----

----

----

|                                                          |   |                             |
|---------------------------------------------------------------|--------|----------------------------------|
| Delaware                                                      |   | 20-4763096                       |
| (State or Other Jurisdiction ofIncorporation or Organization) |   | (IRS EmployerIdentification No.) |

| Title of each class                                         |   | Name of each exchange on which registered |
|-------------------------------------------------------------|--------|-------------------------------------------|
|       None                         |   |                                      |
|                                                        |   |                                      |
| Securities registered pursuant to section 12(g) of the Act: |   |                                      |
|       Common Stock                 |   |       OTC:BB     |

| Large accelerated filer [  ]                                                   |   | Accelerated filer [  ]  |
|------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|
| Non-accelerated filer [  ] (Do not check if a smaller reporting company)       |   | Smaller reporting company [XX]    |

----

----

----

|                                                               | Pages      |
|--------------------------------------------------------------------|------------|
|                                                               |       |
| Reports of Independent Registered Public Accounting Firm           | 3-4        |
|                                                               |       |
| Consolidated Balance Sheets as of December 31, 2009 and 2008       | 5          |
|                                                               |       |
| Consolidated Statements of Operations for the Years Ended     |       |
| December 31, 2009 and 2008                                         | 6          |
|                                                               |       |
| Consolidated Statement of Stockholders’ Equity for the Years |       |
| Ended December 31, 2009 and 2008                                   | 7          |
|                                                               |       |
| Consolidated Statement of Cash Flows for the Years                 |       |
| Ended December 31, 2009 and 2008                                   | 8          |
|                                                               |       |
| Notes to Consolidated Financial Statements                         | 9–21 |

----

----

----

| PRECISION AEROSPACE COMPONENTS, INC.                                                           |   |         |       |
|------------------------------------------------------------------------------------------------|--------|--------------|------------|
| CONSOLIDATED BALANCE SHEETS                                                                    |   |         |       |
|                                                                                           |   |         |       |   |   |   |
| ASSETS                                                                                         |   |         |       |   |
|                                                                                           |   | December 31, |       |   | December 31, |   |
|                                                                                           |   | 2009         |       |   | 2008 |   |
|                                                                                           |   | (Audited)    |       |   | (Audited) |   |
| CURRENT ASSETS                                                                                 |   |         |       |   |   |   |
| Cash and cash equivalents                                                                      |   | $            | 198,971    |   |   | $ | 176,483 |   |
| Accounts receivable, net                                                                       |   |         | 778,450    |   |   |   | 874,124 |   |
| Inventory, net                                                                                 |   |         | 5,087,712  |   |   |   | 4,592,247 |   |
| Prepaid expenses                                                                               |   |         | 5,941      |   |   |   | 39,693 |   |
| Prepaid income taxes                                                                           |   |         | 69,374     |   |   |   | 98,616 |   |
|                                                                                           |   |         | 6,140,448  |   |   |   | 5,781,163 |   |
|                                                                                           |   |         |       |   |   |   |   |   |
| PROPERTY AND EQUIPMENT - Net                                                                   |   |         | 120,458    |   |   |   | 184,634 |   |
|                                                                                           |   |         |       |   |   |   |   |   |
| OTHER ASSETS                                                                                   |   |         |       |   |   |   |   |   |
| Deposits                                                                                       |   |         | 24,700     |   |   |   | 24,700 |   |
| Goodwill                                                                                       |   |         | 2,221,744  |   |   |   | 2,221,744 |   |
|                                                                                           |   |         | 2,246,444  |   |   |   | 2,246,444 |   |
|                                                                                           |   |         |       |   |   |   |   |   |
| TOTAL ASSETS                                                                                   |   | $            | 8,507,350  |   |   | $ | 8,212,241 |   |
|                                                                                           |   |         |       |   |   |   |   |   |
| LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY (DEFICIT)                               |   |         |       |   |   |
|                                                                                           |   |         |       |   |   |   |   |   |
| CURRENT LIABILITIES                                                                            |   |         |       |   |   |   |   |   |
|                                                                                           |   |         |       |   |   |   |   |   |
| Accounts payable and accrued expenses                                                          |   | $            | 210,542    |   |   | $ | 252,530 |   |
| Subordinated note payable-current portion                                                      |   |         | -          |   |   |   | 75,000 |   |
| Loan payable-current portion                                                                   |   |         | 2,682,000  |   |   |   | 2,722,506 |   |
|                                                                                           |   |         | 2,892,542  |   |   |   | 3,050,036 |   |
| LONG -TERM LIABILITIES                                                                         |   |         |       |   |   |   |   |   |
| Subordinated note payable-long term portion                                                    |   |         | -          |   |   |   | - |   |
| Convertible note payable                                                                       |   |         | -          |   |   |   | - |   |
| TOTAL LIABILITIES                                                                              |   |         | 2,892,542  |   |   |   | 3,050,036 |   |
|                                                                                           |   |         |       |   |   |   |   |   |
| TEMPORARY EQUITY                                                                               |   |         |       |   |   |   |   |   |
| Preferred Stock A $.001 par value; 7,100,000 shares authorized                                 |   |         |       |   |   |   |   |   |
| 5,274,152 shares issued and outstanding                                                        |   |         | -          |   |   |   | 5,274 |   |
| Preferred Stock B $.001 par value; 2,900,000 shares authorized                                 |   |         |       |   |   |   |   |   |
| 2,811,000 shares issued and outstanding                                                        |   |         | -          |   |   |   | 2,811 |   |
| Additional paid-in capital - preferred stock                                                   |   |         | -          |   |   |   | 2,916,173 |   |
| Additional paid-in capital -options                                                            |   |         | -          |   |   |   | 4,417,917 |   |
| Additional paid-in capital -warrants                                                           |   |         | -          |   |   |   | 843,272 |   |
|                                                                                           |   |         | -          |   |   |   | 8,185,447 |   |
| STOCKHOLDERS' EQUITY (DEFICIT)                                                                 |   |         |       |   |   |   |   |   |
| Preferred Stock A $.001 par value; 7,100,000 shares authorized                                 |   |         |       |   |   |   |   |   |
| 6,123,301 shares issued and outstanding                                                        |   |         | 6,123      |   |   |   | - |   |
| Preferred Stock B $.001 par value; 2,900,000 shares authorized                                 |   |         |       |   |   |   |   |   |
| 0 shares issued and outstanding                                                                |   |         | -          |   |   |   | - |   |
| Common stock, $.001 par value; 100,000,000 shares authorized                                   |   |         |       |   |   |   |   |   |
| at December 31, 2009 and December 31, 2008; 1,753,279 and 66,649 shares issued and outstanding |   |         | 1,753      |   |   |   | 67 |   |
| Additional paid-in capital                                                                     |   |         | 11,103,398 |   |   |   | 2,925,760 |   |
| Accumulated deficit                                                                            |   |         | (5,496,466 | ) |   |   | (5,949,069 | ) |
| TOTAL STOCKHOLDERS' EQUITY (DEFICIT)                                                           |   |         | 5,614,808  |   |   |   | (3,023,242 | ) |
|                                                                                           |   |         |       |   |   |   |   |   |
| TOTAL LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY (DEFICIT)                         |   | $            | 8,507,350  |   |   | $ | 8,212,241 |   |
|                                                                                           |   |         |       |   |   |   |   |   |
|                                                                                           |   |         |       |   |   |   |   |   |

----

|  PRECISION AEROSPACE COMPONENTS, INC.CONSOLIDATED STATEMENTS OF OPERATIONSFOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008 |
|-------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                                 |   |   |       |   |   |   |
|--------------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
|                                                                                                                                 |   |   |       |   |   |   |
|                                                                                                                                 |   |   |       |   |   |   |
|                                                                                                                                 |   | 2009   |       |   | 2008   |   |
|                                                                                                                                 |   |   |       |   |   |   |
| REVENUE - SALES                                                                                                                      |   | $      | 10,114,990 |   |   | $      | 11,414,687 |   |
|                                                                                                                                 |   |   |       |   |   |   |   |   |
| TOTAL COST OF GOODS SOLD                                                                                                             |   |   | 7,016,346  |   |   |   | 7,888,205 |   |
|                                                                                                                                 |   |   |       |   |   |   |   |   |
| GROSS PROFIT                                                                                                                         |   |   | 3,098,644  |   |   |   | 3,526,482 |   |
|                                                                                                                                 |   |   |       |   |   |   |   |   |
| OPERATING EXPENSES                                                                                                                   |   |   |       |   |   |   |   |   |
| General and administrative expenses ($4,417,917 noncash compensation for year ended December 31, 2008 and -0- for December 31, 2009) |   |   | 1,978,994  |   |   |   | 6,332,498 |   |
| Professional and consulting fees                                                                                                     |   |   | 296,311    |   |   |   | 353,974 |   |
| Depreciation                                                                                                                         |   |   | 81,467     |   |   |   | 80,063 |   |
| Total Operating Expenses                                                                                                             |   |   | 2,356,772  |   |   |   | 6,766,535 |   |
|                                                                                                                                 |   |   |       |   |   |   |   |   |
| INCOME (LOSS) BEFORE OTHER INCOME (EXPENSE)                                                                                          |   |   | 741,872    |   |   |   | (3,240,053 | ) |
|                                                                                                                                 |   |   |       |   |   |   |   |   |
| OTHER INCOME (EXPENSE)                                                                                                               |   |   |       |   |   |   |   |   |
| Interest expense                                                                                                                     |   |   | (138,149   | )      |   |   | (211,575 | ) |
|                                                                                                                                 |   |   | (138,149   | )      |   |   | (211,575 | ) |
|                                                                                                                                 |   |   |       |   |   |   |   |   |
| INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES                                                                                      |   |   | 603,723    |   |   |   | (3,451,628 | ) |
|                                                                                                                                 |   |   |       |   |   |   |   |   |
| Provision for income taxes                                                                                                           |   |   | 151,120    |   |   |   | 369,254 |   |
|                                                                                                                                 |   |   |       |   |   |   |   |   |
| NET INCOME (LOSS) APPLICABLE TO COMMON SHARES                                                                                        |   | $      | 452,603    |   |   | $      | (3,820,882 | ) |
|                                                                                                                                 |   |   |       |   |   |   |   |   |
| NET INCOME (LOSS) PER BASIC SHARES                                                                                                   |   | $      | 4.37       |   |   | $      | (57.33 | ) |
|                                                                                                                                 |   |   |       |   |   |   |   |   |
| NET INCOME (LOSS) PER DILUTED SHARES                                                                                                 |   | $      | 0.03       |   |   | $      | 0.00 |   |
|                                                                                                                                 |   |   |       |   |   |   |   |   |
| WEIGHTED AVERAGE NUMBER OF BASIC COMMON                                                                                              |   |   |       |   |   |   |   |   |
|  SHARES OUTSTANDING                                                                                                             |   |   | 103,617    |   |   |   | 66,649 |   |
|                                                                                                                                 |   |   |       |   |   |   |   |   |
| WEIGHTED AVERAGE NUMBER OF FULLY DILUTED                                                                                             |   |   |       |   |   |   |   |   |
|  COMMON SHARES OUTSTANDING                                                                                                      |   |   | 15,478,043 |   |   |   | 17,770,843 |   |
|                                                                                                                                 |   |   |       |   |   |   |   |   |
|                                                                                                                                 |   |   |       |   |   |   |   |   |

----

|  PRECISION AEROSPACE COMPONENTS, INC.CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITYFOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008 |
|----------------------------------------------------------------------------------------------------------------------------------------|

|                                 |   |                     |      |   |                     |   |   |         |   |   |       |   |   |    |   |   |        |   |      |       |   |   |      |   |   |   |       |
|--------------------------------------|--------|--------------------------|-----------|--------|--------------------------|--------|--------|--------------|--------|--------|------------|--------|--------|---------|--------|--------|-------------|--------|-----------|------------|--------|--------|-----------|--------|--------|--------|------------|
|                                 |   |                     |      |   |                     |   |   |         |   |   |       |   |   |    |   |   |        |   |      | Additional |   |   |      |   |   |   |       |
|                                 |   | Preferred Stock-Series A |      |   | Preferred Stock-Series B |   |   | Common Stock |   |   |       |   |   | paid-in |   |   | Accumulated |   |      |       |   |
|                                 |   | Shares                   |      |   | Amount                   |   |   | Shares       |   |   | Amount     |   |   | Shares  |   |   | Amount      |   |      | Capital    |   |   | (Deficit) |   |   | Total  |       |
|                                 |   |                     |      |   |                     |   |   |         |   |   |       |   |   |    |   |   |        |   |      |       |   |   |      |   |   |   |       |
| Balance, December 31, 2007           |   |                     | -         |   |                     | $      | -      |         |   |   | -          |   |   | $       | -      |   |        |   | 66,649    |       |   | $      | 67        |   |   | $      | 2,925,760  |   |   | $ | (2,128,187 | ) |   | $ | 797,640 |   |
|                                 |   |                     |      |   |                     |   |   |         |   |   |       |   |   |    |   |   |        |   |      |       |   |   |      |   |   |   |       |   |   |   |   |   |   |   |   |   |
| Net (Loss)                           |   |                     | -         |   |                     |   | -      |         |   |   | -          |   |   |    | -      |   |        |   | -         |       |   |   | -         |   |   |   | -          |   |   |   | (3,820,882 | ) |   |   | (3,820,882 | ) |
|                                 |   |                     |      |   |                     |   |   |         |   |   |       |   |   |    |   |   |        |   |      |       |   |   |      |   |   |   |       |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2008           |   |                     | -         |   |                     | $      | -      |         |   |   | -          |   |   | $       | -      |   |        |   | 66,649    |       |   | $      | 67        |   |   | $      | 2,925,760  |   |   | $ | (5,949,069 | ) |   | $ | (3,023,242 | ) |
|                                 |   |                     |      |   |                     |   |   |         |   |   |       |   |   |    |   |   |        |   |      |       |   |   |      |   |   |   |       |   |   |   |   |   |   |   |   |   |
|                                 |   |                     |      |   |                     |   |   |         |   |   |       |   |   |    |   |   |        |   |      |       |   |   |      |   |   |   |       |   |   |   |   |   |   |   |   |   |
| Reclassification to permanent equity |   |                     | 5,274,152 |   |                     |   | 5,274  |         |   |   | 2,811,000  |   |   |    | 2,811  |   |        |   | -         |       |   |   | -         |   |   |   | 8,177,362  |   |   |   |   |   |   |   | 8,185,447 |   |
|                                 |   |                     |      |   |                     |   |   |         |   |   |       |   |   |    |   |   |        |   |      |       |   |   |      |   |   |   |       |   |   |   |   |   |   |   |   |   |
| Conversion of Preferred B stock      |   |                     |      |   |                     |   |   |         |   |   | (2,811,000 | )      |   |    | (2,811 | )      |        |   | 1,686,630 |       |   |   | 1,686     |   |   |   | 1,125      |   |   |   |   |   |   |   | - |   |
|                                 |   |                     |      |   |                     |   |   |         |   |   |       |   |   |    |   |   |        |   |      |       |   |   |      |   |   |   |       |   |   |   |   |   |   |   |   |   |
| Conversion of A and B warrants       |   |                     | 849,149   |   |                     |   | 849    |         |   |   |       |   |   |    |   |   |        |   |      |       |   |   |      |   |   |   | (849       | ) |   |   |   |   |   |   | - |   |
|                                 |   |                     |      |   |                     |   |   |         |   |   |       |   |   |    |   |   |        |   |      |       |   |   | .         |   |   |   |       |   |   |   |   |   |   |   |   |   |
| Net Income                           |   |                     | -         |   |                     |   | -      |         |   |   | -          |   |   |    | -      |   |        |   | -         |       |   |   | -         |   |   |   | -          |   |   |   | 452,603 |   |   |   | 452,603 |   |
|                                 |   |                     |      |   |                     |   |   |         |   |   |       |   |   |    |   |   |        |   |      |       |   |   |      |   |   |   |       |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2009           |   |                     | 6,123,301 |   |                     | $      | 6,123  |         |   |   | -          |   |   | $       | -      |   |        |   | 1,753,279 |       |   | $      | 1,753     |   |   | $      | 11,103,398 |   |   | $ | (5,496,466 | ) |   | $ | 5,614,808 |   |
|                                 |   |                     |      |   |                     |   |   |         |   |   |       |   |   |    |   |   |        |   |      |       |   |   |      |   |   |   |       |   |   |   |   |   |   |   |   |   |
|                                 |   |                     |      |   |                     |   |   |         |   |   |       |   |   |    |   |   |        |   |      |       |   |   |      |   |   |   |       |   |   |   |   |   |   |   |   |   |

----

|  PRECISION AEROSPACE COMPONENTS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008 |
|-------------------------------------------------------------------------------------------------------------------------------|

|                                                                                      |   |   |     |   |   |   |
|-------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
|                                                                                      |   | 2009   |     |   | 2008   |   |
|                                                                                      |   |   |     |   |   |   |
| CASH FLOWS FROM OPERATING ACTIVITIES                                                      |   |   |     |   |   |   |
|    Net (loss) income                                                       |   | $      | 452,603  |   |   | $      | (3,820,882 | ) |
|                                                                                      |   |   |     |   |   |   |   |   |
| Adjustments to reconcile net income (loss) to net cash                                    |   |   |     |   |   |   |   |   |
| (used in) operating activities:                                                           |   |   |     |   |   |   |   |   |
| Depreciation and amortization                                                             |   |   | 81,467   |   |   |   | 80,063 |   |
| Stock Based Compensation                                                                  |   |   | -        |   |   |   | 4,417,917 |   |
|                                                                                      |   |   |     |   |   |   |   |   |
| Changes in assets and liabilities:                                                        |   |   |     |   |   |   |   |   |
| Decrease (increase) in assets                                                             |   |   |     |   |   |   |   |   |
|    Decrease (increase) in accounts receivable                              |   |   | 95,674   |   |   |   | (36,572 | ) |
|    Decrease (increase) in inventory                                        |   |   | (495,465 | )      |   |   | (706,915 | ) |
|    Decrease (increase) in prepaid expenses                                 |   |   | 33,752   |   |   |   | (39,693 | ) |
|    Decrease (increase) in security deposits                                |   |   | -        |   |   |   | (12,000 | ) |
|    Decrease (increase) in prepaid income taxes                             |   |   | 29,242   |   |   |   | (98,616 | ) |
|                                                                                      |   |   |     |   |   |   |   |   |
| Increase (decrease) in liabilities                                                        |   |   |     |   |   |   |   |   |
|    Increase (decrease)  in accounts payable and accrued expenses |   |   | (41,989  | )      |   |   | (354,096 | ) |
|    Increase (decrease) in income taxes payable                             |   |   | -        |   |   |   | (363,356 | ) |
| Total adjustments                                                                         |   |   | (297,319 | )      |   |   | 2,886,732 |   |
|                                                                                      |   |   |     |   |   |   |   |   |
| Net cash provided by (used in) operating activities                                       |   |   | 155,284  |   |   |   | (934,150 | ) |
|                                                                                      |   |   |     |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES                                                      |   |   |     |   |   |   |   |   |
|    (Purchase) of property and equipment                                    |   |   | (17,290  | )      |   |   | (4,116 | ) |
|                                                                                      |   |   |     |   |   |   |   |   |
| Net cash (used in) investing activities                                                   |   |   | (17,290  | )      |   |   | (4,116 | ) |
|                                                                                      |   |   |     |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES                                                      |   |   |     |   |   |   |   |   |
|    Proceeds (payment) of convertible note payable                          |   |   | -        |   |   |   | (1,000,000 | ) |
|    Proceeds (payment) of S/T loan payable Greater Bay                      |   |   | -        |   |   |   | (387,466 | ) |
|    Proceeds (payment) from loan payable IDB Bank                           |   |   | (140,506 | )      |   |   | - |   |
|    Proceeds (payment) from loan payable IDB Bank                           |   |   | 100,000  |   |   |   | 2,722,506 |   |
|    Proceeds (payment) on subordinated note                                 |   |   | (75,000  | )      |   |   | (375,000 | ) |
|                                                                                      |   |   |     |   |   |   |   |   |
| Net cash provided by (used in) financing activities                                       |   |   | (115,506 | )      |   |   | 960,040 |   |
|                                                                                      |   |   |     |   |   |   |   |   |
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                          |   |   | 22,488   |   |   |   | 21,774 |   |
|                                                                                      |   |   |     |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR                                             |   |   | 176,483  |   |   |   | 154,709 |   |
|                                                                                      |   |   |     |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS - END OF YEAR                                                   |   | $      | 198,971  |   |   | $      | 176,483 |   |
|                                                                                      |   |   |     |   |   |   |   |   |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                         |   |   |     |   |   |
| Cash paid during the period for:                                                          |   |   |     |   |   |   |   |   |
|     Interest paid                                                     |   | $      | 138,149  |   |   | $      | 211,575 |   |
|     Income taxes paid                                                 |   | $      | 175,843  |   |   | $      | 460,584 |   |
|                                                                                      |   |   |     |   |   |   |   |   |
| SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITY:                                                |   |   |     |   |   |   |   |   |
|                                                                                      |   |   |     |   |   |   |   |   |
|   Issuance of options for stock based compensation                              |   | $      | -        |   |   | $      | 4,417,917 |   |
|                                                                                      |   |   |     |   |   |   |   |   |

----

----

|   | Warehouse equipment    | 5 years         |
|--------|------------------------|----------------------|
|   | Leasehold improvements | 5 - 39 years ** |
|   | Computers              | 5 years         |
|   | Furniture and fixtures | 7 years         |
|   | Equipment              | 5 years         |

----

----

| i)   | observable inputs such as quoted prices in active markets (Level 1) |
|----------------|---------------------------------------------------------------------|

| ii)   |  inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2) |
|-----------------|---------------------------------------------------------------------------------------------------------------------|

| iii)   |  unobservable inputs that require the Company to use present value and other valuation techniques in the determination of fair value (Level 3). |
|------------------|------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                         |   |   |     |   |   |   |
|----------------------------------------------|--------|--------|----------|--------|--------|--------|
|                                         |   | 2009   |     |   | 2008   |   |
|                                         |   |   |     |   |   |   |
| Furniture and fixtures                       |   | $      | 2,392    |   |   | $      | 2,392 |   |
| Equipment and other                          |   |   | 375,591  |   |   |   | 358,300 |   |
| Leasehold improvements                       |   |   | 6,487    |   |   |   | 6,487 |   |
|                                         |   |   | 384,470  |   |   |   | 367,179 |   |
|                                         |   |   |     |   |   |   |   |   |
| Less accumated depreciation and amortization |   |   | (264,012 | )      |   |   | (182,545 | ) |
|                                         |   |   |     |   |   |   |   |   |
| Property and equipment, net                  |   | $      | 120,458  |   |   | $      | 184,634 |   |
|                                         |   |   |     |   |   |   |   |   |

|             |   | 2009   |    |   | 2008   |   |
|------------------|--------|--------|---------|--------|--------|--------|
| Accounts payable |   | $      | 184,270 |   |   |   | 237,390 |   |
| Accrued expenses |   |   | 26,272  |   |   |   | 15,140 |   |
| Total            |   | $      | 210,542 |   |   |   | 252,530 |   |
|             |   |   |    |   |   |   |   |   |

----

|                                                                     |   | 2009   |    |   | 2008   |   |
|--------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
|                                                                     |   |   |    |   |   |   |
|                                                                     |   |   |    |   |   |   |
| Federal (After credits for tax refunds (2007) $24,618 and (2006) $34,188 |   | $      | 76,913  |   |   | $      | 234,438 |   |
| State                                                                    |   |   | 34,937  |   |   |   | 63,458 |   |
| City                                                                     |   |   | 39,270  |   |   |   | 71,358 |   |
| Total Current income tax                                                 |   | $      | 151,120 |   |   | $      | 369,254 |   |
|                                                                     |   |   |    |   |   |   |   |   |

----

|                                                                                          |   | December 31, |       |
|-----------------------------------------------------------------------------------------------|--------|--------------|------------|
|                                                                                          |   | 2009         |       |   | 2008 |   |
|  Net income (loss) available to                                                          |   |         |       |   |   |   |
|      common stockholders used                                        |   |         |       |   |   |   |
|      in basic EPS and diluted EPS                                    |   | $            | 452,603    |   |   | $ | (3,820,882 | ) |
|                                                                                          |   |         |       |   |   |   |   |   |
|      Weighted average number of                                      |   |         |       |   |   |   |   |   |
|      common shares used in basic EPS                                 |   |         | 103,617    |   |   |   | 66,649 |   |
|                                                                                          |   |         |       |   |   |   |   |   |
|      Effect of dilutive securities:                                  |   |         |       |   |   |   |   |   |
|            Weighted average number of  |   |         |       |   |   |   |   |   |
|            Stock options and warrants, |   |         |       |   |   |   |   |   |
| conversion of preferrred shares and note                                                      |   |         | 15,374,426 |   |   |   | 17,704,194 |   |
|                                                                                          |   |         |       |   |   |   |   |   |
|      Weighted average number of common                               |   |         |       |   |   |   |   |   |
|      shares and dilutive potential common                            |   |         |       |   |   |   |   |   |
|      stock used in diluted EPS                                       |   |         | 15,478,043 |   |   |   | 17,770,843 |   |

|  Treasury stock method-diluted calculation as of December 31: |   |  2009       |
|--------------------------------------------------------------------|--------|------------------|
|                                                               |   |  1,753,249  |
|  Common Stock                                                 |   |             |
|                                                               |   |  8,199,688  |
|  Series A convertible pfd stock                               |   |             |
|                                                               |   |  49,970     |
|  Options issued at $5.00                                      |   |             |
|                                                               |   |  3,703      |
|  Options issued at $2.50                                      |   |             |
|                                                               |   | 200         |
|  Options issued - August 2, 2002                              |   |             |
|                                                               |   |  400        |
|  Warrants - Eagle and Thompson                                |   |             |
|                                                               |   |  2,848,458  |
|  Common Stock Purchase Warrant A                              |   |             |
|                                                               |   |  2,622,375  |
|  Common Stock Purchase Warrant B                              |   |             |
|                                                               |   |             |
|  Fully Diluted                                                |   |  15,478,043 |

----

|                                                                                                                                       |   | 2009   |   |   | 2008   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| $750,000 subordinated term loan due April 30, 2009 secured by all assets equipment at a variable rate of Prime plus 1% (4.25% and 8.25% ). |   | $      | -      |   |   | $      | 75,000 |   |
|                                                                                                                                       |   |   |   |   |   |   |   |   |
| Total debt                                                                                                                                 |   |   | -      |   |   |   | 75,000 |   |
|                                                                                                                                       |   |   |   |   |   |   |   |   |
| Less current portion                                                                                                                       |   |   | -      |   |   |   | (75,000 | ) |
|                                                                                                                                       |   |   |   |   |   |   |   |   |
| Long-term portion                                                                                                                          |   | $      | -      |   |   | $      | - |   |

----

|                                                             |   | 2009    |      |   | 2008                      |   |
|------------------------------------------------------------------|--------|---------|-----------|--------|---------------------------|--------|
|                                                             |   |    |      |   | Weighted Average Exercise |   |   |   |   |   | Weighted Average Exercise |   |
|                                                             |   | Options |      |   | Price                     |   |   | Options |   |   | Price |   |
|                                                             |   |    |      |   |                      |   |   |   |   |   |   |   |
| Outstanding at beginning of year                                 |   |    | 1,274,111 |   |                      | $      | 5 |   |   |   | 200 |   |   | $ | 175 |   |
|                                                             |   |    |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Granted                                                          |   |    | -         |   |                      |   |   |   |   |   | 1,273,911 |   |   |   | 5 |   |
|                                                             |   |    |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Expired                                                          |   |    | 1,273,911 |   |                      |   | 5 |   |   |   | - |   |   |   |   |   |
|                                                             |   |    |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Exercised                                                        |   |    | -         |   |                      |   |   |   |   |   | - |   |   |   |   |   |
|                                                             |   |    |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Forfeited                                                        |   |    | -         |   |                      |   |   |   |   |   | - |   |   |   |   |   |
|                                                             |   |    |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Outstanding at end of year                                       |   |    | 200       |   |                      | $      | 175 |   |   |   | 1,274,111 |   |   | $ | 5 |   |
|                                                             |   |    |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Exercisable at end of year                                       |   |    | 200       |   |                      |   |   |   |   |   | 1,274,111 |   |   |   |   |   |
|                                                             |   |    |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average fair value of options granted during the period |   |    | 0         |   |                      | $      | 0 |   |   |   | 1,273,911 |   |   | $ | 4,417,917 |   |

----

|                     |   |   | Weighted                       |   |   |                               |   |   |                            |   |   |                           |   |
|--------------------------|--------|--------|--------------------------------|--------|--------|------------------------------------|--------|--------|---------------------------------|--------|--------|--------------------------------|--------|
| Range of exercise prices |   |   | Number outstanding at 12/31/09 |   |   | Average remaining contractual life |   |   | Weighted average exercise price |   |   | Number exercisable at 12/31/09 |   |
|                     |   |   |                           |   |   |                               |   |   |                            |   |   |                           |   |
| $                        | 175    |   |                           |   | 200    |                               |   |   | 2.58                            |   |   | $                              | 175    |   |   |   | 200 |   |

|  Date issued             |   | 2/27/2008 |   |   | 12/16/2008 |   |
|-------------------------------|--------|-----------|--------|--------|------------|--------|
|                          |   |      |   |   |       |   |
|  Dividend yield          |   |      | -      |   |       |   | - |   |
|                          |   |      |   |   |       |   |   |   |
|  Risk free interest rate |   |      | 3.75   | %      |       |   | 2.37 | % |
|                          |   |      |   |   |       |   |   |   |
|  Expected life           |   | 1 Year    |   |   | 1 Year     |   |
|                          |   |      |   |   |       |   |   |   |
|  Expected volatility     |   |      | 200.43 | %      |       |   | 339.00 | % |

----

----

|                                 |   |   |       |   |                        |   |   |   |   |   |                        |   |
|--------------------------------------|--------|--------|------------|--------|-----------------------------|--------|--------|--------|--------|--------|-----------------------------|--------|
|                                 |   | 2009   |       |   | 2008                        |   |
|                                 |   | Shares |       |   | Weighted Average Price |   |   | Shares |   |   | Weighted Average Price |   |
|                                 |   |   |       |   |                        |   |   |   |   |   |                        |   |
| Outstanding at Beginning of year (A) |   |   | 6,325,000  |   |                        | $      | 0.915  |   |   |   | 6,325,000                   |   |   | $ | 0.915 |   |
|                                 |   |   |       |   |                        |   |   |   |   |   |                        |   |   |   |   |   |
|                                 |   |   |       |   |                        |   |   |   |   |   |                        |   |   |   |   |   |
| Granted                              |   |   | -          |   |                        |   |   |   |   |   | -                           |   |   |   |   |   |
|                                 |   |   |       |   |                        |   |   |   |   |   |                        |   |   |   |   |   |
| Exercised                            |   |   | (4,399,724 | )      |                        |   |   |   |   |   | -                           |   |   |   |   |   |
|                                 |   |   |       |   |                        |   |   |   |   |   |                        |   |   |   |   |   |
| Expired                              |   |   | -          |   |                        |   |   |   |   |   |                        |   |   |   |   |   |
|                                 |   |   |       |   |                        |   |   |   |   |   |                        |   |   |   |   |   |
|                                 |   |   |       |   |                        |   |   |   |   |   |                        |   |   |   |   |   |
| Outstanding at end of year           |   |   | 1,925,276  |   |                        |   |   |   |   |   | 6,325,000                   |   |   |   |   |   |
|                                 |   |   |       |   |                        |   |   |   |   |   |                        |   |   |   |   |   |
| Warrants exercisable at year end     |   |   | 1,925,276  |   |                        |   |   |   |   |   | 6,325,000                   |   |   |   |   |   |

----

|                           |                                                                 |                       |   |
|--------------------------------|----------------------------------------------------------------------|----------------------------|--------|
|                           | PRECISION AEROSPACE COMPONENTS, INC.                                 |                       |
|                           |                                                                 |                       |   |
| Date:  September 22, 2010 |          By   |  /s/ Andrew S. Prince |   |
|                           | Andrew S. PrincePresident and Chief Executive Officer                |                       |

| Signature               |   | Title                                                         |   | Date                     |
|-------------------------|--------|---------------------------------------------------------------|--------|--------------------------|
|                    |   |                                                          |   |                     |
| /s/ Andrew S. Prince    |   | President, Chief Executive Officer and Director               |   | September 22, 2010       |
| Andrew S. Prince        |   | (Principal Executive Officer and Principal Financial Officer) |   |                     |
|                    |   |                                                          |   |                     |
| /s/ Alexander Kreger    |   | Chairman of the Board of Directors                            |   | September 22, 2010       |
| Alexander Kreger        |   |                                                          |   |                     |
|                    |   |                                                          |   |                     |
| /s/ Robert Adler        |   | Director                                                      |   | September 22, 2010       |
| Robert Adler            |   |                                                          |   |                     |
|                    |   |                                                          |   |                     |
| /s/ Donald Barger, Jr.  |   | Director                                                      |   | September 22, 2010       |
| Donald Barger, Jr.      |   |                                                          |   |                     |
|                    |   |                                                          |   |                     |
| /s/ David Walters  |   | Director                                                 |   | September 22, 2010  |
| David Walters      |   |                                                          |   |                     |

----