UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, DC 20549





FORM 10-Q





[X]
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the quarterly period ended January 31, 2010[  ]
Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934For the transition period __________ to__________Commission File Number:  333-145794





Aviation Surveillance Systems, Inc.


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





Nevada
26-0164981(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)





701 Xuang Mi Hu Road, Xi Yuan, Futian, Shenzhen, P.R.C.(Address of principal executive offices)





086-13828-766-488(Issuer’s telephone number)_____________________________________________________________________(Former name, former address and former fiscal year, if changed since last report)


Check whether the issuer (1) 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 issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days [X] Yes    [
] 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.





[ ] Large accelerated filer
[ ] Non-accelerated filer
[ ] Accelerated filer
[X] Smaller reporting company


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





State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  54,724,119 common shares as of March 18, 2010.




Table of Contents


TABLEOF CONTENTS
PagePART I – FINANCIAL INFORMATIONItem 1:
Financial Statements
3Item 2:
Management’s Discussion and Analysis of Financial Condition and Results of Operations
4Item 3:
Quantitative and Qualitative Disclosures About Market Risk
8Item 4T:
Controls and Procedures
8PART II – OTHER INFORMATIONItem 1:
Legal Proceedings
9Item 1A:
Risk Factors
9Item 2:
Unregistered Sales of Equity Securities and Use of Proceeds
9Item 3:
Defaults Upon Senior Securities
9Item 4:
Submission of Matters to a Vote of Security Holders
9Item 5:
Other Information
9Item 6:
Exhibits
9




2
 Table of Contents





PART I - FINANCIAL INFORMATION





Item1.     Financial Statements





Our financial statements included in this Form 10-Q are as follows:F-1
Balance Sheets as of January 31, 2010 (unaudited) and July 31, 2009 (audited);F-2
Statements of Operations for the three and six months ended January 31, 2010 and 2009 and from inception on May 1, 2007 through January 31, 2010 (unaudited);F-3
Statements of Stockholders’ Equity (deficit) as of January 31, 2010 (unaudited);F-4
Statements of Cash Flows for the six months ended January 31, 2010 and 2009 and from inception on May 1, 2007 through January 31, 2010 (unaudited);F-5
Notes to Financial Statements.








These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q.  In the opinion of management, all adjustments considered necessary for a fair presentation have been included.  Operating
results for the interim period ended January 31, 2010 are not necessarily indicative of the results that can be expected for the full year.




3
 Table of Contents
 AVIATIONSURVEILLANCE SYSTEMS, INC
 (Formerly Fairytale Ventures Inc.)
 (A Development Stage Company)
 Balance Sheets
 ASSETSJanuary 31,2010

July 31,2009(unaudited)

(audited)CURRENT ASSETSCash
$
397

$
1,638Total Current Assets

397


1,638TOTAL ASSETS
$
397

$
1,638LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)CURRENT LIABILITIESNotes payable - related party
$
1,000

$
1,000Accounts payable and accrued expenses

138,737


69,148Total Current Liabilities

139,737


70,148STOCKHOLDERS' EQUITY (DEFICIT)Preferred stock - $0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding

-


-Common stock - $0.001 par value; 90,000,000 shares authorized; 16,488,827 shares issued and outstanding

16,489


16,489Additional paid-in capital

(264)


(264)Deficit accumulated during the development stage

(155,565)


(84,735)Total Stockholders' Equity (Deficit)

(139,340)


(68,510)TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
$
397

$
1,638
 The accompanying notes are an integral part of these financial statements.
 F-1
 Table of Contents
 AVIATIONSURVEILLANCE SYSTEMS, INC
 (Formerly Fairytale Ventures, Inc.)
 (A Development Stage Company)
 Statements of Operations
 (Unaudited)
  For the Three Months EndedJanuary 31,

For the Six Months EndedJanuary 31,

From Inceptionon May 1,2007 ThroughJanuary 31,2010

2009

2010

2009

2010REVENUES
$
-

$
-

$
-

$
-

$
200COST OF GOODS SOLD

-


-


-


-


-GROSS MARGIN

-


-


-


-


200OPERATING EXPENSESGeneral and administrative

26,763


2,697


70,783


7,021


155,555Total Operating Expenses

26,763


2,697


70,783


7,021


155,555OTHER EXPENSESInterest Expense

24


20


47


40


210NET LOSS BEFORE INCOME TAXES

(26,787)


-


(70,830)


-


(155,565)INCOME TAX EXPENSE

-


-


-


-


-NET LOSS
$
(26,787)

$
(2,717)

$
(70,830)

$
(7,061)

$
(155,565)BASIC LOSS PER SHARE
$
(0.00)

$
(0.00)

$
(0.00)

$
(0.00)WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING

16,488,827


16,488,827


16,488,827


16,488,827
 The accompanying notes are an integral part of these financial statements.
 F-2
 Table of Contents
 AVIATIONSURVEILLANCE SYSTEMS, INC
 (Formerly Fairytale Ventures, Inc.)
 (A Development Stage Company)
 Statements of Stockholders' Equity (Deficit)
 Common Stock

AdditionalPaid-In

DeficitAccumulatedDuring theDevelopmentShares

Amount

Capital

Stage

TotalBalance May 1, 2007

-

$
-

$
-

$
-

$
-Contributed capital

-


-


300


-


300Shares issued for cashat $0.001 per shareon May 14, 2007

11,798,803


11,799


(7,799)


-


4,000Shares issued for cashat $0.004 per shareon June 22, 2007

4,690,024


4,690


7,235


-


11,925Net loss from inceptionthrough July 31, 2007

-


-


-


(153)


(153)Balance, July 31, 2007

16,488,827


16,489


(264)


(153)


16,072Net loss for the yearended July 31, 2008

-


-


-


(15,709)


(15,709)Balance, July 31, 2008

16,488,827


16,489


(264)


(15,862)


363Net loss for year endedended July 31, 2009

-


-


-


(68,873)


(68,873)Balance, July 31, 2009

16,488,827


16,489


(264)


(84,735)


(68,510)Net loss for the six monthsended January 31, 2010 (unaudited)

-


-


-


(70,830)


(70,830)Balance, January 31, 2010 (unaudited)

16,488,827

$
16,489

$
(264)

$
(155,565)

$
(139,340)




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


F-3
 Table of Contents


AVIATIONSURVEILLANCE SYSTEMS, INC


(Formerly Fairytale Ventures, Inc).
 (A Development Stage Company)
 Statements of Cash Flows
 (Unaudited)


For the Six Months EndedJanuary 31,

From Inceptionon May 1,2007 ThroughJanuary 31,2010

2009

2010OPERATING ACTIVITIESNet loss
$
(70,830)

$
(7,061)

$
(155,565)Adjustments to reconcile net loss to net cash used by operating activities:Changes in operating assets and liabilities:Increase (decrease) in accounts payable and accrued expenses

69,589


1,424


138,737Net Cash Used in Operating Activities

(1,241)


(5,637)


(16,828)INVESTING ACTIVITIES

-


-


-FINANCING ACTIVITIESProceeds from common stock issued

-


-


16,225Increase in notes payable-related parties

-


-


1,000Net Cash Provided by Financing Activities

-


-


17,225NET INCREASE (DECREASE) IN CASH

(1,241)


(5,637)


397CASH AT BEGINNING OF PERIOD

1,638


9,075


-CASH AT END OF PERIOD
$
397

$
3,438

$
397SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATIONCASH PAID FOR:Interest
$
-

$
-

$
-Income Taxes
$
-

$
-

$
-




The accompanying notes are an integral part of these financial statements.
 F-4
 Table of Contents
 AVIATIONSURVEILLANCE SYSTEMS, INC.


(Formerly Fairytale Ventures, Inc.)
 (A Development Stage Company)
 Notes to Financial Statements
 January 31, 2010 and July 31, 2009


NOTE 1 - CONDENSED FINANCIAL STATEMENTS
 
 The accompanying financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at January 31, 2010, and for all periods presented herein,
have been made.
 
 Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  It is suggested that these condensed financial statements be read in conjunction with the financial statements
and notes thereto included in the Company's July 31, 2009 audited financial statements.  The results of operations for the periods ended January 31, 2010 and 2009 are not necessarily indicative of the operating results for the full years.
 
 NOTE 2 - GOING CONCERN
 
 The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet e stablished
an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
 
 In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However
management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.
 
 The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary
if the Company is unable to continue as a going concern.
 
 NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES
 
 Use of 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 disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period.  Actual results could differ from those estimates.
 F-5
 Table of Contents
 AVIATION SURVEILLANCE SYSTEMS, INC.
 (Formerly Fairytale Ventures, Inc.)
 (A Development Stage Company)
 Notes to Financial Statements
 January 31, 2010 and July 31, 2009
 NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 Recent Accounting Pronouncements
 
 In January 2010, the FASB issued Accounting Standards Update 2010-02, Consolidation (Topic 810):  Accounting and Reporting for Decreases in Ownership of a Subsidiary. This amendment to Topic 810 clarifies, but does not change, the scope of current US GAAP. It clarifies the decrease in ownership provisions of Subtopic 810-10 and
removes the potential conflict between guidance in that Subtopic and asset derecognition and gain or loss recognition guidance that may exist in other US GAAP. An entity will be required to follow the amended guidance beginning in the period that it first adopts FAS 160 (now included in Subtopic 810-10). For those entities that have already adopted FAS 160, the amendments are effective at the beginning of the first interim or annual reporting period ending on or after December 15, 2009. The amendments should
be applied retrospectively to the first period that an entity adopted FAS 160. The Company does not expect the provisions of ASU 2010-02 to have a material effect on the financial position, results of operations or cash flows of the Company.
 
 In January 2010, the FASB issued Accounting Standards Update 2010-01, Equity (Topic 505):  Accounting for Distributions to Shareholders with Components of Stock and Cash (A Consensus of the FASB Emerging Issues Task Force). This amendment to Topic 505 clarifies the stock portion of a distribution to shareholders that allows them
to elect to receive cash or stock with a limit on the amount of cash that will be distributed is not a stock dividend for purposes of applying Topics 505 and 260.  Effective for interim and annual periods ending on or after December 15, 2009, and would be applied on a retrospective basis. The Company does not expect the provisions of ASU 2010-01 to have a material effect on the financial position, results of operations or cash flows of the Company.
 
 In December 2009, the FASB issued Accounting Standards Update 2009-17, Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities.  This Accounting Standards Update amends the FASB Accounting Standards Codification for Statement 167. (See FAS 167 effective date below.)
 
 In December 2009, the FASB issued Accounting Standards Update 2009-16, Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets. This Accounting Standards Update amends the FASB Accounting Standards Codification for Statement 166. (See FAS 166 effective date below)
 
 In October 2009, the FASB issued Accounting Standards Update 2009-15, Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing. This Accounting Standards Update amends the FASB Accounting Standard Codification for EITF 09-1. (See EITF 09-1 effective date below.)
 
 In October 2009, the FASB issued Accounting Standards Update 2009-14, Software (Topic 985):  Certain Revenue Arrangements That Include Software Elements. This update changed the accounting model for revenue arrangements that include both tangible products and software elements. Effective prospectively for revenue arrangements
entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The Company does not expect the provisions of ASU 2009-14 to have a material effect on the financial position, results of operations or cash flows of the Company.
 F-6
 Table of Contents
 AVIATION SURVEILLANCE SYSTEMS, INC.
 (Formerly Fairytale Ventures, Inc.)
 (A Development Stage Company)
 Notes to Financial Statements
 January 31, 2010 and July 31, 2009
  NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 Recent Accounting Pronouncements (Continued)
 
 In October 2009, the FASB issued Accounting Standards Update 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. This update addressed the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than a combined unit and will
be separated in more circumstances that under existing US GAAP.  This amendment has eliminated that residual method of allocation. Effective prospectively for revenue
 arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010.  Early adoption is permitted. The Company does not expect the provisions of ASU 2009-13 to have a material effect on the financial position, results of operations or cash flows of the Company.
 
 In September 2009, the FASB issued Accounting Standards Update 2009-12, Fair Value Measurements and Disclosures (Topic 820): Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). This update provides amendments to Topic 820 for the fair value measurement of investments in certain entities that calculate
net asset value per share (or its equivalent). It is effective for interim and annual periods ending after December 15, 2009. Early application is permitted in financial statements for earlier interim and annual periods that have not been issued. The Company does not expect the provisions of ASU 2009-12 to have a material effect on the financial position, results of operations or cash flows of the Company.
 
 In July 2009, the FASB ratified the consensus reached by EITF (Emerging Issues Task Force) issued EITF No. 09-1, (ASC Topic 470) "Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance" ("EITF 09-1"). The provisions of EITF 09-1, clarifies the accounting treatment and disclosure of share-lending arrangements
that are classified as equity in the financial statements of the share lender. An example of a share-lending arrangement is an agreement between the Company (share lender) and an investment bank (share borrower) which allows the investment bank to use the loaned shares to enter into equity derivative contracts with investors. EITF 09-1 is effective for fiscal years that beginning on or after December 15, 2009 and requires retrospective application for all arrangements outstanding as of the beginning of fiscal
years beginning on or after December 15, 2009.
 
 Share-lending arrangements that have been terminated as a result of counterparty default prior to December 15, 2009, but for which the entity has not reached a final settlement as of December 15, 2009 are within the scope. Effective for share-lending arrangements entered into on or after the beginning of the first reporting period that
begins on or after June 15, 2009. The Company does not expect the provisions of EITF 09-1 to have a material effect on the financial position, results of operations or cash flows of the Company.
 
 F-7
 Table of Contents
 AVIATION SURVEILLANCE SYSTEMS, INC.
 (Formerly Fairytale Ventures, Inc.)
 (A Development Stage Company)
 Notes to Financial Statements
 January 31, 2010 and July 31, 2009
 NOTE 4 - RELATED PARTY TRANSACTIONS

The Company received $1,000 as an advance from a related party to fund ongoing operations. The related party note is interest bearing at 8%, unsecured and due upon demand.

NOTE 5 – SUBSEQUENT EVENTS

On March 15, 2010, Ms. Anusha Kumar, the Company’s President, Chief Executive Officer, Chief Financial Officer and sole director, agreed to sell all of her 11,798,803 shares of common stock in the company to Alp Investments, Ltd.  Following the private issuance of common stock described below, Alp Investments, Ltd. now holds
shares of common stock which constitute approximately 91.43% of the Company’s total issued and outstanding stock.  Ms. Kumar transferred her shares in exchange for total consideration of $20,000.  Following the change in control discussed above, the Company closed an issue of 38,235,294 shares of common stock on March 15, 2010 to Alp Investments, Ltd.  Alp Investments, Ltd. acquired these shares in exchange for $65,000 at an approximate price of $0.0017 per share.

In connection with the sale of her controlling interest in the company, Ms. Kumar appointed Mr. Eden Ho to the board of directors and then resigned from all officer and director positions. Ms. Kumar also released the Company from the $1,000 obligation described in Note 4.

In accordance with SFAS 165 (ASC 855-10) Company management reviewed all material events through the date these financial statements were submitted to the Securities and Exchange Commission and there are no other material subsequent events to report.


F-8
 Table of Contents


Item2.     Management’s Discussion and Analysis or Plan of Operation





Forward-Looking Statements





Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation
Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.   These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,”
“will likely result,” and similar expressions.  We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions.  Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to
differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain.  Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties
should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.  We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.  Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.





Company Overview and Plan of Operation





We are a Nevada corporation, formed May 1, 2007.  On May 11, 2009, we changed our name to Aviation Surveillance Systems, Inc.  Concurrently with our name change, we suspended pursuit of our former plan of operations and began investigating new business opportunities.





As reported in our Current Report on Form 8-K filed March 18, 2010, we experienced a change in control subsequent to the reporting period on March 15, 2010.  Concurrent with the change in control, we raised additional funds in the amount of $65,000 through the sale of common stock in a private transaction, as described in the
Current Report on Form 8-K filed March 17, 2010.  These funds will be used to satisfy existing accounts payable.  Following the change in control, our new management will continue to evaluate alternative business opportunities with which we can go forward as an operating business.  There can be no assurance, however, that we will be able to continue as a going concern.




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 Table of Contents


Expected Changes In Number of Employees, Plant, and Equipment





We currently do not have plans to purchase any physical plant or any significant equipment or to change the number of our employees during the next twelve months.





Results of Operations for the three and six months ended January 31, 2010 and from May 1, 2007 (inception) to January 31, 2010





We have earned only $200 in revenues from inception through the period ending January 31, 2010. We are presently in the development stage of our business and we can provide no assurance that we will produce significant revenues or, if revenues are earned, that we will be profitable.





We incurred expenses and net losses in the amount of $155,565 from our inception on May 1, 2007 through the period ending January 31, 2010.  We incurred operating expenses and net operating losses in the amount of $26,763 during the three months ended January 31, 2010, compared to operating expenses and net operating losses the amount
of $2,697 during the three months ended January 31, 2009. We incurred operating expenses and net operating losses in the amount of $70,783 during the six months ended January 31, 2010, compared to operating expenses and net operating losses the amount of $7,021 during the six months ended January 31, 2009. Our operating expenses from inception through January 31, 2010 consisted primarily of general and administrative expenses.  Our losses are attributable to our operating expenses combined with a lack
of significant revenues during our current stage of development.


Liquidity and Capital Resources





As of January 31, 2010, we had current assets in the amount of $397, consisting entirely of cash. Our current liabilities as of January 31, 2010, were $139,737. Thus, we had a working capital deficit of $139,340 as of January 31, 2010.





We have not attained profitable operations and may be dependent upon obtaining financing to pursue a long-term business plan. We currently do not have any arrangements for financing and we may not be able to obtain financing when required. For these reasons our auditors stated in their report that they have substantial doubt we will be able
to continue as a going concern.





Off Balance Sheet Arrangements





As of January 31, 2010, there were no off balance sheet arrangements.





Going Concern





Our financial statements have been prepared on a going concern basis. We had a working capital deficit of $139,340 as of January 31, 2010 and have an accumulated deficit of $155,565 since inception. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and/or to obtain the
necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. The outcome of these matters cannot be predicted with any certainty at this time. These factors raise substantial doubt that we will be able to continue as a going concern. Management plans to continue to provide for our capital needs by the issuance of common stock and related party advances.




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 Table of Contents





Critical Accounting Policies





In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s
most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We do not believe that any accounting policies currently fit this definition.





Recently Issued Accounting Pronouncements





In January 2010, the FASB issued Accounting Standards Update 2010-02, Consolidation (Topic 810):  Accounting and Reporting for Decreases in Ownership of a Subsidiary. This amendment to Topic 810 clarifies, but does not change, the scope of current US GAAP. It clarifies the decrease in ownership provisions of Subtopic 810-10 and removes
the potential conflict between guidance in that Subtopic and asset derecognition and gain or loss recognition guidance that may exist in other US GAAP. An entity will be required to follow the amended guidance beginning in the period that it first adopts FAS 160 (now included in Subtopic 810-10). For those entities that have already adopted FAS 160, the amendments are effective at the beginning of the first interim or annual reporting period ending on or after December 15, 2009. The amendments should be applied
retrospectively to the first period that an entity adopted FAS 160. The Company does not expect the provisions of ASU 2010-02 to have a material effect on the financial position, results of operations or cash flows of the Company.





In January 2010, the FASB issued Accounting Standards Update 2010-01, Equity (Topic 505):  Accounting for Distributions to Shareholders with Components of Stock and Cash (A Consensus of the FASB Emerging Issues Task Force). This amendment to Topic 505 clarifies the stock portion of a distribution to shareholders that allows them
to elect to receive cash or stock with a limit on the amount of cash that will be distributed is not a stock dividend for purposes of applying Topics 505 and 260.  Effective for interim and annual periods ending on or after December 15, 2009, and would be applied on a retrospective basis. The Company does not expect the provisions of ASU 2010-01 to have a material effect on the financial position, results of operations or cash flows of the Company.





In December 2009, the FASB issued Accounting Standards Update 2009-17, Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities.  This Accounting Standards Update amends the FASB Accounting Standards Codification for Statement 167. (See FAS 167 effective date below.)





In December 2009, the FASB issued Accounting Standards Update 2009-16, Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets. This Accounting Standards Update amends the FASB Accounting Standards Codification for Statement 166. (See FAS 166 effective date below)




6
 Table of Contents





In October 2009, the FASB issued Accounting Standards Update 2009-15, Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing. This Accounting Standards Update amends the FASB Accounting Standard Codification for EITF 09-1. (See EITF 09-1 effective date below.)





In October 2009, the FASB issued Accounting Standards Update 2009-14, Software (Topic 985):  Certain Revenue Arrangements That Include Software Elements. This update changed the accounting model for revenue arrangements that include both tangible products and software elements. Effective prospectively for revenue arrangements entered
into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The Company does not expect the provisions of ASU 2009-14 to have a material effect on the financial position, results of operations or cash flows of the Company.





In October 2009, the FASB issued Accounting Standards Update 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. This update addressed the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than a combined unit and will be
separated in more circumstances that under existing US GAAP.  This amendment has eliminated that residual method of allocation. Effective prospectively for revenue


arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010.  Early adoption is permitted. The Company does not expect the provisions of ASU 2009-13 to have a material effect on the financial position, results of operations or cash flows of the Company.





In September 2009, the FASB issued Accounting Standards Update 2009-12, Fair Value Measurements and Disclosures (Topic 820): Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). This update provides amendments to Topic 820 for the fair value measurement of investments in certain entities that calculate
net asset value per share (or its equivalent). It is effective for interim and annual periods ending after December 15, 2009. Early application is permitted in financial statements for earlier interim and annual periods that have not been issued. The Company does not expect the provisions of ASU 2009-12 to have a material effect on the financial position, results of operations or cash flows of the Company.





In July 2009, the FASB ratified the consensus reached by EITF (Emerging Issues Task Force) issued EITF No. 09-1, (ASC Topic 470) "Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance" ("EITF 09-1"). The provisions of EITF 09-1, clarifies the accounting treatment and disclosure of share-lending arrangements
that are classified as equity in the financial statements of the share lender. An example of a share-lending arrangement is an agreement between the Company (share lender) and an investment bank (share borrower) which allows the investment bank to use the loaned shares to enter into equity derivative contracts with investors. EITF 09-1 is effective for fiscal years that beginning on or after December 15, 2009 and requires retrospective application for all arrangements outstanding as of the beginning of fiscal
years beginning on or after December 15, 2009.





Share-lending arrangements that have been terminated as a result of counterparty default prior to December 15, 2009, but for which the entity has not reached a final settlement as of December 15, 2009 are within the scope. Effective for share-lending arrangements entered into on or after the beginning of the first reporting period that begins
on or after June 15, 2009. The Company does not expect the provisions of EITF 09-1 to have a material effect on the financial position, results of operations or cash flows of the Company.




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Item3.     Quantitative and Qualitative Disclosures About Market Risk





A smaller reporting company is not required to provide the information required by this Item.





Item4T.     Controls and Procedures





We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of January 31, 2010.  This evaluation was carried out under the supervision and with the participation of our former Chief Executive Officer and our
Chief Financial Officer, Ms. Anusha Kumar.  Based upon that evaluation, our former Chief Executive Officer and Chief Financial Officer concluded that, as of January 31, 2010, our disclosure controls and procedures are effective.  There have been no changes in our internal controls over financial reporting during the quarter ended January 31, 2010.





Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.





Limitations on the Effectiveness of Internal Controls





Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving our objectives and our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent
limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving
its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.





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PART II – OTHER INFORMATION





Item1.     Legal Proceedings





We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.





Item1A.  Risk Factors





A smaller reporting company is not required to provide the information required by this Item.





Item2.     Unregistered Sales of Equity Securities and Use of Proceeds





None





Item3.     Defaults upon Senior Securities





None





Item4.     Submission of Matters to a Vote of Security Holders





No matters have been submitted to our security holders for a vote, through the solicitation of proxies or otherwise, during the quarterly period ended January 31, 2010.





Item5.     Other Information





None





Item6.      Exhibits





Exhibit Number
Description of Exhibit3.1
Articles of Incorporation (1)3.2
Bylaws (1)31.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
Certification of 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





1
Incorporated by reference to Registration Statement on Form SB-2 filed August 30, 2007.





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SIGNATURES





In accordance with the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





Aviation Surveillance Systems, Inc.Date:
March 22, 2010By:       /s/ Eden Ho
Eden Ho
Title:Chief Executive Officer and Director