Cannabis Bioscience International Holdings, Inc. - Quarter Report: 2009 February (Form 10-Q)

Unassociated Document

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 February 28, 2009

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

For the transition period from ___________ to ______________

Commission File Number: 333-146758

FIDELITY AVIATION CORPORATION

(Exact name of registrant as specified in its charter)

Colorado		16-1718190
(State or other jurisdiction of incorporation)		(IRS Employer Identification Number)

C915 Jia Hao International Business Center 116 Zizhuyuan Road Haidan District Beijing, China 100097
(Address of principal executive offices)

86-10-5170-9287
(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 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. x Yes o No

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.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes x No

As of April 14, 2009 the Issuer had 15,295,500 shares of common stock issued and outstanding.

TABLE OF CONTENTS

			Page

PART I Financial Information			3

Item 1. Financial Statements.			3

Consolidated Balance Sheets as of February 28, 2009 and May 31, 2008 (Unaudited)			4

Consolidated Statements of Operations for the three and nine months ended February 28, 2009 and February 29, 2008 (Unaudited)			5

Consolidated Statements of Cash Flows for the nine months ended February 28, 2009 and February 29, 2008 (Unaudited)			6

Notes to Consolidated Financial Statements (Unaudited)			7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.			13

Item 4T. Controls and Procedures.			16

PART II Other Information			17

Item 6. Exhibits.			17

Signatures			18

Exhibits/Certifications

PART I-FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FIDELITY AVIATION CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

			Page

Consolidated Balance Sheets as of February 28, 2009 and May 31, 2008 (Unaudited)			4

Consolidated Statements of Operations for the three and nine months ended February 28, 2009 and February 29, 2008 (Unaudited)			5

Consolidated Statements of Cash Flows for the nine months ended February 28, 2009 and February 29, 2008 (Unaudited)			6

Notes to Consolidated Financial Statements (Unaudited)			7

FIDELITY AVIATION CORPORATION

Consolidated Balance Sheets (unaudited)

	February 28, 2009			May 31, 2008
Assets
Current assets
Cash and cash equivalents	$	638,836		$	836,978
Trade accounts receivable, net		24,555,394			10,035,581
Prepayments		53,729			245,495
Inventories		954,647			1,316,445
Total current assets		26,202,606			12,434,499

Property and equipment
Office trailers		1,793,855			1,765,632
Machinery and equipment		1,330,109			1,309,183
Vehicles		1,118,919			1,101,315
Furniture and office equipment		507,225			452,431
Construction in progress		1,462,437			1,439,429
Total property and equipment		6,212,545			6,067,990

Accumulated depreciation		(2,231,603	)		(1,679,688	)
Net property, plant and equipment		3,980,942			4,388,302

Other receivables		2,382,214			472,451
Related party receivables		-			236,042
Total other assets		2,382,214			708,493

Total assets	$	32,565,762		$	17,531,294

Liabilities and stockholders' equity
Current liabilities
Trade accounts payable	$	9,883,647		$	5,503,200
Related party payable		250,981			677,930
Other payables		2,380,139			557,676
Accrued expenses		592,938			268,156
Total current liabilities		13,107,705			7,006,962

Minority Interests		1,066,124			577,995

Stockholders' equity
Preferred stock, no par value; 10,000,000 shares authorized; no shares issued and outstanding		-			-
Common stock; no par value; 100,000,000 shares authorized; 15,295,500 shares issued and outstanding		1,396,644			1,368,021
Retained earnings		15,566,647			7,294,422
Accumulated other comprehensive income		1,428,642			1,283,894
Total stockholders' equity		18,391,933			9,946,337

Total Liabilities and stockholders' equity	$	32,565,762		$	17,531,294

See accompanying notes to financial statements

FIDELITY AVIATION CORPORATION

Consolidated Statements of Operations and Comprehensive Income (unaudited)

	Three months			Three months			Nine months			Nine months
	ended February 28,			ended February 29,			ended February 28,			ended February 29,
	2009			2008			2009			2008

Sales revenues	$	27,351,505		$	10,774,185		$	54,371,630		$	25,262,588

Cost of goods sold		21,898,392			9,039,455			44,149,715			21,347,776

Gross profit		5,453,113			1,734,730			10,221,915			3,914,812

Selling expense		239,263			51,947			494,225			214,820
Other general and administrative		455,432			148,461			965,058			439,091
Total operating expenses		694,695			200,408			1,459,283			653,911

Net operating income		4,758,418			1,534,322			8,762,632			3,260,901

Other income (expense)
Interest income		190			128			1,133			915
Interest (expense)		-			(7,586	)		-			(34,356	)
Other expense		336			4,460			(11,930	)		15,733
Total other income (expense)		526			(2,998	)		(10,797	)		(17,708	)

Net income before income taxes		4,758,944			1,531,324			8,751,835			3,243,193

Income Taxes		-			-			-			-

Net income before minority interests		4,758,944			1,531,324			8,751,835			3,243,193

Minority Interests		260,606			83,840			479,610			177,565

Net income	$	4,498,338		$	1,447,484		$	8,272,225		$	3,065,628

Foreign Currency Translation Adjustment		(7,115	)		395,917			144,748			677,276

Comprehensive Income	$	4,491,223		$	1,843,401		$	8,416,973		$	3,742,904

Earning Per Share - Basic and Diluted	$	0.29		$	0.12		$	0.60		$	0.26

Basic and diluted shares outstanding		15,295,500			12,000,000			13,733,189			12,000,000

See accompanying notes to financial statements

FIDELITY AVIATION CORPORATION

Consolidated Statements of Cash Flows (unaudited)

	Nine months ended			Nine months ended
	February 28, 2009			February 29, 2008

Cash flows from operating activities:
Net income	$	8,272,225		$	3,065,628
Adjustments to reconcile net income to net cash provided by operations:
Minority Interests		479,610			177,565
Depreciation and amortization		523,196			449,409
Changes in operating liabilities and assets:
Trade accounts receivable		(14,320,425	)		(5,398,170	)
Prepayments		195,750			(121,542	)
Inventories		378,188			66,283
Other receivables		(1,930,828	)		(1,119,086	)
Trade accounts payable		4,275,748			1,942,436
Other payables		1,816,538			1,893,190
Accrued expenses		320,482			80,426
Net cash provided by operations		10,484			1,036,139

Cash flows from investing activities:
Purchases of plant and equipment		(47,580	)		(790,943	)
Construction in Progress		-			(127,739	)
Net cash used in investing activities		(47,580	)		(918,682	)

Cash flows from financing activities:
Proceeds from short-term notes payable		-			(77,836	)
Proceeds from Related party		(199,489	)		-
Cash acquired in recapitalization		28,623			-
Net cash used by financing activities		(170,866	)		(77,836	)

Effect of rate changes on cash		9,820			17,933

Increase (decrease) in cash and cash equivalents		(198,142	)		57,554
Cash and cash equivalents, beginning of period		836,978			181,691
Cash and cash equivalents, end of period	$	638,836		$	239,245

Supplemental disclosures of cash flow information:
Interest paid in cash	$	-		$	30,810
Income taxes paid in cash	$	-		$	-

See accompanying notes to financial statement

FIDELITY AVIATION CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

The interim consolidated financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These statements reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these interim consolidated financial statements be read in conjunction with the financial statements of the Company for the year ended May 31, 2008 and notes thereto. The Company follows the same accounting policies in the preparation of interim reports.

Note 1. Nature of operations

Fidelity Aviation Corporation (“Fidelity”) was organized on February 28, 2003 as Fidelity Aircraft Partners LLC, a Colorado limited liability company (“Fidelity LLC”). On December 16, 2004, Fidelity LLC converted itself into Fidelity Aviation Corporation by filing a Statement of Conversion and Articles of Incorporation with the Colorado Secretary of State. Fidelity was formed to purchase large commercial (transport category) jet airframes, salvage the usable aircraft parts and components from them and sell the parts and components. The Board of Directors is currently evaluating the future market for aircraft parts business in light of economic conditions.

On October 8, 2008, Fidelity entered into and consummated the transactions contemplated under a Share Exchange Agreement with Northern Construction Holdings, Ltd., a Hong Kong limited company (“NCH”) and its shareholder pursuant to which Fidelity issued 12,000,000 shares of Fidelity common stock (the “Share Exchange”) in exchange for all issued and outstanding common stock of NCH.

The Share Exchange resulted in (i) a change in control of Fidelity with the shareholder of NCH owning approximately 78% of issued and outstanding shares of common stock of Fidelity, (ii) NCH becoming a wholly-owned subsidiary of Fidelity, and (iii) appointment of certain nominees of the shareholder of NCH as directors and officers of Fidelity and resignation of John Schoenauer as director, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer of Fidelity.

As a result of the Share Exchange Agreement, Beijing Fortune Capital Management Co., Ltd. (“BFCM”), a 95% owned subsidiary of NCH, became our indirect majority-owned subsidiary. Also as a result of the Share Exchange Agreement, Beijing Chengzhi Qianmao Concrete Co., Ltd., (“Beijing Concrete”), the operating company, and a 99.5% owned subsidiary of BFCM, also became our majority-owned subsidiary.

For accounting purposes, the share exchange transaction was treated as a capital transaction where the acquiring corporation issued stock for the net monetary assets of the shell corporation, accompanied by a recapitalization. The accounting is similar in form to a reverse acquisition, except that goodwill or other intangibles are not recorded. All references to NCH common stock have been restated to reflect the equivalent numbers of Fidelity common shares.

When we refer in this report to business and financial information for periods prior to the consummation of the reverse acquisition, we are referring to the business and financial information of NCH on a consolidated basis unless the context suggests otherwise.

Note 2. Basis of Presentation

The accompanying financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). This basis differs from that used in the statutory accounts of the Company, which were prepared in accordance with the accounting principles and relevant financial regulations applicable to enterprises in the PRC. All necessary adjustments have been made to present the financial statements in accordance with US GAAP.

FIDELITY AVIATION CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

Note 3. Summary of Significant Accounting Policies

Economic and Political Risks

The Company faces a number of risks and challenges as a result of having primary operations and marketing in the People’s Republic of China. Changing political climates in the PRC could have a significant effect on the Company’s business.

Principles of Consolidation

The consolidated financial statements include the financial statements of Fidelity Aviation Corporation, and its wholly-owned and majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The Company’s foreign subsidiaries have fiscal year ends of May 31 and the results are consolidated up to that date. Minority interests consist of other stockholders’ ownership interests in majority-owned subsidiaries of the Company.

Cash and Cash Equivalents

For purposes of the statements of cash flows, cash and cash equivalents includes cash on hand and demand deposits held by banks. Deposits held in financial institutions in the PRC are not insured by any government entity or agency.

Accumulated Other Comprehensive Income

Accumulated other comprehensive income represents foreign currency translation adjustments.

Trade Accounts Receivable

The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. Trade accounts receivable are recognized and carried at original invoice amount less an allowance for any uncollectible amounts. An allowance for doubtful accounts is established and determined based on management’s assessment of known requirements, aging of receivables, payment history, the customer’s current credit worthiness and the economic environment.

Revenue Recognition

The Company receives revenue from sales of concrete products. We recognize revenue when all four revenue recognition criteria have been met: persuasive evidence of an arrangement exists, we have delivered the product, the fee is fixed or determinable and collection is reasonably assured. Our product delivered to customers would be checked on site by customers and once the products are accepted by customers they will sign the check or notes payable. There is no warranty issue after the delivery.

The Company recognizes its revenues net of value-added taxes (“VAT”). The Company is subject to VAT which is levied at the rate of 17% on the invoiced value of sales. The Company enjoys a free VAT policy according to the national policy, which encourages the development of the cement industry if the manufacturer satisfies the environmental protection requirements. The Company enjoys the free VAT policy from January 1st, 2006 and has been reviewed every year by the local tax bureau.

Shipping Income and Expense

EITF 00-10 “Accounting for Shipping and Handling Fees and Costs” establishes standards for the classification of shipping and handling costs. All amounts billed to a customer related to shipping and handling are classified as revenue. All costs incurred by the Company for shipping and handling are included in cost of sales.

Estimates

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

FIDELITY AVIATION CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

Note 3. Summary of Significant Accounting Policies (continued)

Inventories

Inventories are stated at the lower of cost, determined on a weighted average basis, and net realizable value. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose.

Property and Equipment

Property and equipment are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the useful lives of the assets. Major renewals are capitalized and depreciated; maintenance and repairs that do not extend the life of the respective assets are charged to expense as incurred. Upon disposal of assets, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in income. Depreciation related to property and equipment is reported in cost of revenues. Property, plant and equipment are depreciated over their estimated useful lives as follows:

Office trailers		10 years
Machinery and equipment		3-8 years
Furniture and office equipment		5-8 years
Motor vehicles		3-5 years

Construction-in-progress

All facilities purchased for installation, self-made or subcontracted are accounted for under construction-in-progress. Construction-in-progress is recorded at acquisition cost, including cost of facilities, installation expenses and the interest capitalized during the course of construction for the purpose of financing the project. Upon completion and readiness for use of the project, the cost of construction-in-progress is to be transferred to fixed assets.

Impairment of Long-Lived and Intangible Assets

Long-term assets of the Company are reviewed annually to assess whether the carrying value has become impaired according to the guidelines established in Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” No impairment of assets was recorded in the periods reported.

Other receivables

Other receivables consist of insurance claims and the temporary lending to the staff with no fixed repayment date and with no interest bearing on it. The Allowances on the other accounts receivable are recorded when circumstances indicate collection is doubtful for particular accounts receivable. The Company provides for allowances on a specific account basis. The total outstanding amount was $2,382,214 and $472,451 as of February 28, 2009 and May 31, 2008, respectively. There is no provision made for the other receivables at February 28, 2009 and May 31, 2008.

Related Party Transactions

Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence. Total outstanding amount of related party payable was $250,981 and $677,930 as of February 28, 2009 and May 31, 2008, respectively.

FIDELITY AVIATION CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

Other Payables

Other payables consist of the following as of February 28, 2009 and May 31, 2008:

	February 28, 2009		May 31, 2008
Commission payable	$	1,767,053	$	407,205
Staff deposit		613,086		150,471
Total other payables	$	2,380,139	$	557,676

Minority Interests

Minority interests consist of other stockholders’ ownership interests in majority-owned subsidiaries of the Company, which is about 5.48% of the total ownership. As of February 28, 2009 and May 31, 2008, the balance of minority interests was $1,066,124 and $577,995 respectively.

Advertising Costs

The Company expenses non-direct advertising costs as incurred. The Company did not incur any direct response advertising costs during the nine months ended February 28, 2009 and February 29, 2008 to be capitalized and deferred to future periods.

Foreign Currency and Comprehensive Income

The accompanying financial statements are presented in US dollars. The functional currency is the Renminbi (“RMB”) of the PRC. The financial statements are translated into US dollars from RMB at year-end exchange rates for assets and liabilities, and weighted average exchange rates for revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.

On July 21, 2005, the PRC changed its foreign currency exchange policy from a fixed RMB/USD exchange rate into a flexible rate under the control of the PRC’s government. We use the Closing Rate Method in currency translation of the financial statements of the Company.

RMB is not freely convertible into the currency of other nations. All such exchange transactions must take place through authorized institutions. There is no guarantee the RMB amounts could have been, or could be, converted into US dollars at rates used in translation.

Income Taxes

The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109 (“SFAS 109”). Under SFAS 109 deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company has recorded no deferred tax assets or liabilities as of February 28, 2009 and February 29, 2008. There are no material timing differences and therefore no deferred tax asset or liability as of February 28, 2009 and February 29, 2008. There are no net operating loss carry forwards as of February 28, 2009 and February 29, 2008.

Under the Income Tax Laws of the PRC, the Company’s subsidiaries are generally subject to an income tax at an effective rate of 25% on income reported in the statutory financial statements after appropriate tax adjustments. Currently, the Company is charged 0% income tax expense for the fiscal quarters ended February 28, 2009 and 2008. The exemption of income tax to the Company will last until December 31, 2010, and from year 2011, the Company will be subject to an income tax at an effective rate of 25%.

FIDELITY AVIATION CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

Note 3. Summary of Significant Accounting Policies (continued)

Restrictions on Transfer of Assets Out of the PRC

Dividend payments by the Company are limited by certain statutory regulations in the PRC. No dividends may be paid by the Company without first receiving prior approval from the Foreign Currency Exchange Management Bureau. However, no such restrictions exist with respect to loans and advances.

Basic and Diluted Earnings Per Share

Earnings per share are calculated in accordance with the Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings per share". Basic net earnings per share are based upon the weighted average number of common shares outstanding. Diluted net earnings per share are based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method.

Segment Reporting

Statement of Financial Accounting Standards No. 131 (SFAS 131), “Disclosure about Segments of an Enterprise and Related Information” requires use of the management approach model for segment reporting. The management approach model is based on the way a company's management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.

As the Company sells its product, concrete, within China, it is not needed to report revenues by segment.

Recent pronouncements

In December 2007, the Financial Accounting Standards Board (the “FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141 (Revised 2007), BUSINESS COMBINATIONS. This revision to SFAS No. 141 requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at the acquisition date, at their fair values as of the acquisition date, with limited exceptions. This revision also requires that acquisition-related costs be recognized separately from the assets acquired and that expected restructuring costs be recognized as if they were a liability assumed at the acquisition date and recognized separately from the business combination. In addition, this revision requires that if a business combination is achieved in stages, that the identifiable assets and liabilities, as well as the non-controlling interest in the acquiree, be recognized at the full amounts of their fair values.

In December 2007, the FASB issued SFAS No. 160, NONCONTROLLING INTERESTS IN CONSOLIDATED FINANCIAL STATEMENTS, an amendment of ARB. No. 51. The objective of this statement is to improve the relevance, comparability, and transparency of the financial statements by establishing accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. The Company believes that this statement will not have any impact on its financial statements, unless it deconsolidates a subsidiary.

In March 2008, the FASB issued SFAS No. 161, DISCLOSURES ABOUT DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (an amendment to SFAS No. 133). This statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008 and requires enhanced disclosures with respect to derivative and hedging activities. The Company will comply with the disclosure requirements of this statement if it utilizes derivative instruments or engages in hedging activities upon its effectiveness.

In April 2008, the FASB issued FASB Staff Position No. 142-3, DETERMINATION OF THE USEFUL LIFE OF INTANGIBLE ASSETS (“FSP No. 142-3”) to improve the consistency between the useful life of a recognized intangible asset (under SFAS No. 142) and the period of expected cash flows used to measure the fair value of the intangible asset (under SFAS No. 141(R)). FSP No. 142-3 amends the factors to be considered when developing renewal or extension assumptions that are used to estimate an intangible asset’s useful life under SFAS No. 142. The guidance in the new staff position is to be applied prospectively to intangible assets acquired after December 31, 2008. In addition, FSP No.142-3 increases the disclosure requirements related to renewal or extension assumptions. The Company does not believe implementation of FSP No. 142-3 have a material impact on its financial statements.

FIDELITY AVIATION CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

Note 3. Summary of Significant Accounting Policies (continued)

Recent pronouncements (continued)

In May 2008, the FASB issued statement No. 162, THE HIERARCHY OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. This statement 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 generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). This statement is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “the Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles”.

In May 2008, the FASB issued Statement No. 163, ACCOUNTING FOR FINANCE GUARANTEE INSURANCE CONTRACTS - AN INTERPRETATION OF FASB STATEMENT NO. 60. The premium revenue recognition approach for a financial guarantee insurance contract links premium revenue recognition to the amount of insurance protection and the period in which it is provided. For purposes of this statement, the amount of insurance protection provided is assumed to be a function of the insured principal amount outstanding, since the premium received requires the insurance enterprise to stand ready to protect holders of an insured financial obligation from loss due to default over the period of the insured financial obligation. This Statement is effective for financial statements issued for fiscal years beginning after December 15, 2008.

In June 2008, the FASB issued FASB Staff Position Emerging Issues Task Force (EITF) No. 03-6-1, DETERMINING WHETHER INSTRUMENTS GRANTED IN SHARE-BASED PAYMENT TRANSACTIONS ARE PARTICIPATING SECURITIES (“FSP EITF No. 03-6-1”). Under FSP EITF No. 03-6-1, unvested share-based payment awards that contain rights to receive nonforfeitable dividends (whether paid or unpaid) are participating securities, and should be included in the two-class method of computing EPS. FSP EITF No. 03-6-1 is effective for fiscal years beginning after December 15, 2008, and interim periods within those years, and is not expected to have a significant impact on the Company’s financial statements.

None of the above new pronouncements has current application to the Company, but may be applicable to the Company’s future financial reporting.

ITEM 2. MANAGEMENT’S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

SPECIAL NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS

CERTAIN STATEMENTS IN THIS REPORT, INCLUDING STATEMENTS IN THE FOLLOWING DISCUSSION, ARE WHAT ARE KNOWN AS "FORWARD LOOKING STATEMENTS", WHICH ARE BASICALLY STATEMENTS ABOUT THE FUTURE. FOR THAT REASON, THESE STATEMENTS INVOLVE RISK AND UNCERTAINTY SINCE NO ONE CAN ACCURATELY PREDICT THE FUTURE. WORDS SUCH AS "PLANS", "INTENDS", "WILL", "HOPES", "SEEKS", "ANTICIPATES", "EXPECTS "AND THE LIKE OFTEN IDENTIFY SUCH FORWARD LOOKING STATEMENTS, BUT ARE NOT THE ONLY INDICATION THAT A STATEMENT IS A FORWARD LOOKING STATEMENT. SUCH FORWARD LOOKING STATEMENTS INCLUDE STATEMENTS CONCERNING OUR PLANS AND OBJECTIVES WITH RESPECT TO THE PRESENT AND FUTURE OPERATIONS OF THE COMPANY, AND STATEMENTS WHICH EXPRESS OR IMPLY THAT SUCH PRESENT AND FUTURE OPERATIONS WILL OR MAY PRODUCE REVENUES, INCOME OR PROFITS. NUMEROUS FACTORS AND FUTURE EVENTS COULD CAUSE THE COMPANY TO CHANGE SUCH PLANS AND OBJECTIVES OR FAIL TO SUCCESSFULLY IMPLEMENT SUCH PLANS OR ACHIEVE SUCH OBJECTIVES, OR CAUSE SUCH PRESENT AND FUTURE OPERATIONS TO FAIL TO PRODUCE REVENUES, INCOME OR PROFITS. THEREFORE, THE READER IS ADVISED THAT THE FOLLOWING DISCUSSION SHOULD BE CONSIDERED IN LIGHT OF THE DISCUSSION OF RISKS AND OTHER FACTORS CONTAINED IN THIS REPORT ON FORM 10-Q AND IN THE COMPANY'S OTHER FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. NO STATEMENTS CONTAINED IN THE FOLLOWING DISCUSSION SHOULD BE CONSTRUED AS A GUARANTEE OR ASSURANCE OF FUTURE PERFORMANCE OR FUTURE RESULTS.

The "Company", "we," "us," and "our," refer to (i) Fidelity Aviation Corporation; (ii) Beijing Chengzhi Qianmao Concrete Corporation Ltd. (“Beijing Concrete”) and (iii) Northern Construction Holdings, Ltd, (“NCH”).

Overview

Fidelity’s business was launched in 2003 when it borrowed $125,000 to purchase two non-flying, narrow-body DC-9-51 airframes without engines and thrust reversers. We salvaged the rotable parts and systems from those airframes, and our business consisted of selling them to the aviation industry. Aviation customers for Fidelity’s parts were primarily: 1) aircraft operators, including leasing companies, charter airlines and scheduled-service airlines that operate DC-9 and MD-80 aircraft, as well as 2) the maintenance and repair organizations (MRO’s) which service those aircraft. We are currently evaluating the future market for our aircraft parts business.

On October 8, 2008, Fidelity entered into and consummated the transactions contemplated under a Share Exchange Agreement with Northern Construction Holdings, Ltd., a Hong Kong limited company (“NCH”) and its shareholder pursuant to which Fidelity purchased from the shareholder of NCH all issued and outstanding shares of NCH’s common stock in consideration of the issuance of 12,000,000 shares of common stock of Fidelity (the “Share Exchange”).

NCH, through its subsidiary Beijing Chengzhi Qianmao Concrete Corporation Ltd. (“Beijing Concrete”) engages in production of ready-mixed concrete and other special high-performance concrete for developers and the construction industry. It has two prime production facilities. One facility is located in the Nanhaizi area, on the west side of the Yizhuang economic development zone in Beijing. The other is located at the Tangshan harbor, about two hundred kilometers from Beijing.

Results of Operations

Three Months Ended February 28, 2009 Compared to Three Months Ended February 29, 2008

Sales Revenues

Sales for the three months ended February 28, 2009 were $27,351,505 as compared to $10,774,185 for the same period last year, an increase of 154%. The increase in sales is attributable to the increase of sales prices during this period and the development of our customer network.

Costs of Goods Sold

Cost of goods sold for the three months ended February 28, 2009 was $21,898,392 as compared to $9,039,455 for the same period last year, an increase of 142%. The increase in cost of goods is attributable to the increase of cost of raw materials during this period and the increase of sales due to the development of our customer network.

Gross Profit

Gross profit for the three months ended February 28, 2009 was $5,453,113, an increase of approximately 214%, as compared to $1,734,730 for the three months ended February 29, 2008. The increase in gross profit is attributable to the increase of sales due to the development of our customer network. Our gross margin in the three months ended February 28, 2009 was approximately 19.9%, which is higher than 16.1% in the same period last year. The increase of the gross margin is mainly due to the increase of sales prices.

Selling Expenses

Selling expenses for the three months ended February 28, 2009 were $239,263 as compared to $51,947 for the same period last year, an increase of $187,316, or approximately increase of 361%. Selling expenses consisted primarily of after sales service expenses. The increase in selling expenses was primarily due to increase of sales revenue.

General and Administrative Expenses

General and administrative expenses for the three months ended February 28, 2009 were $455,432, as compared to $148,461 for the same period last year, an increase of $306,971, or approximately 207%. The increase of the general and administrative expenses was primarily due to the consummation of the Share Exchange Agreement and related legal and professional expenses.

Operating Income

Our operating income for the three months ended February 28, 2009 was $4,758,418, an increase of 210% as compared to $1,534,322 for the three months ended February 29, 2008. The increased income was due to the increased sales revenue and our budget control on operating expenses.

Income Taxes

During the three months ended February 28, 2009, our business operations were solely conducted by our subsidiaries incorporated in the PRC and we are governed by the PRC Enterprise Income Tax Laws. PRC enterprise income tax is calculated based on taxable income determined under PRC GAAP. In accordance with the Income Tax Laws, a PRC domestic company is subject to enterprise income tax at the rate of 25%.

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

Net Income

Net income was $4,498,338 for the three months ended February 28, 2009, compared to $1,447,484 in the same period last year, an increase of $3,050,854 or approximately 211%. The increase was primarily due to the increased sales and our budget control on operating expenses during the three months ended February 28, 2009.

Nine Months Ended February 28, 2009 Compared to Nine Months Ended February 29, 2008

Sales Revenues

Sales for the nine months ended February 28, 2009 were $54,371,630 as compared to $25,262,588 for the same period last year, an increase of 115%. The increase in sales is attributable to the increase of sales prices during this period and the development of our customer network.

Costs of Goods Sold

Cost of goods sold for the nine months ended February 28, 2009 was $44,149,715 as compared to $21,347,776 for the same period last year, an increase of 107%. The increase in cost of goods is attributable to the increase of cost of raw materials during this period and the increase of sales due to the development of our customer network.

Gross Profit

Gross profit for the nine months ended February 28, 2009 was $10,221,915, an increase of approximately 161.1%, as compared to $3,914,812 for the nine months ended February 29, 2008. The increase in gross profit is attributable to the increase of sales due to the development of our customer network. Because of increased sales prices and effective cost control, our gross margin in the nine months ended February 28, 2009 was approximately 18.8%, compared with 15.5% in the same period last year.

Selling Expenses

Selling expenses for the nine months ended February 28, 2009 were $494,225 as compared to $214,820 for the same period last year, an increase of $279,405, or approximately increase of 130%. Selling expenses consisted primarily of after sales service expenses. The increase in selling expenses was primarily due to increase of sales revenue.

General and Administrative Expenses

General and Administrative Expenses for the nine months ended February 28, 2009 were $965,058, as compared to $439,091 for the same period last year, an increase of $525,967, or approximately 119.8%. The increase of the general and administrative expenses was primarily due to the consummation of the Share Exchange Agreement, related legal and professional expenses.

Operating Income

Income from operations for the nine months ended February 28, 2009 was $8,762,632, an increase of 168.7% as compared to $3,260,901 for the nine months ended February 29, 2008. The increased income was due to the increased sales revenue and our budget control on operating expenses.

Income Taxes

During the nine months ended February 28, 2009, our business operations were solely conducted by our subsidiaries incorporated in the PRC and we are governed by the PRC Enterprise Income Tax Laws. PRC enterprise income tax is calculated based on taxable income determined under PRC GAAP. In accordance with the Income Tax Laws, a PRC domestic company is subject to enterprise income tax at the rate of 25%.

Net Income

Net income was $8,272,225 for the nine months ended February 28, 2009, compared with $3,065,628 in the same period last year, an increase of $5,206,597 or approximately 170%. The increase was primarily due to the increased sales and our budget control on operating expenses during the nine months ended February 28, 2009.

Liquidity and Capital Resources

As of February 28, 2009, we had cash and cash equivalents of $638,836. We have historically funded our working capital needs from operations, advance payments from customers, bank borrowings, and capital from shareholders. Our working capital requirements are influenced by the level of our operations, the numerical and dollar volume of our project contracts, the progress of our contract execution, and the timing of accounts receivable collections.

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

	Nine months Ended
	February 28, 2009			February 29, 2008
Net cash provided by / (used in) operating activities	$	10,484		$	1,036,139
Net cash used in investing activities		(47,580	)		(918,682	)
Net cash provided (used in) by financing activities		(170,866	)		(77,836	)
Effect of exchange rate change on cash and cash equivalents		9,820			17,933
Net (decrease) increase in cash and cash equivalent		(198,142	)		57,554
Cash and cash equivalents, beginning balance		836,978			181,691
Cash and cash equivalents, ending balance		638,836			239,245

Operating Activities

Net cash provided by operating activities was $10,484 for the nine months ended February 28, 2009, whereas an amount of $1,036,139 net cash was provided by operating activities for the corresponding period of 2008. The balance of account receivables occupies a major part of the operation capital.

Investing Activities

Net cash used in investing activities is $47,580 during the nine months ended February 28, 2009, while a net of $918,682 was used by investing activities for the corresponding period of 2008. It was primarily used for the purpose of purchasing machines and equipments in 2008.

Financing Activities

$170,866 of cash was used for the nine months ended February 28, 2009, within which $199,489 was used for the purpose of payment to related party payables and $28,623 was contributed by shareholders during the reverse acquisition.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements.

ITEM 4T. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 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 an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to principal executive and principal financial officers to allow timely decisions regarding disclosure.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our chief executive officer and chief financial officer concluded that because of the material weakness in internal control over financial reporting described below our disclosure controls and procedures were not effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

On February 25, 2009, the Board of Directors of the Company concluded, based on the recommendation of management, that certain minority interest ownership had not been accounted properly in the consolidated financial statements of Northern Construction Holdings, Ltd. (“NCH”), a direct wholly owned subsidiary of the Company, for the fiscal years ended May 31, 2008 and 2007, which financial statements should therefore be restated to correct this error. Beijing Fortune Capital Management Co., Ltd., a direct 95% owned subsidiary of NCH, owns 99.5% of Beijing Chengzhi Quianmo Concrete Co, Ltd. However, 95% ownership figure was used in our previously reported 2008 and 2007 consolidated financial statements. Consequently, the consolidated financial statements of the Company for the fiscal quarter ended November 30, 2008 included in the Company’s quarterly report on Form 10-Q filed with the Commission on January 14, 2009 contained the same error. Management has discussed this matter with Child Van Wagoner & Bradshaw, PLLC, the Company’s independent registered public accounting firm.

On April 13, 2009, the Company filed a current report on Form 8-K which included the restated audited consolidated financial statements of NCH for the fiscal years ended May 31, 2008 and 2007 together with the audit opinion reissued by the Company’s independent registered public accounting firm. The Company intends to file its amended quarterly report on Form 10-Q/A for the fiscal quarter ended November 30, 2008 to reflect the correct minority interest ownership of Beijing Chengzhi Quianmo Concrete Co, Ltd.

The management considered the impact of this error on the effectiveness of the Company’s internal control over financial reporting and determined that it amounted to a material weakness. As a result, management no longer believes that the Company's internal controls over financial reporting were effective.

A material weakness (within the meaning of PCAOB Auditing Standard No. 5) is a control deficiency, or a combination of control deficiencies, that result in more than a remote likelihood that a material misstatement of the annual or interim consolidated financial statements will not be prevented or detected.

Except as described above, there was no change in the Company's internal control over financial reporting during the period ended February 28, 2009, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II-OTHER INFORMATION

ITEM 6. EXHIBITS.

(a) The following exhibits are filed herewith:

31.1	Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

FIDELITY AVIATION CORPORATION


By:	/s/ Rong Yang
	Rong Yang, Chief Executive Officer, Chief Financial Officer, Director

Date: April 14, 2009