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

                                    FORM 10-K

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

                       For the year ended January 31, 2006

                         Commission File Number 0-21995


                          First Aviation Services Inc.
             (Exact name of registrant as specified in its charter)

          15 Riverside Avenue
          Westport, Connecticut                            06880-4214

                    Issuer's telephone number (203) 291-3300

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

                                                    Name of each exchange
          Title of each class                       on which registered
          -------------------                       -------------------
          None                                      None

          Securities registered pursuant to Section 12(g) of the Act:
                         Common Stock, $0.01 par value

Indicate by check mark if the registrant is a well-known seasoned issuer as
defined in Rule 405 of the Securities Act. Yes    No X
                                              ---   ---

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15 (d) of the Securities Act.  Yes    No X
                                                                    ---   ---

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act 1934 during
the past 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 or for such short period that the registrant was subject to
such filing requirements.  Yes X   No
                              ---    ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of the 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.  X
           ---

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. Check One:
Large Accelerated Filer      Accelerated Filer      Non-Accelerated Filer  X
                        ---                    ---                        ---

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

The aggregate market value of voting common and non-voting equity held by
non-affiliates as of July 31, 2005 was approximately $13.7 million.

The number of shares outstanding of the registrant's common stock as of April
28, 2006 was 7,353,250 shares.

                      Documents incorporated by reference:

  Portions of the Registrant's definitive Proxy Statement for the 2006 Annual
Meeting of Stockholders is incorporated herein by reference into Part III
hereof.



<PAGE>


                          First Aviation Services Inc.
                                TABLE OF CONTENTS


Forward Looking Statements.....................................................3

                                     Part I

Item 1.  Business..............................................................3
Item 1A. Risk Factors..........................................................6
Item 1B. Unresolved Staff Comments ............................................8
Item 2.  Properties............................................................8
Item 3.  Legal Proceedings.....................................................8
Item 4.  Submission of Matters to a Vote of Security Holders...................8
Executive Officers of the Registrant...........................................9

                                     Part II

Item 5.  Market for Registrant's Common Equity, Related Stockholder Matters
         and Issuer Purchases of Equity Securities............................10
Item 6.  Selected Financial Data..............................................11
Item 7.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations................................................12
Item 7A. Quantitative and Qualitative Disclosures About Market Risk...........20
Item 8.  Financial Statements and Supplementary Data..........................20
Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure.................................................20
Item 9A. Controls and Procedures..............................................20
Item 9B. Other Information....................................................20

                                    Part III

Item 10. Directors and Executive Officers of the Registrant...................21
Item 11. Executive Compensation...............................................21
Item 12. Security Ownership of Certain Beneficial Owners and Management and
         Related Stockholder Matters..........................................21
Item 13. Certain Relationships and Related Transactions.......................21
Item 14. Principal Accountant Fees and Services...............................21

                                     Part IV

Item 15. Exhibits and Financial Statement Schedules...........................22
Signatures....................................................................26
Index to Consolidated Financial Statements and Supplementary Data.............F1



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<PAGE>



                          First Aviation Services Inc.

                           Annual Report on Form 10-K
                   for the Fiscal Year Ended January 31, 2006

Forward-Looking Statements
--------------------------

Certain statements discussed in Item 1, "Business", Item 3, "Legal Proceedings",
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations", Item 7, "Liquidity and Capital Resources", and elsewhere in this
Annual  Report on Form 10-K  constitute  forward-looking  statements  within the
meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements  are not  statements  of  historical  facts,  but rather  reflect the
Company's  current  expectations  concerning  future  events and  results.  Such
forward-looking   statements,   including   those   concerning   the   Company's
expectations,  involve known and unknown risks, uncertainties and other factors,
some of which are beyond the  Company's  control,  that may cause the  Company's
actual  results,  performance  or  achievements,  or  industry  results,  to  be
materially  different  from any  future  results,  performance  or  achievements
expressed   or  implied  by  such   forward-looking   statements.   Such  risks,
uncertainties  and other important  factors  include,  the Company's  ability to
obtain parts and  components  from its  principal  suppliers on a timely  basis,
depressed domestic and international market and economic conditions,  especially
those currently  facing the aviation  industry as a whole, the impact of changes
in fuel and other freight related costs,  relationships with its customers,  the
ability of the Company's  customers to meet their  financial  obligations to the
Company,  the ability to obtain and service supply chain  management  contracts,
changes in  regulations  or  accounting  standards,  the  ability to  consummate
suitable  acquisitions  and  expand,  the  loss  of the  use of  facilities  and
distribution  hub in Memphis,  significant  failure of our  computer  systems or
networks,  efforts to comply with section 404 of the Sarbanes-Oxley Act of 2002,
and other  items that are  beyond the  Company's  control  and may cause  actual
results  to  differ  from  management's  expectations.   In  addition,  specific
consideration should be given to the various factors described in Item 1A, "Risk
Factors",  Item 7, "Management's  Discussion and Analysis of Financial Condition
and Results of  Operations",  and  elsewhere in this Annual Report on Form 10-K.
The Company undertakes no obligation to update any forward-looking statements or
cautionary factors except as required by law.

                                     PART I
                                     ------

Item 1.  Business
-----------------

General

     First Aviation Services Inc. ("First  Aviation"),  together with its wholly
owned subsidiaries,  Aerospace Products  International,  Inc. ("API"),  Aircraft
Parts  International,  Ltd.  ("API  Ltd."),  API Asia  Pacific  Inc.  ("API Asia
Pacific"), and API China, Inc. ("API China"), (collectively,  the "Company"), is
one of the premier suppliers of services to the aviation industry worldwide. The
services  the Company  provides  to the  aviation  industry  include the sale of
aircraft  parts  and  components,  the  provision  of  supply  chain  management
services,  overhaul and repair services for brakes and  starter/generators,  and
the assembly of custom hoses.

     First  Aviation  was  incorporated  in the state of Delaware  in 1995.  The
Company's  principal  executive  offices are located at 15  Riverside  Avenue in
Westport,  Connecticut 06880. Certain filings that First Aviation makes with the
U.S. Securities and Exchange Commission  (including annual reports on Form 10-K,
quarterly reports on Form 10-Q and current reports on Form 8-K) are available on
First Aviation's  corporate  website at www.favs.com.  These public filings also
can be obtained by calling our investor  relations  department,  or by e-mail at
first@firstaviation.com.

Industry Overview

     The market for aerospace parts and supplies consists of two market sectors,
the  manufacturing  parts sector and the  aftermarket  parts  sector.  These two
market sectors are related,  but require different customer focus to satisfy the
needs of the market. The manufacturing parts sector caters to parts installed on
new aircraft or engine  construction.  Large  original  equipment  manufacturers
("OEMs") sell directly to aircraft  manufacturers  and fabricators the parts and
supplies needed to manufacture new aircraft. The aftermarket parts sector caters
to the needs of aircraft and engines already in service and are typically out of
warranty,  and  out-of-production  aircraft  and  engines,  all  of  which  need
maintenance,  repair or modification.  Typically,  aircraft and engines that are


                                       3
<PAGE>


older or had more use require more parts and services.  Furthermore,  within the
aftermarket  parts sector there is a market for new parts and supplies,  as well
as used and refurbished parts and supplies.  New and used parts and supplies can
be  further  categorized  as  consumables  or  repairable  parts  and  supplies.
Therefore  many companies  that cater to the  aftermarket  parts sector sell new
parts and  supplies,  refurbished  and  repaired  parts and  supplies as well as
provide  overhaul and repair services on parts and components,  typically to the
same customers. Many suppliers and OEMs of parts and supplies have traditionally
relied  on  third-party  distributors,  such  as the  Company,  to  service  the
aftermarket  parts  sector.  Some of these  suppliers  now want to service  this
market sector  directly,  but in many cases do not have the market  expertise or
support infrastructure,  so they turn to third party logistics ("3PL") providers
for  assistance.  Similarly,  end-users want to outsource  their buy-side supply
chain  management  needs and turn to 3PL  providers  for  support.  The  Company
provides the  aftermarket  supply services  including the sale of parts,  repair
services and other supply chain services to end-users and suppliers.

     The Company believes based on information from Overhaul and Maintenance,  a
leading industry  publication,  that the current annual worldwide market for new
and used parts,  components and consumable  supplies for aircraft and engines is
estimated  to be  approximately  $23  billion.  This  market has leveled out and
started to increase  slowly after  several  years of decline.  Of the  worldwide
market,  an estimated $2.5 billion is supplied to the general aviation  category
of the aftermarket parts sector in which the Company principally operates,  $5.0
billion goes through  distribution to all market categories,  and the balance is
supplied direct to the end user. The aviation  aftermarket parts sector includes
passenger and cargo airlines, fleet and corporate aircraft operators,  certified
repair facilities,  governments and military services,  flight training schools,
fixed base operators  ("FBOs"),  business aviation,  helicopter and recreational
operators. The aviation aftermarket parts sector is highly-fragmented,  although
there are a  limited  number of  large,  well-capitalized  companies,  including
original equipment manufacturers ("OEMs"), and suppliers,  selling a broad range
of parts and services,  as well as numerous  smaller  competitors  serving niche
markets.

     Aviation  Aftermarket  Parts Sector.  The Company  markets its supply chain
services,  which includes parts sales and service contracts, to several distinct
categories of customers  within the aftermarket  parts sector.  These categories
consist  of  airlines,   corporate  flight   departments,   independent  airline
maintenance,  repair and overhaul  providers  ("MROs"),  large  corporate  MROs,
retail customers,  OEMs and general aviation customers.  The Company's products,
from more  than 170  manufacturers  and  suppliers,  constituting  approximately
200,000  new  and  factory  reconditioned  parts  and  components  are  sold  to
professional aircraft maintenance organizations,  aircraft owners and operators,
including fleet operators, airlines, and FBOs. The parts and components supplied
to the  marketplace  by the  Company are  approved by the FAA and are  generally
acquired  from small,  specialized  manufacturers  as well as major OEMs such as
Raytheon, Goodrich Aerospace, Champion, General Electric Lighting, Goodyear Tire
and  Rubber,  Marathon  Power  Technologies,   Michelin  Aircraft  Tire,  Parker
Hannifin,  Lycoming,  and Teledyne Continental Motors. The Company adds value to
commonly available products by offering  immediate  availability,  broad product
lines,  technical  assistance  and other value  added  supply  chain  management
services.  Supply chain management services allow the Company to offer parts and
components  to its  customers  to satisfy  the  customer's  needs.  The  Company
services the aftermarket parts sector as a channel provider,  whether it acts as
a supplier of parts  provided by an OEM, or  provides  supply  chain  management
services  to the OEM  who  chooses  to  sell  directly  to  customers.  Services
contracts are part of a continuum of product  lines offered by the Company.  The
terms  and  nature  of  supply  chain  management  services  are  stipulated  in
individualized contracts that are unique for each customer. The Company uses its
expertise  gained in  managing  its own parts and supply  business to manage its
customers' product in a seamless method to the end customer, and at less cost to
the Company's customer than if they serviced the market  themselves.  As part of
this process,  the Company provides its internal resources,  such as facilities,
personnel  and systems to the  customer.  The Company  either may supply its own
inventory  for  the  customer,  or  hold  its  customers'  inventory  in its own
facility,  without taking ownership of such inventory,  and supply the inventory
on behalf of its customer.  As an example,  the Company may pick,  pack and ship
product  on behalf of its  customer  in return for a fee based upon the level of
services  provided.  In providing  these  services the Company may provide other
support services as well to its customers,  including sales and billing, and the
use of the Company's call center.

     Competition.  Competition  in the  aftermarket  parts  sector for parts and
supplies is generally based on availability of product, customer service, price,
and  quality,  including  parts  traceability  to the OEM. The  Company's  major
competitors include Aviall,  Inc., AAR Corporation,  Cessna Aircraft Company and
Satair  A/S.  There  also is  substantial  competition,  both  domestically  and
overseas,  from  companies  who focus on  secondary or  regional/niche  markets.
Several of the Company's competitors have faced financial  difficulties over the
last several years.

     Competition  in  supply  chain  management  services  comes  from  numerous
companies  both  within and outside of the  aerospace  industry,  although  many
competitors  are  specialized  to  a  particular  industry.   The  supply  chain
management service provider market is fragmented and growing due to the trend to
outsource,  as a  result  of  the  need  for  companies  to  reduce  their  cost
structures.  Some competitors in the distribution business pay up front fees and


                                       4
<PAGE>


acquire their  customers'  inventory in exchange for supply chain  contracts,  a
strategy that the Company has not pursued.  The Company  believes that it has an
advantage in the aerospace  industry due to its experience,  knowledge and focus
within the industry.

     Increasing  Consolidation.  In order to reduce  the  administrative  costs,
lower the  costs  associated  with  carrying  and  managing  inventory,  satisfy
governmental regulatory scrutiny,  streamline buying decisions,  assure quality,
and reduce turnaround times,  aircraft and fleet operators are seeking to reduce
their number of  suppliers,  including  parts and component  providers,  and are
increasingly   using  third  parties  to  manage  their  parts  and   components
inventories. As a result, the Company believes that aircraft and fleet operators
increasingly  select larger,  more  sophisticated,  technologically  capable and
better-capitalized  service  providers  that are capable of providing a range of
high quality,  efficient and timely services,  including supply chain management
services.  Additionally, the increasing costs of technology and inventory levels
required to compete effectively has made entry into and continued success in the
industry   more   difficult   and   expensive.   The   Company   believes   that
well-capitalized,  technologically sophisticated providers capable of offering a
wide range of services,  like the Company,  will benefit from this consolidation
trend. In addition, some OEMs have decided to by-pass wholesale distributors and
are distributing their products directly to their customers, a trend the Company
believes will continue.

     Industry  Conditions.  The  aftermarket  parts  sector in which the Company
operates is affected by general economic conditions and specific market activity
like flight activity, flight training, and air travel for business and pleasure.
Revenues for the year ended January 31, 2006 were higher than the prior year due
to increased  demand in the  corporate  sector and  expansion  of the  Company's
product line offerings.  These positive influences were offset by reduced levels
of specific market  activity that were caused by higher fuel prices,  and in the
latter half of the year, adverse weather  conditions in the Southeast.  Recovery
in the market  environment  remains  mixed.  Overall  business  activity  in the
aftermarket  parts sector is  improving in several of the customer  segments the
Company serves.  However,  sales of aviation gasoline were reported down for the
year  according to a petroleum  industry  source,  which  impacts the  Company's
general  aviation parts sales  business.  Some categories have improved with the
economy,  for example,  retail and corporate,  but commercial airlines are still
vulnerable  to a downturn  from  terrorist  acts and higher fuel prices.  Flight
schools  continue  to struggle  due to record high fuel prices and recent  civil
aviation flight restrictions. Bankruptcies have and may continue to occur in the
airline industry,  which have reverberating  effects for all market sectors. The
Company  expects that the current level of business  activity in the aftermarket
parts  sector will  continue,  but the timing of any further  expansion  remains
uncertain.  The Company continues to look for new sources of revenue, to control
its costs, and expand its offering of services both within the aftermarket parts
sector and the  production  environment  through the use of  technology  and its
infrastructure.

Principal Suppliers

     API has five  suppliers  from whom  approximately  38%, 40%, and 45% of its
total  purchases  were made during the years ended  January 31,  2006,  2005 and
2004, respectively.

     The Company,  in September  2005,  entered into an initial  parts  purchase
agreement and long-term agreement to sell parts with Raytheon Aircraft Parts and
Inventory  Distribution Company LLC ("Rapid"),  to support Raytheon's Beechcraft
product line.

Sales and Marketing

     New and serviceable parts, supplies and components are sold to professional
aircraft  maintenance  organizations,  aircraft owners and operators,  including
fleet  operators and airlines,  flight training  schools,  and FBOs. The Company
uses senior management,  business development leaders,  regional sales managers,
inside  salespersons,  outbound  telephone  salespersons,  electronic  commerce,
independent  contract  representatives,  associated  distributors,  and  foreign
partners in its sales and marketing efforts.

     The Company sells supply chain management services by identifying potential
customers  and  opportunities  in  the  industry  through  contacts  within  the
industry,  advertising  and  targeted  marketing,  recommendations  from current
customers,   and  leads  from  regional  sales  managers.  Lead  times  for  the
procurement  of new  contracts  is  effected  by the  long-term  nature  of such
contracts,  relationship  building with the customer and the substantial  change
often required of the customer's existing business model.


                                       5
<PAGE>


Customers

     The Company currently has approximately 7,000 customers. The Company is not
reliant upon any single customer.

Regulation

     Regulatory bodies such as the FAA, the Joint Airworthiness  Administration,
the Department of Defense (the "DOD"),  and governments around the world require
all  aircraft  and  engines to follow  defined  maintenance  programs  to ensure
airworthiness and safety.  For parts and components  distributed by the Company,
including  inventory  managed  by the  Company  under  supply  chain  management
services,  the programs are  developed  by the original  equipment  manufacturer
(OEM) or customer in  coordination  with the  regulatory  body. The Company must
comply with  regulations  for shipping  hazardous  materials,  and is subject to
export control regulations. The Company has received certifications from the FAA
covering its repair and overhaul facilities, and its hose shop. The DOD requires
that parties providing parts for branches of the U.S. armed services comply with
applicable  government   regulations,   and  the  DOD  continually  reviews  the
operations  of the  Company  for  compliance  with  applicable  regulations.  In
addition,  the Company's  Memphis,  Tennessee facility is ISO/9002 certified and
subject to periodic reviews.

Environmental Matters and Proceedings

     The  Company's   operations  are  subject  to  federal,   state  and  local
environmental laws and related regulation by government agencies,  including the
United States  Environmental  Protection Agency, the United States Department of
Transportation,   and  the  United   States   Occupational   Safety  and  Health
Administration.   Among  other  matters,  these  regulatory  authorities  impose
requirements that regulate the operation, handling,  transportation and disposal
of  hazardous  materials,  the health and safety of  workers,  and  require  the
Company to obtain and  maintain  licenses  and  permits in  connection  with its
operations.  This extensive regulatory framework imposes potentially significant
compliance burdens and risks on the Company.  The Company believes that it is in
material  compliance  with all federal,  state,  and local laws and  regulations
governing its  operations.  The Company has not had and does not anticipate that
any material capital  expenditures  will be required during the next fiscal year
in order to  maintain  compliance  with the  federal,  state and local  laws and
regulations.

Employees

     As of January 31,  2006,  the Company  employed  204 persons on a full-time
basis.  None of the  Company's  employees  is covered by  collective  bargaining
agreements.  The Company  believes that its  relationship  with its employees is
good.

Geographic Areas

     Sales to unaffiliated  foreign customers were  approximately  25%, 22%, and
22% of net  sales  for  the  years  ended  January  31,  2006,  2005  and  2004,
respectively.  The majority of these customers were located in Canada, Southeast
Asia, Latin America and Europe.

Products and Services

     The Company  reports its revenue as one reportable  segment and believes it
is  impracticable  to breakout  various  products  and  services  for  reporting
purposes.

Item 1A.  Risk Factors
----------------------

Cautionary Statements

Certain statements made in Item 1 "Business",  Item 1A., "Risk Factors", Item 3,
"Legal Proceeding",  Item 7, "Management's  Discussion and Analysis of Financial
Condition and Results of  Operations",  "Liquidity and Capital  Resources",  and
elsewhere  in  this  Annual  Report  on  Form  10-K  constitute  forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995.  Forward-looking  statements are not statements of historical  facts,  but
rather reflect the Company's current expectations


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<PAGE>


concerning future events and results. Such forward-looking statements, including
those concerning the Company's expectations, involve known and unknown risks,
uncertainties and other factors, some of which are beyond the Company's control,
that may cause the Company's actual results, performance or achievements, or
industry results, to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such risks, uncertainties, and other important factors, include:

o    The Company's  continued  ability to obtain parts and  components  from its
     principal suppliers on a timely basis. The Company's  distribution services
     business  is  dependent  upon the  availability  of parts,  components  and
     supplies from its suppliers.  API does not have any long-term agreements or
     commitments from OEM's or other suppliers from whom it generally  purchases
     parts,  and is dependent upon these  manufacturers  for access to parts for
     resale. In addition, some OEM's, in an effort to find additional sources of
     income,  are attempting to distribute  directly to the customer and by-pass
     the  Company as a  distribution  channel.  A  disruption  in the  Company's
     ability to obtain  parts,  components  and  supplies,  for any reason,  and
     without  the  ability to find  alternative  sources,  would have an adverse
     impact on the Company's business.

o    Depressed  domestic  and  international  market  and  economic  conditions,
     especially  those currently  facing the aviation  industry as a whole.  The
     Company is dependent  upon the level of activity in the aviation  industry,
     including  commercial and recreational flying, and flight training schools.
     Economic  conditions in the aviation  industry,  as well as any downturn in
     economic conditions in general,  and increases in fuel prices specifically,
     will have an adverse impact on the Company's future results.

o    The impact of changes in fuel and other freight  related  costs.  Fuel is a
     significant cost in the aviation industry and increases in the cost of fuel
     or lack of  availability  of fuel could  have an adverse  impact on overall
     flight activity levels, and the Company's business.

o    Relationships   with  its   customers.   An  inability  to  maintain   good
     relationships   with  its   customers,   or  the  inability  to  expand  by
     establishing relationships with new customers, could have an adverse impact
     on the Company.

o    The ability of the Company's customers to meet their financial  obligations
     to the  Company.  The  inability of the  Company's  customers to meet their
     obligations to the Company, or to meet their general financial  obligations
     and face financial  difficulty,  would adversely  impact the ability of the
     Company to collect on its receivables and generate future sales.

o    The ability to obtain and service supply chain management contracts. Supply
     chain  management  contracts  have a long  lead-time and require  extensive
     effort and focus to obtain.  An inability to obtain such  contracts,  or to
     service the customer  appropriately,  for any reason, would have an adverse
     impact on the Company's future results.

o    Changes in regulations or accounting  standards.  The Company is subject to
     regulations (including income tax laws) and accounting standards that could
     change in the future,  and such changes could have an adverse impact on the
     Company's reported results.

o    The ability to consummate suitable acquisitions and expand. An inability to
     expand  through  acquisitions  or through other means of growth,  including
     internationally, may have an adverse impact on the Company.

o    The loss of the Company's  facilities and  distribution  hub. The Company's
     distribution  hub  is  located  in  Memphis  and  substantially  all of its
     inventory is stored in contiguous  warehouse space. Losing access or use of
     these facilities, through security concerns, natural disasters or damage to
     the  buildings,  would  interrupt  the  Company's  business  and destroy or
     prevent the Company from accessing its inventory, which could significantly
     affect its business and operating results.

o    The  significant  failure of  computer  systems or  networks  that  disrupt
     business or  operations.  The  Company's  computer  systems,  internal  and
     external  networks,  and  suppliers  are crucial to service  customers  and
     manage operations.  Significant disruptions or malfunctions of its computer
     systems or networks  could have a material  adverse  effect on its business
     and results of operations.  The Company is in the late stages of installing
     a new  suite  of  enterprise  resource  planning  software  using  internal
     resources and consultants for implementation.  Failure to achieve effective
     implementation  could have a material  adverse  effect on its  business and
     results of operations.  Failure of  implementation  to achieve  anticipated
     results could have a material adverse effect on sales,  business operations
     and results of operations.


                                       7
<PAGE>


o    The effort to comply  with  Section 404 of the  Sarbanes-Oxley  Act of 2002
     will result in  additional  expenses.  Financial and  management  resources
     needed for the Company and its  auditors to assess  internal  control  over
     financial  reporting  to  comply  with the  Sarbanes-Oxley  Act of 2002 and
     related  regulations  are  expected to be  significant,  and our efforts to
     comply will  result in  additional  expenses.  These  expenses  may have an
     adverse impact on our business results.

The factors  noted  above are not all  inclusive.  All of the factors  should be
considered   carefully  when  reviewing  the  Company's   current   results  and
forward-looking  statements.  The Company undertakes no obligation to update any
forward-looking statements or cautionary factors except as required by law.

Item 1B. Unresolved Staff Comments
----------------------------------

         None.


Item 2.   Properties
--------------------

         The Company leases all of its facilities, described below:

<TABLE>
<CAPTION>
                                                                                      Square               Lease
Location                      Entity               Description                        Footage            Expiration
--------                      ------               -----------                        -------            ----------
<S>                             <C>                    <C>                              <C>                 <C>
Westport, CT                  First Aviation       Executive offices                    3,000               2007

Memphis, TN                   API                  Distribution/sales                 204,000               2013

Calgary, Canada               API Ltd.             Sales                                5,600               2009

Montreal, Canada              API Ltd.             Sales                                7,270               2008

Clark Field, Pampanga,
Philippines                   API Asia Pacific     Distribution/sales                  22,235               2010

St. Charles, IL               API                  Sales                                1,000               2006
</TABLE>


Item 3.  Legal Proceedings
--------------------------

     The Company's  business  exposes it to possible claims for personal injury,
death or  property  damage  that may  result  from a failure  of  certain  parts
serviced  by the  Company  or  spare  parts  and  components  sold by it,  or in
connection  with the  provision of its supply  chain  management  services.  The
Company takes what it believes to be adequate  precautions to ensure the quality
of the  work  it  performs  and  the  traceability  of the  aircraft  parts  and
components that it sells.  The OEMs that  manufacture the parts,  components and
supplies that the Company sells carry  liability  insurance on the products they
manufacture.  In addition,  the Company  maintains  what it believes is adequate
liability insurance to protect it from any claims.

     In the normal  conduct of its  business,  the  Company  also is involved in
various  claims and  lawsuits,  none of which,  in the opinion of the  Company's
management,  will have a material,  adverse impact on the Company's consolidated
financial position. The Company maintains what it believes is adequate liability
and other  insurance to protect it from such claims.  However,  depending on the
amount and timing,  unfavorable  resolution of any of these matters could have a
material effect on the Company's  consolidated  financial  position,  results of
operations or cash flows in a particular period.


Item 4.  Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
         None.



                                       8
<PAGE>


Executive Officers of the Registrant
------------------------------------

     The  Company's  executive  officers,  their  ages  and  backgrounds  are as
follows:


     Aaron P. Hollander,  49, co-founded and has served as Chairman of the Board
of Directors of the Company since March 1995. In 1985, Mr. Hollander, along with
Mr. Culver,  co-founded First Equity Group Inc. ("First Equity Group"),  and has
served as its President and Co-Chief  Executive  Officer since that time.  First
Equity Group's ownership  interests,  in addition to the Company,  include First
Equity  Development  Inc., an aerospace  investment and advisory  firm,  ("First
Equity"),  Skip  Barber  Racing  School,  LLC ("Skip  Barber")  and Imtek,  Inc.
("Imtek"),  a specialty  marketing and fulfillment  company.  Mr. Hollander is a
director and serves as the President and Chief Executive Officer of Skip Barber,
and is the Chairman of the Board of Directors of Imtek


     Michael C. Culver,  55, has served as President and Chief Executive Officer
of First  Aviation  since March 1995.  Mr. Culver has also served as Chairman of
API since 1997. In 1985, Mr. Culver  co-founded  First Equity Group Inc. ("First
Equity  Group").  First Equity  Group's  interests,  in addition to the Company,
include  First Equity  Development  Inc., an aerospace  investment  and advisory
firm,  Skip Barber Racing School,  LLC and Imtek,  Inc. Mr. Culver serves on the
Boards of Skip Barber Racing School, LLC and Imtek, Inc.

     Robert G. Costantini,  46, became First Aviation's Chief Financial Officer,
Senior Vice President of Finance, and Corporate Secretary in October 2003. Prior
to joining First Aviation, from 1999 to 2003, Mr. Costantini was Chief Financial
Officer of FocusVision  Worldwide,  Inc., a technology  company  providing video
transmission services. From 1986 to 1989 he was first Corporate Controller,  and
from 1989 to 1999 he was Vice President - Finance for M.T.  Maritime  Management
Corp., a global maritime  transportation  company.  Mr.  Costantini  started his
career with Peat Marwick,  Mitchell & Co. Mr.  Costantini is a Certified  Public
Accountant, Certified Management Accountant, and a member of the bar of New York
and Connecticut.

     Paul J. Fanelli, 44, became President and CEO of First Aviation's principal
subsidiary  Aerospace Products  International Inc. on April 5, 2004. Mr. Fanelli
was hired February 16, 2004 as Senior Vice President and Chief Operating Officer
of API. From 2000 to 2003, Mr.  Fanelli was President - Europe for  Brightpoint,
Inc.,  a  distributor  of  wireless  voice and data  products  and a supplier of
outsourced services. Previously he was Chief Operating Officer from 1998 to 2000
for  Brightpoint  Europe,  Middle  East and Africa.  Mr.  Fanelli has worked for
Ericsson Mobile Communications,  Texas Instruments, ITT Avionics and started his
career with Loral Electronics.




                                       9
<PAGE>


                                     PART II
                                     -------


Item 5. Market for Registrant's  Common Equity,  Related Stockholder Matters and
--------------------------------------------------------------------------------
Issuer Purchases of Equity Securities
-------------------------------------

     Market  Information.  First  Aviation's  common  stock trades on The NASDAQ
Small Cap Market under the symbol FAVS. The table below sets forth the quarterly
high and low sales prices for the First  Aviation's  common stock as reported by
the NASDAQ Stock Market since February 1, 2004.

<TABLE>
<CAPTION>


                    Year Ended                                                    Year Ended
                 January 31, 2006                                              January 31, 2005
----------------------------------------------------          ---------------------------------------------------
                           High            Low                                        High             Low
<S>                         <C>            <C>                     <C>                 <C>             <C>
First Quarter              $4.70          $4.00               First Quarter           $4.80          $3.90
Second Quarter             $4.50          $3.71               Second Quarter          $5.00          $4.25
Third Quarter              $4.49          $3.65               Third Quarter           $4.72          $3.86
Fourth Quarter             $4.50          $3.71               Fourth Quarter          $4.60          $3.52
</TABLE>

     Holders.  As of April  27, 2006, there were 15 holders of  record  of First
Aviation's common stock.

     Dividends.  First Aviation did not pay a dividend in the fiscal years ended
January 31, 2006 and 2005. In January 2003,  First  Aviation paid a special cash
dividend of $1.00 per share.  The total cash paid was $7.3 million.  This is the
only cash dividend or distribution  paid on First Aviation's  common stock since
its  inception.   At  this  time,  First  Aviation  anticipates  that,  for  the
foreseeable  future,  all  earnings  will be retained  for use in the  Company's
business and no cash  dividends  will be paid on the common stock.  In addition,
API's credit facility  prohibits the payment of cash dividends from API to First
Aviation  without the  lender's  consent.  Any payment of cash  dividends in the
future on the common stock will be  dependent  upon First  Aviation's  financial
condition,  results of operations,  current and anticipated  cash  requirements,
plans for  expansion,  the  ability  of its  subsidiaries  to pay  dividends  or
otherwise  make cash  payments  or  advances  to it (as  described  above),  and
restrictions,  if any, under any current or future debt obligations,  as well as
other factors that the Board of Directors deems relevant.

     Repurchases.  In the fourth  quarter of the fiscal  year ended  January 31,
2006, First Aviation did not purchase any shares of its Common Stock.











                                       10
<PAGE>


Item 6.  Selected Financial Data
--------------------------------

     The selected  financial  data set forth below should be read in conjunction
with  the  "Consolidated  Financial  Statements",  the  "Notes  to  Consolidated
Financial  Statements",  "Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations"  and other financial  information  included
herein.

<TABLE>
<CAPTION>

                                                                        Year Ended January 31,
(Amounts in thousands, except per share amounts)        2006          2005         2004        2003         2002
                                                   ------------ -------------- ------------ ------------ ------------

Balance Sheet Summary:
   <S>                                                  <C>           <C>           <C>          <C>          <C>
Working capital                                    $   47,234    $   47,179    $   49,143   $   47,996  $   56,903

Total assets                                           73,348        65,199        64,982       65,041      80,544

Current obligations under capital leases and notes
payable                                                 1,125             -             -            4         180
Long-term debt and notes payable                       15,745        14,500        14,500       14,500      14,800
Other long-term liabilities                                 -         1,041         1,041        1,041       1,041
Total stockholders' equity                         $   36,452    $   34,634    $   36,565   $   36,094  $   49,018
Book value per share outstanding (1)               $     4.96    $     4.73    $     5.02   $     4.98  $     6.79
Cash dividends paid per share                               -             -             -   $     1.00           -
Common shares outstanding                               7,353         7,322         7,284        7,251       7,214

Results of Operations Summary (2):

Net sales                                          $  131,525    $  124,249    $  105,777   $  101,737  $  105,696
Gross profit                                           23,051        20,724        19,536       18,473      19,016

Income (loss) from operations                             746       (2,142)         (121)      (1,577)         227

Income (loss) before income taxes                       1,095       (2,108)          (14)      (1,413)         486
Provision (benefit) for income taxes                       71           121          (25)       1,786         (194)
                                                   ------------ -------------- ------------ ------------ ------------
Income (loss) from continuing operations before
     accounting change                                  1,024       (2,229)            11      (3,199)         292
Cumulative effect of change in accounting (3)               -             -             -      (2,735)           -
                                                   ------------ -------------- ------------ ------------ ------------
Net income (loss)                                  $    1,024    $  (2,229)    $       11    $ (5,934)   $   1,252
                                                   ============ ============== ============ ============ ============
Basic income (loss) per share from continuing      $     0.14    $   (0.31)    $     0.00    $  (0.44)   $    0.04
     operations

Basic net income (loss) per share                  $     0.14    $   (0.31)    $     0.00    $  (0.82)   $    0.17

Weighted average shares outstanding - basic             7,337         7,302         7,267        7,225       7,198
                                                   ------------ -------------- ------------ ------------ ------------
Income (loss) per share from continuing operations
     - assuming dilution                           $     0.14    $   (0.31)    $     0.00    $  (0.44)   $    0.04
Net income (loss) per share - assuming dilution    $     0.14    $   (0.31)    $     0.00    $  (0.82)   $    0.17
Weighted average shares outstanding - assuming
    dilution                                            7,341         7,302         7,282        7,225       7,209
                                                   ------------ -------------- ------------ ------------ ------------
</TABLE>

Notes to Selected Financial Data

     (1)  Book  value per  share  outstanding  is  calculated  by  taking  total
          stockholders' equity and dividing by common shares outstanding.

     (2)  During the year ended  January 31, 2003 the Company  recorded a charge
          of  $0.8  million  to  increase  its  allowance  for  doubtful   trade
          receivables,  recorded  an  income  tax  charge  of  $2.0  million  to
          establish  a  valuation  allowance  against  its  deferred  income tax
          assets,  recorded a net charge of $2.7 million upon  adoption of a new
          accounting  principle  related to  goodwill,  and paid a special  cash
          dividend of $1.00 per share.


                                       11
<PAGE>


     (3)  Goodwill was  recognized  upon First  Aviation's  acquisition of API's
          business in 1997 and upon the  acquisition of Superior's  distribution
          business in 2001. All goodwill  recorded with these  acquisitions  was
          written off during the quarter  ended April 30, 2002.  Pursuant to FAS
          142,  goodwill  is  not  amortized  but  is  tested  periodically  for
          impairment   using   discounted   cash  flows  and  other  fair  value
          methodologies.

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

     The following analysis of the financial condition and results of operations
of the Company  should be read in  conjunction  with the Company's  Consolidated
Financial  Statements,  including the Notes thereto, and selected financial data
of the Company included elsewhere in this Annual Report on Form 10-K.

General

     The Company is a leading supplier of products and services to the aerospace
industry worldwide,  including the provisioning and the supply of aircraft parts
and components,  and supply chain management  services.  The Company also builds
custom hose assemblies, and performs overhaul and repair services for brakes and
starters/generators.

     The Company recorded an increase in revenues for the year ended January 31,
2006, as the result of an improving market in some sectors,  an expanded product
line, and its ability to effectively compete. For the full year, increased gross
profit  margins and  effective  cost controls  produced  quarterly and full year
profitability. Cash levels decreased primarily due to the inventory purchases to
expand the product lines,  expenditures  for equipment and enterprise  software,
accelerated  payments to obtain vendor price  discounts,  and  repurchase of the
Company's subsidiary preferred stock. The Company believes that its results show
that it continues to take market  share from its  competitors,  as it managed to
grow and maintain profitability in difficult markets.

     Results for the three months ended  January 31, 2006 produced the Company's
second  highest  quarterly  revenues  for this year and record  quarterly  gross
margin, while maintaining costs at prior year's levels.

     Recovery in the industry has been sporadic since 2001, and overall business
activity  in the  aerospace  industry  continues  to be  influenced  by  several
factors, including higher fuel prices. Although the extent and timing of further
increases in market  activity is  uncertain,  the Company  continues to look for
opportunities  for new markets and revenues,  increased  margins,  improved cost
controls, and expanded service offerings.

Critical Accounting Policies

     The Company is required to provide additional  disclosure and commentary on
those  accounting  policies  considered most critical.  An accounting  policy is
deemed to be critical if it is important to the  Company's  financial  condition
and results,  and requires  judgment and  estimates on the part of management in
its  application.  The process of preparing  financial  statements in conformity
with accounting  principles generally accepted in the United States requires the
use of judgments,  estimates and  assumptions  to determine the  measurement  of
revenues  and  expenses,   and  the  realizable  value  of  certain  assets  and
liabilities.   These  estimates  and  assumptions  are  based  upon  information
available at the time the estimates or  assumptions  are made. The estimates and
assumptions   could  change   significantly  as  conditions  within  and  beyond
management's   control   change.   Therefore,   actual   results   could  differ
significantly  from  the  estimates.  The  most  significant  estimates  made in
preparing the Company's financial  statements include revenue  recognition,  the
determination of the allowance for doubtful trade receivables, the allowance for
excess and obsolete inventories,  deferred income tax asset valuations,  and the
valuation of goodwill.  The following is a discussion of the critical accounting
policies  and the  related  judgments,  estimates  and  assumptions  utilized in
preparing  the  Company's  consolidated  financial  statements.   A  summary  of
significant  accounting  policies  is  included  in  Note 2 to the  consolidated
financial statements included in this Annual Report on Form 10-K.

Revenue Recognition

     The  Company's  net sales  consist  of sales of  services  to the  aviation
industry,   including  parts  and  components  supply  services,   supply  chain
management services,  and component overhaul and repair services.  Net sales are


                                       12
<PAGE>


recorded  when parts and  components  are  shipped  and title  transfers  to the
customer,  when  supply  chain  management  services  have been  provided to the
customer,  or when  overhauled and repaired items are completed and shipped back
to the customer.  Shipping and handling fees billed to customers are included in
net  sales.  The  terms  and  nature of supply  chain  management  services  are
stipulated in a long-term  contract  between the Company and the  customer.  The
Company provides its facilities, personnel and systems to provide cost effective
services to the customer.  In providing  services where the Company  distributes
inventory on behalf of its  customer,  the Company may use its own  inventory or
hold its customers'  inventory  without taking  ownership of such inventory.  In
cases where the Company does not take ownership of its customers' inventory, net
sales  generally are recognized as a fee based on the sales value of the product
shipped through the Company's facilities, and not the sales value of the product
itself. Alternatively, the Company, when providing services to handle customers'
inventory  without  taking  ownership,  can  take a fee  based  on the  cost  of
providing services, and not on the sales value of the product.

Allowance for Doubtful Accounts

     The  allowance  for doubtful  trade  receivables  is  established  based on
estimates of the amount of uncollectible trade receivables,  utilizing financial
formulas based principally upon historical experience,  the credit worthiness of
the customer, the age of the account, the estimated risk that the account can be
collected,  and specific  identification.  Also, receivables arising from export
activities  may be supported by foreign  credit  insurance.  Collection of trade
receivables is affected by aviation industry and market trends, overall economic
trends and  conditions,  and customers'  credit issues and financial  condition.
Changes in any of these factors may have a significant  negative impact upon the
estimated allowance, and the Company's financial performance.

Allowance for Excess and Obsolete Inventories

     Inventories  generally  consist of aircraft parts and  components,  and are
valued at the lower of cost or market,  using the  first-in,  first-out  method.
Provisions  are made in each  period  for the  estimated  effect of  excess  and
obsolete  inventories  based  upon  financial  formulas  that take into  account
quantities,  costs,  the age of the inventory on hand,  historical and projected
sales, and other inventory  movements,  adjusted for known or estimated  factors
such as new product lines and product return allowances. During the three months
ended  July 31,  2004,  as a result of normal  review  procedures,  the  Company
adjusted  the  methodology  for  estimating  the  Allowance  for Slow Moving and
Obsolete  Inventory  that makes the estimate  more  objective,  and efficient to
calculate,  by applying percentages based on historical experiences of inventory
in  various  age  classifications,   and  eliminating  the  practice  of  making
adjustments  based  on  historical  and  projected  sales,  or  other  inventory
movements due to new product lines and product return allowances. As a result of
this  review,  the  company  increased  inventory  reserves.  Actual  excess and
obsolete  inventories may differ  significantly  from such  estimates,  and such
differences could have a significant negative impact on the estimated allowance,
and the Company's financial performance.

Deferred Income Taxes

     The Company uses the liability  method to account for income  taxes.  Under
this  method,  deferred  tax  assets and  liabilities  are  determined  based on
differences between financial reporting and tax bases of assets and liabilities,
and are estimated  using the enacted tax rates and laws that are estimated to be
in effect when the differences  are expected to reverse.  The realization of the
assets is subject  to  estimates  and  judgments,  and may  change  based upon a
variety of factors,  including  future  profitability of the Company and tax law
changes.  If an asset is not deemed more likely than not to be fully realizable,
a valuation  allowance must be established  against all or part of the asset. In
addition,  FAS 109 requires the  establishment  of a valuation  allowance  under
certain conditions.

New Accounting Pronouncements

     In December 2004, the Financial Accounting Standards Board, or FASB, issued
SFAS No. 123 (revised  2004),  "Share-Based  Payment." SFAS No. 123(R)  requires
that the  compensation  cost relating to  share-based  payment  transactions  be
recognized in financial statements.  The cost will be measured based on the fair
value  of the  instruments  issued.  SFAS  No.  123(R)  covers  a wide  range of
share-based compensation arrangements including share options,  restricted share
plans,  performance-based  awards,  share appreciation rights and employee share
purchase plans. SFAS No. 123(R) replaces SFAS No. 123 and supersedes APB Opinion
No. 25. As originally issued in 1995, SFAS No. 123 established as preferable the
fair-value-based  method of accounting for share-based payment transactions with
employees.  However,  that Statement permitted entities the option of continuing
to apply the  guidance  in Opinion  25, as long as the  footnotes  to  financial
statements  disclosed  what net income (loss) would have been had the preferable
fair-value-based  method been used.  The Company  will be required to apply SFAS
No.  123(R) at the beginning of the first fiscal year  beginning  after June 15,


                                       13
<PAGE>


2005,  and plans to adopt it effective  February 1, 2006. The impact of adoption
of Statement  123(R) on future  periods cannot be predicted at this time because
it will depend on levels of share-based payments granted in the future. However,
had the Company adopted  Statement  123(R) in prior periods,  the impact of that
standard would have approximated the impact of Statement 123 as described in the
disclosure  of pro forma net income and  earnings  per share in the  Stock-Based
Compensation  section of the Summary of Significant  Accounting Policies Note 2.
Statement  123(R) has  alternative  transitional  methods for  adoption  and the
Company has not determined which transitional alternative it will use.

Results of Operations

     The following table sets forth, for the periods indicated,  the percentages
of the Company's net sales that certain income and expense items represent.

<TABLE>
<CAPTION>

                                                                           Year Ended January 31,
                                                       -------------------- --------------------- --------------------
                                                               2006                 2005                  2004
                                                       -------------------- --------------------- --------------------
    <S>                                                         <C>                 <C>                     <C>
  Net sales                                                    100.0%               100.0%                100.0%
  Cost of sales                                                 82.5                 83.3                  81.5
                                                       -------------------- --------------------- --------------------
  Gross profit                                                  17.5                 16.7                  18.5
  Selling, general and administrative expenses                  15.1                 16.1                  16.1
  Corporate expenses                                             1.8                  2.4                   2.5
                                                       -------------------- --------------------- --------------------
  Income (loss) from operations                                  0.6                 (1.8)                 (0.1)
  Interest income                                                0.0                  0.1                   0.1
  Interest and other expense                                    (0.1)                 -                     -
  Other income                                                   0.3                  -                     -
                                                       -------------------- --------------------- --------------------
  Income (loss) before income taxes                              0.8                 (1.7)                  0.0
  (Provision) benefit for income taxes                           0.0                 (0.1)                  -
                                                       -------------------- --------------------- --------------------
  Net income (loss)                                              0.8%                (1.8)%                 0.0%
                                                       -------------------- --------------------- --------------------
</TABLE>


Year ended January 31, 2006 compared to year ended January 31, 2005


Net sales

     Net sales for the year ended January 31, 2006  increased  $7.3 million,  or
5.9%, to $131.5 million from $124.2 million for the year ended January 31, 2005.
The increase was largely due to increases in the  Company's  corporate  aviation
sector.  The increase in sales occurred  across all geographic  regions with the
most  significant  improvement in sales growth  occurring in Asia at 26.9%,  and
Canada at 28.7%. European revenue growth, while positive, was relatively flat at
2.2% over the prior  year.  Sales to  foreign  customers  during  the year ended
January 31, 2006 was  approximately 25% of the total sales of the Company during
that period.

     Freight  revenue  is a  component  of net sales and it  represents  freight
billed to customers. Freight revenue declined for year ended January 31, 2006 by
6.9% to $2.0  million  from $2.1  million  for the prior year ended  January 31,
2005.  The  decrease  occurred in the first nine  months of the year,  while the
fourth  quarter  ended January 31, 2006  exhibited a positive  increase over the
prior year  quarter.  The decline in the first nine months was due  primarily to
the  continuance  of customer  incentive  programs  resulting  from  promotional
activities  and industry  competition.  These  programs had an adverse effect on
gross profit margin as explained below under the caption "Gross Profit".

Cost of sales

     Cost of sales consists of costs of inventory sold, direct costs to overhaul
and repair parts and components, and direct costs of providing services. Freight
costs for parts and components sold are also included in cost of sales. Costs of
sales for the year ended January 31, 2006  increased  $5.0 million,  or 4.8%, to
$108.5  million from $103.5  million for the year ended  January 31,  2005.  The
increase in cost of sales was due primarily to the corresponding increase in net
sales of parts and components.

     As a percentage of net sales, cost of sales decreased for the twelve months
ended January 31, 2006,  to 82.5% from 83.3%,  for the twelve month period ended
January 31, 2005.  The decrease in the  percentage of cost of sales  compared to


                                       14
<PAGE>


net  sales for the  twelve  months  ended  January  31,  2006,  compared  to the
comparable  twelve  month 2005 period,  was due to the reasons  described in the
section on net sales and the  introduction  of higher profit margin  products to
the product mix.


Gross profit

     Gross profit for the twelve  months ended January 31, 2006  increased  $2.3
million  or 11.2% to $23.1  million,  compared  to gross  profit  for the twelve
months ended  January 31, 2005.  Gross profit as a percentage  of net sales also
increased  to 17.5% for the twelve month  period  ended  January 31, 2006,  from
16.7% for the comparable prior year twelve month period. Gross profit margin for
the twelve month period increased compared to the comparable period of the prior
year  principally  due to the  introduction  of higher  profit  margin  products
mentioned  above  under the caption  "Cost of Sales",  as well as an increase in
gross profit margin due to strategic pricing strategies. The overall increase in
gross profit margin  compared to the prior year twelve  months,  was  negatively
impacted by an increase in net freight expense as described below.

     Gross profit is impacted by net freight expense,  which represents  freight
expense  recorded in cost of sales,  less  freight  billed to  customers  in net
sales.  The excess of freight  expense versus freight billed to customers  ("net
freight  expense")  reduced  gross  profit by 5.7% for the twelve  months  ended
January 31, 2006, and January 31, 2005.

Selling, General and Administrative Expenses

     Selling,  general and  administrative  expenses for the twelve months ended
January 31, 2006 decreased  slightly by $40,000 to $19.9 million compared to the
expense  incurred for the twelve months ended January 31, 2005.  The decrease in
costs in the current  year were due to lower  payroll  expenses,  travel  costs,
postage and other expenses  partially  offset by increases in contract labor for
IT  systems  maintenance,  higher  depreciation  charges  due  to  IT  upgrades,
increased  communication  costs,  and an increase in bad debt  expense.  Selling
general and  administrative  expense as a  percentage  of revenues  decreased to
15.1% for the current  year twelve  months  versus  16.1% for the twelve  months
ended January 31, 2005.

Corporate Expenses

     Corporate  expenses for the twelve months ended January 31, 2006  decreased
$521,000,  or 18.0%, to $2.4 million,  from the $2.9 million incurred during the
twelve months ended January 31, 2005. The decrease in corporate  expenses in the
current twelve month period resulted from substantially lower legal fees related
to corporate governance regulations and a dissident  shareholder's proxy contest
incurred in the prior year period, the termination of First Equity Development's
advisory  agreement  with the Company on January 31,  2005,  and lower costs for
other expenses partially offset by increases in salaries and related costs.

Interest income and interest and other expenses

     During the twelve  months  ended  January 31,  2006,  interest  income from
investing the Company's cash in short term investments,  decreased by $19,000 to
$47,000 over the comparable prior year period. The decrease in income was due to
lower  excess  cash  balances  invested.  Interest  and other  income  (expense)
resulted in expense of  ($105,000)  for the current  year twelve  months  versus
income of $10,000  in the prior  year  period  due to an  increase  in  interest
expense of ($170,000) on borrowings,  reduced by an increase in foreign exchange
income of $56,000 versus the prior year.

Other Income

     In July 2005,  the Company  recorded  income of $417,000 as the result of a
$567,000 cash settlement of a distribution  agreement  contract  dispute between
API and a vendor.  The settlement  consisted of $417,000 in damages  recorded in
"Other  Income"  and  $150,000  recorded as a reduction  in  inventory  from the
repurchase of inventory held by API.

Provision for Income Taxes

     The Company recorded a provision for income taxes related to foreign income
tax expense estimates for operations in Canada and the Philippines,  and federal
taxes under Alternative  Minimum Tax regulations.  The Company does not record a
tax benefit for U.S. tax purposes on any  operating  losses  incurred due to the
deferred  tax  valuation  allowance  recorded as it is more likely than not that
some  portion  or all of the  deferred  tax  asset  will  not be  realized.  The
Company's  effective  tax rate for the period  ended  January  31, 2006 was 6.5%
versus  the 34.0%  statutory  rate due  primarily  to the net  operating  losses
utilized.





                                       15
<PAGE>


Net Income (Loss) and Net Income (Loss) per Share

     The  Company  had net  income  of $1.0  million  or $0.14 per share for the
twelve months ended January 31, 2006,  compared to a net loss of $2.2 million or
$0.31 per share  for the full year  ended  January  31,  2005.  The  significant
improvement  in  operating  results  was  due to the  reasons  described  in the
preceding sections.


Year ended January 31, 2005 compared to year ended January 31, 2004

Net sales

     Net sales for the year ended January 31, 2005 increased  $18.5 million,  or
17.5%,  to $124.2  million  from $105.8  million for the year ended  January 31,
2004.  Net sales  increased  in all  customer  sectors,  as economic  conditions
improved  for the  general  economy as a whole for the year,  leading to greater
flight  activity than the previous year, and therefore  increases in maintenance
and repairs.  The increase in sales occurred across all geographic  regions with
the most  significant  improvement  in sales growth  occurring in Asia and Latin
America at 31% and 38%  respectively.  European revenue growth,  while positive,
lagged the other regions of the world at 10%.

     Freight  revenue  is a  component  of net sales and it  represents  freight
billed to customers. Freight revenue declined for year ended January 31, 2005 by
13% to $2.1 million from $2.4 million for the prior year ended January 31, 2004.
This decline was due primarily to increased customer  incentives  resulting from
promotional  activities and industry competition.  This had an adverse effect on
gross profit margin as explained below under the caption "Gross Profit".

Cost of sales

     Cost of sales consists of costs of inventory sold, direct costs to overhaul
and repair parts and components, and direct costs of providing services. Freight
costs for parts and components sold are also included in cost of sales. Costs of
sales for the year ended January 31, 2005 increased $17.3 million,  or 20.0%, to
$103.5  million  from $86.2  million for the year ended  January 31,  2004.  The
increase  in cost of sales was due  primarily  to the  increase  in net sales of
parts and components. In addition, a $300,000 increase to inventory reserves was
recorded  in the  quarter  ended July 31,  2004 as  described  under the caption
"Critical Accounting Policies" in the section "Allowance for Excess and Obsolete
Inventories".

     As a percentage of net sales, cost of sales increased for the twelve months
ended January 31, 2005,  to 83.3% from 81.5%,  for the twelve month period ended
January 31, 2004.  The increase in the  percentage of cost of sales  compared to
net  sales  for the  twelve  months  ended  January  31,  2005  compared  to the
comparable twelve month 2004 period,  was due to the reasons described above, as
well as higher growth in sales of products and components supply services versus
supply chain management  services  contracts,  the latter  representing a larger
share of the  revenue  mix in the prior  year  period  versus the  current  year
period.

Gross profit

     Gross profit for the twelve  months ended January 31, 2005  increased  $1.2
million or 6.1% to $20.7 million, compared to gross profit for the twelve months
ended January 31, 2004.  Gross profit as a percentage of net sales  decreased to
16.7% for the twelve  month period  ended  January 31, 2005,  from 18.5% for the
comparable  twelve month period ended January 31, 2004.  Gross profit margin for
the twelve  month  period  ended  January 31,  2005,  decreased  compared to the
comparable  period of the  prior  year  principally  due to the  accrual  for an
increase in the inventory  reserves,  as mentioned above under the caption "Cost
of Sales",  as well as an increase  in the mix in sales of parts and  components
supply  services which have a lower gross profit margin relative to supply chain
management  services.  The increase in net freight expense,  as described below,
contributed to the reduction in gross profit for the twelve months ended January
31, 2005 compared to the twelve months ended January 31, 2004.

     Gross  profit is also  impacted by net freight  expense,  which  represents
freight expense  recorded in cost of sales,  less freight billed to customers in
net sales.  Net freight  expense  decreased  gross profit by 5.7% for the twelve
months ended January 31, 2005,  compared to a decrease of 3.9% in the comparable
2004 period.  The decrease was due  primarily to increased  customer  incentives
from  promotional  activities  offering  customers  reduced  or zero  freight on
shipments.


                                       16
<PAGE>


Selling, general and administrative expenses

     Selling, general and administrative expenses for the year ended January 31,
2005 increased $3.0 million,  or 17.3%,  to $20.0 million from $17.0 million for
the year ended  January 31,  2004.  The  increases  for the twelve  months ended
January 31, 2005,  over the twelve month period ended  January 31, 2004,  is due
primarily to increases in salaries and payroll costs related to additional sales
personnel,  higher sales commissions,  sales related travel expenses,  severance
and  relocation  expense  for  personnel  changes,  increased  legal  fees,  the
expiration  of  property  tax   incentives,   and  expenses   incurred  for  the
implementation  of a new  customer  initiative  requiring  additional  temporary
warehouse  personnel.  Offsetting  these  increases were  reductions to bad debt
expense from a reduction in the  reserves  for  accounts  receivable,  and lower
depreciation  expense.  The reduction in the accounts  receivable  reserves that
resulted  during normal review  procedures  was due to a change in the Company's
estimate for bad debts resulting from changes in estimated  collections based on
improving customer payment trends, and the overall improving economy.

     Selling,  general and  administrative  expenses as a percentage of revenues
were 16.1% for the twelve  months  ended  January 31, 2005,  unchanged  from the
twelve months ended January 31, 2004.

Corporate Expenses

     Corporate  expenses for the twelve months ended January 31, 2005  increased
$268,000,  or 10.2%, to $2.9 million,  from the $2.6 million incurred during the
twelve  months ended  January 31, 2004.  For the twelve months ended January 31,
2005 versus the prior year, the Company incurred an additional $324,000 in legal
expenses related to updating our corporate governance policies under new SEC and
NASDAQ  exchange  rules,  responding  to  a  dissident  shareholder's  proposal,
activities in connection with a proxy contest,  and for the 2004 annual meeting.
Other  increases in the twelve  months ended  January 31, 2005 versus the twelve
months  ended  January 31, 2004 related to salary and payroll  expenses,  travel
expenses,  insurance  charges,  and  consulting  services  related to changes in
management,  which were partially  offset by lower expenses in other  categories
over the prior year period.

Interest income and interest and other expenses

     During the twelve  months  ended  January 31,  2005,  interest  income from
investing the Company's cash in short term investments,  decreased by $88,000 to
$66,000 over the comparable prior year period. The decrease in income was due to
lower  cash  balances  to  invest,  and  lower  interest  rates due to a revised
investment  strategy  minimizing market risk for the year ended January 31, 2005
over the twelve-month period ended January 31, 2004. Interest and Other Expenses
resulted  in income of $10,000  for the twelve  months  ended  January  31, 2005
versus expense in the amount of $5,000 in the  comparable  prior year period due
primarily to reductions in other expenses and less foreign exchange gains.

Provision for Income Taxes

     The Company recorded a provision for income taxes related to foreign income
tax expense estimates for operations in Canada and the Philippines.  The Company
does not record a tax benefit for U.S.  tax  purposes  on any  operating  losses
incurred  due to the  deferred tax  valuation  allowance  recorded as it is more
likely than not that some  portion or all of the  deferred tax asset will not be
realized.

Net Income (Loss) and Net Income (Loss) per Share

     The  Company  had a net loss of $2.2  million  or $0.31  per  share for the
twelve months ended January 31, 2005,  compared to net income of $11,000 for the
full year ended January 31, 2004. The net loss was due to the reasons  described
in the preceding sections.

Liquidity and Capital Resources

     The Company's  liquidity  requirements  arise  principally from its working
capital  needs.  In addition,  the Company has  liquidity  requirements  to fund
capital expenditures to support its current operations, and facilitate growth


                                       17
<PAGE>


and expansion.  The Company funds its liquidity  requirements with a combination
of cash on hand, cash flows from operations, and from borrowings.

     Cash and cash  equivalents  at any time may  consist  of a  combination  of
demand  deposits,  money  market  or  short-term,  high-grade  bond  funds,  and
short-term certificates of deposit.

     The reduction in cash for the year ended  January 31, 2006 was  principally
the  result  of  inventory  purchases  to  expand  the  company's  product  line
offerings,  purchases of equipment  and software,  and the  repurchase by API of
subsidiary  preferred  stock. The Company believes it maintains a strong balance
sheet.

     The Company's cash used in operations for the years ended January 31, 2006,
2005  and  2004  was  $(8.8)  million,   $(1.5)  million,  and  $(0.6)  million,
respectively.  Cash used in  operations  for the year ended January 31, 2006 was
impacted by increases in inventory  due to a large  purchase of inventory  parts
from a leading aircraft OEM, and additional inventory opportunity buys to secure
price or volume  discounts,  and an increase in trade  receivables  offset by an
increase  in  accounts  payable.  On  September  20,  2005,  API made an initial
inventory  purchase of  approximately  $7.1  million.  The OEM vendor  agreed to
partially  finance  the  purchase  with two  promissory  notes  from API of $2.5
million and $1.8 million,  with the Company entering into a guarantee  agreement
to ensure payment by API. These promissory notes were subsequently  amended. The
amended  promissory  note for  $1.6  million  is for a term of 4 years,  at 5.0%
interest  per  annum.  The  amended  promissory  note  for  $1.4  million  is  a
non-interest  bearing short term note due within one year. The vendor  financing
promissory notes are subordinated to the Company's  revolving line of credit. In
addition,  subsequent  to  the  initial  purchase  and  pursuant  to a  separate
transaction  with the same OEM, API made an additional  purchase of $4.8 million
of  inventory  to broaden the product  line  offering,  pursuant to usual vendor
terms.  Cash used in investing  activities for the years ended January 31, 2006,
2005  and  2004  was  $(3.2)  million,   $(1.0)  million,  and  $(0.4)  million,
respectively.  Cash used in investing  activities for these years was related to
purchases  of fixed  assets  and  enterprise  software  in 2006 and  2005.  Cash
provided by (used in) financing activities for the years ended January 31, 2006,
2005 and 2004 was  $(1.1)  million,  nil,  and $1,  respectively.  Cash  used in
financing  activities  for the year ended  January  31,  2006  results  from the
repurchase  of the preferred  stock of API held by a third party,  in the second
quarter of the current year.

     First Aviation's aggregate cash used for capital expenditures for the years
ended January 31, 2006, 2005 and 2004 was $3.2 million,  $1.0 million,  and $0.5
million,  respectively.  The increase in capital  requirements in fiscal 2006 is
the result of current upgrades to the Company's  enterprise system and equipment
to handle current  requirements  and support the Company's growth and expansion.
For fiscal year 2007 the amount required for capital  expenditures  currently is
expected to range between $1.5 million and $2.0 million.  Management  expects to
fund these requirements from cash on hand, cash flows from operations,  and from
borrowings.

     Effective  July 29, 2005 API entered into a new $20 million  revolving line
of credit  facility  which under  certain  conditions  may be  increased  to $25
million,   through  a  Commercial   Revolving   Loan  and   Security   Agreement
("Agreement").  This  Agreement  which expires on September 1, 2007 replaces the
Company's prior facility which was scheduled to expire July 1, 2006.  Borrowings
under this facility  bear  interest  equal to LIBOR plus 1.5% and are limited to
specified  percentages of eligible trade receivables and inventories of API. The
Agreement  contains a number of covenants,  including  restrictions  on mergers,
consolidations  and acquisitions,  the incurrence of indebtedness,  transactions
with affiliates, the creation of liens, and limitations on capital expenditures.
Pursuant to the terms and conditions of the Agreement,  the payment of dividends
on API's common stock is prohibited,  except with the lender's consent,  and API
is required  to  maintain  minimum  levels of net worth and  specified  interest
expense coverage ratios.  Substantially all of API's domestic assets are pledged
as collateral under the Facility,  and First Aviation  guarantees all borrowings
under the  Agreement.  In October  2005,  the line was  increased to $25 million
under provisions of the agreement as a result of a large inventory purchase made
by the Company in  September  2005.  At January 31, 2006,  borrowings  under the
facility totaled $14.5 million,  at an interest rate of  approximately  5.8%. Of
the $14.5 million, $0.5 million represented a draw on the Facility just prior to
January 31, 2006.  The Company  would  regularly  draw down on the Facility just
prior to  quarter  end and year end,  hold the cash,  and then  repay the amount
drawn  shortly  thereafter.  The  purpose  was to  show  cash  availability  for
potential  acquisitions  or  other  investment  oppurtunities.  The  Company  is
currently  using the Facility more for inventory  investment and working capital
requirements. This represents a more frequent use of the line that will increase
borrowing costs.  Approximately $8.9 million was available under the facility at
January 31, 2006.  The new facility  extended the maturity to September 1, 2007,
therefore, borrowings under the facility are classified as long term. Management
believes that the carrying amount of the Company's borrowings  approximates fair
market value because the interest rate is variable and resets frequently.

     Based upon  current  and  anticipated  levels of  operations,  the  Company
believes  that its cash on hand and cash flow  from  operations,  combined  with
borrowings  available  under its line of credit,  will be sufficient to meet its
current and  anticipated  cash  operating  requirements  through the year ending
January 31, 2007, including scheduled interest payments,  working capital needs,
and capital expenditures.


                                       18
<PAGE>


     On January 6, 2003, the Company  announced that its Board of Directors,  in
light of the Company's  cash  position,  had approved a special cash dividend of
$1.00 per share.  The dividend was paid on January 30, 2003.  The total paid was
$7.3  million.  The  Company  previously  had not  declared  nor  paid  any cash
dividends or  distributions  on its common stock since its inception in 1997. In
addition,  API's credit facility prohibits the payment of cash dividends from it
to First  Aviation  without  the  lender's  consent.  At this time,  the Company
anticipates  that all future  earnings will be retained for use in the Company's
business.  Any payment of cash  dividends in the future on the Company's  common
stock will be dependent upon the Company's financial  condition,  its results of
operations, current and anticipated cash requirements,  plans for expansion, the
ability of its  subsidiaries to pay dividends or otherwise make cash payments or
advances to it (as described above), and restrictions,  if any, under any future
debt obligations, as well as any other factors that the Board of Directors deems
relevant.

     In  conjunction  with the Company's  acquisition of API in 1997, AMR Combs,
Inc. ("AMR Combs") purchased 10,407 shares of API Series A Convertible Preferred
Stock,  $0.001 par value,  with  annual  dividends  of $4.00 per share,  payable
quarterly (the "Convertible  Preferred Stock").  On March 5, 1999, AMR Combs was
acquired by Signature Flight Support, an affiliate of BBA Group Plc. On June 20,
2005, all of the outstanding  shares of Preferred Stock were  repurchased by the
Company for $500,000. The difference between the carrying value and the purchase
price was recorded as additional paid-in capital.

Inflation

     The  Company  does not  believe  that the  relatively  moderate  levels  of
inflation that have been experienced in the United States have had a significant
impact on its revenues or operations.

Off -Balance Sheet Arrangements

     The Company has no material  off-balance  sheet  arrangements as defined in
Item 303(a)(4)(ii) of Regulation S-K.

Contractual Obligations

     The following table sets forth the Company's contractual  obligations as of
January 31, 2006:

<TABLE>
<CAPTION>

                                                                         Payments due by period
                                                                  Less than        1-3          3-5      More than
(Amounts in thousands)                                 Total        1 year        years        years      5 years
                                                    ------------ ------------- ----------- ----------- --------------
      <S>                                                <C>           <C>          <C>          <C>         <C>
Long-Term Debt Obligations (1)                      $   14,500   $        -     $  14,500    $      -    $      -
Notes Payable (2)                                        2,553        1,199         1,354           -           -
Operating Lease Obligations (3)                          4,463        1,055         1,443       1,049         916
Purchase Obligations (4)                                16,480       16,480             -           -           -

Total                                               $   37,996   $   18,734     $  17,297    $  1,049    $    916
</TABLE>


Notes to Contractual Obligations Data:

     (1)  Long-term  debt consists of API's  revolving  line of credit through a
          Commercial  Revolving  Loan and  Security  Agreement  as  described in
          Liquidity and Capital Resources, above.

     (2)  Notes Payable consists of vendor financing  principal and interest for
          inventory  purchases as described in the footnotes to the consolidated
          financial statements of the Company.

     (3)  Operating leases includes minimum rental payments under non-cancelable
          leases of one year or longer.

     (4)  Purchase obligations  represent cancelable open purchase orders in the
          normal  course of business  for parts  inventory.  Although  such open
          purchase  orders are  generally  cancelable,  the  Company  intends to
          execute substantially all of them.


                                       19
<PAGE>


Item 7A.   Quantitative and Qualitative Disclosures about Market Risks
----------------------------------------------------------------------

     The  Company's  Canadian  operations  utilize the Canadian  dollar as their
functional  currency,  while the  Company's  Asian  operation  utilizes the U.S.
dollar as its functional currency.  The Company has transactions  denominated in
Canadian  dollars and  Philippine  pesos.  The Company is exposed to market risk
from foreign exchange rates.  Foreign currency  transaction exposure principally
arises from the  transfer of foreign  currency to and/or from U.S.  dollars from
one  subsidiary  to  another  within  the  Company,  and from  foreign  currency
denominated trade receivables.  Currency  transaction and translation  exposures
are not hedged.  Foreign currency  transaction  gains and losses are included in
earnings,  and gains or losses will increase in significance  with the growth of
the  Canadian  operations.  Unrealized  currency  translation  gains and  losses
resulting from the  translation of foreign  subsidiaries  balance sheets to U.S.
dollars are not recorded as income or expense, but are recognized in the Balance
Sheet as other  comprehensive  income or loss as a  component  of  Stockholder's
Equity.  The Company does have risk  principally  relating to the translation of
accounts in which the Canadian  dollar is the functional  currency.  Sensitivity
analysis of foreign  currency  exchange rate risk assumes an  instantaneous  10%
change in the foreign  currency  exchange  rates from their level at January 31,
2006,  with all  other  variables  held  constant.  A 10%  strengthening  of the
Canadian   dollar  versus  the  U.S.  dollar  would  result  in  a  decrease  of
approximately $211,000 in the net liability position of financial instruments at
January 31, 2006. A 10% weakening of the Canadian  dollar versus the U.S. dollar
would  result in a  increase  of  approximately  $258,000  in the net  liability
position of financial  instruments at January 31, 2006. During the twelve months
ended January 31, 2006 the Company experienced a comprehensive gain of $126,000,
due to an  increase  in the value of the  Canadian  dollar  relative to the U.S.
dollar.  The Company did not experience any  significant  changes in market risk
during the twelve months ended  January 31, 2006.  Borrowings of the Company are
denominated in U.S. dollars. Management believes that the carrying amount of the
Company's  borrowings  approximates  fair value  because the interest  rates are
variable and reset frequently.


Item 8.  Financial Statements and Supplementary Data
----------------------------------------------------

     See Index to Financial Statements, which appears on page F-1 hereof.


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

     No disclosure required.


Item 9A.   Controls and Procedures
----------------------------------

     The Company's management evaluated, with the participation of the Company's
principal  executive and principal  financial officer,  the effectiveness of the
Company's  disclosure controls and procedures (as defined in Rules 13a-15(e) and
l5d-15(e)  under the Securities  Exchange Act of 1934, as amended (the "Exchange
Act")),  as of  January  31,  2006.  Based on their  evaluation,  the  Company's
principal executive and principal financial officer concluded that the Company's
disclosure controls and procedures were effective as of January 31, 2006.

     There has been no change in the Company's  internal  control over financial
reporting (as defined in Rules  13a-l5(f) and 15d-l5(f)  under the Exchange Act)
that  occurred  during the Company's  fourth  fiscal  quarter of the fiscal year
ended January 31, 2006, that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial reporting.


Item 9B.   Other Information
----------------------------

     No disclosure required.






                                       20
<PAGE>


                                    PART III
                                    --------


Item 10.  Directors and Executive Officers of the Registrant
------------------------------------------------------------

     Other than information with respect to First Aviation's executive officers,
which is set forth  after  Item 4 of Part I of this Form 10-K,  the  information
required  to be  disclosed  pursuant  to  this  Item 10 is  incorporated  in its
entirety herein by reference to the Company's  definitive  proxy statement to be
filed with the  Securities  and Exchange  Commission  pursuant to Regulation 14A
within 120 days after the end of the Company's last fiscal year.


Item 11.   Executive Compensation
---------------------------------

     The  information  required  to be  disclosed  pursuant  to this  Item 11 is
incorporated  in its entirety  herein by reference to the  Company's  definitive
proxy statement to be filed with the Securities and Exchange Commission pursuant
to  Regulation  14A within 120 days after the end of the  Company's  last fiscal
year.


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

     The  information  required  to be  disclosed  pursuant  to this  Item 12 is
incorporated  in its entirety  herein by reference to the  Company's  definitive
proxy statement to be filed with the Securities and Exchange Commission pursuant
to  Regulation  14A within 120 days after the end of the  Company's  last fiscal
year.


Item 13.   Certain Relationships and Related Transactions
---------------------------------------------------------

     The  information  required  to be  disclosed  pursuant  to this  Item 13 is
incorporated  in its entirety  herein by reference to the  Company's  definitive
proxy statement to be filed with the Securities and Exchange Commission pursuant
to  Regulation  14A within 120 days after the end of the  Company's  last fiscal
year.


Item 14.   Principal Accountant Fees and Services
-------------------------------------------------

     The  information  required  to be  disclosed  pursuant  to this  Item 14 is
incorporated  in its entirety  herein by reference to the  Company's  definitive
proxy statement to be filed with the Securities and Exchange Commission pursuant
to  Regulation  14A within 120 days after the end of the  Company's  last fiscal
year.






                                       21
<PAGE>


                                     PART IV
                                     -------


Item 15. Exhibits and Financial Statement Schedules
---------------------------------------------------

(a) Documents filed as part of this report:

     (1)  Financial Statements:  See Index to Consolidated Financial Statements,
          which appears on Page F-1 hereof.
     (2)  Financial  Statement Schedule II - Valuation and Qualifying  Accounts,
          which  appears on Page F-19  hereof.  (All other  schedules  have been
          omitted because they are not applicable or the required information is
          shown  in  the  Consolidated  Financial  Statements  or the  Notes  to
          Consolidated Financial Statements.)
     (3)  Exhibits

Exhibit
Number                   Description of Exhibit
------                   ----------------------

3.1       Restated Certificate of Incorporation of the Company (filed as Exhibit
          3.1  to  the  Company's   Registration  Statement  on  Form  S-1  (No.
          333-18647),  as amended,  filed on December 23, 1996, and incorporated
          herein by reference).

3.2       Amended and  Restated  Bylaws of the Company  (filed as Exhibit 3.2 to
          the Company's  Quarterly  Report on Form 10-Q for the quarterly period
          ended  October  31, 2001 (No.  0-21995),  and  incorporated  herein by
          reference).

10.1      Form of  Director  Indemnification  Agreement  between the Company and
          each  of its  directors  (filed  as  Exhibit  10.1  to  the  Company's
          Registration Statement on Form S-1 (No. 333-18647),  as amended, filed
          on December 23, 1996, and incorporated herein by reference).

10.2      Asset Purchase Agreement,  dated November 25, 1996, by and between AMR
          Combs and API (filed as Exhibit 10.9 to the Company's  Amendment No. 1
          to  Registration  Statement on Form S-1 (No.  333-18647),  as amended,
          filed on January 24, 1997, and incorporated herein by reference).

10.3 *    First Aviation  Services Inc. Stock Incentive Plan (filed as Exhibit
          10.14 to the Company's  Amendment No. 3 to  Registration  Statement on
          Form S-1 (No. 333-18647),  as amended, filed on February 24, 1997, and
          incorporated herein by reference).

10.4 *    First Aviation  Services Inc. Employee Stock Purchase Plan (filed as
          Exhibit  10.15  to  the  Company's  Amendment  No.  3 to  Registration
          Statement on Form S-1 (No. 333-18647),  as amended,  filed on February
          24, 1997, and incorporated herein by reference).

10.5      Amended  and  Restated  Registration  Rights  Agreement,  dated  as of
          February 21, 1996,  by and between the Company and FAS Inc.  (filed as
          Exhibit  10.24  to  the  Company's  Amendment  No.  3 to  Registration
          Statement on Form S-1 (No. 333-18647),  as amended,  filed on February
          24, 1997, and incorporated herein by reference).

10.6      Sublease  Agreement,  dated as of December  31,  1996,  between  First
          Equity  and the  Company  (filed  as  Exhibit  10.30 to the  Company's
          Amendment No. 3 to Registration Statement on Form S-1 (No. 333-18647),
          as amended,  filed on February 24, 1997,  and  incorporated  herein by
          reference).

10.7 *    Amendment No. 1 to the First Aviation  Services Inc. Stock Incentive
          Plan (filed as exhibit  10.39 to Company's  Annual Report on Form 10-K
          for the year ended January 31, 1998 (No.  0-21995),  and  incorporated
          herein by reference).

10.8      Commercial  Revolving  Loan and  Security  Agreement,  dated March 30,
          2000,  by and  between  Hudson  United  Bank  and  Aerospace  Products
          International,  Inc.  (filed as Exhibit 10.43 to the Company's  Annual
          Report on Form 10-K for the year ended January 31, 2000 (No. 0-21995),
          and incorporated herein by reference).


                                       22
<PAGE>


10.9      Guaranty,  dated as of March 30, 2000, between First Aviation Services
          Inc. and Hudson  United Bank (filed as Exhibit  10.44 to the Company's
          Annual  Report on Form 10-K for the year ended  January  31, 2000 (No.
          0-21995), and incorporated herein by reference).

10.10     Second Amendment to Commercial  Revolving Loan and Security Agreement
          dated as of April 27, 2001 between  Hudson  United Bank and  Aerospace
          Products International,  Inc. (filed as Exhibit 10.48 to the Company's
          Quarterly Report on Form 10-Q for the quarterly period ended April 30,
          2001 (No. 0-21995), and incorporated herein by reference).

10.11     Second  Reaffirmation of Guaranty dated as of April 27, 2001 by First
          Aviation  Services  Inc. and in favor of Hudson  United Bank (filed as
          Exhibit 10.49 to the Company's  Quarterly  Report on Form 10-Q for the
          quarterly period ended April 30, 2001 (No. 0-21995),  and incorporated
          herein by reference).

10.12     Third Amendment to Commercial  Revolving Loan and Security  Agreement
          dated as of June 28, 2001  between  Hudson  United Bank and  Aerospace
          Products International,  Inc. (filed as Exhibit 10.48 to the Company's
          Quarterly  Report on Form 10-Q for the quarterly period ended July 31,
          2001(No. 0-21995), and incorporated herein by reference).

10.13     Third  Reaffirmation  of Guaranty  dated as of June 28, 2001 by First
          Aviation  Services  Inc. and in favor of Hudson  United Bank (filed as
          Exhibit 10.49 to the Company's  Quarterly  Report on Form 10-Q for the
          quarterly  period ended July 31, 2001(No.  0-21995) , and incorporated
          herein by reference).

10.14 *   Amendment No. 2 to the First Aviation Services Inc. Stock Incentive
          Plan (filed as Exhibit 4.5 to the Company's  Form S-8 (No.  333-25915)
          on September 20, 2001, and incorporated herein by reference).

10.15     Letter,  effective  February  1, 2002,  by and between  First  Equity
          Development  Inc. and its affiliates and First Aviation  Services Inc.
          regarding pursuit of acquisition opportunities (filed as Exhibit 10.23
          to the Company's Annual Report on Form 10-K for the year ended January
          31, 2002 (No. 0-21995), and incorporated herein by reference).

10.16     Engagement  Letter  between  First  Equity  Development  Inc. and its
          affiliate,  FED  Securities  Inc.,  and First  Aviation  Services Inc.
          effective  February 1, 2002 (filed as Exhibit  10.40 to the  Company's
          Annual  Report on Form 10-K for the year ended  January  31, 2002 (No.
          0-21995), and incorporated herein by reference).

10.17     Fourth Amendment to Commercial  Revolving Loan and Security Agreement
          dated as of July 31, 2002  between  Hudson  United Bank and  Aerospace
          Products International,  Inc. (filed as Exhibit 10.48 to the Company's
          Quarterly  Report on Form 10-Q for the quarterly period ended July 31,
          2002 (No. 0-21995), and incorporated herein by reference).

10.18     Fourth  Reaffirmation  of Guaranty dated as of July 31, 2002 by First
          Aviation  Services  Inc. and in favor of Hudson  United Bank (filed as
          Exhibit 10.49 to the Company's  Quarterly  Report on Form 10-Q for the
          quarterly period ended July 31, 2002 (No.  0-21995),  and incorporated
          herein by reference).


10.19     Fifth Amendment to Commercial  Revolving Loan and Security  Agreement
          dated as of July 31, 2003  between  Hudson  United Bank and  Aerospace
          Products International,  Inc. (filed as Exhibit 10.19 to the Company's
          Quarterly  Report on Form 10-Q for the quarterly period ended July 31,
          2003 (No. 0-21995), and incorporated herein by reference).

10.20     Fifth  Reaffirmation  of Guaranty  dated as of July 31, 2003 by First
          Aviation  Services  Inc. and in favor of Hudson  United Bank (filed as
          Exhibit 10.20 to the Company's  Quarterly  Report on Form 10-Q for the
          quarterly period ended July 31, 2003 (No.  0-21995),  and incorporated
          herein by reference).


10.21 *   Amendment No. 3 to the First Aviation  Services Inc. Stock  Incentive
          Plan (filed as Exhibit 10.21 to the Company's Quarterly Report on Form
          10-Q for the quarterly period ended July 31, 2003 (No.  0-21995),  and
          incorporated herein by reference).


                                       23
<PAGE>



10.22 *   Employment  Agreement,  dated as of October 7, 2003,  between  the
          Company  and  Robert  G.  Costantini  (filed as  Exhibit  10.22 to the
          Company's  Annual  Report on Form 10-K for the year ended  January 31,
          2004 (No. 0-21995), and incorporated herein by reference).

10.23 *   Form of Incentive Stock Option Award  Agreement  Letter Pursuant to
          the 1997 Stock Incentive Plan (filed as Exhibit 10.23 to the Company's
          Annual  Report on Form 10-K for the year ended  January  31, 2004 (No.
          0-21995), and incorporated herein by reference).

10.24 *   Officer  Indemnification  Agreement  dated as of October  27,  2003
          between the Company and Robert G.  Costantini  (filed as Exhibit 10.24
          to the Company's Annual Report on Form 10-K for the year ended January
          31, 2004 (No. 0-21995), and incorporated herein by reference).

10.25 *   Employment  Agreement,  dated  as of  February  2,  2004,  between
          Aerospace Products  International,  Inc. and Paul J. Fanelli (filed as
          Exhibit 10.25 to the Company's Annual Report on Form 10-K for the year
          ended  January  31, 2004 (No.  0-21995),  and  incorporated  herein by
          reference).

10.26 *   Amendment  to  Employment  Agreement,  dated as of April 5,  2004,
          between  Aerospace  Products  International,  Inc. and Paul J. Fanelli
          (filed as Exhibit  10.26 to the  Company's  Annual Report on Form 10-K
          for the year ended January 31, 2004 (No.  0-21995),  and  incorporated
          herein by reference).

10.27 *   Relocation  Agreement,  dated as of  February  16,  2004,  between
          Aerospace Products  International,  Inc. and Paul J. Fanelli (filed as
          Exhibit 10.27 to the Company's Annual Report on Form 10-K for the year
          ended  January  31, 2004 (No.  0-21995),  and  incorporated  herein by
          reference).

10.28     Sixth Amendment to Commercial  Revolving Loan and Security Agreement,
          dated as of July 31, 2004,  between  Hudson  United Bank and Aerospace
          Products  International  Inc. (filed as Exhibit 10.31 to the Company's
          Quarterly  Report on Form 10-Q for the quarterly period ended July 31,
          2004 (No. 0-21995), and incorporated herein by reference).

10.29     Sixth  Reaffirmation  of Guaranty dated as of July 31, 2004, by First
          Aviation  Services  Inc. and in favor of Hudson  United Bank (filed as
          Exhibit 10.32 to the Company's  Quarterly  Report on Form 10-Q for the
          quarterly period ended July 31, 2004 (No.  0-21995),  and incorporated
          herein by reference).

10.30 *   Amendment  dated May 14,  2004 to the  Relocation  Agreement  dated
          February 16, 2004 between Aerospace  Products  International  Inc. and
          Paul J. Fanelli  (filed as Exhibit  10.33 to the  Company's  Quarterly
          Report on Form 10-Q for the quarterly  period ended July 31, 2004 (No.
          0-21995), and incorporated herein by reference).

10.31 *   Compensation Arrangements with Certain Executive Officers (filed as
          Exhibit 10.31 to the Company's Annual Report on Form 10-K for the year
          ended  January  31, 2005 (No.  0-21995),  and  incorporated  herein by
          reference)

10.32 *   Compensation of Non-Employee  Directors  (filed as Exhibit 10.32 to
          the  Company's  Annual  Report on Form 10-K for the year ended January
          31, 2005 (No. 0-21995), and incorporated herein by reference)

10.33     Description of Amendment to letter regarding pursuit of Acquisition
          Opportunities  (filed as Exhibit 10.33 to the Company's  Annual Report
          on Form 10-K for the year ended  January 31, 2005 (No.  0-21995),  and
          incorporated herein by reference)

10.34 *   Compensation  for  Services  of the  Board of  Directors  of First
          Aviation  Services  Inc.  (filed  as  Exhibit  10.1  to the  Company's
          Current Report on Form 8-K dated June 7, 2005. (No. 0-21995), and
          incorporated herein by reference).

10.35     Preferred  Stock  Purchase  Agreement,  dated  as of June  20,  2005,
          between  Signature Combs,  Inc. (f/k/a AMR Combs,  Inc.) and Aerospace
          Products  International,  Inc. (filed as Exhibit 10.1 to the Company's
          Current Report on Form 8-K dated June 20, 2005 (No. 0-21995), and
          incorporated herein by reference).


                                       24

<PAGE>



10.36     Amended  and  Restated   Commercial   Revolving   Loan  and  Security
          Agreement,  dated  as of July  29,  2005,  entered  into by  Aerospace
          Products  International,  Inc., a direct  wholly-owned  subsidiary  of
          First Aviation Services, Inc. and Hudson United Bank (filed as Exhibit
          10.1 to the Company's Current Report on Form 8-K dated July 29, 2005
          (No. 0-21995),  and incorporated  herein by reference).

10.37     Amended and Restated  Guaranty,  dated as of July 29,  2005,  entered
          into by First Aviation Services, Inc. (on behalf of Aerospace Products
          International,   Inc.,  a  direct  wholly-owned  subsidiary  of  First
          Aviation Services, Inc.) and Hudson United Bank (filed as Exhibit 10.4
          to the  Company's  Current Report on Form 8-K dated July 29, 2005
          (No. 0-21995),  and incorporated  herein by reference).

10.38 *   Compensation  for Aaron P. Hollander  (filed as Exhibit 10.5 to the
          Company's Quarterly Report on Form 10-Q for the quarterly period ended
          July 31, 2005 (No. 0-21995), and incorporated herein by reference).

10.39 *   Compensation  arrangements with other executive officers (effective as
          of February 1, 2006).

21.1      List of Subsidiaries.

23.1      Consent of Ernst & Young LLP.

31.1      Certification of Chief Executive Officer required by Rule 13a-14(a).

31.2      Certification of Chief Financial Officer required by Rule 13a-14(a).

32.1      Certification  of Chief Executive  Officer  required by Rule 13a-14(b)
          and 18 U.S.C. Section 1350 (furnished herewith).

32.2      Certification  of Chief Financial  Officer  required by Rule 13a-14(b)
          and 18 U.S.C. Section 1350 (furnished herewith).




     * Management contracts or compensatory plans or arrangements.






                                       25
<PAGE>



                                   SIGNATURES


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

Date: May 1, 2006

                              FIRST AVIATION SERVICES INC.



                              By:  /s/ Robert G. Costantini
                                   ------------------------
                                   Robert G. Costantini
                                   Chief Financial Officer
                                   (Principal Financial and Accounting Officer)


Signature                Title                                      Date
---------                -----                                      ----



/s/ Aaron P. Hollander    Chairman of the Board                     May 1, 2006
------------------------
Aaron P. Hollander



/s/ Michael C. Culver     Chief Executive Officer and               May 1, 2006
------------------------
Michael C. Culver         Director (Principal Executive Officer)



/s/ Stanley J. Hill       Director                                  May 1, 2006
------------------------
Stanley J. Hill




/s/ Robert L. Kirk        Director                                  May 1, 2006
------------------------
Robert L. Kirk



/s/ Joseph J. Lhota       Director                                  May 1, 2006
------------------------
Joseph J. Lhota




                                       26
<PAGE>




                          First Aviation Services Inc.

                        Consolidated Financial Statements

               For the years ended January 31, 2006, 2005 and 2004




                   Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm.....................F2

Consolidated Financial Statements:

Consolidated Balance Sheets.................................................F3
Consolidated Statements of Operations.......................................F4
Consolidated Statements of Stockholders' Equity.............................F5
Consolidated Statements of Cash Flows.......................................F6
Notes to Consolidated Financial Statements..............................F7-F18

Schedule II - Valuation and Qualifying Accounts............................F19








                                       F1

<PAGE>



             Report of Independent Registered Public Accounting Firm





The Board of Directors and Stockholders
First Aviation Services Inc.


We have audited the accompanying  consolidated  balance sheets of First Aviation
Services  Inc.  as of January 31,  2006 and 2005,  and the related  consolidated
statements of operations,  stockholders'  equity, and cash flows for each of the
three years in the period ended  January 31, 2006.  Our audits also included the
financial statement schedule listed in the Index at Item 15(a)2. These financial
statements and schedule are the responsibility of the Company's management.  Our
responsibility  is to  express  an opinion  on these  financial  statements  and
schedule based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  We were not engaged to perform an
audit of the Company's  internal  control over financial  reporting.  Our audits
included  consideration of internal control over financial  reporting as a basis
for designing audit  procedures that are appropriate in the  circumstances,  but
not for the  purpose  of  expressing  an  opinion  on the  effectiveness  of the
Company's internal control over financial reporting.  Accordingly, we express no
such  opinion.  An audit also  includes  examining,  on a test  basis,  evidence
supporting the amounts and  disclosures in the financial  statements,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial  position of First Aviation
Services Inc. at January 31, 2006 and 2005, and the consolidated  results of its
operations  and its cash flows for each of the three  years in the period  ended
January  31,  2006,  in  conformity  with  U.S.  generally  accepted  accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered  in  relation  to the basic  financial  statements  taken as a whole,
presents fairly in all material respects the information set forth therein.



                                                /s/  Ernst & Young LLP



Stamford, Connecticut
April 21, 2006



                                       F2

<PAGE>



                          First Aviation Services Inc.

                           Consolidated Balance Sheets
                      (in thousands, except share amounts)


                                                            January 31,
Assets                                                  2006           2005
                                                   -------------  --------------
Current assets:
     Cash and cash equivalents                          $ 9,488        $ 22,584
     Trade receivables, net                              18,737          14,563
     Inventories, net                                    38,809          24,156
     Prepaid expenses and other                           1,351             900
                                                   -------------  --------------

Total current assets                                     68,385          62,203

Plant and equipment, net                                  4,963           2,996
                                                   -------------  --------------

Total Assets                                           $ 73,348        $ 65,199
                                                   =============  ==============

Liabilities and stockholders' equity
Current liabilities:
     Accounts payable                                  $ 15,441        $ 10,495
     Accrued compensation and related expenses            1,823           1,205
     Other accrued liabilities                            1,750           2,424
     Notes payable                                        1,125               -
     Income taxes payable                                 1,012             900
                                                   -------------  --------------

Total current liabilities                                21,151          15,024

Long-term debt                                           14,500          14,500
Notes payable, less current portion                       1,245
Minority interest in subsidiary                               -           1,041
                                                   -------------  --------------

Total liabilities                                        36,896          30,565

Stockholders' equity
     Common stock, $0.01 par value, 25,000,000
        shares authorized, 9,135,699
        shares issued                                        91              91
     Additional paid-in capital                          38,799          38,318
     Retained earnings                                    6,349           5,325
    Accumulated other comprehensive income                  500             374
                                                   -------------  --------------
                                                         45,739          44,108
     Less:  Treasury stock, at cost, 1,782,449
        and 1,814,191 shares, respectively               (9,287)         (9,474)
                                                   -------------  --------------
     Total stockholders' equity                          36,452          34,634
                                                   -------------  --------------

Total liabilities and stockholders' equity             $ 73,348        $ 65,199
                                                   =============  ==============


See accompanying notes.


                                       F3

<PAGE>


<TABLE>
<CAPTION>

                          First Aviation Services Inc.

                      Consolidated Statements of Operations
               (in thousands, except share and per share amounts)



                                                                            Year ended January 31,
                                                                ----------------------------------------------
                                                                    2006            2005            2004
                                                                --------------  --------------  --------------
<S>                                                                   <C>             <C>              <C>
Net sales                                                           $ 131,525       $ 124,249       $ 105,777
Cost of sales                                                         108,474         103,525          86,241
                                                                --------------  --------------  --------------
Gross profit                                                           23,051          20,724          19,536

Selling, general and administrative expenses                           19,933          19,973          17,032
Corporate expenses                                                      2,372           2,893           2,625
                                                                --------------  --------------  --------------
Income (Loss) from operations                                             746          (2,142)           (121)
Interest income                                                            47              66             154
Net interest income (expense) and other                                  (105)             10              (5)
Other income                                                              417               -               -
Minority interest in subsidiary                                           (10)            (42)            (42)
                                                                --------------  --------------  --------------
Income (Loss) before income taxes                                       1,095          (2,108)            (14)
(Provision) benefit for income taxes                                      (71)           (121)             25
                                                                --------------  --------------  --------------
Net income (loss)                                                     $ 1,024        $ (2,229)           $ 11
                                                                ==============  ==============  ==============

Basic net income (loss) per share, and net income (loss)
    per share - assuming dilution:

Basic net income (loss) per  share                                     $ 0.14         $ (0.31)            $ -
                                                                --------------  --------------  --------------

Net income (loss) per  share - assuming dilution                       $ 0.14         $ (0.31)            $ -
                                                                ==============  ==============  ==============

Weighted average shares outstanding - basic                         7,336,925       7,301,751       7,267,368
                                                                ==============  ==============  ==============

Weighted average shares outstanding - assuming dilution             7,341,007       7,301,751       7,281,598
                                                                ==============  ==============  ==============
</TABLE>


See accompanying notes.


                                       F4

<PAGE>

<TABLE>
<CAPTION>


                          First Aviation Services Inc.

                 Consolidated Statements of Stockholders' Equity
                      (in thousands, except share amounts)

                                          Common Stock                            Accumulated
                                      -------------------  Additional               Other
As of January 31, 2006                   Number             Paid-in    Retained  Comprehensive             Treasury
                                       of Shares  Amount    Capital    Earnings  Income (Loss)  Sub-Total   Stock        Total
                                      ----------- -------  ----------- ---------  -----------  ---------- -----------  ----------
         <S>                                <C>    <C>        <C>          <C>         <C>        <C>          <C>         <C>
Balances at January 31, 2003           7,250,710  $ 91    $ 38,445     $ 7,543       $ (96)    $ 45,983    $ (9,889)    $ 36,094
                                      ----------- -------  ----------- ---------  -----------  ---------- -----------  ----------

Shares issued under qualified plans
    and to directors                      33,383     -         (70)          -           -          (70)        196          126
Other comprehensive income                     -     -           -           -         334          334           -          334
    Net Income                                 -     -           -          11           -           11           -           11
                                      ----------- -------  ----------- ---------  -----------  ---------- -----------  ----------

Balances at January 31, 2004           7,284,093  $ 91    $ 38,375     $ 7,554       $ 238     $ 46,258    $ (9,693)    $ 36,565
                                      ----------- -------  ----------- ---------  -----------  ---------- -----------  ----------

Shares issued under qualified plans       37,415     -         (57)          -           -          (57)        219          162
    and to directors
Other comprehensive income                     -     -           -           -         136          136           -          136
    Net Loss                                   -     -           -      (2,229)          -       (2,229)          -       (2,229)
                                      ----------- -------  ----------- ---------  -----------  ---------- -----------  ----------

Balances at January 31, 2005           7,321,508  $ 91    $ 38,318     $ 5,325       $ 374     $ 44,108    $ (9,474)    $ 34,634
                                      =========== =======  =========== =========  ===========  ========== ===========  ==========

Shares issued under qualified plans
    and to directors                      31,742     -         (60)          -           -          (60)        187          127
Repurchase of preferred stock
    of subsidiary                              -     -         541           -           -          541           -          541
Other comprehensive income                     -     -           -           -         126          126           -          126
    Net Income                                 -     -           -       1,024           -        1,024           -        1,024
                                      ----------- -------  ----------- ---------  -----------  ---------- -----------  ----------

Balances at January 31, 2006           7,353,250  $ 91    $ 38,799     $ 6,349       $ 500     $ 45,739    $ (9,287)    $ 36,452
                                      =========== =======  =========== =========  ===========  ========== ===========  ==========
</TABLE>

See accompanying notes.

                                       F5

<PAGE>

<TABLE>
<CAPTION>

                          First Aviation Services Inc.

                      Consolidated Statements of Cash Flows
                                 (in thousands)

                                                                                      Year ended January 31,
                                                                           -----------------------------------------------
                                                                               2006            2005             2004
                                                                           --------------  --------------  ---------------
      <S>                                                                        <C>             <C>               <C>
Cash flows from operating activities
Net income (loss)                                                                $ 1,024        $ (2,229)            $ 11

Adjustments to reconcile net income (loss) to net cash from
     operating activities - non cash expense (income):
     Depreciation and amortization                                                 1,255           1,011            1,101
     Compensation paid through issuance of stock                                     127             162              121
(Increase) decrease in working capital assets:
          Trade receivables                                                       (4,049)           (990)             416
          Inventories                                                            (11,596)         (1,717)          (1,561)
          Prepaid expenses and other assets                                         (444)            150               10
Increase (decrease) in working capital liabilities:
          Accounts payable                                                         4,917             930             (775)
          Other accrued liabilities                                                 (165)          1,206              188
          Income taxes payable                                                       110             (32)             (70)
                                                                           --------------  --------------  ---------------
Net cash used in operating activities                                             (8,821)         (1,509)            (559)

Cash flows from investing activities
Purchases of plant and equipment and other assets                                 (3,208)         (1,039)            (484)
Proceeds from disposals of plant and equipment and other assets                        -               3               70
                                                                           --------------  --------------  ---------------
Net cash used in investing activities                                             (3,208)         (1,036)            (414)

Cash flows from financing activities
Borrowings on revolving line of credit                                            46,400          56,150           58,000
Repayments on revolving line of credit and capital lease obligations             (46,400)        (56,150)         (58,004)
Repayments on notes payable                                                         (600)              -                -
Repurchase of Minority Interest in Subsidiary                                       (500)              -                -
Repurchases of common stock for treasury and other                                     -               -                5
                                                                           --------------  --------------  ---------------
Net cash provided by (used in) financing activities                               (1,100)              -                1

Effect of exchange rate changes on cash and cash equivalents                          33             (15)             103
                                                                           --------------  --------------  ---------------
Net change in cash and cash equivalents                                        $ (13,096)       $ (2,560)          $ (869)
Cash and cash equivalents at the beginning of the year                            22,584          25,144           26,013
                                                                           --------------  --------------  ---------------
Cash and cash equivalents at the end of the year                                 $ 9,488        $ 22,584         $ 25,144
                                                                           ==============  ==============  ===============

Supplemental cash flow disclosures
Cash paid for:
     Interest                                                                      $ 218            $ 46             $ 61
                                                                           ==============  ==============  ===============
     Income taxes paid, net                                                         $ 59           $ 145            $ 124
                                                                           ==============  ==============  ===============

</TABLE>

See accompanying notes.


                                       F6

<PAGE>


                          First Aviation Services Inc.

                   Notes to Consolidated Financial Statements
               (in thousands, except share and per share amounts)

1.   Business and Basis of Presentation

First  Aviation  Services  Inc.  ("First  Aviation"),  through its  wholly-owned
subsidiaries,  Aerospace Products International, Inc. ("API"), Aircraft Products
International,  Ltd. ("API Ltd."), API Asia Pacific,  Inc. ("API Asia Pacific"),
and API China, Inc. ("API China"),  (collectively the "Company"),  is one of the
leading suppliers of products and services to the aerospace industry  worldwide,
including the  provisioning of aircraft parts and  components,  and supply chain
management services.  The Company also performs overhaul and repair services for
brakes and  starter/generators,  and builds custom hose assemblies.  The Company
has its headquarters in Westport, Connecticut.

The accompanying consolidated financial statements include the accounts of First
Aviation   and  its   subsidiaries.   Significant   intercompany   balances  and
transactions have been eliminated in consolidation.

First Aviation was formed in March 1995 to acquire the capital stock of National
Airmotive  Corporation  ("NAC").  On March 5, 1997,  the  Company  completed  an
initial public  offering of its common stock. A portion of the proceeds was used
to acquire API's business from AMR Combs, Inc. ("AMR Combs").


2.   Summary of Significant Accounting Policies

Use of Estimates

The  preparation  of  consolidated   financial  statements  in  conformity  with
accounting   principles   generally  accepted  in  the  United  States  requires
management to make estimates and assumptions that affect the amounts reported in
the consolidated  financial  statements and accompanying  notes.  Actual results
could differ from those estimates, and the differences may be significant.

Net Sales, Cost of Sales, and Trade Receivables

The Company's  net sales consist of sales of services to the aviation  industry,
including  parts  and  components  suppply  services,  supply  chain  management
services,  and component  overhaul and repair  services.  Net sales are recorded
when parts and components are shipped and title transfers to the customer,  when
overhaul and repair  services are  completed and the item is shipped back to the
customer,  or when supply chain  management  services  have been provided to the
customer.  Shipping  and handling  fees billed to customers  are included in net
sales.  The terms and nature of supply chain  management  services  provided are
stipulated in a long-term  contract  between the Company and the  customer.  The
Company provides its facilities, personnel and systems to provide cost effective
services to the customer.  In providing  services where the Company  distributes
inventory on behalf of its  customer,  the Company may use its own  inventory or
hold its customers'  inventory  without taking  ownership of such inventory.  In
cases where the Company does not take ownership of its customers' inventory, net
sales  generally are recognized as a fee based on the sales value of the product
shipped through the Company's facilities, and not the sales value of the product
itself. Alternatively, the Company, when providing services to handle customers'
inventory  without  taking  ownership,  can  take a fee  based  on the  cost  of
providing services, and not on the sales value of the product.

Cost of sales consists of costs of inventory sold,  costs to overhaul and repair
parts and components,  and direct costs of providing services. Freight costs for
parts and  components  sold are also  included  in cost of  sales.  API has five
suppliers from whom approximately 38%, 40%, and 45% of it's total purchases were
made during the years ended January 31, 2006, 2005, and 2004, respectively.


                                       F7

<PAGE>


Sales to unaffiliated  foreign customers were  approximately 25%, 22% and 22% of
net sales for the years ended January 31, 2006, 2005 and 2004, respectively. The
majority  of these  customers  were  located in Canada,  Southeast  Asia,  Latin
America, and Europe.

The Company  provides  credit in the form of trade  accounts  receivable  to its
customers. The Company generally does not require collateral to support domestic
customer  receivables.   Receivables  arising  from  export  activities  may  be
supported by foreign  credit  insurance.  The Company  performs  ongoing  credit
evaluations of its customers and maintains  allowances that management  believes
are adequate for potential  credit losses.  The allowance for doubtful  accounts
was $596 and $806, at January 31, 2006 and 2005, respectively.

Shipping and Handling Revenues and Costs

Fees billed to customers  associated  with shipping and handling  activities are
classified as revenue,  and costs  associated  with  shipping and handling,  are
classified as part of cost of sales.

Stock Based Compensation and Stock Options Issued to Employees

The  Company's   non-employee  directors  receive  a  portion  of  their  annual
compensation in the Company's  stock. The value of stock issued is equivalent to
the compensation expense, and the number of shares issued is based upon the fair
market value per share at the date issued. The Company's  non-employee directors
receive  compensation in cash for committee meetings and special board meetings,
excluding  the  four   regularly   scheduled   board  meetings  and  the  annual
shareholders'  meeting  that are  paid  for in  stock  as part of  their  annual
compensation.

The Company  generally  grants stock options to its employees for a fixed number
of shares with an exercise  price equal to the fair market value of the stock on
the date of grant. As permitted under Statement of Financial Accounting Standard
No. ("FAS") 123,  "Accounting  for  Stock-Based  Compensation",  the Company has
elected to follow  Accounting  Principles Board Opinion No. 25,  "Accounting for
Stock Issued to Employees",  and related interpretations in accounting for stock
awards to employees.  No  compensation  expense was recognized  during the years
ending January 31, 2006,  2005 and 2004 since all grants were issued at the fair
market value of the Company's common stock at the date of grant.

The  Company is required to  disclose  the fair  value,  as defined,  of options
granted to employees and the related compensation expense. The fair value of the
stock options  granted was estimated at the date of grant using a  Black-Scholes
option-pricing  model. The Black-Scholes  option-pricing model was developed for
use in  estimating  the fair  value  of  traded  options  that  have no  vesting
restrictions and are fully  transferable.  In addition,  option valuation models
require the input of highly subjective assumptions, including the expected stock
price volatility.  In management's opinion, because the Company's employee stock
options  are  not  publicly  traded,  and  have  characteristics   significantly
different from those of traded  options,  and because  changes in the subjective
input  assumptions can materially  affect the fair value estimate,  the existing
models do not necessarily provide a reliable single measure of the fair value of
its employee stock options.








                                       F8

<PAGE>



The fair value of each option issued was estimated at the date of grant using
the following assumptions for the years ended January 31:


                                 2006              2005             2004
                            ----------------  ---------------- ---------------

Expected dividend yield         0.0%               0.0%             0.0%

Risk-free interest rate         4.3%               3.6%             1.9%

Expected volatility            31.0%              32.3%            37.8%

Expected life of option         5.0 years          5.0 years        5.0 years

Weighted-average fair value
   of options granted during
   the year                   $ 1.40            $  1.55          $  1.15

Using the above noted  assumptions and the  weighted-average  fair value of each
option granted,  the following shows the Company's  results if the fair value of
options issued had been recorded as an expense.


                                         2006           2005            2004
                                     ------------   ------------   -------------

Net income (loss) as reported        $    1,024     $  (2,229)     $      11

Pro forma net compensation expense
 for issuance of stock options               13            57             42
                                     ------------   ------------   -------------

Pro forma net income (loss)          $    1,011     $  (2,286)     $     (31)
                                     ============   ============   =============

Basic net income (loss) per share,
 and net income (loss) per share
 - assuming dilution as reported     $     0.14     $   (0.31)     $   (0.00)
                                     ============   ============   =============

Pro forma basic net income (loss)
 per share, and net income (loss)
 per share - assuming dilution       $     0.14     $    (0.31)    $   (0.00)
                                     ============   ============   =============

In December 2004, the Financial Accounting Standards Board, or FASB, issued SFAS
No. 123 (revised 2004), "Share-Based Payment." SFAS No. 123(R) requires that the
compensation cost relating to share-based payment  transactions be recognized in
financial  statements.  The cost will be measured based on the fair value of the
instruments  issued.  SFAS  No.  123(R)  covers  a  wide  range  of  share-based
compensation  arrangements  including  share  options,  restricted  share plans,
performance-based  awards, share appreciation rights and employee share purchase
plans.  SFAS No. 123(R) replaces SFAS No. 123 and supersedes APB Opinion No. 25.
As  originally  issued in 1995,  SFAS No.  123  established  as  preferable  the
fair-value-based  method of accounting for share-based payment transactions with
employees.  However,  that Statement permitted entities the option of continuing
to apply the  guidance  in Opinion  25, as long as the  footnotes  to  financial
statements  disclosed  what net income (loss) would have been had the preferable
fair-value-based  method been used.  The Company  will be required to apply SFAS
No.  123(R) at the beginning of the first fiscal year  beginning  after June 15,
2005,  and plans to adopt it effective  February 1, 2006. The impact of adoption
of Statement  123(R) on future  periods cannot be predicted at this time because
it will depend on levels of share-based payments granted in the future. However,
had the Company adopted  Statement  123(R) in prior periods,  the impact of that
standard would have approximated the impact of Statement 123 as described in the
disclosure  of pro forma net income and  earnings  per share in the table above.
Statement  123(R) has  alternative  transitional  methods for  adoption  and the
Company has not determined which transitional alternative it will use.

Cash and Cash Equivalents

Cash and cash  equivalents  at any time may consist of a  combination  of demand
deposits,  money  market or  short-term,  high-grade  bond funds and  short-term
certificates  of deposit  purchased with original  maturities of less than three
months.



                                       F9

<PAGE>


Inventories

Inventories generally consist of aircraft parts and components and are stated at
the lower of cost or market,  using the first-in,  first-out method.  Provisions
are made in each period for the  estimated  effect of  obsolete  and slow moving
inventories.  During the three months ended July 31, 2004, as a result of normal
review  procedures,  the Company  adjusted the  methodology  for  estimating the
Allowance  for Slow Moving and Obsolete  Inventory  that makes the estimate more
objective,  and  efficient  to  calculate,  by  applying  percentages  based  on
historical  experiences  of  inventory  in  various  age  classifications,   and
eliminating the practice of making adjustments based on historical and projected
sales, or other inventory movements due to new product lines and product returns
and  allowances.   Actual  obsolete  and  slow  moving  inventories  may  differ
significantly from such estimates, and such differences could be material to the
financial  statements.  The allowance for obsolete and slow moving inventory was
$1,709 and $1,656, at January 31, 2006 and 2005, respectively.

Fair Value of Financial Instruments

The carrying values of current assets and liabilities approximate fair value due
to the  short-term  maturities  of these  assets and  liabilities.  The carrying
amount  of the  Company's  borrowings  under  its  revolving  credit  agreements
approximates  fair value, as these obligations have interest rates which vary in
conjunction with current market conditions.  The carrying amount of the minority
interest in subsidiary at January 31, 2005  represented API preferred  stock, at
face value,  prior to repurchase by API pursuant to an agreement  dated June 20,
2005 (See Note 6).

Plant and Equipment

Plant and  equipment  are stated at cost,  less an allowance  for  depreciation.
Additions and improvements that materially  increase the productive  capacity or
extend  the  useful  life of an  asset  are  added  to the  cost  of the  asset.
Expenditures  for  normal  maintenance  and  repairs  are  charged to expense as
incurred.

Depreciation of plant and equipment is computed using the  straight-line  method
over the estimated  useful lives of the assets,  which range from 3 to 15 years.
Leasehold  improvements  are amortized over the shorter of the estimated life of
the improvement or the term of the related lease.

Long-Lived Assets

During the year ended January 31, 2003, the Company adopted FAS 144, "Accounting
for the  Impairment  or  Disposal  of  Long-Lived  Assets".  Under  FAS 144,  an
impairment  loss must be  recognized  when the  carrying  amount of a long-lived
asset  exceeds  its fair  value.  In the  event  that the  carrying  amounts  of
long-lived  assets may be impaired,  an  assessment  of  recoverability  must be
performed.  The assessment  process  consists of comparing the estimated  future
undiscounted cash flows associated with the asset to the asset's carrying amount
to determine if a write-down is required.  If this review process indicates that
the asset  will not be  recoverable,  the  carrying  value of the asset  must be
reduced to its estimated realizable value. The adoption of FAS 144 had no effect
on the consolidated financial position of the Company. No asset impairments were
recorded during the years ended January 31, 2006, 2005 and 2004.

Principal Suppliers

API has five suppliers of parts and components from which approximately 38%, 40%
and 45% of its total  purchases  were made  during the years  ended  January 31,
2006,  2005 and 2004,  respectively.  Accounts  payable to these vendors totaled
$4,279 and $1,803 at January 31, 2006 and 2005,  respectively.  An  inability to
maintain   timely  access  to  parts  and  components   from  these  vendors  on
commercially  reasonable  terms  would  have a  material  adverse  effect on the
Company's consolidated business, financial condition and results of operations.

Income Taxes

The Company uses the liability  method to account for income  taxes.  Under this
method,  deferred tax assets and liabilities are determined based on differences
between  financial  reporting and tax bases of assets and  liabilities,  and are
measured  using the  enacted  tax rates and laws that will be in effect when the
differences are expected to reverse.  The Company records  valuation  allowances
against  deferred  tax assets as it is more likely than not that some portion or
all of the deferred tax asset will not be realized.



                                      F10

<PAGE>


Accumulated Other Comprehensive Income (Loss)

The accumulated other comprehensive  income (loss) arose from the translation of
accounts into U.S. dollars where the functional currency is the Canadian dollar.
The increase in other  comprehensive  income  during the years ended January 31,
2006,  2005,  respectively,  was due to an increase in the value of the Canadian
dollar relative to the U.S.  dollar.  Comprehensive  income (loss) for the years
ended January 31, 2006, 2005 and 2004, respectively, was as follows:


                                            2006          2005          2004
                                         ------------  ------------ ------------

Net income (loss) as reported            $   1,024     $  (2,229)   $       11

Net impact of foreign currency
  translation adjustments - gain               126           136           334
                                         ------------  ------------ ------------

Comprehensive income (loss)              $   1,150     $  (2,093)   $      345
                                         ============  ============ ============


3.   Plant and Equipment

Plant and equipment consist of the following:
                                                          January 31,
                                                     2006            2005
                                                 -----------      -----------
Machinery and equipment                           $    2,488       $    2,183
Buildings and leasehold improvements                   1,242            1,239
Computer equipment, software, office furniture,
     fixtures and other office equipment               8,965            6,628
Construction-in-process                                1,085              508
                                                 -----------      -----------
                                                      13,780           10,558

Less:  accumulated depreciation                       (8,817)          (7,562)
                                                 -----------      -----------
                                                  $    4,963       $    2,996
                                                 ===========      ===========

4.   Long-Term Debt

                                                          January 31,
                                                     2006            2005
                                                 -----------      -----------

Long-term debt - revolving line of credit         $   14,500       $   14,500
                                                 ===========      ===========


On July 29, 2005,  Aerospace  Products  International  Inc., (the  "Borrower") a
direct wholly-owned subsidiary of First Aviation Services Inc. (the "Guarantor")
entered  into  a  Commercial  Revolving  Loan  and  Security  Agreement  (the  "
Agreement") and Guaranty  Agreement (the  "Guaranty") by and among the Borrower,
Guarantor and Hudson United Bank (the "Lender").

The  facility  created  by the  Agreement  replaces  the  Borrower's  previously
existing,  $20 million  revolving  credit facility  scheduled to expire July 31,
2006. The Agreement has a commitment  expiration  date of September 1, 2007. The
Guaranty replaces the previously existing guaranty agreement that existed on the
previous credit facility.

The  Agreement  provides  a 25  month  senior  revolving  credit  facility  (the
"Facility I") to the Borrower in the amount of $20 million, subject to terms and
conditions  set forth in the  Agreement.  The  facility  may be  increased by $5
million to $25  million  should the  Company  make an  acquisition  of assets of
another company,  subject to the Lender's approval.  In October 2005, the lender
approved the  increase in the  facility to $25 million  after the Company made a

                                      F11

<PAGE>


large initial inventory  purchase in September 2005 from a leading aircraft OEM.
The  proceeds  of any loans made under the  Agreement  will be used for  working
capital purposes in the ordinary course of business of the Borrower.

The Agreement  also provides for a one-time  advance (the  "Facility  II") in an
amount up to $3 million,  subject to  borrowing  availability.  The  Facility II
advance is repaid over 60 months at a fixed rate  determined  at the time of the
drawdown of the advance, with the portion of the advance to be repaid within one
year  reported  in  current  liabilities  on the  balance  sheet.  There  are no
outstanding amounts under Facility II at January 31, 2006.

Borrowings  under  Facility  I bear  interest  equal to LIBOR  plus 1.5% and are
limited to specified  percentages of eligible trade  receivables and inventories
of API. The Agreement contains a number of covenants,  including restrictions on
mergers,  consolidations  and  acquisitions,  the  incurrence  of  indebtedness,
transactions with affiliates,  the creation of liens, and limitations on capital
expenditures. Pursuant to the terms and conditions of the Agreement, the payment
of  dividends  on API's  common  stock is  prohibited,  except with the lender's
consent,  and API is  required  to  maintain  minimum  levels  of net  worth and
specified interest expense coverage ratios.  Substantially all of API's domestic
assets  are  pledged  as  collateral  under the  Agreement,  and First  Aviation
guarantees all borrowings under the Agreement. At January 31, 2006, borrowings
under the facility totaled $14.5 million, at an interest rate of approximately
5.8%. Approximately $8.9 million was available under the facility at January 31,
2006.

5.   Notes Payable

                                                      January 31,
                                                2006                 2005
                                        ---------------       ---------------
Notes Payable                           $         2,370       $             -
                                        ===============       ===============
Less : Current Portion                           (1,125)                    -
                                        ================      ===============
Long-term portion of notes payable      $         1,245       $             -
                                        ===============       ===============


API entered into an initial parts purchase  agreement on September 20, 2005 with
a leading  aircraft  original  equipment  manufacturer  ("OEM") to purchase $8.3
million of  inventory,  including  a  long-term  agreement  to sell  parts.  API
received  approximately  $7.1  million  of  this  inventory,  and  the  original
agreement  was  subsequently  amended to reflect the actual  amount of inventory
received.  The OEM vendor  agreed to  partially  finance the  purchase  with two
promissory  notes from API of $2.5  million and $1.8  million,  with the Company
entering into a guarantee  agreement to ensure payment by API. These  promissory
notes were also  subsequently  amended to reflect the lower  amount of inventory
actually received. The amended promissory note for $1.6 million is for a term of
4 years,  at 5.0%  interest  per annum.  The  amended  promissory  note for $1.4
million is a  non-interest  bearing  short-term  note due  within one year.  The
vendor financing  promissory  notes are subordinated to the Company's  revolving
line of credit.  The Company  purchased an additional  $4.8 million of inventory
from the OEM in  October  of  2005.  This  additional  purchase  and  subsequent
purchases from this OEM were on standard vendor terms. Future principal payments
on the notes are $1,073,  $340,  $511,  and $446 for the years ended January 31,
2007, 2008, 2009, and 2010, respectively.


6.   Stockholders' Equity

The  Company has an  Employee  Stock  Purchase  Plan  ("ESPP").  Under the ESPP,
250,000  shares of common stock have been  reserved for  issuance.  With certain
limitations,  the plan allows for eligible  employees to purchase  stock through
payroll deductions at 85% of the lower of the fair market value of the Company's
common stock as of the first day of each semi-annual offering period or the fair
market value of the stock at the end of the offering period.  The Company issued
5,249 and 2,682 shares from  treasury  stock to employees  under the ESPP during
the years ended  January 31, 2006 and 2005,  respectively.  At January 31, 2006,
179,914 shares were available for purchase under the ESPP.

The Company also has a Stock Incentive Plan (the "Plan").  The Plan provides for
the  grant  of  incentive  stock  options,  nonqualified  stock  options,  stock
appreciation  rights,  stock grants and stock  purchase  rights.  The  Company's
shareholders  voted at the 2003 annual  meeting to approve  the  increase in the
number of shares  available  under the Plan. On September 12, 2003,  the Company
filed a registration statement on Form S-8 to register 200,000 additional shares
of common stock, for issuance pursuant to awards under the Plan. Subsequently, a


                                      F12

<PAGE>


total of 1,200,000  shares of common stock have been reserved for issuance under
the Plan.  Only employee  stock options and shares issued to directors have been
issued under the Plan.

All of the stock options vest ratably over two to five-year  periods,  beginning
one year after the date of the grant, and expire ten years after issuance. Since
the exercise price of all of the options  granted during the years ended January
31,  2006,  2005 and 2004 was at or above the fair market value per share of the
Company's  common stock at the dates of grant, no compensation  expense relating
to stock options was recorded.  At January 31, 2006,  options for 206,350 shares
(after  forfeitures)  had been issued under the Plan.  The following  table is a
summary of  activity  related to stock  options for the  respective  years ended
January 31:

<TABLE>
<CAPTION>

                                              2006                          2005                            2004
                                   ---------------------------    --------------------------    -----------------------------
                                                    Weighted-                     Weighted-                       Weighted-
                                      Number        Average         Number         Average         Number          Average
                                       Of           Exercise         Of           Exercise          Of            Exercise
                                     Options         Price         Options         Price          Options           Price
                                   -----------    ------------    ----------     -----------    ------------    -------------
     <S>                                <C>            <C>             <C>            <C>            <C>            <C>
Outstanding at
    beginning of year                 223,350     $    4.41         592,700      $    4.94         598,200      $    5.18

Granted                                10,000          4.00         101,100           4.49         115,000           3.21

Exercised                                   -             -               -              -               -              -

Forfeited                             (27,000)         4.54        (470,450)          5.09        (120,500)          4.49
                                   -----------    ------------    ----------     -----------    ------------    -------------

Outstanding at end of year            206,350     $    4.37         223,350      $    4.41         592,700      $    4.94
                                   ===========    ============    ==========     ===========    ============    =============

Exercisable at end of year            133,252     $    4.42          90,866      $    4.50         314,368      $    5.59
                                   ===========    ============    ==========     ===========    ============    =============
</TABLE>



The following table is a summary of information about stock options outstanding
at January 31, 2006:

<TABLE>
<CAPTION>

                              Options Outstanding                                           Options Exercisable
---------------------------------------------------------------------------------    ----------------------------------
                                               Weighted-
    Range of               Number               Average             Weighted-                            Weighted-
    Exercise                 Of                Remaining             Average          Number of           Average
     Prices               Options          Contractual Life      Exercise Price        Options         Exercise Price
------------------    -----------------    ------------------    ----------------    -------------     ----------------
      <S>                    <C>                   <C>                <C>                 <C>                  <C>
  $3.83 - 5.00             206,350             7.2 years        $      4.37             133,252       $       4.42
------------------    -----------------    ------------------    ----------------    -------------     ----------------
</TABLE>


All of the  Company's  current  directors  elected to receive a portion of their
compensation  for the years ended  January 31,  2006,  2005 and 2004 paid in the
form of shares of the  Company's  common  stock.  The fair  market  value of the
Company's  common  stock at the date of issuance  was charged to expense  with a
corresponding  decrease to treasury stock and additional  paid-in capital.  Such
compensation  expense  totaled  $108,  $153 and $121,  and the  number of shares
issued was 26,493,  34,733 and 32,100 for the years ended January 31, 2006, 2005
and 2004, respectively.  A total of 178,630 shares have been issued to directors
under the Plan.

At January 31, 2006, 654,220 shares were available to be issued under the Plan.

In a series of authorizations  commencing  November 3, 1999, the Company's Board
of Directors  authorized a repurchase  program of up to 2,118,817  shares of the
Company's  common stock.  The repurchases have been funded from a portion of the
proceeds from the sale of its previously  owned  subsidiary  National  Airmotive
Corp.,  and were  made  from  time to time in open  market  transactions,  block
purchases,  privately negotiated  transactions or otherwise at prices prevailing
at the  time of the  repurchase.  The  aggregate  share  repurchases  since  the
repurchase program began totaled 2,024,498 shares through January 31, 2002 at an
aggregate  cost of $10,708 or $5.29 per  share.  There have been no  repurchases
since that time.  Approximately  94,000 shares remain  available for  repurchase
under this program.

                                      F13

<PAGE>


In conjunction  with the API  acquisition,  AMR Combs purchased 10,407 shares of
API  Series A  Cumulative  Convertible  Preferred  Stock,  $0.001 par value (the
"Preferred Stock"), at a price of $100 per share. Total adjusted proceeds to the
Company  were  $1,041.  This  transaction  had been  accounted  for as  minority
interest  in  subsidiary  in  the  accompanying   consolidated  balance  sheets.
Dividends were payable on a quarterly  basis on the Preferred Stock at an annual
rate of $4.00 per share;  accordingly,  dividends of $10, $42, and $42 were paid
during each of the years ended  January 31, 2006,  2005 and 2004,  respectively,
and have been reflected as minority  interest in subsidiary in the  accompanying
consolidated  statements of operations.  Pursuant to an agreement dated June 20,
2005, API repurchased the outstanding shares of the Convertible  Preferred Stock
from Signature  Combs,  Inc. (f/k/a AMR Combs,  Inc.) for an aggregate  purchase
price of $500.  The  difference  between the  repurchase  price of the Preferred
Stock and the book value of $541 was credited to Paid-in Capital in June 2005.

7.   Income Taxes

The provision (benefit) for income taxes on continuing operations is as follows:

                                           Year ended January 31,
                              -------------------------------------------------
                                  2006              2005             2004
                              --------------    --------------   --------------

  Current:
       Federal & Foreign      $       71        $      121       $       68
       State                           -                 -                -
                              --------------    --------------   --------------
                                      71               121               68

  Deferred:
       Federal                $        -        $        -       $      (93)
       State                           -                 -                -
                              --------------    --------------   --------------
                                       -                 -              (93)
                              --------------    --------------   --------------
  Total provision (benefit)   $       71        $      121       $      (25)
                              ==============    ==============   ==============

A reconciliation between the income tax provision (benefit) computed at the U.S.
federal  statutory  rate and the effective  rate  reflected in the  consolidated
statements of operations is as follows:

                                                 Year ended January 31,
                                      ------------------------------------------
                                        2006            2005           2004
                                      ------------  -------------- -------------


Provision (benefit) at federal
 statutory rate                           34.0%          (34.0)%        (34.0)%
State tax (benefit), net of federal        -               -            (29.3)
Foreign tax provision, net of federal      4.7             3.8          314.1
Net operating loss utilized              (32.2)            -            -
Non-deductible items                       -               2.5          328.3
Prior year and other items                 1.4             5.0       (2,743.4)
Deferred tax valuation allowance          (1.4)           28.4        1,985.7
                                      ------------  -------------- -------------
                                           6.5%            5.7%        (178.6)%
                                      ============  ============== =============

Deferred tax assets result from  temporary  differences  in the  recognition  of
income and expenses for tax and financial statement purposes.  These differences
are set forth below:

                                                        January 31,
                                             --------------------------------
                                                  2006              2005
                                             --------------    --------------

Financial statement accruals not currently
  deductible for income tax purposes:
     Bad debt                                $     215         $     290
     Inventory reserve                             683               596
     Amortization of tax goodwill                  642               709
     Net operating loss carryforwards              764             1,087
     Other                                         333               187
                                             --------------------------------
                                                 2,637             2,869
Valuation allowance                          $  (2,637)        $  (2,869)
                                             --------------    --------------
Net deferred income tax assets               $       -         $       -
                                             ==============    ==============

                                      F14

<PAGE>


For the fiscal year ended January 31, 2006,  the Company  recorded a net expense
from  income  taxes  of $71.  The  expense  is $19 for  federal  due to  federal
alternative  minimum tax and $52 of foreign income tax expense for operations in
Canada.  The  effective  rate of 6.5% for the year ended January 31, 2006 is the
result of the  federal  and  state  tax  benefits  from the  utilization  of the
Company's  net operating  loss  carryforward  offset by the federal  alternative
minimum  tax. The Company  decreased  the  valuation  reserve for the year ended
January 31, 2006 by $232,  against  deferred tax assets resulting from temporary
differences.   The  Company  has  net  operating  loss  carryforwards   totaling
approximately $1,756 for federal income tax purposes, and various state net
operating loss carryforwards.  The carryforwards expire between 2023 and 2025.

For the fiscal year ended January 31, 2005,  the Company  recorded a net expense
from  income  taxes of $121.  The  expense is foreign  income tax  expense,  for
operations in Canada and the  Philippines.  The  effective  rate of 5.7% for the
year ended January 31, 2005 is the result of the federal tax  benefits,  foreign
taxes,  state tax benefits and changes in the deferred tax valuation  allowance.
The Company also  increased the  valuation  allowance for the year ended January
31,  2006,  by $598,  against  deferred  tax  assets  resulting  from  temporary
differences.

For the fiscal year ended January 31, 2004,  the Company  recorded a net benefit
from income taxes of $25. The benefit was from a $93 credit from a U.S.  federal
refund  received  that is offset by  foreign  income  tax  expense  of $68,  for
operations in Canada and the  Philippines.  The accrual for the refund  received
was offset in its entirety by the  valuation  reserve that had been  recorded by
the  Company  during the prior  year,  but  changes to U.S.  federal  income tax
regulations during the fiscal year ended January 31, 2004 allowed the Company to
carry back the benefit to prior years, and receive a refund.  The effective rate
of (178.6%) for the year ended January 31, 2004 is the result of the tax benefit
from the U.S.  federal  refund  received,  state tax benefits and changes in the
deferred tax valuation  allowance due primarily to  depreciation  expenses.  The
Company also  increased  the  valuation  reserve for the year ended  January 31,
2004, by $278, against deferred tax assets resulting from temporary differences.


8.   Employee Benefits Plan

API  maintains a defined  contribution  savings  plan,  qualified  under Section
401(k) of the  Internal  Revenue  Code,  that  covers  substantially  all of its
full-time employees. The savings plan allows employees to defer up to 15 percent
of their salary,  with the Company partially  matching  employee  contributions.
Employees vest in the Company contribution ratably over three years. The Company
expensed  $164,  $206 and $167  related to the  savings  plan in the years ended
January 31, 2006, 2005 and 2004,  respectively.  Employees do not have an option
to invest in the Company's stock under the savings plan.


9.   Related Parties

The Company and First Equity  Development Inc. ("First Equity") the wholly-owned
subsidiary of First Equity Group, Inc., the majority stockholder of the Company,
have an  agreement  relating  to the  allocation  of  potential  investment  and
acquisition  opportunities  in the aerospace  parts  distribution  and logistics
businesses.  The agreement was approved by the independent  members of the Board
of Directors on a month-to-month  basis effective February 1, 2004. First Equity
Group,  Inc. is beneficially  owned by Mr. Aaron P. Hollander and Mr. Michael C.
Culver,  respectively  Chairman of the Board and Chief Executive  Officer of the
Company.  Pursuant  to  the  agreement,  neither  First  Equity  nor  any of its
majority-owned  subsidiaries  will  consummate  any  acquisition  of a  majority
interest in any aerospace parts  distribution and logistics business anywhere in
the world (a "Covered  Acquisition"),  without  first  notifying the Company and
providing the Company with the opportunity to effect the Covered Acquisition for
its own  account.  The  Company's  decision  as to whether to effect the Covered
Acquisition will be made by the independent members of the Board of Directors of
the  Company.  The  agreement  can be  terminated  by either  party upon 30 days
written notice to the other party.  The agreement does not apply to any proposed
acquisition  by First Equity of any business that generates less than 15% of its
aggregate net sales from aerospace parts  distribution  or logistics,  or to any
advisory services performed by First Equity on behalf of third parties.

The Company and First Equity also had an advisory agreement  terminated by First
Equity on January 1, 2005.  The  advisory  agreement  had been  approved  by the
independent  members  of  the  Board  of  Directors  on a  month-to-month  basis
effective  February  1, 2004.  Pursuant  to the terms of this  agreement,  First
Equity  provided the Company with  investment  and financial  advisory  services
relating  to  potential  acquisitions  and  other  financial  transactions.  The
agreement could be terminated by either party upon 30 days written notice to the
other party. The Company paid First Equity a $30 monthly retainer, and

                                      F15

<PAGE>


reimbursed First Equity for its out-of-pocket  expenses.  In addition,  upon the
successful  completion of certain  transactions,  the Company would pay a fee to
First  Equity  (the  "Success  Fee").  The  amount of any  Success  Fee would be
established  by the  independent  members of the Board of Directors and would be
dependent upon a variety of factors, including, but not limited to, the services
provided  and the size and the type of  transaction.  Up to one year's  worth of
retainer fees paid could be applied as a credit against any Success Fee, subject
to certain limitations. During the three years ended January 31, 2006, 2005, and
2004,  the  Company  paid First  Equity  retainer  fees of $0,  $360,  and $360,
respectively, and no Success Fee.

The  Company and First  Equity had entered  into an  arrangement  whereby  First
Equity  provided  the Company  with  various  additional  services to assist the
Company.  These  services  were not part of the  advisory  agreement,  described
above,  but derived from the work First Equity  performed  under the  agreement.
Therefore, First Equity did not charge the Company additional fees in connection
with providing such services under the advisory agreement,  because the services
were derived from the work First Equity  performed under the advisory  agreement
consistent with their role as financial advisor.  The advisory agreement expired
on January 31, 2005. These services included (i) detailed financial modeling for
new business proposals,  (ii) Board of Directors  presentation  analysis,  (iii)
investor relations  marketing and presentations,  (iv) various analysis for API,
including benchmarking, financial analysis, and competitive market analyses, and
(v)  other  financial  analyses  for  the  Company,  including  stock  buy-back,
valuations,  and  capital  structure  analyses.  The  Company's  CEO and CFO had
unlimited  access to these  resources when  requested.  These services were also
terminated  by First Equity with the  expiration  of the  advisory  agreement on
January 31, 2005, as described above.

The Company  subleases  from First  Equity  approximately  3,000  square feet of
office  space in  Westport,  Connecticut.  The leased  space is  utilized by the
Company as its corporate  headquarters.  First Equity also utilizes space in the
same premises.  The sublease,  which became  effective  April 21, 1997, is for a
period of ten years,  and is cancelable by either party with six months  notice.
The Company has the option to renew the  sublease for two  additional  five-year
periods.  Lease payments under this sublease totaled approximately $93, $84, and
$80, for the years ended January 31, 2006, 2005, and 2004, respectively.

The Company and First Equity also share certain common  expenses that arise from
sharing office space in Westport,  CT. The Company  reimburses  First Equity and
vice versa,  for expenses each entity incurs  related to the common usage of the
office space. The amounts are included in the Company's corporate expenses,  and
include expenses such as telephone, computer consulting, office cleaning, office
supplies and utilities. The expenses are allocated based on base salaries of the
Company's  and First  Equity's  personnel  working in the shared  space.  Common
expenses are  approved by the Company and First  Equity,  prior to  expenditure,
when not of a recurring  nature.  The  allocations are reviewed by the Company's
CFO and the Controller of First Equity each month. In addition,  a member of the
Company's audit  committee  reviews the allocation of expenses  quarterly.  Some
business  development  expenses,  such as joint  marketing  expense and business
organizational  dues,  are shared on an equal basis.  Management  believes  this
method of allocation is reasonable.  In addition,  the amounts reimbursed by the
Company are the actual costs  incurred for the expense.  The Company  reimbursed
First Equity, $52, $53, and $67 in 2006, 2005 and 2004, respectively.

In order to simplify the  administration  of payroll,  certain  employees of the
Company who are  authorized  to perform  services for both the Company and First
Equity are paid  through the payroll of First  Equity.  Employees of the Company
who work  exclusively  for the Company by agreement are paid through the payroll
of API, the Company's principal subsidiary.

The Company  paid Imtek,  an affiliate of First  Equity,  approximately  $29 for
printing,  insertion, and mailing services, for the year ended January 31, 2004,
and reimbursed Imtek for actual expenses incurred. These services were cancelled
during the year ended January 31, 2004.

The Company paid Skip Barber Racing Inc.,  an affiliate of First Equity,  during
the year ended January 31, 2004,  $22 to reimburse such affiliate for the use of
the affiliate's  in-house counsel,  for services  performed  exclusively for the
Company.


                                      F16

<PAGE>




10.  Interest and Other Income (Expense)

The components relate to interest expense on external debt, realized and
unrealized foreign exchange gain (loss) on Canadian dollar transactions by the
Canadian operations, and other charges.

                                              Year ended January 31,
                           -----------------------------------------------------
                                  2006                2005             2004
                           -----------------  ------------------  --------------

  Interest expense         $       (234)      $        (64)       $        (67)
  Foreign exchange gain             130                 74                  98
  Other income (expense)             (1)                 -                 (36)
                           -----------------  ------------------  --------------

                           $       (105)      $         10        $         (5)
                           =================  ==================  ==============

11. Other Income

In July  2005,  the  Company  received  $567  in  settlement  of a  distribution
agreement contract dispute between API and a vendor. The settlement consisted of
$417 in damages  recorded in other  income,  and $150 recorded as a reduction in
inventory from the repurchase of inventory held by API.

12.  Net Income (Loss) per Share

The  following  sets  forth the  denominator  used in the  computation  of basic
earnings per share and earnings per share - assuming dilution.

                                                    Years ended January 31,
                                           -------------------------------------
                                               2006          2005         2004
                                           -----------  ------------ -----------

   Denominator for basic net income (loss)
     per share - weighted average shares    7,336,925     7,301,751    7,267,368

   Effect of dilutive employee
     stock options                              4,082           N/A       14,230
                                           -----------  ------------ -----------

   Denominator for net income (loss)
     per share - assuming dilution
     - adjusted weighted average shares
     and assumed conversions                7,341,007     7,301,751    7,281,598
                                           ===========  ============ ===========

For the year ended January 31, 2005, the denominator  used in the calculation of
loss per share from continuing  operations - assuming dilution,  was the same as
the  denominator  used for basic  loss per share  because  the effect of options
would have been  anti-dilutive.  The number of potential  shares of common stock
that were excluded from the  computation  of diluted  earnings per share because
their effect was anti-dilutive for the years ended January 31, 2005 was 8,072.

13.  Commitments and Contingencies

Commitments

The Company leases  certain  warehouse  facilities,  equipment and office space.
Certain of the Company's  operating leases have options which allow the Company,
at the end of the initial  lease term,  to renew the leases for periods  ranging
from three to five  years.  Certain  leases also allow for  cancellation  of the
lease  upon  payment  of  a  penalty.  Certain  lease  agreements  also  contain
escalation  clauses that are based on the consumer  price index.  Future minimum
rental payments under  operating  leases that have initial  noncancelable  lease
terms in excess of one year as of January 31, 2006 are as follows:

                Year ending January 31, 2007                    $ 1,055
                Year ending January 31, 2008                        824
                Year ending January 31, 2009                        619
                Year ending January 31, 2010                        573
                Year ending January 31, 2011                        476
                Thereafter                                          916
                                                            -------------------
                                                                $ 4,463
                                                            ===================

                                      F17

<PAGE>



Rental expense under noncancelable  operating leases amounted to $1,129, $1,148,
and $1,031 for the years ended January 31, 2006, 2005 and 2004, respectively.

Contingencies

In the  ordinary  course of  business,  the Company is subject to many levels of
governmental  inquiry and  investigation.  Among the  agencies  that oversee the
Company's  business  activities  are the Federal  Aviation  Administration,  the
Department  of  Transportation  and the  Environmental  Protection  Agency.  The
Company does not  anticipate  that any action as a result of such  inquiries and
investigations  would  have  a  material  adverse  affect  on  its  consolidated
financial position, results of operations or its ability to conduct business.

In the normal  conduct of its business,  the Company also is involved in various
claims and lawsuits,  none of which, in the opinion of the Company's management,
will have a material  adverse  impact on the  Company's  consolidated  financial
position. The Company maintains what it believes is adequate liability and other
insurance to protect it from such claims.  However,  depending on the amount and
timing,  unfavorable  resolution  of any of these  matters could have a material
effect on the Company's consolidated  financial position,  results of operations
or cash flows in a particular period.

16.  Quarterly Financial Information (unaudited)

<TABLE>
<CAPTION>

                                                      First           Second          Third          Fourth
                                                     Quarter          Quarter        Quarter         Quarter
                                                     -------          ------         -------         -------
Year ended January 31, 2006
<S>                                                    <C>               <C>             <C>             <C>
Net sales                                           $    31,981      $  32,706       $  33,611      $  33,227

Gross profit                                              5,654          5,542           5,642          6,213

Net income (loss)                                           153            432              90            349

Basic and diluted net income (loss) per share       $      0.02      $    0.06       $    0.01      $    0.05
</TABLE>

<TABLE>
<CAPTION>

                                                      First           Second          Third          Fourth
                                                     Quarter          Quarter        Quarter         Quarter
                                                     -------          -------        -------         -------
Year ended January 31, 2005
<S>                                                    <C>               <C>             <C>             <C>
Net sales                                           $    30,215      $  31,072       $  32,050      $  30,912

Gross profit                                              5,612          4,769           5,352          4,991

Net income (loss)                                         (410)          (833)           (130)          (856)

Basic and diluted net income (loss) per share       $    (0.06)      $  (0.11)       $  (0.02)      $  (0.12)
</TABLE>



                                      F18

<PAGE>



Schedule II - Valuation and Qualifying Accounts

<TABLE>
<CAPTION>

           First Aviation Services Inc. and Consolidated Subsidiaries
                             (amounts in thousands)

                                             Balance at
                                            beginning of                                Balance as of
                                               period       Additions    Deductions     end of period
                                            ------------    ---------    ----------     --------------

Description:
   <S>                                          <C>            <C>          <C>             <C>
Year ended January 31, 2004
   Allowance for doubtful accounts            $ 1,656         106         344 (a)         $ 1,418
Year ended January 31, 2005
   Allowance for doubtful accounts            $ 1,418         (79) (c)    533 (a)         $   806
Year ended January 31, 2006
   Allowance for doubtful accounts            $   806         179         389 (a)         $   596



Year ended January 31, 2004
   Slow moving and obsolete inventory         $   997          41         25 (b)          $ 1,013
Year ended January 31, 2005
   Slow moving and obsolete inventory         $ 1,013         754         111 (b)         $ 1,656
Year ended January 31, 2006
   Slow moving and obsolete inventory         $ 1,656         280         227 (b)         $ 1,709
</TABLE>


(a) Write off of uncollectible accounts, net of recoveries.
(b) Write off of excess and obsolete inventory.
(c) Net reversal of excess reserve balance for doubtful accounts.



                                      F19

<PAGE>





                          First Aviation Services Inc.
                                  EXHIBIT INDEX

Exhibit
Number                       Description of Exhibit
------                       ----------------------

3.1       Restated Certificate of Incorporation of the Company (filed as Exhibit
          3.1  to  the  Company's   Registration  Statement  on  Form  S-1  (No.
          333-18647),  as amended,  filed on December 23, 1996, and incorporated
          herein by reference).

3.2       Amended and  Restated  Bylaws of the Company  (filed as Exhibit 3.2 to
          the Company's  Quarterly  Report on Form 10-Q for the quarterly period
          ended  October  31, 2001 (No.  0-21995),  and  incorporated  herein by
          reference).

10.1      Form of  Director  Indemnification  Agreement  between the Company and
          each  of its  directors  (filed  as  Exhibit  10.1  to  the  Company's
          Registration Statement on Form S-1 (No. 333-18647),  as amended, filed
          on December 23, 1996, and incorporated herein by reference).

10.2      Asset Purchase Agreement,  dated November 25, 1996, by and between AMR
          Combs and API (filed as Exhibit 10.9 to the Company's  Amendment No. 1
          to  Registration  Statement on Form S-1 (No.  333-18647),  as amended,
          filed on January 24, 1997, and incorporated herein by reference).

10.3 *    First Aviation  Services Inc. Stock Incentive Plan (filed as Exhibit
          10.14 to the Company's  Amendment No. 3 to  Registration  Statement on
          Form S-1 (No. 333-18647),  as amended, filed on February 24, 1997, and
          incorporated herein by reference).

10.4 *    First Aviation  Services Inc. Employee Stock Purchase Plan (filed as
          Exhibit  10.15  to  the  Company's  Amendment  No.  3 to  Registration
          Statement on Form S-1 (No. 333-18647),  as amended,  filed on February
          24, 1997, and incorporated herein by reference).

10.5      Amended  and  Restated  Registration  Rights  Agreement,  dated  as of
          February 21, 1996,  by and between the Company and FAS Inc.  (filed as
          Exhibit  10.24  to  the  Company's  Amendment  No.  3 to  Registration
          Statement on Form S-1 (No. 333-18647),  as amended,  filed on February
          24, 1997, and incorporated herein by reference).

10.6      Sublease  Agreement,  dated as of December  31,  1996,  between  First
          Equity  and the  Company  (filed  as  Exhibit  10.30 to the  Company's
          Amendment No. 3 to Registration Statement on Form S-1 (No. 333-18647),
          as amended,  filed on February 24, 1997,  and  incorporated  herein by
          reference).

10.7 *    Amendment No. 1 to the First Aviation  Services Inc. Stock Incentive
          Plan (filed as exhibit  10.39 to Company's  Annual Report on Form 10-K
          for the year ended January 31, 1998 (No.  0-21995),  and  incorporated
          herein by reference).

10.8      Commercial  Revolving  Loan and  Security  Agreement,  dated March 30,
          2000,  by and  between  Hudson  United  Bank  and  Aerospace  Products
          International,  Inc.  (filed as Exhibit 10.43 to the Company's  Annual
          Report on Form 10-K for the year ended January 31, 2000 (No. 0-21995),
          and incorporated herein by reference).

10.9      Guaranty,  dated as of March 30, 2000, between First Aviation Services
          Inc. and Hudson  United Bank (filed as Exhibit  10.44 to the Company's
          Annual  Report on Form 10-K for the year ended  January  31, 2000 (No.
          0-21995), and incorporated herein by reference).

10.10     Second Amendment to Commercial  Revolving Loan and Security Agreement
          dated as of April 27, 2001 between  Hudson  United Bank and  Aerospace
          Products International,  Inc. (filed as Exhibit 10.48 to the Company's
          Quarterly Report on Form 10-Q for the quarterly period ended April 30,
          2001 (No. 0-21995), and incorporated herein by reference).



<PAGE>


10.11     Second  Reaffirmation of Guaranty dated as of April 27, 2001 by First
          Aviation  Services  Inc. and in favor of Hudson  United Bank (filed as
          Exhibit 10.49 to the Company's  Quarterly  Report on Form 10-Q for the
          quarterly period ended April 30, 2001 (No. 0-21995),  and incorporated
          herein by reference).

10.12     Third Amendment to Commercial  Revolving Loan and Security  Agreement
          dated as of June 28, 2001  between  Hudson  United Bank and  Aerospace
          Products International,  Inc. (filed as Exhibit 10.48 to the Company's
          Quarterly  Report on Form 10-Q for the quarterly period ended July 31,
          2001(No. 0-21995), and incorporated herein by reference).

10.13     Third  Reaffirmation  of Guaranty  dated as of June 28, 2001 by First
          Aviation  Services  Inc. and in favor of Hudson  United Bank (filed as
          Exhibit 10.49 to the Company's  Quarterly  Report on Form 10-Q for the
          quarterly  period ended July 31, 2001(No.  0-21995) , and incorporated
          herein by reference).

10.14 *   Amendment No. 2 to the First Aviation Services Inc. Stock Incentive
          Plan (filed as Exhibit 4.5 to the Company's  Form S-8 (No.  333-25915)
          on September 20, 2001, and incorporated herein by reference).

10.15     Letter,  effective  February  1, 2002,  by and between  First  Equity
          Development  Inc. and its affiliates and First Aviation  Services Inc.
          regarding pursuit of acquisition opportunities (filed as Exhibit 10.23
          to the Company's Annual Report on Form 10-K for the year ended January
          31, 2002 (No. 0-21995), and incorporated herein by reference).

10.16     Engagement  Letter  between  First  Equity  Development  Inc. and its
          affiliate,  FED  Securities  Inc.,  and First  Aviation  Services Inc.
          effective  February 1, 2002 (filed as Exhibit  10.40 to the  Company's
          Annual  Report on Form 10-K for the year ended  January  31, 2002 (No.
          0-21995), and incorporated herein by reference).

10.17     Fourth Amendment to Commercial  Revolving Loan and Security Agreement
          dated as of July 31, 2002  between  Hudson  United Bank and  Aerospace
          Products International,  Inc. (filed as Exhibit 10.48 to the Company's
          Quarterly  Report on Form 10-Q for the quarterly period ended July 31,
          2002 (No. 0-21995), and incorporated herein by reference).

10.18     Fourth  Reaffirmation  of Guaranty dated as of July 31, 2002 by First
          Aviation  Services  Inc. and in favor of Hudson  United Bank (filed as
          Exhibit 10.49 to the Company's  Quarterly  Report on Form 10-Q for the
          quarterly period ended July 31, 2002 (No.  0-21995),  and incorporated
          herein by reference).


10.19     Fifth Amendment to Commercial  Revolving Loan and Security  Agreement
          dated as of July 31, 2003  between  Hudson  United Bank and  Aerospace
          Products International,  Inc. (filed as Exhibit 10.19 to the Company's
          Quarterly  Report on Form 10-Q for the quarterly period ended July 31,
          2003 (No. 0-21995), and incorporated herein by reference).

10.20     Fifth  Reaffirmation  of Guaranty  dated as of July 31, 2003 by First
          Aviation  Services  Inc. and in favor of Hudson  United Bank (filed as
          Exhibit 10.20 to the Company's  Quarterly  Report on Form 10-Q for the
          quarterly period ended July 31, 2003 (No.  0-21995),  and incorporated
          herein by reference).


10.21 *   Amendment No. 3 to the First Aviation  Services Inc. Stock  Incentive
          Plan (filed as Exhibit 10.21 to the Company's Quarterly Report on Form
          10-Q for the quarterly period ended July 31, 2003 (No.  0-21995),  and
          incorporated herein by reference).

10.22 *   Employment  Agreement,  dated as of October 7, 2003,  between  the
          Company  and  Robert  G.  Costantini  (filed as  Exhibit  10.22 to the
          Company's  Annual  Report on Form 10-K for the year ended  January 31,
          2004 (No. 0-21995), and incorporated herein by reference).

10.23 *   Form of Incentive Stock Option Award  Agreement  Letter Pursuant to
          the 1997 Stock Incentive Plan (filed as Exhibit 10.23 to the Company's
          Annual  Report on Form 10-K for the year ended  January  31, 2004 (No.
          0-21995), and incorporated herein by reference).


<PAGE>



10.24 *   Officer  Indemnification  Agreement  dated as of October  27,  2003
          between the Company and Robert G.  Costantini  (filed as Exhibit 10.24
          to the Company's Annual Report on Form 10-K for the year ended January
          31, 2004 (No. 0-21995), and incorporated herein by reference).

10.25 *   Employment  Agreement,  dated  as of  February  2,  2004,  between
          Aerospace Products  International,  Inc. and Paul J. Fanelli (filed as
          Exhibit 10.25 to the Company's Annual Report on Form 10-K for the year
          ended  January  31, 2004 (No.  0-21995),  and  incorporated  herein by
          reference).

10.26 *   Amendment  to  Employment  Agreement,  dated as of April 5,  2004,
          between  Aerospace  Products  International,  Inc. and Paul J. Fanelli
          (filed as Exhibit  10.26 to the  Company's  Annual Report on Form 10-K
          for the year ended January 31, 2004 (No.  0-21995),  and  incorporated
          herein by reference).

10.27 *   Relocation  Agreement,  dated as of  February  16,  2004,  between
          Aerospace Products  International,  Inc. and Paul J. Fanelli (filed as
          Exhibit 10.27 to the Company's Annual Report on Form 10-K for the year
          ended  January  31, 2004 (No.  0-21995),  and  incorporated  herein by
          reference).

10.28     Sixth Amendment to Commercial  Revolving Loan and Security Agreement,
          dated as of July 31, 2004,  between  Hudson  United Bank and Aerospace
          Products  International  Inc. (filed as Exhibit 10.31 to the Company's
          Quarterly  Report on Form 10-Q for the quarterly period ended July 31,
          2004 (No. 0-21995), and incorporated herein by reference).

10.29     Sixth  Reaffirmation  of Guaranty dated as of July 31, 2004, by First
          Aviation  Services  Inc. and in favor of Hudson  United Bank (filed as
          Exhibit 10.32 to the Company's  Quarterly  Report on Form 10-Q for the
          quarterly period ended July 31, 2004 (No.  0-21995),  and incorporated
          herein by reference).

10.30 *   Amendment  dated May 14,  2004 to the  Relocation  Agreement  dated
          February 16, 2004 between Aerospace  Products  International  Inc. and
          Paul J. Fanelli  (filed as Exhibit  10.33 to the  Company's  Quarterly
          Report on Form 10-Q for the quarterly  period ended July 31, 2004 (No.
          0-21995), and incorporated herein by reference).

10.31 *   Compensation Arrangements with Certain Executive Officers (filed as
          Exhibit 10.31 to the Company's Annual Report on Form 10-K for the year
          ended  January  31, 2005 (No.  0-21995),  and  incorporated  herein by
          reference)

10.32 *   Compensation of Non-Employee  Directors  (filed as Exhibit 10.32 to
          the  Company's  Annual  Report on Form 10-K for the year ended January
          31, 2005 (No. 0-21995), and incorporated herein by reference)

10.33     Description of Amendment to letter regarding pursuit of Acquisition
          Opportunities  (filed as Exhibit 10.33 to the Company's  Annual Report
          on Form 10-K for the year ended  January 31, 2005 (No.  0-21995),  and
          incorporated herein by reference)

10.34 *   Compensation  for  Services  of the  Board of  Directors  of First
          Aviation  Services  Inc.  (filed  as  Exhibit  10.1  to the  Company's
          Current Report on Form 8-K dated June 7, 2005 (No. 0-21995), and
          incorporated herein by reference).

10.35     Preferred  Stock  Purchase  Agreement,  dated  as of June  20,  2005,
          between  Signature Combs,  Inc. (f/k/a AMR Combs,  Inc.) and Aerospace
          Products  International,  Inc. (filed as Exhibit 10.1 to the Company's
          Current Report on Form 8-K dated June 20, 2005 (No. 0-21995), and
          incorporated herein by reference).

10.36     Amended  and  Restated   Commercial   Revolving   Loan  and  Security
          Agreement,  dated  as of July  29,  2005,  entered  into by  Aerospace
          Products  International,  Inc., a direct  wholly-owned  subsidiary  of
          First Aviation Services, Inc. and Hudson United Bank (filed as Exhibit
          10.1 to the Company's  Current Report on Form 8-K dated July 29, 2005
          (No. 0-21995),  and incorporated  herein by reference).

10.37     Amended and Restated  Guaranty,  dated as of July 29,  2005,  entered
          into by First Aviation Services, Inc. (on behalf of Aerospace Products
          International,   Inc.,  a  direct  wholly-owned  subsidiary  of  First
          Aviation Services, Inc.) and Hudson United Bank (filed as Exhibit 10.4
          to the  Company's  Current Report  on Form  8-K dated July 29, 2005
          (No. 0-21995),  and incorporated  herein by reference).

<PAGE>



10.38 *   Compensation  for Aaron P. Hollander  (filed as Exhibit 10.5 to the
          Company's Quarterly Report on Form 10-Q for the quarterly period ended
          July 31, 2005 (No. 0-21995), and incorporated herein by reference).

10.39 *   Compensation  arrangements with other executive officers (effective as
          of February 1, 2006.

21.1      List of Subsidiaries.

23.1      Consent of Ernst & Young LLP.

31.1      Certification of Chief Executive Officer required by Rule 13a-14(a).

31.2      Certification of Chief Financial Officer required by Rule 13a-14(a).

32.1      Certification of Chief Executive  Officer required by Rule 13a-14(b)
          and 18 U.S.C. Section 1350 (furnished herewith).

32.2      Certification of Chief Financial Officer required by Rule 13a-14(b)
          and 18 U.S.C. Section 1350 (furnished herewith).




     * Management contracts or compensatory plans or arrangements.