Note 27 (c)) that will provide
sufficient liquidity to meet its ongoing administrative obligations at least
through the remainder of 2010.  As a result, Company management
believes that it has sufficient resources to operate until BT Project
receivables are collected.  However, there can be no assurance that
the plans and actions of management will be achieve the expected results or that
unforeseen circumstances will not require us to seek additional funding sources
in the future or effectuate further initiatives to conserve liquidity in the
event additional sources of funds are needed or may not be available on
acceptable terms, if at all.




3. Basis
of Presentation and Principles of Consolidation




Prior to
the share exchange with the members of Sing Kung on September 9, 2009, Sing Kung
was a non-reporting privately held company.  The reverse acquisition
is accounted for using accounting principles applicable to recapitalization with
Sing Kung being treated as the accounting parent (acquirer) and the Company, the
legal parent, being treated as the accounting acquiree.





In a
recapitalization, all accounting history, prior to the reverse merger date,
becomes that of the accounting acquirer (Sing Kung).  Accordingly, all
historical information prior to the acquisition is that of Sing Kung and its
subsidiaries, CCI and SNC.  The only adjustment necessary under
recapitalization accounting is to retroactively adjust Sing Kung’s legal capital
to that of the Company.





The
consolidated financial statements, after the recapitalization, includes all
accounts of the Company and its subsidiaries.  All material
inter-company balances and transactions have been eliminated.


F-7


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)




The
Company’s consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
(“U.S. GAAP”).  Sing Kung applied purchase accounting to account for
the acquisition of SNC on December 9, 2008 as further discussed in Note
6.  All significant inter-company balances and transactions have been
eliminated in consolidation




4. 
  Summary of Significant Accounting Policies




(a)     
Cash




Cash
consists solely of cash on hand and in banks.  As of December 31, 2009
$60,371 was held in U.S. dollars in accounts outside of the PRC and the
remainder, $320,990, was held in Chinese Renminbi in accounts with banks located
in the PRC. Renminbi is not a freely convertible currency, and the remittance of
funds out of the PRC is subject to the exchange restrictions imposed by the PRC
government. Changes in the exchange rate of Renminbi to the U.S. dollar affect
the value of cash held in Renminbi and cannot be accurately
predicted.




(b)      Property
and equipment, net




Property
and equipment are stated at cost less accumulated depreciation. Depreciation
expense is recognized using the straight-line method, applied according to the
estimated useful lives of asset classes applicable to the Group:





YearsMotor
      Vehicle
                10Office
      Equipment
                5




(c) Impairment
of long-lived assets




Long-Lived
assets, principally property and equipment, are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is measured
by comparing the carrying amount of an asset to the estimated undiscounted
future cash flows expected to be generated by the asset. If the carrying amount
of an asset exceeds its estimated future cash flows, an impairment charge is
recognized in the amount by which the carrying amount of the asset exceeds the
fair value of the asset.




When
applicable, assets to be disposed of are separately presented inthe balance sheet and
reported at the lower of the carrying amount or fair value less costs to sell,
and are no longer depreciated. The assets and liabilities of a disposed group
classified as held for sale are presented separately in the appropriate asset
and liability sections of the consolidated balance sheet whenever
applicable.




As of
December 31, 2009, the Group recognized:




-
            impairment
      of goodwill of $1,474,102 in connection with the redomestication merger
      (Note 5) and of $808,443 related to the reassessment of the fair-value of
      net assets acquired from SNC in 2008 (Note
6).




-
            impairment
      of the full value of a long-term consulting contract, $872,685, as
      described in Note 7.


F-8


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)




Based on
the Company’s assessment, there have been no events or circumstances that would
indicate any additional impairment of other long-lived assets.




(d) Fair
value measurements




ASC Topic
820, Fair Value Measurement and Disclosures, defines fair value as the exchange
price that would be received for an asset or paid to transfer a liability (an
exit price) in the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants on the
measurement date. This topic also establishes a fair value hierarchy which
requires classification based on observable and unobservable inputs when
measuring fair value. There are three levels of inputs that may be used to
measure 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 forsimilar
      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 activityand
      that are significant to the fair value of the assets or
      liabilities.




(e)
            Interest/valuation
      adjustments to net investments in BT Projects and to accounts receivable
      and payable classified as
non-current




The
nature of the Company’s business is that it accepts payments from its customers
over many years (eight years in the case of the Jiaohe Project) and maintains
both current and long-term payables with its subcontractors in connection with
the performance of BT projects. In accordance with the requirements of ASC 840
and 835, the Company makes adjustments in the value of its Net investment in BT
projects and in other long-term accounts receivable and payable obligations with
fixed durations exceeding one year in those cases where the obligations do not
bear interest at what it deems to be a market rate.




Net
Investments in BT projects recorded in the financial statements, as well as
payables to consortium partners that are linked to the collection of such
receivables bear interest, as applicable, at the variable long- or medium-term
(five years & over five years) loan rate set by state-owned
banks.  The accrual of such interest is reflected in the Company’s
financial statements, net of reserves that it deems appropriate under the
circumstances.  Municipal receivables of this sort are not traded in
an open market in the PRC. The Company believes that the interest rates payable
by our BT project customers is on par with the rate at which the municipality
can obtain financing from other sources after taking into consideration its
credit standing, the payment terms and other relevant factors. No discount or
premium is applied to the face amount of BT project receivables or related
payables that bear market interest rates; the face amounts of such receivables
and payables are deemed to reasonably represent their present value; there is no
unearned income component.


F-9


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)




Should
such municipal receivables and payables accrue interest at rates that differ
materially from the applicable municipal borrowing rates, it is the Company’s
policy to discount or apply premiums to their face value based on the scheduled
or expected payment periods and the then-applicable short- medium- or long-term
rates set by state-owned banks, adjusted as deemed appropriate for the credit
standing of such municipalities if circumstances warrant.




(f) Revenue
recognition




The
Company’s long term BT contracts do not dispositively transfer risk of loss to
the customer prior to contract completion and acceptance. Specifically, the
customer does not make progress payments typical in most construction-type
contracts, and there is ambiguity in the contracts about the customer’s
contractual liability for damage or loss prior to project acceptance and
completion.  Furthermore, the legal framework of state land ownership
creates uncertainty about the Company’s ability to enforce collateral or lien
rights that might otherwise secure its right to payment prior to
acceptance.  As a result, the BT contracts have the substantive
characteristics of sales-type leases.  Specifically the contracts give
rise to a profit by the company for execution of the project; ownership of the
project is transferred to the customer prior to receipt of the final payment;
the present value of the payment under the contract exceeds 90% of the project’s
fair value; collectability is reasonably predictable; and no important
uncertainties surround the amount of unreimbursable costs yet to be incurred by
the Company following acceptance of the project.  Therefore, in
accordance with ASC 840, “Accounting for Leases”, revenue is recognized upon
final project acceptance by the customer.  Final acceptance of the
project by the customer occurs following completion and inspection, including a
determination that all project requirements have been met.  Following
acceptance, a settlement of the final project price is determined by the
contract parties based on the pricing parameters of the contract.  The
determination of the final project price typically involves an audit by the
customer of preliminary acceptances generated as the project progresses and
aggregation of the amounts reflected therein together with adjustments, if
any.  Preliminary acceptances are based on periodic multi-party review
and documented approval of completed work among the Company, key
sub-contractor(s) and the customer.   The differences in the
cumulative value of preliminary acceptances and the final project price, if any,
are reflected by the Company in revenue recognized during the period in which
the final acceptance occurs.




In
accordance with ASC 605 the Company records revenue upon project acceptance
based on:




i.     the
aggregate contract value (the “Gross Method”) when it:


-
            is
      responsible for project fulfillment including the acceptability of the
      project to the customer


-
            has
      reasonable latitude to establish the project price with the
      customer


-
            has
      discretion in subcontractor
selection


-
            holds
      the primary risk of collection for the project as a result of a
      non-contingent requirement to pay subcontractors for their
      work


F-10


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)




ii.
            the
      value of its allocated share of contract revenue (the “Net Method)” when
      its role as BT Consortium leader is substantively that of an agent
      construction manager, e.g.:


-
            the
      Company does not have direct responsibility for all key aspects of project
      fulfillment


-
            the
      contract specifies that the Company is entitled to receive only an
      allocated fraction of the contract
value


-
            the
      Company is required to pay subcontractors only if and when it receives
      payment from the customer.




The
Company considers the relevant facts and circumstances in its evaluation to
determine if revenue is to be recorded under the Gross or Net Method, including
the relative strength of each indicator.  None of the indicators alone
is considered presumptive or determinative.




Essential
conditions set by the Company for recognition of revenue earned pursuant to BT
contracts is that written contracts exist among the parties and collection of
such revenue is determinable and reasonably assured.




Provisions
for estimated losses on uncompleted contracts, if any, are made in the period in
which such losses are determined.




The sole
project that was completed and accepted by the customers in 2008 (the “Jiaohe
Project”) is consistent with the requirements of, and is recorded under, the Net
Method. No projects were completed or accepted during 2009.




(g) Operating
cycle/net investment in BT Projects




The
Company’s work performed under BT contracts with municipal governments is based
on contracts with fixed pricing for specific elements of work.  To the
extent that quantities of work elements vary from the initial scope of work, the
contract price varies.  The Company’s BT contracts contemplate the
involvement of subcontractors or contract consortium partners, but the Company
generally retains the latitude to make unilateral decisions regarding
performance of the contracts.  Following acceptance of a BT Project
(or project phase), the contract price (including advances and prepayments
applicable to projects and present value adjustments, if applicable) is recorded
as Net investment in BT projects (Note 4(f) and Note 8).  Contract
execution typically spans 6 to 12 months from the start of contract performance,
but the acceptance date (and the start of interest accrual on the investment in
BT projects) for each contract (or contract phase) cannot be determined with
precision prior to completion and acceptance.  Prior to project
acceptance, all assets and liabilities related to contracts in progress are
carried at cost until a schedule for payment and interest accrual can be
reasonably determined.  Subject to early payment requirements or
elections, if any, the Company’s policy is to allocate amounts for advances,
prepayments and project work-in-progress between current and long-term as
dictated by the contract payment terms and estimated date of project completion,
adjusted by information provided by municipalities regarding payment plans that
deviate from contractual terms. The classification of the related project
liabilities between current and long term follows the same classification of the
assets if the payment amounts are required to be made ratably and
contemporaneously with collection of receivables, as is the case for the
Changchun Project assets and liabilities that are consolidated as a result of
the acquisition of SNC.  Otherwise the classification of project
liabilities is made in accordance with the timing of payments set forth in
contracts with consortium members.


F-11


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)





(h) BT
Project payables





The
Company’s contracts with subcontractors and consortium partners for the
performance of BT contracts stipulate that compensation for services rendered is
accrued on a percentage of completion basis.  Subcontractors and
consortium partners are compensated at a rate that is a stipulated fraction of
the project value completed. Under both the Gross and Net Methods, liabilities
to contractors and consortium partners are recorded on the balance sheet as a
payable when determinable.   The classification of such
liabilities as current or long-term is made as described in Note 4(g)
above.   Advances made by the Company to the consortium for
prepaying vendors or to meet other costs on behalf of the customer are
reimbursable at cost under the BT contracts.  Such advances are not
recognized as expenses or revenue but are reflected on the balance sheet as
Project advances or, if the project has received final acceptance, as Net
investment in BT Projects.




(i) Construction
in-progress





The BT
projects the Company carries on have the substantive characteristics of
sales-type leases (Note 4(f)).  Therefore, the Company records cost of
the project continuously as Construction in Progress until project completion
and acceptance, in compliance with ASC 840 Accounting for
Leases.  Construction in Progress includes both direct labor cost of
the Company and the cost incurred with subcontractors and consortium partners
for their performance under contracts.





The work
progress of the BT Contracts and cost incurred are measured by periodic
multi-party review and documented acceptance of completed work among the
Company, sub-contractor, construction supervisor and the customer, as provided
in BT Contracts (a “preliminary acceptance”).  Each preliminary
acceptance is typically facilitated by a third-party review of project progress
conducted following each measurement period.  The Group believes that
use of third-party verification to achieve each preliminary acceptance provides
a reliable record of work completed.




(j) Income
Taxes




The
Company accounts for income taxes under ASC 740 "Income Taxes". Deferred income
tax assets and liabilities are determined based upon differences between the
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be effective when the differences
are expected to reverse.





Deferred
tax assets are reduced by a valuation allowance to the extent management
concludes it is more likely than not that the assets will not be
realized.  Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled.  The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in the statements of income in the period that
includes the enactment date.


F-12


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)





ASC 740
prescribes a more-likely-than-not threshold for financial statement recognition
and measurement of a tax position taken in the tax return. This interpretation
also provides guidance on de-recognition of income tax assets and liabilities,
classification of current and deferred income tax assets and liabilities,
accounting for interest and penalties associated with tax positions, accounting
for income taxes in interim periods and income tax disclosures.





The
Company is incorporated in the British Virgin Islands, the laws of which do not
require the Company to pay any income taxes or other taxes based on revenue,
business activity or assets.




The
Company’s consolidated subsidiaries, SNC and CCI, are subject to various taxes
in the PRC, which include a statutory business tax on applicable revenue at a
rate of 5.25% (which is included in cost of sales) and statutory income tax at a
rate of 25% of operating income as determined under applicable national codes,
both as modified by applicable local regulations and negotiated
concessions.  The Group estimates the effective tax rate for the
current year after taking into account any applicable local regulations and
concessions.  Refer to Note 23 for additional discussion regarding the
calculation of tax provisions for the periods covered by these financial
statements.




(k) Foreign
currency translation




All of
the revenues and costs of SNC and CCI are denominated in Chinese Renminbi, as
are substantially all of the Group’s cash holdings, together with BT contract
receivables and payables related to those contracts.  Changes in the
exchange rate of Renminbi relative to the U.S. dollar will affect the Group's
sales, cost of sales, and operating margins and could result in exchange losses
or gains. The impact of future exchange rate fluctuations on the Group's results
of operations cannot be accurately predicted.




RMB is
not a currency fully convertible to USD. All foreign exchange transactions
involving RMB must take place either through the Peoples Bank of China (the
"PBOC") or other institutions authorized to buy and sell foreign exchange. The
exchange rates adopted for the foreign exchange transactions are the rates of
exchange quoted by the PBOC, which are determined by market supply and demand
with reference to a basket of currencies and policy priorities of the PRC
central government.




The
consolidated financial statements of the Company are presented in United States
Dollars ("$" or “USD”). Transactions in foreign currencies during the period are
translated into USD at the exchange rates prevailing at the transaction dates.
Assets and liabilities denominated in foreign currencies at the balance sheet
date are translated into USD from RMB as of the balance sheet date. Income and
expenditures are translated at the average exchange rate of the reporting
period.  Translation of amounts from RMB into USD have been made at
the following exchange rates for the respective times and periods
presented:


F-13


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)





As of December 31, 2007 and
for the period from January 18, 2007 (inception) through December 31,
2007





Balance
      Sheet
                    RMB
      7.2946 to US$1.00Statement
      of operations and comprehensive income
                    RMB
      7.5806 to
US$1.00





As of December 31, 2008 and
for the year ending December  31, 2008





Balance
      Sheet
                    RMB
      6.8166 to US$1.00Statement
      of operations and comprehensive income
                    RMB
      6.9372 to
US$1.00





As of December 31, 2009 and
for the year ending December 31, 2009





Balance
      Sheet
                    RMB
      6.8259 to US$1.00Statement
      of operations and comprehensive income
                    RMB
      6.8210 to
US$1.00




There is
no assurance that the RMB amounts could have been, or could be, converted into
U.S. dollars at the above rates.




(l) Warranty
Reserves




BT
contracts performed by the Group contain customary provisions for government
contracts for construction that permit payment holdbacks by the municipal
customers for a one-year warranty period.  If the warranty claims made
by the municipal customer are valid and the Company fails to rectify them within
specified notice periods, the municipal customer may be entitled to retain some
or all of the holdback.  In spite of the preliminary acceptance
process, the Company believes that it is reasonably probable that there will be
some amount of repair work required during the warranty period. To maintain
positive customer relations, the Company expects to rectify valid claims made
during the warranty period, and therefore to receive all payment holdback
amounts.




In light
of the expectation that there will be some corrective work required during
contract warranty periods, the Group’s policy is to accrue additional project
expense to the extent that associated costs are reasonably determinable.
 However, there is currently no objective basis for making an estimate of
warranty cost, due to the Group’s short operating history.  The actual
claims experience is very limited. To date, the Group has completed only
two projects (Changchun and Jiaohe) that have passed the warranty period
and final settlement of warranty matters is still being negotiated with respect
to the Changchun Project. The Group it is not aware of, nor has it received
any notices regarding the need for correction of completed work on the Jiaohe
Project) or on projects in progress.  Reference to the experience of
other enterprises in the same business does not provide a reliable reference
point for the type of work that the Group performs, because the work is unique
for each project and contract.  Furthermore, the Group’s financial
risk is mitigated by indemnity arrangements with its subcontractors that call
for them to correct defects in their work during the warranty
period.  To ensure that this work is done, the Company holds back
payments from such subcontractors through the end of the warranty period in
amounts equal to or greater than the indemnity amounts.  Until
circumstances change and the Group can reasonably estimate warranty cost based
on statistically meaningful historical data, the Group’s policy is to recognize
revenue without any provision for warranty costs.


F-14


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)




Warranty
costs in excess of amounts indemnified by subcontractors, if any, are
recorded as an expense during the period when incurred.  Under the
current contract terms, the maximum loss exposure is limited to the 5% of the
contract price.  Notwithstanding the contractual limitation on
warranty exposure, given the length of time over which payment of amounts due
are to be paid, there may be exposure for amounts in excess of the contractual
maximum, although as of December 31, 2009 there is no basis to believe such
excess costs will be incurred and no accruals are required to be
recorded.




(m) Pension
and postretirement benefits plans




Contributions
to retirement plans (which are defined contribution plans) are charged as and
when the related employee service is provided. Refer to Note 21 for details for
the applicable periods.




(n) Comprehensive
income




The Group
has adopted the provision of ASC 220 “Comprehensive Income”. This statement
establishes rules for the reporting of comprehensive income and its
components.  Comprehensive income consists of net income and foreign
currency translation adjustments, details of which are provided in Note
24.




(o) Segment
reporting




ASC 280
"Segment reporting" establishes standards for reporting information on operating
segments in interim and annual financial statements.  The Group has
only one segment, all of the Group's operations and customers are in the PRC and
all income are derived from Construction contracts.  Accordingly, no
geographic information is presented.




(p) Use
of estimates




The
preparation of the financial statements requires management to make a number of
estimates and assumptions relating to the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the period. Significant items subject to such estimates and assumptions
include the recording of contract revenues and costs, the amount of construction
in-progress and project payables, the recoverability of the carrying amount and
valuation allowances for receivables, the determination of the present value of
long-term receivables and payables and the cost of rectification during the
project warranty period (“warranty costs”). Actual results could differ from
those estimates


F-15


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)




(q) Commitments
and contingencies




Certain
conditions may exist as of the date the financial statements are issued which
may result in a loss to the Group but which will only be resolved when one or
more future events occur or fail to occur.  In the normal course of
business, The Group is subject to a wide range of matters including potential
legal proceedings, that could give rise to claims against the
Company.  The Group’s management, audit committee and, if appropriate
legal counsel, assess such contingent liabilities, which assessment inherently
involves an exercise of judgment.  In assessing loss contingencies
related to unasserted claims that may result in legal proceedings, the Group’s
legal counsel evaluates the perceived merits of such claims and the amount of
relief expected to be sought.





If the
assessment of a contingency indicates that it is probable that a material loss
has been incurred and the amount of the liability can be estimated, the
estimated liability would be accrued in the Group’s consolidated financial
statements.





Loss
contingencies considered remote are generally not disclosed unless they arise
from guarantees, in which case the guarantees would be disclosed. Commitments
and contingencies for the applicable periods presented herein are discussed in
Note 22.




(r) Recently
issued accounting pronouncements




In
August 2009, the FASB issued Accounting Standards Updates (“ASU”)
No. 2009-05 (“ASU 2009-05”), Fair Value Measurements and Disclosures (Topic
820) — Measuring Liabilities at Fair Value. ASU 2009-05 amends ASC Subtopic
820-10, Fair Value Measurements and Disclosures — Overall, for the fair value
measurement of liabilities. It provides clarification that in circumstances in
which a quoted price in an active market for the identical liability is not
available, a reporting entity is required to measure the fair value using
(1) a valuation technique that uses the quoted price of the identical
liability when traded as an asset or quoted prices for similar liabilities or
similar liabilities when traded as assets or (2) another valuation
technique that is consistent with the principles of Topic 820. It also clarifies
that when estimating the fair value of a liability, a reporting entity is not
required to include a separate input or adjustment to other inputs relating to
the existence of a restriction that prevents the transfer of the liability
and that both a quoted price in an active market for the identical liability at
measurement date and that the quoted price for the identical liability when
traded as an asset in an active market when no adjustments to the quoted price
of the asset are required are Level 1 fair value measurements. The provisions of
ASU 2009-05 are effective for the first reporting period (including interim
periods) beginning after issuance. Early application is permitted.




In
September 2009, the FASB issued ASU No. 2009-12 (“ASU 2009-12”), Fair
Value Measurements and Disclosures (Topic 820) — Investments in Certain Entities
That Calculate Net Asset Value per Share (or Its Equivalent). ASU 2009-12 amends
ASC Subtopic 820-10, Fair Value Measurements and Disclosures—Overall, to permit
a reporting entity to measure the fair value of certain investments on the basis
of the net asset value per share of the investment (or its equivalent) if the
net asset value of the investment (or its equivalent) is calculated in
a manner consistent with the measurement principles of Topic 946 —
Financial Services — Investment Companies, as of the reporting entity’s
measurement date. It also requires new disclosures, by major category of
investments, about the attributes includes of investments within the scope
of this amendment to the ASC. The provisions of ASU 2009-12 is effective for
interim and annual periods ending after December 15, 2009. Early
application is permitted. The Group is currently evaluating the impact of
adoption on its consolidated financial statements.


F-16


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)





In
December 2009, the FASB issued ASU No. 2009-16 (“ASU 2009-16”),
Transfers and Servicing (Topic 860) — Accounting for Transfers of Financial
Assets, which formally codifies FASB Statement No. 166, Accounting for
Transfers of Financial Assets into the Accounting Standards Codification
(“ASC”), issued by the FASB in June 2009. ASU 2009-16 represents
a revision to the provisions of former FASB Statement No. 140,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities. The amendments in this ASU eliminate the exceptions for
qualifying special-purpose entities from the consolidation guidance and the
exception that permitted sale accounting for certain mortgage securitizations
when a transferor has not surrendered control over the transferred financial
assets. In addition, the amendments require enhanced disclosures about the risks
that a transferor continues to be exposed to because of its continuing
involvement in transferred financial assets. ASU 2009-16 is effective for annual
and interim periods beginning after November 15, 2009. Additionally, the
recognition and measurement provisions of this ASU should be applied to
transfers that occur on or after the effective date. Early application is not
permitted.





In
December 2009, the FASB issued ASU No. 2009-17 (“ASU 2009-17”),
Consolidations (Topic 810) - Improvements to Financial Reporting by Enterprises
Involved with Variable Interest Entities which amends the FASB Accounting
Standards Codification for the issuance of FASB Statement No. 167,
Amendments to FASB Interpretation No. 46(R), issued by the FASB in
June 2009. The amendments in this ASU replace the quantitative-based risks
and rewards calculation for determining which reporting entity, if any, has a
controlling financial interest in a variable interest entity with an approach
primarily focused on identifying which reporting entity has the power to
direct the activities of a variable interest entity that most significantly
impact the entity’s economic performance and (1) the obligation to absorb
the losses of the entity or (2) the right to receive the benefits from the
entity. ASU 2009-17 also requires additional disclosure about a reporting
entity’s involvement in variable interest entities, as well as any significant
changes in risk exposure due to that involvement. ASU 2009-17 is effective for
annual and interim periods beginning after November 15, 2009. Early
application is not permitted.





In
January 2010, the FASB issued ASU No. 2010-06 (“ASU 2010-06”),
Improving Disclosures About Fair Value Measurements. The ASU amends ASC 820
(formerly Statement No. 157, Fair Value Measurements) to add new
requirements for disclosures about transfers into and out of Levels 1 and 2 and
separate disclosures about purchases, sales, issuances, and settlements relating
to Level 3 measurement on a gross basis rather than as a net basis as currently
required. ASU 2010-06 also clarifies existing fair value disclosures about the
level of disaggregation and about inputs and valuation techniques used to
measure fair value. ASU 2010-06 is effective for annual and interim periods
beginning after December 15, 2009, except for the requirement to provide
the level 3 activity of purchases, sales, issuances, and settlements on a gross
basis, which will be effective for annual and interim periods beginning after
December 15, 2010. Early application is permitted and in the period of
initial adoption, entities are not required to provide the amended disclosures
for any previous periods presented for comparative purposes.


F-17


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)





Management
does not believe that any recently issued, but not yet effective, accounting
standards, if currently adopted, would have a material effect on the
accompanying financial statements.




(s) Reclassifications




Certain
Reclassifications have been made to prior year financial statements to conform
to the current year presentation.




(t)     Stock
Option Plan




On August
11, 2008, Sing Kung’s shareholders approved and adopted the Sing Kung 2008
Equity Plan and approved amendments to it on September 25, 2009 (referred to
hereafter as the “2008 Stock Plan”), which amended plan was assumed and adopted
by the Company pursuant to a vote of its shareholders on September 9, 2009 in
conjunction with the Sing Kung acquisition.  The 2008 Stock Plan
reserves 5,500,000 shares of the Company common stock for issuance in accordance
with the plan’s terms. The Company has not made any grants under the 2008 Stock
Plan as of August 17, 2010. It is our policy to account for any grants made
under the 2008 Stock Plan at the time such grants are made.


5.     Re-domestication
of IAG and acquisition of Sing Kung




Re-domestication
Merger




IAG was
incorporated in Delaware on May 10, 2005, as a blank check company with the
objective to acquire an operating business.  IAG’s IPO, including the
exercise of the underwriters’ overallotment option, was consummated on September
10 and 11 2007.





On May
15, 2008, IAG entered into a stock purchase agreement to acquire 94.9% of the
issued and outstanding ordinary shares of Sing Kung (the “stock purchase
agreement”).  On August 8, 2008, IAG created a wholly-owned subsidiary
(CNC, which is incorporated in the BVI) to ultimately execute the agreement, as
amended, with Sing Kung.





On
September 9, 2009, IAG held a special meeting of its stockholders, during which
the re-domestication merger of IAG into its BVI-based wholly-owned subsidiary
and the acquisition of Sing Kung were both approved.





On
September 9, 2009, IAG merged with and into its wholly-owned subsidiary, CNC,
for the purposes of changing its domicile to the BVI and in anticipation of the
acquisition of Sing Kung.  As required by the stock purchase
agreement, the re-domestication merger was achieved by an exchange of each
outstanding share of IAG’s common stock for 0.1850734 shares of common stock and
0.8857955 shares of Class A Preferred Stock of CNC, and the assumption of all
the rights and obligations of IAG by CNC, including the assumption of all then
outstanding warrants of IAG.  The warrant terms were adjusted to
enable the warrant holders to acquire the same combination of CNC common and
preferred shares upon exercise of each warrant as were issued to holders of each
share of IAG common stock (Note 17).





In
connection with the consummation of the re-domestication merger and acquisition,
the board of CNC declared a dividend payable to eligible shareholders who voted
in favor of the Sing Kung acquisition and who did not waive or otherwise forfeit
their rights to such dividend.  The dividend payable by CNC (Note 12)
is recorded as a current liability


.


Acquisition of Sing
Kung




On
September 9, 2009, CNC acquired 94.9% of the issued and outstanding
common stock of Sing Kung (a private operating company) by issuing
19,843,412 shares of CNC’s common stock to the shareholders of Sing Kung
who were parties to the stock purchase agreement.  Between September
9, 2009 and October 2, 2009, CNC acquired, (by issuing 1,076,068 shares of
common stock) pursuant to an exchange offer, all remaining Sing Kung common
shares and Class A Preferred Shares held by parties who were not party to the
stock purchase agreement.  Under the terms of the exchange offer, each
Sing Kung common share was exchanged for 0.42220 shares ofCNC common stock and each Sing Kung Class A Preferred share was exchanged
for 1.84173 shares
of CNC Class A Preferred Stock.  As of October 2, 2009, CNC
owned 100% of the equity securities of Sing Kung. As discussed in Note 2, the
reverse acquisition transaction was accounted for as a
recapitalization.  Accordingly, the related share issuances (detailed
in Notes 15 and 16) were retroactively restated.


F-18


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)





Upon the consummation of
Sing Kung’s acquisition, the shareholders of Sing Kung obtained a majority
voting interest in the Company, which was a non-operating public company with
limited assets.   In accordance with ASC 805, “Business
Combinations”,the entity with a controlling financial interest in the
combined business is generally deemed the acquirer. The Company also considered
a number of additional factors to determine the acquirer for accounting
purposes, including the effect of the exchange offer and which company’s
stockholders control the Board of Directors of the combined business and it has
determined that Sing Kung is deemed the accounting acquirer, although the Company is
the legal acquirer. Moreover, because The Company did not have any assets
with operating substance except cash and current receivables, the Sing Kung
Acquisition has been accounted for as a recapitalization of the Company rather
than as a business combination.





Since
Sing Kung is the accounting acquirer, the financial statements reflect the
capital structure of the Company and the effect of the aforementioned stock
exchange (recapitalization) transaction is recorded as an adjustment to retained
earnings based on the net assets of the Company as of September 9, 2009, which
was as follows:





AmountTangible
      Assets
                                  
                                  $
                                  859,222Goodwill
                                  
                                  
                                  1,474,572Total
      Assets
                                  
                                  
                                  2,333,794Liabilities,
      net of dividends (Note 14)
                                  
                                  
                                  (1,512,434
                                  )Effect
      of exchange of IAG common stock interests to CNC common
    stock
                                  
                                  
                                  (29
                                  )Effect
      of exchange of IAG common stock interests to CNC redeemable preferred
      stock
                                  
                                  
                                  (4,117,602
                                  )Total
      liabilities
                                  
                                  $
                                  (5,630,065
                                  )Net
      adjustment recorded to retained earnings
                                  
                                  $
                                  (3,296,271
                                  )





In a
recapitalization, all accounting history, prior to the reverse merger date,
becomes that of the accounting acquirer (Sing Kung).  Accordingly, all
historical information prior to the acquisition is that of Sing
Kung.  The only adjustment necessary under recapitalization accounting
is to retroactively adjust Sing Kung’s legal capital to that of the
Company.





The
consolidated financial statements, after the recapitalization, include all
accounts of the Company and its subsidiaries.  All material
inter-company balances and transactions have been eliminated.


F-19


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)





In an
assessment of the fair value of the Company’s assets and liabilities conducted
at December 31, 2009, it was determined that there was no basis for
substantiating the value of goodwill recorded in connection with the
reorganization and recapitalization.  Accordingly, the entire balance
of $1,474,572 was written off and recorded as an impairment charge in the
Statement of operations for the year ended December 31, 2009 (see also Note
4(c)).





Earn-Out
Shares





As additional purchase
price, the stock purchase agreement provides that the original stockholders of
Sing Kung will be issued up to 10,300,000 share of CNC common stock, if, on a
consolidated basis, the Company has net operating profit after-taxes (calculated
in accordance with U.S. GAAP and excluding any profit from an acquisition
by CNC that involves the issuance of securities that has a dilutive effect on
the holders of common stock of CNC).  The target net operating profits
for CNC and schedule of additional shares issuable to Sing Kung stockholders
upon achieving the net operating profit for such fiscal year are as
follows:





Year ending December 31,
                    
                    Net Operating Profit
                      (after tax)
                    
                    
                    Additional Common
                      Shares Issuable2009
                    
                    $
                    15,000,000
                    
                    
                    
                    2,000,0002010
                    
                    $
                    19,500,000
                    
                    
                    
                    2,000,0002011
                    
                    $
                    25,350,000
                    
                    
                    
                    2,100,0002012
                    
                    $
                    32,955,000
                    
                    
                    
                    2,100,0002013
                    
                    $
                    42,841,500
                    
                    
                    
                    2,100,000




The net
operating profit target for fiscal 2009 was not met and no earn-out shares were
issued.  If and when earn-out shares are issued, such shares will be
retroactively accounted for as part of the reverse acquisition and will be
reflected as a stock dividend having been issued at the beginning of the
earliest period presented because the beneficiaries are not involved in the
management of the Company.




6.
            SNC
      Acquisition - 2008




On
December 9, 2008, CCI consummated the purchase of all of the SNC equity
interests.  Since its formation in 2005, SNC has been in the business
of planning and developing BT infrastructure projects for municipal governments
in the PRC.  Although not engaged in any active projects of its own
after 2006, at the time of the closing of the acquisition by CCI, SNC had
contacts and the reputation in the BT development sector and employed trained
personnel that the Company could leverage in its continuing business
interests.  SNC’s key personnel were not subject to employment
contracts.  In addition SNC had a relationship and completed contract
with the municipality of Changchun for which payments were pending as of the
acquisition date.  The Company determined that building on SNC’s
relationship with Changchun to facilitate growth of its overall business could
be most effective if it acquired SNC and thereby held control over the contract
and collection process.


F-20


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)




The
goodwill of $808,443 arising from the acquisition was perceived to represent the
value of SNC’s reputation in the market, its relationship with the Changchun
municipality, the value that its key personnel were expected to contribute to
the growth of the Company’s business in China and the track record associated
with having completed the Changchun Project.  None of the goodwill
recognized is expected to be deductible for income tax purposes. In its
evaluation of the value of the goodwill at year-end 2009, Company management
determined that there was no longer any basis for substantiating the value and
the good will was written off in its entirety and the charge was reflected with
other impairments in the statement of operations and comprehensive income for
2009.




The
following table summarizes the consideration paid and contingently payable for
SNC and the amounts of the assets acquired and liabilities assumed, recognized
at the acquisition date, as well as the fair value at the acquisition
date:




Consideration
                          
                          AmountFixed
      payment (net of cash retained)
                          
                          $
                          4,401,000Contingent
      Payment arising from Changchun BT Project collection
                          
                          
                          2,308,711Contingent
      tax indemnity
                          
                          
                          461,742Fair
      value of total consideration transferred
                          
                          $
                          7,171,453Acquisition-related
      costs (included in selling, general and administrative expenses in the
      Company’s income statement for the year ending December 31,
      2008
                          
                          $
                          40Recognized
      amounts of identifiable assets acquired and liabilities
      assumedCash
                          
                          $
                          570,971Prepaid
      expenses, deposits and other receivables
                          
                          
                          123,796Property,
      plant and equipment
                          
                          
                          54,618Net
      investment in BT projects (Changchun)
                          
                          
                          7,894,894Accounts
      payable and accrued expenses
                          
                          
                          (650,796
                          )BT
      Project Payable
                          
                          
                          (1,599,050
                          )Taxes
      payable
                          
                          
                          (31,423
                          )Total
      identifiable net assets
                          
                          $
                          6,363,010Goodwill
                          
                          
                          808,443Total
                          
                          $
                          7,171,453





The fair
value of prepaid expenses, deposits and other receivables was determined to
equal the gross value.





The
Company has determined that the collectability of the remaining payments due in
connection with the Changchun Project is reasonably predictable.  The
remaining payments are scheduled to be made over a period of eight years in
accordance with the schedule set forth in the BT contract, although they may be
accelerated.  If payment is not accelerated, interest accrues at
market rates on the unpaid principal balance due under the contract and
therefore the Company recognizes the fair value of the asset (Net investment in
BT projects (Changchun)) at the principal balance without discount or premium
(Note 8).


F-21


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)





Plant and
equipment are comprised primarily of a car and office equipment purchased by SNC
within 8 months of the acquisition date.  The net book value, $54,618,
was deemed to be representative of the fair value.





The
contingent liability arising from collections pursuant to the Changchun BT
Project contract requires Century City to pay the former owners of SNC up to RMB
15,737,632 (approximately $2,308,711 at the date of the acquisition) on a
last-out basis if, as and when collections from the contract are
received.  To the extent that there is a shortfall in the collection
of the Changchun Project payment, any such shortfall reduces the contingent
amount due to the former SNC shareholders, dollar for dollar. Moreover, in
accordance with the purchase agreement the Sing Kung shareholders have the right
(but no obligation) to transfer uncollected receivables from the Changchun
Project to the former SNC shareholders to reduce or extinguish the contingent
payment obligation to the former SNC shareholders.  SNC has no current
expectation of making such a transfer because it deems it desirable to maintain
unilateral control over the collection process, and such a transfer could
trigger payment obligations under the contingent tax indemnity before they would
otherwise become payable.





In light
of the expectation that the fair value of the remaining Changchun BT Project
assets is equal to the gross value (net of a valuation allowance for accrued
interest of $1,146,139) at the time of the acquisition (Note 8)), the Company
has recorded the full contingent purchase amount to the former SNC shareholders
without adjustment.  Should facts arise or be discovered in connection
with the investigation described in Note 22, that lead to a basis to adjust the
amount payable to the former SNC shareholders, we would make such an adjustment,
but in no case do we anticipate that the amount realized by the company will be
less than the net amount currently stated. Because no interest accrues on the
contingent purchase amount, the gross value would be discounted to reflect the
multi-year payment schedule if the payment is not
accelerated.  However, based on communications with the Changchun
municipality, the Company expects that all remaining payments related to the
Changchun Project will be accelerated and paid by the municipality prior to the
end of November 2009.    Therefore, the Company recognizes
the liability to the former SNC shareholders at gross value without
discount.  As of December 31, 2009 there has been no change since the
acquisition date in the amount recognized for the liability or any change in the
range of outcomes or assumptions used to develop the estimates.





Because
the Net Investment in the Changchun BT Project is recognized at gross value, a
liability of $1,599,050 has been recognized for the BT Project payable that
reflects the full undiscounted amount of all future payments that the Company
could be required to make in connection with this liability, net of accrued
interest that has been reserved because of the probability of accelerated
payment (Note 12).  The cumulative interest reserved in connection
with the Changchun Project payable was $232,142 at the time of the
acquisition.   If no further payments related to the Changchun
Project are received there would be no liability associated with the BT Project
payables or interest accrued thereon (Note 12).  As of December 31,
2009 there has been no change since the acquisition date in the amount
recognized for the liability or any change in the range of outcomes or
assumptions used to develop the estimates.


F-22


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)





A
liability of $461,742 has been recognized for the contingent tax
indemnity.  The potential undiscounted amount of all future payments
that the Company could be required to make is capped at 5.0 million RMB (or
$733,504) according to purchase agreements.  Furthermore, the maximum
tax payable by the former SNC shareholders upon receipt of the full contingent
amount related to the Changchun Project is calculated to be $461,742, according
to Chinese statutory tax rate.  However, due to their application of
certain tax mitigation strategies, there is a reasonable expectation that any
tax paid by the former SNC shareholders will be less than $461,742 and that
payment of any indemnity in connection therewith will be deferred for an
extended period, resulting in a further reduction of fair value.





The
amounts of SNC’s revenue and earnings included in the Company’s consolidated
income statement for the year ending December 31, 2008 and the revenue and
earnings of the combined entity had the acquisition been January 1, 2008 or
January 1, 2007 are:





Revenue
                              
                              
                              EarningsActual
      from December 9, 2008 –December
      31, 2008
                              
                              
                              -
                              
                              
                              $
                              (92,973
                              )Supplemental
      pro forma amounts fromJanuary
      1, 2008 – December 31, 2008
                              
                              $
                              4,892,204
                              
                              
                              $
                              3,448,351Supplemental
      pro forma amounts fromJanuary
      1, 2007 – December 31, 2007
                              
                              
                              -
                              
                              
                              $
                              369,811




7.
              Prepaid
      expenses and other assets  (current and
    long-term)




Prepaid
expenses and other assets at December 31, 2009 and 2008 are as
follows:




December 31,2009
                  
                  
                  2008CurrentPrepaid
      expenses and deposits
                  
                  $
                  114,295
                  
                  
                  $
                  662,994Other
      receivables
                  
                  
                  -
                  
                  
                  
                  38,162Current
      total
                  
                  $
                  114,295
                  
                  
                  $
                  701,156Non-current
      prepaid expenses
                  
                  
                  -
                  
                  
                  
                  904,352Total
      prepaid expenses, deposits and other receivables
                  
                  $
                  114,295
                  
                  
                  $
                  1,605,508





In April
2008, the Company recorded $200,000 of deferred finance costs in connection with
the issuance of Sing Kung Preferred Shares.  $68,333 was amortized
during 2008 and at December 31, 2008 the unamortized balance of such deferred
finance costs was $131,667, $100,000 of which was included in Prepaid expenses
(current) and $31,667 of which was included in Prepaid expenses
(non-current).  At December 31, 2009 the unamortized balance of the
deferred finance costs, $31,667, was included in Prepaid expenses (current),
together with $54,042 of prepaid D&O insurance premiums
and  $28,606 in deposits for equipment leases and public relations
services.


F-23


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)





In
October 2008, the Company paid $1,450,000 for a 3-year consulting contract for
professional services (the “Dehai Contract”) that was recorded in Prepaid
expenses.  As of December 31, 2008, the unamortized balance of the
contract prepayment was $1,356,019.   Of that amount, $872,685
was recorded as non-current, with the remainder of the balance, $483,334 in
current prepaid expenses and other assets together with $100,00 of prepaid
finance costs and $79,660 of deposits and prepaid lease expense on equipment and
furnishings for our Shanghai offices.   At December 31, 2009 the
unamortized balance of the Dehai contract was determined to be unrealizable and
the unamortized portion was charged to operating expense (See also Note 4(c)).
Assessment of the basis for recording the contract in 2008 is part of the scope
of the investigation further described in Note 23.




8.
            Net
      investment in BT Projects




Net
investments in BT projects (inclusive of accrued interest not reserved) are
shown in the table below:





December 31,2009
                        
                        
                        2008Changchun
      Project
                        
                        $
                        7,884,130
                        
                        
                        $
                        7,894,893Jiaohe
      Project (Renewal Phase)
                        
                        
                        16,317,580
                        
                        
                        
                        15,437,420Total
                        
                        $
                        24,201,710
                        
                        
                        $
                        23,332,313




Changchun
Project




Net
investment in BT projects (Changchun) was acquired from SNC shareholders with
SNC’s outstanding assets and liabilities in December 2008 and includes amounts
for the benefit of other members of the Changchun Project consortium that are
payable by the municipality to SNC pursuant to the contract.  In
August 2007 the customer made an accelerated payment of principal due under the
Changchun Project contract in the amount of 221.7 million RMB (approximately
$25.8 million at the time of payment).  This amount constituted
approximately 81% of the total Changchun project payment obligation, and it was
applied to the initial principal installments.  Because of the initial
accelerated payment, the next payment of principal and interest is due in 2014
in the amount of 18.7 million RMB (approximately $2.56 million).  The
remaining principal amount together with an additional interest payment is due
in January 2015.




As an
incentive to accelerate payment, the Company and other consortium members have
offered to retroactively waive interest on the remaining Changchun contract
payments (or any fraction thereof) paid on an accelerated basis.  The
final payment has been delayed pending resolution of disputes regarding warranty
claims related to the project that were not previously disclosed by the
Company’s prior management.  Those issues have been resolved, and the
Changchun municipality has indicated that it is likely to pay the full remaining
balance due under the contract to SNC prior to the end of 2010 in order to take
advantage of the interest waiver, although there can be no assurance that it
will do so.     Based on the indications from the
Changchun municipality, the Company has classified the amounts due as
current.


F-24


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)




To
reflect the contingency associated with the interest waiver offer, the Company
has adjusted the fair value of the Net investment in the Changchun BT project at
the time of the acquisition (Note 6), and it has established a 100% valuation
allowance for the interest accrued after acquisition.  As a result, no
interest income was recognized in connection with the Net investment in BT
Projects (Changchun) during 2008 after the acquisition of SNC.  If
interest is received from the Changchun municipality, it is probable that 21.9 %
of such interest will be payable to other consortium members based on the
percentage of total payments due to them (Note 12).




Jiaohe Project (Renewal
Phase)




Net
investment in BT projects (Jiaohe) relates to the first phase (Renewal Phase) of
a project for the People's Government of Jiaohe City for Tiangang road/pipeline
network project that was completed and accepted in October 2008.  The
balance includes the outstanding principal balance as well as interest
receivable as of December 31, 2008.  Payments under the Jiaohe Project
contract are due in eight annual installments and the Company has agreed that
the first of those is to be paid prior to year-end 2010, with interest accrued
from the date of project acceptance. Based on these understandings, $3,042,443
has been classified as current and the remaining amounts due after December 31,
2010 $13,275,347, are classified as long-term.




The
Jiaohe Project contract requires payments by the customer in 8 equal annual
installments, subject to certain acceleration provisions.  Interest
accrues on the outstanding balance and is due contemporaneously with the annual
installments of principal.  From the date of acceptance of the Renewal
Phase of the Jiaohe Project, interest began to accrue on the project principal
at a variable market rate (equal to the municipality customers’ incremental
borrowing rate) beginning on the day of final project acceptance.  The
applicable interest rate was 6.84% in 2008 and 5.94%.  As a result of
the accrual interest at market rates, no fair value adjustment has been recorded
for the Net investment in BT projects related to the Jiaohe Project and no
unearned revenue is included in the balance of Net investment in BT
projects.  Interest accrued on Net investment in BT projects, net of
applicable reserves, is added to the balance of Net investment in BT projects
and included in interest income.




The
accrued interest on Net investment in BT Projects and valuation allowance at
December 31, 2008 is shown below:




December 31,
                            2009
                          
                          
                          December 31,
                            2008Accrued
      Interest included in Net investment in BT projects:Changchun
                          
                          $
                          1,462,965
                          
                          
                          $
                          1,174,008Jioahe
                          
                          
                          1,145,755
                          
                          
                          
                          244,883Less:
      Valuation allowance - Changchun
                          
                          
                          (1,462,965
                          )
                          
                          
                          (1,174,008
                          )Net
      interest included in Net investment in BT projects
                          
                          $
                          1,145,755
                          
                          
                          $
                          244,883


F-25


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)




Collectability
of amounts due pursuant to the Changchun and Jiaohe contracts is reasonably
predictable.  Notwithstanding the extended payment time frames, both
municipalities are obligated to pay the full amounts due under the
contracts.  These obligations are enforceable against the
municipalities under Chinese law.  Both municipalities have affirmed
the contractual payment obligations in writing when requested to do
so.  Both municipalities are taxing authorities and therefore have a
reliable source of revenue for payment of their obligations to the Group and
others.  Both municipalities have an established record of timely
payment of their obligations to others. The completion of the infrastructure
projects also confers substantial economic benefits on the municipalities
through appreciation of the improved land, which the municipalities have begun
to realize by granting rights to use the land to third parties to make further
improvements, such as constructing production facilities. This enhances the
customers’ ability to pay in accordance with the
contracts.  Collectively these factors unambiguously establish the
contractual payment obligations for both customers and indicate that they have
the intent and will have the cash flow to meet their respective payment
obligations in a timely manner.  Furthermore:




i.
            Changchun,
      has demonstrated both the ability and willingness to pay, having
      previously met 81% of the contract payment obligations to SNC prior to its
      acquisition by CCI.  Changchun also has access to development
      bank financing to meet the remainder of its payment obligations (although
      there is no assurance that they will actually draw on such commitments to
      make contract payments).




ii.
            Jiaohe
      has included annual contract payment amounts and interest in its annual
      budget, and those amounts have been approved by the Standing Committee of
      the National People’s Congress.    Moreover, the
      Contract grants to the Group the right to a security interest to
      collateralize the unpaid amounts due under the contract.  In the
      event of a payment default, the Group has rights under the contract to
      realize economic rents and control access to such collateral to effect
      collection. Although the economic benefit to be derived from enforcement
      of such security interests is uncertain, such rights strengthen the
      Company’s ability to enforce collection should it be necessary to do
      so.




F-26


CNC
DEVELOPMENT LTD.
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (Stated
in U.S. Dollars)


The
components of the Net Investment in BT contracts are as follows:




December 31,2009
                          
                          
                          2008Total
      payments to be received
                          
                          $
                          24,201,710
                          
                          
                          $
                          23,332,313Less:   executory
      costs
                          
                          
                          -
                          
                          
                          
                          -Minimum
      payments receivable
                          
                          
                          24,201,710
                          
                          
                          
                          23,332,313Less:  allowance
      for uncollectible amounts
                          
                          
                          -
                          
                          
                          
                          -Net
      minimum payments receivable
                          
                          
                          24,201,710
                          
                          
                          
                          23,332,313Estimated
      residual value of project
                          
                          
                          -
                          
                          
                          
                          -Less:  unearned
      income
                          
                          
                          -
                          
                          
                          
                          -Net
      investment in BT projects - total
                          
                          $
                          24,201,710
                          
                          
                          $
                          23,332,313Net
      investment in BT projects - current
                          
                          $
                          (10,926,363
                          )
                          
                          $
                          -Net
      investment in BT projects – long-term
                          
                          $
                          13,275,347
                          
                          
                          $
                          23,332,313




9.
              Construction
      in-progress




The
balances of construction in progress are shown below:




December 31,2009
                      
                      
                      2008Construction
      in-progress
                      
                      $
                      497,587
                      
                      
                      $
                      20,526,812




In
accordance with ASC 840, the amount recorded in construction-in-progress does
not include any amount related to estimated profits but does include estimated
losses applicable to the project.  The balance of construction in
progress at December 31, 2008 represents the construction costs incurred in 2008
for projects then under construction; i.e.  Jiaohe (2nd Phase)
and Zhengding.  Prior to December 31, 2009, the Company concluded that
it lacked the financial resources to complete the Jiaohe 2nd Phase
and Zhengding Projects successfully and assigned those projects to another
contractor which assumed most projects payable related thereto and the right to
collect almost all project revenues.  The amounts that continue to be
reflected in construction-in-progress at year-end 2009 reflect costs incurred in
the initial stages of the Zhengding Project that the Company incurred and that
it expects to recover when the projects are ultimately completed and billed by
the successor contractor. No amounts recorded in construction-in-progress had
been billed to the customer at December 31, 2008 or 2009, nor did they bear
interest prior to project final acceptance.


F-27


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)




10.
            Plant
      and equipment, net




December 31,2009
                    
                    
                    2008Motor
      vehicle and office equipment
                    
                    $
                    60,548
                    
                    
                    $
                    58,859Accumulated
      depreciation
                    
                    
                    (13,169
                    )
                    
                    
                    (4,905
                    )Plant
      and equipment, net
                    
                    $
                    47,379
                    
                    
                    $
                    53,954





Depreciation
expense for the year ended December 31, 2009 was $8,288 and for the year ended
December 31, 2008 was $4,905.




11.
            Accounts
      payable and accrued expenses




Accounts
payable and accrued liabilities as of December 31, 2009 and December 31, 2008
consist of the following:




December 31,2009
                    
                    
                    2008Accrued
      wages and benefits
                    
                    $
                    85,332
                    
                    
                    $
                    417,709Accrued
      expenses
                    
                    
                    1,102,274
                    
                    
                    
                    134,664Total
                    
                    $
                    1,187,596
                    
                    
                    $
                    552,373





The
amounts owed to related parties as of December 31, 2009 consisted of $58,913
payable to members of CNC management for unreimbursed out-of-pocket
expenses.  No related party amounts were payable as of December 31,
2008.




12.
            BT
      project payables – current and
long-term




BT
project payables as of December 31, 2009 and December 31, 2008 consist of the
following:




December 31,2009
                    
                    
                    2008Current
                    
                    $
                    5,985,026
                    
                    
                    $
                    20,790,155Long-term
                    
                    
                    -
                    
                    
                    
                    10,344,767Total
                    
                    $
                    5,985,026
                    
                    
                    $
                    31,134,922


F-28


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)





Current
BT project payables are obligations due to BT project consortium partners within
12 months of the applicable year-end.





BT
project payables for both 2008 and 2009 include $1,599,090 related to the
Changchun Project, a liability of SNC that is consolidated as a result of the
consummation of that acquisition.The Changchun project
payables are unsecured and have no fixed terms of repayment other than becoming
ratably due to other consortium members only if and when payments under the
Changchun Project contract are due, i.e. if no future payments under the
contract are received by the Company, it is not obligated to make any additional
payments to other consortium members.  If interest is received on the
Net investment in BT projects, 21.9% of the amount collected is owed to other
consortium members based on the amounts they are owed as a percentage of the
total remaining payments due under the contract (Note 7).   The
Company accrues interest on the project payables for the Changchun Project at
the same market rate as it was accrued on the Net investment in BT
projects.  Therefore, in accordance with ASC 835, “Interest” no
discount or premium has been applied to adjust the present value of the BT
project payables related to the Changchun Project.




13.
            Other
      payables




December 31,2009
                    
                    
                    2008Due
      to former SNC shareholders
                    
                    $
                    2,766,676
                    
                    
                    $
                    2,770,453





Other
payables represent amounts due to the former SNC shareholders pursuant to the
SNC acquisition (Note 6). The obligation is payable upon collection of the
Changchun Project receivables acquired in the transaction. No interest accrues
on the payment obligation.  Because of the Company’s expectation that
the Changchun receivable will be collected prior to December 31, 2010, the
Company has classified the obligation as current.




14.
            Dividends
      payable




a)
              Common
      stock




Prior to
consummation of the re-domestication merger of IAG and the Company and the
acquisition of Sing Kung, IAG declared a dividend of $4.85 per common share
payable to its shareholders who voted in favor of the acquisition with Sing Kung
and who did not waive or otherwise forfeit their rights to receive the
dividend.  The Company has determined that holders of 70,291 IAG
shares were eligible for the dividend resulting in a total dividend declared of
$340,911.  The obligation to pay the dividend was assumed by the
Company in the re-domestication merger and became payable after the date
thereof.  As of December 31, 2009, $80,040 of the dividends payable
remained unpaid since an uncertainty exists about payee
eligibility.  The Company expects to resolve outstanding dividend
claims and to pay out the full amount of the remaining dividends payable before
the end of 2010.


F-29


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)




b)
              Preferred
      stock




As
described in Notes 5, 15 and 16, following the re-domestication merger, the
Company exchanged its Class A Preferred Shares (“CNC Preferred Shares”) for IAG
common shares and for Sing Kung Class A Preferred Shares (“SK Preferred
Shares”).  An additional liquidation preference amount accrues
quarterly on the CNC Preferred Shares from the date of issue and is recorded as
“Accumulated Dividends - preferred stock”.  The rate of accrual is 7%
per annum on the liquidation preference amount (including previously unpaid
accretion thereof), and the rate is adjusted quarterly on the last business day
of each calendar quarter based on changes in the $US – RMB exchange rate from
the base rate of RMB 6.834 to $1.00.  The Company has the option to
pay accrued preferred dividends in cash but does not have the obligation to pay
until the redemption date or conversion of the CNC Preferred
Shares.  Therefore the accrued amounts are recorded as long-term and
are shown on the balance sheet as Accumulated dividend – Preferred
stock.  As of December 31, 2009, the amount accrued was
$235,129.




15.
            Preferred
      stock subject to redemption




As of
December 31, 2009, the Company was authorized to issue 25,000,000 Class A
Preferred Shares, although additional preferred shares were subsequently
authorized as of March 22, 2010 (Note 27(c)).  Issuances of Preferred
Shares by CNC and Sing Kung are described below.




On April
24, 2008 Sing Kung issued 2,915,000 Series A Preferred Shares having par value
of $0.0001 per share in a private placement transaction (the “SK Preferred
Shares”).  The SK Preferred Shares were convertible at any time by the
holder into common shares at a conversion price of $5.00 per share and were
redeemable at the end of two years under circumstances not solely within the
Company’s control.  Consequently, the SK Preferred Shares were
classified as a non-current liability.  Sing Kung raised gross
proceeds of $14,575,000 million from the sale of the Series A Preferred Shares
in April 2008.  Net proceeds from the offering were $14,375,000
million after expenses totaling $200,000.  All SK Preferred shares
were exchanged for the Company’s Preferred Shares in the amounts set forth in
the table below.  Offering expenses related to the issuance were being
amortized over the two-year redemption period, but all unamortized offering
expenses were written off following exchange of the Sing Kung Preferred Shares
for Company’s Preferred Shares (Note 8).  Amortization expense for the
years-ended December 31, 2009 and 2008 of $131,667 and $68,333 respectively, and
is included in Financing and other costs in the accompanying Statements of
Operations and Comprehensive Income/(Loss).




As
described in Note 4, IAG shares in the amounts set forth in the table below were
exchanged for the Company’s Preferred Shares pursuant to the re-domestication
merger agreement.  The Company’s Preferred Shares are redeemable after
September 9, 2013 under circumstances not solely within the Company’s control
and are therefore classified as a liability.




Additional
Preferred shares are issuable by the Company upon the exercise of outstanding
warrants (Note 17).  No warrants were exercised as of December 31,
2009.


F-30


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)




16.
            Shareholders’
      Equity




As of
December 31, 2009, the Company was authorized to issue 100,000,000 common shares
having a par value of $0.0001 per share.  75,000,000 additional common
shares were subsequently authorized on March 22, 2010 but none have been issued
as of the date hereof (Note 27(c)).  In the recapitalization
accounting applicable to the acquisition of Sing Kung by CNC (Note 2), the
paid-in-capital and common shares held by the Sing Kung shareholders, have been
adjusted retroactively to reflect the recapitalization.  The effect of
these adjustments are summarized below:




CNC common shares issued to Sing Kung common
                            
                            Number of
                            
                            
                            Commonshareholders
      in the recapitalization pursuant to the:
                            
                            Shares
                            
                            
                            StockStock
      purchase agreement
                            
                            
                            19,843,412
                            
                            
                            $
                            1,984Exchange
      agreement
                            
                            
                            1,076,068
                            
                            
                            
                            108Total
                            
                            
                            20,919,480
                            
                            
                            $
                            2,092




Upon
consummation of the reverse acquisition of Sing Kung by CNC, 1,549,537 IAG
common shares were outstanding.  The conversion of IAG shares to CNC
shares resulted in the issuance of 286,774 CNC common shares after cancellation
of fractional shares.  This conversion had the effect of increasing
common stock by $29.  The adjustment to shareholders’ equity
associated with the reverse acquisition of IAG assets and liabilities is more
fully described in Note 5:




17.
            Warrants




The
Company has outstanding 5,750,000 warrants resulting from IAG’s IPO, each of
which entitles the holder to purchase from the Company 0.1850734 share of its
common stock and 0.8857955 share of the Company’s Preferred Stock at an exercise
price of $5.00.  The outstanding warrants expire September 4,
2011.  If all warrants were exercised and no cancellations occurred as
a result of limitations on fractional share issuances, the following number of
the Company’s common and Preferred Shares would be issuable:




Number of CNCSharesCNC
      shares issuable upon full exercise of outstanding warrantsClass
      A Preferred Shares
                      
                      
                      5,093,324Common
      shares
                      
                      
                      1,064,172





No
warrants have been exercised as of the date hereof.


F-31


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)




18.
            Shares
      outstanding, basic and dilutive




Basic
earnings per share is computed on the basis of the weighted average number of
shares of common stock outstanding during the period.  For historical
periods presented for comparative purposes, the number of shares outstanding
reflects the retroactive adjustment of the shares held by the Sing Kung
shareholders to reflect the recapitalization as if it occurred from the earliest
date presented.  Diluted earnings per share is computed on the basis
of weighted average number of shares of common stock plus the effect of dilutive
shares issuable upon conversion of the Preferred Stock then outstanding and on
the terms in effect during the period.  The components of basic and
diluted earnings per share are as follows:





Year-ending
                          December 31,
                          2009
                        
                        
                        Year-ending
                          December 31,
                          2008
                        
                        
                        Period from
                          January 18, 2007,
                          (inception) to
                          December 31,
                          2007Basic
      weighted average outstanding common shares
                        
                        
                        21,009,038
                        
                        
                        
                        20,919,480
                        
                        
                        
                        20,919,480Dilutive
      effect of conversion of Preferred shares
                        
                        
                        -
                        
                        
                        
                        2,915,000
                        
                        
                        
                        -Dilutive
      weighted average outstanding shares
                        
                        
                        21,009,038
                        
                        
                        
                        23,834,480
                        
                        
                        
                        20,919,480





The
warrants are not included in the computation of diluted earnings per share
because they are anti-dilutive.









19.
            Revenues




Revenues
are as follows:




Year-ending
                        December
                        31, 2009
                      
                      
                      Year-ending
                        December 31,
                        2008
                      
                      
                      Period from
                        January 18
                        (inception) to
                        December 31,
                        2007Revenues
      from BT Projects
                      
                      
                      -
                      
                      
                      
                      4,892,204
                      
                      
                      
                      -




All
revenues from BT projects during 2008 were earned in connection with the 1st
(Renewal) Phase of the Jiaohe Project that was accepted by the People's
Government of Jiaohe City in December 2008.  Because of joint
liability with consortium members and limitations on the Company’s direct
responsibility for key aspects of project fulfillment and management, revenue is
recognized according to the Net Method.  The total value of the
accepted phase of the project to the consortium was approximately $15.4
million.  The amount related to this phase of the project (none of
which has been paid by the customer) that remained due to the consortium as of
December 31, 2009 is recorded on the balance sheet as “Net investment in BT
Projects” (Note 8). No projects were passed the acceptance phase during the
period ended December 31, 2007 or the year-ended December 31, 2009, so no
revenue was recorded during those periods.  No estimated losses were
identified for any of the projects in progress during 2007, 2008 or
2009.


F-32


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)




20.
            Cost
      of revenue




Because
revenue for the completed phase of the Jiaohe project is recognized in
accordance with the Net Method, costs associated with the contract revenue
recognized during the year include only the Company’s direct costs and not costs
incurred by the consortium members for project construction.  These
direct contract costs include the Group’s pro rata share of business taxes
related to the portion of the Jiaohe project completed during
2008.  Total costs incurred by subcontractors in connection with the
portion of the Jiaohe Project completed during 2008 were approximately $10.5
million. No project expenses were recorded during the period ended December 31,
2007 or during the year-ended December 31, 2009.




21.
            Pension
      and Other Postretirement Benefit
Plans




Full time
employees of the Company's PRC entities participate in a government mandated
multi-employer defined contribution plan pursuant to which certain pension
benefits, medical care, unemployment insurance, employee housing fund and other
welfare benefits are provided to employees.  PRC labor regulations
require the Company to accrue for and make contributions under the plans based
on certain percentages of the employees' salaries.  Costs for pension
and employee benefits for the years ended December 31, 2009, 2008 and 2007 were
$2,018, $1,549 and nil, respectively.




The Group
has no other obligation to make payments in respect of retirement benefits of
its employees.




22.
            Commitments
      and Contingencies




On
December 9, 2008, CCI consummated its purchase of SNC.  The purchase
terms provide for a contingent amount of up to RMB5.0 million (approximately
$727,611) for taxes actually paid by the SNC shareholders arising from the
transaction.  (Refer to Note 6).  According to statutory tax
rate of 20% applicable to this type of transaction, the Company recorded a
contingent payable of RMB3.2 million (approximately $461,742), which has been
recognized in the cost of SNC acquisition.




The audit
committee of the Board has commenced a review of certain past payments and
contract arrangements of Sing Kung and its subsidiaries made to third parties
and parties related to its former shareholders. The investigation is being
supported by independent legal counsel.  The internal investigation is
ongoing and the Company expects to incur material expenses to complete it. There
is no assurance that the findings of the investigation will not lead to a
requirement to make historical financial statement adjustments, which could be
material.




In the
course of the investigation, it has been discovered that one Sing Kung’s vendors
has disputed the amounts owed to it by the Company and its subsidiaries in
connection with the completion of the Jiaohe Project.  The claims
asserted amount to approximately RMB 4.5 million
($660,000).   Although the Company has not received formal notice
of a legal claim, management is currently reviewing the basis for the vendor’s
assertions.  To this point, we have not recorded in our consolidated
financial statements an adjustment to the amounts owed to the vendor in
connection with this claim.


F-33


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)




In
addition to the above matter, the Group, in the normal course of business, is
subject to legal proceedings and claims.  As of December 31, 2009 the
Group’s management has evaluated all such matters and none were then
outstanding.  In June 2010 one of the Company’s subsidiaries based in
the P.R.C. was served with a law suit related to the failure of a supplier to
pay the party bringing the suit.  The Company believes that it was
served improperly and that neither it nor any of its subsidiaries has any
financial responsibility in this matter.  The Company intends to
defend itself vigorously against this action.  In the opinion of
management, the ultimate disposition of these matters will not have a material
adverse effect on the Group’s financial position, liquidity or results of
operations.




There are
no other contingencies and commitments other than those disclosed in other notes
to the consolidated financial statements.




23.
            Income
      Taxes




(a)
            Income
      tax expense:




The
entities within the Company file separate tax returns in the respective tax
jurisdictions in which they are domiciled or operate.




British
Virgin Islands




CNC and
Sing Kung are not subject to an income tax in the British Virgin
Islands.




PRC




CNC being
established in the PRC was subject to the PRC Enterprise Income Tax ("EIT") at
33% prior to January 1, 2008.  In March 2007, the PRC government
enacted the PRC Enterprise Income Tax Law, or the New EIT Law, and promulgated
related regulation, Implementing Regulations for the PRC Enterprise Income Tax
Law, which became effective from January 1, 2008.  The PRC Enterprise
Income Tax Law, among other things, imposes a unified income tax rate 25% for
both domestic and foreign invested enterprises registered in the
PRC.  The New EIT Law provides a grandfathering on tax holidays which
were granted under the then effective tax laws and regulations.




CNC has
been approved as a "foreign invested enterprise" and granted a preferential tax
treatment, i.e. a tax holiday of full exemption from EIT for the two calendar
years ended December 31, 2008 and 2009 and a 50% reduction on its EIT rate for
the ensuing three calendar years ending December 31, 2010 through
2012.


F-34


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)




The
Company’s income tax expense consists of the following:




For the periodfrom January 18,2007 (inception)throughFor the year ended December 31,
                      
                      
                      December 31,2009
                      
                      
                      2008
                      
                      
                      2007PRC
      income tax:current
                      
                      $
                      7,750
                      
                      
                      $
                      114,695
                      
                      
                      $
                      -deferred
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Total
                      
                      $
                      7,750
                      
                      
                      $
                      114,695
                      
                      
                      $
                      -




A
reconciliation of the expected income tax expense to the actual income tax
expense is as follows:


For the periodfrom January 18,2007 (inception)throughFor the year ended December 31,
                            
                            
                            December31,2009
                            
                            
                            2008
                            
                            
                            2007(Loss)/income
      before tax
                            
                            $
                            (4,285,174
                            )
                            
                            $
                            3,884,834
                            
                            
                            $
                            (9,961
                            )PRC
      tax at statutory income tax rates
                            
                            
                            (1,071,293
                            )
                            
                            
                            971,208
                            
                            
                            
                            (2,490
                            )Expected
      income tax expense calculated at PRC
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -statutory
      tax rates
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Under
      provision in prior year
                            
                            
                            7,750
                            
                            
                            
                            -
                            
                            
                            
                            -Tax
      effect not recognised
                            
                            
                            1,071,293
                            
                            
                            
                            (856,513
                            )
                            
                            
                            2,490Actual
      income tax expense
                            
                            $
                            7,750
                            
                            
                            $
                            114,695
                            
                            
                            $
                            -




As of
December 31, 2009 and 2008, the Company did not have any significant temporary
differences and carry forwards that may result in deferred tax. The Company has
analyzed the tax positions taken or expected to be taken in its tax filings and
has concluded it has no material liability related to uncertain tax positions or
unrecognized tax benefits. The Company classifies interest and/or penalties
related to income tax matters in income tax expense. For the years ended
December 31, 2009 and 2008, the Company has not recognized any amount of
interest and penalties related to uncertain tax positions. The Company does not
anticipate any significant increases or decreases to its liability for
unrecognized tax benefits within the next 12 months.




The New
EIT Law also imposes a withholding tax of 10% unless reduced by a tax treaty,
for dividends distributed by a PRC-resident enterprise to its immediate holding
company outside the PRC for earnings accumulated beginning on January 1, 2008
and undistributed earnings generated prior to January 1, 2008 are exempt from
such withholding tax. The Company has not provided for income taxes on
accumulated earnings of its PRC subsidiary as of December 31, 2009 because these
earnings are intended to be reinvested indefinitely in this jurisdictions. It is
not practicable to estimate the amount of additional taxes that might be payable
on such undistributed earnings.


F-35


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)




According
to the PRC Tax Administration and Collection Law, the statute of limitations is
three years if the underpayment of taxes is due to computational or other errors
made by the taxpayer or the withholding agent.  The statute of
limitations extends to five years under special circumstances. In the case of
transfer pricing issues, the statute of limitations is ten years. There is no
statute of limitations in the case of tax evasion. Accordingly, for the years
ended December 31, 2007 through 2009 the income tax returns of the Company’s
subsidiaries domiciled in the PRC are open to examination by the PRC state and
local tax authorities.




(b)
            Tax
      receivable:




The tax
receivable of $189,026 reflected on the balance sheet as of December 31, 2009
reflects the amount due to the company after the filing of the final U.S.
Federal tax return of IAG.  Such amount was subsequently received by
the Company.  Following the date of the re-domestication merger
(September 9, 2009) the Company is no longer subject to U.S. tax
jurisdiction.




(c)
            Taxes
      payable :





The
current portion of income taxes payable are as follows:





As of December 31,2009
                            
                            
                            2008Income
      tax payable
                            
                            $
                            9,147
                            
                            
                            $
                            11,912Total
                            
                            $
                            9,147
                            
                            
                            $
                            11,912




The
current income tax payable at December 31, 2009 was all related to state taxes
payable by IAG pursuant to its final U.S. returns.  The current income
tax payable at December 31, 2008 was all related to taxes payable in the
PRC.





The
non-current portion of taxes payable, all of which are applicable to the PRC,
are as follows:




As of December 31,2009
                      
                      
                      2008Income
      tax payable
                      
                      $
                      124,474
                      
                      
                      $
                      116,724Total
                      
                      $
                      124,474
                      
                      
                      $
                      116,724


F-36


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)




24.
            Comprehensive
      (Loss)/Income




Comprehensive
(loss)/income consists of the following for the years ending December 31, 2009
and 2008 and period from January 18 (inception) to December 31,
2007:




Year-ending
                          December 31,
                          2009
                        
                        
                        Year-ending
                          December 31
                          2008
                        
                        
                        Period from
                          January 18, 2007
                          (inception) to
                          December 31,
                          2007Net
      (loss)/income attributable to common stock
                        
                        $
                        (4,285,174
                        )
                        
                        $
                        3,770,139
                        
                        
                        $
                        (9,961
                        )Other
      comprehensive income:Foreign
      currency translation adjustments
                        
                        
                        284,589
                        
                        
                        
                        278,593
                        
                        
                        
                        -Total
      comprehensive (loss)/income
                        
                        $
                        (4,000,585
                        )
                        
                        $
                        4,048,732
                        
                        
                        $
                        (9,961
                        )




25.
            Operating
      Lease Commitment




The
Company is obligated under an operating lease for its administrative facilities
in Changchun, PRC. All other lease obligations are month-to-month.  As
of December 31, 2009, the total future minimum lease payments under the
non-cancelable operating lease are as follows:




Payments due by periodLess than 1
                                
                                
                                
                                
                                
                                
                                
                                
                                More thanTotal
                                
                                
                                year
                                
                                
                                1-3 years
                                
                                
                                3-5 years
                                
                                
                                5 yearsOperating
      lease obligations
                                
                                $
                                1,288
                                
                                
                                $
                                1,288
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -


Although
the Company does not have long-term arrangements to accommodate its
administration and other operational needs, management believes that it can find
suitable office accommodations on a short-term basis.




26.
            Certain
      risks and concentrations




(a)
            Credit
      risk – major customers




Financial
instruments that expose the Group to concentrations of credit risk primarily
consist of cash and Net Investments in BT Projects. The maximum amount of loss
due to credit risk in the event of other parties failing to perform their
obligations is represented by the carrying amount of each financial asset as
stated in the consolidated balance sheet.




As of
December 31, 2009 and 2008, most of the Group’s cash included bank deposits in
accounts maintained within the PRC where there is currently no rule or
regulation in place for obligatory insurance to cover bank deposits in the event
of bank failure. However, the Company has not experienced any losses in such
accounts and believes it is not exposed to any significant risks on its cash in
bank accounts.




The Group
performs ongoing credit evaluations of its customers’ financial condition and
historically has not experienced any significant collectability problem. As of
December 31, 2009, two customers accounted for 100% of the Group’s accounts
receivable.


F-37


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)




(b)
            Foreign
      operations




Substantially
all of the Company’s operations are carried out and its long-lived assets are
located within the PRC. Accordingly, the Company’s business, financial condition
and results of operations may be influenced by the political, economic and legal
environments in the PRC. Among other risks, the Company’s operations in the PRC
are subject to the risks of restrictions on transfer of funds, changing taxation
policies, foreign exchange restrictions, an uncertain legal framework and
political conditions and the potential imposition of governmental regulations
that could be adverse to the Company.




27.
            Subsequent
      events




(a)
            Suspension
      of Operations in the P.R.C.




Due to a
lack of liquidity with which to carry on its operations in China, the Company’s
board approved the discontinuance of infrastructure business operations in
January 2010.  Except for selected accounting personnel, all employees
involved in the infrastructure development business in the PRC were terminated,
work on ongoing BT Projects has been discontinued and negotiations are in
progress to assign those projects to unrelated third parties for assumption of
liabilities.  Consequently, no revenue from the infrastructure
development business is anticipated during 2010.  A final
determination regarding whether or not to restart the infrastructure business in
the PRC will be made later in 2010 based on the availability of capital and the
company’s success in collecting amounts due from customers.





(b)
            BT
      Project Financing




During
January 2010 the Company arranged, and the board unanimously approved, a credit
facility with a private individual for RMB 24.0 million (approximately $3.5
million) at an annual interest rate of 18%.  Interest accrues
semi-annually and the final maturity date is February 8, 2011, at which time
principal and interest will be due in a single payment.  The loan is
non-recourse to the Company, but SNC, CCI and Sing Kung are all obligors under
the loan agreement, and SNC’s remaining interests in the Changchun Project were
pledged as collateral for the loan.  RMB 18.0 million (approximately
$2.6 million) was drawn on the facility in February 2010, and all proceeds were
used to pay obligations to Jiaohe Project creditors.  Final settlement
with the subcontractor is still being negotiated, but the Company expects
resolution prior to the maturity date of the credit facility and believes that
the remaining availability under the credit facility will be sufficient to
satisfy its obligation to the subcontractor.  The receipt of the first
installment of the Jiaohe contract or a payment from the Changchun project is
expected to be received prior to the maturity date of the credit facility, and
the Company intends to utilize the proceeds to satisfy its obligations under the
facility.


F-38


CNC
DEVELOPMENT LTD.


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in U.S. Dollars)





(c)
            Working
      Capital Financing




The
requisite majority of the board unanimously authorized the Company to conduct a
financing in February 2010 (the “Working Capital Facility”).  Prior to
the end of March, 2010, $600,000 of the approved financing was subscribed by
certain of the Company’s Class A Preferred Shareholders.  The term of
the financing ends on the earliest to occur of (i) the first anniversary of the
initial funding of the loan (February 22, 2010); (ii) the collection of
US$4,000,000 or more of BT Project Receivables (net of costs and related
payments) by its subsidiaries; (iii) an event of default; or (iv) the
consummation of an acquisition of a business enterprise having a value greater
than US$10 million or a merger transaction.  The loan amount is
convertible by each Lender into Class B Preferred shares at any time and
conversion is mandatory under certain circumstances.  The loan accrues
interest at the rate of 3% per month. In conjunction with the authorization of
the Working Capital Facility, the requisite majority of the Company’s Board also
approved amendments to the Company’s Memorandum and Articles of Association that
increased the authorized common shares from 100,000,000 to 175,000,000 and
increased the authorized Preferred Shares from 25,000,000 to 35,000,000,
including 10,000,000 shares of a newly authorized class of Preferred
Shares,  the “Class B Preferred Shares” having the following rights
and preferences:




-
            a
      liquidation preference pari pasu with the Company’s Class A Preferred
      shares




-
            a
      conversion ratio of 10 common shares for each Class B Preferred
      Share.




As of
August 17, 2010, the Company’s cash position is believed to be sufficient to
sustain operations beyond December 31, 2010 and no holders of the notes issued
in conjunction with the funding of the Working Capital Facility had converted
the notes to Class B shares.


F-39