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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-QSB
 [X]
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
   [  ]
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT OF 1934
  000-30185
 PRECISION AEROSPACE COMPONENTS, INC.
  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
 
 (718) 356-1500
  
      APPLICABLE ONLY TO CORPORATE ISSUERS
  Transitional Small Business Disclosure Format (check one):
    
    Yes  [  ]            No [ X ]




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TABLE OF CONTENTS
  
 PagePART I FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    
    1Condensed Consolidated Balance Sheet  (Unaudited)
    
    
    1Condensed Consolidated Statements of Operations  (Unaudited)
    
    
    2Condensed
Consolidated Statements of Cash Flows  (Unaudited)
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4Item 2.
    
    Plan of Operations
    
    
    10Item 3.
    
    Controls and Procedures
    
    
    15PART
II OTHER INFORMATIONItem 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    16Item 6.
    
    Exhibits
    
    
    16Signatures
    
    
    
    
    16




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PART I
 
 FINANCIAL INFORMATION
 
 Precision Aerospace Components, Inc.
Condensed Consolidated Balance Sheet
(Unaudited)
 September 30,2006ASSETSCurrent AssetsCash
    
    $
    25,210Accounts
receivable, net
    
    
    1,135,996Prepaid expense
    
    
    75,218Inventory, net
    
    
    2,558,772Total current assets
    
    
    3,795,196Deferred income taxes
    
    
    361Deposits
    
    
    314,420Property and equipment-net
    
    
    226,527Goodwill
    
    
    2,221,744Total Assets
    
    $
    6,558,248LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable  trade
    
    $
    992,555Accrued expenses
    
    
    74,224Subordinated note payable-current portion
    
    
    150,000Total current liabilities
    
    
    1,216,779Long-term LiabilitiesDeferred income taxes
    
    
    3,148Subordinated note payable-long-term portion
    
    
    600,000Convertible note payable
    
    
    1,000,000Total
long-term liabilities
    
    
    1,603,148Commitments and contingenciesStockholders EquityPreferred Stock, Series A, $0.001 par value,
7,100,000 shares authorized 5,277,778 issued and outstanding
    
    
    5,278Preferred Stock, Series B, $0.001 par value,
2,900,000 shares authorized, 2,811,000 issued and
outstanding
    
    
    2,811Common stock, $0.001 par value, 100,000,000 shares
authorized, 31,690,491 issued and outstanding
    
    
    31,690Additional paid-in capital
    
    
    3,698,983Accumulated deficit
    
    
    (441
    )Total stockholders equity
    
    
    3,738,321Total Liabilities and Stockholders Equity
    
    $
    6,558,248
 The accompanying notes are an integral part of these condensed consolidated financial statements
 1




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Precision Aerospace Components, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Sales
    
    $
    2,897,344
    
    
    $
    
    
    
    $
    2,897,344
    
    
    $
    Cost of sales
    
    
    2,135,424
    
    
    
    
    
    
    
    2,135,424
    
    
    
    Gross profit
    
    
    761,920
    
    
    
    
    
    
    
    761,920
    
    
    
    Operating Expenses:Selling, general and administrative
    
    
    734,151
    
    
    
    
    
    
    
    734,151
    
    
    
    Depreciation
    
    
    8,968
    
    
    
    
    
    
    
    8,968
    
    
    
    Total operating expenses
    
    
    743,119
    
    
    
    
    
    
    
    743,119
    
    
    
    Income from continuing operations
    
    
    18,801
    
    
    
    
    
    
    
    18,801
    
    
    
    Loss from
discontinued operations
    
    
    
    
    
    
    (324,947
    )
    
    
    
    
    
    
    (898,721
    )Other Expenses:Interest
    
    
    19,603
    
    
    
    
    
    
    
    19,603
    
    
    
    Loss before income taxes
    
    
    (802
    )
    
    
    (324,947
    )
    
    
    (802
    )
    
    
    (898,721
    )Benefit for income taxes
    
    
    (361
    )
    
    
    
    
    
    
    (361
    )
    
    
    Net loss applicable to common shareholders
    
    $
    (441
    )
    
    $
    (324,947
    )
    
    $
    (441
    )
    
    $
    (898,721
    )Basic and diluted loss per common share
    
    $
    (0.00
    )
    
    $
    (0.03
    )
    
    $
    (0.00
    )
    
    $
    (0.09
    )Weighted
average number of shares outstanding
    
    
    33,353,468
    
    
    
    10,670,066
    
    
    
    33,353,468
    
    
    
    10,312,557
 The
accompanying notes are an integral part of these condensed consolidated financial statements
 2




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Precision Aerospace Components, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Nine Months EndedSeptember 30,2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (441
    )
    
    $
    Adjustments
to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    8,968
    
    
    
    Deferred income taxes
    
    
    3,148Changes in operating assets and liabilities:(Increase) decrease in accounts receivable
    
    
    (292,367
    )
    
    
    (Increase) decrease in inventory
    
    
    19,337
    
    
    
    (Increase) decrease in prepaid expenses
    
    
    (75,218
    )
    
    
    (Increase) decrease in deposits
    
    
    (314,020
    )
    
    
    Increase (decrease) in accounts payable and accrued expenses
    
    
    161,527
    
    
    
    Total adjustments
    
    
    (500,741
    )
    
    
    NET CASH USED IN OPERATING ACTIVITIES
    
    
    (489,066
    )
    
    
    CASH FLOWS FROM INVESTING ACTIVITIES:Additions to property and equipment
    
    
    (26,962
    )
    
    
    Acquisition of Freundlich Supply Co., Inc.
    
    
    (6,104,092
    )
    
    
    NET CASH USED IN INVESTING ACTIVITIES
    
    
    (6,131,054
    )
    
    
    CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from issuance of preferred stock
    
    
    4,750,000
    
    
    
    Proceeds from subordinated note
    
    
    750,000
    
    
    
    Proceeds from convertible note
    
    
    1,000,000
    
    
    
    CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    6,500,000
    
    
    
    CASH USED IN DISCONTINUED OPERATIONS
    
    
    
    
    
    
    (62,940
    )NET DECREASE IN CASH
    
    
    (120,120
    )
    
    
    (62,940
    )CASH:Beginning of period
    
    
    145,330
    
    
    
    63,109End of period
    
    $
    25,210
    
    
    $
    169Supplemental cash flow informationNet cash paid during the period for:Interest
    
    $
    
    
    
    $
    Income taxes
    
    
    
    
    
    
    
 The accompanying notes are an integral part of these condensed consolidated financial statements
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PRECISION AEROSPACE COMPONENTS, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  NOTE 1- ORGANIZATION AND NATURE OF BUSINESS
  NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
  Use of Estimates
  Revenue Recognition
  4




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PRECISION AEROSPACE COMPONENTS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Gross Profit
  Shipping and Handling Costs and Fees
  Allowance for Doubtful Accounts
  Inventories
  
 Concentration
  Property
and Equipment
  Warehouse equipment
    
    5 yearsLeasehold
improvements
    
    15 yearsComputers
    
    5 yearsFurniture
and fixtures
    
    5 yearsEquipment
    
    5 years
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PRECISION AEROSPACE COMPONENTS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Fair Value of Financial Instruments
  Interim Financial Information
  Recent Accounting Pronouncements
   6




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NOTE 3  PER SHARE DATA
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Basic and
diluted loss per common share
    
    $
    (0.00
    )
    
    $
    (0.03
    )
    
    $
    (0.00
    )
    
    $
    (0.09
    )Weighted
average number of shares outstanding
    
    
    33,353,468
    
    
    
    10,670,066
    
    
    
    33,353,468
    
    
    
    10,312,557
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NOTE 4- ACCOUNTS RECEIVABLE
  September 30,2006Accounts receivable, trade
    
    $
    1,135,996Allowance for doubtful accounts
    
    
    Accounts receivable, net
    
    $
    1,135,996
 NOTE 5- INVENTORY
  September 30,2006Finished goods
    
    $
    5,031,074Reserve for obsolescence
    
    
    (2,472,302
    )Inventory,
net
    
    $
    2,558,772
 NOTE 6- PROPERTY AND EQUIPMENT
  September 30,2006Warehouse equipment
    
    $
    538,734Leasehold improvements
    
    
    188,139Computers
    
    
    97,347Furniture and fixtures
    
    
    71,308Equipment
    
    
    9,729905,257Less: Accumulated depreciation
    
    
    (678,730
    )Net property and equipment
    
    $
    226,527
  8




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PRECISION AEROSPACE COMPONENTS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
7  ACQUISITION
    Accounts Receivable
    
    $
    1,113,686Inventory
    
    
    2,521,153Prepaid Expenses
    
    
    9,946Deposits
    
    
    400Furniture and Equipment
    
    
    200,000Goodwill
    
    
    2,221,745Total Assets
    
    $
    6,066,930Accounts Payable
    
    
    779,005Accrued Expenses
    
    
    23,982Total Purchase Price
    
    $
    5,263,943
 NOTE
8   LOSS FROM DISCONTINUED OPERATIONS
  9




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PRECISION AEROSPACE COMPONENTS, INC.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
 This report contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements other than statements of historical facts included or incorporated by
reference in this report, including, without limitation, statements regarding our future financial
position, business strategy, budgets, projected revenues, projected costs and plans and objective
of management for future operations, are forward-looking statements. In addition, forward-looking
statements generally can be identified by the use of forward-looking terminology such as may,
will, expects, intends, plans, projects, estimates, anticipates, or believes or the
negative thereof or any variation thereon or similar terminology or expressions.
 These forward-looking statements are subject to risks and uncertainties that could cause
actual results to differ materially from results proposed in such statements. Although we believe
that the expectations reflected in such forward-looking statements are reasonable, we can give no
assurance that such expectations will prove to have been correct. Important factors that could
cause actual results to differ materially from our expectations include, but are not limited to:
our ability to fund future growth and implement our business strategy; our ability to identify and
acquire companies in our industry, the level of competition in and general condition of aerospace
and defense industries; general economic and business conditions, either nationally or
internationally or in the jurisdictions in which we are doing business; the condition of the
securities and capital markets; legislative or regulatory changes; and statements of assumption
underlying any of the foregoing, as well as those other factors set forth under the caption Risk
Factors in our Current Report on Form 8-K dated July 20, 2006.
 All subsequent written and oral forward-looking statements attributable to us, or
persons acting on our behalf, are expressly qualified in their entirety by the foregoing. Readers
are cautioned not to place undue reliance on these forward-looking statements which speak only as
of the date made. Except as required by law, we assume no duty to update or revise our
forward-looking statements based on changes in internal estimates or expectations or otherwise.
 
 Item 2.
Plan of Operations
   10




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Background
  Overview
     11




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Outlook
   Critical Accounting Policies and Estimates
   12




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Results
of Operations
  Liquidity and Capital Resources
    13




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14




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Off Balance Sheet Arrangements
  
 Item 3. Controls and Procedures.
   15




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PART II
OTHER INFORMATION
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 
 Item 6. Exhibits.
  Exhibit No.
    
    Exhibit31.1
    
    Certification of Chief Executive Officer of the Company
required by Rule 13a-14(a) under the Securities Exchange Act
of 1934, as amended31.2
    
    Certification of Chief Financial Officer of the Company
required by Rule 13a-14(a) under the Securities Exchange Act
of 1934, as amended32.1
    
    Certification of Chief Executive Officer and Chief Financial
Officer of the Company required by Rule 13a-14(b) under the
Securities Exchange Act of 1934, as amended
 
 SIGNATURES
  Dated: December 22, 2006
    
    PRECISION AEROSPACECOMPONENTS, INC./s/ Robert P. MoyerRobert P. MoyerChief Executive Officer
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EXHIBIT INDEX
 Exhibit Number
    
    Description31.1
    
    Certification of Chief Executive Officer of the Company required by Rule
13a-14(a) under the Securities Exchange Act of 1934, as amended31.2
    
    Certification of Chief Financial Officer of the Company required by Rule
13a-14(a) under the Securities Exchange Act of 1934, as amended32.1
    
    Certification of Chief Executive Officer and Chief Financial Officer of the
Company required by Rule 13a-14(b) under the Securities Exchange Act of 1934, as
amended
 17