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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM 10-K



(Mark One)X
  
  ANNUAL REPORT
  UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the year ended December 31, 2010TRANSITION REPORT
  UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition
  period from___________ to __________Commission file
  number 000-49768PREFERENTIAL EQUITIES CORP.(Exact name of registrant as specified in its charter)NEVADA
  
  91-2015980(State or other jurisdiction of
   incorporation or organization)
  
  (I.R.S. Employer
   Identification No.)P.O. Box 741,
  Bellevue, WA
  98009(Address of
  principal executive offices)
  (Zip Code)Registrant's telephone number,
  including area code (425) 453-0355Securities registered pursuant
  to Section 12(b) of the Act:Title of each class
  
  Name of each exchange on which registeredNot Applicable
  
  Not ApplicableSecurities registered pursuant
  to Section 12(g) of the Act:Common Stock $0.001 par value per shareIndicate by check mark if the
  registrant is a well known seasoned issuer, as defined by Rule 405 of
  Securities ActYes9
  No:Indicate by check mark if the
  registrant is not required to file reports pursuant to Section 13 or Section
  15(d) of the ActYes
  :
  No
  9Indicate 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
  :
  No
  9i




Indicate by check mark whether the registrant has submitted electronically and
  posted on its corporate Web site, if any, every Interactive Data File required
  to be submitted and posted pursuant to Rule 405 of Regulation S-T (S 232.405
  of this chapter) during the preceding 12 months (or for such shorter period
  that the registrant was required to submit and post such files). Not
  Applicable.Yes:
  No
  9Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
  of Regulation S-K (S 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 this
  Form 10-K or any amendment to this Form 10-K. Not Applicable.Yes:
  No
  9Indicate by check mark whether the
  registrant is large accelerated filer, an accelerated filer, a non accelerated
  filer, or a small reporting company. See the definitions of "large accelerated
  filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act
  (Check one):Large accelerated filer9
  
  Accelerated filer9Non-accelerated filer
  9
  
  Smaller reporting
  company:Indicate by check mark whether the registrant is a shell company (as defined
  in Rule 12b-2 of the Act)
  Yes:
  No
  9State 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.Not ApplicableAPPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY 
  PROCEEDINGS DURING THE PRECEDING FIVE YEARSIndicate by check mark whether the registrant has filed all documents and
  reports required to be filed by Section 12, 13 and 15(d) of the Securities
  Exchange Act of 1934 subsequent to the distribution ofsecurities under a
  plan confirmed by a court
  Yeso
  No
  oNot Applicable.(APPLICABLE ONLY TO CORPORATE REGISTRANTS)Indicate the number of shares outstanding of each of the Registrant's classes
  of common stock, as of the latest practicable date.5,000,000 common shares issued and outstanding as of March 30, 2011DOCUMENTS INCORPORATED BY REFERENCENone


ii

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Table of Contents

FORWARD
LOOKING INFORMATIONPART I
   1Item 1.
 Business.
   1Formation
   1Our
 Business
   1Competition
   1Research and Development
   2Environmental Compliance
   2Government Regulation
   2Employees
   4Reports
 to Securities Holders
   4Item 1A. Risk
 Factors.
   4Risks
 Related to Our Business and Industry
   4Risks
 Related to Owning Our Common Stock
   4Item 1B. Unresolved Staff Comments
   6Item 2. Property
   6Item 3. Legal Proceedings
   6Item 4.( Removed and Reserved)
   6PART II
   7Item 5. Market
 for Registrant's Common Equity, Related Stockholder Matters and Issuer
 Purchases of
   7Equity
   Securities
   7General
   7Dividend Policy
   7No
 Equity Compensation Plan
   7Recent
 Sales of Unregistered Securities
   7Item 6.
 Selected Financial Data
   7Item 7. Management Discussion and Analysis of Financial Condition and Results
   of Operations
   72010
 Business Environment
   7Results
 of Operation
   7Off-Balance Sheet Arrangement
   8Capital
 Expenditure Commitments
   8Plan of
 Operations
   8Item 7A.
 Quantitive and Qualitive Disclosure About Market Risk.
   10Item 8. Financial Statements and Supplementary Data
   10Item 9. Changes In and Disagreements with Accountants on Accounting and
   Financial Disclosure
   21Item 9A. Controls and Procedures
   21(a)
 Evaluation of Disclosure Controls and Procedures
   21(b)
 Internal control over financial reporting
   21Changes
 in Internal Controls
   22ITEM 9A(T) - Controls and Procedures above
   22Item 9B. Other Information
   22PART III
   22Item 10. Directors and Executive Officers and Corporate Governance
   22Identification of Directors and Executive Officers
   22Background of Officers and Directors
   22Significant Employees
   23Involvement in Certain Legal Proceedings
   23Family
 Relationships
   23Audit
 Committee Financial Expert
   23Compliance with Section 16(a) of the Securities Exchange Act of 1934
   23Code of
 Ethics
   23


iii

---

Item 11.
 Executive Compensation.
   24Summary
 Compensation of Executive Officers
   24Compensation of Directors
   24Employment Contracts and Termination of Employment or Change of Control
   24Compensation of Directors
   24Board
 of Directors Report on Executive Compensation
   25Stock
 Options/SAR Grants
   25Long-Term Incentive Plans/ Equity Compensation Plan
   25Stock Option
 Plans
   25Item 12.
 Security Ownership of Certain Beneficial Owners and Management and Related
 Stockholder Matters
   25Principle Stockholders
   25Changes in Control
   26Item 13. Certain Relationships and Related Transactions, and Director
   Independence
   26Certain Relationships and Related Transactions
   26Director Independence
   26Item 14. Principal Accounting Fees and Services
   26Fees
 and Services
   26Pre-Approval Policies and Procedures
   26PART IV
   27Item 15. Exhibits, Financial Statement Schedules
   27SIGNATURES
   27


iv

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FORWARD LOOKING INFORMATION

This annual report contains forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995. These
statements relate to future events or our future financial performance. In some
cases, you can identify forward-looking statements by terminology such as "may",
"will", "should", "expects", "plans", "anticipates", "believes", "estimates",
"predicts", "potential" or "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section entitled "Risk Factors", that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results.

PART I

Item 1. Business

Formation

Preferential Equities Corp. ("Preferential"), was incorporated on
October 2, 2006 in the State of Nevada, to engage in any lawful corporate
undertaking, including, but not limited to, selected mergers and acquisitions.
Pursuant to the Articles of Incorporation, Preferential is authorized to issue
100,000,000 shares of Common Stock at $0.001 par value. Each holder of the
Common Stock shall be entitled to one vote for each share of Common Stock held.
As of December 31, 2010, there were 5,000,000 shares of Common Stock
outstanding.

Our Business

Preferential has been in the developmental stage since inception and has no
operations to date. Other than issuing shares to its shareholders, Preferential
never commenced any operational activities. As such, Preferential can be defined
as a "shell" or "blank check" company, whose sole purpose at this time is to
locate and consummate a merger or acquisition with a private entity. The Board
of Directors of Preferential has elected to commence implementation of
Preferential's principal business purpose.

Preferential is filing this registration statement on a voluntary basis
because the primary attraction of Preferential as a merger partner or
acquisition vehicle will be its status as a reporting public company. Any
business combination or transaction may potentially result in a significant
issuance of shares and substantial dilution to present stockholders of
Preferential.

The proposed business activities described herein classify Preferential as a
"blank check" company. Many states have enacted statutes, rules and regulations
limiting the sale of securities of "blank check" companies in their respective
jurisdictions. Harry Miller, the primary shareholder of Preferential, has
expressed his intention that he has no plan to sell his respective shares of
Preferential's common stock until such time as Preferential has successfully
consummated a merger or acquisition and Preferential is no longer classified as
a "blank check" company, and he has also expressed his intention not to sell his
shares unless the shares are subsequently registered or if an exemption from
registration is available.

Competition

### 

We will compete with other blank check companies that have a business
objective similar to ours. Some of our competitors are the remains of failed or
discontinued businesses. As failed or discontinued businesses, these blank check
companies have ceased their day-to-day operations but have maintained their
public corporate structure. Some of our competitors are blank check companies
that publicly distributed shares under Rule 419 of the Securities Exchange
Act of 1934.Some of our competitors file reports with the Securities and
Exchange Commission, and some do not. Some of our competitors have securities
that trade in the over-the-counter securities markets, and some do not.

1

---

We believe that the principal competitive factors in our business may be
summarized as follows:

We believe Preferential will remain an insignificant participant among the
companies which engage in the acquisition of business opportunities. There are
many established venture capital and financial concerns which have significantly
greater financial and personnel resources and technical expertise than
Preferential. In view of Preferential's combined extremely limited financial
resources and limited management availability, Preferential will continue to be
at a significant competitive disadvantage compared to Preferential's
competitors.

Research and Development

Our Lack of Market Research or Marketing Organization Could Adversely Affect
Our Ability to Successfully Find and Conclude a Merger or Acquisition.
Preferential has neither conducted, nor have others made available to it,
results of market research indicating that market demand exists for the
transactions contemplated by Preferential. Moreover, Preferential does not have,
and does not plan to establish, a marketing organization. Even in the event
demand is identified for a merger or acquisition contemplated by Preferential,
there is no assurance Preferential will be successful in completing any such
business combination.

### 

Environmental Compliance

### 

The nature of Preferential's business does not require special environmental
or local government approval. Preferential is compliant with all environmental
laws. There is no cost to Preferential for such compliance.

### 

Government Regulation

### 

Securities Exchange Act of 1934, as amended, (the
"1934 Act"). Sections 13 and 15(d) of the 1934 Act requires
companies subject thereto to provide certain information about significant
acquisitions, including certified financial statements for the company acquired,
covering one, two, or three years, depending on the relative size of the
acquisition. The time and additional costs that may be incurred by some target
entities to prepare such statements may significantly delay or essentially
preclude consummation of an otherwise desirable acquisition by the Company.
Acquisition prospects that do not have or are unable to obtain the required
audited statements may not be appropriate for acquisition so long as the
reporting requirements of the 1934 Act are applicable.

2

---

SEC Shell Company Rules. On June 29, 2005, the Securities and
Exchange Commission adopted final rules amending the Form S-8 and the Form 8-K
for shell companies. These rules were published in the Federal Register on July
21, 2005 and were made effective as of August 22, 2005, except for an amendment
to Item 5.06 of the Form 8-K that became effective on November 5, 2005. The
amendments expand the definition of a shell company to be a company with no or
nominal operations, assets consisting of cash and cash equivalents, or assets
consisting of any amount of cash and cash equivalents and nominal other assets.
Shell companies, as a result of these rule changes:

1. are now prohibited from using Form S-8 (the abbreviated registration
 statement used to register securities issued under employee benefit plans)
 until 60 days after it ceases to be a shell company;;
2. must include current Form 10 or Form 10-SB information, including audited
 financial statements in the Form 8-K that the shell company files to report an
 event that causes it to cease being a shell company;
3. must file financial statements within four days about the transaction; and
4. where an operating company acquires a shell company and the operating
 company survives the transaction; the operating company will have acquired
 control of the shell for purposes of the definition of "succession" under the
 final rules and the operating company, as the surviving entity, will be
 required to file a Form 8-K under Item 5.01.

Prior to the new rules, financial statements of the acquired private company
were not required to be filed on Form 8-K until 75 days after completion of the
merger or acquisition. Also, detailed information about the business and
management of the acquired private company was not required until the reporting
company filed its next annual report on Form 10-KSB. As a result, securities of
the new entity could be traded for up to 75 days with investors having little or
no access to vital information about the acquired private company. These rule
changes will add additional cost onto completing a merger or acquisition
transaction and may make us less attractive as a means of going public.



Sarbanes-Oxley Act of 2002. On July 30, 2002,
President Bush signed into law the Sarbanes-Oxley Act of 2002, or the SOA.
SOA imposes a wide variety of new requirements on both U.S. and non-U.S.
companies, that file or are required to file periodic reports with the SEC (the
"SEC") under the Securities Exchange Act of 1934. Many of these
new requirements will affect us and our board of directors. For instance, under
SOA we are required to:



- form an audit committee in compliance with SOA;
- our chief executive office and chief financial officer are required to
 certify our financial statements; 
 ensure our directors and senior officers are required to forfeit all bonuses or
 other incentive-based compensation and profits received from the sale of our
 securities in the twelve month period following initial publication of any of
 our financial statements that later require restatement;
- disclose any off-balance sheet transactions as required by SOA;
- prohibit all personal loans to directors and officers;
- ensure directors, officers and 10% holders file their Forms 4's within two
 days of a transaction;
- adopt a code of ethics and file a Form 8-K whenever there is a change or
 waiver of this code; and
 ensure our auditor is independent as defined by SOA.



SOA has required us to review our current procedures and
policies to determine whether they comply with the SOA and the new regulations
promulgated thereunder. We will continue to monitor our compliance with all
future regulations that are adopted under the SOA and will take whatever actions
are necessary to ensure that we are in compliance.



Investment Company Act of 1940. Although we are
subject to regulation under the Securities Act of 1933and the Securities Exchange Act of 1934, we believe Preferential will not be subject
to regulation under the Investment Company Act of 1940insofar as we are
not engaged in the business of investing or trading in securities. In the event
that we engage in a business combination which results in us holding passive
investment interests in a number of entities, we could be subject to regulation
under the Investment Company Act of 1940.In such an event, we would be
required to register as an investment company and could be expected to incur
significant registration and compliance costs. We have obtained no formal
determination from the SEC as to the status of Preferential under the Investment Company Act of 1940and, consequently, any violation of such Act
would subject us to material adverse consequences. Preferential presently
believes it is exempt from the Investment Company Act of 1940via
Regulation 3a-2 thereto.

3

---



Investment Advisor Act of 1940. We are not an
"investment adviser" under the Federal Investment Adviser Act of 1940,
which classification would involve a number of negative considerations.
Accordingly, we do not and will not furnish or distribute advice, counsel,
publications, writings, analysis or reports to anyone relating to the purchase
or sale of any securities within the language, meaning and intent of Section
2(a)(11) of the Investment Adviser Act of 1940, 15 U.S.C.

Employees

We have no full time or part time employees. Harry Miller,
our president, has agreed to allocate a portion of his time to our activities,
without compensation. We anticipate that our business plan can be implemented
through the efforts of Mr. Miller who devotes up to 5% of his work week to our
business affairs, consequently, conflicts of interest may arise with respect to
the limited time commitment by Mr. Miller.

### 

Reports to Securities Holders

We are required to file annual reports on Form 10-Kand quarterly reports on
Form 10-Q with the SEC on a regular basis, and will be required to timely
disclose certain material events (e.g., changes in corporate control;
acquisitions or dispositions of a significant amount of assets other than in the
ordinary course of business; and bankruptcy) in a current report on Form 8-K.

You may read and copy any materials we file with the SEC at
their Public Reference Room Office, 100 F Street, NE, Room 1580, Washington,
D.C. 20549-0102. You may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. Additionally, the SEC
maintains an Internet site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the SEC.

Item 1A. Risk Factors

Risks Related to Our Business and Industry

### 

Preferential Has No Operating History That Can Be Used to Evaluate its Future
Business Prospects. Preferential was incorporated in the state of Nevada on
October 2, 2006. Preferential has had no operating history nor any revenues or
earnings from operations since inception. Preferential has little or no tangible
assets or financial resources. Preferential will, in all likelihood, continue to
sustain operating expenses without corresponding revenues, at least until the
consummation of a business combination. This may result in Preferential
incurring a net operating loss which will increase continuously until
Preferential can consummate a business combination with a profitable business
opportunity.

There Is No Assurance That Preferential's Proposed Operations Will Be
Successful. The success of Preferential's proposed plan of operation will
depend to a great extent on the operations, financial condition and management
of the identified business opportunity. While management intends to seek
business combination(s) with entities having established operating histories,
there can be no assurance that Preferential will be successful in locating
candidates meeting such criteria. In the event Preferential completes a business
combination, of which there can be no assurance, the success of Preferential's
operations may be dependent upon management of the successor firm or venture
partner firm and numerous other factors beyond Preferential's control. There is
no assurance that Preferential can identify such a business opportunity and
consummate such a business combination. Preferential's sole officer and director
does not have any direct experience with black check companies or related
transactions. Preferential has not made any attempts to negotiate or consummate
a merger with, or acquisition of, a private company.

Risks Related to Owning Our Common Stock

State Blue Sky Registration Laws Will Restrict the Resales of the
Preferential's Stock. Transferability of the shares of Common Stock of
Preferential is very limited because a significant number of states have enacted
regulations pursuant to their securities or so-called "blue sky" laws
restricting or, in many instances, prohibiting, the initial sale and subsequent
resale of securities of "blank check" companies such as Preferential within that
state. In addition, many states, while not specifically prohibiting or
restricting "blank check" companies, would not register the securities of
Preferential for sale or resale in their states. Because of these regulations,
Preferential currently has no plan to register any securities of Preferential
with any state. To ensure that any state laws are not violated through the
re-sales of the securities of Preferential, Preferential will refuse to register
the transfer of any securities of  Preferential, to residents of any state,
which prohibit such resale or if no exemption is available for such resale. It
is not anticipated that a secondary trading market for Preferential's securities
will develop in any state until subsequent to consummation of a Business
Combination, if at all.

4

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Preferential Will Face Scarcity of and Competition for Business Opportunities
and Combinations and as a Result May Never Complete a Merger or Acquisition.
Preferential is and will continue to be an insignificant participant in the
business of seeking mergers with, joint ventures with and acquisitions of small
private and public entities. A large number of established and well-financed
entities, including venture capital companies, are active in mergers and
acquisitions of companies which may be desirable target candidates for
Preferential. Nearly all such entities have significantly greater financial
resources, technical expertise and managerial capabilities than Preferential
and, consequently, Preferential will be at a competitive disadvantage in
identifying possible business opportunities and successfully completing a
business combination. Moreover, Preferential will also compete in seeking merger
or acquisition candidates with numerous other small public companies.

Preferential Has Not Entered into an Agreement for a Specific Business
Combination or Other Transaction and May Never be Successful in Finding or
Concluding Such an Agreement. Preferential has no arrangement, agreement or
understanding with respect to engaging in a merger with, joint venture with or
acquisition of, a private or public entity. There can be no assurance
Preferential will be successful in identifying and evaluating suitable business
opportunities or in concluding a business combination. Management has not
identified any particular industry or specific business within an industry for
evaluation by Preferential. There is no assurance Preferential will be able to
negotiate a business combination on terms favorable to Preferential.
Preferential has not established a specific length of operating history or a
specified level of earnings, assets, net worth or other criteria which it will
require a target business opportunity to have achieved, and without which
Preferential would not consider a business combination in any form with such
business opportunity. Accordingly, Preferential may enter into a business
combination with a business opportunity having no significant operating history,
losses, limited or no potential for earnings, limited assets, negative net worth
or other negative characteristics.

Mr. Miller, Our Sole Director and Officer, Will Only Devote Part Time Efforts
to Preferential Due to His Involvement in Other Business Interests Which May
Further Limit Our Likelihood of Success. While seeking a business
combination, Harry Miller, President of Preferential anticipates devoting up to
ten hours per month to the business of Preferential. Harry Miller will be the
only person responsible in conducting the day to day operations of Preferential
including searches, evaluations, and negotiations with potential merger or
acquisition candidates. Preferential has not entered into any written employment
agreement with Harry Miller and is not expected to do so in the foreseeable
future. Preferential has not obtained key man life insurance on Harry Miller.
The loss of the services of Harry Miller would adversely affect development of
Preferential's business and its likelihood of continuing operations.

Preferential May Have Potential Business Conflict of Interests with Other
Companies Formed by Mr. Miller, the Resolution of Which May Not Necessarily Be
Favorable to Us . Harry Miller may in the future participate in business
ventures which could be deemed to compete directly with Preferential. Additional
conflicts of interest and non-arms length transactions may also arise in the
future in the event Preferential's current and future officers or directors are
involved in the management of any firm with which Preferential transacts
business. Management has adopted a policy that Preferential will not seek a
merger with, or acquisition of, any entity in which management serve as
officers, directors or partners, or in which they or their family members own or
hold any ownership interest.

Our Lack of Market Research or Marketing Organization Could Adversely Affect
Our Ability to Successfully Find and Conclude a Merger or Acquisition.
Preferential has neither conducted, nor have others made available to it,
results of market research indicating that market demand exists for the
transactions contemplated by Preferential. Moreover, Preferential does not have,
and does not plan to establish, a marketing organization. Even in the event
demand is identified for a merger or acquisition contemplated by Preferential,
there is no assurance Preferential will be successful in completing any such
business combination.

Preferential Will Face Significant Legal Requirements That Have the Potential
to Subject Us to Substantial Liability and Increase Our Costs of Doing Business
if It is Characterized as an Investment Company. Although Preferential will
be subject to regulation under the Securities Exchange Act of 1934,
management believes Preferential will not be subject to regulation under the Investment Company Act of 1940, insofar as Preferential will not be engaged
in the business of investing or trading in securities. In the event Preferential
engages in business combinations which result in Preferential holding passive
investment interests in a number of entities, Preferential could be subject to
regulation under the Investment Company Act of 1940.In such event,
Preferential would be required to register as an investment company and could be
expected to incur significant registration and compliance costs. Preferential
has obtained no formal determination from the Securities and Exchange Commission
as to the status of Preferential under the Investment Company Act of 1940
and, consequently, any violation of such Act would subject Preferential to
material adverse consequences.

5

---

The Successful Completion of a Merger or Acquisition Transaction Will Likely
Result in a Change in Control And Our Current Management Will Not Have Any Power
to Influence Preferential after a Consummated Merger or Acquisition Transaction.
A business combination involving the issuance of Preferential's Common Shares
will, in all likelihood, result in shareholders of a private company obtaining a
controlling interest in Preferential. Any such business combination may require
management of Preferential to sell or transfer all or a portion of
Preferential's Common Shares held by them, or resign as members of the Board of
Directors of Preferential. The resulting change in control of Preferential could
result in the removal of Harry Miller and a corresponding reduction in or
elimination of his participation in the future affairs of Preferential.

Preferential May Face Significant Delays and Disadvantages if it Embarks Upon
a Blank Check Offering Prior to Completion of A Merger or Acquisition.
Preferential may enter into a business combination with an entity that desires
to establish a public trading market for its shares. A business opportunity may
attempt to avoid what it deems to be adverse consequences of undertaking its own
public offering by seeking a business combination with Preferential. Such
consequences may include, but are not limited to, time delays of the
registration process, significant expenses to be incurred in such an offering,
loss of voting control to public shareholders and the inability or unwillingness
to comply with various federal and state laws enacted for the protection of
investors.

Taxation Concerns May Influence Whether a Future Identified Business
Opportunity Proceeds. Federal and state tax consequences will, in all
likelihood, be major considerations in any business combination Preferential may
undertake. Currently, such transactions may be structured so as to result in
tax-free treatment to both companies, pursuant to various federal and state tax
provisions. Preferential intends to structure any business combination so as to
minimize the federal and state tax consequences to both Preferential and the
target entity; however, there can be no assurance that such business combination
will meet the statutory requirements of a tax- free reorganization or that the
parties will obtain the intended tax-free treatment upon a transfer of stock or
assets. A non-qualifying reorganization could result in the imposition of both
federal and state taxes which may have an adverse effect on both parties to the
transaction.

Requirement of Audited Financial Statements May Disqualify Business
Opportunities. Section 13 and 15(d) of the Securities Exchange Act of
1934(the "Exchange Act"), require companies subject thereto to provide
certain information about significant acquisitions, including certified
financial statements for Preferential acquired, covering one, two or three
years, depending on the relative size of the acquisition. The time and
additional costs that may be incurred by some target entities to prepare such
statements may preclude consummation of an otherwise desirable acquisition by
Preferential. Acquisition prospects that do not have or are unable to obtain the
required audited financial statements may not be appropriate for acquisition so
long as the reporting requirements of theSecurities Exchange Act of 1934
are applicable.

Item 1B. Unresolved Staff Comments

Not Applicable.

Item 2. Property

Preferential currently maintains a mailing address at P.O. Box 741, Bellevue,
Washington 98009, which is the address of its President. Preferential pays no
rent for the use of this mailing address. Preferential does not believe that it
will need to maintain an office at any time in the foreseeable future in order
to carry out its plan of operations described herein.

Item 3. Legal Proceedings

Preferential is not a party to any legal proceedings.

Item 4.( Removed and Reserved)

6

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PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters

General

Preferential's Common Stock has never been traded. It is unlikely that
Preferential's stock will be accepted for trading on any exchange or quotation
system until completion of a merger or acquisition. It is likely if any such
trading market developed it would be on one the over the counter markets and be
considered a "penny stock". There is no assurance that a trading market will
ever develop or, if such a market does develop, that it will continue.



As of March 30, 2011, we had one stockholder of record
holding 5,000,000 common shares.



Dividend Policy

Preferential has not paid any cash dividends on its Common Stock and presently
intends to continue a policy of retaining earnings, if any, for reinvestment in
its business.

No Equity Compensation Plan

Preferential does not have an equity compensation plan and does not plan to
implement such a plan.

Recent Sales of Unregistered Securities

Preferential has not had any recent sales of any of its securities.



Item 6. Selected Financial Data

No disclosure is required hereunder as the Company is a
"smaller reporting company," as defined in Item 10(f) of Regulation S-K.



Item 7. Management Discussion and Analysis of
Financial Condition and Results of Operations

2010 Business Environment



Interest in becoming public, either through an initial public
offering or through a merger with a reporting company remained flat in 2010.
This was a result of a number of factors not the least of which was the
continued instability of the economy as a result of the subprime mortgage
crisis, deepening global recession and weakoning US dollar. Although our
President, Mr. Miller, has reviewed a number of proposals he did not find one
which he believed to be suitable for Preferential. Management believes the
securities market in 2011 will remain unstable. If the markets do remain
unstable through-out 2011 it may be that we will be unable to complete a merger
or acquisition with a suitable business candidate this year despite our
continued investigation of interested parties.



Results of Operation

For the years ended December 31, 2010 and December 31, 2009
and for the period from October 2, 2006 (inception) through to December 31,
2010.



Revenues



Revenue. Preferential has a net loss of $5,650 for
the year ended December 31, 2010 (year ended December 31, 2009 - loss of $5,250)
and $23,400 for the period from inception to December 31, 2010. To date, we have
generated no revenue and have no business operations.

Loans. As of December 31, 2010, Mr. Miller has loaned
Preferential a total of $18,400 for working capital (year ended December 31,
2009 - $11,750). The advance does not carry an interest rate, is unsecured and
has no fixed terms of repayment.

7

---



Common Stock. Net cash provided by financing
activities during the year ended December 31, 2010 was $Nil (year ended December
31, 2009 - $Nil).



Expenses

Summay. Total expenses were $5,650 for the year ended
December 31, 2010. Expenses have increased slightly in the year ended December
31, 2010, by $400 from $5,250 in the previous year ended. A total of $23,400 in
expenses has been incurred by Preferencial since inception on October 2, 2006,
through to December 31, 2010. All expenses relate to professional accounting and
audit fees.

Income Tax Provision. We have losses carried forward
for income tax purpose to December 31, 2010. There are no current or deferred
tax expenses for the period ended December 31, 2010, due to our loss position.
We have fully reserved for any benefits of these losses. The deferred tax
consequences of temporary differences in reporting items for financial statement
and income tax purposes are recognized as appropriate.



Off-Balance Sheet Arrangement



As of December 31, 2010, we have had no off-balance sheet
arrangements.



Capital Expenditure Commitments



Capital expenditures during the year ended December 31, 2010,
amounted to $Nil ($Nil for the year ended December 31, 2009) Preferential does
not anticipate any significant purchase or sale of equipment over the next 12
months.



Plan of Operations



Our business purpose is to seek, investigate and, if such
investigation warrants, merge or acquire an interest in business opportunities
presented to us by persons or companies who or which desire to seek the
perceived advantages of a Securities Exchange Act of 1934registered
corporation. We have not restricted our search to any specific business,
industry, or geographical location and we may participate in a business venture
of virtually any kind or nature. This discussion of the proposed business is
purposefully general and is not meant to be restrictive of our virtually
unlimited discretion to search for and enter into potential business
opportunities. We may seek a business opportunity with entities which have
recently commenced operations, or which wish to utilize the public marketplace
in order to raise additional capital in order to expand into new products or
markets, to develop a new product or service, or for other corporate purposes.
We may acquire assets and establish wholly-owned subsidiaries in various
businesses or acquire existing businesses as subsidiaries.



Mr. Miller has limited experience in managing companies
similar to Preferential and we shall now be relying upon his efforts in
accomplishing the business purposes of Preferential. It is not anticipated that
any outside consultants or advisors will be utilized by Preferential to
effectuate its business purposes described herein. However, if Preferential does
retain such an outside consultant or advisor, any cash fee earned by such party
will need to be paid by the prospective merger/acquisition candidate, as
Preferential has no cash assets with which to pay such obligation. There have
been no contracts or agreements with any outside consultants and none are
anticipated in the future.



Marketing. Mr. Miller, our President, has contacted a
couple of broker-dealer, venture capitalist and other members of the financial
community who he had a pre-existing relationship and who were likely to have
clients, associates and contacts interested in a blank check company such as
Preferential. To date, Mr. Miller has reviewed the business plans and met the
principals of at least two potential reverse merger/acquisition candidates. Mr.
Miller did not, however, find a suitable privately held company seeking to
consummate a reverse merger/acquisition transaction. Mr. Harry Miller plans on
continuing to tap into his extensive network of business contacts in North
America in seeking a suitable business entity to consummate a reverse
merger/acquisition transaction for Preferential. Mr. Miller has not identified a
specific potential merger or acquisition candidate at this time.



Evaluation of Acquisition Opportunities. Mr. Miller
will obtain from potential private company candidates written materials
regarding these privately held companies prior to considering a reverse
merger/acquisition transaction with said companies. Mr. Miller plans on
requesting or will request such items as:



- a description of products, services and company history;
- management resumes;
- available projections with related assumptions upon which they are based;

8

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- an explanation of proprietary products and services;
- evidence of existing patents, trademarks or service marks or rights
 thereto;
- present and proposed forms of compensation to management;
- a description of transactions between the privately-held company and its
 affiliates during relevant prior periods;
- a description of present and required facilities;
- an analysis of risks and competitive conditions;
- a financial plan of operation and estimated capital requirements;
- audited financial statements; and
- other information deemed relevant.



Mr. Miller will endeavor to personally meet with management
and key personal of companies which he considers are serious candidates for
concluding a reverse merger or acquisition. Preferential will also attempt to
obtain independent analysis or verification of certain information provided,
check references of management and key personnel and take other reasonable
investigative measures, to the extent of Preferential's limited financial
resources. Preferential will not acquire or merge with any company for which
current audited financial statements cannot be obtained prior to or within a
reasonable period of time after closing of the proposed transaction.



Mr. Miller intends to take into consideration the following
factors when analyzing a company for its potential as a reverse
merger/acquisition candidate:



- potential for growth, indicated by new technology, anticipated market
 expansion or new products;
- competitive position compared to other companies of similar size and
 experience within the privately-held company's industry segment as well as
 within the industry as a whole;
- strength and diversity of management; either in place or scheduled for
 recruitment;
- capital requirements and anticipated availability of required funds to be
 provided by us or from operations, through the sale of additional securities,
 through joint ventures or similar arrangements or from other sources;
- the extent to which the business of the privately-held company can be
 advanced;
- The regulatory environment within the privately-held company's industry;
- the market performance of equity securities of similarly situated companies
 in the privately-held company's industry; and
- reputation of owners, principals and/or managers for complying with and not
 violating federal and/or state securities laws.



The time, effort and expense required to evaluate a
privately-held company for a reverse merger/acquisition transaction with
Preferential and to effectuate such a transaction cannot be predicted with any
degree of accuracy. Preferential does not have any full-time employees and Mr.
Miller, the sole unpaid employee of Preferential, is not required to devote any
specific amount of time to the business of Preferential.



Preferential does not intend to merge with or acquire a
business or company in which Mr. Miller has, directly or indirectly, an
ownership interest in.



Treatment of Reverse Merger/Acquisition Transaction.
The SEC considers a reverse merger/acquisition transaction to be a capital
transaction in substance, rather than a business combination. That is, the
transaction will be equivalent to the issuance of stock by the privately-held
company for the net monetary assets of Preferential, accompanied by a
recapitalization. As a result, the post-reverse merger/acquisition comparative
historical financial statements for Preferential will be those of the
privately-held company, with appropriate footnote disclosure concerning the
changes in the capital structure of the privately-held company, effected at the
reverse merger/acquisition transaction date.



Cost Projections. It is anticipated that Preferential
will incur nominal expenses in the implementation of its business plan. Our main
cost is related to compliance with our ongoing reporting issuer obligations with
the SEC. Because Preferential has no capital with which to pay these anticipated
expenses, Mr. Harry Miller has verbally agreed to pay these charges with his
personal funds. Any monies loaned to Preferential by Mr. Miller will be
unsecured and non- interest bearing. We expect that any loans made to us by Mr.
Miller will be repaid from cash generated from our operations after we have
merged or acquired a privately held company. Mr. Miller has agreed that the
repayment of any loans made by it to Preferential will not impede, or be made
conditional in any manner, to consummation of a proposed transaction.

9

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## 

Item 7A. Quantitive and Qualitive Disclosure About
Market Risk

## 

No disclosure is required hereunder as the Company is a "smaller reporting
company," as defined in Item 10(f) of Regulation S-K.

## 

Item 8. Financial Statements and Supplementary
Data

The financial statements and schedules that constitute Item 8 of Form 10-K
immediately follow on the next page.

10

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PREFERENTIAL EQUITIES CORP.



Index





Report of Independent Registered Public Accounting Firm
   12Financial Statements:Balance Sheet
   13Statement of Operations
   14Statement of Stockholders' Equity
   15Statement of Cash Flows
   16Notes to Financial Statements
   17-20




11

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GEORGE STEWART, CPA
316 17TH AVENUE SOUTH
SEATTLE, WASHINGTON 98144
(206) 328-8554 FAX(206) 328-0383



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors

Preferential Equities Corp.

I have audited the accompanying balance sheet of Preferential Equities Corp.
(A Development Stage Company) as of December 31, 2010 and 2009, and the related
statement of operations, stockholders' equity and cash flows the years then
ended and for the period from October 2, 2006 (inception) to December 31, 2010.
These financial statements are the responsibility of the Company's management.
My responsibility is to express an opinion on these financial statements based
on my audit.

I conducted my audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audit provides a reasonable
basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Preferential Equities Corp., (A
Development Stage Company) as of December 31, 2010 and 2009, and the results of
its operations and cash flows for the years then ended and from October 2, 2006
(inception) to December 31, 2010 in conformity with generally accepted
accounting principles in the United States of America.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note #3 to the financial
statements, the Company has had no operations and has no established source of
revenue. This raises substantial doubt about its ability to continue as a going
concern. Management's plan in regard to these matters is also described in Note
# 3. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.



/S/ George Stewart

Seattle, Washington
March 13, 2011

12

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|Preferential Equities Corp.                   
|----------------------------------------------
|(A Development Stage Company)                 
|Balance Sheets                                
|                                              
|ASSETS                                        
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)  
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|                                              
|See Accompanying Notes and Accountant's Report
|                                              

13

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Preferential Equities Corp.(A Development Stage Company)Statements of OperationsOctober 2, 2006Year
  
  
  Year
  
  
  (inception)Ended
  
  
  Ended
  
  
  throughDec. 31,
  
  
  Dec. 31,
  
  
  Dec. 31,2010
  
  
  2009
  
  
  2010RevenuesRevenues
  $
  -
  
  $
  -
  
  $
  -Total Revenues
  
  -
  
  
  -
  
  
  -Operating CostsAdministrative
  Expenses
  
  5,650
  
  
  5,250
  
  
  23,400Total Operating
  Costs
  
  5,650
  
  
  5,250
  
  
  23,400Net Income
  (Loss)
  $
  (5,650)
  
  $
  (5,250)
  
  $
  (23,400)Basic earnings
  (loss) per share
  $
  (0.00)
  
  $
  (0.00)Weighted average
  number ofcommon shares
  outstanding
  
  5,000,000
  
  
  5,000,000See Accompanying Notes and Accountant's Report


14

---

Preferential Equities Corp.
  (A Development Stage Company)
  Statement of Changes in Stockholders' Equity
  From October 2, 2006 (Inception) through December 31, 2010DeficitCommon
  
  Common
  
  Additional
  
  AccumulatedStock
  
  Stock
  
  Paid-in
  
  During
  
  TotalAmount
  
  Capital
  
  DevelopmentStageBalance, October
  2, 2006
  -
  
  $ -
  
  $ -
  
  $ -
  
  $ -Stock issued for cash on
  October 2, 2006 @$0.001 per share5,000,000
  
  5,000
  
  -
  
  -
  
  5,000Net loss, December
  31, 2006
  
  
  
  
  
  
  (2,000)
  
  (2,000)Balance,
  December 31, 2006
  5,000,000
  
  $ 5,000
  
  $ -
  
  $ (2,000)
  
  $ 3,000Net loss, December
  31, 2007
  
  
  
  
  
  
  (5,250)
  
  (5,250)Balance,
  December 31, 2007
  5,000,000
  
  $ 5,000
  
  $ -
  
  $ (7,250)
  
  $ (2,250)Net loss, December
  31, 2008
  
  
  
  
  
  
  (5,250)
  
  (5,250)Balance,
  December 31, 2008
  5,000,000
  
  $ 5,000
  
  $ -
  
  $ (12,500)
  
  $ (7,500)Net loss, December
  31, 2009
  
  
  
  
  
  
  (5,250)
  
  (5,250)Balance,
  December 31, 2009
  5,000,000
  
  $ 5,000
  
  $ -
  
  $ (17,750)
  
  $12,750)Net loss, December
  31, 2010
  
  
  
  
  
  
  (5,650)
  
  (5,650)Balance,
  December 31, 2010
  5,000,000
  
  $ 5,000
  
  $ -
  
  $ (23,400)
  
  $18,400)












































See Accompanying Notes and Accountant's Report

15

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Preferential Equities Corp.(A Development Stage Company)Statements of Cash FlowsOctober 2, 2006Year
  
  
  Year
  
  
  (inception)Ended
  
  
  Ended
  
  
  throughDec. 31,
  
  
  Dec. 31,
  
  
  Dec. 31,2010
  
  
  2009
  
  
  2010CASH FLOWS FROM OPERATING ACTIVITIESNet
  income (loss)
  
  $
  (5,650)
  
  $
  (5,250)
  
  $
  (23,400)Adjustments to reconcile net loss to net cashprovided by (used in) operating activities:Changes
  in operating assets and liabilities:Increase (Decrease) in Advances from Officers
  6,650
  
  
  4,250
  
  
  18,400Increase (Decrease) in Accounts Payable
  (1,000)
  
  
  1,000Net cash provided by (used in) operating activities
  -
  
  
  -
  
  
  (5,000)CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of equipment
  
  -
  
  
  -
  
  
  -Net cash provided by (used in) investing activities
  -
  
  
  -
  
  
  -CASH FLOWS FROM FINANCING ACTIVITIESIssuance of common stock
  
  
  
  
  
  
  
  5,000Additional paid-in capital(Increase) Decrease in Subscription Receivable
  
  
  
  -Net cash provided by (used in) financing activities
  -
  
  
  -
  
  
  5,000Net increase (decrease) in cash
  
  -
  
  
  -
  
  
  -Cash at beginning of period
  
  
  
  
  
  
  
  -Cash at end of period
  
  $
  -
  
  $
  -
  
  $
  -SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATIONCash
  paid during year for :Interest
  
  
  $
  -
  
  $
  -
  
  $
  -Income
  Taxes
  
  $
  -
  
  $
  -
  
  $
  -See Accompanying Notes and Accountant's Report




16

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PREFERENTIAL EQUITIES CORP.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2010



NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS



Preferential Equities, Corp. (the Company) was incorporated
under the laws of the State of Nevada on October 2, 2006. The Company is
pursuing their business as may be necessary, convenient or desirable to
accomplish.



The Company is in the development stage. Its activities to
date have been limited to capital formation, organization and development of its
business plan. The Company has not commenced operations.



NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



a. Basis of Accounting



The Company's financial statements are prepared using the
accrual method of accounting. The Company has elected a December 31, year-end.



b. Basic Earnings per Share



ASC No.260 "Earnings Per Share", which specifies the
computation, presentation and disclosure requirements for earnings (loss) per
share for entities with publicly held common stock. The Company has adopted the
provisions of ASC No. 260.



Basic net loss per share amounts is computed by dividing the
net loss by the weighted average number of common shares outstanding. Diluted
earnings per share are the same as basic earnings per share due to the lack of
dilutive items in the Company.



c. Cash Equivalents



The Company considers all highly liquid investments purchased
with an original maturity of three months or less to be cash equivalents.



d. Use of Estimates and Assumptions



The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during

the reporting period. Actual results could differ from those
estimates. In accordance with ASC No. 250 all adjustments are normal and
recurring.

17

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PREFERENTIAL EQUITIES CORP.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2010



NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)



e. Income Taxes



Income taxes are provided in accordance with ASC No. 740,
"Accounting for Income Taxes". A deferred tax asset or liability is recorded for
all temporary differences between financial and tax reporting and net operating
loss carryforwards. Deferred tax expense (benefit) results from the net change
during the year of deferred tax assets and liabilities.



Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some portion
of all of the deferred tax assets will be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.

NOTE 3. GOING CONCERN

The accompanying financial statements are presented on a
going concern basis. The Company had no operations during the period from
October 2, 2006 (date of inception) to December 31, 2010, generated no revenues,
and incurred losses of $ 23,400. This condition raises substantial doubt about
the Company's ability to continue as a going concern. Because the Company is
currently in the development stage and has minimal expenses, management believes
that the company's current cash of $ -0- is sufficient to cover the expenses
they will incur during the next twelve months in a limited operations scenario
or until they raise additional funding.

NOTE 4. WARRANTS AND OPTIONS



There are no warrants or options outstanding to acquire any
additional shares of common stock.

18



---

PREFERENTIAL EQUITIES CORP.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2010





NOTE 5. RELATED PARTY TRANSACTIONS



The sole officer and director of the Company may, in the
future, become involved in other business opportunities as they become
available, he may face a conflict in selecting between the Company and his other
business opportunities. The Company has not formulated a policy for the
resolution of such conflicts.



Harry Miller, sole officer and director of the
Company, will not be paid for any underwriting services that he performs on
behalf of the Company with respect to the Company's upcoming SB-2 offering. He
will also not receive any interest on any funds that he advances to the Company
for offering expenses prior to the offering being closed which will be repaid
from the proceeds of the offering.



While the Company is seeking additional capital, Mr. Miller has advanced
funds to the Company to pay any costs incurred by it. These funds are interest
free. The balance due Mr. Miller was $ 18,400 on December 31, 2010.



NOTE 6. INCOME TAXES

As of December 31, 
  2010Deferred tax assets:
  6,256Net operating tax carryforwards
  $ -0-Other
  -0-Gross deferred tax assets
  -0-Valuation allowance
  (6,256)Net deferred tax assets
  $ -0-


Realization of deferred tax assets is dependent upon
sufficient future taxable income during the period that deductible temporary
differences and carryforwards are expected to be available to reduce taxable
income. As the achievement of required future taxable income is uncertain, the
Company recorded a valuation allowance.



NOTE 7. NET OPERATING LOSSES



As of December 31, 2010, the Company has net operating loss
carryforwards of $ 23,400. Net operating loss carryforward expires twenty years
from the date the loss was incurred.

19



---

PREFERENTIAL EQUITIES CORP.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2010





NOTE 8. STOCK TRANSACTIONS



Transactions, other than employees' stock issuance, are in
accordance with ASC No. 505. Thus issuances shall be
accounted for based on the fair value of the consideration received.
Transactions with employees' stock issuance are in accordance with ASC No. 718.
These issuances shall be accounted for based on the fair value of the
consideration received or the fair value of the equity instruments issued, or
whichever is more readily determinable.



On October 2, 2006 the Company issued a total of 5,000,000
shares of common stock to a director for cash in the amount of $0.001 per share
for a total of $5,000.



As of December 31, 2010 the Company had 5,000,000 shares of
common stock issued and outstanding.



NOTE 9. STOCKHOLDERS' EQUITY



The stockholders' equity section of the Company contains the
following classes of capital stock as of December 31, 2010:



Common stock, $ 0.001 par value: 100,000,000 shares
authorized; 5,000,000 shares issued and outstanding.

20



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Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure

Preferential has not changed accountants since its formation and there are no
disagreements with the findings of said accountants.

Item 9A. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Disclosure controls are controls and procedures that are designed to ensure
that information required to be disclosed in our reports filed under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the SEC's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by a Company in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the company's management, including its principal executive and principal
financial officers, or persons performing similar functions, as appropriate to
allow timely decisions regarding required disclosure.

Our management carried out an evaluation (with the participation of our CEO
and CFO), of the effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934 ("Exchange Act"). Based upon that evaluation,
the Company's CEO and CFO have concluded that the Company's disclosure controls
and procedures were effective as of December 31, 2010.

(b) Internal control over financial reporting

Management's annual report on internal control over financial reporting

Management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act. Our internal control over financial reporting is
intended to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with U.S. GAAP. Our internal control over financial reporting should
include those policies and procedures that:

- pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of our assets;
- provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with applicable GAAP,
and that receipts and expenditures are being made only in accordance with
authorizations of management and the Board of Directors; and
- provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have a
material effect on the financial statements.

Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

As required by Rule 13a-15(c) promulgated under the Exchange Act, our
management, with the participation of our Chief Executive Officer ("CEO") and
Chief Financial Officer ("CFO"), evaluated the effectiveness of our internal
control over financial reporting as of December 31, 2010. Management's
assessment took into consideration the size and complexity of the company and
was based on criteria set forth by the Committee of Sponsoring Organizations of
the Treadway Commission in Internal Control over Financial Reporting -Guidance
for Smaller Public Companies. In performing the assessment, management has
concluded that our internal control over financial reporting was effective as of
December 31, 2010.

Attestation report of the registered public accounting firm

This annual report does not include an attestation report of the company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the company's
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the company to provide only management's
report in this annual report.

21

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Changes in internal control over financial reporting

There were no changes in our internal controls that occurred during the year
covered by this report that have materially affected, or are reasonably likely
to materially affect our internal controls.

Changes in Internal
Controls

Based on the evaluation as of December 31, 2010,
Harry Miller, our President, Chief Executive Officer, and Chief Financial
Officer has concluded that there were no significant changes in our internal
controls over financial reporting or in any other areas that could significantly
affect our internal controls subsequent to the date of his most recent
evaluation, including corrective actions with regard to significant deficiencies
and material weaknesses.

ITEM 9A(T) -Controls and Procedures above



See Item 9A - Controls and Procedures above.

Item 9B. Other Information

None

PART III

Item 10. Directors and Executive Officers and Corporate Governance

Identification of Directors and Executive Officers

The following table sets forth the names, positions and ages of our executive
officer and directors.



|Name         | Age | Position                                                                               | Since          
|------------ | --- | -------------------------------------------------------------------------------------- | ---------------
|             |     |                                                                                        |                
|Harry Miller | 77  | President, CEO, CFO, Treasurer,
  Principal Accounting Officer, Secretary and Director | October 2, 2006



Mr. Miller has held the above offices/positions since inception and is
expected to hold said offices/positions until the next meeting of stockholders.

Background of Officers and Directors

The principal occupation and business experience during the last five years
for each of our present director and executive officer is as follows:



Harry Miller, has been President, Chief Executive Officer, Secretary,
Treasurer, Acting Chief Financial Officer and sole director of Preferential
since October 2, 2006. Mr. Miller has years of experience in starting new
enterprises; having spent the last thirty years in forming many companies and
providing consulting services to a variety of businesses. Many of these
companies were in the medical products and health care industries. Currently he
is associated with Eastside Mortgage, LLC. of Bellevue, Washington where he
maintains a real estate license and analyzes funding proposals, primarily
construction loans for his investment portfolio and that of the principal of the
firm. In 1991, Mr. Miller established Solar Health Care of Florida, investing in
the Medicaid HMO industry. As CEO of Solar Health Care, he developed its
business plan that included leasing office space, preparing and filing the
complex application to the state, hiring staff and negotiating the purchase of
an existing HMO. During the subsequent five year period, Mr. Miller entered into
a contractual arrangement to provide medical care to over 8,000 patients. At the
end of his tenure intense competitive pressures caused the company to be wound
up. Mr. Miller is the former director and officer of the following reporting issuers: (1)
Coronation Acquisition Corp., a former blank check company, now known as Supreme
Realty Investments, Inc. ("SRLT.OB"); (2) Black Gardenia Corp., a former blank
check company, now known as Asia Interactive Media Inc.; (3) Medina Coffee,
Inc., an espresso cart and cafe company, now known as China Bak Battery Inc. ("CBBT.OB");
and Dentalserv.com, a dental software company which changed control in December
2006 ("DSRV.OB"). Mr. Miller is also the President and Chief Executive Officer
of Clifton Star Resources Inc. (CFO.V), a TSX Venture listed mining exploration
company.

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Significant Employees

Preferential has no employees who are not executive officers, but who are
expected to make a significant contribution to our business.

Involvement in Certain Legal
Proceedings

During the past five years, none of our directors or officers have been:



- a general partner or executive officer of any business against which any
 bankruptcy petition was filed, either at the time of the bankruptcy or two
 years prior to that time;
- convicted in a criminal proceeding or named subject to a pending criminal
 proceeding (excluding traffic violations and other minor offenses);
- subject to any order, judgment or decree, not subsequently reversed,
 suspended or vacated, of any court of competent jurisdiction, permanently or
 temporarily enjoining, barring, suspending or otherwise limiting his
 involvement in any type of business, securities or banking activities; or
- found by a court of competent jurisdiction (in a civil action), the
 Securities and Exchange Commission or the Commodity Futures Trading Commission
 to have violated a federal or state securities or commodities law, and the
 judgment has not been reversed, suspended or vacated.

Family Relationships

Not Applicable. We currently have only one director and officer, Mr. Harry
Miller.

Audit Committee Financial
Expert

Preferential does not have a standing Audit Committee. The functions of the
Audit Committee are currently assumed by our Board of Directors. Additionally,
Preferential does not have a member on its board of directors that has been
designated as an audit committee "financial expert." Preferential does not
believe that the addition of such an expert would add anything meaningful to
Preferential at this time. It is also unlikely Preferential would be able to
attract an independent financial expert to serve on its Board of Directors at
this stage of its development. In order to entice such a director to join its
Board of Directors Preferential would probably need to acquire directors' errors
and omission liability insurance and provide some form of meaningful
compensation to such a director; two things Preferential is unable to afford at
this time.

Compliance with Section 16(a) of the Securities
Exchange Act of 1934

Under the securities laws of the United States, our directors, executive
officers (and certain other officers) and any persons holding more than 10% of
our outstanding voting securities are required to report their ownership in our
securities and any changes in that ownership to the SEC. Based solely upon
reliance on the verbal and written representations of our director and officer,
we believe we are in compliance with Section 16(a) of the Securities Exchange
Act of 1934. Under this section Mr. Harry Miller is now required to file a
Form 3 initial report with the Securities and Exchange Commission and file a
Form 4 on any subsequent changes. Mr. Miller has not bought or sold any
securities since October 2, 2006 when we issued 5,000,000 shares of our common
stock to Mr. Harry Miller, for an aggregate purchase price of $5,000.00.

Code of Ethics

Preferential has not adopted a Code of Ethics at this time and the Board of
Directors of Preferential is reviewing the necessity of adopting such a document
at this time by Preferential given the composition of its Board of Directors and
Officer and its scale of its operations at this time.

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Item 11. Executive Compensation



Summary Compensation of Executive Officers

The following table contains information concerning the compensation paid
during our fiscal years ended December 31, 2010, 2009 and 2008 to the persons
who served as our Chief Executive Officers, and each of the two other most
highly compensated executive officers during 2010 (collectively, the "Named
Executive Officers").



|SUMMARY COMPENSATION TABLE                                                      
|--------------------------------------------------------------------------------
|Name and Principal
  Position                                                   
|Harry
  Miller
  President CEO, Treasurer, Secretary, Acting CFO and Director(1)
|2009                                                                            
|2008                                                                            





|Notes:
|------
|(1)   



Compensation of Directors

Preferential's sole officer and director has not received any compensation
for his services rendered to Preferential since inception. Harry Miller has
agreed to act without compensation until authorized by the Board of Directors,
which is not expected to occur until Preferential has generated revenues from
operations after consummation of a merger or acquisition. As of the date of this
registration statement, Preferential has no funds available to pay Harry Miller.
Further, Harry Miller is not accruing any compensation pursuant to any agreement
with Preferential.



It is possible that, after Preferential successfully consummates a merger or
acquisition with an unaffiliated entity, that entity may desire to employ or
retain Mr. Miller for the purposes of providing services to the surviving
entity, or otherwise provide other compensation to Mr. Miller. However,
Preferential has adopted a policy whereby the offer of any post-transaction
remuneration to members of management will not be a consideration in
Preferential's decision to undertake any proposed transaction.



Preferential may also compensate Harry Miller, President of Preferential
shares of Common Stock of Preferential for his services in connection with
completion of an acquisition or merger. Preferential does not intend to
compensate any other individual or consultants in connection with completion of
an acquisition or merger.

Employment Contracts and Termination of Employment
or Change of Control

We have no plans or arrangements in respect of remuneration received or that
may be received by our executive officers to compensate such officers in the
event of termination of employment (as a result of resignation, retirement,
change of control) or a change of responsibilities following a change of
control.

Further, no retirement, pension, profit sharing, stock option or insurance
programs or other similar programs have been adopted by Preferential for the
benefit of its employees.

### 

Compensation of Directors

No cash compensation was paid to any of our directors for the director's
services as a director during the year ended December 31, 2010 or since our
inception.  We have no standard arrangement pursuant to which our directors
are compensated for their services in their capacity as directors except for the
granting from time to time of incentive stock options.  The board of
directors may award special remuneration to any director undertaking any special
services on behalf of Preferential other than services ordinarily required of a
director.  Other than indicated below, no director received and/or accrued
any compensation for his services as a director, including committee
participation and/or special assignments.

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Board of Directors Report on Executive Compensation

The Board of Directors of Preferential is responsible for
reviewing and determining the annual salary and other compensation of the
executive officers and key employees of Preferential. The goals of Preferential
are to align compensation with business objectives and performance and to enable
Preferential to attract, retain and reward executive officers and other key
employees who contribute to the long-term success of Preferential. Preferential
will provide base salaries to its executive officers and key employees
sufficient to provide motivation to achieve certain operating goals. Although
salaries are not specifically tied to performance, incentive bonuses are
available to certain executive officers and key employees. In the future,
executive compensation may include without limitation cash bonuses, stock option
grants and stock reward grants. In addition, Preferential may set up a pension
plan or similar retirement plans.

Preferential has no pension, health, annuity, insurance,
profit sharing or similar benefit plans.

Stock Options/SAR Grants

During the fiscal years ended December 31, 2010 and December
31, 2009, we did not grant any stock options or stock appreciation rights to any
of our directors or officers. There were no stock options exercised during the
fiscal year ended December 31, 2010 or December 31, 2009, and there were no
stock options or stock appreciation rights outstanding on December 31, 2010 or
December 31, 2009.

Long-Term Incentive Plans/ Equity Compensation
Plan

There are no arrangements or plans in which we provide
pension, retirement or similar benefits for directors or executive officers,
except that our directors and executive officers may receive stock options at
the discretion of our board of directors.  We do not have any material
bonus or profit sharing plans pursuant to which cash or non-cash compensation is
or may be paid to our directors or executive officers, except that stock options
may be granted at the discretion of our board of directors.

Stock Option Plans

Preferential has not adopted a stock option plan or long-term
incentive plans at this time.

Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters

Principle Stockholders

The following table sets forth certain information as of December 31, 2010,
regarding the beneficial ownership of Preferential's Common Stock by (i) each
stockholder known by Preferential to be the beneficial owner of more than 5% of
Preferential's Common Stock, (ii) by each Director and executive officer of
Preferential and (iii) by all executive officer and Directors of Preferential as a group. Each of the
persons named in the table has sole voting and investment power with respect to
Common Stock beneficially owned.





|Name and Address
  of Beneficial Owner              | Amount and Nature of
  Beneficial Ownership (1)                             | Percent of Class                                                                                                                                
|--------------------------------------------------- | --------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------
|Harry Miller
  Bellevue, WA                         | 5,000,000
  (Restricted securities as defined in theSecurities Act of 1933) | 100%                                                                                                                                            
|All officers and directors
  as a group (1 person). | 5,000,000
  (Restricted securities as defined in theSecurities Act of 1933) | 100%                                                                                                                                            
|                                                    | (1)                                                                         | Unless otherwise indicated, the named party is believed to have
  sole investment and voting control of the shares set forth in the above table.





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There are currently no options, warrants, rights or other securities
conversion privileges granted to our officer, director or beneficial owner.

Changes in Control

There are no present arrangements or pledges of Preferential's securities which
may result in a change in control of Preferential.

Item 13. Certain Relationships and Related
Transactions, and Director Independence

Certain Relationships and Related Transactions

We were formed on October 2, 2006. On October 2, 2006, we issued 5,000,000
shares of our common stock to Mr. Harry Miller, for an aggregate purchase price
of $5,000. Mr. Harry Miller, is our President, Chief Financial Officer,
Secretary, and a director.

As of December 31, 2010, Mr. Miller has loaned Preferential a total of
$18,400 for working capital (year ended December 31, 2009 - $11,750). The
advance does not carry an interest rate, is unsecured and has no fixed terms of
repayment.



There have been no other related party transactions, or any other
transactions or relationships required to be disclosed pursuant to Item 404 of
Regulation S-B.

Director Independence.

We currently do not have any independent directors, as the term "independent"
is defined by the rules of the Nasdaq Stock Market (Note: Our shares of common
stock are not listed on NASDAQ or any other national securities exchange and
this reference is used for definition purposes only). We currently only have one
director on our Board of Directors.

Item 14. Principal Accounting Fees and Services

Fees and Services

We were formed October 2, 2006. George Stewart, CPA, audited our financial
statements for fiscal 2010. The following is an aggregate of fees billed for
each of the last year for professional services rendered by our principal
accountants:



|                                                                                                | 2010  |                                  | 2009 
|----------------------------------------------------------------------------------------------- | ----- | -------------------------------- | -----
|Audit fees - auditing of our annual financial statements and
  preparation of auditors' report. | 2,000 |                                  | 2,000
|Audit-related fees - review of each of the quarterly financial
  statements.                    | 3,400 |                                  | 3,000
|Tax fees - preparation and filing of three major tax-related
  forms and tax planning.          | 250   |                                  | 250  
|All other fees - other services provided by our principal
  accountants.                        | -     |                                  | -    
|Total fees paid or accrued to our principal accountants                                         | 5,650 |                                  | 5,250
|Notes:                                                                                          | (1)   | This number is an estimate only.



Pre-Approval Policies and Procedures

We understand the need for our principal accountants to maintain objectivity
and independence in their audit of our financial statements. To minimize
relationships that could appear to impair the objectivity of our principal
accountants, our audit committee has restricted the non-audit services that our
principal accountants may provide to us primarily to tax services and review
assurance services.

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We are only to obtain non-audit services from our principal accountants when
the services offered by our principal accountants are more effective or
economical than services available from other service providers, and, to the
extent possible, only after competitive bidding. These determinations are among
the key practices adopted by the audit committee effective during fiscal 2010.
The board has adopted policies and procedures for pre-approving work performed
by our principal accountants.

After careful consideration, the audit committee of the board of directors
has determined that payment of the above audit fees is in conformance with the
independent status of our company's principal independent accountants. Before
engaging the auditors in additional services, the audit committee considers how
these services will impact the entire engagement and independence factors.

PART IV

Item 15. Exhibits, Financial Statement Schedules

Exhibit Number
  
  Exhibit Title31.a
  
  Section 906 Certificate of CEO31.b
  
  Section 906 Certificate of CFO32
  
  Section 302 Certificate of CEO &
  CFO


The Board of Directors has pre-approved specifically identified non-audit
related services, including tax compliance, review of tax returns, documentation
of processes and controls as submitted to the Board of Directors from time to
time.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.



PREFERENTIAL EQUITIES CORP./s/
  Harry MillerBy:
  Harry Miller,
  President, CEO, Secretary, Treasurer, CFO, 
  Principal Accounting Officer and sole DirectorDate:
  March 31, 2011






Pursuant to the requirements of the Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities an don the dates indicated.

/s/ Harry MillerBy:
  Harry Miller,
  President, CEO, Secretary, Treasurer, CFO, 
  Principal Accounting Officer and sole DirectorDate:
  March 31, 2011


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