UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-Q
 
 xQUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 For the
quarterly period ended February 28, 2009
 or
 
 oTRANSITION 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 oNon-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
  PagePART
      I Financial Information
                    
                    
                    3Item 1. Financial
      Statements.
                    
                    
                    3Consolidated
      Balance Sheets as of February 28, 2009 and May 31, 2008
      (Unaudited)
                    
                    
                    4Consolidated
      Statements of Operations for the three and nine months ended February 28,
      2009 and February 29, 2008 (Unaudited)
                    
                    
                    5Consolidated
      Statements of Cash Flows for the nine months ended February 28, 2009 and
      February 29, 2008 (Unaudited)
                    
                    
                    6Notes
      to Consolidated Financial Statements (Unaudited)
                    
                    
                    7Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations.
                    
                    
                    13Item
      4T. Controls and Procedures.
                    
                    
                    16PART II Other
    Information
                    
                    
                    17Item
      6. Exhibits.
                    
                    
                    17Signatures
                    
                    
                    18Exhibits/Certifications
 
 2
  PART
I-FINANCIAL INFORMATION
 
 ITEM
      1. FINANCIAL STATEMENTS
 
 FIDELITY
AVIATION CORPORATION
 INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  PageConsolidated
      Balance Sheets as of February 28, 2009 and May 31, 2008
      (Unaudited)
                
                
                4Consolidated
      Statements of Operations for the three and nine months ended February 28,
      2009 and February 29, 2008 (Unaudited)
                
                
                5Consolidated
      Statements of Cash Flows for the nine months ended February 28, 2009 and
      February 29, 2008 (Unaudited)
                
                
                6Notes
      to Consolidated Financial Statements (Unaudited)
                
                
                7
  3
  FIDELITY
AVIATION CORPORATION
 Consolidated
Balance Sheets (unaudited)
  February 28,
      2009
                                                                
                                                                
                                                                May 31,
2008AssetsCurrent
    assetsCash and cash
      equivalents
                                                                
                                                                $
                                                                638,836
                                                                
                                                                
                                                                $
                                                                836,978Trade accounts
      receivable, net
                                                                
                                                                
                                                                24,555,394
                                                                
                                                                
                                                                
                                                                10,035,581Prepayments
                                                                
                                                                
                                                                53,729
                                                                
                                                                
                                                                
                                                                245,495Inventories
                                                                
                                                                
                                                                954,647
                                                                
                                                                
                                                                
                                                                1,316,445Total current
      assets
                                                                
                                                                
                                                                26,202,606
                                                                
                                                                
                                                                
                                                                12,434,499Property and
      equipmentOffice
      trailers
                                                                
                                                                
                                                                1,793,855
                                                                
                                                                
                                                                
                                                                1,765,632Machinery and
      equipment
                                                                
                                                                
                                                                1,330,109
                                                                
                                                                
                                                                
                                                                1,309,183Vehicles
                                                                
                                                                
                                                                1,118,919
                                                                
                                                                
                                                                
                                                                1,101,315Furniture and
      office equipment
                                                                
                                                                
                                                                507,225
                                                                
                                                                
                                                                
                                                                452,431Construction in
      progress
                                                                
                                                                
                                                                1,462,437
                                                                
                                                                
                                                                
                                                                1,439,429Total property
      and equipment
                                                                
                                                                
                                                                6,212,545
                                                                
                                                                
                                                                
                                                                6,067,990Accumulated
      depreciation
                                                                
                                                                
                                                                (2,231,603
                                                                )
                                                                
                                                                
                                                                (1,679,688
                                                                )Net property,
      plant and equipment
                                                                
                                                                
                                                                3,980,942
                                                                
                                                                
                                                                
                                                                4,388,302Other
      receivables
                                                                
                                                                
                                                                2,382,214
                                                                
                                                                
                                                                
                                                                472,451Related party
      receivables
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                236,042Total other
      assets
                                                                
                                                                
                                                                2,382,214
                                                                
                                                                
                                                                
                                                                708,493Total
assets
                                                                
                                                                $
                                                                32,565,762
                                                                
                                                                
                                                                $
                                                                17,531,294Liabilities and stockholders'
      equityCurrent
      liabilitiesTrade accounts
      payable
                                                                
                                                                $
                                                                9,883,647
                                                                
                                                                
                                                                $
                                                                5,503,200Related party
      payable
                                                                
                                                                
                                                                250,981
                                                                
                                                                
                                                                
                                                                677,930Other
      payables
                                                                
                                                                
                                                                2,380,139
                                                                
                                                                
                                                                
                                                                557,676Accrued
      expenses
                                                                
                                                                
                                                                592,938
                                                                
                                                                
                                                                
                                                                268,156Total current
      liabilities
                                                                
                                                                
                                                                13,107,705
                                                                
                                                                
                                                                
                                                                7,006,962Minority
      Interests
                                                                
                                                                
                                                                1,066,124
                                                                
                                                                
                                                                
                                                                577,995Stockholders'
      equityPreferred stock,
      no par value; 10,000,000shares
      authorized; no shares issued andoutstanding
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                -Common stock; no
      par value; 100,000,000shares
      authorized; 15,295,500 shares issued andoutstanding
                                                                
                                                                
                                                                1,396,644
                                                                
                                                                
                                                                
                                                                1,368,021Retained
      earnings
                                                                
                                                                
                                                                15,566,647
                                                                
                                                                
                                                                
                                                                7,294,422Accumulated other
      comprehensive income
                                                                
                                                                
                                                                1,428,642
                                                                
                                                                
                                                                
                                                                1,283,894Total stockholders'
      equity
                                                                
                                                                
                                                                18,391,933
                                                                
                                                                
                                                                
                                                                9,946,337Total Liabilities and
      stockholders' equity
                                                                
                                                                $
                                                                32,565,762
                                                                
                                                                
                                                                $
                                                                17,531,294
  See
accompanying notes to financial statements
  4
  FIDELITY
AVIATION CORPORATION
 Consolidated
Statements of Operations and Comprehensive Income (unaudited)
  Three
months
                                                                                                  
                                                                                                  
                                                                                                  Three
months
                                                                                                  
                                                                                                  
                                                                                                  Nine months
                                                                                                  
                                                                                                  
                                                                                                  Nine monthsended February
      28,
                                                                                                  
                                                                                                  
                                                                                                  ended
      February 29,
                                                                                                  
                                                                                                  
                                                                                                  ended February
      28,
                                                                                                  
                                                                                                  
                                                                                                  ended February
      29,2009
                                                                                                  
                                                                                                  
                                                                                                  2008
                                                                                                  
                                                                                                  
                                                                                                  2009
                                                                                                  
                                                                                                  
                                                                                                  2008Sales
    revenues
                                                                                                  
                                                                                                  $
                                                                                                  27,351,505
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  10,774,185
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  54,371,630
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  25,262,588Cost of goods
      sold
                                                                                                  
                                                                                                  
                                                                                                  21,898,392
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  9,039,455
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  44,149,715
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  21,347,776Gross
profit
                                                                                                  
                                                                                                  
                                                                                                  5,453,113
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  1,734,730
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  10,221,915
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  3,914,812Selling
      expense
                                                                                                  
                                                                                                  
                                                                                                  239,263
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  51,947
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  494,225
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  214,820Other general and
      administrative
                                                                                                  
                                                                                                  
                                                                                                  455,432
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  148,461
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  965,058
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  439,091Total operating
      expenses
                                                                                                  
                                                                                                  
                                                                                                  694,695
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  200,408
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  1,459,283
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  653,911Net operating
      income
                                                                                                  
                                                                                                  
                                                                                                  4,758,418
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  1,534,322
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  8,762,632
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  3,260,901Other income
      (expense)Interest
      income
                                                                                                  
                                                                                                  
                                                                                                  190
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  128
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  1,133
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  915Interest
      (expense)
                                                                                                  
                                                                                                  
                                                                                                  -
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  (7,586
                                                                                                  )
                                                                                                  
                                                                                                  
                                                                                                  -
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  (34,356
                                                                                                  )Other
      expense
                                                                                                  
                                                                                                  
                                                                                                  336
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  4,460
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  (11,930
                                                                                                  )
                                                                                                  
                                                                                                  
                                                                                                  15,733Total other income
      (expense)
                                                                                                  
                                                                                                  
                                                                                                  526
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  (2,998
                                                                                                  )
                                                                                                  
                                                                                                  
                                                                                                  (10,797
                                                                                                  )
                                                                                                  
                                                                                                  
                                                                                                  (17,708
                                                                                                  )Net income before income
      taxes
                                                                                                  
                                                                                                  
                                                                                                  4,758,944
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  1,531,324
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  8,751,835
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  3,243,193Income
Taxes
                                                                                                  
                                                                                                  
                                                                                                  -
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  -
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  -
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  -Net income before minority
      interests
                                                                                                  
                                                                                                  
                                                                                                  4,758,944
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  1,531,324
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  8,751,835
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  3,243,193Minority
      Interests
                                                                                                  
                                                                                                  
                                                                                                  260,606
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  83,840
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  479,610
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  177,565Net income
                                                                                                  
                                                                                                  $
                                                                                                  4,498,338
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  1,447,484
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  8,272,225
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  3,065,628Foreign Currency Translation
      Adjustment
                                                                                                  
                                                                                                  
                                                                                                  (7,115
                                                                                                  )
                                                                                                  
                                                                                                  
                                                                                                  395,917
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  144,748
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  677,276Comprehensive
      Income
                                                                                                  
                                                                                                  $
                                                                                                  4,491,223
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  1,843,401
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  8,416,973
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  3,742,904Earning Per Share - Basic and
      Diluted
                                                                                                  
                                                                                                  $
                                                                                                  0.29
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  0.12
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  0.60
                                                                                                  
                                                                                                  
                                                                                                  $
                                                                                                  0.26Basic and diluted shares
      outstanding
                                                                                                  
                                                                                                  
                                                                                                  15,295,500
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  12,000,000
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  13,733,189
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  12,000,000
  See
accompanying notes to financial statements
 
 5
  FIDELITY
AVIATION CORPORATION
 Consolidated
Statements of Cash Flows (unaudited)
  Nine months
      ended
                                                
                                                
                                                Nine months
      endedFebruary 28,
      2009
                                                
                                                
                                                February 29,
      2008Cash flows from operating
      activities:Net
      income
                                                
                                                $
                                                8,272,225
                                                
                                                
                                                $
                                                3,065,628Adjustments to
      reconcile net incometo net cash
      provided by operations:Minority
      Interests
                                                
                                                
                                                479,610
                                                
                                                
                                                
                                                177,565Depreciation and
      amortization
                                                
                                                
                                                523,196
                                                
                                                
                                                
                                                449,409Changes in operating liabilities
      and assets:Trade accounts
      receivable
                                                
                                                
                                                (14,320,425
                                                )
                                                
                                                
                                                (5,398,170
                                                )Prepayments
                                                
                                                
                                                195,750
                                                
                                                
                                                
                                                (121,542
                                                )Inventories
                                                
                                                
                                                378,188
                                                
                                                
                                                
                                                66,283Other
      receivables
                                                
                                                
                                                (1,930,828
                                                )
                                                
                                                
                                                (1,119,086
                                                )Trade accounts
      payable
                                                
                                                
                                                4,275,748
                                                
                                                
                                                
                                                1,942,436Other
      payables
                                                
                                                
                                                1,816,538
                                                
                                                
                                                
                                                1,893,190Accrued
      expenses
                                                
                                                
                                                320,482
                                                
                                                
                                                
                                                80,426Net cash provided by
      operations
                                                
                                                
                                                10,484
                                                
                                                
                                                
                                                1,036,139Cash 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
                                                
                                                
                                                
                                                17,933Increase
      (decrease) in cash and cash equivalents
                                                
                                                
                                                (198,142
                                                )
                                                
                                                
                                                57,554Cash and cash
      equivalents, beginning of period
                                                
                                                
                                                836,978
                                                
                                                
                                                
                                                181,691Cash and cash
      equivalents, end of period
                                                
                                                $
                                                638,836
                                                
                                                
                                                $
                                                239,245Supplemental disclosures of cash
      flow information:Interest paid in
      cash
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                30,810Income taxes paid
      in cash
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                -
  See accompanying notes to
financial statement
  6
  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.
  7
  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 issubject to VAT which is leviedat the rate of 17% on the
invoiced value ofsales.
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.
  8
  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
      yearsMachinery
      and equipment
                    
                    3-8
      yearsFurniture
      and office equipment
                    
                    5-8
      yearsMotor
      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 financialand 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, respect ively.
  9
  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,
2008Commission
      payable
                      
                      $
                      1,767,053
                      
                      
                      $
                      407,205Staff
    deposit
                      
                      
                      613,086
                      
                      
                      
                      150,471Total 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%.
  10
  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.
  11
  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.
  12
  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”).
 
 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.
 
 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.
  13
  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
endedFebruary 28, 2009were $239,263as compared to $51,947for the same period last year,
anincrease of $187,316, or approximatelyincrease of 361%. Selling expenses consisted primarily
ofafter sales serviceexpenses. Theincrease in selling expenses was
primarily due toincrease 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.
  14
  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 thenine
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.
Theincrease in selling expenses was primarily
due toincrease 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%.
 
 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 $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.
  15
  The
following table sets forth a summary of our cash flows for the periods
indicated:
  Nine
      months EndedFebruary
      28, 2009
                      
                      
                      February
      29, 2008Net
      cash provided by / (used in) operating activities
                      
                      $
                      10,484
                      
                      
                      $
                      1,036,139Net
      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
                      
                      
                      
                      17,933Net
      (decrease) increase in cash and cash equivalent
                      
                      
                      (198,142
                      )
                      
                      
                      57,554Cash
      and cash equivalents, beginning balance
                      
                      
                      836,978
                      
                      
                      
                      181,691Cash
      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.
  16
  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.
  17
  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 YangRong
      Yang,
                  Chief
      Executive Officer, Chief Financial Officer, Director
 Date:
 April 14, 2009
  18