UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington, DC
20549


(Mark
one)


FORM 10-K





[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
fiscal year ended December 31, 2008


or





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





For the
transition period from __________________________________
to________________________________________





Commission
File
Number________________________________________________________________________________





Precision
Aerospace Components, Inc.


(Exact
name of registrant as specified in its charter)


Delaware
                  
                  20-4763096(State
      or Other Jurisdiction of
                    Incorporation
      or Organization)
                  
                  (IRS
      Employer
                    Identification
      No.)





2200
Arthur Kill Road


Staten Island, New York
10309-1202


(Address
of Principal Executive Offices)




(718)-356-1500


(Issuer’s
Telephone Number, including Area Code)







Securities
registered pursuant to Section 12(b) of the Act:





Title
      of each class
                    
                    Name
      of each exchange on which registeredNoneSecurities
      registered pursuant to section 12(g) of the Act:Common Stock
                    
                    OTC:BB





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.


Yes
[   ] No [XX]





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.


Yes [   ] No [ 
 ]


Note-Checking the box above
will not relieve any registrant required to file reports pursuant to Section 13
or 15(d) of the Exchange Act from their obligations under those
Sections.





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




Indicate
by check mark if disclosure of delinquent filers pursuant to item 405 of
Regulation S-K (229.405 of this chapter)is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of the Form 10-K or
any amendment to this Form 10-K.  Yes [  ] No [XX]





Indicate
by check mark whether the registrants 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 [  ]
            
            Accelerated filer
      [  ]Non-accelerated
      filer [  ] (Do not check if a smaller reporting
      company)
            
            Smaller reporting
      company [XX]




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





State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter.  $392,600





APPLICABLE
ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY


PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:





Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. [XX]
Yes        [  ]
No




(APPLICABLE
ONLY TO CORPORATE REGISTRANTS)


Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of March 15, 2009  33,324,691.





DOCUMENTS
INCORPORATED BY REFERENCE





List
hereunder the following documents if incorporated by reference and the Part of
the Form 10-K (e.g., Part I, Pat II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933.  The listed documents should be
clearly for identification purposes (e.g., annual report to security holders for
fiscal year ended December 24, 1980).








TABLE OF CONTENTSPagePART
      I
                        3INTRODUCTORY
      NOTE
                        3ITEM
      1. DESCRIPTION OF BUSINESS
                        3ITEM
      1A RISK FACTORS
                        6ITEM
      2.  DESCRIPTION OF PROPERTY
                        11ITEM
      3. LEGAL PROCEEDINGS
                        12ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
                        12PART
      II
                        13ITEM
      5. MARKET FOR PRECISION AEROSPACE COMPONENTS, INC.’S COMMON EQUITY AND
      RELATED STOCKHOLDER MATTERS
                        13ITEM
      7. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
    OPERATION
                        14ITEM
      8.  FINANCIAL STATEMENTS
                        17ITEM
      9A. CONTROLS AND PROCEDURES
                        19ITEM
      9B. OTHER INFORMATION
                        19PART
      III
                        20ITEM
      10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE
      GOVERNANCE
                        20ITEM
      11. EXECUTIVE COMPENSATION
                        22ITEM
      12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
      RELATED STOCKHOLDER MATTERS
                        25ITEM
      13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE
                        27ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
                        27PART IV
                        28ITEM
      15. EXHIBITS
                        28SIGNATURES
                        28









2









PART
I





INTRODUCTORY
NOTE





FORWARD-LOOKING
STATEMENTS





This
Form 10-K contains "forward-looking statements" relating to Precision Aerospace
Components, Inc. (the "Company") which represent the Company's current
expectations or beliefs including, but not limited to, statements concerning the
Company's operations, performance, financial condition and
growth.  For this purpose, any statements contained in this Form 10-K
that are not statements of historical fact are forward-looking
statements.  Without limiting the generality of the foregoing, words
such as "may", "anticipate", "intend", "could", "estimate", or "continue" or the
negative or other comparable terminology are intended to identify
forward-looking statements.  These statements by their nature involve
substantial risks and uncertainties, such as credit losses, dependence on
management and key personnel, variability of quarterly results, and the ability
of the Company to continue its growth strategy and the Company’s competition,
certain of which are beyond the Company's control.  Should one or more
of these risks or uncertainties materialize or should the underlying assumptions
prove incorrect, or any of the other risks herein occur, actual outcomes and
results could differ materially from those indicated in the forward-looking
statements.





Any
forward-looking statement speaks only as of the date on which such statement is
made, and the Company undertakes no obligation to update any forward-looking
statement or statements to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events.  New factors emerge from time to time and it is not possible
for management to predict all of such factors, nor can it assess the impact of
each such factor on the business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.





ITEM 1. DESCRIPTION OF BUSINESS





DESCRIPTION
OF PRECISION AEROSPACE COMPONENTS’ BUSINESS





Organizational
History





Precision
Aerospace Components (Precision Aerospace or the “Company”) was previously known
as Jordan 1 Holdings Company (“Jordan 1”) and was incorporated in Delaware on
December 28, 2005.  Jordan 1 is the successor to Gasel Transportation
Lines, Inc. ("Gasel"), an Ohio corporation that was organized under the laws of
the State of Ohio on January 27, 1988.





Gasel was
a trucking company that filed for bankruptcy in the Southern District of Ohio,
Eastern Division, in May 2003.  On December 12, 2005, a final plan of
reorganization was approved by the court and the bankruptcy proceeding was
dismissed.





On
December 30, 2005, Gasel entered into a private sale of stock under a Stock
Purchase Agreement with Venture Fund I, Inc., a Nevada corporation owned and
controlled by accredited investor Ruth Shepley (“Shepley”), of Houston,
Texas.  Under the terms of the Stock Purchase Agreement, Shepley
purchased 29,000,000 shares of restricted common stock for a purchase price of
$100,000.





Subsequent
to December 30, 2005, Jordan 1 did not engage in any business activity until
July 20, 2006 when it entered into an exchange agreement (the “Exchange
Agreement”) pursuant to which the Company acquired all of the equity of Delaware
Fastener Acquisition Corp., a Delaware corporation (“DFAC”), pursuant to an
exchange agreement with the stockholders of DFAC.  Contemporaneously,
DFAC acquired the assets, subject to certain liabilities, of Freundlich Supply
Company, Inc. (“Freundlich Supply”) pursuant to an asset purchase agreement (the
“Asset Purchase Agreement”) dated May 24, 2006 among DFAC, Freundlich Supply,
and Michael Freundlich.  The purchase of the assets was financed by
the proceeds from the sale by the Company of its securities pursuant to a
securities purchase agreement (the “Securities Purchase
Agreement”).  As a result of the Exchange Agreement, DFAC became a
wholly-owned subsidiary of the Company.  Upon completion of the
foregoing transactions, the Company changed its name to Precision Aerospace
Components, Inc. and DFAC changed its name to Freundlich Supply Company, Inc.
(“Freundlich”).






3






The
Company’s present sole operating subsidiary and sole source of revenues is
Freundlich.





Overview
of Business





Freundlich
and through it the Company is a stocking distributor of aerospace quality,
internally-threaded fasteners.  The organization from which the
operating assets were acquired, Freundlich Supply, was founded in 1938 and had
been operating in its present business line since 1940.  The Company
distributes high-quality, domestically-manufactured nut products that are used
primarily for aerospace and military applications and for industrial/commercial
applications that require a high level of certified and assured
quality.  The Company’s products are manufactured, by others, to
exacting specifications and are made from raw materials that provide the
strength and reliability required for aerospace applications.





Freundlich
is a niche player in the North American aerospace fastener
industry.  Freundlich currently focuses on aero-space and nuclear
quality nut products, serving as an authorized stocking distributor for seven of
the premier nut manufacturers in the United States.





Freundlich
is a one-stop source for standard, self-locking, semi-special and special nuts
manufactured to several military, aerospace and equivalent
specifications.  Freundlich maintains a large inventory of more than
6,400 SKUs comprised of more than 21 million parts of premium quality, brand
name nut products. Management believes that Freundlich’s demonstrated ability to
immediately fulfill a high percentage (over 50 percent) of customer orders from
stock-on-hand gives Freundlich a distinct competitive advantage in the
marketplace.  Freundlich sells its products pursuant to written
purchase orders it receives from its customers.  All products are
shipped via common carrier.





Industry
Overview





The
fastener distribution industry is highly fragmented.  No one company
holds a dominant position.  This is primarily caused by the varied
uses of fasteners and the size of the industry.  Freundlich competes
with the numerous fastener distributors which serve as authorized stocking
distributors for the seven nut manufacturers in the Freundlich supplier
base.  Freundlich believes that the depth of its 6,400 SKU inventory
represents a competitive advantage.  As a stocking distributor,
Freundlich has employed a business model of maintaining levels of inventory on
hand or on order with its suppliers that can satisfy its customers’ projected
needs.  While this business model has allowed Freundlich to mitigate
the supply shortage suffered by the industry, the extremely long supply times
are creating challenges and creating shortages at
Freundlich.  Regulatory requirements which require manufacturer
certifications create a barrier to new supplier entry into the aerospace
fastener manufacturing business beyond the usual investment and patent barriers
faced by new entrants to other industries.  Certain domestic
manufacturing capacity was eliminated during a post-9/11 downturn in the
aerospace industry.  The industry began a turnaround in 2004, driven
by increased levels of defense spending and increased commercial demand caused
by new orders received by Boeing Company and others.  The continuing
increased demand has exceeded the manufacturing capacity of qualified
manufacturers.  Through the middle of this year, manufacturing lead
times have continued to increase, as have prices.  As the year was
ending, the lead times appear to be stabilizing albeit at long periods, in some
cases in excess of a year.  After close of the year lead times started
to slightly decrease.  Prices of finished product are yet to reflect
the reported declines in raw material costs.





Inventory





As a
stocking distributor, Freundlich attempts to maintain levels of inventory on
hand or on order to satisfy its customers’ projected
needs.  Freundlich has approximately 6,400 different types of nuts in
its inventory, comprised of more than 21 million parts of premium quality, brand
name nut products.  Freundlich’s primary suppliers include the
following:





SPS
Technologies


Greer
Stop Nut


Republic
Fastener Mfg. Corp


MacLean-ESNA


Alcoa
Fastening Systems


Bristol
Industries Inc.


Abbott-Interfast
Corporation






4





Customers





In 2008,
Freundlich Supply sold approximately 48% of its products to the United States
Department of Defense.  All of these products were sold for
maintenance, repair and operations functions, were shipped to various government
installations across the United States and were sold for many different
government programs.  For 2007, sales to the United States Department
of Defense represented approximately 37% of total sales.





Freundlich’s
commercial customers include original equipment manufacturers, repair facilities
and other distributors.  Other than the sales to the United States
Department of Defense, no one customer represented more than 10 percent of total
sales in 2008 or 2007.





Competition





The
fastener distribution industry is highly fragmented.  No one company
holds a dominant position.  This is primarily caused by the varied
uses of fasteners and the size of the industry.  The Company competes
with the numerous fastener distributors which serve as authorized stocking
distributors for the seven nut manufacturers in the Company's supplier base. The
Company believes that the depth of its 6,400 SKU inventory represents a
competitive advantage.





Few
barriers to entry exist for fastener distributors generally.  However,
the business model employed by Freundlich promotes competitive differences
favoring Freundlich and collectively not generally seen in the
industry.





Freundlich’s
quality system is certified to AS9100:2004 and ISO 9001:2000 quality
measures.  Since quality is an important measure of aerospace
suppliers, Freundlich strives to maintain its quality system to the highest
standards in the industry.





As an
authorized stocking distributor for the premier domestic manufacturers,
Freundlich is able to maintain relationships with customers not generally
available to the industry.  Most manufacturers are not expanding their
network of authorized distributors.





As a
certified government supplier, i.e. because it is listed on the “Qualified
Supplier/Manufacturer List,” Freundlich does not have to compete with companies
not so listed.





Government
Regulation





Freundlich
is approved as a “qualified supplier” by the United States Department of
Defense, and, as such, can provide certain critical parts that other suppliers
not so approved cannot supply.





The
Fastener Quality Act (“FQA”) and its implementing regulations issued by the
United States Department of Commerce require certain distributors of fasteners
to, among other things, maintain lot traceability for all of its products
sold.  This requires that companies like Freundlich keep their books
and records such that they can trace the origin of each item sold to the
manufacturer from which the item was purchased.  The FQA imposes
additional requirements on the manufacturers of subject parts and on the
users.  Because of the demands of the industry, its customers, and its
own quality systems, Freundlich maintains strict lot traceability for each item
in inventory, and has done so for many years.





Employees





Freundlich
has 17 employees, all of whom are full time employees.  We believe our
employee relations are very good.








5




ITEM
1A RISK FACTORS





An
investment in our securities involves a high degree of risk. We are subject to
various risks that may materially harm our business, financial condition and
results of operations.  An investor should carefully consider the
risks and uncertainties described below and the other information in this filing
before deciding to purchase our securities.  If any of these risks or
uncertainties actually occurs, our business, financial condition or operating
results could be materially harmed. In that case, the trading price of our
common stock could decline.  You should only purchase our securities
if you can afford to suffer the loss of your entire investment.





RISKS
RELATED TO OUR BUSINESS





Fluctuations
in our operating results and announcements and developments concerning our
business affect our stock price.





Our
quarterly operating results, the number of stockholders desiring to sell their
shares, changes in general economic conditions and the financial markets, the
execution of new contracts and the completion of existing agreements and other
developments affecting us, could cause the market price of our common stock to
fluctuate substantially.





As
a result of the acquisition, our expenses have increased
significantly.





Following
the 2006 acquisition, our ongoing expenses have increased significantly, these
include ongoing public company expenses, such as increased legal and accounting,
administrative (including directors and insurance) expenses and the requirement
that we register the shares of common stock issued underlying the preferred
stock and warrants issued to Barron Partners LP, as well as expenses incurred in
complying with the internal controls requirements of the Sarbanes-Oxley Act, and
obligations incurred in connection with the acquisition.  Our failure
to generate sufficient revenue and gross profit could result in reduced profits
or losses as a result of the additional expenses and our failure to be able to
meet our payment obligations could result in default under our
obligations.





We
may not be able to obtain necessary additional capital which could adversely
impact our operations.





Unless
the Company can increase its investment in inventory and meet operational
expenses with the existing sources of funds we have available, we may need
access to additional financing to grow our sales.  Such additional
financing, whether from external sources or related parties, may not be
available if needed or on favorable terms.  Our inability to obtain
adequate financing will adversely affect the Company’s pace of business
operations or could create liquidity and cash flow problems.  This
could be materially harmful to our business and may result in a lower stock
price.





Our
officers and directors are involved in other businesses which may cause them to
devote less time to our business.





Our
officers' and directors' involvement with other businesses may cause them to
allocate their time and services between us and other
entities.  Consequently, they may give priority to other matters over
our needs which may materially cause us to lose their services temporarily which
could affect our operations and profitability.





We
could fail to attract or retain key personnel, which could be detrimental to our
operations





Our
success largely depends on the efforts and abilities of key executives,
employees and consultants.  The loss of the services of a key
executive, employee or consultant could materially harm our business because of
the cost and time necessary to replace and train a replacement.  Such
a loss would also divert management attention away from operational
issues.  To the extent that we are smaller than our competitors and
have fewer resources, we may not be able to attract the sufficient number and
quality of staff.






6





We
may not be able to grow through acquisitions.





In
addition to our planned growth through the development of our business, an
important part of our growth strategy is to expand our business and to acquire
other businesses in related industries.  Such acquisitions may be made
with cash or our securities or a combination of cash and
securities.  If our stock price is less than the exercise price of the
outstanding warrants, it is not likely that that warrants will be exercised at
their present exercise price.  To the extent that we require cash, we
may have to borrow the funds or sell equity securities.  Any issuance
of equity as a portion of the purchase price or any sale of equity, to the
extent that we are able to sell equity, to raise funds to enable us to pay the
purchase price would result in dilution to our stockholders.  We have
no commitments from any financing source and we may not be able to raise any
cash necessary to complete an acquisition.  If we fail to make any
acquisitions, our future growth may be limited.  As of the date of
this report, we do not have any agreement as to any acquisition. Further, any
acquisition may be subject to government regulations.





If
we make any acquisitions, they may disrupt or have a negative impact on our
business.





If we
make acquisitions, we could have difficulty integrating the acquired companies’
personnel and operations with our own.  In addition, the key personnel
of the acquired business may not be willing to work for us.  We cannot
predict the affect expansion may have on our core
business.  Regardless of whether we are successful in making an
acquisition, the negotiations could disrupt our ongoing business, distract our
management and employees and increase our expenses.  In addition to
the risks described above, acquisitions are accompanied by a number of inherent
risks, including, without limitation, the following:





the
difficulty of integrating acquired products, services or
operations;


the
potential disruption of the ongoing businesses and distraction of our management
and the management of acquired companies;


the
difficulty of incorporating acquired rights or products into our existing
business;


difficulties
in disposing of the excess or idle facilities of an acquired company or business
and expenses in maintaining such facilities;


difficulties
in maintaining uniform standards, controls, procedures and
policies;


the
potential impairment of relationships with employees and customers as a result
of any integration of new management personnel;


the
potential inability or failure to achieve additional sales and enhance our
customer base through cross-marketing of the products to new and existing
customers;


the
effect of any government regulations which relate to the business acquired;
and


potential
unknown liabilities associated with acquired businesses or product lines, or the
need to spend significant amounts to retool, reposition or modify the marketing
or sales of acquired products or the defense of any litigation, whether of not
successful, resulting from actions of the acquired company prior to our
acquisition.





Our
business could be severely impaired if and to the extent that we are unable to
succeed in addressing any of these risks or other problems encountered in
connection with these acquisitions, many of which cannot be presently
identified.  These risks and problems could disrupt our ongoing
business, distract our management and employees, increase our expenses and
adversely affect our results of operations.





7







We
may be required to pay liquidated damages if our board does not consist of a
majority of independent directors.





Our
Securities Purchase Agreement with Barron Partners LP and Richard Henri Kreger
requires us to (i) appoint such number of independent directors that would
result in a majority of our directors being independent directors, (ii) have an
audit committee that is composed solely of independent directors and (iii) have
a compensation committee that is composed of a majority of independent
directors.  Our failure to maintain these requirements would results
in our payment of liquidated damages that are payable in cash or by the issuance
of additional shares of series A preferred stock at the election of the
investors.





We
are dependent on a few major industries.





We are
dependent on the aerospace and defense industries for a majority of our revenue
and, as a result, our business will be negatively impacted by any decline in
those industries.





We
face risks relating to government contracts.





There are
inherent risks in contracting with the U.S. government, including risks that are
peculiar to the defense industry, which could have a material adverse effect on
our business, prospects, financial condition and operating results, including
changes in the department of defense’s procurement policies and
requirements.





RISKS
RELATING TO OUR CURRENT FINANCING ARRANGEMENT





There are a large number of shares
underlying our series A and B convertible preferred stock and our warrants that
may be available for future sale and the sale of these shares may depress the
market price of our common stock. Currently, the Company is not
authorized to issue a sufficient number of shares if the preferred shares were
converted to common stock or the warrants were exercised for common
stock.








The
Company entered into a Securities Purchase Agreement with Barron Partners LP and
Richard Henri Kreger (the “Investors”) pursuant to which the Investors purchased
and as of Dec 31, 2008 held: (a) 5,274,152 shares of the Company’s series A
convertible preferred stock (the “series A preferred stock”) which, are
convertible into 4,098,016,050 shares of the Company’s common stock; (b)
warrants to purchase 1,581,150,000 shares of the Company’s common stock at
$0.00135 per share; and (c) 1,581,150,000 shares of the Company’s common stock
at $0.00231 per share..





Additionally,
all 2,811,000 shares of the Company’s series B convertible preferred stock
convert into 843,300,000 common shares, however these shares cannot be converted
until the stock Reverse Split described below.





The
Securities Purchase Agreement provides that the Company will have filed a
restated certificate of incorporation that will (i) change the authorized
capital stock to 10,000,000 shares of preferred stock and 90,000,000 shares of
common stock and (ii) effect a one-for-150 reverse split of the common stock
(the “Reverse Split”).  The total number of shares, upon full
conversion of all securities which could be converted to common stock of the
Company without giving effect to the Reverse Split or presently authorized
shares, would be 8,774,196,464 shares.  The Company presently has an
authorized common stock limit of 100,000,000 shares.  As a result, the
Investors will not have the ability to convert the series A preferred stock or
exercise the warrants in full unless the Reverse Split is
effected.  The Investors have agreed to extend that the date of the
Reverse Split to December 15, 2009.  If the Reverse Split is not
effective on or prior to December 15, 2009, the Company is required to pay the
investors liquidated damages in an amount equal to 5% of the investment made by
the investors, which would be $287,500and if
it fails to timely file and maintain effective a registration statement it may
be liable for liquidated damages which would be 2,100 shares of Series A stock
per day it is in violation, up to a maximum of 750,000 shares.






8





The sale
of these shares may adversely affect the market price of our common
stock.





The
terms of our Securities Purchase Agreement may restrict our ability to obtain
necessary financing and could impede us from using our securities as
consideration in contracts related to our operations.





Under the
Securities Purchase Agreement, we are restricted, during the three year period
commencing on the date of the agreement or such earlier time as the investors
have sold certain of their securities, (i) from issuing or selling any of our
common stock either (A) at a conversion, exercise or exchange rate or other
price that is based upon and or varies with the trading prices of or quotations
for the shares of Common Stock at any time after the initial issuance of such
debt or equity securities, or (B) with a conversion, exercise or exchange price
that is subject to being reset at some future date after the initial issuance of
such debt or equity security or upon the occurrence of specified or content
events directly or indirectly related to the business of the Company or the
market for the Common stock, or (ii) in a transaction in which the Company
issues or sells any securities in a capital raising transaction or series of
related transactions which grants to an investor the right to receive additional
shares based upon future transactions of the Company on terms which are more
favorable to the Investors than the terms initially provided to the investor in
its initial securities purchase agreement with the Company.  In
addition, the Company is restricted from issuing Preferred Stock and Convertible
Debt.  Further, each investor through the Securities Purchase
Agreement has a right of first refusal in subsequent private placements of
securities on a pro rata basis to the investor’s holdings in the total post
financing total fully diluted shares of the Company.  These
restrictions could impede us from using our securities as consideration in
contracts related to our operations, including, but not limited to, common stock
issued to consultants and vendors and obtaining additional
financing.  This may force us to use our limited cash to pay third
parties as opposed to issue our securities and may also lead to certain parties
deciding to not enter into contracts with us to provide us with necessary
financing.  If we have difficulty in entering into contracts related
to our operations or obtaining additional financing, we may be forced to curtail
our business operations.





RISKS
RELATING TO OUR COMMON STOCK





If
we fail to remain current on our reporting requirements, we could be removed
from the OTC Bulletin Board which would limit the ability of broker-dealers to
sell our securities and the ability of stockholder to sell their securities in
the secondary market.





Companies
trading on the OTC Bulletin Board, such as us, must be reporting issuers under
Section 12 of the Securities Exchange Act of 1934, as amended, and must be
current in their reports under Section 13, in order to maintain price quotation
privileges on the OTC Bulletin Board.  If we fail to remain current on
our reporting requirements, we could be removed from the OTC Bulletin
Board.  As a result, the market liquidity for our securities could be
severely adversely affected by limiting the ability of broker-dealers to sell
our securities and the ability of stockholders to sell their securities in the
secondary market.





Our
common stock may be affected by limited trading volume and the price of our
shares may fluctuate significantly, which cumulatively may affect shareholders'
ability to sell shares of our common stock





There has
been a limited public market for our common stock.  A more active
trading market for our common stock may not develop.  An absence of an
active trading market could adversely affect our shareholders' ability to sell
our common stock in short time periods, or possibly at all.  Our
common stock has experienced, and is likely to experience in the future,
significant price and volume fluctuations, which could adversely affect the
market price of our common stock without regard to our operating
performance.  In addition, we believe that factors such as quarterly
fluctuations in our financial results and changes in the overall economy or the
condition of the financial markets could cause the price of our common stock to
fluctuate substantially.  These factors may negatively impact
shareholders' ability to sell shares of the Company's common stock.








9






Our
common stock may be affected by sales of short sellers, which may affect
shareholders' ability to sell shares of our common stock





As stated
above, our common stock has experienced, and is likely to experience in the
future, significant price and volume fluctuations.  These fluctuations
could cause short sellers to enter the market from time to time in the belief
that the Company will have poor results in the future.  The market for
our stock may not be stable or appreciate over time and the sale of our common
stock may negatively impact shareholders' ability to sell shares of the
Company's common stock.





Because
we may be subject to the “penny stock” rules, our investors may have difficulty
in selling their shares of our common stock.





“Penny
Stock” are shares of stock:





With a
price of less than $5.00 per share;





That are
not traded on a "recognized" national exchange;





Whose
prices are not quoted on the NASDAQ automated quotation system (NASDAQ listed
stock must still have a price of not less than $5.00 per share); or





Of
issuers with net tangible assets less than $2.0 million (if the issuer has been
in continuous operation for at least three years) or $10.0 million (if in
continuous operation for less than three years), or with average revenues of
less than $6.0 million for the last three years.





Our
Common Stock is presently deemed to be Penny Stock.





If our
stock price continues to be less than $5.00 per share, our stock may be subject
to the SEC’s penny stock rules, (Rule 3a51-1 promulgated under the Securities
Exchange Act of 1934) which impose additional sales practice requirements and
restrictions on broker-dealers that sell our stock to persons other than
established customers and institutional accredited investors.  These
requirements may reduce the potential market for our common stock by reducing
the number of potential investors.  This may make it more difficult
for investors in our common stock to sell shares to third parties or to
otherwise dispose of them.  This could cause our stock price to
decline.





Broker-dealers
dealing in penny stocks are required to provide potential investors with a
document disclosing the risks of penny stocks.  Moreover,
broker-dealers are required to determine whether an investment in a penny stock
is a suitable investment for a prospective investor.





According
to the SEC, the market for penny stocks has suffered in recent years from
patterns of fraud and abuse. Such patterns include:





Control
of the market for the security by one or a few broker-dealers that are often
related to the promoter or issuer;





Manipulation
of prices through prearranged matching of purchases and sales and false and
misleading press releases;





“Boiler
room” practices involving high pressure sales tactics and unrealistic price
projections by inexperienced sales persons;





Excessive
and undisclosed bid-ask differentials and markups by selling broker-dealers;
and





The
wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired level, along with the inevitable
collapse of those prices with consequent investor losses.






10





This may
make it more difficult for investors to sell their shares due to suitability
requirements.





The
protection provided by the federal securities laws relating to forward looking
statements does not presently apply to us since our shares are Penny Stock
shares.





Although
the federal securities law provide a safe harbor for forward-looking statements
made by a public company that files reports under the federal securities laws,
this safe harbor is not available to issuers of penny stocks.  As a
result, as long as our shares continue to be a Penny Stock, we will not have the
benefit of this safe harbor protection in the event of any proceeding based upon
a claim that the material provided by us contained a material misstatement of
fact or was misleading in any material respect because of our failure to include
any statements necessary to make the statements not misleading.





Failure
to achieve and maintain effective internal controls in accordance with Section
404 of the Sarbanes-Oxley Act could have a material adverse effect on our
business and operating results and stockholders could lose confidence in our
financial reporting.





Effective
internal controls are necessary for us to provide reliable financial reports and
effectively prevent fraud.  If we cannot provide reliable financial
reports or prevent fraud, our operating results could be
harmed.  Section 404 of the Sarbanes-Oxley Act requires increased
control over financial reporting requirements, including documentation and
testing of our internal control procedures in order to satisfy its
requirements,annual management
assessments of the effectiveness of such internal controls and a report by our
independent certified public accounting firm addressing these
assessments.  This section may become fully applicable to us in the
future resulting in significantly increased cost due to the additional third
party report required.  Failure to achieve and maintain an effective
internal control environment, regardless of whether we are required to maintain
such controls could also cause investors to lose confidence in our reported
financial information, which could have a material adverse effect on our stock
price.





The
Chairman of our board of directors will own a controlling interest in our voting
stock following the completion of a proposed 1-for-150 reverse
split.





The
chairman of our board of directors, Alexander Kreger, will own approximately 53%
of our outstanding common stock immediately following the completion of our
proposed 1-for-150 reverse split.  As a result, Mr. Kreger will have
the ability to control substantially all matters submitted to our stockholders
for approval, including:





election
of our board of directors;


removal
of any of our directors;


amendment
of our certificate of incorporation or bylaws; and


adoption
of measures that could delay or prevent a change in control or impede a merger,
takeover or other business combination involving us.










ITEM
2.  DESCRIPTION OF PROPERTY





Our
principal executive office and the offices and distribution center of Freundlich
is located at 2200 Arthur Kill Road, Staten Island, New York
10309.  The space is leased, pursuant to a triple net lease, by the
Company through July 2013.  The space is leased for approximately
$12,400 per month.  We have an option to extend our lease for this
space and the Company can terminate the lease upon six months
notice.  The approximately 18,000 square foot building is constructed
from brick and cinder block and is maintained in excellent
condition.  The space is sufficient for our present and anticipated
needs.





11








ITEM 3.  LEGAL PROCEEDINGS





None





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





None





























12





PART
II





ITEM
5.  MARKET FOR PRECISION AEROSPACE COMPONENTS, INC.'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS





The
Company's common stock currently trades on the OTC:BB under the trading symbol
"PAOS.OB".





The
following table sets forth the highest and lowest bid prices for the common
stock for each calendar quarter and subsequent interim period since January 1,
2007 as reported on the web site Big Charts.  It represents
inter-dealer quotations, without retail markup, markdown or commission and may
not be reflective of actual transactions.






PRICESHIGH
                              
                              
                              LOW2007First
      Quarter
                              
                              $
                              0.03
                              
                              
                              $
                              0.007Second
      Quarter
                              
                              $
                              0.09
                              
                              
                              $
                              0.023Third
      Quarter
                              
                              $
                              0.05
                              
                              
                              $
                              0.03Fourth
      Quarter
                              
                              $
                              0.035
                              
                              
                              $
                              0.008
 2008First
      Quarter
                  
                  $
                  0.017
                  
                  
                  $
                  0.01Second
      Quarter
                  
                  $
                  0.09
                  
                  
                  $
                  0.023Third
      Quarter
                  
                  $
                  0.05
                  
                  
                  $
                  0.023Fourth
      Quarter
                  
                  $
                  0.035
                  
                  
                  $
                  0.008
 The
Company presently is authorized to issue 100,000,000 shares of common stock with
a $0.001 par value.  As of March 13, 2009, there were 78 holders
of record of the Company's common stock and 33,324,691 shares issued and
outstanding.





The
Company is authorized to issue 10,000,000 shares of preferred stock with a
$0.001 par value. As of March 13, 2009, there were 2 holders of record and
5,274,152 shares of series A convertible preferred stock outstanding, each of
which is convertible into 777 shares of the Company’s common stock and there
were 5 holders of record and 2,811,000 shares of series B convertible preferred
stock outstanding each of which would be convertible into 300 shares of the
Company’s common stock.  (These shares convert automatically upon the
reverse split described herein into 2 shares of the Company’s post split common
stock.)





Dividends





Precision
Aerospace has not declared or paid cash dividends on its common stock since its
inception and does not anticipate paying such dividends in the foreseeable
future.  The payment of dividends may be made at the discretion of the
Board and will depend upon, among other factors, the Company's operations, its
capital requirements, and its overall financial condition.





13








ITEM
7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION





General





The
following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements, and the Notes thereto included
herein.  The information contained below includes statements of the
Company's or management's beliefs, expectations, hopes, goals and plans that, if
not historical, are forward-looking statements subject to certain risks and
uncertainties that could cause actual results to differ materially from those
anticipated in the forward-looking statements.  For a discussion on
forward-looking statements, see the information set forth in the Introductory
Note to this Annual Report under the caption "Forward Looking Statements" which
information is incorporated herein by reference.





The
Company's operations are presently carried out through its Freundlich
subsidiary.  A description of Freundlich's operations and marketplace
is contained in section 1 of this report.





Liquidity and Capital
Resources





During
this past year the Company entered into a $3million dollar line of credit (at
prime plus 1%), replacing its $1 million dollar line (at prime plus
4%).  A portion of the additional availability was utilized to pay off
the Company’s 1 million dollar, 14% interest convertible subordinated note, due
July 2011 without any prepayment penalty or conversion.  Since the
interest rate being paid on the new line is the prime rate plus one percent, at
year end the rate was 4.25 percent meaning that the Company is presently
realizing an interest saving of nearly $100,000.  This savings and
reduction of potential dilution has been realized by bringing more of its debt
(all of its debt) to be due within 12 months.  The Company expects
that it will be able to renew its present line.





The
Company has also paid down an additional $375,000 of the Company’s subordinated
note.  It also reduced its accounts payable by over $285,000 and
reduced accrued expenses by over $65,000.  The Company has also paid
all of its income taxes fully to date; this included a payment of the 2007 taxes
and the estimated 2008 taxes to have been paid through the end of the
year.  The total of these tax payments was over $460,000.





Additionally
the Company increased its inventory by over $700,000 ($4,592,247 vs
$3,885,332).  It is important to fully recognize the value of the
Freundlich inventory.  Not only does Freundlich’s inventory enable
Freundlich to meet customer demand and obtain orders, but a portion of the
inventory is carried on the Company’s balance sheet at a value well below the
replacement cost were it to be reordered today.  As Freundlich
replaces its lower cost inventory with new higher-priced inventory, it will have
to make this investment.  Freundlich has the strategic benefit over a
potential new entrant of having a lower cost of goods versus the seller of newly
purchased items.  The replacement cost of Freundlich’s inventory is
difficult to ascertain exactly, since the cost of each particular item is
generally increasing and the unit cost usually decreases as the quantity
purchased increases.





As a
result of these additional payments and the Company’s operations, the Company’s
overall cash position increased by over $20,000.





The
Company’s total liabilities increased by under $250,000 ($3,050,036 vs
$2,807,449) while total assets grew by over $850,000 ($8,212,241 vs $7,372,619)
and our current assets grew over $900,000 ($5,781,163 vs $4,877,593) so our Net
Worth increased nearly $600,000, or more than 13%, to $5,162,205
(from$4,565,170).





When
looking at the Company’s accumulated deficit of $5,949,069, the reader should be
aware that the Company restarted from non-operating status in July 2006 with a
balance sheet which consisted of virtually no assets, but an accumulated deficit
of $2,997,934 which could not be used to offset future taxes, and this year was
required to incur a $4,417,917 non cash option charge, so more than $7,400,000
of non cash reductions have been brought to that deficit, which would otherwise
be positive by about 1,500,000 during the Company’s two and a half years of
operations as presently constituted.






14






The
amount available for the Company to draw under its credit line stood at over
$178,627 at the end of the year, compared with the amount available under it s
prior line at the end of 2007 of $302,694.





The
Company is dependent upon its cash flow from operations to maintain appropriate
liquidity.  It can fall back to its line of credit to meet additional
liquidity needs; at the end of the year this unused capacity was
$178,627.  In the present market environment, other sources of
financing for continuing operations will be difficult to obtain.  The
Company does believe that it will be able to raise additional funding to support
properly structured, attractive acquisitions; market conditions will impact
this.





The
Company does not anticipate the need to make any material capital equipment
investments in the coming year.  It anticipates that it has and will
generate sufficient capital to more than offset the additional investment in
inventory it will make during the coming year.  Stresses could be
created if product deliveries to the Company occur at a rate greater than
anticipated or operating results fail to reach expectations.  The
Company’s available cash gets depleted to the extent it must be utilized to pay
taxes and the Company is quite concerned by the various tax increase proposals
which abound.





The
Company does not anticipate any material changes in its mix or cost of its
capital resources until there is an increase in the prime rate.  An
increase in the prime rate will increase the Company’s cost of borrowing, since
its line of credit is priced at one percentage point over the prime rate, as it
changes from time to time.  While the Company does not expect a near
term increase, it anticipates that there could be substantial future
increases.  The Company believes it will have sufficient cash flow to
absorb reasonable additional interest expenses.





The
Company has no off balance sheet financing arrangements.





Results of
Operations





The
economic turmoil that is gripping the world will affect the
Company.  What is not clear is what the net effect will
be.  A significant portion of the Company’s sales are to the Defense
Department for aviation and nuclear repair requirements.  The Company
believes that Defense Department requirements for its products should continue
unabated-whether or not there are programmatic reviews of Defense Department
programs.





Unfortunately
for the Company, non commercial aviation has been singled out as an area of
excess, at least when it comes to the purchase and use of certain corporate
jets.    The Company also recognizes that weak economic
times may well result in reduced utilization of private
aircraft.  This reduction in use should be partially offset by the
reduction in fuel prices which will reduce operating costs.  The use
of the parts the Company supplies is related to aircraft operating
hours.  A decrease in aircraft flying hours will decrease demand for
the products sold by the Company.





While the
Company has not yet seen a significant decline in business there has been some
decline in activity.  This is perhaps better shown on a more macro
level where most of the Company’s suppliers are reducing their lead times for
their product lines.  These lead times are still excessively long, in
many instances still in excess of a year. However this is an improvement over
the approximate 18 month lead times that previously existed.  This
Company believes that these reductions are only partially attributable to
weakness in order books, but are also attributable to increased capacity that
has come on line.





The
overall reduction in backlog combined with more stability in material costs
should result in an overall stabilization, and perhaps reduction, in the cost of
goods the Company purchases. These results will take a while to show themselves
in 2009, since the still significant lead times from the fabricator, as well as
the lead times the fabricators use to acquire their materials, build in a delay
in revisions to the prices charged to the Company.





The more
immediate impact should be improved certainty of delivery of
products.  In the recent past, many of the promised delivery dates to
the Company have been meaningless.  Having delivery dates which are
kept should enable the Company to better manage its business as well as allow
the Company to better serve its customers.  Reflecting the long lead
times for the receipt of its products, which continue to persist, the Company
has more than the amount of its inventory on backorder to better enable it to
meet the needs of its customers






15





The
Company believes with turmoil comes opportunity and will attempt to take
advantage of marketplace conditions.





During
the past year the Company’s sales increased over 25% in comparison to 2007
($11,414,687 vs. $8,961,990).  This is substantially due to the
increased product deliveries received by the Company.  A portion of
this, perhaps as much as 10%, can be attributed to the price increases in the
goods acquired by the Company which resulted in the Company charging higher
prices for its sales.  A key component in the Company’s selling effort
is the immediate or near term availability of the product for
shipment.  The Company was unable to fully maintain its margins on the
higher priced supplies as can be seen by the reduction in our Gross Profit from
nearly 37% to nearly 31%.  This decrease in margin had been
anticipated.  With the stabilization in prices expected, the Company
expects that margins will be more stabile; however there may be additional
reductions in the margins as a result of market forces.





The
results of the Company’s operations in 2008, when either taken alone or compared
to 2007, were substantially adversely affected by the mandated requirement in
GAAP to include the Company’s non-cash option expense.  The reported
results are a loss in 2008 of $3,451,628 before provision for income
taxes.  In 2007 the Company reported income before income taxes of
$1,226,664.  The options expense amount included for 2008 is over
$4,400,000.  The inclusion of this expense amount, which was
calculated in accordance with Generally Accepted Accounting Principles mandates,
using the Black-Scholes valuation formula, makes the observation and utilization
of the loss before provision for income taxes substantially misleading when
compared the $1,226,664 income the Company reported in the prior year when there
were no non cash option expenses.  Although the options will expire
unexercised and were expected to do so, the “loss” will never be
reversed.  Additionally the Internal Revenue Service does not allow
any portion of the non-cash option expense to be utilized as a deduction to
income for income tax purposes.  The Company is concerned that this
increased understanding will not be available to the significant number of
persons who only review the “bottom line” reported number in the electronic
reporting sites and will have no understanding of what makes up this
number.  The Company has been surprised that even sophisticated
financial experts, including investment bankers and bankers, and other
reviewers, did not initially fully grasp the Company’s financial status until
walked through it by the Company.  When a small company such as this
is required to materially distort the perception created in the public by being
required to include, without appropriate break out, certain expenses or events,
the Company believes it is indeed time that the reporting rules should be
questioned.  The present rules, which while presumably well
intentioned and understandable to a practitioner, with high probability, lead to
the substantial result that the non nuanced reader, particularly those who do
not review these full discussions, but only review the financials from other
than this report, will be inappropriately misled.





The
Company’s Operating Expenses, apart from the noncash option expense, increased
due substantially to additional compensation expenses, both directly to staff as
well as to professional advisors.  The Company anticipates that the
level of operating expense for its present level of operations should continue
at about the same expense level in the coming year.





By
replacing its line of credit and retiring its convertible preferred debt, the
Company has reduced its interest expense by nearly $40,000, and unless there is
a substantial and unanticipated increase in the prime rate this year, the
Company anticipates that this debt realignment should result in a further
reduction in interest expense.





The
Company is anticipating significant increases in the prime rate in the future
and believes that it will have the capability of meeting the increased interest
payments that will occur.




The
Company, in addition to working to expand its operations internally is looking
to expand through acquisitions.  The Company recognizes that the
proper structuring of each acquisition needs to be even more elegantly addressed
in the present economic climate.  The task and the operational aspects
of the transaction may well be made more difficult and the reporting of results
more distorted as a result of the new financial accounting pronouncement SFAS
141R which became effective as of 2009.  The Company is concerned that
this required accounting will further distort the Company’s future financial
reports even though the acquisition causing the distortion makes operational and
economic sense.






16




The
opportunities presently under consideration by the Company, in addition to the
expansion of the Freundlich operations, are the acquisition of horizontal,
vertical and complementary operations.  While the company is in
various discussions and investigations, no specific acquisition opportunities or
ventures are nearing conclusion at this time.  In connection with
pursuit of these opportunities, the Company will also pursue the arrangement of
adequate financing to carry out its plans.





In view
of the size of the operations of the Company's sole operating subsidiary, and
the costs involved in pursuing and consummating an acquisition, the Company will
have to be selective and may have to obtain additional anticipatory
financing.





Horizontal
acquisitions would effectively improve the Company's overall volume which, in
turn, would enable the Company to take advantage of economies of scale as they
pertain to inventory management and certain administrative
practices.  Vertical or synergistic acquisitions could enhance the
capability of the Company to satisfy potential customer desires to deal with
multi-product companies or to deal with companies that have expanded service
offerings not presently provided by Freundlich.





Additionally,
acquisition of skills and product lines which are complementary to the
Freundlich offering could mutually enhance the sales of each.





The
Company believes it can expand its business with its present staff until
acquisitions warrant additional personnel.  Freundlich does not
presently anticipate making further hires; however, it is possible that one or
two additional staff members may be retained should business activity warrant
it.  Presently many Company level activities are either outsourced or
handled at the Freundlich level.





The
Company has reached agreement with its investors in its financing of July 20,
2006, further extending the date by which the Company is required to file a
registration statement effecting a 150:1 reverse split through December 15,
2009.  The Company and the affected investors agree that it is in the
best interests of the Company that the deferral continues.





Off-Balance Sheet
Arrangements





None.








Subsequent
Events





The
Company entered into an Employment Agreement with its President





The
Company, in its 8-K filed on January 28, 2009, reported that it had approved an
employment and compensation agreement with Andrew S. Prince, its President and
CEO, which will run through September 30, 2009.







ITEM
8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA





The
consolidated financial statements of Precision Aerospace required by Article 8
of Regulation S-X are attached to this report. Reference is made to Item 13
below for an index to the financial statements.





Of
particular importance are the notes to those financial statements.






17





Critical
Accounting Policies and Estimates





Our
consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America
(“GAAP”).  These accounting principles require us to make certain
estimates, judgments and assumptions.  We believe that the estimates,
judgments and assumptions upon which we rely are reasonably based upon
information available to us at the time that these estimates, judgments and
assumptions are made.  These estimates, judgments and assumptions can
affect the reported amounts of assets and liabilities as of the date of the
financial statements, as well as the reported amounts of revenue and expenses
during the periods presented.  To the extent there are material
differences between these estimates, judgments and assumptions and actual
results, our financial statements will be affected.





In many
cases, the accounting treatment of a particular transaction is specifically
dictated by GAAP and does not require management's judgment in its
application.  There are also areas in which management's judgment in
selecting among available alternatives would not produce a materially different
result.  Our senior management has reviewed these critical accounting
policies and related disclosures.  See Notes to Condensed Consolidated
Financial Statements, which contain additional information regarding our
accounting policies and other disclosures required by GAAP.





The
following areas are of particular importance to the Company’s operations and
available cash flow:




Inventory -The prices for replacement inventory have and through the major part of
the year continued to escalate.  Additionally the lead times for
delivery remain long, at times exceeding 60 weeks.  With few,
insignificant, exceptions, none of the Company’s products in inventory have any
shelf life limitations and, assuming eventual utilization, their value, from a
replacement perspective meet or exceed their initial acquisition
cost.  Demand for individual products extends for long durations and
the Company’s business is characterized by the either immediate availability or
near term availability of a product being crucial to its sale.  Sales
of a particular product may occur at irregular
intervals.  Consequently the Company continues to invest in a
substantial inventory and to recognize a product as being no longer in demand,
if a sale does not occur within five year period.  Although the
product is, at the end of the five year period, reduced to a zero cost basis, it
may remain in the Company’s inventory and be available for sale at a later
time.




Allowance
for doubtful accounts - In determining the adequacy of the allowance for
doubtful accounts, the Company considers a number of factors including the aging
of the receivable portfolio, customer payment trends, and financial condition of
the customer, industry conditions and overall credibility of the customer.
Actual amounts could differ significantly from our estimates.




Income
Taxes - In the preparation of consolidated financial statements, the Company
estimates income taxes based on the existing regulatory
structures.  Deferred income tax assets and liabilities represent tax
benefits or obligations that arise from temporary differences due to differing
treatment of certain items for accounting and income tax
purposes.  The Company evaluates deferred tax assets each period to
ensure that estimated future taxable income will be sufficient in character
amount and timing to result in their recovery.  A valuation allowance
is established when management determines that it is more likely than not that a
deferred tax asset will not be realized to reduce the assets to their realizable
value.  Considerable judgments are required in establishing deferred
tax valuation allowances and in assessing probable exposures related to tax
matters.  The Company’s tax returns are subject to audit and local
taxing authorities that could challenge the company’s tax
positions.  The Company believes it records and/or discloses such
potential tax liabilities as appropriate and has reasonably estimated its income
tax liabilities and recoverable tax assets.




Options -
During 2008 the Company issued non-plan options to officers and directors of the
Company. The option number of shares were in accordance with compensation
arrangements agreed to by the Company and approved by its board of
directors.  Grantees vested in the options at the date of
issuance.  The exercise price of each option that has been granted
equals 100% of the market price of the Company’s stock on the date of the
grant.  Options under this plan vest on the grant date and are
exercisable for a period not to exceed 1 year from the option grant issuance
date.  The Company does not believe that the expense required to be
recognized in accordance with GAAP, which is a non cash expense, will be other
than an accounting entry for the Company because the Company believes the
Options will expire unexercised.







18




ITEM
9. CHANGES IN AND DISAGREEMENTS WITH THE ACCOUTANTANTS ON (SIC) ACCOUNTING AND
FINANCIAL DISCLOSURE





None





ITEM
9A. CONTROLS AND PROCEDURES





(A)
Disclosure Controls and Procedures





The
Company carried out an evaluation, under the supervision and with the
participation of the Company's Principal Executive Officer/Principal Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures on or about February 23, 2009.  The
term "disclosure controls and procedures" is defined in Rules 13a-15(e) and
15d-15(e) of the Securities Exchange Act of 1934, as amended the ("Exchange
Act").  This term refers to the controls and procedures of a company
that are designed to ensure that the information required to be disclosed by a
company in the reports that it files under the Exchange Act is recorded,
processed, summarized and reported within the required time
periods.  The Company's disclosure controls and procedures are
designed to provide a reasonable level of assurance of achieving the Company's
disclosure control objectives.  The Company's Principal Executive
Officer/Principal Financial Officer has concluded that the Company's disclosure
controls and procedures are effective at this reasonable assurance level as of
the period covered by this 10-K.  Due to the size of the Company and
as a result of the implementation of the Company’s integrated financial
reporting system, items of note are appropriately brought to the attention of
the Company’s CEO for appropriate disclosure.





In
addition, the Company's Principal Executive Officer/Principal Financial Officer
evaluated the Company’s internal controls over financial reporting and
determined that there have been no changes in its internal controls that have
materially adversely affected, or are reasonably likely to adversely materially
affect, those internal controls over financial reporting.





(B)
Changes In Internal Controls Over Financial Reporting





In
connection with the evaluation of the Company's internal controls conducted at
the end of February 2009, the Company's Principal Executive Officer/Principal
Financial Officer has determined that there are no changes to the Company's
internal controls over financial reporting that have materially adversely
affected, or are reasonably likely to materially adversely affect, the Company's
internal controls over financial reporting.  The term "disclosure
controls and procedures" is defined in Rules 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934, as amended the ("Exchange
Act").  This term refers to the controls and procedures of a company
that are designed to ensure that the information required to be disclosed by a
company in the reports that it files under the Exchange Act is recorded,
processed, summarized, and reported within the required time
periods.  The Company concludes that our disclosure controls and
procedures are effective at ensuring that required information will be disclosed
on a timely basis in our reports filed under the Exchange Act.





ITEM
9B. OTHER INFORMATION





There is
no information required to have been disclosed in a report on Form 8-K during
the fourth quarter of the year covered by this Form 10-K, but not
reported.





19





PART
III





ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE





Set forth
below is certain information concerning each of the directors and executive
officers of the Company as of February 20, 2009:





Name
                
                Age
                
                Position
                
                With
      Company SinceAlexander
      Kreger
                
                65
                
                Director
      and Chairman of the Board
                
                2006Andrew
      S. Prince
                
                65
                
                President
      and CEO, Principal Financial Officer and Director
                
                2006,
      Officer since 2007Robert
      Adler
                
                74
                
                Director
                
                2006Chris
      Phillips
                
                36
                
                Secretary
      and Director
                
                2006David
      Walters
                
                46
                
                Director
                
                2006Donald
      Barger
                
                66
                
                Director
                
                2008




The Company's directors are elected at the annual
meeting of stockholders and hold office until their successors are
elected.  The Company's officers are appointed by the Board of
Directors and serve at the pleasure of the Board and are subject to employment
agreements, if any, approved and ratified by the Board.





Alexander
Kreger





Mr.
Kreger served as the President of Kreger Truck Renting Company, Inc. from 1999
through 2008.  Mr. Kreger has a BS in accounting and finance from the
Wharton School, University of Pennsylvania.





Mr.
Kreger is a member of the Company’s Audit and Compensation
Committees.





Andrew S.
Prince





Mr.
Prince is presently President and Chief Executive Officer of the
Company.  Mr. Prince is, and for the last five years has been, a
principal of Prince Strategic Group LC, a strategic advisory and
merchant-banking group.  Prince Strategic Group’s focus is strategic
planning, acquisition/disposition advice, financial restructuring and providing
crisis and interim CEO, COO management.  Mr. Prince assists large and
small organizations to develop and implement their business strategies and
refine their operations.  He has extensive experience in corporate
financing, strategic relationship and acquisition transactions, including their
financial and strategic analysis, structuring and negotiations, strategic
planning and management development activities as well as background in all
facets of operations in both small and large organizations.  From June
1, 2004-June 1, 2006, Mr. Prince was a director of CDKnet.com (OTCBB:
CDKN).  Mr. Prince is a graduate of the United States Naval Academy,
Harvard Law School and Harvard Business School.





Mr.
Prince is a member of the Company’s Compensation Committee.





Robert I.
Adler





From 2000
to 2002, Mr. Adler was Managing Director for ING Furman Selz Asset Management.
From 1991 to 2000, he was Vice President, Senior Investment Officer for BHF
Securities Corp. He is currently a member of the Board of Directors of China
Medicine Company, a distributor of pharmaceutical products, including
traditional Chinese herbal medicine, and SinoEnergy Holding Co., a manufacturer
of stainless steel vessels for liquid and compressed natural gas.





Mr. Adler
is Chairman of the Company’s Audit Committee.





20








Donald G. Barger
Jr.





From
September 2007 until his retirement in February 2008. Mr. Barger served as
advisor to the CEO of YRC Worldwide Inc. (“YRCW”), a publicly held company
specializing in the transportation of goods and materials; until September 2007,
he was Executive Vice President and Chief Financial Officer of YRCW. He joined
YRCW’s predecessor company, Yellow Corporation (“Yellow”), in December 2000 as
Senior Vice President and Chief Financial Officer. Prior to joining Yellow, he
served as Vice President and Chief Financial Officer of Hillenbrand Industries
Inc. (“Hillenbrand”), a publicly held company serving the healthcare and funeral
services industries, from March 1998 until December 2000. Mr. Barger was
also Vice President, Chief Financial Officer of Worthington Industries, Inc., a
publicly held manufacturer of metal and plastic products and processed steel
products, from September 1993 until joining Hillenbrand. Mr. Barger is a
director of Quanex Building Products Corporation, a publicly held manufacturer
of engineered materials and components for the U.S. building products markets;
Globe Specialty Metals, Inc., a publicly held producer of silicon metal and
silicon-based specialty alloys; and Gardner Denver a designer, manufacturer, and
marketer of compressor and vacuum products, and fluid transfer
products.  Mr. Barger has a B.S. degree from the United States
Naval Academy and an M.B.A. from the University of Pennsylvania, Wharton School
of Business.





Chris
Phillips




Since February 2008, Chris Phillips has
been a managing director for Vicis Capital, LLC, a NY based hedge fund.
Previously from October 2004 until January 2008, Chris served as
the President and CEO of Apogee Financial Investments, Inc., a merchant
bank, who owns 100% of Midtown Partners & Co., LLC, a FINRA licensed
broker-dealer.  Since July 2000 and up until January 2008, he acted as
the managing member of TotalCFO, LLC which provides consulting and CFO services
to a number of public and private companies and high net worth
individuals.  From November 2007 through January 2008 Chris served as the
CEO and Chief Accounting Officer of OmniReliant Holdings, Inc. (OTCBB: ORHI).
Presently, he is also a Board Member of OmniReliant Holdings, Inc. (OTCBB:
ORHI), Brookside Technology Holdings, Corp. (OTCBB: BKSD), and MDwerks, Inc.
(OTCBB: MDWK). Mr. Phillips holds a Bachelors of Science Degree in Accounting
and Finance and a Masters of Accountancy with a concentration in Tax from the
University of Florida.  Mr. Phillips is a Florida licensed Certified Public
Accountant.




David
Walters





David
Walters co-founded Monarch Bay Associates, LLC, a FINRA member broker dealer, in
2006. Prior to Monarch Bay Associates, Mr. Walters was a principal with Monarch
Bay Capital Group, LLC, a firm that provided advisory services and capital for
emerging growth companies.  From 1992 through 2000 he was Executive
Vice President and Managing Director in charge of Capital Markets for Roth
Capital (formerly Cruttenden Roth) where he was instrumental in building the
company’s revenues from $7 million to $65 million.  As an equity
partner, he managed the capital markets group and led over 100 public and
private financings, raising over $2 billion in growth
capital.  Additionally, Mr. Walters oversaw a research department that
covered over 100 public companies, and was responsible for the syndication,
distribution and after-market trading of the public offerings.  Prior
to Cruttenden Roth, he was Vice President for both Drexel Burnham Lambert and
Donaldson Lufkin and Jenrette in Los Angeles, and he ran a private equity
investment fund.  Mr. Walters is Chairman of the Board of Directors of the
publicly traded companies: Remote Dynamics, Inc. (OCTBB: REDI), Monarch
Staffing, Inc. (OCTBB: MSTF.OB), and the non-publicly traded companies Bounce
Mobile Systems, Inc. and Systems Evolution, Inc., STI Group, Inc. and a director
of Lathian Systems, Inc.  Mr. Walters earned a B.S. in Bioengineering from
the University of California, San Diego.





Mr.
Walters is Chairman of the Company’s Compensation Committee .and a member of the
Company’s Audit Committee.





Code
of Ethics and Committee Charters





Drafts of
committee charters for the Audit and Compensation committees have been prepared
and are under review by the Board of Directors but have not been formally
adopted.





Code
of Ethics





The Code
of Ethics applies to the Company’s directors, officers and
employees.  It is available on the Company’s website.






21






Audit
Committee





The Audit
Committee makes such examinations as are necessary to monitor the corporate
financial reporting and the external audits of the Company, to provide to the
Board of Directors (the “Board”) the results of its examinations and
recommendations derived therefrom, to outline to the Board improvements made, or
to be made, in internal control, to nominate independent auditors and to provide
to the Board such additional information and materials as it may deem necessary
to make the Board aware of significant financial matters that require Board
attention.





Compensation
Committee





The
compensation committee is authorized to review and make recommendations to the
Board regarding all forms of compensation to be provided to the executive
officers and directors of the Company, including stock compensation and bonus
compensation to all employees.  Officers of the Company serving on the
Compensation committee do not participate in discussions regarding their own
compensation.





Nominating
Committee





The
Company does not have a Nominating Committee and the full Board acts in such
capacity.





Compliance
with Section 16(a) of the Exchange Act





Section
16(a) of the Securities Exchange Act of 1934 requires that the Company’s
directors and executive officers and persons who beneficially own more than ten
percent (10%) of a registered class of its equity securities, file with the SEC
reports of ownership and changes in ownership of its common stock and other
equity securities.  Executive officers, directors, and greater than
ten percent (10%) beneficial owners are required by SEC regulation to furnish
the Company with copies of all Section 16(a) reports that they
file.  Based solely upon a review of the copies of such reports
furnished to us or written representations that no other reports were required,
the Company believes that, for 2008, all filing requirements applicable to its
executive officers, directors and greater than ten percent (10%) beneficial
owners were met.





ITEM 11.  EXECUTIVE
COMPENSATION





The
following table sets forth information concerning all cash and non-cash
compensation awarded to, earned by or paid to the Company’s principal executive
officer,and all of the other executive officers with annual compensation
exceeding $100,000, who served during the fiscal year ended December 31, 2008,
for services in all capacities to the Company:









22











SUMMARY
COMPENSATION TABLE





Name
      & Principal Position
                                                      Year
                                                      
                                                      Salary
                                                        ($)
                                                      Bonus
                                                        ($)
                                                      Stock
                                                        Awards
                                                        ($)
                                                      
                                                      Option
                                                        Awards(2)
                                                        ($)
                                                      Non-Equity
      Incentive
                                                        Plan
Compensation
                                                        ($)
                                                      Nonqualified Deferred
                                                        Compensation
      Earnings
                                                        ($)
                                                      
                                                      All
      Other Compensation
                                                        ($)Andrew
      Prince
                                                        President, CEO and
                                                        Director(1)
                                                      2008
                                                      
                                                      $
                                                      200,000
                                                      $
                                                      36,999
                                                      -
                                                      $
                                                      4,349,968
                                                      -
                                                      -
                                                      $
                                                      -


(1)
            Mr.
      Prince serves as a director of the Company, but without compensation for
      his director services.


(2)
            Mr.
      Prince is to have a7% ownership interest in the company based on fully
      diluted shares outstanding as of January
2007.











OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR END










Name
            Number of
              Securities
              underlying
              unexercised
              options (#)
              exercisable
            Number of

              Securities
              underlying
              unexercised
              options (#)
              unexercisable
            Equity
              incentive plan
              awards:
              Number of
      securities
              underlying
              unexercised
              unearned
              options (#)
            Options
              exercise ($)
            Options
              expiration
              date
            Number
      of
              shares or units
              of stock that
              have not
              vested (#)
            Market
      value
              of shares or
              units of stock
              that have not
              vested ($)
            Equity
              incentive plan
              awards.
              Number of
              shares or units
              and other
              rights that
              have not
              vested (#)Andrew
      Prince
            630,805,669
            -
            -
            0.01
            Feb 27
      2009















23











Compensation
of Directors





The
following table sets forth information with respect to director’s compensation
for the fiscal year ended December 31, 2008:





DIRECTOR
COMPENSATION










Name
              
              Fees
      Earned
                or Paid in
                Cash
              
              
              Stock
                Awards
              
              
              Options
                Awards
              
              
              Non-Equity
                Incentive Plan
                Compensation
              
              
              Nonqualified
                Deferred
                Compensaton
                Earnings
              
              
              All
      Other
                Compensation
              
              
              TotalRobert
      Adler
              
              $
              10,000
              
              
              $
              -
              
              
              
              13,239
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              23,239Alex
      Kreger
              
              $
              10,000
              
              
              $
              -
              
              
              
              13,239
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              23,239Chris
      Phillips
              
              $
              6,000
              
              
              $
              -
              
              
              
              13,239
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              19,239Donald
      Barger
              
              $
              5,000
              
              
              $
              -
              
              
              
              14,995
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              19,995David
      Walters
              
              $
              8,000
              
              
              $
              -
              
              
              
              13,239
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              21,239




Non-employee
Directors of the Company are paid $2,500 per meeting for board meeting
attendance in person and $1,500 per meeting for board meeting attendance by
phone and $1,500 per meeting for each committee meeting.
























24








ITEM
12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS.





The
following table sets forth certain information with respect to the beneficial
ownership of the Common Stock of the Company as of March 25, 2009, for: (i) each
person who is known by the Company to beneficially own more than 5 percent of
the Company’s Common Stock, (ii) each of the Company’s directors, (iii) each of
the Company’s Named Executive Officers, and (iv) all directors and executive
officers as a group. As of March 25, 2009, the Company had 33,324,691 shares of
Common Stock outstanding.





















































25








Name
      and Address
                                              of
      Beneficial Owner (1)
                                            
                                            Shares
      Beneficially Owned
                                            
                                            
                                            Percentage
      of Shares Beneficially Owned
                                            
                                            
                                            Percentage
      of Total Voting Power
                                            
                                            PositionRichard
      Kreger
                                              134
      Lords Highway
                                              Weston,
      CT 06883
                                            
                                            
                                            69,111,309
      (2)
                                            
                                            
                                            
                                            69.1
                                            %
                                            
                                            
                                            69.1
                                            %Alex
      Kreger
                                            
                                            
                                            15,042,000
                                            
                                            
                                            
                                            15.0
                                            %
                                            
                                            
                                            15.0
                                            %
                                            Executive
      Chairman&
      DirectorBGRS12333
      Fairy Hill
                                              RoadRydal,
      PA 19046
                                            
                                            
                                            3,150,000
                                            
                                            
                                            
                                            3.2
                                            
                                            
                                            
                                            3.2
                                            %Aimee
      Brooks
                                              12
      Graham Terrace
                                              Montclair,
      NJ 07042
                                            
                                            
                                            1,722,000
                                            
                                            
                                            
                                            1.7
                                            %
                                            
                                            
                                            1.7
                                            %Robert
      Adler
                                            
                                            
                                            1,350,000
                                            
                                            
                                            
                                            1.4
                                            %
                                            
                                            
                                            1.4
                                            %
                                            DirectorChris
      Phillips
                                            
                                            
                                            1,350,000
                                            
                                            
                                            
                                            1.4
                                            %
                                            
                                            
                                            1.4
                                            %
                                            Director
      SecretaryAndrew
      Prince
                                            
                                            
                                            66,675,309
                                            
                                            
                                            
                                            66.7
                                            %
                                            
                                            
                                            66.7
                                            %
                                            Director
      President and CEODavid
      Walters
                                            
                                            
                                            1,350,000
                                            
                                            
                                            
                                            1.4
                                            %
                                            
                                            
                                            1.4
                                            %
                                            DirectorDonald
      Barger
                                            
                                            
                                            750,000
                                            
                                            
                                            
                                            0.8
                                            %
                                            
                                            
                                            0.8
                                            %
                                            DirectorDirectors
      and Executive Officers as a Group
                                              (5
      persons)
                                            
                                            
                                            86,517,309
                                            
                                            
                                            
                                            86.5
                                            %
                                            
                                            
                                            86.5
                                            %











(1)
            Except
      where otherwise indicated, the address of the beneficial owner is deemed
      to be the same address as the
Company.





(2)
                Includes
      all shares of Common Stock, up to the maximum presently authorized shares
      of Company common stock issuable, upon conversion of either convertible
      preferred series A stock or Series A or Series B warrants held by Mr.
      Richard Kreger.  Were sufficient shares of Company common stock
      available, and all warrants and conversion of preferred series A possible,
      a total of 592, 486,771 shares could be held by Mr. Kreger.(3)
                Includes
      all shares of Common Stock, up to the maximum presently authorized shares
      of Company common stock issuable upon exercise of options held by Mr.
      Andrew Prince.  Were sufficient shares of Company common stock
      available, and all his options were exercised a total of 630,805,669
      shares could be held by Mr.
Prince.








Securities
Authorized for Issuance Under Equity Compensation Plans





The
Company has no presently active plan.





26








ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE





On July
20, 2006, the Company entered into an exchange agreement (the “Exchange
Agreement”) pursuant to which the Company acquired all of the equity of Delaware
Fastener Acquisition Corp., a Delaware corporation (“DFAC”), pursuant to an
exchange agreement with the stockholders of DFAC.  The stockholders of
DFAC included our chairman, Alex Kreger, his son Richard Kreger and daughter,
Aimee Brooks (the “Related Parties”).  Contemporaneously, DFAC
acquired the assets, subject to certain liabilities, of Freundlich Supply
Company, Inc. (“Freundlich Supply”) pursuant to an asset purchase agreement (the
“Asset Purchase Agreement”) dated May 24, 2006 among DFAC, Freundlich Supply and
Michael Freundlich.  The purchase of the assets was financed by the
proceeds from the sale by the Company of its securities pursuant to a securities
purchase agreement (the “Securities Purchase Agreement”).  The overall
transaction involved an investment of $5,750,000 (five million seven hundred
fifty thousand dollars) and the Related Parties obtained an eventual approximate
16% interest in the Company (assuming full conversion of the convertible
preferred series A and B shares and the convertible note and no adjustment to
the conversion prices).  As a result of the Exchange Agreement, DFAC
became a wholly-owned subsidiary of the Company.  Upon completion of
the foregoing transactions, the Company changed its name to Precision Aerospace
Components, Inc. and DFAC changed its name to Freundlich Supply Company,
Inc.





In
connection with the transactions described above, Midtown Partners, with whom
Mr. Richard Kreger was a vice president, an investor in the Securities Purchase
Agreement, and the son of the Company’s Chairman, Alex Kreger, obtained 250,000
of the Company’s series B Convertible Preferred shares.  These shares
were received from the shares paid by the Company to DFAC.  Midtown
Partners & Co., LLC is a registered broker – dealer.







ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES





Audit
Fees





The
aggregate fees billed or to be billed for professional services rendered by our
independent registered public accounting firms for the audit of our annual
financial statements, review of financial statements included in our quarterly
reports and other fees that are normally provided by the accounting firms in
connection with statutory and regulatory filings or engagements for the fiscal
years ended December 31, 2008 and 2007 were: $81,258 for 2008 and $66,975 for
2007.





Audit
Related Fees





The
aggregate fees billed or to be billed for audit related services by the
Company’s independent registered public accounting firms that are reasonably
related to the performance of the audit or review of our financial statements,
other than those previously reported in this Item 14, for the fiscal years ended
December 31, 2008 and 2007 were $-0- in 2008 and $-0-in 2007.





Tax
Fees





The
aggregate fees billed for professional services rendered by the Company’s
independent registered public accounting firms for tax compliance, tax advice
and tax planning for the fiscal year ended December 31, 2007 and 2006 were and
$5,000-in 2008 and $5,000 in 2007.





27








All
Other Fees





The
aggregate fees billed for products and services provided the Company’s
independent registered public accounting firms for the fiscal years ended
December 31, 2008 and 2007 were $50,000- in 2008 and $-0-in 2007.





Audit
Committee





Our Audit
Committee implemented pre-approval policies and procedures for our engagement of
the independent auditors for both audit and permissible non-audit
services.  Under these policies and procedures, all services provided
by the independent auditors must be approved by the Audit
Committee  or Board of Directors prior to the commencement of the
services, subject to certain de-minimus non-audit service (as described in Rule
2-01(c)(7)(C) of Regulation S-X) that do not have to be pre-approved as long as
management promptly notifies the Audit Committee of such service and the Audit
Committee or Board of Directors approves it prior to the service being
completed.  All of the services provided by our independent auditors
have been approved in accordance with our pre-approval policies and
procedures.






PART IV




ITEM
15. EXHIBITS
 
 Listed in
the Exhibit Index on page 29 hereof.


SIGNATURES





In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.





PRECISION
      AEROSPACE COMPONENTS, INC.Date: March
      30, 2009
            By
            /s/
      Andrew S. Prince[Missing Graphic Reference]
              Andrew
      S. Prince
              President
      and Chief Executive Officer





In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.





Signature
                                        
                                        Title
                                        
                                        Date/s/
      Andrew S. Prince
                                        
                                        President,
      Chief Executive Officer and Director
                                        
                                        March 30  ,
      2009Andrew
      S. Prince
                                        
                                        (Principal
      Executive Officer and Principal Financial Officer)/s/
      Alexander Kreger
                                        
                                        Chairman
      of the Board of Directors
                                        
                                        March
      30, 2009Alexander
      Kreger/s/
      Robert Adler
                                        
                                        Director
                                        
                                        March
      30, 2009Robert
      Adler/s/
      Chris Philips
                                        
                                        Director
                                        
                                        March
      30, 2009Chris
      Philips/s/
      David Walters
                                        
                                        Director
                                        
                                        March
      30, 2009David
      Walters





28





EXHIBIT
      NO.3.1
                                
                                Certificate
      of Incorporation
                                
                                Incorporated
      by reference to Exhibit 3.1 to the Company’s Report on Form 8-K as filed
      with the United states Securities and Exchange Commission on July 27,
      20063.2
                                
                                By-laws
                                
                                Incorporated
      by reference to Exhibit 3.2 to the Company’s Report on Form 8-K as filed
      with the United States Securities and Exchange Commission on July 27,
      20063.3
                                
                                Series
      A Preferred Stock Certificate of Designation
                                
                                Incorporated
      by reference to Exhibit 3.3 to the Company’s Report on Form 8-K as filed
      with the United States Securities and Exchange Commission on July 27,
      20063.4
                                
                                Series
      B Preferred Stock Certificate of Designation
                                
                                Incorporated
      by reference to Exhibit 3.4 to the Company’s Report on Form 8-K as filed
      with the United States Securities and Exchange Commission on July 27,
      200610.1
                                
                                Asset
      Purchase Agreement by and among Delaware Fastener Acquisition Corporation,
      Michael Freundlich and Freundlich Supply Company, Inc.
                                
                                Incorporated
      by reference to Exhibit 10.1 to the Company’s Report on Form 8-K as filed
      with the United States Securities and Exchange Commission on July 27,
      200610.2
                                
                                Securities
      Purchase Agreement by and among Jordan 1 Holdings Company, Barron Partners
      LP and Certain Equity Investors
                                
                                Incorporated
      by reference to Exhibit 10.2 to the Company’s Report on Form 8-K as filed
      with the United States Securities and Exchange Commission on July 27,
      200610.3
                                
                                Registration
      Rights Agreement
                                
                                Incorporated
      by reference to Exhibit 10.3 to the Company’s Report on Form 8-K as filed
      with the United States Securities and Exchange Commission on July 27,
      200610.4
                                
                                Convertible
      Note
                                
                                Incorporated
      by reference to Exhibit 10.4 to the Company’s Report on Form 8-K as filed
      with the United States Securities and Exchange Commission on July 27,
      200610.5
                                
                                Form
      of Series A Warrant
                                
                                Incorporated
      by reference to Exhibit 10.5 to the Company’s Report on Form 8-K as filed
      with the United States Securities and Exchange Commission on July 27,
      200610.6
                                
                                Form
      of Series B Warrant
                                
                                Incorporated
      by reference to Exhibit 10.2 to the Company’s Report on Form 8-K as filed
      with the United States Securities and Exchange Commission on July 27,
      200610.7
                                
                                Contract
      of Sale and Security Agreement between Freundlich Supply Company, Inc. and
      Greater Bay Business Funding
                                
                                Incorporated
      by reference to Exhibit 10.1 to the Company’s Report on Form 8-K as filed
      with the United States Securities and Exchange Commission on March 19,
      200710.8
                                
                                Amendment
      to Contract of Sale and Security Agreement between Freundlich Supply
      Company, Inc. and Greater Bay Business Funding.
                                
                                Incorporated
      by reference to Exhibit 10.2 to the Company’s Report on Form 8-K as filed
      with the United States Securities and Exchange Commission on March 19,
      200710.9
                                
                                Guaranty
      between Greater Bay Business Funding and Freundlich Supply Company, Inc.
      and Precision Aerospace Components, Inc.
                                
                                Incorporated
      by reference to Exhibit 10.3 to the Company’s Report on Form 8-K as filed
      with the United States Securities and Exchange Commission on March 19,
      200710.10
                                
                                Loan
      and Security Agreement as of March 6, 2008, by and among Freundlich Supply
      Company, Inc. (borrower) Precision Aerospace Components, Inc. (guarantor)
      and Israel Discount Bank of New York (lender)
                                
                                Provided
      herewith31.1
                                
                                Certification
      By Chief ExecutiveOfficer
      pursuant to 15U.S.C.
      Section 7241, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Actof
      2002
                                
                                Provided
      herewith31.2
                                
                                Certification
      ByPrincipal
      Financial Officer pursuant to 15U.S.C.
      Section 7241, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Actof
      2002
                                
                                Provided
      herewith32.1
                                
                                Certification
      by Chief Executive Officer and Principal Financial Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002
                                
                                Provided
      herewith





29























PRECISION
AEROSPACE COMPONENTS, INC.
 CONSOLIDATED
FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007














































1












PRECISION
AEROSPACE COMPONENTS, INC.
 CONSOLIDATED
FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 
 CONSOLIDATED
FINANCIAL STATEMENTS:
  PagesReport
      of Independent Registered Public Accounting Firm
                                                          3Consolidated
      Balance Sheets as of December 31, 2008 and 2007
                                                          4Consolidated
      Statements of Income for the Years EndedDecember
      31, 2008 and 2007
                                                          5Consolidated
      Statement of Stockholders’ Equity for the YearsEnded
      December 31, 2008 and 2007
                                                          6Consolidated
      Statement of Temporary Equity for the YearsEnded
      December 31, 2008 and 2007
                                                          7Consolidated
      Statement of Cash Flows for the YearsEnded
      December 31, 2008 and 2007
                                                          8Notes
      to Consolidated Financial Statements
                                                          9–25




























2








BAGELL,
JOSEPHS, LEVINE & COMPANY, L.L.C.
 Certified
Public Accountants
 
 406
Lippincott Drive, Ste. J
 Marlton,
NJ 08053-4168
 (856)
355-5900   Fax (856) 396-0022
 
 
 
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 Board of
Directors and Stockholders
 Precision
Aerospace Components, Inc.
 2200
Arthur Kill Rd.
 Staten
Island, NY 10309
 
 
 We have
audited the accompanying consolidated balance sheet of Precision Aerospace
Components, Inc. (the “Company”) as of December 31, 2008 and 2007, and the
related consolidated statements of operations, stockholders’ equity and cash
flows for each of the years in the two-year period ended December 31,
2008.  The Company’s management is responsible for these financial
statements.  Our responsibility is to express an opinion on these
financial statements based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting.  Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the company’s
internal control over financial reporting.  Accordingly, we express no
such opinion.  An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Precision Aerospace
Components, Inc. as of December 31, 2008 and 2007, and the results of its
operations and its cash flows for each of the years in the two-year period ended
December 31, 2008 in conformity with accounting principles generally accepted in
the United States of America.
 
 As
discussed in Note 12 to the financial statements, the accompanying financial
statements have been restated.
 
  /s/ 
BAGELL, JOSEPHS, LEVINE & COMPANY, L.L.C.
 Bagell,
Josephs, Levine & Company, L.L.C.
 Marlton,
NJ 08053
 
 March 15,
2009
        3






PRECISION AEROSPACE COMPONENTS, INC.CONSOLIDATED BALANCE SHEETSASSETS
                                  
                                  
                                  (Restated)December
      31,
                                  
                                  
                                  December
      31,2008
                                  
                                  
                                  2007(Audited)
                                  
                                  
                                  (Audited)CURRENT
      ASSETSCash
      and cash equivalents
                                  
                                  $
                                  176,483
                                  
                                  
                                  $
                                  154,709Accounts
      receivable, net
                                  
                                  
                                  874,124
                                  
                                  
                                  
                                  837,552Inventory,
      net
                                  
                                  
                                  4,592,247
                                  
                                  
                                  
                                  3,885,332Prepaid
      expenses
                                  
                                  
                                  39,693
                                  
                                  
                                  
                                  -Prepaid
      income taxes
                                  
                                  
                                  98,616
                                  
                                  
                                  
                                  -5,781,163
                                  
                                  
                                  
                                  4,877,593PROPERTY
      AND EQUIPMENT - Net
                                  
                                  
                                  184,634
                                  
                                  
                                  
                                  260,582OTHER
      ASSETSDeposits
                                  
                                  
                                  24,700
                                  
                                  
                                  
                                  12,700Goodwill
                                  
                                  
                                  2,221,744
                                  
                                  
                                  
                                  2,221,7442,246,444
                                  
                                  
                                  
                                  2,234,444TOTAL
      ASSETS
                                  
                                  $
                                  8,212,241
                                  
                                  
                                  $
                                  7,372,619LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY
      (DEFICIT)CURRENT
      LIABILITIESAccounts
      payable and accrued expenses
                                  
                                  $
                                  252,530
                                  
                                  
                                  $
                                  606,627Subordinated
      note payable-current portion
                                  
                                  
                                  75,000
                                  
                                  
                                  
                                  300,000Loan
      payable-current portion
                                  
                                  
                                  2,722,506
                                  
                                  
                                  
                                  387,466Income
      taxes payable
                                  
                                  
                                  -
                                  
                                  
                                  
                                  363,3563,050,036
                                  
                                  
                                  
                                  1,657,449LONG
      -TERM LIABILITIESSubordinated
      note payable-long term portion
                                  
                                  
                                  -
                                  
                                  
                                  
                                  150,000Convertible
      note payable
                                  
                                  
                                  -
                                  
                                  
                                  
                                  1,000,000TOTAL
      LIABILITIES
                                  
                                  
                                  3,050,036
                                  
                                  
                                  
                                  2,807,449TEMPORARY
      EQUITYPreferred
      Stock A $.001 par value; 7,100,000 shares authorized5,274,152
      shares issued and outstanding
                                  
                                  
                                  5,274
                                  
                                  
                                  
                                  5,274Preferred
      Stock B $.001 par value; 2,900,000 shares authorized2,811,000
      shares issued and outstanding
                                  
                                  
                                  2,811
                                  
                                  
                                  
                                  2,811Additional
      paid-in capital - preferred stock
                                  
                                  
                                  2,916,173
                                  
                                  
                                  
                                  2,916,173Additional
      paid-in capital -options
                                  
                                  
                                  4,417,917
                                  
                                  
                                  
                                  -Additional
      paid-in capital -warrants
                                  
                                  
                                  843,272
                                  
                                  
                                  
                                  843,2728,185,447
                                  
                                  
                                  
                                  3,767,530STOCKHOLDERS'
      EQUITY (DEFICIT)Preferred
      Stock A $.001 par value; 7,100,000 shares authorized
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -5,274,152
      shares issued and outstandingPreferred
      Stock B $.001 par value; 2,900,000 shares authorized
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -2,811,000
      shares issued and outstandingCommon
      stock, $.001 par value; 100,000,000 shares authorized33,324,691
      shares issued and outstanding
                                  
                                  
                                  33,325
                                  
                                  
                                  
                                  33,325Additional
      paid-in capital
                                  
                                  
                                  2,892,502
                                  
                                  
                                  
                                  2,892,502Accumulated
      deficit
                                  
                                  
                                  (5,949,069
                                  )
                                  
                                  
                                  (2,128,187
                                  )TOTAL
      STOCKHOLDERS' EQUITY (DEFICIT)
                                  
                                  
                                  (3,023,242
                                  )
                                  
                                  
                                  797,640TOTAL
      LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY
      (DEFICIT)
                                  
                                  $
                                  8,212,241
                                  
                                  
                                  $
                                  7,372,619














4




PRECISION
AEROSPACE COMPONENTS, INC.


CONSOLIDTED
STATEMENTS OF OPERATIONS


FOR THE YEARS
ENDED DECEMBER 31, 2008 AND 2007




2008
                                                  
                                                  
                                                  2007REVENUE
      - SALES
                                                  
                                                  $
                                                  11,414,687
                                                  
                                                  
                                                  $
                                                  8,961,990TOTAL
      REVENUE
                                                  
                                                  
                                                  11,414,687
                                                  
                                                  
                                                  
                                                  8,961,990TOTAL
      COST OF GOODS SOLD
                                                  
                                                  
                                                  7,888,205
                                                  
                                                  
                                                  
                                                  5,627,081GROSS
      PROFIT
                                                  
                                                  
                                                  3,526,482
                                                  
                                                  
                                                  
                                                  3,334,909OPERATING
      EXPENSESGeneral
      and administrative expenses ($4,417,917 noncash compensation for year
      ended December 31, 2008)
                                                  
                                                  
                                                  6,332,498
                                                  
                                                  
                                                  
                                                  1,581,604Professional
      Fees
                                                  
                                                  
                                                  353,974
                                                  
                                                  
                                                  
                                                  218,143Depreciation
                                                  
                                                  
                                                  80,063
                                                  
                                                  
                                                  
                                                  78,711Total
      Operating Expenses
                                                  
                                                  
                                                  6,766,535
                                                  
                                                  
                                                  
                                                  1,878,458INCOME
      (LOSS) BEFORE OTHER INCOME (EXPENSE)
                                                  
                                                  
                                                  (3,240,053
                                                  )
                                                  
                                                  
                                                  1,456,451OTHER
      INCOME (EXPENSE)Expiration
      of warrants
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  50,000Interest
      income
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  899Interest
      expense
                                                  
                                                  
                                                  (211,575
                                                  )
                                                  
                                                  
                                                  (250,686
                                                  )Loss
      on abandonment-deposit
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (30,000
                                                  )(211,575
                                                  )
                                                  
                                                  
                                                  (229,787
                                                  )INCOME
      (LOSS) BEFORE PROVISION FOR INCOME TAXES
                                                  
                                                  
                                                  (3,451,628
                                                  )
                                                  
                                                  
                                                  1,226,664Provision
      for income taxes
                                                  
                                                  
                                                  369,254
                                                  
                                                  
                                                  
                                                  455,559NET
      INCOME (LOSS) APPLICABLE TO COMMON SHARES
                                                  
                                                  $
                                                  (3,820,882
                                                  )
                                                  
                                                  $
                                                  771,105NET
      INCOME (LOSS) PER BASIC SHARES
                                                  
                                                  $
                                                  ($0.11
                                                  )
                                                  
                                                  $
                                                  0.02NET
      INCOME (LOSS) PER DILUTED SHARES
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  0.00WEIGHTED
      AVERAGE NUMBER OF BASIC COMMONSHARES
      OUTSTANDING
                                                  
                                                  
                                                  33,324,691
                                                  
                                                  
                                                  
                                                  33,324,691WEIGHTED
      AVERAGE NUMBER OF FULLY DILUTEDCOMMON
      SHARES OUTSTANDING
                                                  
                                                  
                                                  8,885,421,556
                                                  
                                                  
                                                  
                                                  8,999,309,761






5




PRECISION
AEROSPACE COMPONENTS, INC.


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY (RESTATED)


FOR THE YEARS
ENDED DECEMBER 31, 2008 AND 2007




AdditionalPreferred
      Stock-Series A
                          
                          
                          Preferred
      Stock-Series B
                          
                          
                          Common
      Stock
                          
                          
                          paid-in
                          
                          
                          Accumulated
                          
                          
                          TreasuryShares
                          
                          
                          Amount
                          
                          
                          Shares
                          
                          
                          Amount
                          
                          
                          Shares
                          
                          
                          Amount
                          
                          
                          Capital
                          
                          
                          (Deficit)
                          
                          
                          Stock
                          
                          
                          TotalBalance,
      January 1, 2007
                          
                          
                          -
                          
                          
                          $
                          -
                          
                          
                          
                          -
                          
                          
                          $
                          -
                          
                          
                          
                          33,324,691
                          
                          
                          $
                          33,325
                          
                          
                          $
                          2,892,502
                          
                          
                          $
                          (2,899,292
                          )
                          
                          $
                          -
                          
                          
                          $
                          26,535Net
      Income
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          771,105
                          
                          
                          
                          -
                          
                          
                          
                          771,105Balance,
      December 31, 2007
                          
                          
                          -
                          
                          
                          $
                          -
                          
                          
                          
                          -
                          
                          
                          $
                          -
                          
                          
                          
                          33,324,691
                          
                          
                          $
                          33,325
                          
                          
                          $
                          2,892,502
                          
                          
                          $
                          (2,128,187
                          )
                          
                          $
                          -
                          
                          
                          $
                          797,640Net
      (Loss)
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (3,820,882
                          )
                          
                          
                          -
                          
                          
                          
                          (3,820,882
                          )Balance,
      December 31, 2008
                          
                          
                          -
                          
                          
                          $
                          -
                          
                          
                          
                          -
                          
                          
                          $
                          -
                          
                          
                          
                          33,324,691
                          
                          
                          $
                          33,325
                          
                          
                          $
                          2,892,502
                          
                          
                          $
                          (5,949,069
                          )
                          
                          $
                          -
                          
                          
                          $
                          (3,023,242
                          )
































6










PRECISION
AEROSPACE COMPONENTS, INC.
 CONSOLIDATED
STATEMENT OF TEMPORARY STOCKHOLDERS'
EQUITY  (RESTATED)
 FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007




Additional
                              
                              
                              Additional
                              
                              
                              Additionalpaid-in
                              
                              
                              paid-in
                              
                              
                              paid-inPreferred
      Stock-Series A
                              
                              
                              Preferred
      Stock-Series B
                              
                              
                              Capital
                              
                              
                              Capital
                              
                              
                              Capital
                              
                              
                              PrepaidShares
                              
                              
                              Amount
                              
                              
                              Shares
                              
                              
                              Amount
                              
                              
                              Warrants
                              
                              
                              Options
                              
                              
                              Preferred
      Stock
                              
                              
                              Services
                              
                              
                              TotalBalance,
      January 1, 2007
                              
                              
                              -
                              
                              
                              $
                              -
                              
                              
                              
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              -Transfer
      from Liability
                              
                              
                              5,274,152
                              
                              
                              
                              5,274
                              
                              
                              
                              2,811,000
                              
                              
                              
                              2,811
                              
                              
                              
                              843,272
                              
                              
                              
                              -
                              
                              
                              
                              2,916,173
                              
                              
                              
                              -
                              
                              
                              
                              3,767,530Balances,
      December 31, 2007
                              
                              
                              5,274,152
                              
                              
                              $
                              5,274
                              
                              
                              
                              2,811,000
                              
                              
                              $
                              2,811
                              
                              
                              $
                              843,272
                              
                              
                              $
                              -
                              
                              
                              $
                              2,916,173
                              
                              
                              $
                              -
                              
                              
                              $
                              3,767,530Stock
      Based Compensation
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              4,417,917
                              
                              
                              
                              
                              
                              
                              
                              -
                              
                              
                              
                              4,417,917Balances,
      December 31, 2008
                              
                              
                              5,274,152
                              
                              
                              $
                              5,274
                              
                              
                              
                              2,811,000
                              
                              
                              $
                              2,811
                              
                              
                              $
                              843,272
                              
                              
                              $
                              4,417,917
                              
                              
                              $
                              2,916,173
                              
                              
                              $
                              -
                              
                              
                              $
                              8,185,447


































7




PRECISION
AEROSPACE COMPONENTS, INC.
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007




2008
                                    
                                    
                                    2007CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      (loss) income
                                    
                                    $
                                    (3,820,882
                                    )
                                    
                                    $
                                    771,105Adjustments
      to reconcile net income (loss) to net cash(used
      in) operating activities:Depreciation
      and amortization
                                    
                                    
                                    80,063
                                    
                                    
                                    
                                    78,711Stock
      Based Compensation
                                    
                                    
                                    4,417,917
                                    
                                    
                                    
                                    -Changes
      in assets and liabilities:Decrease
      (increase) in assetsDecrease
      (increase) in accounts receivable
                                    
                                    
                                    (36,572
                                    )
                                    
                                    
                                    (52,754
                                    )Decrease
      (increase) in inventory
                                    
                                    
                                    (706,915
                                    )
                                    
                                    
                                    (376,149
                                    )Decrease
      (increase) in prepaid expenses
                                    
                                    
                                    (39,693
                                    )
                                    
                                    
                                    62,926Decrease
      (increase) in security deposits
                                    
                                    
                                    (12,000
                                    )
                                    
                                    
                                    117,000Decrease
      (increase) in prepaid income taxes
                                    
                                    
                                    (98,616
                                    )
                                    
                                    
                                    -Increase
      (decrease) in liabilitiesIncrease
      (decrease)  in accounts payable and accrued
    expenses
                                    
                                    
                                    (354,096
                                    )
                                    
                                    
                                    (861,433
                                    )Increase
      (decrease) in income taxes payable
                                    
                                    
                                    (363,356
                                    )
                                    
                                    
                                    328,517Increase
      (decrease) in redeemable warrants
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (50,000
                                    )Total
      adjustments
                                    
                                    
                                    2,886,732
                                    
                                    
                                    
                                    (753,182
                                    )Net
      cash provided by (used in) operating activities
                                    
                                    
                                    (934,150
                                    )
                                    
                                    
                                    17,923CASH
      FLOWS FROM INVESTING ACTIVITIES(Purchase)
      of property and equipment
                                    
                                    
                                    (4,116
                                    )
                                    
                                    
                                    (17,774
                                    )Net
      cash (used in) investing activities
                                    
                                    
                                    (4,116
                                    )
                                    
                                    
                                    (17,774
                                    )CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      (payment) of convertible note payable
                                    
                                    
                                    (1,000,000
                                    )
                                    
                                    
                                    -Proceeds
      (payment) of S/T loan payable Greater Bay
                                    
                                    
                                    (387,466
                                    )
                                    
                                    
                                    387,466Proceeds
      (payment) from loan payable IDC Bank
                                    
                                    
                                    2,722,506
                                    
                                    
                                    
                                    -Proceeds
      (payment) on subordinated note
                                    
                                    
                                    (375,000
                                    )
                                    
                                    
                                    (300,000
                                    )Net
      cash provided by financing activities
                                    
                                    
                                    960,040
                                    
                                    
                                    
                                    87,466INCREASE
      (DECREASE) IN CASH AND CASH EQUIVALENTS
                                    
                                    
                                    21,774
                                    
                                    
                                    
                                    87,615CASH
      AND CASH EQUIVALENTS - BEGINNING OF PERIOD
                                    
                                    
                                    154,709
                                    
                                    
                                    
                                    67,094CASH
      AND CASH EQUIVALENTS - END OF PERIOD
                                    
                                    $
                                    176,483
                                    
                                    
                                    $
                                    154,709SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      paid during the period for:Interest
      paid
                                    
                                    $
                                    211,575
                                    
                                    
                                    $
                                    250,686Income
      taxes paid
                                    
                                    $
                                    460,584
                                    
                                    
                                    $
                                    1,255,398SUPPLEMENTAL
      SCHEDULE OF NONCASH ACTIVITY:Issuance
      of options for stock based compensation
                                    
                                    $
                                    4,417,917
                                    
                                    
                                    $
                                    -




8






1.
HISTORY AND NATURE OF BUSINESS
 
 Precision
Aerospace Components (Precision Aerospace or the “Company”) was previously known
as Jordan 1 Holdings Company (“Jordan 1”) and was incorporated in Delaware on
December 28, 2005.  Jordan 1 is the successor to Gasel Transportation
Lines, Inc. ("Gasel"), an Ohio corporation that was organized under the laws of
the State of Ohio on January 27, 1988.
 
 Gasel was
a trucking company that filed for bankruptcy in the Southern District of Ohio,
Eastern Division, in May of 2003.  On December 12, 2005, a final plan
of reorganization was approved by the court and the bankruptcy proceeding was
dismissed.
 
 On
December 30, 2005, Gasel entered into a private sale of stock under a Stock
Purchase Agreement with Venture Fund I, Inc., a Nevada corporation.
 
 Subsequent
to December 30, 2005, Jordan 1 did not engage in any business activity until
July 20, 2006 when it entered into an exchange agreement (the “Exchange
Agreement”) pursuant to which the Company acquired all of the equity of Delaware
Fastener Acquisition Corp., a Delaware corporation (“DFAC”), pursuant to an
exchange agreement with the stockholders of DFAC.  Contemporaneously,
DFAC acquired the assets, subject to certain liabilities, of Freundlich Supply
Company, Inc. (“Freundlich Supply”), pursuant to an asset purchase agreement
(the “Asset Purchase Agreement”) dated May 24, 2006 among DFAC, Freundlich
Supply, and Michael Freundlich.  The purchase of the assets was
financed by the proceeds from the sale by the Company of its securities pursuant
to a securities purchase agreement (the “Securities Purchase
Agreement”).  As a result of the Exchange Agreement, DFAC became a
wholly-owned subsidiary of the Company.  Upon completion of the
foregoing transactions, the Company changed its name to Precision Aerospace
Components, Inc. and DFAC changed its name to Freundlich Supply Company, Inc.
(“Freundlich”)  The Company has received additional financing and has
acquired assets which have a long history of profitable
operations.  However, although the Company after the acquisition of
the Freundlich Supply assets can not recognize the accumulated earnings which
resulted from those assets prior to their sale, the Company is required to
continue to recognize the accumulated deficit of $2,977,934 which it had as of
December 31, 2005.  This deficit is the result of its prior and now
discontinued operations.  The Company will not derive any tax benefit
from this accumulated deficit.
 
 The
Company’s present sole operating subsidiary and sole source of revenues is
Freundlich.
 
 Freundlich
is a stocking distributor of aerospace quality, internally-threaded
fasteners.  The organization from which the operating assets were
acquired was founded in 1938 and had been operating in its present business line
since 1940.  The Company distributes high-quality,
domestically-manufactured nut products that are used primarily for aerospace and
military applications and for industrial/commercial applications that require a
high level of certified and assured quality.  The Company’s products
are manufactured, by others, to exacting specifications and are made from raw
materials that provide strength and reliability required for aerospace
applications.
 
 Freundlich
is a niche player in the North American aerospace fastener
industry.  The Company currently focuses exclusively on aero-space
quality nut products, serving as an authorized stocking distributor for seven of
the premier nut manufacturers in the United States.
 
 Freundlich
is a one-stop source for standard, self-locking, semi-special and special nuts
manufactured to several military, aerospace and equivalent
specifications.  The Company maintains a large inventory of more than
6,400 SKUs comprised of more than 21 million parts of premium quality, brand
name nut products.  Management believes that the Company's
demonstrated ability to immediately fulfill a high percentage (approximately 50
percent) of customer orders from stock-on-hand gives Freundlich a distinct
competitive advantage in the marketplace.  The Company sells its
products pursuant to written purchase orders it receives from its
customers.  All products are shipped via common carrier.
    9
    2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Principles
of Consolidation and Basis of Presentation
 
 The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiary.  All inter-company accounts have been
eliminated.
 
 Cash
and Cash Equivalents
 
 For the
purposes of the consolidated statements of cash flow, the Company considers all
highly liquid debt instruments purchased with maturity of three months or less
to be cash equivalents.
 
 Accounts
Receivable and Allowance for Doubtful Accounts
 
 Accounts
receivable are recorded net of reserves for sales returns and allowances and net
of provisions for doubtful accounts.  The Company records an allowance
for doubtful accounts to allow for any amounts that may not be
recoverable.  The amount of the allowance is based on an analysis of
the Company’s prior collection experience, customer credit worthiness, and
current economic trends.  Based on management’s review of accounts
receivable, no allowance for doubtful accounts is considered
necessary.  The Company determines receivables to be past due based on
the payment terms of original invoices.  Interest is not typically
charged on past due receivables.
 
 Allowance
for doubtful accounts was $0 for December 31, 2008 and 2007,
respectively.
 
 Inventory
 
 Inventory
is stated at the lower of cost or market, utilizing the specific lot
identification method (except as noted subsequently).  The Company is
a distributor of goods that retain their value and may be purchased by its
customers for an extended period of time.  The Company has adopted the
convention that any Inventory item for which the Company has not had any
transactions within the past five years shall be reduced to a zero
value.  Inventory consists of finished goods for resale at December
31, 2008. The Company has not established a valuation allowance for
inventory.  For the period ending January 1-December 31, 2008, the
Company had $148,750.33 in inventory which became over five years without sale
during the period and has been reduced to zero value. For the period ending
January 1-December 31, 2007, the Company had $130,625 in inventory which became
over five years without sale during the period and has been reduced to zero
value.
 
 
 Property and
Equipment
 
 Property
and equipment are stated at cost less accumulated depreciation and
amortization.  The Company computes depreciation and amortization
using the straight-line method over the estimated useful lives of the assets
acquired as follows:
  Warehouse
      equipment
                    5 yearsLeasehold
      improvements
                    5 -
      39 years **Computers
                    5 yearsFurniture
      and fixtures
                    7 yearsEquipment
                    5 years






**
Shorter of life or lease term.








10






2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 
 Property
and Equipment (Continued)
 
 The
carrying amount of all long-lived assets is evaluated periodically to determine
whether adjustment to the useful life or to the unamortized balance is
warranted.  Such evaluation is based principally on the expected
utilization of the long-lived assets.
 
 Goodwill
and Other Intangible Assets
 
 In June
2001, the Financial Accounting Standards Board (“FASB”) issued Statement No. 142
“Goodwill and Other Intangible Assets”.  This statement addresses
financial accounting and reporting for acquired goodwill and other intangible
assets and supersedes APB Opinion No. 17, “Intangible Assets”.  It
addresses how intangible assets that are acquired individually or with a group
of other assets (but not those acquired in a business combination) should be
accounted for in financial statements upon their acquisition.  This
Statement also addresses how goodwill and other intangible assets should be
accounted for after they have been initially recognized in the financial
statements.  In conjunction with the purchase of Freundlich assets and
acquisition of DFAS in July 2006 goodwill is recognized at
$2,221,744.  Impairment, if any, is based on the excess of the
carrying amount over the fair value of those assets. The Company tests for
impairment on an annual basis.  The Company has determined that no
impairment is needed at December 31, 2008.
 
 Income
Taxes
 
 The
Company accounts for income taxes in accordance with Statements of Financial
Accounting Standards No. 109, “Accounting for Income Taxes,” which requires an
asset and liability approach to financial accounting and reporting for income
taxes.  Deferred income taxes and liabilities are computed annually
for differences between the financial statement and the tax basis of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income.  Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized.
 
 Earnings
(Loss) per Common Share
 
 Basic
earnings (loss) per share is calculated by dividing net income attributable to
common stockholders by the weighted average number of outstanding common shares
during the year.  Basic earnings (loss) per share exclude any dilutive
effects of options, warrants and other stock-based compensation, which are
included in diluted earnings per share.
 
 Revenue
Recognition
 
 Revenues
are recognized when title, ownership and risk of loss pass to the
customer.  A sale occurs at the time of shipment from the Company’s
warehouse in Staten Island, New York, as the terms of the Company’s sales are
FOB shipping point.
 
 Estimates
 
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods.  Actual results could differ from those
estimates.
 
 
 11
 
  2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 Fair
Value of Financial Instruments
 
 The
carrying amounts reported in the consolidated balance sheet for cash,
certificates of deposit, accounts receivable, accounts payable and accrued
liabilities approximate fair value because of the immediate or short-term
maturity of the financial instruments.
 
 The
Company believes that its indebtedness approximates fair value based on current
yields for debt instruments with similar terms.
 
 Concentration
of Credit Risk
 
 Sales to
the United States Department of Defense (“DOD”) represented approximately 48
percent of our total sales.  No other customer accounted for greater
than 10 percent of our total sales and the Company has no substantial
concentrations of credit risk in its trade receivables.
 
 Gross Profit
 
 The
Company determines its gross profit by subtracting cost of goods sold from
sales.  Cost of goods sold includes the cost of the products sold and
excludes costs for selling, general and administrative expenses, which are
reported separately in the income statement.
 
 Shipping and Handling Costs and
Fees
 
 The
Company records freight cost on merchandise purchased to cost of
goods.
 
 Recent Accounting
Pronouncements
 
 In
February 2006, the FASB issued SFAS No. 155, “Accounting for Certain
Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and
140.” SFAS No. 155 resolves issues addressed in SFAS No. 133
Implementation Issue No. D1, “Application of Statement 133 to Beneficial
Interests in Securitized Financial Assets,” and permits fair value remeasurement
for any hybrid financial instrument that contains an embedded derivative that
otherwise would require bifurcation, clarifies which interest-only strips and
principal-only strips are not subject to the requirements of SFAS No. 133,
establishes a requirement to evaluate interests in securitized financial assets
to identify interests that are freestanding derivatives or that are hybrid
financial instruments that contain an embedded derivative requiring bifurcation,
clarifies that concentrations of credit risk in the form of subordination are
not embedded derivatives and amends SFAS No. 140 to eliminate the
prohibition on a qualifying special-purpose entity from holding a derivative
financial instrument that pertains to a beneficial interest other than another
derivative financial instrument. SFAS No. 155 is effective for all
financial instruments acquired or issued after the beginning of the first fiscal
year that began after September 15, 2006. The implementation of this
pronouncement had no impact on the Company’s financial position or results of
operations.
 
 In
March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of
Financial Assets, an amendment of FASB Statement No. 140.” SFAS
No. 156 requires an entity to recognize a servicing asset or liability each
time it undertakes an obligation to service a financial asset by entering into a
servicing contract under a transfer of the servicer’s financial assets that
meets the requirements for sale accounting, a transfer of the servicer’s
financial assets to a qualified special-purpose entity in a guaranteed mortgage
securitization in which the transferor retains all of the resulting securities
and classifies them as either available-for-sale or trading securities in
accordance with SFAS No. 115, “Accounting for Certain Investments in Debt
and Equity Securities” and an acquisition or assumption of an obligation to
service a financial asset that does not relate to financial assets of the
servicer or its consolidated affiliates. Additionally, SFAS No. 156
requires all separately recognized servicing assets and servicing liabilities to
be initially measured at fair value, permits an entity to choose either the use
of an
   12
   2.
Summary of Significant Accounting Policies (CONTINUED)
 
 Recent
Accounting Pronouncements (Continued)
 
 amortization
or fair value method for subsequent measurements, permits at initial adoption a
one-time reclassification of available-for-sale securities to trading securities
by entities with recognized servicing rights and requires separate presentation
of servicing assets and liabilities subsequently measured at fair value and
additional disclosures for all separately recognized servicing assets and
liabilities. SFAS No. 156 is effective for transactions entered into after
the beginning of the first fiscal year that began after September 15,
2006.  The implementation of this pronouncement had no impact on the
Company’s financial position or results of operations.
 
 In
September 2006, the FASB issued SFAS No. 157 “Fair Value
Measurements,” which provides a definition of fair value, establishes a
framework for measuring fair value and requires expanded disclosures about fair
value measurements. SFAS No. 157 is effective for financial statements
issued for fiscal years beginning after November 15, 2007 and interim
periods within those fiscal years.
 
 The
implementation of this pronouncement had no impact on the Company’s financial
position or results of operations and Management believes this will have no
material impact on Company’s financial condition and results of
operations.
 
 In
September 2006, the FASB issued SFAS No. 158 “Employers’ Accounting
for Defined Benefit Pension and Other Postretirement Plans”, which amends
SFAS No. 87 “Employers’ Accounting for Pensions”
(SFAS No. 87), SFAS No. 88 “Employers’ Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits” (SFAS No. 88), SFAS No. 106
“Employers’ Accounting for Postretirement Benefits Other Than Pensions”
(SFAS No. 106), and SFAS No. 132R “Employers’ Disclosures
about Pensions and Other Postretirement Benefits (revised 2003)”
(SFAS No. 132R). This Statement requires companies to recognize an
asset or liability for the overfunded or underfunded status of their benefit
plans in their financial statements. SFAS No. 158 also requires the
measurement date for plan assets and liabilities to coincide with the sponsor’s
year end. The standard provides two transition alternatives related to the
change in measurement date provisions. The recognition of an asset and liability
related to the funded status provision is effective for fiscal year ending after
December 15, 2006 and the change in measurement date provisions is
effective for fiscal years ending after December 15, 2008.  The
Company has no defined benefit pension plans at this time and therefore this
pronouncement has no effect on the Company.
 
 In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Liabilities, including an amendment of FASB Statement No.
115” (“SFAS No. 159”). SFAS No. 159 permits entities to choose, at specified
election dates, to measure many financial instruments and certain other items at
fair value that are not currently required to be measured at fair value.
Unrealized gains and losses shall be reported on items for which the fair value
option has been elected in earnings at each subsequent reporting date. SFAS No.
159 is effective for fiscal years beginning after November 15, 2007. Early
adoption is permitted as of the beginning of a fiscal year that begins on or
before November 15, 2007, provided the entity also elects to apply the
provisions of SFAS No. 157 “Fair Value Measurements” (“SFAS No.
157”).  The implementation of this pronouncement had no impact on the
Company’s financial position or results of operations and Management believes
this will have no material impact on Company’s financial condition and results
of operations.
    13
   2.
Summary of Significant Accounting Policies (CONTINUED)
 
 Recent
Accounting Pronouncements (Continued)
 
 In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations” (SFAS 141R). The purpose of issuing the
statement is to replace current guidance in SFAS 141 to better represent
the economic value of a business combination transaction. The changes to be
effected with SFAS141R from the current guidance include,
but are not limited to: (1) acquisition costs will be recognized separately
from the acquisition; (2) known contractual contingencies at the time of
the acquisition will be considered part of the liabilities acquired measured attheir fair value; all other contingencies will be part of
the liabilities acquired measured at their fair value only if it is more likely
than not that they meet the definition of a liability; (3) contingent
consideration based on the outcome of future events will be recognized and
measured at the time of the acquisition; (4) business combinations achieved
in stages (step acquisitions) will need to recognize the identifiable assets and
liabilities, as well as noncontrolling interests, in the acquiree, at the full
amounts of their fair values; and (5) a bargain purchase (defined as a
business combination in which the total acquisition-date fair value of the
identifiable net assets acquired exceeds the fair value of the consideration
transferred plus any noncontrolling interest in the acquiree) will require that
excess to be recognized as a gain attributable to the acquirer. The Company is
reviewing the impact of SFAS but believes that, at the least, it will add to the
expense of certain acquisitions and may adversely affect the perceived
performance of the Company subsequent to a combination compared to present
practice and could impact relationships with acquired
companies.  SFAS141R is effective for the
Company beginning January 1, 2009.
 
 In
December 2007, the FASB issued SFAS No. 160, "Non-controlling Interests in
Consolidated Financial Statements: an amendment of ARB No. 51" ("SFAS
No. 160"). SFAS No. 160 replaces the term minority interests with the
newly-defined term of non-controlling interests and establishes this line item
as an element of stockholders’ equity, separate from the parent’s equity. SFAS
No. 160 also includes expanded disclosure requirements regarding the
interests of the parent and its non-controlling interest. The Company is
reviewing the provisions of SFAS No. 160, which is effective for the
Company January 1, 2009.  The Company does not presently have any
“non-controlling interests” and consequently this new accounting standard will
not presently have an impact on the Company’s financial statements and is not
anticipated to have a future impact.
  In March
2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities: an amendment of FASB Statement No. 133"
("SFAS No. 161"). SFAS No. 161 changes the disclosure requirements for
derivative instruments and hedging activities. SFAS 161 is effective the first
quarter of fiscal 2010.  The Company is reviewing the provisions of
SFAS No. 161. The Company does not currently have any such instruments or
engage in such activities, and consequently does not anticipate that this new
accounting standard will have an impact on the Company’s Financial
Statements.
 
 In May
2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles" (SFAS No. 162). SFAS No. 162 identifies the sources of
accounting principles and the framework for selecting principles used in the
preparation of financial statements.  SFAS No. 162 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". The effective date of SFAS No.
162 has not yet been determined.  The implementation of this standard will
not have a material impact on the Company’s Financial Statements.
 
 In
December 2008, the FASB issued FSP FAS 132(R)-1, Employers’ Disclosures
about Postretirement Benefit Plan Assets . FSP FAS 132(R)-1 requires more
detailed disclosures about employers’ plan assets in a defined benefit pension
or other postretirement plan, including employers’ investment strategies, major
categories of plan assets, concentrations of risk within plan assets, and inputs
and valuation techniques used to measure the fair value of plan assets. FSP FAS
132(R)-1 also requires, for fair value measurements using significant
unobservable inputs (Level 3), disclosure of the effect of the measurements on
changes in plan assets for the period. The disclosures about plan
 
 
 
 14
 
 
 2.
Summary of Significant Accounting Policies (CONTINUED)
 
 Recent
Accounting Pronouncements (Continued)
 
 assets
required by FSP FAS 132(R)-1 must be provided for fiscal years ending after
December 15, 2009. The Company has no such plans and has no present intention of
having such plans.  Even if it had such a plan, this pronouncement is
only disclosure-related, and it would not have an impact on the financial
position and results of operations, but would affect the disclosures within our
financial statements.
 
 
 3.
PROPERTY AND EQUIPMENT
 
  2008
                        
                        
                        2007Furniture
      and fixtures
                        
                        $
                        2,392
                        
                        
                        $
                        2,392Equipment
      and other
                        
                        
                        358,300
                        
                        
                        
                        354,184Leasehold
      improvements
                        
                        
                        6,487
                        
                        
                        
                        6,487367,179
                        
                        
                        
                        363,063Less
      accumated depreciation and amortization
                        
                        
                        (182,545
                        )
                        
                        
                        (102,481
                        )Property
      and equipment, net
                        
                        $
                        184,634
                        
                        
                        $
                        260,582
   4.
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
  Accounts
payable and accrued expenses as of December 31, 2008 and 2007 consist of the
following:
   2008
                        
                        
                        2007Accounts
      payable
                        
                        $
                        237,390
                        
                        
                        
                        525,407Accrued
      expenses
                        
                        
                        15,140
                        
                        
                        
                        81,220Total
                        
                        $
                        252,530
                        
                        
                        
                        606,627
   5.
COMMITMENTS AND CONTINGENCIES
 
 The
Company leases office space for its operations under a triple net lease which
expires July 20, 2013.  The lease has an option for
renewal.  The rental rate is $12,400 per month.  The Company
can terminate the lease upon six months notice.
 
 On March
6, 2008, the Company guaranteed the performance of Freundlich in connection with
the agreement, entered into on the same date, between Freundlich and Israel
Discount Bank of New York (the “Agreement”).  The Agreement, which has
a maturity date of April 30, 2009, established a revolving funding facility
which allows Freundlich to receive up to three (3) million
dollars.  The funds will be made available to Freundlich in accordance
with an advance formula which allows for the payment of up to Eighty (80)
per-cent of eligible accounts and fifty (50) per-cent of eligible inventory, up
to a maximum inventory advance amount of two million five hundred thousand
dollars ($2,500,000).  Eligible accounts are those domestic accounts
not outstanding for more than one hundred twenty (120) days and eligible
inventory is inventory as determined by the bank, presently that which has had
sales within the
     15








5.
COMMITMENTS AND CONTINGENCIES ( CONTINUED)
 
 preceding
sixty (60) months.  The daily rate on the outstanding balance will be,
at the Company’s option, the prime rate plus one (1) per cent with a minimum of
four and one quarter (4.25) per-cent or LIBOR plus three and three quarters
(3.75) per cent.  The balance is secured by a first lien position on
all of Freundlich’s assets.  The Agreement replaced the Company’s
existing facility with Greater Bay Business Funding.
 
 
 6.
INCOME TAXES
  Income
taxes are provided for the tax effects of transactions reported in the financial
statements and consist of taxes currently due.
 
 Significant
components of the income tax provision for the years ended December 31, 2008 and
2007 are as follows:
   2008
                          
                          
                          2007Federal
                          
                          $
                          234,438
                          
                          
                          $
                          232,163State
                          
                          
                          63,458
                          
                          
                          
                          106,379City
                          
                          
                          71,358
                          
                          
                          
                          117,017Total
      Current income tax
                          
                          $
                          369,254
                          
                          
                          $
                          455,559






Although
the Company has a stockholders' equity deficit of $5,949,069 there are no net
operating losses available to be used against taxable income.
 
 
 7.
EARNINGS (LOSS) PER COMMON SHARE AND COMMON EQUIVALENT SHARE
 
 Earnings
(loss) per common and common equivalent share were computed by dividing net
income (loss) by the weighted average number of shares of common stock
outstanding during the period.  At December 31, 2008 and 2007, the
number of common shares was increased by the number of shares issuable upon the
exercise of outstanding stock options and warrants and the conversion of Series
A and Series B Preferred Stock and, in 2007, the convertible note which was paid
off without conversion in 2008.  In July 31, 2007 the conversion
ratios of the Series A Preferred stock and the convertible note were
adjusted.
 
 The
following data shows the amounts used in computing earnings per share (EPS) and
the effect on income and the weighted average number of shares of dilutive
potential common stock.






16








December
      31,2008
                                                    
                                                    
                                                    2007Net
      income (loss) available tocommon
      stockholders usedin
      basic EPS and diluted EPS
                                                    
                                                    $
                                                    (3,820,882
                                                    )
                                                    
                                                    $
                                                    771,105Weighted
      average number ofcommon
      shares used in basic EPS
                                                    
                                                    
                                                    33,324,691
                                                    
                                                    
                                                    
                                                    33,324,691Effect
      of dilutive securities:Weighted average number ofStock
      options and warrants,conversion of preferrred shares and note
                                                    
                                                    
                                                    8,852,096,865
                                                    
                                                    
                                                    
                                                    8,965,985,070Weighted
      average number of commonshares
      and dilutive potential commonstock
      used in diluted EPS
                                                    
                                                    
                                                    8,885,421,556
                                                    
                                                    
                                                    
                                                    8,999,309,761


























17






7.
EARNINGS (LOSS) PER COMMON SHARE AND COMMON EQUIVALENT SHARE
(CONTINUED)




Fully diluted calculation as of December
      31:
                                                
                                                2008
                                                
                                                
                                                2007Common
      Stock
                                                
                                                
                                                33,324,691
                                                
                                                
                                                
                                                33,324,691Series
      A convertible pfd stock (5,274,152 shares outstanding) each converts to
      777 shares.
                                                
                                                
                                                4,098,016,104
                                                
                                                
                                                
                                                4,098,016,104Series
      B convertible pfd stock (2,811,000 shares outstanding) each converts
      to 300 shares; (not
      convertible until after 150:1 reverse split)
                                                
                                                
                                                843,300,000
                                                
                                                
                                                
                                                843,300,000Convertible
      Note - paid off March 31, 2008
                                                
                                                
                                                -
                                                
                                                
                                                
                                                862,068,966Options
      issued - August 2, 2002
                                                
                                                
                                                100,000
                                                
                                                
                                                
                                                100,000Options
      issued - Februrary 28, 2008
                                                
                                                
                                                635,005,669
                                                
                                                
                                                
                                                -Options
      issued - December 16, 2008
                                                
                                                
                                                1,950,000
                                                
                                                
                                                
                                                -Warrants
      - Eagle
                                                
                                                
                                                200,000
                                                
                                                
                                                
                                                200,000Common
      Stock Purchase Warrant A
                                                
                                                
                                                1,581,150,000
                                                
                                                
                                                
                                                1,581,150,000Common
      Stock Purchase Warrant B
                                                
                                                
                                                1,581,150,000
                                                
                                                
                                                
                                                1,581,150,000Fully
      Diluted
                                                
                                                
                                                8,774,196,464
                                                
                                                
                                                
                                                8,999,309,761






8.
LONG-TERM DEBT AND LINE OF CREDIT
 
 Long-term
debt as of December 31, 2008 and 2007 consists of the
following:






2008
                      
                      
                      2007$1,000,000
      five year convertible unsecured term loan at a rate which was
      14%  on December 31, 2007, paid off in 2008.
                      
                      $
                      -
                      
                      
                      $
                      1,000,000$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% on December 31, 2008
      and 2007).
                      
                      
                      75,000
                      
                      
                      
                      450,000Total
      debt
                      
                      
                      75,000
                      
                      
                      
                      1,450,000Less
      current portion
                      
                      
                      (75,000
                      )
                      
                      
                      (300,000
                      )Long-term
      portion
                      
                      $
                      -
                      
                      
                      $
                      1,150,000










18








8.
LONG-TERM DEBT AND LINE OF CREDIT (CONTINUED)
 
 
 Convertible
Note
  On July
20, 2006, the Company received $1,000,000 in return for issuing a $1,000,000
convertible note due July 20, 2011.  The note had an interest rate of
3% p.a. through December 2, 2006, and 12% p.a. through January 30, 2007, and
thereafter to 14% p.a. through maturity.  The note also had a
conversion feature.  The note had an original conversion price of
$0.002 per share, subject to adjustment for failing to meet specific earnings in
2006 and 2007.  On July 31, 2007, the Company and the note holder
agreed to a onetime adjustment of the conversion price to $0.00116 per
share.  If the note could have been fully converted, after the
adjustment the note could have been converted to 862,068,966
shares.
  The note
was paid in full without any conversion on March 31, 2008.
 
 
 
 Line of Credit
 
 $3,000,000
available to draw revolving funding facility.  Availability of payment
of up to eighty (80) per-cent of eligible accounts and fifty (50) per-cent of
eligible inventory, up to a maximum inventory advance amount of two million five
hundred thousand dollars ($2,500,000).Eligible accounts are
those domestic accounts not outstanding for more than one hundred twenty (120)
days and eligible inventory is inventory as determined by the bank, presently
that which has had sales within the preceding sixty (60) months.  The
daily rate on the outstanding balance will be, at the Company’s option, the
prime rate plus one (1) per cent, with a minimum of four and one quarter (4.25)
percent or LIBOR plus three and three quarters (3.75) per cent.  The
balance is secured by a first lien position on all of the Company’s
assets.  The facility is due as of April 30, 2009.  The
Company expects that the facility will be renewed. As of December 31, 2008,
$2,722,506 was outstanding and $178,627 was available to draw.  As of
December 31, 2007 $387,466 was outstanding, and $302,694 was available to draw
under the prior facility.
 
 
 9.
ACQUISITION
 
 On July
20, 2006, the Company acquired all the assets and certain liabilities of
Freundlich Supply, a New York corporation which operated as a distributor of
fasteners to the aerospace industry.  The purchase price totaled
$6,066,930, consisting of the original purchase price of $5,000,000 plus
$263,943 working capital adjustment and liabilities assumed of
$802,987.  The asset purchase agreement provided that the purchase
price would be adjusted to the extent of the Seller’s net working capital
(defined as the excess of accounts receivable, inventory and prepaid expenses
over accounts payable and accrued expenses) exceeded, or was less than,
$2,280,000 at closing.  Net working capital totaled $2,543,943 at
closing, and accordingly, the purchase price was increased by
$263,943.
 
 The
acquisition was recorded by allocating the cost of the assets acquired and
liabilities assumed based upon their estimated fair value at the acquisition
date.  The excess of the cost of the acquisition over the net of the
amounts assigned to the fair value of the assets acquired and the liabilities
assumed was recorded as goodwill.












19






9.
ACQUISITION (CONTINUED)
 
 The fair
value of the assets and liabilities was determined and the purchase price was
allocated as follows:




Accounts
      receivable
                    
                    $
                    1,113,686Inventory
                    
                    
                    2,521,153Prepaid
      expenses
                    
                    
                    9,946Deposits
                    
                    
                    400Furniture
      and equipment
                    
                    
                    200,000Goodwill
                    
                    
                    2,221,745Allocation
      of Purchase Price
                    
                    
                    6,066,930Accounts
      payable
                    
                    
                    (779,005
                    )Accrued
      expenses
                    
                    
                    (23,982
                    )Liabilities
      Assumed
                    
                    
                    (802,987
                    )Total
      Purchase Price
                    
                    $
                    5,263,943






The
Company acquired the Freundlich Assets in a series of transactions which
occurred on the same date.
 
 The
events were:
 
 1.
              The
      Company acquired DFAC in a stock for stock
  transaction
  The July
20, 2006 asset purchase of the Freundlich assets were the result of the Company
entering into an exchange agreement (the “Exchange Agreement”) pursuant to which
the Company acquired all of the shares of Delaware Fastener Acquisition Corp., a
Delaware corporation (“DFAC”), in return for 21,000,000 shares of the Company’s
common stock and 2,611,000 shares of the Company’s Class B convertible preferred
stock.  The Company’s Class B convertible preferred stock
automatically converts into post 150:1 reverse split stock in an amount equal to
783,300,000 shares of the Company’s presently existing common stock which would
no longer be existing since the conversion cannot occur prior to the 150:1
reverse split discussed below; so it really converts into 5,222,000 shares of
the Company’s post 150:1 reverse split common stock.
  2.
              The
      Company received financing
  The
Investors in the Security Purchase Agreement provided the Company financing of
$5,750,000.  In return the Company issued (a) a $1 Million convertible
note which has subsequently been repaid without conversion; (b) 5,277,778 shares
of series A Preferred stock each originally convertible into 450 shares (3 post
150:1 reverse split shares) of the Company’s common stock and presently
convertible into 777 shares (5.18 post 150:1 reverse split shares) of the
Company’s common stock; (c) 10,541,000 Series A warrants convertible into
1,581,150,000 shares of the Company’s common stock at an original exercise price
of .00233 per share which has
     20






9.
ACQUISITION (CONTINUED)
   
  2.
              The Company received
      financing (Continued)
  been
adjusted to .00135 per share (10,541,000 post 150:1 reverse split shares at an
original exercise price of $0.35 per share which has been adjusted to $.203 per
share) and (d) 10,541,000 Series B warrants convertible into 1,581,150,000
shares of the Company’s common stock at an original exercise price of .004 per
share which has been adjusted to .00231 per share (10,541,000 post 150:1 reverse
split shares of the Company’s common stock at an original exercise price of
$0.60 per share which has been adjusted to $0.347 per share).  Other
than standard adjustment terms there are no other adjustment terms for either
the Preferred stock or the warrants.  As a result of the Exchange
Agreement, DFAC became a wholly-owned subsidiary of the Company.  The
Company then caused its subsidiary, DFAC to carry out the asset purchase
agreement as described below.  Upon completion of the foregoing
transactions, the Company changed its name to Precision Aerospace Components,
Inc. and DFAC changed its name to Freundlich Supply Co., Inc.
(“Freundlich”).
   The
adjusted conversion terms and prices shown above are a result of the Company, on
July 31, 2007, negotiating adjustments to fix the conversion ratio or prices for
the securities.  The Securities Purchase Agreement required that the
ratio or prices be the adjusted by the percentage shortfall of certain pre-tax
income milestones to be reached by the Company in years 2006 and
2007.  Due to these contingencies (possible reduction of conversion
prices), the Company has reclassified its preferred A stock and warrants as
liabilities at the time of issuance.  Upon the fixing of the prices,
in 2007, these preferred shares and warrants were reclassified as temporary
equity because the Company is not authorized to issue a sufficient number of
shares if the preferred A shares were converted to common stock or the warrants
were exercised for common stock.
   The
Securities Purchase Agreement requires the Company to accomplish a 150:1 reverse
split of its common stock; originally to have been accomplished by November
2006, this requirement has been extended several times, without additional
consideration, and is now to occur by December 15, 2008 (subsequent to the date
covered by this report the date has been further extended to December 15,
2009).  In the event the Company does not timely accomplish the 150:1
reverse split it may have to pay a penalty of $287,500 and if it fails to timely
file and maintain effective a registration statement it may be liable for
liquidated damages which would be 2,100 shares of Series A stock per day it is
in violation, up to a maximum of 750,000 shares.
  3.
              DFAC
      acquired the assets of Freundlich
 Contemporaneously,
DFAC acquired the assets, subject to certain liabilities, of Freundlich Supply
Company, Inc., described above (“Freundlich Supply”), pursuant to an asset
purchase agreement (the “Asset Purchase Agreement”) dated May 24, 2006 among
DFAC, Freundlich Supply, and Michael Freundlich.  The purchase of the
assets was financed by the proceeds from the sale by the Company of its
securities pursuant to a securities purchase agreement (the “Securities Purchase
Agreement”).  The Securities Purchase Agreement requires the Company
to accomplish a 150:1 reverse split of its common stock; originally to have been
accomplished by November 2006, this requirement has been extended several times,
without additional consideration, and is now to occur by December 15, 2008
(subsequent to the date of covered by this report the date has been further
extended to December 15, 2009).  (In the event the Company does not
timely accomplish the 150:1 reverse split it may have to pay a penalty of
$287,500 and if it fails to timely file and maintain effective a registration
statement it may be liable for liquidated damages which would be 2,100 shares of
Series A stock per day it is in violation, up to a maximum of 750,000
shares.)
    21






10.
STOCK OPTIONS
 
 The
Company had adopted a stock option plan, which provided for the granting of
options to certain officers, directors and key employees of the
Company.  Currently, options for 100,000 shares of common stock have
been issued under this plan and remain outstanding.  The option price,
number of shares and grant date were determined at the discretion of the
Company's board of directors.  Grantees vested in the options at the
date of the grant.  The exercise price of each option that has been
granted under the plan equals 100% of the market price of the Company’s stock on
the date of the grant.  Options under this plan vest on the grant date
and are exercisable for a period not to exceed 10 years from the option grant
date.  Plan options are non-transferable.
 
 During
2008 the Company issued non-plan options to officers and directors of the
Company. The option number of shares were in accordance with compensation
arrangements agreed to by the Company and approved by its board of
directors.  Grantees vested in the options at the date of
issuance.  The exercise price of each option that has been granted
equals 100% of the market price of the Company’s stock on the date of the
grant.  Options under this plan vest on the grant date and are
exercisable for a period not to exceed 1 year from the option grant issuance
date.
 
 A
summary of the status of the Company’s stock options as of December 31, 2008 and
2007, and changes during the years then ended is presented
below:






2008
                                    
                                    
                                    2007Weighted
      Average Exercise
                                    
                                    
                                    Weighted
      Average ExerciseOptions
                                    
                                    
                                    Price
                                    
                                    
                                    Options
                                    
                                    
                                    PriceOutstanding
      at beginning of year
                                    
                                    
                                    100,000
                                    
                                    
                                    $
                                    0.35
                                    
                                    
                                    
                                    410,000
                                    
                                    
                                    $
                                    0.70Granted
                                    
                                    
                                    636,955,669
                                    
                                    
                                    
                                    0.01
                                    
                                    
                                    
                                    -Exercise
                                    
                                    
                                    -
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    -Forfeited
                                    
                                    
                                    -
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    310,000
                                    
                                    
                                    
                                    0.81Outstanding
      at end of year
                                    
                                    
                                    637,055,669
                                    
                                    
                                    $
                                    0.01
                                    
                                    
                                    
                                    100,000
                                    
                                    
                                    $
                                    0.35Exercisable
      at end of year
                                    
                                    
                                    637,055,669
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    100,000Weighted
      average fair value of options granted during the
                                      period
      - none granted
                                    
                                    
                                    -
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    $
                                    -
















22






10.
STOCK OPTIONS (CONTINUED)
 
 The
following table summarizes information about stock options outstanding at
December 31, 2008.






Range
      of
                          exercise
      prices
                        
                        Weighted
                          Number
                          outstanding
      at
                          12/31/08
                        Average
      remaining
                          contractual
      life
                        Weighted
                          average
                          exercise
      price
                        Number
                          exercisable
      at
                          12/31/08$
                        0.35
                        
                        100,000
                        3.58
                        
                        $
                        0.35
                        
                        100,000$
                        0.01
                        
                        635,005,669
                        0.16
                        
                        $
                        0.01
                        
                        635,005,669$
                        0.005
                        
                        1,950,000
                        0.96
                        
                        $
                        0.005
                        
                        1,950,000




The Black
Scholes option valuation model was developed for use in estimating the fair
value of traded options, which have no vesting restrictions and are fully
transferable.  In addition, option valuation models require the input
of highly subjective assumptions including the expected stock price
volatility.  Because the Company’s stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions may materially affect the fair value estimate, in
management’s opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its stock options.  However, for
the options granted in 2008, the Company did utilize the model to meet GAAP
guidance, even though this does not properly reflect the cost to the
Company.
 
 
 For the
2008 options:
 
 Disclosures
required by SFAS 123, Accounting for Stock Based Compensation, are as
follows:










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










23






11.  WARRANTS
 
 As part
of the December, 2000 acquisition of the freight transport and freight brokerage
business of Eagle Transportation Services, Inc., and Eagle Transport, Inc., the
Sellers were granted warrants to purchase 100,000 shares of common stock at
$2.50 per share and 75,000 shares of common stock at $3.00 per share,
exercisable after one year and expiring in 10 years (2010).
 
 On August
5, 2002, Gasel and S. Gene Thompson executed an Employment Agreement outlining
the terms and conditions of Mr. Thompson’s employment as Vice President and
Chief Financial Officer.  In accordance with the terms of this
agreement, Mr. Thompson was given 25,000 shares of common stock, no par value,
of the Company; warrants to purchase an additional 25,000 shares of common
stock, no par value, of Gasel at an exercise price of $.35 per share; and will
receive additional warrants to purchase 50,000 shares of common stock in the
future at the market price effective on the grant dates, which were to be given
on January 1, 2003 and January 2, 2004.  The warrants may be exercised
at any time within a 10-year period after the date of issuance.  In
the event the Company shall terminate Mr. Thompson’s employment prior to the end
of the three year term, or should Gasel enter into a merger or other combination
with another company, then the grant date of future warrants shall be
accelerated to the date of such merger, combination or termination.
 
 In
connection with the Securities Purchase Agreement of July 20, 2006, (the “SPA”)
the Company issued 5 year warrants to purchase 1,581,150,000 shares of the
Company’s common stock at $0.002333 per share; and 1,581,150,000 shares of the
Company’s common stock at $0.004 per share. On July 31, 2007 the Company and the
investors under the SPA agreed to modify the exercise price of the warrants to
be $.001353 and $.0023133 respectively.  The Company does not have
sufficient authorized shares (only 100,000,000 shares are authorized) to enable
full exercise of the warrants.
  The
Company, in connection with the Securities Purchase Agreement of July 20, 2006,
calculated the fair value of the warrants issued using a Black-Scholes valuation
model, in which Management considered all the facts and circumstances of this
equity instrument and has deemed the use of a Black-Scholes formula to estimate
the fair value of the warrants to be appropriate and consistent with the
measurement objectives of the accounting standards.
  The
factors used by the Company in determining fair value were: closing stock price
on Yahoo.finance at the date of the issuance ($0.04), the exercise prices
($.00233 and $0.004), the expected life in years (5 years), the historical
volatility of 418.05% was determined by observing the stock price on the issue
date and the same date of the eleven prior months, and the discount rate
utilized was 2.25%.  These factors yielded fair values of $421,636 for
each of the warrants issued, a sum of $843,272.


















24






11.  WARRANTS
(CONTINUED)






2008
                        
                        
                        
                        2007Weighted
      Average Exercise Shares
                        Price
                        
                        Weighted
      Average Exercise Shares
                        PriceOutstanding
      at Beginning of year (A)
                        3,162,500,000
                        $
                        0.0018
                        
                        3,162,600,000
                        $
                        0.0018Granted
                        
                        
                        -
                        
                        
                        
                        -Exercised
                        
                        -
                        
                        
                        
                        -Expired
                        
                        
                        -
                        
                        
                        
                        (100,000)Outstanding
      at end of year
                        3,162,500,000
                        
                        
                        
                        3,162,500,000Warrants
      exercisable at year end
                        3,162,500,000
                        
                        
                        
                        3,162,600,000




(A)
-Cannot be fully exercised until the Company completes its 150:1 reverse
conversion.


12.RESTATEMENT OF CONSOLIDATED FINANCIAL
STATEMENTS
  
 The
Company is restating its financial statements and disclosures to reflect an
effective date of July 20, 2006, for the acquisition of Freundlich Supply
Company.  The Company previously reported all financial activity  for
the period of July 1, 2006 to July 19, 2006 in its originally filed Form 10-KSB
for the year ended December 31, 2006.  This error caused revenues for 2006
to be overstated by $735,675, cost of sales to be overstated by $514,305 and
goodwill to be overstated by $221,370.
 
 Additionally,
the Company’s Balance Sheet for 2006 has been revised to reclassify all of the
Company’s Series A Preferred Stock and its Warrants issued in connection with
the acquisition as Liabilities because they had possible contingent changes to
their conversion or exercise prices.  These contingencies were removed by
the negotiation of agreement to fix the conversion and exercise prices on July
31, 2007.  Upon the fixing of the prices, in 2007, these preferred shares
and warrants were reclassified as temporary equity because the Company is not
authorized to issue a sufficient number of shares if the preferred A shares were
converted to common stock or the warrants were exercised for common stock. 
These changes to the information included in the report have no impact on the
Company’s operations or financial status, either at December 31, 2006 or 2007 or
subsequently.
       25