**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-Q**




**x** **QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF**


**THE
      SECURITIES EXCHANGE ACT OF 1934**





**For
      the quarterly period ended June 30, 2008**





**OR**





** ̈**  **TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**


**SECURITIES
      EXCHANGE ACT OF 1934**





**Commission
      File Number**


**001-33709**





**CHINA
      ARCHITECTURAL ENGINEERING, INC.**


*(Exact
      name of small business issuer as specified in its charter)*





**Delaware**
              *(State
                or other jurisdiction of incorporation*
              *or
                organization)*
            **51-05021250**
              *(I.R.S.
                Employer Identification*
              *No.)***105
                Baishi Road, Jiuzhou West Avenue,**
              **Zhuhai,
                People’s Republic of China**
              *(Address
                of principal executive offices)*
            **519070**
              *(Zip
                Code)*





**0086-756-8538908**


*(Registrant’s
      telephone number, including area code)*





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




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





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





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




There
      were 51,885,446 shares outstanding of registrant’s common stock, par value
      $0.001 per share, as of July 31, 2008.







**CHINA
      ARCHITECTURAL ENGINEERING, INC.**


**FORM
      10-Q QUARTERLY REPORT**





**TABLE
      OF CONTENTS**





**Page**PART
                I - FINANCIAL INFORMATIONITEM
                1.
            FINANCIAL
                STATEMENTS
            1Unaudited
                Consolidated Balance Sheet as of June 30, 2008 and December 31,
                2007
            2Unaudited
                Interim Consolidated Statements of Income for the three and six months
                ended June 30, 2008 and 2007
            4Unaudited
                Interim Consolidated Statements of Cash Flows for the six months
                ended
                June 30, 2008 and 2007
            5Unaudited
                Consolidated Statements of Stockholders’ Equity from January 1, 2008 to
                June 30, 2008
            6Notes
                to the Unaudited Interim Consolidated Financial Statements
            7ITEM
                2.
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATION
            27ITEM
                3.
            QUANTITATIVE
                AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
            34ITEM
                4.
            CONTROLS
                AND PROCEDURES
            34PART
                II - OTHER INFORMATION
            36ITEM
                1.
            LEGAL
                PROCEEDINGS
            36ITEM 1A.
            RISK
                FACTORS
            36ITEM
                2.
            UNREGISTERED
                SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
            36ITEM
                3.
            DEFAULTS
                UPON SENIOR SECURITIES
            36ITEM
                4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS
            36ITEM
                5.
            OTHER
                INFORMATION
            36ITEM
                6.
            EXHIBITS
            37SIGNATURES
            38





**PART
      I - FINANCIAL INFORMATION**





**ITEM
      1.**  **FINANCIAL
      STATEMENTS**





The
      accompanying unaudited financial statements have been prepared in accordance
      with accounting principles generally accepted in the United States of America
      for interim financial information and with the instructions to Form 10-Q.
      Accordingly, they do not include all of the information and footnotes required
      by generally accepted accounting principles for complete financial statements.
      The accompanying unaudited financial statements reflect all adjustments that,
      in
      the opinion of management, are considered necessary for a fair presentation
      of
      the financial position, results of operations, and cash flows for the periods
      presented. The results of operations for such periods are not necessarily
      indicative of the results expected for the full fiscal year or for any future
      period. The accompanying unaudited financial statements should be read in
      conjunction with the audited financial statements of China Architectural
      Engineering, Inc. as contained in its Annual Report for the fiscal year ended
      December 31, 2007 on Form 10-K and Form 10-K/A, as filed with the Securities
      and
      Exchange Commission on March 31, 2008 and April 29, 2008,
      respectively.





**CHINA
      ARCHITECTURAL ENGINEERING, INC.**





**UNAUDITED
      CONSOLIDATED BALANCE SHEETS**


**AS
      OF JUNE 30, 2008 AND DECEMBER 31, 2007**


**(STATED
      IN US DOLLARS)**





**June 30,**
              **2008**
            
            **December 31, 2007****ASSETS*****Current assets***Cash
                and cash equivalents
            
            $
            17,763,812
            
            $
            4,040,168Restricted
                cash
            
            
            96,808
            
            
            595,016Contract
                receivables, net
            
            
            66,379,142
            
            
            13,047,559Costs
                and earnings in excess of billings
            
            
            25,957,723
            
            
            57,488,693Job
                disbursements advances
            
            
            -
            
            
            2,454,106Tender
                and other site deposits
            
            
            -
            
            
            83,046Other
                receivables
            
            
            13,806,200
            
            
            6,640,865Inventories
            
            
            379,441
            
            
            528,743Deferred
                income taxes
            
            
            2,383
            
            
            -Other
                current assets
            
            
            1,164,204
            
            
            109,533Total
                current assets
            
            
            125,549,713
            
            
            84,987,729***Non-current
                assets***Plant
                and equipment, net
            
            
            3,410,794
            
            
            2,582,554Intangible
                Assets
            
            
            5,130
            
            
            70,386Organization
                cost
            
            
            -
            
            
            92,741Goodwill
            
            
            7,995,896
            
            
            7,995,896Other
                non-current asset
            
            
            -
            
            
            7,505**TOTAL
                ASSETS**
            
            $
            136,961,533
            
            $
            95,736,811**LIABILITIES
                AND STOCKHOLDERS’ EQUITY*****Current
                liabilities***Short-term
                bank loans
            
            $
            1,155,390
            
            $
            2,578,550Accounts
                payable
            
            
            24,570,686
            
            
            18,737,771Billings
                in excess of costs and earnings
            
            
            2,029,965
            
            
            757,079Amount
                due to shareholder
            
            
            1,319,991
            
            
            1,334,856Other
                payables
            
            
            6,519,213
            
            
            9,193,186Income
                tax payable
            
            
            2,685,582
            
            
            2,673,643Business
                and other taxes payable
            
            
            3,281,436
            
            
            3,538,336Other
                Accrual
            
            
            1,282,048
            
            
            499,684Total
                current liabilities
            
            
            42,844,311
            
            
            39,313,105





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


2


**CHINA
      ARCHITECTURAL ENGINEERING, INC.**





**UNAUDITED
      CONSOLIDATED BALANCE SHEETS (Continued)**


**AS
      OF JUNE 30, 2008 AND DECEMBER 31, 2007**


**(STATED
      IN US DOLLARS)**





**June 30,**
              **2008**
            
            **December 31, 2007*****Non-current
                liabilities***Long
                term bank loans
            
            $
            1,839,440
            
            $
            443,881Convertible
                bond payable, net
            
            
            24,924,040
            
            
            3,465,741Minority
                interest
            
            
            20,706
            
            
            49,482**TOTAL
                LIABILITIES**
            
            $
            69,628,497
            
            $
            43,272,209**STOCKHOLDERS’
                EQUITY**Preferred
                stock, $0.001 par value, 10,000,000 shares authorized, 0 shares issued
                and
                outstanding at June 30, 2008 and December 31, 2007; Common stock,
                $0.001
                par value, 100,000,000 shares authorized, 51,885,446 and 51,783,416
                shares
                issued and outstanding at June 30, 2008 and December 31, 2007,
                respectively
            
            $
            51,886
            
            $
            51,784Additional
                paid in capital
            
            
            21,656,684
            
            
            23,665,558Statutory
                reserves
            
            
            3,040,595
            
            
            3,040,595Accumulated
                other comprehensive income
            
            
            6,018,534
            
            
            1,892,829Retained
                earnings
            
            
            36,565,337
            
            
            23,813,83667,333,036
            
            
            52,464,602**TOTAL
                LIABILITIES AND****STOCKHOLDERS’
                EQUITY**
            
            $
            136,961,533
            
            $
            95,736,811





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


3


**CHINA
      ARCHITECTURAL ENGINEERING, INC.**





**UNAUDITED
      INTERIM CONSOLIDATED STATEMENTS OF INCOME**


**FOR
      THE THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 2008 AND
      2007**


**(STATED
      IN US DOLLARS)**





**Three Months Ended**
              **June 30,**
            
            **Six Months Ended**
              **June 30,****2008**
            
            **2007**
            
            **2008**
            
            **2007**Contract
                revenues earned
            
            $
            41,380,189
            
            $
            19,453,645
            
            $
            66,729,495
            
            $
            33,883,737Cost
                of contract revenues earned
            
            
            (28,038,332
            )
            
            (11,961,163
            )
            
            (44,942,086
            )
            
            (23,493,770
            )Gross
                profit
            
            $
            13,341,857
            
            $
            7,492,482
            
            $
            21,787,409
            
            $
            10,389,967Selling,
                general and administrative expenses
            
            
            (4,590,147
            )
            
            (1,689,696
            )
            
            (7,590,572
            )
            
            (2,564,071
            )Income
                from operations
            
            $
            8,751,710
            
            $
            5,802,786
            
            $
            14,196,837
            
            $
            7,825,896Interest
                income
            
            
            35,242
            
            
            -
            
            
            42,205
            
            
            3,637Interest
                expense
            
            
            (1,197,889
            )
            
            (572,379
            )
            
            (1,532,026
            )
            
            (576,459
            )Other
                income
            
            
            39,440
            
            
            -
            
            
            150,602
            
            
            -Income
                before taxation
            
            $
            7,628,503
            
            $
            5,230,407
            
            $
            12,857,618
            
            $
            7,253,074Income
                tax
            
            
            (69,613
            )
            
            (937,630
            )
            
            (116,980
            )
            
            (1,264,678
            )Equity
                loss and minority interests
            
            
            18,893
            
            
            (14,277
            )
            
            10,863
            
            
            (14,277
            )Net
                income
            
            $
            7,577,783
            
            $
            4,278,500
            
            $
            12,751,501
            
            $
            5,974,119Earnings
                per share:Basic
            
            $
            0.15
            
            $
            0.09
            
            $
            0.25
            
            $
            0.12Diluted
            
            $
            0.14
            
            $
            0.08
            
            $
            0.24
            
            $
            0.11Weighted
                average shares outstanding:Basic
            
            
            51,812,477
            
            
            50,000,000
            
            
            51,832,946
            
            
            50,000,000Diluted
            
            
            55,549,949
            
            
            59,588,586
            
            
            55,550,770
            
            
            54,794,293





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


4


**CHINA
      ARCHITECTURAL ENGINEERING, INC.**





**UNAUDITED
      INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS**


**FOR
      THE SIX-MONTH PERIODS ENDED JUNE 30, 2008 AND 2007**


**(STATED
      IN US DOLLARS)**





**Six Months Ended June 30,****2008**
            
            **2007*****Cash
                flows from operating activities***Net
                income
            
            $
            12,751,501
            
            $
            5,974,119Minority
                interest
            
            
            (10,863
            )
            
            (11,299
            )Depreciation
                and amortization expense
            
            
            398,241
            
            
            99,350Loss
                on disposal of equipments
            
            
            10,383
            
            
            -Deferred
                income taxes
            
            
            (2,383
            )
            
            -Share-based
                payment
            
            
            425,748
            
            
            -Amortization
                expense on convertible bond
            
            
            615,061
            
            
            479,965Decrease
                in restricted cash
            
            
            498,208
            
            
            154,652Decrease
                in security deposit
            
            
            -
            
            
            80,446(Increase)
                /decrease in inventories
            
            
            149,302
            
            
            (356
            )Increase
                in receivables
            
            
            (27,306,892
            )
            
            (10,851,500
            )Decrease
                in other assets
            
            
            100,246
            
            
            -Increase/(decrease)
                in payables
            
            
            4,969,232
            
            
            (1,474,440
            )Net
                cash used in operating activities
            
            $
            (7,402,216
            )
            $
            (5,549,063
            )***Cash
                flows from investing activities***Purchases
                of plant and equipment
            
            
            (906,885
            )
            
            (514,028
            )Net
                cash used in investing activities
            
            $
            (906,885
            )
            $
            (514,028
            )***Cash
                flows from financing activities***Repayments
                from short-term loans
            
            $
            (1,423,160
            )
            $
            -Proceeds
                from long-term loans
            
            
            1,444,502
            
            
            211,807Repayments
                of long-term loans
            
            
            (48,944
            )
            
            -Repayments
                of amount due to shareholder
            
            
            (14,865
            )
            
            (1,735
            )Issuance
                of convertible bond and warrants
            
            
            19,500,000
            
            
            9,700,000Net
                cash provided by financing activities
            
            $
            19,457,533
            
            $
            9,910,072Net
                increase in cash and cash equivalents
            
            $
            11,148,432
            
            $
            3,846,981Effect
                of foreign currency translation on cash and cash
                equivalents
            
            
            2,575,212
            
            
            45,823Cash
                and cash equivalents - beginning of period
            
            
            4,040,168
            
            
            2,115,966Cash
                and cash equivalents - end of period
            
            $
            17,763,812
            
            $
            6,008,770***Other
                supplementary information:***Cash
                paid during the period for:Interest
                paid
            
            $
            477,153
            
            $
            56,771Income
                tax paid
            
            $
            162,895
            
            $
            760,170





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


5


**CHINA
      ARCHITECTURAL ENGINEERING, INC.**


**UNAUDITED
      CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY**


**FOR
      THE PERIOD FROM JANUARY 1, 2008 TO JUNE 30, 2008**


**(STATED
      IN US DOLLARS)**





**Total**
              **Number of
                shares**
            
            **Commonstock**
            
            **Additional**
              **paid in capital**
            
            **Statutory
                reserves**
            
            **Accumulated
                other comprehensive income**
            
            **Retained
                earnings**
            
            **Total**Balance,
                January 1, 2008
            
            
            51,783,416
            
            
            51,784
            
            
            23,665,558
            
            
            3,040,595
            
            
            1,892,829
            
            
            23,813,836
            
            
            52,464,602Net
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            12,751,501
            
            
            12,751,501Foreign
                currency translation adjustment
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            4,125,705
            
            
            
            
            
            4,152,705Total
                comprehensive income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            16,904,206Adjustment
                of additional Paid-in Capital from warrants and beneficial conversion
                feature
            
            
            
            
            
            
            
            
            (2,611,095
            )
            
            
            
            
            
            
            
            
            
            
            (2,611,095
            )Issuance
                of new shares
            
            
            102,030
            
            
            102
            
            
            602,221
            
            
            
            
            
            
            
            
            
            
            
            602,323Balance,
                June 30, 2008
            
            
            51,885,446
            
            
            51,886
            
            
            21,656,684
            
            
            3,040,595
            
            
            6,018,534
            
            
            36,565,337
            
            
            67,333,036





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


6




**CHINA
        ARCHITECTURAL ENGINEERING, INC.**
 **NOTES
        TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS**
 **(Stated
        in US Dollars)**
 
 **1.**
              **ORGANIZATION
                  AND****PRINCIPAL
                  ACTIVITIES**
 
 China
        Architectural Engineering, Inc. (the “Company”) formerly SRKP 1, Inc., was
        incorporated in the State of Delaware, United State on March 16, 2004. The
        Company’s common stock was listed for trading on the American Stock Exchange on
        September 28, 2007.
  On
        October 17, 2006, the Company underwent a reverse-merger with Full Art
        International Ltd. (a Hong Kong company) and its four wholly-owned subsidiaries
        as detailed in Note *2(b)*  *Consolidation* below,
        involving an exchange of shares whereby the Company issued an aggregate of
        43,304,125 shares of common stock in exchange for all of the issued and
        outstanding shares of Full Art. The Company was the accounting acquiree.
        For
        financial reporting purposes, this transaction is classified as a
        recapitalization of China Architectural Engineering, Inc. and the historical
        financial statements of Full Art.
  The
        Company through its subsidiaries conducts its principal activity as building
        envelope systems contractors, specializing in the design, engineering,
        fabrication and installation of curtain wall systems, roofing systems, steel
        construction systems and eco-energy saving building conservation systems,
        throughout China, Australia, Southeast Asia, the Middle East, and the United
        States.
  The
        Company's work is performed under cost-plus-fee contracts, fixed-price
        contracts, and fixed-price contracts modified by incentive and penalty
        provisions. These contracts are undertaken by the Company or its wholly owned
        subsidiaries. The length of the Company's contracts varies but is typically
        about one to two years.
  **2.**
              **SUMMARY
                  OF SIGNIFICANT ACCOUNTING
                  POLICIES**
 
 *(a)*
              *Method
                  of accounting*
 
 The
        Company maintains its general ledger and journals with the accrual method
        accounting for financial reporting purposes. The consolidated financial
        statements and notes are representations of management. Accounting policies
        adopted by the Company conform to generally accepted accounting principles
        in
        the United States of America and have been consistently applied in the
        presentation of consolidated financial statements, which are compiled on
        the
        accrual basis of accounting.
 
 *(b)*
              *Consolidation*
 
 The
        consolidated financial statements include the accounts of the Company and
        its
        twelve subsidiaries. Significant inter-company transactions have been eliminated
        in consolidation. The consolidated financial statements include 100% of the
        assets and liabilities of these majority-owned subsidiaries, and the ownership
        interests of minority investors are recorded as minority interests.
 
 7
  The
        Company owned the subsidiaries since its reverse-merger on October 17, 2006.
        As
        of June 30, 2008, detailed identities of the consolidating subsidiaries are
        as
        follows: -
 
 **Name of Company**
              
              **Place of**
                **Incorporation**
              
              **Attributable Equity interest**
                **%**Full Art International Limited
              
              
              Hong
                  Kong
              
              
              100Zhuhai
                  King Glass Engineering Co., Ltd.
              
              
              PRC
              
              
              100Zhuhai
                  King General Glass Engineering Technology Co., Ltd.
              
              
              PRC
              
              
              100King
                  General Engineering (HK) Limited
              
              
              Hong
                  Kong
              
              
              100KGE
                  Building System Limited
              
              
              Hong
                  Kong
              
              
              100KGE
                  Australia Pty Limited
              
              
              Australia
              
              
              55Zhuhai
                  Xiangzhou District Career Training School
              
              
              PRC
              
              
              72Techwell
                  Engineering Limited
              
              
              Hong
                  Kong
              
              
              100Techwell
                  International Limited
              
              
              Macau
              
              
              100Techwell
                  Building System (Shenzhen) Co., Ltd.
              
              
              PRC
              
              
              100CAE
                  Building Systems, Inc.
              
              
              USA
              
              
              100China
                  Architectural Engineering (Shenzhen) Co., Ltd.
              
              
              PRC
              
              
              100
 
 *(c)*
              *Use
                  of estimates*
 
 The
        preparation of the consolidated financial statements in conformity with
        generally accepted accounting principles in the United States of America
        requires management to make estimates and assumptions that affect the reported
        amounts of assets and liabilities and disclosure of contingent assets and
        liabilities at the date of the consolidated financial statements and the
        reported amounts of revenues and expenses during the reporting periods.
        Management makes these estimates using the best information available at
        the
        time the estimates are made; however, actual results could differ materially
        from those estimates.
 
 *(d)*
              *Plant
                  and equipment*
 
 Plant
        and
        equipment are carried at cost less accumulated depreciation. Depreciation
        is
        provided over their estimated useful lives, using the straight-line method.
        Estimated useful lives of the plant and equipment are as follows: -
 
 Building
              20
                  yearsMachinery
                  and equipment
              5
                  -
                  10 yearsFurniture
                  and office equipment
              5
                  yearsMotor
                  vehicle
              5
                  years
  The
        cost
        and related accumulated depreciation of assets sold or otherwise retired
        are
        eliminated from the accounts and any gain or loss is included in the statement
        of income. The cost of maintenance and repairs is charged to income as incurred,
        whereas significant renewals and betterments are capitalized.
  8
 
 *(e)*
              *Accounting
                  for the impairment of long-lived
                  assets*
 
 The
        long-lived assets held and used by the Company are reviewed for impairment
        whenever events or changes in circumstances indicate that the carrying amount
        of
        assets may not be recoverable. It is reasonably possible that these assets
        could
        become impaired as a result of technology or other industry changes.
        Determination of recoverability of assets to be held and used is by comparing
        the carrying amount of an asset to future net undiscounted cash flows to
        be
        generated by the assets.
  If
        such
        assets are considered to be impaired, the impairment to be recognized is
        measured by the amount by which the carrying amount of the assets exceeds
        the
        fair value of the assets. Assets to be disposed of are reported at the lower
        of
        the carrying amount or fair value less costs to sell.
 During
        the reporting periods, there was no impairment loss.
 
 *(f)*
              *Goodwill
                  and Intangible Assets*
 
 In
        accordance with Statement of Financial Accounting Standard 142 (“FAS 142”),
“Goodwill and Other Intangible Assets.” the Company does not amortize goodwill
        or intangible assets with indefinite lives.
 
 For
        goodwill and other intangible assets, impairment tests are performed annually
        and more frequently whenever events or changes in circumstances indicate
        goodwill carrying values exceed estimated reporting unit fair values. Upon
        indication that the carrying values of such assets may not be recoverable,
        the
        Company recognizes an impairment loss as a charge against current operations
        during the reporting periods, there was no impairment loss.
 
 *(g)*
              *Inventories*
 
 Inventories
        are raw materials, which are stated at the lower of weighted average cost
        or
        market value.
  *(h)*
              *Contracts
                  receivable*
 
 Contracts
        receivable from performing construction of industrial and commercial buildings
        are based on contracted prices. The company provides an allowance for doubtful
        debts, which is based upon a review of outstanding receivables, historical
        collection information, and existing economic conditions.
 
 *(i)*
              *Cash
                  and cash equivalents*
 
 The
        Company considers all highly liquid investments purchased with original
        maturities of three months or less to be cash equivalents.
 
 *(j)*
              *Restricted
                  cash*
 
 Restricted
        cash represents time deposit accounts to secure notes payable and bank
        loans.
  9
 
 *(k)*
              *Earnings
                  per share*
 
 The
        Company computes earnings per share (“EPS’) in accordance with Statement of
        Financial Accounting Standards No. 128, “Earnings per Share” (“SFAS No. 128”),
        and SEC Staff Accounting Bulletin No. 98 (“SAB 98”). SFAS No. 128
        requires companies with complex capital structures to present basic and diluted
        EPS. Basic EPS is measured as the income or loss available to common
        shareholders divided by the weighted average common shares outstanding for
        the
        period. Diluted EPS is similar to basic EPS but presents the dilutive effect
        on
        a per share basis of potential common shares (e.g., convertible securities,
        options, and warrants) as if they had been converted at the beginning of
        the
        periods presented, or issuance date, if later. Potential common shares that
        have
        an anti-dilutive effect (i.e., those that increase income per share or decrease
        loss per share) are excluded from the calculation of diluted EPS.
 
 The
        calculation of diluted weighted average common shares outstanding for the
        periods ended June 30, 2008 and 2007 is based on the estimate fair value
        of the
        Company’s common stock during such periods applied to warrants and options using
        the treasury stock method to determine if they are dilutive. The Convertible
        Bond is included on an “as converted “basis when these shares are
        dilutive.
 
 Components
        of basic and diluted earnings per share were as follows:
 
 **Three Months Ended June 30,**
              
              **Six Months Ended June 30,****2008**
              
              **2007**
              
              **2008**
              
              **2007**Net Income
              
              $
              7,577,783
              
              $
              4,278,500
              
              $
              12,751,501
              
              $
              5,974,119Add:
                  Interest expenses less income taxes
              
              
              276,774
              
              
              311,977
              
              
              487,688
              
              
              311,977Adjusted
                  income
              
              
              7,854,557
              
              
              4,590,477
              
              
              13,239,189
              
              
              6,286,096Basic
                  Weighted Average Shares Outstanding
              
              
              51,812,477
              
              
              50,000,000
              
              
              51,832,946
              
              
              50,000,000Dilutive
                  Shares:-Addition
                  to Common Stock from Conversion of Bonds
              
              
              2,857,143
              
              
              703,297
              
              
              2,857,143
              
              
              353,591-Addition
                  to Common Stock from Exercise of Warrants
              
              
              880,329
              
              
              8,885,289
              
              
              860,681
              
              
              4,440,702**Diluted
                  Weighted Average Outstanding Shares:**
              
              
              55,549,949
              
              
              59,588,586
              
              
              55,550,770
              
              
              54,794,293Earnings
                  Per Share-Basic
              
              $
              0.15
              
              $
              0.09
              
              $
              0.25
              
              $
              0.12-Diluted
              
              $
              0.14
              
              $
              0.08
              
              $
              0.24
              
              $
              0.11
 
 *(l)*
              *Revenue
                  and cost recognition*
  Revenues
        from fixed-price and modified fixed-price construction contracts are recognized
        on the percentage-of-completion method, measured by the percentage of costs
        incurred to date to estimated total cost for each contract.
 
 Contract
        costs include all direct material and labor costs and those indirect costs
        related to contract performance, such as indirect labor, supplies, tools,
        repairs, and depreciation costs.
 
 10
  Selling,
        general, and administrative costs are charged to expense as incurred. Provisions
        for estimated losses on uncompleted contracts are made in the period in which
        such losses are determined. Changes in job performance, job conditions, and
        estimated profitability, including those arising from contract penalty
        provisions, and final contract settlements may result in revisions to costs
        and
        income and are recognized in the period in which the revisions are determined.
        Profit incentives are included in revenues when their realization is reasonably
        assured. An amount equal to contract costs attributable to claims is included
        in
        revenues when realization is probable and the amount can be reliably
        estimated.
 
 Total
        estimated gross profit on a contract, being the difference between total
        estimated contract revenue and total estimated contract cost, is determined
        before the amount earned on the contract for a period can be determined.
 
 The
        measurement of the extent of progress toward completion is used to determine
        the
        amount of gross profit earned to date and that the earned revenue to date
        is the
        sum of the total cost incurred on the contract and the amount of gross profit
        earned.
 
 Earned
        revenue, cost of earned revenue, and gross profit are determined as follows:
        -
 
 a.
              Earned
                  Revenue is the amount of gross profit earned on a contract for
                  a period
                  plus the costs incurred on the contract during the
                  period.
 
 b.
              Cost
                  of Earned Revenue is the cost incurred during the period, excluding
                  the
                  cost of materials not unique to a contract that have not been used
                  for the
                  contract.
 
 c.
              Gross
                  Profit earned on a contract is computed by multiplying the total
                  estimated
                  gross profit on the contract by the percentage of completion. The
                  excess
                  of that amount over the amount of gross profit reported in prior
                  periods
                  is the earned gross profit that should be recognized in the income
                  statement for the current period.
 
 Change
        orders are common for the changes in specifications or design while claims
        are
        uncommon. Contract revenue and costs are adjusted to reflect change orders
        approved by the customer and the contractor regarding both scope and price.
        Recognition of amounts of additional contract revenue relating to claims
        is
        appropriate only if it is probable that the claim will result in additional
        contract revenue and if the amount can be reliably estimated.
 
 *(m)*
              *Income
                  taxes*
 
 The
        Company uses the accrual method of accounting to determine and report its
        taxable reduction of income taxes for the year in which they are available.
        The
        Company has implemented *Statement
        of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes.* The
        Company also adopted *FIN
        48, Accounting for Uncertainty in Tax Positions.*
 
 Income
        tax liabilities computed according to the United States, People’s Republic of
        China (PRC), Hong Kong SAR, Macau SAR and Australia tax laws are provided
        for
        the tax effects of transactions reported in the financial statements and
        consists of taxes currently due plus deferred taxes related primarily to
        differences between the basis of fixed assets and intangible assets for
        financial and tax reporting. The deferred tax assets and liabilities represent
        the future tax return consequences of those differences, which will be either
        taxable or deductible when the assets and liabilities are recovered or settled.
        Deferred taxes also are recognized for operating losses that are available
        to
        offset future income taxes. A valuation allowance is created to evaluate
        deferred tax assets if it is more likely than not that these items will either
        expire before the Company is able to realize that tax benefit, or that future
        realization is uncertain.
  11
  In
        respect of the Company’s subsidiaries domiciled and operated in China and Hong
        Kong, the taxation of these entities can be summarized as follows:
 
 ·
              Zhuhai
                  King Glass Engineering Co., Limited (“Zhuhai KGE”) and Zhuhai King General
                  Glass Engineering Technology Co., Limited (“Zhuhai KGGET”) are located in
                  Zhuhai and was subject to the PRC corporation income tax rate of
                  33% prior
                  to January 1, 2008. However, in accordance with the relevant tax
                  laws and
                  regulations of PRC, the Zhuhai local corporation income tax rate
                  was 15%
                  prior to January 1, 2008. Zhuhai KGGET is presently dormant, and
                  from the
                  time that it has its first profitable tax year, it is exempt from
                  corporate income tax for its first two years and is then entitled
                  to a 50%
                  tax reduction for the succeeding three years. Zhuhai KGGET has
                  enjoyed
                  this tax incentive in the previous years. On March 16, 2007, the
                  National
                  People’s Congress of China enacted a new PRC Enterprise Income Tax Law,
                  under which foreign invested enterprises and domestic companies
                  will be
                  subject to enterprise income tax at a uniform rate of 25%. The
                  new law has
                  become effective from January 1, 2008. During the transition period,
                  the
                  tax rate will be gradually increased starting in 2008 and be equal
                  to the
                  new tax rate in 2012. Zhuhai KGE is subject to 18% tax rate during
                  the
                  first half year of 2008 and anticipates that as a result of the
                  new EIT
                  law, its income tax provision will increase, which could adversely
                  affect
                  Zhuhai KGE’s financial condition and results of
                  operations.
 
 ·
              Full
                  Art International Limited, King General Engineering (HK) Limited,
                  and KGE
                  Building System Limited are subject to Hong Kong profits tax rate
                  of
                  17.5%.
 
 ·
              Techwell
                  Engineering Limited is subject to Hong Kong profits tax rate of
                  17.5%.
                  Techwell International Limited is a Macau registered company and
                  therefore
                  is subject to Macau profits tax rate of 12%. Techwell Building
                  System
                  (Shenzhen) Co. Limited is located in Shenzhen and is subject to
                  PRC
                  corporate income tax rate of 18% in 2008.
 
 ·
              KGE
                  Australia Pty Limited is subject to corporate income tax rate of
                  30%.
 
 ·
              The
                  Company is subject to United States Tax according to Internal Revenue
                  Code
                  Sections 951 and 957.
 
 ·
              The
                  Company, after a reverse-merger on October 17, 2006, revived to
                  be an
                  active business enterprise because of the operations with subsidiaries
                  in
                  China and Hong Kong. Based on the consolidated net income for the
                  year
                  ended December 31, 2007, the Company shall be taxed at the 35%
                  tax
                  rate.
 
 ·
              Techwell
                  Engineering Limited has established a branch in Dubai, which has
                  zero
                  corporate income tax rate.
 
 *(n)*
              *Advertising*
 
 The
        Company expensed all advertising costs as incurred. Advertising expenses
        included in selling expenses were $362,076 and $83,630 for the six months
        periods ended June 30, 2008 and 2007, respectively.
 
 (o)
              *Research
                  and development*
 
 All
        research and development costs are expensed as incurred. Research and
        development costs included in general and administrative expenses were $689,495
        and $25,477 for the six months periods ended June 30, 2008 and 2007,
        respectively .
 
 12
 
 *(p)*
              *Retirement
                  benefits*
 
 Retirement
        benefits in the form of contributions under defined contribution retirement
        plans to the relevant authorities are charged to the statements of income
        as
        incurred.
 
 *(q)*
              *Foreign
                  currency translation*
 
 The
        accompanying consolidated financial statements are presented in United States
        Dollars (USD). The functional currencies of the Company are Renminbi (RMB),
        Hong
        Kong Dollar (HKD), Macau Pacata (MOP), Australia Dollar (AUD), United Arab
        Emirate Dirham (AED) and USD. The consolidated financial statements are
        translated into USD from RMB, HKD, MOP, AUD and AED at June 30, 2008 exchange
        rates as to assets and liabilities and average exchange rates as to revenues
        and
        expenses. Capital accounts are translated at their historical exchange rates
        when the capital transactions occurred.
 
 **June 30,**
                **2008**
              
              **December 31,**
                **2007**
              
              **June 30,**
                **2007**Period
                  end RMB : US$ exchange rate
              
              
              6.8591
              
              
              7.3141
              
              
              7.6248Average
                  quarterly RMB : US$ exchange rate
              
              
              6.9575
              
              
              7.6172
              
              
              7.6891
  **June 30,**
                **2008**
              
              **December 31,**
                **2007**
              
              **June 30,**
                **2007**Period
                  end HKD : US$ exchange rate
              
              
              7.7970
              
              
              7.8049
              
              
              7.8172Average
                  quarterly HKD : US$ exchange rate
              
              
              7.7939
              
              
              7.8026
              
              
              7.8172
 
 **June 30,**
                **2008**
              
              **December 31,**
                **2007**
              
              **June 30,**
                **2007**Period
                  end MOP : US$ exchange rate
              
              
              8.0360
              
              
              -
              
              
              -Average
                  quarterly MOP : US$ exchange rate
              
              
              8.0331
              
              
              -
              
              
              -
 
 **June 30,**
                **2008**
              
              **December 31,**
                **2007**
              
              **June 30,**
                **2007**Period
                  end AUD : US$ exchange rate
              
              
              1.0458
              
              
              -
              
              
              -Average
                  quarterly AUD : US$ exchange rate
              
              
              1.0597
              
              
              -
              
              
              -
 
 **June 30,**
                **2008**
              
              **December 31,**
                **2007**
              
              **June 30,**
                **2007**Period
                  end AED : US$ exchange rate
              
              
              3.6732
              
              
              -
              
              
              -Average
                  quarterly AED : US$ exchange rate
              
              
              3.6734
              
              
              -
              
              
              -
 
 The
        RMB
        is not freely convertible into foreign currency and all foreign exchange
        transactions must take place through authorized institutions. No representation
        is made that the RMB amounts could have been, or could be, converted into
        US$ at
        the rates used in translation.
 
 *(r)*
              *Statutory
                  reserves*
 
 Statutory
        reserves for foreign investment enterprises are referring to the amount
        appropriated from the net income in accordance with laws or regulations,
        which
        can be used to recover losses and increase capital, as approved, and are
        to be
        used to expand production or operations.
  13
 
 *(s)*
              *Comprehensive
                  income*
 
 Comprehensive
        income is defined to include all changes in equity except those resulting
        from
        investments by owners and distributions to owners. Among other disclosures,
        all
        items that are required to be recognized under current accounting standards
        as
        components of comprehensive income are required to be reported in a financial
        statement that is presented with the same prominence as other consolidated
        financial statements. The Company’s current components of other comprehensive
        income are the foreign currency translation adjustment.
 
 *(t)*
              *Recent
                  accounting pronouncements*
  In
        December 2007, the FASB issued SFAS 141 (revised 2007), *Business
        Combinations* ,
        (‘‘SFAS
        141(R)’’). SFAS 141(R) retains the fundamental requirements of the original
        pronouncement requiring that the purchase method be used for all business
        combinations, but also provides revised guidance for recognizing and measuring
        identifiable assets and goodwill acquired and liabilities assumed arising
        from
        contingencies, the capitalization of in-process research and development
        at fair
        value, and the expensing of acquisition-related costs as incurred. SFAS 141(R)
        is effective for fiscal years beginning after December 15, 2008. The Company
        will evaluate how the new requirements could impact the accounting for any
        acquisitions completed beginning in fiscal 2009 and beyond, and the potential
        impact on the Company’s consolidated financial statements.
  In
        December 2007, the FASB issued SFAS 160, *Noncontrolling
        Interests in Consolidated Financial Statements − an amendment of ARB No.
        51* .
        SFAS
        160 requires that ownership interests in subsidiaries held by parties other
        than
        the parent (previously referred to as minority interests), and the amount
        of
        consolidated net income, be clearly identified, labeled and presented in
        the
        consolidated financial statements. It also requires once a subsidiary is
        deconsolidated, any retained noncontrolling equity investment in the former
        subsidiary be initially measured at fair value. Sufficient disclosures are
        required to clearly identify and distinguish between the interests of the
        parent
        and the interests of the noncontrolling owners as components of equity. It
        is
        effective for fiscal years beginning after December 15, 2008, and requires
        retroactive adoption of the presentation and disclosure requirements for
        existing minority interests. All other requirements are applied prospectively.
        The Company is currently evaluating the impact of SFAS 160 on the Company’s
        consolidated financial statements.
  In
        March
        2008, the Financial Accounting Standards Board (“FASB”) issued Statement of
        Financial Accounting Standards (“SFAS”) No. 161, *Disclosures
        about Derivative Instruments and Hedging Activities,* an
        amendment of FASB Statement No. 133 (“SFAS No. 161”).
        SFAS No. 161 requires enhanced disclosures about a company’s
        derivative and hedging activities. These enhanced disclosures will discuss
        (a) how and why a company uses derivative instruments, (b) how
        derivative instruments and related hedged items are accounted for under FASB
        Statement No. 133 and its related interpretations and (c) how
        derivative instruments and related hedged items affect a company’s financial
        position, results of operations and cash flows. SFAS No. 161 is
        effective for the Company on January 1, 2009. This standard will have no
        impact on the Company’s financial position, results of operations or cash flow.
  In
        April
        2008, the FASB issued FASB Staff Position (“FSP”) SFAS No. 142-3, *Determination
        of the Useful Life of Intangible Assets* (“FSP
        SFAS No. 142-3”). FSP SFAS No. 142-3 amends the factors that should be
        considered in developing renewal or extension assumptions used to determine
        the
        useful life of a recognized intangible asset under SFAS No. 142,
        Goodwill and Other Intangible Assets. The intent of this FSP is to improve
        the
        consistency between the useful life of a recognized intangible asset and
        the
        period of expected cash flows used to measure the fair value of the asset
        under
        SFAS No. 141 (revised 2007), *Business
        Combinations* ,
        and
        other US GAAP. FSP SFAS No. 142-3 is effective for the Company on
        January 1, 2009. The Company is currently evaluating the impact of adopting
        FSP SFAS No. 142-3 on the Company’s financial position, results of
        operations and cash flows.
  14
  In
        May
        2008, the FASB issued SFAS No. 162, *The
        Hierarchy of Generally Accepted Accounting Principles* ,
        (“SFAS No. 162”), which becomes effective 60 days following the
        SEC’s approval of the Public Company Accounting Oversight Board (“PCAOB”)
        amendments to US Auditing Standards (“AU”) Section 411, The Meaning of
        Present Fairly in Conformity With Generally Accepted Accounting Principles.
        SFAS No. 162 identifies the sources of accounting principles and the
        framework for selecting the principles to be used in the preparation of
        financial statements of nongovernmental entities that are presented in
        conformity with US GAAP. This standard is not expected to have an impact
        on the
        Company’s financial position, results of operations or cash flow.
  In
        June
        2008, the EITF reached a consensus on EITF Issue No. 08-4, *Transition
        Guidance for Conforming Changes to EITF Issue No. 98-5, Accounting for
        Convertible Securities with Beneficial Conversion Features or Contingently
        Adjustable Conversion Ratios* (“EITF
        No. 08-4”). Subsequent to the issuance of EITF No. 98-5, certain
        portions of the guidance contained in EITF No. 98-5 were nullified by EITF
        Issue No. 00-27, Application of EITF Issue No. 98-5, ‘ *Accounting
        for Convertible Securities with Beneficial Conversion Features or Contingently
        Adjustable Conversion Ratios* ’
(“EITF
        No. 00-27”). However, the portions of EITF No. 98-5 that were
        nullified by EITF No. 00-27 were not specifically identified in EITF
        No. 98-5, nor were the illustrative examples in EITF No. 98-5 updated
        for the effects of EITF No. 00-27. EITF No. 08-4 specifically
        addresses the conforming changes to EITF Issue No. 98-5 and provides
        transition guidance for the conforming changes. EITF No. 08-4 is effective
        for the Company for the fiscal year ending December 31, 2008. The Company
        is currently evaluating the impact of adopting EITF No. 08-4 on the
        Company’s financial position, results of operations and cash flows.
 
 **3.**
              **CONTRACT
                  RECEIVABLES**
 
 **June 30,**
                **2008**
              
              **December 31,**
                **2007**Contract
                  receivables
              
              $
              66,609,152
              
              $
              13,263,260*Less**:*Allowance for doubtful accounts
              
              
              (230,010
              )
              
              (215,701
              )Net
              
              $
              66,379,142
              
              $
              13,047,559
 
 *Allowance
                  for Doubtful Accounts*
              
              **June 30,**
                **2008**
              
              **December 31,**
                **2007**Beginning
                  balance
              
              $
              215,701
              
              $
              417,648Foreign
                  exchange adjustments
              
              
              14,309
              
              
              -Written
                  off
              
              
              -
              
              
              (201,947
              )Ending
                  balance
              
              $
              230,010
              
              $
              215,701
  15
  **4.**
              **INVENTORIES**
 
 **June
                  30,**
                **2008**
              
              **December
                  31,**
                **2007**Raw
                  materials at sites
              
              $
              379,441
              
              $
              528,743
  16
 
 **5.**
              **PLANT
                  AND EQUIPMENT**
  Plant
        and
        equipment consist of the following as of:
  **June 30,**
                **2008**
              
              **December 31,**
                **2007****At
                  cost**Motor
                  vehicle
              
              $
              1,305,423
              
              $
              1,223,692Machinery
                  and equipment
              
              
              3,175,992
              
              
              3,383,123Furniture,
                  software and office equipment
              
              
              1,677,491
              
              
              625,102Building
              
              
              309,933
              
              
              290,652Leasehold
                  improvement
              
              
              377,262
              
              
              189,403$
              6,846,101
              
              $
              5,711,972*Less**:
                  Accumulated depreciation*Motor
                  vehicle
              
              $
              630,182
              
              $
              593,141Machinery
                  and equipment
              
              
              1,874,920
              
              
              2,227,231Furniture,
                  software and office equipment
              
              
              766,649
              
              
              269,695Building
              
              
              17,434
              
              
              9,810Leasehold
                  improvement
              
              
              146,122
              
              
              29,541$
              3,435,307
              
              $
              3,129,418$
              3,410,794
              
              $
              2,582,554
  Depreciation
        expenses included in the selling and administrative expenses for six months
        periods ended June 30, 2008 and 2007 were $332,985 and $99,350, respectively.
 
 **6.**
              **INTANGIBLE
                  ASSETS**
 
 **June 30,**
                **2008**
              
              **December 31,**
                **2007****At cost**Intangible
                  Assets
              
              $
              104,204
              
              $
              104,204*Less**:
                  Accumulated amortization*
              
              
              99,074
              
              
              33,818$
              5,130
              
              $
              70,386
  17
 
 **7.**
              **LOANS**
 
 **A.**
              **SHORT-TERM
                  BANK LOANS**
 
 **June 30,**
                **2008**
              
              **December 31,**
                **2007**Bank
                  of East Asia Ltd., line of credit, at 5.508% per annum, subject
                  to
                  variation every 6 months
              
              $
              -
              
              $
              546,889Dah
                  Sing Bank, 5.0% per annum, line of credit, due November 28,
                  2008
              
              
              380,478
              
              
              257,926Dah
                  Sing Bank, 5.5% per annum, trust receipts, due November 25,
                  2008
              
              
              774,912
              
              
              1,773,735$
              1,155,390
              
              $
              2,578,550
 
 In
        October 25, 2006, the Company opened a line of credit facility with the Zhuhai
        branch of Bank of East Asia for a maximum of RMB20,000,000. The credit facility
        does not require renewal until October 2011. In order to facilitate the
        extension of the credit facility, the Company agreed to deposit the same
        amount
        on fixed deposit terms into the Hong Kong branch of Bank of East Asia. This
        facility is subject to a current interest rate of 5.913% and interest rate
        adjusts every 6 months.
 
 **B.**
              **LONG-TERM
                  BANK LOANS**
  **June 30,**
                **2008**
              
              **December 31,**
                **2007**Bank
                  of East Asia Ltd., line of credit, at 5.832% per annum, subject
                  to
                  variation ever 6 months, due October 25, 2011
              
              $
              161,214
              
              $
              169,518Auto
                  capital lease obligations (hire purchase) due November 12,
                  2009
              
              
              300,391
              
              
              274,363Installment
                  loan from Dah Sing Bank at an interest rate at 3.5% due July 28,
                  2015
              
              
              290,506
              
              
              -Installment
                  loan from Dah Sing Bank at an interest rate at 4.0% due October
                  25,
                  2025.
              
              
              1,087,329
              
              
              -$
              1,839,440
              
              $
              443,881
  18


Zhuhai
      King Glass Engineering Co., Limited borrowed from Bank of East Asia with a
      condominium as collateral. This facility is subject to a current interest rate
      of 5.913% and interest rate adjusts every 6 months.





Full
      Art
      International Limited borrowed a hire purchase (car) loan from DBS
      Bank.





**8.
      CONVERTIBLE BONDS AND BOND WARRANTS**





**A.**  **$10,000,000
      Variable Rate Convertible Bonds due in 2012**





On
      April
      12, 2007, the Company completed a financing transaction with ABN AMRO Bank
      N.V.
      (the “Subscriber”) issuing (i) $10,000,000 Variable Rate Convertible Bonds due
      in 2012 (the “Bonds”) and (ii) 800,000 warrants to purchase an aggregate of
      800,000 shares of our common stock, subject to adjustments for stock splits
      or
      reorganizations as set forth in the warrant, that expire in 2010 (the
“Warrants”).





The
      Bonds
      were subscribed at a price equal to 97% of their principal amount, which is
      the
      issue price of 100% less a 3% commission to the Subscriber. The Bonds were
      issued pursuant to, and are subject to the terms and conditions of, a trust
      deed
      dated April 12, 2007, as amended, between us and The Bank of New York, London
      Branch (the “Amended and Restated Trust Deed”). The Bonds are also subject to a
      paying and conversion agency agreement dated April 12, 2007 between us, The
      Bank
      of New York, and The Bank of New York, London Branch. The terms and conditions
      of the Bonds, as set forth in the Amended and Restated Trust Deed include,
      among
      other thing, the following terms:





·
            *Interest
                Rate.*The Bonds bear interest from April 12, 2007 at the rate of 6% per
                annum
                for the first year after April 12, 2007 and 3% per annum thereafter,
                of
                the principal amount of the Bonds.





·
            *Conversion.*Each Bond is convertible at the option of the holder at any time
                after
                April 12, 2008 up to March 28, 2012, into shares of our common stock
                at an
                initial conversion price equal to the price per share at which shares
                are
                sold in our initial public offering of common stock on the American
                Stock
                Exchange (“AMEX”) with minimum gross proceeds of $2,000,000. If no initial
                public offering occurs prior to conversion, the conversion price
                per share
                will be $2.00, subject to adjustment in accordance with the terms
                and
                conditions of the Bonds. Based on the initial public offering completed
                on
                October 3, 2007 the initial conversion is now set at $3.50 per share
                resulting initial conversion shares of 2,857,143. The conversion
                price is
                subject to adjustment in certain events, including our issuance of
                additional shares of common stock or rights to purchase common stock
                at a
                per share or per share exercise or conversion price, respectively,
                at less
                than the applicable per share conversion price of the Bonds. If for
                the
                period of 20 consecutive trading days immediately prior to April
                12, 2009
                or February 18, 2012, the conversion price for the Bonds is higher
                than
                the average closing price for the shares, then the conversion price
                will
                be reset to such average closing price; provided that, the conversion
                price will not be reset lower than 70% of the then existing conversion
                price. In addition, the Amended and Restated Trust Deed provides
                that the
                conversion price of the Bonds cannot be adjusted to lower than $0.25
                per
                share of common stock (as adjusted for stock splits, stock dividends,
                spin-offs, rights offerings, recapitalizations and similar
                events).





·
            *Mandatory
                Redemptions.*If
                on or before April 12, 2008, either (i) our common stock (including
                the
                shares of common stock issuable upon conversion of the Bonds and
                exercise
                of the Warrants) are not listed on AMEX or (ii) the Bonds, Warrants,
                and
                shares underlying the Bonds and Warrants are not registered with
                the
                Securities and Exchange Commission (the “SEC”), then holders of the Bonds
                can require us to redeem the Bonds at 106.09% of the principal amount.
                In
                addition, at any time after April 12, 2010, holders of the Bonds
                can
                require us to redeem the Bonds at 126.51% of the principal amount.
                The
                Company is required to redeem any outstanding Bonds at 150.87% of
                its
                principal amount on April 4, 2012.




19


On
      April
      12, 2007, the Company entered into a warrant instrument with the Subscriber
      pursuant to which the Subscriber purchased the Warrants from us (the “Warrant
      Instrument”). The Warrants, which are represented by a global certificate, are
      also subject to a warrant agency agreement by and among us, The Bank of New
      York
      and The Bank of New York, London Branch dated April 12, 2007 (the “Warrant
      Agency Agreement”). Pursuant to the terms and conditions of the Warrant
      Instrument and the Warrant Agency Agreement, the Warrants vested on April 12,
      2007 and will terminate on April 12, 2010. The Bond Warrants are exercisable
      at
      a per share exercise price of $0.01. The Company has agreed to list the Warrants
      on AMEX, or any alternative stock exchange by April 12, 2008.





On
      April
      12, 2007, the Company also entered into a registration rights agreement with
      the
      Subscriber pursuant to which the Company agreed to include the Bonds, the
      Warrants, and the shares of common stock underlying the Bonds and Warrants
      in a
      pre-effective amendment to a registration statement that the Company have on
      file with the SEC. Subsequently, the Company verbally agreed with the Subscriber
      not to include the Subscriber’s securities in the pre-effective amendment to the
      registration statement and to register them in a separate registration statement
      to be filed promptly after the effective date of the previously filed
      registration statement. The Company registered resale of the Bonds, the
      Warrants, and the shares of common stock underlying the Bonds and Warrants
      in a
      registration statement that was declared effective by the SEC on February 7,
      2008.





On
      April
      12, 2007, the date of issuance, the Company determined the fair value of the
      Bonds to be $9,700,000. The warrants and the beneficial conversion feature
      were
      $3,207,790 and $3,507,791 respectively, which were determined under the
      Black-Scholes valuation method. They are included under stockholders’ equity as
      additional paid in capital - stock warrants and additional paid in capital
      -
      beneficial conversion feature respectively in accordance with guidance of APB
      14
      and EITF No. 98-5. Accordingly, the interest discount on the warrants and
      beneficial conversion feature were recorded, and are being amortized by the
      interest method of 5 years.





As
      addressed in an earlier paragraph under Mandatory Redemptions, the Company
      will
      redeem each bond at 150.87% of its principal amount on April 4, 2012 (the
      maturity date). On the basis of this commitment, the Company has determined
      the
      total redemption premium to be $5,087,100, which is an addition to the original
      face value of the Bonds of $10,000,000. This redemption premium is to be
      amortized to interest expense over the term of the Bonds by the interest method.





Because
      of the fact that the $10,000,000 Variable Rate Convertible Bonds contain three
      separate securities and yet merged into one package, the bond security must
      identify its constituents and establish the individual value as determined
      by
      the Issuer as follows:





(1)
            
            Bond
                Discount
            
            300,000(2)
            
            Warrants
            
            2,183,000(3)
            
            Beneficial Conversion Feature
            
            2,171,429




20


**B.**  **$20,000,000
      12% Convertible Bonds due in 2011**





On
      April
      15, 2008, the Company completed a financing transaction with ABN AMRO Bank
      N.V.,
      London Branch (“ABN AMRO”), CITIC Allco Investments Limited (together with ABN
      AMRO, the “Subscribers,” and each a “Subscriber”), and CITIC Capital Finance
      Limited issuing (i) $20,000,000 12% Convertible Bonds due in 2011 (the “Bonds”)
      and (ii) 300,000 warrants to purchase an aggregate of 300,000 shares of the
      Company’s common stock, subject to certain adjustments as set forth in the
      warrant instrument, that expire in 2013 (the “Bond Warrants”). The transaction
      was completed in accordance with a subscription agreement entered into by the
      Company, Subscribers, and CITIC Capital Finance Limited, dated April 2, 2008
      (the “Subscription Agreement”).





The
      Bonds
      were subscribed at a price equal to 100% of their principal amount. The Company
      agreed to pay to the Subscribers an aggregate commission of 2.5% of the
      principal amount of the Bonds and of the aggregate warrant issue price for
      the
      Bond Warrants. The Bonds were issued pursuant to, and are subject to the terms
      and conditions of, a trust deed dated April 15, 2008 between the Company and
      The
      Bank of New York, London Branch (the “Trust Deed”). The Bonds are also subject
      to a paying and conversion agency agreement dated April 15, 2008 between the
      Company, The Bank of New York, and The Bank of New York, London Branch. The
      terms and conditions of the Bonds, as set forth in the Trust Deed include,
      among
      other things, the following terms:





·
            *Interest
                Rate.*The Bonds bear cash interest from April 15, 2008 at the rate of 12%
                per
                annum of the principal amount of the
                Bonds.




·
            *Conversion*.
                Each Bond is convertible at the option of the holder at any time during
                the period (i) beginning on the earlier of (a) the date that a
                registration statement for the shares to be issued upon conversion
                of the
                Bonds is first declared effective by the United States Securities
                and
                Exchange Commission (the “SEC”) and (b) October 15, 2008 and (ii) ending
                at the close of business on April 8, 2011, subject to certain exceptions,
                into shares of the Company’s common stock at an initial conversion price
                equal to $6.35 per share, which is the product of 1.1 and the average
                closing price per share of the Company’s common stock for the period of 20
                consecutive trading days immediately prior to April 15, 2008. The
                conversion price is subject to adjustment in certain events, including
                the
                Company’s issuance of additional shares of common stock or rights to
                purchase common stock at a per share or per share exercise or conversion
                price, respectively, at less than the applicable per share conversion
                price of the Bonds.




·
            *Mandatory
                Redemptions*.
                Interest is payable semi-annually in arrears on April 15 and October
                15 of
                each year (each an “Interest Payment Date”) commencing October 15, 2008.
                On any Interest Payment Date on or after April 15, 2010, the holders
                of
                the Bonds can require the Company to redeem the Bonds at 116.61%
                of the
                principal amount of the Bonds redeemed, plus all accrued but unpaid
                interest. The Company is required to redeem any outstanding Bonds
                at
                116.61% of its principal amount on April 15,
                2011.




On
      April
      15, 2008, the Company entered into a warrant instrument with the Subscribers
      pursuant to which the Subscribers purchased the Bond Warrants from the Company
      (the “Warrant Instrument”). The Bond Warrants, which are represented by a global
      certificate, are also subject to a warrant agency agreement by and among the
      Company, The Bank of New York and The Bank of New York, London Branch dated
      April 15, 2008 (the “Warrant Agency Agreement”). Pursuant to the terms and
      conditions of the Warrant Instrument and the Warrant Agency Agreement, the
      Bond
      Warrants became exercisable on April 15, 2008 and terminate on April 15, 2013.
      The Bond Warrants have an initial exercise price per share of $6.35, subject
      to
      adjustment in certain events.


21


The
      Company agreed to list the shares of common stock underlying the Bonds and
      the
      Bond Warrants on AMEX, or any alternative stock exchange by the earlier of
      October 15, 2008 and the date on which a registration statement registering
      the
      shares of common stock underlying the Bonds and the Bond Warrants is first
      declared effective by the SEC. In addition, the Company agreed to register
      the
      shares of common stock underlying the Bonds and the Bond Warrants with the
      SEC
      on or prior to October 15, 2008 and will keep the registration effective until
      30 days after the Bond Warrants terminate.





On
      April,
      15, 2008, the Company also entered into a registration rights agreement with
      the
      Subscribers pursuant to which it agreed to register the Bonds, the Bond
      Warrants, and the shares of common stock underlying the Bonds and Bond Warrants
      (the “Registrable Securities”). The Company agreed to prepare and file with the
      SEC, no later than 30 days after April 15, 2008, a registration statement on
      Form S-1, of which this prospectus is a part, to register the Registrable
      Securities (the “Registration Statement”) and, as promptly as possible, cause
      that Registration Statement, as amended, to become effective and in any event
      within six months after April 15, 2008. In addition, the Company agreed to
      list
      all the Registrable Securities covered by the Registration Statement on each
      securities exchange on which similar securities issued by the Company are then
      listed.





Pursuant
      to the terms of the Subscription Agreement, the Company was required as a
      condition to the closing to appoint a director designated by CITIC Capital
      Finance Limited to the Company’s Board of Directors. The closing condition was
      waived by the parties to the financing transaction and the Company appointed
      such a director within three months from closing.





Because
      of the fact that the $20,000,000 Convertible Bonds contain three separate
      securities and yet merged into one package, the bond security must identify
      its
      constituents and establish the individual value as determined by the Issuer
      as
      follows:





(1)
            
            Bond
                Discount
            
            500,000(2)
            
            Warrants
            
            1,413,503(3)
            
            Beneficial Conversion Feature
            
            -




The
      above
      items A and B are to be amortized to interest expense over the term of the
      bonds
      by the effective interest method as disclosed in the table
      below.


22


The
      Convertible Bonds Payable, net consists of the following: -





**June 30,**
              **2008**
            
            **December 31, 2007**Convertible
                Bonds Payable
            
            $
            30,000,000
            
            $
            10,000,000Less:
                Interest discount – Warrants
            
            
            (3,596,503
            )
            
            (4,036,170
            )Less:
                Interest discount – Beneficial conversion feature
            
            
            (2,171,429
            )
            
            (4,342,857
            )Less:
                Bond discount
            
            
            (800,000
            )
            
            (300,000
            )Accretion
                of interest discount and accrual of interest payable
            
            
            1,491,972
            
            
            2,144,768Net
            
            $
            24,924,040
            
            $
            3,465,741




**9.**
            **CONTRACT
                REVENUES EARNED**





The
      contract revenues earned for the periods ended June 30, 2008 and 2007 consist
      of
      the following:


**Three Months Ended June 30,**
              
              **Six Months Ended June 30,****2008**
              
              **2007**
              
              **2008**
              
              **2007**Billed
              
              $
              40,460,581
              
              $
              10,677,301
              
              $
              47,254,730
              
              $
              13,551,466Unbilled
              
              
              919,608
              
              
              8,776,344
              
              
              19,474,765
              
              
              20,332,27141,380,189
              
              
              19,453,645
              
              
              66,729,495
              
              
              33,883,737




The
      unbilled contract revenue earned represents those revenue that should be
      recognized according to the percentage of completion method for accounting
      for
      construction contract because the Company is entitled to receive payment from
      the customers for the amount of work that has been rendered to and completed
      for
      that customer according to the terms and progress being made as stipulated
      under
      that contract between the Company and that customer. As an industrial practice,
      there are certain procedures that need to be performed, such as project account
      finalization, by both the customer and the Company before the final billing
      is
      issued; however this does not affect the Company’s recognition of revenue and
      respective cost according to the terms of the contract with the consistent
      application of the percentage-of-completion method.


23





**10.**  **INCOME
      TAXES**





The
      following table accounts for the differences between the actual tax provision
      and the amounts obtained by applying the relevant applicable corporation income
      tax rate to income before tax for the periods ended June 30, 2008 and 2007:





**Three Months Ended**
              **June 30,**
            
            **Six Months Ended**
              **June 30,****2008**
            
            **2007**
            
            **2008**
            
            **2007**Income
                before tax
            
            $
            7,628,503
            
            $
            5,230,407
            
            $
            12,857,618
            
            $
            7,253,074Taxes
                at the applicable
              income
                tax rates
            
            $
            1,187,928
            
            $
            1,476,138
            
            $
            1,253,715
            
            $
            2,143,618Miscellaneous
                non taxable income and non-deductible expenses
            
            
            (1,118,315
            )
            
            (538,508
            )
            
            (1,136,735
            )
            
            (878,940
            )Current
                income tax expense
            
            $
            69,613
            
            $
            937,630
            
            $
            116,980
            
            $
            1,264,678





Effective
      January 1, 2008, the PRC government implemented a new 25% tax rate across the
      board for all enterprises regardless of whether domestic or foreign enterprise
      without any tax preferences which is defined as "two-year exemption followed
      by
      three-year half exemption" enjoyed by tax payers. As a result of the new tax
      law, a standard 15% tax preference terminated as of December 31, 2007. The
      PRC
      government has established a set of transition rules to allow enterprises using
      tax preferences before January 1, 2008 to continue using the tax preferences
      on
      a transitional basis until being the new tax rates are fully implemented over
      a
      five-year period. The Company’s subsidiaries in Zhuhai and Shenzhen are now
      subject to PRC tax rate of 18% starting from January 1, 2008.





**11.**  **COMMITMENTS**





The
      Company leases certain administrative and production facilities from third
      parties. Accordingly, for the six-month periods ended June 30, 2008 and 2007,
      the Company incurred rental expenses of $856,780 and $279,069,
      respectively.





The
      Company has commitments with respect to non-cancelable operating leases for
      these offices, as follows:





For
                the year ended December 31,2008
            
            
            1,143,8602009
            
            
            927,6712010
            
            
            94,825$
            2,166,356




24


**12.**  **RELATED
      PARTIES TRANSACTIONS**





The
      amount due to shareholder at June 30, 2008 was $1,319,991 and the amount due
      to
      the shareholder at December 31, 2007 was $1,334,856. During the six-month period
      ended June 30, 2008, the Company purchased construction materials amounting
      to
      $2,072,241 from Guangdong Canbo Electrical Co., Ltd. The transactions with
      related parties during the periods were carried out in the ordinary course
      of
      business and on normal commercial terms.


25





**13.**  **OTHER
      EVENTS**





Upon
      the
      closing of the initial public offering in October 2007, the Company sold to
      WestPark Capital, Inc., as underwriter, warrants to purchase up to 73,700 shares
      of its common stock. The warrants are exercisable at a per share price of $4.20
      and will expire if unexercised after five years from the date of issuance.
      On
      October 31, 2007, the Company also issued 50,000 warrants to Investor Relation
      International at exercisable at a per share price $3.50 for a period of four
      years from the date of issuance. On May 8, 2008, the Company issued another
      50,000 warrants to Investor Relation International at exercisable at a per
      share
      price $3.50 for a period of four years from the date of issuance.





As
      of
      June 30, 2008, WestPark Capital, Inc. has not exercised its warrants. On June
      11, 2008, Investor Relation International exercised its warrants issued on
      October 31, 2007 and received 32,030 shares in accordance with the cashless
      settlement terms in the warrant agreement. The Company recognized the cost
      of
      these warrants as determined by the Black-Scholes Model at a value of $50,375
      and $50,905 for the warrants issued to WestPark and Investor Relation
      International, respectively, for the six months ended June 30, 2008. These
      expenses have been recorded and included in the accompanying Statements of
      Income for the six-month period ended June 30, 2008.





**14.**  **SUBSEQUENT
      EVENTS**





***RMB70,000,000
      banking facility granted by ABN AMRO Bank N.V.***





On
      July
      19, 2008, Zhuhai King Glass Engineering Co., Ltd., the Company’s wholly-owned
      subsidiary was granted a bank’s acceptance bill facility by the Shenzhen Branch
      of ABN AMRO Bank N.V. The facility amount is RMB70,000,000 (US$10,218,978).
      ABN
      AMRO requires guarantees as follows:





·
            Irrevocable
                and unconditional guarantee executed by China Architectural Engineering,
                Inc., and




·
            Cash
                collateral of 20% of bank’s acceptance bill
                issued




As
      of
      August 8, 2008, Zhuhai King Glass Engineering Co., Ltd. utilized RMB27,540,000
      (US$4,020,000) of the facility.


26


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





**Forward-Looking
      Statements**





*The
      following discussion should be read in conjunction with our consolidated
      financial statements and related notes included elsewhere in this quarterly
      report. This quarterly report contains forward-looking statements. The words
      “anticipated,” “believe,” “expect, “plan,” “intend,” “seek,” “estimate,”
“project,” “could,” “may,” and similar expressions are intended to identify
      forward-looking statements. These statements include, among others, information
      regarding future operations, future capital expenditures, and future net cash
      flow. Such statements reflect our management’s current views with respect to
      future events and financial performance and involve risks and uncertainties,
      including, without limitation, general economic and business conditions, changes
      in foreign, political, social, and economic conditions, regulatory initiatives
      and compliance with governmental regulations, the ability to achieve further
      market penetration and additional customers, and various other matters, many
      of
      which are beyond our control. Should one or more of these risks or uncertainties
      occur, or should underlying assumptions prove to be incorrect, actual results
      may vary materially and adversely from those anticipated, believed, estimated
      or
      otherwise indicated. Consequently, all of the forward-looking statements made
      in
      this report are qualified by these cautionary statements and there can be no
      assurance of the actual results or developments.*





**Overview**





We
      specialize in high-end curtain wall systems (including glass, stone and metal
      curtain walls), roofing systems, steel construction systems, eco-energy saving
      building conservation systems and related products, for public works and
      commercial real estate projects. We have completed over one hundred projects
      throughout China, Hong Kong, Macau, Australia and Southeast Asia, including
      the
      National Grand Theater in Beijing, the Meridian Gate Exhibition Hall of the
      Palace Museum in Beijing’s Forbidden City (winner of the 2005 UNESCO Jury
      Commendation for Innovation of Asia Pacific Heritage Award), the Beijing
      Botanical Garden Conservatory (winner of the Zhan Tian You award in 2003),
      the
      Shenzhen Airport Terminal Building, the Shanghai South Railway Station and
      the
      Vietnam National Conference Center.





**Recent
      Events**





***April
      2008 Issuance of Bonds and Bond Warrants***





On
      April
      15, 2008, we completed a financing transaction with ABN AMRO Bank N.V., London
      Branch (“ABN AMRO”), CITIC Allco Investments Limited (together with ABN AMRO,
      the “Subscribers,” and each a “Subscriber”), and CITIC Capital Finance Limited
      issuing (i) $20,000,000 12% Convertible Bonds due in 2011 (the “Bonds”) and (ii)
      300,000 warrants to purchase an aggregate of 300,000 shares of our common stock,
      subject to certain adjustments as set forth in the warrant instrument, that
      expire in 2013 (the “Bond Warrants”). The transaction was completed in
      accordance with a subscription agreement entered into by us, the Subscribers,
      and CITIC Capital Finance Limited, dated April 2, 2008 (the “Subscription
      Agreement”).





The
      Bonds
      were subscribed at a price equal to 100% of their principal amount. We agreed
      to
      pay to the Subscribers an aggregate commission of 2.5% of the principal amount
      of the Bonds and of the aggregate warrant issue price for the Bond Warrants.
      The
      Bonds were issued pursuant to, and are subject to the terms and conditions
      of, a
      trust deed dated April 15, 2008 between us and The Bank of New York, London
      Branch (the “Trust Deed”). The Bonds are also subject to a paying and conversion
      agency agreement dated April 15, 2008 between us, The Bank of New York, and
      The
      Bank of New York, London Branch. The terms and conditions of the Bonds, as
      set
      forth in the Trust Deed include, among other things, the following
      terms:





·
            *Interest
                Rate.*The
                Bonds bear cash interest from April 15, 2008 at the rate of 12% per
                annum
                of the principal amount of the
                Bonds.





·
            *Conversion.*Each Bond is convertible at the option of the holder at any time
                during
                the period (i) beginning on the earlier of (a) the date that a
                registration statement for the shares to be issued upon conversion
                of the
                Bonds is first declared effective by the United States Securities
                and
                Exchange Commission (the “SEC”) and (b) October 15, 2008 and (ii) ending
                at the close of business on April 8, 2011, subject to certain exceptions,
                into shares of our common stock at an initial conversion price equal
                to
                $6.35 per share, which is the product of (i) 1.1 and (ii) the average
                closing price per share of our common stock for the period of 20
                consecutive trading days immediately prior to April 15, 2008. The
                conversion price is subject to adjustment in certain events, including
                our
                issuance of additional shares of common stock or rights to purchase
                common
                stock at a per share or per share exercise or conversion price,
                respectively, at less than the applicable per share conversion price
                of
                the Bonds.




27


·
            *Mandatory
                Redemptions.*Interest is payable semi-annually in arrears on April 15 and October
                15 of
                each year (each an “Interest Payment Date”) commencing October 15, 2008.
                On any Interest Payment Date on or after April 15, 2010, the holders
                of
                the Bonds can require us to redeem the Bonds at 116.61% of the principal
                amount of the Bonds redeemed, plus all accrued but unpaid interest.
                We are
                required to redeem any outstanding Bonds at 116.61% of its principal
                amount on April 15, 2011.





On
      April
      15, 2008, we entered into a warrant instrument with the Subscribers pursuant
      to
      which the Subscribers purchased the Bond Warrants from us (the “Warrant
      Instrument”). The Bond Warrants, which are represented by a global certificate,
      are also subject to a warrant agency agreement by and among us, The Bank of
      New
      York and The Bank of New York, London Branch dated April 15, 2008 (the “Warrant
      Agency Agreement”). Pursuant to the terms and conditions of the Warrant
      Instrument and the Warrant Agency Agreement, the Bond Warrants become
      exercisable on April 15, 2008 and terminate on April 15, 2013. The Bond Warrants
      have an initial exercise price per share of $6.35, subject to adjustment in
      certain events.





We
      have
      agreed to list the shares of common stock underlying the Bonds and the Bond
      Warrants on AMEX, or any alternative stock exchange by the earlier of October
      15, 2008 and the date on which a registration statement registering the shares
      of common stock underlying the Bond Warrants is first declared effective by
      the
      SEC. In addition, we have agreed to register the shares of common stock
      underlying the Bonds and the Bond Warrants with the SEC on or prior to October
      15, 2008 and will keep the registration effective until 30 days after the Bond
      Warrants terminate.





On
      April,
      15, 2008, we also entered into a registration rights agreement with the
      Subscribers pursuant to which we agreed to register the Bonds, the Bond
      Warrants, and the shares of common stock underlying the Bonds and Bond Warrants
      (the “Registrable Securities”). We agreed to prepare and file with the SEC, no
      later than 30 days after April 15, 2008, a registration statement on Form S-1
      to
      register the Registrable Securities (the “Registration Statement”) and, as
      promptly as possible, cause that Registration Statement, as amended, to become
      effective and in any event within six months after April 15, 2008. In addition,
      we agreed to list all the Registrable Securities covered by the Registration
      Statement on each securities exchange on which similar securities issued by
      us
      are then listed.





Pursuant
      to the terms of the Subscription Agreement, we were required as a condition
      to
      the closing to appoint a director designated by CITIC Capital Finance Limited
      to
      our Board of Directors. The closing condition was waived by the parties to
      the
      financing transaction and we have appointed such a director from CITIC Capital
      Finance Ltd. on June 10, 2008.


28




**Results
      of Operations**





The
      following table sets forth our statements of operations for the three months
      and
      six months ended June 30, 2008 and 2007 in U.S. dollars
      (unaudited):





**Three Months Ended June 30,**
            
            **Six Months Ended June 30,****2008**
            
            **2007**
            
            **2008**
            
            **2007*****(in thousands, except for share***
              ***and per share amounts)***
            
            ***(in thousands, except for share***
              ***and per share amounts)***Contract
                revenues earned
            
            $
            41,380
            
            $
            19,454
            
            $
            66,729
            
            $
            33,884Cost
                of contract revenues earned
            
            
            (28,038
            )
            
            (11,962
            )
            
            (44,942
            )
            
            (23,494
            )Gross
                profit
            
            $
            13,342
            
            $
            7,492
            
            $
            21,787
            
            $
            10,390Selling,
                general and administrative expenses
            
            
            (4,590
            )
            
            (1,689
            )
            
            (7,590
            )
            
            (2,564
            )Income
                from operations
            
            $
            8,752
            
            $
            5,803
            
            $
            14,197
            
            $
            7,826Interest
                income
            
            
            35
            
            
            -
            
            
            42
            
            
            3Interest
                expenses
            
            
            (1,198
            )
            
            (573
            )
            
            (1,532
            )
            
            (576
            )Other
                income
            
            
            40
            
            
            0
            
            
            151
            
            
            0Income
                before taxes
            
            $
            7,629
            
            $
            5,230
            
            $
            12,858
            
            $
            7,253Income
                tax
            
            
            (70
            )
            
            (937
            )
            
            (117
            )
            
            (1,265
            )Equity
                loss and minority interests
            
            
            19
            
            
            (14
            )
            
            11
            
            
            (14
            )Net
                income
            
            $
            7,578
            
            $
            4,279
            
            $
            12,752
            
            $
            5,974Earnings
                per share:Basic
            
            $
            0.15
            
            $
            0.09
            
            $
            0.25
            
            $
            0.12Diluted
            
            $
            0.14
            
            $
            0.08
            
            $
            0.24
            
            $
            0.11Weighted
                average shares outstanding:Basic
            
            
            51,812,477
            
            
            50,000,000
            
            
            51,832,946
            
            
            50,000,000Diluted
            
            
            55,549,949
            
            
            59,588,586
            
            
            55,550,770
            
            
            54,794,293





**Three
      Months Ended June 30, 2008 and 2007**





Contract
      revenues earned for the three months ended June 30, 2008 were $41.4 million,
      an
      increase of $21.9 million, or 112%, from the contract revenues earned of $19.5
      million for the comparable period in 2007. The primary reason for the increase
      in contract revenues earned was due to new large overseas projects outside
      of
      China for the three months ended June 30, 2008.




Cost
      of
      contract revenues earned for the three months ended June 30, 2008 was $28.0
      million, an increase of $16.0 million, or 133%, from $12.0 million for the
      comparable period in 2007. Cost of contract revenues earned consists of the
      raw
      materials, labor and other operating costs related to manufacturing. The
      increase in costs of contract revenues earned was primarily due to the increase
      in contract revenue and increase in the cost of raw materials and other costs
      for the three months ended June 30, 2008.




29




Gross
      profit for the three months ended June 30, 2008 was $13.3 million, an increase
      of $5.8 million, or 77%, from $7.5 million for the comparable period of 2007.
      Our gross margin for the three months ended June 30, 2008 was 32.2% as compared
      with 38.5% for the three months ended June 30, 2007. The decrease in gross
      margin was primarily a result of higher raw materials and labor costs in the
      quarter, which was partially offset by higher margins obtained from overseas
      projects.





Selling,
      general and administrative expenses were approximately $4.6 million for the
      three months ended June 30, 2008, an increase of approximately $2.9 million,
      or
      171%, from $1.7 million for the comparable period in 2007. The increase was
      due
      to the growth in staff, office rental and other start-up costs associated with
      the expansion of our overseas operations during the three months ended June
      30,
      2008.





Interest
      expenses were approximately $1.2 million for the three months ended June 30,
      2008, an increase of approximately $0.6 million, from approximately $0.6 million
      for the comparable period in 2007. The increase was mainly due to cash interest
      expense and non-cash amortization expense associated with the $10 million
      convertible bonds and warrants issued in April 2007 and $20 million convertible
      bonds and warrants issued in April 2008.





Income
      tax was approximately $70,000 for the three months ended June 30, 2008 at an
      effective tax rate of 0.9%, compared with $937,000 taxes for the same period
      of
      2007 at an effective tax rate of 17.9%. The primary reason for the decrease
      was
      due to zero corporate income tax rate associated with revenues from the Dubai
      project, our largest ongoing project during the second quarter of
      2008.





Net
      income for the three months ended June 30, 2008 was $7.6 million, an increase
      of
      $3.3 million, or 77%, from $4.3 million for the comparable period in
      2007.





**Six
      Months Ended June 30, 2008 and 2007**





Contract
      revenues earned for the six months ended June 30, 2008 were $66.7 million,
      an
      increase of $32.8 million, or 97%, from the contract revenues earned of $33.9
      million for the comparable period in 2007. The primary reason for the increase
      in contract revenues earned was due to new large overseas projects outside
      of
      China for the six months ended June 30, 2008.




Cost
      of
      contract revenues earned for the six months ended June 30, 2008 was $44.9
      million, an increase of $21.4 million, or 91%, from $23.5 million for the
      comparable period in 2007. Cost of contract revenues earned consists of the
      raw
      materials, labor and other operating costs related to manufacturing. The
      increase in costs of contract revenues earned was primarily due to the increase
      in contract revenue and increase in the cost of raw materials and other costs
      for the six months ended June 30, 2008.




Gross
      profit for the six months ended June 30, 2008 was $21.8 million, an increase
      of
      $11.4 million, or 110%, from $10.4 million for the comparable period of 2007.
      Our gross margin for the six months ended June 30, 2008 was 32.6% as compared
      with 30.7% for the six months ended June 30, 2007. The increase in gross margin
      was primarily a result of higher margins obtained from overseas projects, which
      was partially offset by higher raw materials and labor costs in the first half
      of 2008.





Selling,
      general and administrative expenses were approximately $7.6 million for the
      six
      months ended June 30, 2008, an increase of approximately $5.0 million, or 192%,
      from $2.6 million for the comparable period in 2007. The increase was due to
      the
      growth in staff, office rental and other start-up costs associated with the
      expansion of our overseas operations during the six months ended June 30,
      2008.





Interest
      expenses were approximately $1.5 million for the six months ended June 30,
      2008,
      an increase of approximately $0.9 million, from approximately $0.6 million
      for
      the comparable period in 2007. The increase was mainly due to cash interest
      expense and non-cash amortization expense associated with the $10 million
      convertible bonds and warrants issued in April 2007 and $20 million convertible
      bonds and warrants issued in April 2008.




30




Income
      tax was approximately $117,000 for the six months ended June 30, 2008 at an
      effective tax rate of 0.9%, compared with $1,265,000 taxes for the same period
      of 2007 at an effective tax rate of 17.4%. The primary reason for the decrease
      was due to zero corporate income tax rate associated with revenues from the
      Dubai project, our largest ongoing project during the first half of
      2008.





Net
      income for the six months ended June 30, 2008 was $12.8 million, an increase
      of
      $6.8 million, or 113%, from $6.0 million for the comparable period in
      2007.





**Liquidity
      and Capital Resources**





At
      June
      30, 2008, we had cash and cash equivalents of $17.8 million. Prior to October
      17, 2006, we have historically financed our business operations through
      short-term bank loans, cash provided by operations, and credit provided by
      suppliers. More recently, we have raised capital through debt and equity
      offerings, as well as bonding facilities.





On
      April
      15, 2008, we completed a financing transaction pursuant to which we issued
      the
      2008 Bonds in the principal amount of $20.0 million. The 2008 Bonds bear cash
      interest at the rate of 12% per annum. Interest is payable semi-annually in
      arrears on April 15 and October 15 of each year (each an “Interest Payment
      Date”) commencing October 15, 2008. On any Interest Payment Date on or after
      April 15, 2010, the holders of the Bonds can require us to redeem the Bonds
      at
      116.61% of the principal amount. We are required to redeem any outstanding
      Bonds
      at 116.61% of its principal amount on April 15, 2011. If we are required to
      repurchase all or a portion of the Bonds and do not have sufficient cash to
      make
      the repurchase, we may be required to obtain third party financing to do so,
      and
      there can be no assurances that we will be able to secure financing in a timely
      manner and on favorable terms, which could have a material adverse effect on
      our
      financial performance, results of operations and stock price. We also issued
      300,000 warrants in connection with the 2008 Bonds on April 15, 2008 to purchase
      an aggregate of 300,000 shares of our common stock, subject to adjustments
      for
      stock splits or reorganizations as set forth in the warrant
      instrument.





In
      October 2006, we opened a line of credit facility with the Zhuhai branch of
      Bank
      of East Asia for up to a maximum of RMB20,000,000. The credit facility does
      not
      require renewal until October 2011. In order to facilitate the extension of
      the
      credit facility, we agreed to deposit the equivalent amount in HKD on fixed
      deposit terms into the Hong Kong branch of Bank of East Asia. This facility
      is
      subject to a current interest rate of 5.508% and interest rate adjusts every
      6
      months. There was no outstanding balance as of June 30, 2008.





Our
      subsidiary, Zhuhai King Glass Engineering Co., Limited, borrowed from Bank
      of
      East Asia with a condominium as collateral. This facility, which is due October
      25, 2011, is subject to a current interest rate of 5.832% and interest rate
      adjusts every 6 months. The amount outstanding as of June 30, 2008 was
      $161,214.





Full
      Art
      International Limited incurred an automobile hire purchase obligations due
      November 12, 2009 that had an outstanding amount of $300,391 as of June 30,
      2008.





We
      also
      opened a line of credit and a trust receipts line with the Hong Kong Branch
      of
      Dah Sing Bank. The credit facilities are set to expire on November 28 and
      November 25, 2008, respectively, which had approximately $290,506 and
      $1,087,329, respectively, outstanding as of June 30, 2008.





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





On
      March
      28, 2008, we, Full Art and Techwell Engineering Limited were granted a bonding
      facility by the Hong Kong Branch of HSBC. The facility amount was $10,000,000,
      at a tenor of up to one year with 1% flat interest rate on the issued amount
      of
      bonds such as bank guarantees, performance bonds, advanced payment bonds and
      standby letters of credit. HSBC required guarantees as follows: (i) an unlimited
      guarantee among China Architectural Engineering, Inc., Full Art International
      Limited and Techwell Engineering Limited; and (ii) an “all monies” securities
      deposits with 15% margin. As of August 8, 2008, we have utilized $8.4 million
      of
      the facility.





31




We
      also
      lease certain administrative and production facilities from third parties.
      Accordingly, for the six months ended June, 2008 and 2007, we incurred rental
      expenses of $856,780 and $279,069, respectively.





On
      July
      19, 2008, Zhuhai King Glass Engineering Co., Ltd., our wholly-owned subsidiary
      was granted a bank’s acceptance bill facility by the Shenzhen Branch of ABN AMRO
      Bank N.V. The facility amount is RMB70,000,000 (US$10,218,978). ABN AMRO
      requires guarantees irrevocable and unconditional guarantee from us and cash
      collateral of 20% of bank’s acceptance bill issued. As of August 8, 2008, Zhuhai
      King Glass Engineering Co., Ltd. utilized RMB27,540,000 (US$4,020,000) of the
      facility.





Net
      cash
      used in operating activities for the six months ended June 30, 2008 was
      approximately $7.4 million, as compared to $5.6 million used in the same period
      in 2007. The change is primarily the result of growth in net income, add-back
      of
      non-cash warrant expense and non-cash amortization expense on the $10,000,000
      April 2007 and $20,000,000 April 2008 convertible bonds, an increase in
      receivables due to a relatively long collection period typical of the
      architecture industry in China, and an increase in payables for the six months
      ended June 30, 2008.





Net
      cash
      used by investing activities was approximately $0.9 million for the six months
      ended June 30, 2008 compared to approximately $0.5 million used for the six
      months ended June 30, 2007. The change was mainly a result of an increase of
      fixed assets purchased during the six months ended June 30, 2008.





Net
      cash
      provided by financing activities was $19.5 million for the six months ended
      June
      30, 2008 compared to $9.9 million provided for the six months ended June 30,
      2007. The increase was primarily due to the issuance of $20,000,000 convertible
      bonds in April 2008.





At
      June
      30, 2008, we had no material commitments for capital expenditures other than
      for
      those expenditures incurred in the ordinary course of business. We intend to
      expend a significant amount of capital to purchase materials and serve as
      deposits for performance bonds for new projects that we have obtained.
      Additional capital for this objective may be required that is in excess of
      our
      liquidity, requiring us to raise additional capital through an equity offering
      or secured or unsecured debt financing. The availability of additional capital
      resources will depend on prevailing market conditions, interest rates, and
      our
      existing financial position and results of operations.





**Contractual
      Obligations**





The
      following table describes our contractual commitments and obligations as of
      June
      30, 2008:





**Payments due by period****Total**
            
            **Less than**
              **1 year**
            
            **1-3 years**
            
            **3-5 years**
            
            **More**
              **than**
              **5** **years**Operating
                Lease Obligations
            
            $
            2,166,356
            
            $
            1,607,696
            
            $
            558,660
            
            $
            —
            
            $
            —Contingent
                Liabilities (1)
            
            $
            20,365,768
            
            $
            16,229,932
            
            $
            4,137,836
            
            $
            —
            
            $
            —Long-term
                debt (2)
            
            $
            38,409,000
            
            $
            —
            
            $
            23,322,000
            
            $
            15,087,000
            
            $
            —





(1)
            Includes
                the $3,500,000 standby guarantee expired May 2, 2009, $2,121,322
                performance bond expired April 11, 2009 and $6,363,966 advanced payment
                bond expired March 25, 2009, issued by ABN AMRO Bank N.V. Also includes
                $1,831,411 performance bond expired December 31, 2009, $2,306,425
                advanced
                payment bond expired August 6, 2009 and $4,242,644 advanced payment
                bond
                expired March 25, 2009, issued by HSBC.





(2)
            Includes
                the $10 million convertible bond which is required to be redeemed
                at
                150.87% at maturity at April 4, 2012, which may be converted into
                our
                common stocks after September 28, 2008, accordingly we may re-classify
                upon conversion. Also includes the $20 million convertible bond which
                is
                required to be redeemed at 116.61% at maturity at April 15, 2011,
                which
                may be converted into our common stocks after October 15, 2008,
                accordingly we may re-classify upon
                conversion.





32





**Off-Balance
      Sheet Arrangements**





None.




**Critical
      Accounting Policies and Estimates**





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




We
      describe our significant accounting policies in Note 2, Summary of Significant
      Accounting Policies, of the Notes to Consolidated Financial Statements included
      in our Annual Report on Form 10-K as of and for the year ended December 31,
      2007. We discuss our critical accounting policies and estimates in Management’s
      Discussion and Analysis of Financial Condition and Results of Operations in
      our
      Annual Report on Form 10-K as of and for the year ended December 31, 2007.
      Other
      than as indicated in this quarterly report, there have been no material
      revisions to the critical accounting policies as filed in our Annual Report
      for
      the fiscal year ended December 31, 2007 on Form 10-K and Form 10-K/A, as filed
      with the SEC on March 31, 2008 and April 29, 2008, respectively.





**Recent
      Accounting Pronouncements**





In
      December 2007, the FASB issued SFAS 141 (revised 2007), *Business
      Combinations* ,
      (‘‘SFAS
      141(R)’’). SFAS 141(R) retains the fundamental requirements of the original
      pronouncement requiring that the purchase method be used for all business
      combinations, but also provides revised guidance for recognizing and measuring
      identifiable assets and goodwill acquired and liabilities assumed arising from
      contingencies, the capitalization of in-process research and development at
      fair
      value, and the expensing of acquisition-related costs as incurred. SFAS 141(R)
      is effective for fiscal years beginning after December 15, 2008. The Company
      will evaluate how the new requirements could impact the accounting for any
      acquisitions completed beginning in fiscal 2009 and beyond, and the potential
      impact on the Company’s consolidated financial statements.





In
      December 2007, the FASB issued SFAS 160, *Noncontrolling
      Interests in Consolidated Financial Statements − an amendment of ARB No.
      51* .
      SFAS
      160 requires that ownership interests in subsidiaries held by parties other
      than
      the parent (previously referred to as minority interests), and the amount of
      consolidated net income, be clearly identified, labeled and presented in the
      consolidated financial statements. It also requires once a subsidiary is
      deconsolidated, any retained noncontrolling equity investment in the former
      subsidiary be initially measured at fair value. Sufficient disclosures are
      required to clearly identify and distinguish between the interests of the parent
      and the interests of the noncontrolling owners as components of equity. It
      is
      effective for fiscal years beginning after December 15, 2008, and requires
      retroactive adoption of the presentation and disclosure requirements for
      existing minority interests. All other requirements are applied prospectively.
      The Company is currently evaluating the impact of SFAS 160 on the Company’s
      consolidated financial statements.





In
      March
      2008, the Financial Accounting Standards Board (“FASB”) issued Statement of
      Financial Accounting Standards (“SFAS”) No. 161, *Disclosures
      about Derivative Instruments and Hedging Activities,* an
      amendment of FASB Statement No. 133 (“SFAS No. 161”).
      SFAS No. 161 requires enhanced disclosures about a company’s
      derivative and hedging activities. These enhanced disclosures will discuss
      (a) how and why a company uses derivative instruments, (b) how
      derivative instruments and related hedged items are accounted for under FASB
      Statement No. 133 and its related interpretations and (c) how
      derivative instruments and related hedged items affect a company’s financial
      position, results of operations and cash flows. SFAS No. 161 is
      effective for the Company on January 1, 2009. This standard will have no
      impact on the Company’s financial position, results of operations or cash flow.





In
      April
      2008, the FASB issued FASB Staff Position (“FSP”) SFAS No. 142-3, *Determination
      of the Useful Life of Intangible Assets* (“FSP
      SFAS No. 142-3”). FSP SFAS No. 142-3 amends the factors that should be
      considered in developing renewal or extension assumptions used to determine
      the
      useful life of a recognized intangible asset under SFAS No. 142,
      Goodwill and Other Intangible Assets. The intent of this FSP is to improve
      the
      consistency between the useful life of a recognized intangible asset and the
      period of expected cash flows used to measure the fair value of the asset under
      SFAS No. 141 (revised 2007), *Business
      Combinations* ,
      and
      other US GAAP. FSP SFAS No. 142-3 is effective for the Company on
      January 1, 2009. The Company is currently evaluating the impact of adopting
      FSP SFAS No. 142-3 on the Company’s financial position, results of
      operations and cash flows.




33





In
      May
      2008, the FASB issued SFAS No. 162, *The
      Hierarchy of Generally Accepted Accounting Principles* ,
      (“SFAS No. 162”), which becomes effective 60 days following the
      SEC’s approval of the Public Company Accounting Oversight Board (“PCAOB”)
      amendments to US Auditing Standards (“AU”) Section 411, The Meaning of
      Present Fairly in Conformity With Generally Accepted Accounting Principles.
      SFAS No. 162 identifies the sources of accounting principles and the
      framework for selecting the principles to be used in the preparation of
      financial statements of nongovernmental entities that are presented in
      conformity with US GAAP. This standard is not expected to have an impact on
      the
      Company’s financial position, results of operations or cash flow.





In
      June
      2008, the EITF reached a consensus on EITF Issue No. 08-4, *Transition
      Guidance for Conforming Changes to EITF Issue No. 98-5, Accounting for
      Convertible Securities with Beneficial Conversion Features or Contingently
      Adjustable Conversion Ratios* (“EITF
      No. 08-4”). Subsequent to the issuance of EITF No. 98-5, certain
      portions of the guidance contained in EITF No. 98-5 were nullified by EITF
      Issue No. 00-27, Application of EITF Issue No. 98-5, ‘ *Accounting
      for Convertible Securities with Beneficial Conversion Features or Contingently
      Adjustable Conversion Ratios* ’
(“EITF
      No. 00-27”). However, the portions of EITF No. 98-5 that were
      nullified by EITF No. 00-27 were not specifically identified in EITF
      No. 98-5, nor were the illustrative examples in EITF No. 98-5 updated
      for the effects of EITF No. 00-27. EITF No. 08-4 specifically
      addresses the conforming changes to EITF Issue No. 98-5 and provides
      transition guidance for the conforming changes. EITF No. 08-4 is effective
      for the Company for the fiscal year ending December 31, 2008. The Company
      is currently evaluating the impact of adopting EITF No. 08-4 on the
      Company’s financial position, results of operations and cash flows.




**ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
      RISK**





There
      have been no material changes in market risk from the information provided
      in
      Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in
      our Annual Report for the fiscal year ended December 31, 2007 on Form 10-K
      and
      Form 10-K/A, as filed with the SEC on March 31, 2008 and April 29, 2008,
      respectively.





**ITEM
      4.  CONTROLS AND PROCEDURES**





**Evaluation
      of Disclosure Controls and Procedures**





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





As
      of the
      end of the period covered by this Quarterly Report, we conducted an evaluation,
      under the supervision and with the participation of our Chief Executive Officer
      and Chief Financial Officer, of our disclosure controls and procedures (as
      defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon
      this evaluation, our Chief Executive Officer and Chief Financial Officer
      concluded that the Company’s disclosure controls and procedures are effective to
      ensure that information required to be disclosed by the Company in the reports
      that we file or submit under the Exchange Act is recorded, processed, summarized
      and reported within the time periods specified in the SEC’s rules and forms and
      which also are effective in ensuring that information required to be disclosed
      by the Company in the reports that it files or submits under the Exchange Act
      is
      accumulated and communicated to the Company’s management, including the
      Company’s Chief Executive Officer and Chief Financial Officer, to allow timely
      decisions regarding required disclosure.




34





**Changes
      in internal control over financial reporting**




As
      disclosed in the Form 8-K filing filed with the Securities and Exchange
      Commission on June 16, 2008, our CFO resigned her position effective June 30,
      2008. A new CFO was appointed as of the same date and has assumed the internal
      control duties of the CFO. Based on the evaluation of our management as required
      by paragraph (d) of Rule 13a-15 or 15d-15 of the Exchange Act, we believe that,
      except as stated above, there were no changes in our internal control over
      financial reporting that occurred during the second quarter of 2008 that have
      materially affected, or are reasonably likely to materially affect, our internal
      control over financial reporting.




35





**PART
      II-OTHER INFORMATION**





**ITEM
      1.**  **LEGAL
      PROCEEDINGS**





Not
      applicable.





**ITEM
      1A.**  **RISK
      FACTORS**





There
      have been no material changes from the risk factors disclosed in the “Risk
      Factors” section of our annual report on Form 10-K for the year ended December
      31, 2007.





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





On
      April
      15, 2008, we completed a financing transaction with the Subscribers under
      Regulation S of the Securities Act of 1933, as amended (the “Securities Act”)
      and issued (i) $20,000,000 12% Convertible Bonds due in 2011 (the “Bonds”) and
      (ii) 300,000 warrants to purchase an aggregate of 300,000 shares of our common
      stock, subject to adjustments for stock splits or reorganizations as set forth
      in the warrant instrument, that expire in 2013 (the “Bond Warrants”). The Bonds
      and the Bond Warrants were offered and sold to the Subscribers in reliance
      upon
      exemption from registration pursuant to Regulation S of the Securities Act.
      We
      complied with the conditions of Rule 903 as promulgated under the Securities
      Act
      including, but not limited to, the following: (i) each of the Subscribers is
      a
      non-U.S. resident and has not offered or sold their shares in accordance with
      the provisions of Regulation S; (ii) an appropriate legend was affixed to the
      securities issued in accordance with Regulation S; (iii) each of the Subscribers
      has represented that it was not acquiring the securities for the account or
      benefit of a U.S. person; and (iv) each of the Subscribers agreed to resell
      the
      securities only in accordance with the provisions of Regulation S, pursuant
      to a
      registration statement under the Securities Act, or pursuant to an available
      exemption from registration. We will refuse to register any transfer of the
      shares not made in accordance with Regulation S, after registration, or under
      an
      exemption.





**ITEM
      3.**  **DEFAULTS
      UPON SENIOR SECURITIES**





Not
      applicable.





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





Not
      applicable.





**ITEM
      5.**  **OTHER
      INFORMATION**





On
      May
      28, 2008, pursuant to authorization by its Board of Directors, the Company
      notified the American Stock Exchange (“AMEX”) that it intends to voluntarily
      withdraw the listing of its common stock on the AMEX in order to transfer its
      listing to The NASDAQ Stock Market LLC (“NASDAQ”). The Company’s common stock
      commenced trading on the NASDAQ on June 10, 2008 under the symbol
      "CAEI."




36





**ITEM
      6.**  **EXHIBITS**




21.1
            List
                of Subsidiaries31.1
            Certification
                of Chief Executive Officer pursuant to Section 302(a) of the
                Sarbanes-Oxley Act of 200231.2
            Certification
                of Chief Financial Officer pursuant to Section 302(a) of the
                Sarbanes-Oxley Act of 2002.32.1
            Certification
                of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002.*





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




37





**SIGNATURES**





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





**CHINA
                ARCHITECTURAL ENGINEERING, INC.**
              (Registrant)August
                11, 2008
            By:
            /s/ Luo
                Ken YiLuo
                Ken YiChief
                Executive Officer and Chairman of the
                Board




38