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, 2007

                         Commission File Number 0-21995

                          First Aviation Services Inc.

                                  www.favs.com
                              www.apiworldwide.com

                               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
 -------------------                          -------------------
 Common Stock, $0.01 Par Value               The NASDAQ Stockmarket LLC

        SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None

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, 2006 was approximately $12.7 million.

The number of shares  outstanding of the  registrant's  common stock as of April
27, 2007 was 7,378,851 shares.

                      Documents incorporated by reference:

Portions of the  Registrant's  definitive  Proxy  Statement  for the 2007 Annual
Meeting of  Stockholders  are  incorporated  herein by  reference  into Part III
hereof.



<PAGE>
<TABLE>
<CAPTION>

                          FIRST AVIATION SERVICES INC.
                                TABLE OF CONTENTS


<S>                                                                                                              <C>
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....................................................9
           Executive Officers of the Registrant..................................................................10


                                                         PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
           Equity Securities.....................................................................................11
Item 6.    Selected Financial Data...............................................................................12
Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations.................13
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk............................................21
Item 8.    Financial Statements and Supplementary Data...........................................................21
Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..................21
Item 9A.   Controls and Procedures...............................................................................21
Item 9B.   Other Information.....................................................................................21


                                                         PART III

Item 10.   Directors, Executive Officers and Corporate Governance................................................22
Item 11.   Executive Compensation................................................................................22
Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters........22
Item 13.   Certain Relationships and Related Transactions, and Director Independence.............................22
Item 14.   Principal Accountant Fees and Services................................................................22


                                                         PART IV

Item 15.   Exhibits and Financial Statement Schedule.............................................................23
Signatures
           ......................................................................................................27
Index to Consolidated Financial Statements and Supplementary Data................................................F1


</TABLE>
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<PAGE>



                          FIRST AVIATION SERVICES INC.

                           ANNUAL REPORT ON FORM 10-K
                   FOR THE FISCAL YEAR ENDED JANUARY 31, 2007

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  THE COMPANY'S
FACILITIES  AND  DISTRIBUTION  HUB IN  MISSISSIPPI,  SIGNIFICANT  FAILURE OF OUR
COMPUTER  SYSTEMS,  TELEPHONE  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"), API  Europe  Ltd. ("API Europe"), 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 wheels, 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
typically out of warranty,  and  out-of-production  aircraft and engines, all of


                                       3
<PAGE>

which need maintenance, repair or modification.  Typically, aircraft and engines
that are 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 may also 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  would like 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.

         Based on information from a leading industry publication,  Overhaul and
Maintenance,  the Company  believes 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  directly  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
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.

                                       4
<PAGE>

         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.
Overall  business  activity in the aftermarket  parts sector is improving in the
airline and corporate aviation sectors the Company serves,  while the piston and
general  aviation  sectors and corporate flight schools continue to struggle due
to record high fuel prices and 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 focus on
its core business, to control its costs, investigate new sources of revenue, 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 34%, 38%, and 40% of its
total  purchases  were made during the years ended  January 31,  2007,  2006 and
2005, respectively.

         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, implementation resource availability,  relationship building with the
customer and the  substantial  change often required of the customer's  existing
business model. The Company had a backlog of customer orders at January 31,
2007. The Company believes that the dollar value of these backlog orders is not
significant. The Company is confident in its ability to fill the majority of
these orders during its subsequent fiscal year ending January 31, 2008.


                                       5
<PAGE>




CUSTOMERS

         The Company  currently has approximately  6,000 active  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  and  Southaven,
Mississippi facilities are 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, 2007, the Company employed 212 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  28%, 25%,
and 22% of net  sales for the  years  ended  January  31,  2007,  2006 and 2005,
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  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:

                                       6
<PAGE>

     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 OEMs 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 PRICES.  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 Mississippi and substantially
          all of its inventory is stored in a single warehouse facility.  Losing
          access or use of this facility,  through  security  concerns,  natural
          disasters or damage to the  building,  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,  TELEPHONE  SYSTEMS OR
          NETWORKS THAT DISRUPT BUSINESS OR OPERATIONS.  The Company's  computer
          systems,  telephone  systems and internal and external  networks,  and
          suppliers  are  crucial to service  customers  and manage  operations.
          Significant  disruptions or malfunctions of its computer and telephone
          systems  or  networks  could  have a  material  adverse  effect on its
          business 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.

     o    THE COMPANY'S DISTRIBUTION MODEL RELIES HEAVILY ON THE USE OF FREIGHT
          CARRIERS SUCH AS FEDEX AND UPS FOR BOTH INBOUND  SHIPMENTS OF PRODUCTS
          AND  SUPPLIES AS WELL AS OUTBOUND  CUSTOMER  SHIPMENT VIA BOTH AIR AND
          GROUND  TRANSPORTATION.  Disruption  or outages of these  services  or
          significant increases in freight costs that cannot be passed on to the
          customer  could  have a  material  adverse  effect on sales,  business
          operations and results of operations.

     o    CHANGES IN REGULATIONS.  The company is subject to FAA regulations.
          The  FAA  is  considering  changes in user  fees  for air  traffic
          activity. An increase in user fees for the general aviation sector may
          adversely  impact  the operating results of the Company.  The ultimate
          outcome and the impact on the  Company  cannot be  determined  at this
          time.

     o    LOAN COVENANT  RESTRICTIONS.  The Company's debt includes  restrictive
          and financial  covenants.  Changes in these covenants or the Company's
          inability  to comply  with these  covenants  could have a  significant
          impact on business operations and results of operations.

     o    COMPLIANCE WITH ENVIRONMENTAL REGULATIONS.  The Company's inability to
          comply with changes in environmental regulations could have a material
          adverse effect on business  operations.

     o    PRODUCT  LIABILITY  CLAIMS.  Product liability claims and claims not
          covered by insurance could have a material adverse effect on business
          operations.

     o    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             2012

Southaven, MS                          API                          Distribution            172,000             2012

Memphis, TN                            API                          Technologies/sales       35,500             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

Shanghai, China                        API Shanghai Ltd.            Distribution/sales       16,960             2011
</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.

                                       8
<PAGE>

         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.


                                       9
<PAGE>





         Supplemental Item:

         Executive Officers of the Registrant

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


         AARON P.  HOLLANDER,  50,  co-founded and has served as Chairman of the
Board of  Directors  of the  Company  since  March 1995.  In October  2006,  Mr.
Hollander succeeded Michael Culver as Chief Executive Officer of the Company. 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 Chief Executive  Officer
of Skip Barber, and is the Chairman and CEO of the Board of Directors of Imtek.

         BILL  REZNICEK,  47, became First Aviation's Vice President and Chief
Financial Officer in January 2007. Mr. Reznicek previously served as Vice
President of Finance and IT for Lancaster Colony Automotive Products Division
from June 2000 until January 2007. Prior to his position at Lancaster Colony
Automotive Products, Mr. Reznicek held various other executive and financial
management positions with public and privately held companies. Mr. Reznicek
received his CPA certification from the state of Tennessee in 1993.




                                       10
<PAGE>


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 closing  market sales prices for First  Aviation's  common stock as
reported by the NASDAQ Stock Market.

<TABLE>
<CAPTION>

                    Year Ended                                                Year Ended
                 January 31, 2007                                          January 31, 2006
----------------------------------------------------      -------------------------------------------------
                        HIGH                LOW                                HIGH                  LOW
                        ----                ---                                ----                  ---
<S>                     <C>                 <C>           <C>                 <C>                  <C>
First Quarter           $4.35               $3.90         First Quarter        $4.70                $4.00
Second Quarter          $4.80               $3.69         Second Quarter       $4.50                $3.71
Third Quarter           $3.93               $3.32         Third Quarter        $4.49                $3.65
Fourth Quarter          $3.93               $3.45         Fourth Quarter       $4.50                $3.71
</TABLE>

         HOLDERS. As of April 27, 2007, 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, 2007 and 2006. 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,
2007, First Aviation did not purchase any shares of its common stock.



                                       11
<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)               2007         2006       2005          2004        2003
                                                             ---------    --------   ---------    ---------    ---------

BALANCE SHEET SUMMARY:

<S>             <C>                                          <C>          <C>        <C>          <C>          <C>
Working capital (1)                                          $  17,906    $ 47,234   $  47,179    $  49,143    $  47,996

Total assets                                                    62,235      73,348      65,199       64,982       65,041

Current obligations under capital leases and notes payable         340       1,125        --           --              4

Revolving line of credit                                        22,100        --          --           --           --
Long-term debt and notes payable                                   956      15,745      14,500       14,500       14,500
Other long-term liabilities                                       --          --         1,041        1,041        1,041
Total stockholders' equity                                   $  22,045    $ 36,452   $  34,634    $  36,565    $  36,094
Book value per share outstanding (2)                         $    2.99    $   4.96   $    4.73    $    5.02    $    4.98
Cash dividends paid per share                                     --          --          --           --      $    1.00
Common shares outstanding                                        7,379       7,353       7,322        7,284        7,251

RESULTS OF OPERATIONS SUMMARY (3):

Net sales                                                    $ 119,361    $131,525   $ 124,249    $ 105,777    $ 101,737
Gross profit                                                    12,806      23,051      20,724       19,536       18,473

Income (loss) from operations                                  (14,299)        746      (2,142)        (121)      (1,577)

Income (loss) before income taxes                              (15,189)      1,095      (2,108)         (14)      (1,413)
Provision (benefit) for income taxes                              (695)         71         121          (25)       1,786
                                                             ---------    --------   ---------    ---------    ---------
Income (loss) from continuing operations before                (14,494)      1,024      (2,229)          11       (3,199)
     accounting change
Cumulative effect of change in accounting (4)                     --          --          --           --         (2,735)
                                                             ---------    --------   ---------    ---------    ---------
Net income (loss)                                            $ (14,494)   $  1,024   $  (2,229)   $      11    $  (5,934)
                                                             =========    ========   =========    =========    =========
Basic income (loss) per share from continuing                $   (1.97)   $   0.14   $   (0.31)   $    0.00    $   (0.44)
     operations
Basic net income (loss) per share                            $   (1.97)   $   0.14   $   (0.31)   $    0.00    $   (0.82)

Weighted average shares outstanding - basic                      7,362       7,337       7,302        7,267        7,225
                                                             ---------    --------   ---------    ---------    ---------
Income (loss) per share from continuing operations           $   (1.97)   $   0.14   $   (0.31)   $    0.00    $   (0.44)
     - assuming dilution
Net income (loss) per share - assuming dilution              $   (1.97)   $   0.14   $   (0.31)   $    0.00    $   (0.82)
Weighted average shares outstanding - assuming
    dilution                                                     7,362       7,341       7,302        7,282        7,225
                                                             ---------    --------   ---------    ---------    ---------
</TABLE>

NOTES TO SELECTED FINANCIAL DATA

(1)  Includes  revolving  line of credit at January 31, 2007 scheduled to expire
     on September 1, 2008.
(2)  Book  value  per  share   outstanding   is   calculated   by  taking  total
     stockholders' equity and dividing by common shares outstanding.
(3)  During the year ended  January 31, 2007,  the Company  recorded  charges of
     $4.5  million and $2.6  million,  respectively  to increase  its  inventory
     valuation  allowance and its allowance  for doubtful  accounts.  During the
     year  ended  January  31,  2006,  the  Company  recorded  $0.4  million  of
     litigation  income.  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.
(4)  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.

                                       12
<PAGE>

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 wheels, brakes and starters/generators.


The Company's revenues  decreased for the year ended January 31, 2007.  Customer
service issues during the fiscal year,  primarily the result of issues with  the
installation of new ERP systems and a telephone system upgrade,  and weakening
markets in the general aviation and aviation maintenance sectors were the major
reasons for the decrease in revenue. Decreased gross profit, increased overhead
and increases in bad  debt  reserves  resulted  in  a loss for  the  year.  Cash
levels   decreased   primarily  due   to   payments   to   vendors   to   ensure
uninterrupted  supplies  of saleable  product,  expenditures  for equipment  and
enterprise  software,  and  expenditures   related  to  the  relocation  of  the
Company's  primary  distribution center  to Southaven, MS. The Company  believes
that  while  we  feel we  have recovered  from the customer service  issues that
adversely  impacted revenues and gross profit, it will take some time to fully
restore customer confidence.

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 historically high 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 the determination of the
allowance  for  doubtful  accounts,   the  allowance  for  excess  and  obsolete
inventories,  and  deferred  income tax asset  valuations.  The Company also has
other  policies  that it  considers  key  accounting  policies  such as  revenue
recognition,  however this policy typically does not require the Company to make
estimates or assumptions  regarding the recognition of revenue. 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.

                                       13
<PAGE>

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
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 the 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,  the Company  takes  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  accounts 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. Collection  of  trade  receivables  is
affected by aviation industry and  market  trends, overall  economic  trends and
conditions,  and customers' credit  issues and  financial condition. A change in
any of these factors may have a significant  negative  impact upon the estimated
allowance,  and  the Company's  financial  performance.  As the result of normal
review  procedures,  in the three  months ended  January 31,  2007,  the Company
revised  the  percentage  it  uses  to calculate reserves on overdue accounts to
bring the allowance more in line with historical collection realizations.

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.

         The Company  increased the allowance for excess and obsolete  inventory
by $4.0 million  during the three months ended October 31, 2006 for an inventory
purchase  in October  2005 from an  aircraft  OEM.  The  additional  reserve was
derived from the data that became  available  during the quarter  ended  October
2006,  and was used to  calculate  the  estimate  of the  effect of  excess  and
obsolete inventories.

         As the result of normal  review  procedures,  during  the three  months
ended October 31, 2006, the Company  started using an adjusted  methodology  for
calculating  the effect of slow  moving and  obsolete  inventory.  The  adjusted
methodology estimates the provision for excess and obsolete inventory 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.  This method differs from the previous  method which
was based on historical  aging.  The impact of the change in methodology was not
material to the Company's Operating results.

         As a result of this review,  the Company  will  continue to monitor the
results of this method of estimating  inventory reserves,  however actual excess
and obsolete inventories could differ significantly from such estimates and 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 June 2006, the FASB issued  Interpretation  No. 48,  "Accounting for
Uncertainty in Income Taxes-an  Interpretation  of FASB Statement No. 109" ("FIN
48"). FIN 48 clarifies the accounting for uncertainty in income taxes recognized
in a company's financial statements in accordance with SFAS No. 109, "Accounting
for Income  Taxes." FIN 48  prescribes a recognition  threshold and  measurement
attribute for the  financial  statement  recognition  and  measurement  of a tax
position taken or expected to be taken in a tax return.  FIN 48 is effective for
First Aviation  beginning on February 1, 2007. The Company at this time is still
evaluating  the  impact,  if any,  that the  adoption of FIN 48 will have on its
financial statements.

                                       14
<PAGE>

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,
                                                      ------------    ------------    ------------
                                                          2007            2006            2005
                                                      ------------    ------------    ------------
<S>                                                      <C>             <C>            <C>
  Net sales                                              100.0%          100.0%          100.0%
  Cost of sales                                           89.3            82.5            83.3
                                                      ------------    ------------    ------------
  Gross profit (a)                                        10.7            17.5            16.7
  Selling, general and administrative expenses            20.6            15.1            16.1
  Corporate expenses                                       2.0             1.8             2.4
                                                      ------------    ------------    ------------
  Income (loss) from operations                          (11.9)            0.6            (1.8)
  Interest income                                          0.0             0.0             0.1
  Interest expense and other expense, net                 (0.8)           (0.1)            -
  Other income                                             0.0             0.3             -
                                                      ------------    ------------    ------------
  Income (loss) before income taxes                      (12.7)            0.8            (1.7)
  (Provision) benefit for income taxes                     0.6             0.0            (0.1)
                                                      ------------    ------------    ------------
  Net income (loss)                                      (12.1)%           0.8%           (1.8)%
                                                      ------------    ------------    ------------
</TABLE>


(A) GROSS  PROFIT  MARGIN IN 2007 WAS  IMPACTED  BY THE  INCREASE  IN  INVENTORY
RESERVES DURING THE QUARTER ENDED OCTOBER 31, 2006.


YEAR ENDED JANUARY 31, 2007 COMPARED TO YEAR ENDED JANUARY 31, 2006


NET SALES

         Net sales for the year ended January 31, 2007 decreased  $12.2 million,
or 9.2%,  to $119.4  million from $131.5  million for the year ended January 31,
2006.  The decrease was largely due to market  weakness in the general  aviation
and the  aviation  maintenance  sectors  that were  impacted  by the record high
prices of gasoline,  and customer service  issues.  The decreases were partially
offset by  increased  revenue  in the Company's  corporate  aviation sector. The
revenue decreases occurred across all geographic  regions. Sales to unaffiliated
foreign  customers  during  the  year  ended January  31, 2007 was approximately
28% 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, 2007 by
15.0% to $1.7  million  from $2.0  million for the prior year ended  January 31,
2006.  The  decrease  was  primarily  the result of reduced  freight  charges to
customers on larger orders that  qualified  for freight  incentives in the third
and fourth  quarters of the fiscal year ended January 31, 2007.  The decrease in
freight  billed to customers in the current fiscal year 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.  Cost of sales for the year ended  January  31,  2007  decreased  $1.9
million,  or 1.8%,  to $106.6  million  from  $108.5  million for the year ended
January  31,  2006.  During  the year  ended  January  31,  2007,  cost of sales
increased due to a $4.0 million charge increasing  reserves in the third quarter
due to an increase in the  allowance  for excess and obsolete  inventory  for an
inventory  purchase in October 2005 from an aircraft OEM. The additional reserve
was derived from data that became available during the quarter ended October 31,
2006,  and was used to  calculate  the  estimate  of the  effect of  excess  and
obsolete inventories as described in the notes to the financial statements.  The
decrease in cost of sales for the twelve  months  ended  January 31, 2007 versus
2006 was due primarily to the  corresponding  decrease in net sales of parts and
components  described  in net  sales,  offset by the impact of the  increase  in
inventory reserves of $4.0 million in  the  third quarter ended October 31, 2006
described above.

                                       15
<PAGE>

         As a  percentage  of net sales,  cost of sales  increased  for the year
ended  January 31,  2007,  to 89.3% from 82.5%,  for the year ended  January 31,
2006.  The increase in the percentage of cost of sales compared to net sales for
the twelve months ended January 31, 2007, compared to 2006, was due primarily to
the increase in  inventory  reserves  described  above and a decrease in revenue
derived from the higher profit margin services sector.


GROSS PROFIT

         Gross  profit for the year  ended  January  31,  2007  decreased  $10.2
million or 44.4% to $12.8  million,  compared to gross profit for the year ended
January 31, 2006.  Gross profit as a percentage  of net sales also  decreased to
10.7% for the year ended January 31, 2007,  from 17.5% for the comparable  prior
year period.  Gross profit margin for the twelve month period decreased compared
to the prior year  principally due to the $4.0 million increase in the allowance
for excess and obsolete  inventory  mentioned  above under the caption  "Cost of
Sales",  the decrease in revenue  described above under the caption "Net Sales",
and was also  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 11.1% and 5.7% for the year
ended January 31, 2007 and 2006, respectively.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

         Selling,  general and  administrative  expenses  for the twelve  months
ended January 31, 2007  increased by $4.7 million to $24.7  million  compared to
the expense  incurred for the twelve months ended January 31, 2006. The increase
in costs in the current year were  primarily  due to a $2.4 million  increase in
bad debt expense,  a $1.0 million  increase in payroll costs  resulting from the
required  capitalization  of prior year salary charges related to IT development
costs, $0.4 million in additional IT related amortization expense in the current
year, and costs related to the relocation of the Memphis, TN distribution hub to
Southaven,  MS. Selling,  general and administrative  expense as a percentage of
revenues increased to 20.6% for the current year versus 15.1% for the year ended
January 31, 2006.

CORPORATE EXPENSES

Corporate  expenses for the twelve  months  ended  January 31, 2007 were flat at
$2.4  million  versus the prior  year  twelve  month  period.

 INTEREST INCOME AND INTEREST EXPENSE AND OTHER EXPENSES, NET

         During the year ended January 31, 2007,  interest income from investing
the  Company's  cash in short term  investments,  decreased by $46,000 to $1,300
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  $961,000  for the  current  year  twelve  months  versus  expense of
$105,000  in the prior year  period  principally  due to an increase in interest
expense of $948,000 on  borrowings,  reduced by an increase in foreign  exchange
income of $67,000 versus the prior year.

                                       16
<PAGE>



BENEFIT (PROVISION) FOR INCOME TAXES

         The Company recorded a net tax benefit of $695,000 for the current year
ended  January 31, 2007  primarily as the result of recording  federal and state
tax benefits of $756,000  that arose due to a change in facts and  circumstances
that related to  assumptions  that  generated the  establishment  of federal and
state  tax  liabilities  in  prior  periods  leading  to  the  reversal  of  the
liabilities in the current periods,  partially reduced by a provision for income
taxes related to foreign income tax expense for  operations in 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  the deferred  tax asset will not be realized. The
Company's effective tax rate for the period ended January  31,  2007 was  (4.7%)
versus the 34.0% statutory  rate due primarily to the valuation  allowance on US
losses  incurred and the benefit provided by  the reversal of  prior period  tax
liabilities.



NET INCOME (LOSS) AND NET INCOME (LOSS) PER SHARE

         The Company  recognized a net loss of $14.5  million or $1.97 per share
for the year ended  January 31, 2007,  compared to net income of $1.0 million or
$0.14 per share for the year ended  January 31,  2006.  The decline in operating
results was due to the reasons described in the preceding sections.


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.  Cost 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 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.

                                       17
<PAGE>

         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 EXPENSE AND OTHER EXPENSES, NET

         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.


                                       18
<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.

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
and expansion.  The Company funds its liquidity  requirements with a combination
of cash on hand, cash flows from operations, and from borrowings under a secured
revolving credit facility and certain notes.

         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,  2007  was
principally the result of an increase in customer trade receivables, payments to
principal  vendors for product  purchases,  purchases of equipment and software,
and expenditures related to the relocation of the Company's primary distribution
facility to Mississippi.

         The Company's  cash used in operations  for the years ended January 31,
2007, 2006 and 2005 was $(13.0)  million,  $(8.8)  million,  and $(1.5) million,
respectively.  Cash used in  operations  for the year ended January 31, 2007 was
primarily  due to the loss  incurred,  an  increase in trade  receivables  and a
decrease in accounts payable for payments to vendors for product puchases.  Cash
used in investing activities for the years ended January 31, 2007, 2006 and 2005
was $(1.5) million, $(3.2) million, and $(1.0) million, respectively.  Cash used
in investing activities for these years was related to purchases of fixed assets
and enterprise software and ecommerce  initiatives and facilities  enhancements.
Cash provided by (used in) financing  activities for the years ended January 31,
2007,  2006 and 2005 was $6.5 million,  $(1.1) million,  and nil,  respectively.
Cash  provided  by  financing  activities  for the year ended  January  31, 2007
resulted  from  borrowings  against the  revolver to fund  operations  offset by
payments on notes payable.

         First Aviation's  aggregate cash used for capital  expenditures for the
years ended January 31, 2007, 2006 and 2005 was $1.6 million,  $3.2 million, and
$1.0 million,  respectively.  The capital  requirements  in fiscal 2007 were the
result of current upgrades to the Company's  enterprise  system and equipment to
handle current requirements and support the Company's move to a state of the art
distribution facility in Southaven, MS. For fiscal year 2008 the amount required
for capital expenditures  currently is expected to range between $.5 million and
$1.0 million.  Management  expects to fund these requirements from cash on hand,
cash flows from  operations,  and from  borrowings  under its  revolving  credit
facility.

         On January 11, 2007, API and API Ltd. entered into a Second Amended
and  Restated Loan and Security Agreement (the Agreement) with TD Banknorth, NA.
This Agreement, which  expires  on  September 1, 2008,  replaces  the  Company's
previously existing   $25   million   revolving   credit   facility   with   the
Lender's predecessor-in-interest,  which was scheduled to  expire  September 1,
2007. The Agreement provides for  a 21  month  senior  revolving credit facility
(the  Revolving  Loan  Facility) in  the  amount of $25 million,  subject  to  a
borrowing base based  on  a formula of qualifying  assets as well as outstanding
letters of credit. The  proceeds  of  any loans made under  the  Revolving  Loan
Facility  will  be  used for working capital  purposes in the ordinary course of
business.

         The  Agreement  also provides for a Line of  Credit/Term  Facility (the
Term  Loan  Facility)  in an  amount  up to  $3 million,  subject  to  borrowing
availability.  The proceeds of this advance under the Term Loan Facility will be
used for the purpose of  purchasing  certain  equipment  for use in the ordinary
course  of  business. There  were  no borrowings outstanding under the Term Loan
Facility at January 31, 2007.

         The  Revolving  Loan  Facility  bears  interest  at the  option  of the
Borrower (i) at the prime rate in effect from time to time, (ii) at the adjusted
LIBOR for the applicable  interest period plus 150 or 175 basis points depending
upon financial  ratios of the Borrower,  or (iii) at the FHLB Rate (Federal Home
Loan  Bank  Rate).  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 the Company's common stock is prohibited,
except  with the  lender's  consent,  and the  Company is  required  to maintain
minimum  levels of Tangible  Capital Base and specified  Debt Service  Coverage.
Substantially  all of the Company's  Domestic and Canadian assets are pledged as
collateral under the Agreement,  and the Company guarantees all borrowings under
the Agreement.


                                       19
<PAGE>

         On April 27, 2007, the Company  entered into an amendment to the Second
Amended and Restated Loan and Security  Agreement  dated  January 11, 2007.  The
amendment provides for a waiver from the lender of the Company's violation of it
financial covenants for the three months ended January 31, 2007. Pursuant to the
amendment, the Company also agrees to immediately repay any balances owing under
the Term Loan Facility and that the Term Loan Facility agreement would terminate
immediately.  Changes to the debt services coverage ratios, the minimum Tangible
Capital  Base,  and interest  rate pricing were also modified as a result of the
amendment.

         The amendment  further allows the Company to select an interest  period
of  twelve months  for  up  to $15  million of the  outstanding  Revolving  Loan
Facility.  Interest rate pricing under the amendment ranges from LIBOR plus 1.5%
to LIBOR plus 2.25%, depending on debt service coverage ratios.

         The entire  Revolving Loan Facility is classified as current debt based
upon the subjective  acceleration  clause and required  lockbox cash  management
agreement.  At January 31, 2007,  borrowings  under the Revolving  Loan Facility
totaled $22.1 million, at an interest rate of approximately 6.8%.  Approximately
$0.3 million was  available  under the  Revolving  Loan  Facility at January 31,
2007.

         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 the revolving loan facility will  be  sufficient to
meet  its  current  and  anticipated   cash  operating requirements  through the
year  ending  January 31,  2008,  including scheduled interest payments, working
capital needs, and capital expenditures.

INFLATION

         The Company does not believe  that the  relatively  moderate  levels of
inflation that have been experienced in the United States,  Canada and Asia 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, 2007:
<TABLE>
                                                                       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>
Revolving Line of Credit (1)            $   22,100        $        -         $  22,100        $      -        $      -
Notes Payable (2)                            1,296               340               956               -               -
Operating Lease Obligations (3)              5,624             1,177             2,735           1,712               -
Purchase Obligations (4)                    21,217            21,217                 -               -               -

Total                                   $   50,237        $   22,734         $  25,791        $  1,712        $      -
</TABLE>

Notes to Contractual Obligations Data:
(1)      Revolving  line of credit  consists of API's  revolving  loan  facility
         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.

                                       20
<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,
2007,  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 $202,000 in the net liability position of financial instruments at
January 31, 2007. A 10% weakening of the Canadian  dollar versus the U.S. dollar
would  result in an increase  of  approximately  $246,000  in the net  liability
position of financial  instruments  at January 31,  2007.  During the year ended
January 31, 2007 the Company experienced a comprehensive loss of $51,000, due to
a decrease 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, 2007.  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, 2007. 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,
2007.

         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,  2007,  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.


                                       21
<PAGE>






                                    PART III



ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS OF THE REGISTRANT
          AND CORPORATE GOVERNANCE

         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, AND
           DIRECTOR INDEPENDENCE

         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.


                                       22
<PAGE>




                                    PART IV



ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE

(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-20 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 dated as of December 31, 2003,  to Sublease  Agreement
         dated as of December 31, 1996, between First Equity and the Company.

10.8 *   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).

                                       23
<PAGE>

10.9     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).

10.10    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).

10.11    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).

10.12    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).

10.13    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).

10.14    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).

10.15    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).

10.16    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).

10.17    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).

10.18    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).


                                       24
<PAGE>

10.19    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  10.1 to the
         Company's Current Report on Form 8-K dated July 29, 2005 (No. 0-21995),
         and incorporated herein by reference).

10.20 *  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).

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

10.22    Second Amended and Restated Loan and Security Agreement, dated as of
         January 11, 2007, by and among Aerospace Products International Inc.
         and Aerospace Produits International LTEE (d/bla Aerospace Products
         International Ltd.) (each direct wholly-owned subsidiaries of First
         Aviation Services Inc.) and TD Bankworth, N.A.

10.23    Ratification Confirmation and Amendment, dated as of January 11, 2007
         entered into by First Aviation Services Inc. (on hehalf of Aerospace
         Products International Inc. and Aerospace Products International LTEE
         (d/bla Aerospace Products International Ltd.) and TD Bankworth, N.A.

10.24 *  Employment Agreement, dated as of January 12, 2007, by and between
         Bill Reznieck and Aerospace Products International Inc.

10.25 *  Compensation arrangements with named certain executive officers as of
         February 1, 2007.

                                       25
<PAGE>


21.1     List of Subsidiaries.

23.1     Consent of Ernst & Young LLP.

31.1     Certification of Chief Executive Officer pursuant to Rule 13a-14(a)

31.2     Certification of Chief Financial Officer pursuant to Rule 13a-14(a).

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

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



     * Management contracts or compensatory plans or arrangements.




                                       26
<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 4, 2007

                          FIRST AVIATION SERVICES INC.



                          By:  /S/ BILL L. REZNIECK
                          ----------------------------------------------------
                                  Bill L. Reznieck
                                  Chief Financial Officer
                                  (Principal Financial and Accounting Officer)

<TABLE>
<CAPTION>


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

        SIGNATURE                           TITLE/CAPACITY                              DATE
        ---------                           -----------------                           ----
<S>                                        <C>                                         <C>

       /S/ AARON P. HOLLANDER               President and Chief Executive Officer          May 4, 2007
       --------------------------          (Principal Executive Officer and Director)
       Aaron P. Hollander



       /S/ MICHAEL C. CULVER                Vice Chairman and Director                     May 4, 2007
       --------------------------
       Michael C. Culver



       /S/ STANLEY J. HILL                  Director                                       May 4, 2007
       --------------------------
       Stanley J. Hill




       /S/ ROBERT L. KIRK                   Director                                       May 4, 2007
       --------------------------
       Robert L. Kirk



       /S/ JOSEPH J. LHOTA                  Director                                       May 4, 2007
       --------------------------
       Joseph J. Lhota


      /S/ BILL L. REZNICEK                  Chief Financial Officer                        May 4, 2007
      ---------------------------           (Principal Financial and
          BILL L. REZNICEK                  Accounting Officer)
</TABLE>


                                       27
<PAGE>

                          FIRST AVIATION SERVICES INC.

                        Consolidated Financial Statements

               For the years ended January 31, 2007, 2006 and 2005


<TABLE>
<CAPTION>


   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

<S>                                                                                                               <C>
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-F19

Schedule II - Valuation and Qualifying Accounts.................................................................F20

</TABLE>


                                       F-1
<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,  2007 and 2006,  and the related  consolidated
statements of operations,  stockholders'  equity, and cash flows for each of the
three years in the period ended  January 31, 2007.  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, 2007 and 2006, and the consolidated  results of its
operations  and its cash flows for each of the three  years in the period  ended
January  31,  2007,  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
May 3, 2007

                                      F-2
<PAGE>



                          FIRST AVIATION SERVICES INC.

                           Consolidated Balance Sheets
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                    January 31,
Assets                                                                    2007                      2006
                                                                   -------------------       -------------------
Current assets:
<S>                                                                           <C>                       <C>
     Cash and cash equivalents                                                $ 1,745                   $ 9,488
     Trade receivables, net                                                    20,847                    18,737
     Inventories, net                                                          33,069                    38,809
     Prepaid expenses and other                                                 1,479                     1,351
                                                                   -------------------       -------------------
Total current assets                                                           57,140                    68,385

Plant and equipment, net                                                        5,095                     4,963
                                                                   -------------------       -------------------
Total Assets                                                                 $ 62,235                  $ 73,348
                                                                   ===================       ===================
Liabilities and stockholders' equity
Current liabilities:
     Accounts payable                                                        $ 12,880                  $ 15,441
     Accrued compensation and related expenses                                    845                     1,823
     Other accrued liabilities                                                  2,880                     1,750
     Revolving line of credit                                                  22,100                         -
     Notes payable                                                                340                     1,125
     Income taxes payable                                                         189                     1,012
                                                                   -------------------       -------------------
Total current liabilities                                                      39,234                    21,151

Long-term debt                                                                      -                    14,500
Notes payable, less current portion                                               956                     1,245
                                                                   -------------------       -------------------
Total liabilities                                                              40,190                    36,896

Commitments and contingencies (Note 13)                                             -                         -

Stockholders' equity
     Common stock, $0.01 par value, 25,000,000 shares authorized,                  91                        91
          9,135,699 shares issued
     Additional paid-in capital                                                38,787                    38,799
     (Accumulated deficit) retained earnings                                   (8,145)                    6,349
    Accumulated other comprehensive income                                        449                       500
                                                                   -------------------       -------------------
                                                                               31,182                    45,739
     Less:  Treasury stock, at cost, 1,756,848 and 1,782,449                   (9,137)                   (9,287)
          shares, respectively
                                                                   -------------------       -------------------
     Total stockholders' equity                                                22,045                    36,452
                                                                   -------------------       -------------------
Total liabilities and stockholders' equity                                   $ 62,235                  $ 73,348
                                                                   ===================       ===================


See accompanying notes.

</TABLE>
                                      F-3





<PAGE>



                          FIRST AVIATION SERVICES INC.

                      Consolidated Statements of Operations
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)






<TABLE>
<CAPTION>
                                                                                    Year ended January 31,
                                                                  -------------------------------------------------------------
                                                                        2007                 2006                  2005
                                                                  ------------------   ------------------    ------------------

<S>                                                                       <C>                  <C>                   <C>
Net sales                                                                 $ 119,361            $ 131,525             $ 124,249
Cost of sales                                                               106,555              108,474               103,525

                                                                  ------------------   ------------------    ------------------
Gross profit                                                                 12,806               23,051                20,724

Selling, general and administrative expenses                                 24,655               19,933                19,973
Corporate expenses                                                            2,380                2,372                 2,893

                                                                  ------------------   ------------------    ------------------
Income (loss) from operations                                               (14,229)                 746                (2,142)
Interest income                                                                   1                   47                    66
Interest expense and other, net                                                (961)                (105)                   10
Other income                                                                      -                  417                     -
Minority interest in subsidiary                                                   -                  (10)                  (42)

                                                                  ------------------   ------------------    ------------------
Income (Loss) before income taxes                                           (15,189)               1,095                (2,108)
(Provision) benefit for income taxes                                            695                  (71)                 (121)

                                                                  ------------------   ------------------    ------------------
Net income (loss)                                                         $ (14,494)             $ 1,024              $ (2,229)
                                                                  ==================   ==================    ==================

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

Basic net income (loss) per  share                                          $ (1.97)              $ 0.14               $ (0.31)

                                                                  ------------------   ------------------    ------------------
Net income (loss) per  share - assuming dilution                            $ (1.97)              $ 0.14               $ (0.31)
                                                                  ==================   ==================    ==================
Weighted average shares outstanding - basic                               7,362,125            7,336,925             7,301,751
                                                                  ==================   ==================    ==================
Weighted average shares outstanding - assuming dilution                   7,362,125            7,341,007             7,301,751
                                                                  ==================   ==================    ==================


See accompanying notes.


</TABLE>

                                      F-4





<PAGE>



                          FIRST AVIATION SERVICES INC.

                 Consolidated Statements of Stockholders' Equity
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>



                                                          Common Stock
                                             --------------------------------------       Additional
                                                   Number                                  Paid-in              Retained
                                                  of Shares             Amount             Capital              Earnings
                                             --------------------   ---------------   -------------------   -----------------
<S>                                           <C>                    <C>               <C>                  <C>
Balances at January 31, 2004                           7,284,093              $ 91              $ 38,375             $ 7,554

Shares issued under qualified plans                       37,415                 -                   (57)                  -
    and to directors
Other comprehensive income                                     -                 -                     -                   -
    Net loss                                                   -                 -                     -              (2,229)
                                             --------------------   ---------------   -------------------   -----------------
Balances at January 31, 2005                           7,321,508              $ 91              $ 38,318             $ 5,325
                                             --------------------   ---------------   -------------------   -----------------
Shares issued under qualified plans                       31,742                 -                   (60)                  -
    and to directors
Repurchase of preferred stock of subsidiary                    -                 -                   541                   -
Other comprehensive income                                     -                 -                     -                   -
    Net income                                                 -                 -                     -               1,024
                                             --------------------   ---------------   -------------------   -----------------
Balances at January 31, 2006                           7,353,250              $ 91              $ 38,799             $ 6,349
                                             ====================   ===============   ===================   =================
Shares issued under qualified plans                       25,601                 -                   (56)                  -
    and to directors
Equity based compensation                                      -                 -                    44                   -
Other comprehensive income                                     -                 -                     -                   -
    Net loss                                                   -                 -                     -             (14,494)
                                             --------------------   ---------------   -------------------   -----------------
Balances at January 31, 2007                           7,378,851              $ 91              $ 38,787            $ (8,145)
                                             ====================   ===============   ===================   =================

See accompanying notes.




                                                   Accumulated
                                                     Other
                                                  Comprehensive                                  Treasury
                                                  Income (Loss)             Sub-Total              Stock              Total
                                             -------------------------  ------------------   ------------------  -----------------
Balances at January 31, 2004                                    $ 238            $ 46,258             $ (9,693)          $ 36,565

Shares issued under qualified plans                                 -                 (57)                 219                162
    and to directors
Other comprehensive income                                        136                 136                    -                136
    Net loss                                                        -              (2,229)                   -             (2,229)
                                             -------------------------  ------------------   ------------------  -----------------
Balances at January 31, 2005                                    $ 374            $ 44,108             $ (9,474)          $ 34,634
                                             -------------------------  ------------------   ------------------  -----------------
Shares issued under qualified plans                                 -                 (60)                 187                127
    and to directors
Repurchase of preferred stock of subsidiary                         -                 541                    -                541
Other comprehensive income                                        126                 126                    -                126
    Net income                                                      -               1,024                    -              1,024
                                             -------------------------  ------------------   ------------------  -----------------
Balances at January 31, 2006                                    $ 500            $ 45,739             $ (9,287)          $ 36,452
                                             =========================  ==================   ==================  =================
Shares issued under qualified plans                                 -                 (56)                 150                 94
    and to directors
Equity based compensation                                           -                  44                    -                 44
Other comprehensive loss                                          (51)                (51)                   -                (51)
    Net loss                                                        -             (14,494)                   -            (14,494)
                                             -------------------------  ------------------   ------------------  -----------------
Balances at January 31, 2007                                    $ 449            $ 31,182             $ (9,137)          $ 22,045
                                             =========================  ==================   ==================  =================

See accompanying notes.

</TABLE>
                                      F-5





<PAGE>


                          FIRST AVIATION SERVICES INC.

                      Consolidated Statements of Cash Flows
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                         Year ended January 31,
                                                                  ---------------------------------
                                                                    2007        2006        2005
                                                                  ---------  ---------    ---------

Cash flows from operating activities
<S>                                                               <C>         <C>         <C>
Net income (loss)                                                 $(14,494)   $  1,024    $ (2,229)

Adjustments to reconcile net income (loss) to net cash used in
      operating activities - non cash expense (income):
     Depreciation and amortization                                   1,614       1,255       1,011
     Equity based compensation                                         138         127         162
     Provision for bad debts                                         2,555         179         (79)
     Provision for excess and obsolete inventory                     4,487         280         754
     Gain on sale of plant and equipment                              (135)       --          --
      Other                                                             57        --          --
(Increase) decrease in working capital assets:
          Trade receivables                                         (4,783)     (4,228)       (911)
          Inventories                                                  964     (11,876)     (2,471)
          Prepaid expenses and other assets                           (155)       (444)        150
Increase (decrease) in working capital liabilities:
          Accounts payable                                          (2,544)      4,917         930
          Other accrued liabilities                                    107        (165)      1,206
          Income taxes payable                                        (824)        110         (32)

                                                                  --------    --------    --------
Net cash used in operating activities                              (13,013)     (8,821)     (1,509)

Cash flows from investing activities
Purchases of plant and equipment and other assets                   (1,604)     (3,208)     (1,039)
Proceeds from disposals of plant and equipment and other assets        142        --             3

                                                                  --------    --------    --------
Net cash used in investing activities                               (1,462)     (3,208)     (1,036)

Cash flows from financing activities
Borrowings on revolving line of credit                               8,100      46,400      56,150
Repayments on revolving line of credit                                (500)    (46,400)    (56,150)
Repayments on notes payable                                         (1,074)       (600)       --
Repurchase of Minority Interest in Subsidiary                         --          (500)       --

                                                                  --------    --------    --------
Net cash provided by (used in) financing activities                  6,526      (1,100)       --

Effect of exchange rate changes on cash and cash equivalents           206          33         (15)

                                                                  --------    --------    --------
Net change in cash and cash equivalents                           $ (7,743)   $(13,096)   $ (2,560)
Cash and cash equivalents at the beginning of the year               9,488      22,584      25,144

                                                                  --------    --------    --------
Cash and cash equivalents at the end of the year                  $  1,745    $  9,488    $ 22,584
                                                                  ========    ========    ========

Supplemental cash flow disclosures
Cash paid for:
     Interest                                                     $  1,181    $    218    $     46
                                                                  ========    ========    ========

     Income taxes paid, net                                       $     40    $     59    $    145
                                                                  ========    ========    ========


See accompanying notes.
</TABLE>
                                      F-6




<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"),
API  Europe,   Ltd.  ("API  Europe"),   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  wheels,   brakes  and
starter/generators,  and builds  custom  hose  assemblies.  The  Company has its
headquarters in Westport, CT.

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  supply  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. The
Company, when providing services to handle customers' inventory  without  taking
ownership, takes 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 34%, 38%, and 40% of its total purchases were
made during the years ended January 31, 2007, 2006, and 2005, respectively.

                                       F-7
<PAGE>

Sales to unaffiliated  foreign customers were  approximately 28%, 25% and 22% of
net sales for the years ended January 31, 2007, 2006 and 2005, 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 $2,015 and $596, at January 31, 2007 and 2006, 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. In December 2004, the FASB issued  Statement No. 123 (Revised
2004),  or  Statement  123(R),  Share-Based  Payment,  which  is a  revision  of
Statement No. 123,  Accounting for Stock-Based  Compensation.  Statement  123(R)
supersedes  APB Opinion No. 25,  Accounting  for Stock Issued to Employees,  and
amends  Statement  No. 95,  Statement  of Cash Flows.  The approach in Statement
123(R) is similar to the approach described in Statement 123; however, Statement
123(R)  requires all  share-based  payments to  employees,  including  grants of
employee stock options, to be recognized in the statement of operations based on
their fair values. Pro forma disclosure,  as allowed under Statement No. 123, is
no longer an alternative. The Company adopted FAS 123(R) on February 1, 2006.

         Prior to adoption  of FAS 123 (R),  as  permitted  under  Statement  of
Financial  Accounting  Standard No.  ("FAS") 123,  "Accounting  for  Stock-Based
Compensation", the Company 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 ended January 31, 2006 and 2005,  because all grants
were issued at the fair market value of the  Company's  common stock at the date
of grant.

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.

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.

As the result of normal review procedures, during the three months ended October
31, 2006, the Company started using an adjusted  methodology for calculating the
effect of slow moving and obsolete inventory. The adjusted methodology estimates
the provision for excess and obsolete  inventory  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.  This method  differs  from the  previous  method which was based on
historical  aging.  The impact of the change in methodology  was not material to
the  Company's  Operating  results.  The  allowance for obsolete and slow moving
inventory was $6,402 and $1,709, at January 31, 2007 and 2006, respectively.

The additional  reserve was derived from the data that became  available  during
the quarter ended  October  2006,  and was used to calculate the estimate of the
effect of excess and obsolete inventories.


                                      F-8

<PAGE>

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.

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

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. No asset  impairments were recorded
during the years ended January 31, 2007, 2006 and 2005.

Principal Suppliers

API has five suppliers of parts and components from which approximately 34%, 38%
and 40% of its total  purchases  were made  during the years  ended  January 31,
2007,  2006 and 2005,  respectively.  Accounts  payable to these vendors totaled
$3,129 and $4,279 at January 31, 2007 and 2006,  respectively.

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 the deferred tax
asset will not be realized.

In June 2006, the FASB issued Interpretation No. 48, "Accounting for Uncertainty
in Income Taxes-an  Interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48
clarifies  the  accounting  for  uncertainty  in income  taxes  recognized  in a
company's financial  statements in accordance with SFAS No. 109, "Accounting for
Income  Taxes."  FIN 48  prescribes  a  recognition  threshold  and  measurement
attribute for the  financial  statement  recognition  and  measurement  of a tax
position taken or expected to be taken in a tax return.  FIN 48 is effective for
First Aviation  beginning on February 1, 2007. The Company at this time is still
evaluating  the  impact,  if any,  that the  adoption of FIN 48 will have on its
financial statements.

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 decrease in other  comprehensive  income  during the year ended  January 31,
2007 was due to a decrease in the value of the Canadian  dollar relative to the
U.S. dollar. The increase in other  comprehensive  income during the years ended
January 31, 2006 and 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, 2007, 2006 and 2005, respectively, was as follows:

                                      F-9
<PAGE>

<TABLE>
<S>                                            <C>                <C>                <C>
                                                   2007               2006                2005
                                             ---------------    ---------------    -----------------

Net income (loss), as reported                 $ (14,494)         $   1,024          $  (2,229)

Net impact of foreign currency translation
 adjustments - gain (loss)                           (51)               126                136
                                             ---------------    ---------------    -----------------

Comprehensive income (loss)                    $ (14,545)         $    1,150         $  (2,093)
                                             ===============    ===============    =================
</TABLE>

Reclassifications

Certain  amounts  have  been   reclassified  to  conform  to  the  current  year
presentation.  The effect of the  reclassifications did not impact the financial
position or results of operations.

3.   Plant and Equipment

Plant and equipment consist of the following:
<TABLE>
<S>                                                                <C>                    <C>
                                                                               January 31,
                                                                        2007                  2006
                                                                   -------------          -------------
Machinery and equipment                                            $      2,255           $      2,488
Buildings and leasehold improvements                                        932                  1,242
Computer equipment, software, office furniture, fixtures and
     other office equipment                                              11,765                  8,965
Construction-in-process                                                      70                  1,085
                                                                   -------------          -------------
                                                                         15,022                 13,780

Less:  accumulated depreciation                                          (9,927)                (8,817)
                                                                   -------------          -------------
                                                                   $      5,095           $      4,963
                                                                   =============          =============
</TABLE>
The amount of the unamortized  capitalized software at January 31, 2007 and 2006
was $2,318 and $1,607, respectively. The related amortization expense during the
year ended January 31, 2007 and 2006 was $1,414 and $119, respectively.


4.   Revolving Line of Credit

                                                   January 31,
                                         2007                     2006
                                     -----------              -----------
Revolving line of credit             $   22,100               $  14,500
                                     ===========              ===========

  On January 11,  2007, API and API Ltd. entered  into a Second  Amended and
Restated Loan and Security Agreement (the Agreement) with TD Banknorth, NA. This
Agreement, which expires on September 1, 2008, replaces the Company's previously
existing   $25   million   revolving   credit   facility   with   the   Lender's
predecessor-in-interest,  which was scheduled to expire  September 1, 2007.  The
Agreement  provides  for  a 21  month  senior  revolving  credit  facility  (the
Revolving  Loan Facility) in the amount of  $25 million,  subject to a borrowing
base based on a formula of qualifying  assets as well as outstanding  letters of
credit. The proceeds of any loans made under the Revolving Loan Facility will be
used for working capital purposes in the ordinary course of business.

         The  Agreement  also provides for a Line of  Credit/Term  Facility (the
Term  Loan  Facility)  in an  amount  up to  $3 million,  subject  to  borrowing
availability.  The proceeds of this advance under the Term Loan Facility will be
used for the purpose of  purchasing  certain  equipment  for use in the ordinary
course  of  business. There  were  no borrowings outstanding under the Term Loan
Facility at January 31, 2007.

         The  Revolving  Loan  Facility  bears  interest  at the  option  of the
Borrower (i) at the prime rate in effect from time to time, (ii) at the adjusted
LIBOR for the applicable  interest period plus 150 or 175 basis points depending
upon financial  ratios of the Borrower,  or (iii) at the FHLB Rate (Federal Home
Loan  Bank  Rate).  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 the Company's common stock is prohibited,
except  with the  lender's  consent,  and the  Company is  required  to maintain
minimum  levels of Tangible  Capital Base and specified  Debt Service  Coverage.
Substantially  all of the Company's  Domestic and Canadian assets are pledged as
collateral under the Agreement,  and the Company guarantees all borrowings under
the Agreement.


                                      F-10
<PAGE>

         On April 27, 2007, API and API Ltd. entered into an  amendment  to  the
Second Amended and  Restated  Loan  and  Security  Agreement  dated  January 11,
2007.  The amendment provides for  a  waiver  from  the  lender of the Company's
violation of it financial covenants for the three months ended January 31, 2007.
Pursuant to the amendment, the  Company  also  agrees to immediately  repay  any
balances owing under the Term Loan Facility and  that  the  Term  Loan  Facility
agreement would terminate immediately.  Changes to the  debt  services  coverage
ratios, the minimum Tangible Capital  Base,  and interest rate pricing were also
modified as a result of the amendment.

         The amendment  further allows the company to select an interest  period
of twelve months  for  up  to  $15  million of the  outstanding  Revolving  Loan
Facility.  Interest rate pricing under the amendment ranges from LIBOR plus 1.5%
to LIBOR plus 2.25%, depending on debt service coverage ratios.

         The entire  Revolving Loan Facility is classified as current debt based
upon the subjective  acceleration  clause and required  lockbox cash  management
agreement.  At January 31, 2007,  borrowings  under the Revolving  Loan Facility
totaled $22.1 million, at an interest rate of approximately 6.8%.  Approximately
$0.3 million was  available  under the  Revolving  Loan  Facility at January 31,
2007.

5.   Notes Payable
                                                January 31,
                                             2007          2006
                                         ------------  ------------

Notes Payable                            $     1,296   $     2,370
Less : Current Portion                          (340)       (1,125)
                                         ============  ============
Long-term portion of notes payable       $       956   $     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 payable  quarterly through 2010. 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 $340,  $511,  and $445 for the years ended
January 31, 2008, 2009, and 2010, respectively.

                                      F-11
<PAGE>

6.   Share Based Payments

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  is  paid  in  stock  as  part  of  their  annual
compensation. 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 $75, $108 and
$153,  and the  number of shares  issued was  19,641,  26,493 and 34,733 for the
years ended January 31, 2007,  2006 and 2005,  respectively.  A total of 198,271
shares have been issued to directors under the Plan.

The  Company  also  has a Stock  Incentive  Plan  (the  "Plan")  with a total of
1,200,000  shares of common stock reserved for issuance.  The Plan provides for
the  grant  of  incentive  stock  options,  nonqualified  stock  options,  stock
appreciation rights, stock grants and stock purchase rights. Only employee stock
options  and shares  issued to  directors  have been issued  under the Plan.  At
January 31, 2007, 763,779 shares were available to be issued under the Plan.

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. In December 2004,  the FASB issued Statement No. 123 (Revised
2004),  or  Statement  123(R),  Share-Based  Payment,  which  is a  revision  of
Statement  No. 123,  Accounting for Stock-Based  Compensation.  Statement 123(R)
supersedes APB Opinion  No. 25,  Accounting  for Stock Issued to Employees,  and
amends  Statement  No. 95,  Statement  of Cash Flows.  The approach in Statement
123(R) is similar to the approach described in Statement 123; however, Statement
123(R)  requires all  share-based  payments to  employees,  including  grants of
employee stock options, to be recognized in the statement of operations based on
their fair values. Pro forma disclosure,  as allowed under Statement No. 123, is
no longer an alternative.

The  Company  adopted FAS 123(R) on  February  1, 2006.  As  required  under FAS
123(R),  the Company  recognized a $44 expense in corporate expenses for options
vested  during the year ended  January 31,  2007.  The fair value of each option
issued was estimated at the date of grant.  There were no options granted during
the year ended January 31, 2007.  Prior to adoption of FAS 123 (R), as permitted
under Statement of Financial  Accounting  Standard No. ("FAS") 123,  "Accounting
for  Stock-Based  Compensation",   the  Company  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 ended January 31, 2006 and
2005,  because all grants were issued at the fair market value of the  Company's
common stock at the date of grant.

The Company has elected the modified-prospective  transition method as permitted
by FAS 123(R) and,  therefore,  prior  periods have not been restated to reflect
the impact of stock option  expense.  Stock option  expense will be recorded for
all new and  unvested  stock  options that are expected to vest over the service
period  beginning on February 1, 2006.  Under FAS 123(R) stock option expense is
generally recognized on a straight line basis over the stated vesting period.

The impact of adopting FAS 123(R)  increased  the  Company's  basic net loss per
share by $0.01.

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.  Upon the  adoption of FAS 123(R) the
Company changed the accounting for forfeitures  and estimates  forfeitures  when
calculating the  compensation  expense.  The forfeitures did not have a material
impact on the estimated fair value of the stock  options.  Prior to the adoption
of FAS 123(R), for purposes of pro-forma  disclosures under FAS 123, the Company
did not make an  estimate of  forfeitures,  but  instead  subsequently  reversed
pro-forma  compensation costs for forfeited awards when the awards were actually
forfeited.

The fair value of each option  granted was  estimated at the date of grant using
the  following  assumptions  for the years ended  January 31, 2006 and 2005.  No
options were issued during the year ended January 31, 2007.

                                      F-12

<PAGE>
                                                  2006        2005
                                               -----------  ----------

             Expected dividend yield                  0.0%        0.0%

             Risk-free interest rate                  4.3%        3.6%

             Expected volatility                     31.0%       32.3%

             Expected life of option           5.0 years    5.0 years

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


Using the assumptions  under the Black-Scholes  option-pricing  model above, and
the  weighted-average  fair  value of each  option  granted,  the net income and
earnings per share that would have been recorded if the estimated  fair value of
options  granted had been recorded as an expense  during the years ended January
31, 2006 and 2005, prior to adoption of FAS 123(R) on February 1, 2006, was:

                                                      2006              2005
                                                  -------------   --------------

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

Pro forma compensation expense for issuance of
 stock options, net of tax effect                           13               57
                                                  -------------  ---------------

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

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

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


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.  At
January 31, 2007, options for 237,950 shares (after forfeitures) had been issued
under the Plan.  The following  table is a summary of activity  related to stock
options for the year ended January 31, 2007:

                                             2007
                                    ------------------------
                                                  Weighted-
                                       Number      Average
                                         of        Exercise
                                      Options       Price
                                    ------------  ----------
Outstanding at
beginning of year                       206,350       $4.37

Granted                                       -           -

Exercised                                     -           -

Forfeited                              (129,200)       4.33
                                    ------------  ----------

Outstanding at end of year               77,150       $4.44
                                    ============  ==========

Exercisable at end of year               59,268       $4.50
                                    ============  ==========

The aggregate intrinsic value of options outstanding  and exercisable at January
31, 2007 was $-0-. The weighted  average  remaining  contractual term of options
outstanding and exercisable at January 31, 2007 is 6.0 years.

                                      F-13
<PAGE>

                                              Weighted-
                                    Number     Average
                                      of       Exercise
                                   Options      Price
                                  ----------  ----------
Nonvested at February 1, 2006        73,098   $    4.42

Granted                                   -           -

Vested                              (27,553)       4.42

Forfeited                           (27,663)       4.12
                                  ----------  ----------

Nonvested at January 31, 2007        17,882   $    4.25
                                  ==========  ==========


The total fair value of options  which vested  during the year ended January 31,
2007,  was  approximately  $78 (27,553  shares).  As of January 31, 2007, $33 of
unrecognized  compensation  cost related to non-vested stock options is expected
to be recognized over a weighted average period of approximately one year.

The fair value of options  which vested  during the year ended January 31, 2007,
was estimated  assuming that no dividends  will be declared and using  risk-free
rates ranging from 1.75% to 4.25%.  Additionally,  the Company  assumed that the
expected term of share options would be 5.0 years with  volatility  ranging from
0.31% to 0.37% based on historical  prices of the Company's  stock. The weighted
average volatility was 0.33%.

In  November  2005,  the FASB issued FSP No. FAS  123(R),  "Transition  Election
Related to Accounting for the Tax Effects of Share-Based  Payment Awards".  This
FSP provides an elective alternative  simplified method for calculating the pool
of  excess  tax  benefits  available  to  absorb  tax  deficiencies   recognized
subsequent  to the  adoption  of FAS 123(R)  and  reported  in the  consolidated
statements of cash flows.  The Company has not recognized and does not expect to
recognize  in the  foreseeable  future  any  tax  benefit  related  to  employee
stock-based  compensation expense as a result of the full valuation allowance on
its net deferred tax assets and its net operating loss carryforwards.

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.  Under FAS 123(R),
compensation  charges are recorded for the ESPP. The Company issued 5,959 shares
of stock under the ESPP plan during the year ended January 31, 2007.

At January 31, 2007, 173,955 shares were  available to  be issued under the ESPP
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.

                                      F-14

<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 $-0-, $10, and $42 were paid
during each of the years ended  January 31, 2007,  2006 and 2005,  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,
                                    --------------------------------------------
                                        2007           2006           2005
                                    -------------  ------------- ---------------

Current:
  Federal & Foreign                 $        (695) $         71   $         121
  State                                        -              -               -
                                    -------------  ------------- ---------------
                                             (695)           71             121

Deferred:
  Federal                           $          -   $          -   $           -
  State                                        -              -               -
                                    -------------  ------------- ---------------
                                               -              -               -
                                    -------------  ------------- ---------------

Total provision (benefit)           $        (695) $         71   $         121
                                    =============  ============= ===============

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:

<TABLE>
<S>                                                   <C>             <C>         <C>
                                                          Year ended January 31,
                                                 ----------------------------------------
                                                    2007           2006          2005
                                                 ------------   -----------   -----------


Provision (benefit) at federal statutory rate         (34.0)%         34.0%       (34.0)%
State tax (benefit), net of federal                        -             -             -
Foreign tax provision, net of federal                    0.4           4.7           3.8
Net operating loss utilized                                -         (32.2)            -
Non-deductible items                                     0.2             -           2.5
Prior year and other items                                 -           1.4           5.0
Adjustments to tax liabilities                          (5.1)            -             -
Deferred tax valuation allowance                        33.9          (1.4)         28.4
                                                 ------------   -----------   -----------
                                                        (4.6)%         6.5%          5.7%
                                                 ============   ===========   ===========
</TABLE>

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,
                                             ----------------------------------
                                                  2007              2006
                                             ---------------- -----------------

Deferred tax assets (liabilities):
       Bad debt                              $           791  $            215
       Inventory reserve                               2,428               683
       Amortization of tax goodwill                      607               642
       Net operating loss carryforwards                4,430               764
       Other, net                                        (18)              333
                                             ---------------- -----------------
                                                       8,238             2,637
Valuation allowance                          $        (8,238) $         (2,637)
                                             ---------------- -----------------
Net deferred income tax assets               $             -  $              -
                                             ================ =================

                                      F-15
<PAGE>

For the fiscal year ended January 31, 2007,  the Company  recorded a net benefit
from income taxes of $695. The Company  recorded  federal and state tax benefits
in  the  amount  of  $756.  The  benefits  arose due  to  a  change in facts and
circumstances  and assumptions  that generated the  establishment of federal and
state tax liabilities in prior periods. These liabilities which were recorded in
income taxes  payable,  have been reversed in the current  year.  The benefit is
offset in part by the provision for foreign  income taxes for  operations in the
Philippines and Canada. The Company increased the valuation reserve for the year
ended January 31, 2007 by $5,601, against net deferred tax assets resulting from
temporary differences. The Company has net operating loss carryforwards totaling
approximately  $11,504 for federal  income tax  purposes, and various  state net
operating loss carryforwards. The carryforwards expire between 2023 and 2027.

For the fiscal year ended January 31, 2006, the Company recorded a provision for
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
Company  decreased the valuation reserve for the year ended January 31,  2006 by
$232,  against  deferred  tax  assets  resulting  from  temporary differences.

For the fiscal year ended January 31, 2005, the Company recorded a provision for
income  taxes of $121. The expense is foreign income tax expense, for operations
in  Canada  and  the  Philippines.  The  Company  also  increased  the valuation
allowance  for  the year  ended  January  31,  2006,  by $598,  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  $181,  $164 and $206  related to the  savings  plan in the years ended
January 31, 2007, 2006 and 2005,  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,  President & Chief  Executive  Officer and Vice Chairman of the Company,
respectively.  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
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 year ended January 31, 2005, the Company paid
First Equity a retainer fee of $360, and no Success Fee.

                                      F-16

<PAGE>

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,  CT.  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. First
Equity   has  renewed  the lease for an additional five-year period beginning in
April 2007. Lease payments under this sublease totaled approximately $115, $93,
and $84, for the years ended January 31, 2007, 2006, and 2005, 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, $50, $52, and $53 in 2007, 2006 and 2005, 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 an  employee of  First  Equity  $50 for  consulting  services
performed  exclusively  for the Company's  benefit during the year ended January
31, 2007, and reimbursed First Equity for actual travel expenses incurred.

10.      Interest expense and other income (expense), net

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

                                          Year ended January 31,
                             -------------------------------------------------
                                 2007            2006              2005
                             --------------  --------------  -----------------

    Interest expense          $     (1,182)   $       (234)   $           (64)
    Foreign exchange gain              197             130                 74
    Other income (expense)              23              (1)                 -
                             --------------  --------------  -----------------

                              $       (961)   $       (105)   $            10
                             ==============  ==============  =================
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.

                                      F-17
<PAGE>

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.

<TABLE>
<S>                                                                 <C>          <C>          <C>
                                                                          Years ended January 31,
                                                                  ---------------------------------------
                                                                     2007          2006         2005
                                                                  ------------  -----------  -----------

 Denominator for basic net income (loss) per share - weighted
  average shares                                                    7,362,125    7,336,925    7,301,751

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

 Denominator for net income (loss) per share - assuming dilution
  - adjusted weighted average shares and assumed conversions        7,362,125    7,341,007    7,301,751
                                                                  ============  ===========  ===========
</TABLE>


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  due to the loss  incurred  for the year ended
January 31, 2005 was 8,072. There were no potentially dilutive common shares for
the year ended January 31, 2007.

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, 2007 are as follows:

        Year ending January 31, 2008                         $ 1,177
        Year ending January 31, 2009                           1,031
        Year ending January 31, 2010                             901
        Year ending January 31, 2011                             803
        Year ending January 31, 2012                             856
        Thereafter                                               856
                                                         ------------------
                                                             $ 5,624
                                                         ==================

Rental expense under noncancelable  operating leases amounted to $1,212, $1,129,
and $1,148 for the years ended January 31, 2007, 2006 and 2005, 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.

                                      F-18

<PAGE>

16.  Quarterly Financial Information (unaudited)

<TABLE>
<S>                                       <C>          <C>          <C>             <C>
                                             First        Second       Third          Fourth
                                            Quarter       Quarter     Quarter         Quarter
                                          ------------ ------------ ------------   -------------
Year ended January 31, 2007

Net sales                                 $    29,242  $    29,665  $    32,358     $    28,096

Gross profit                                    5,727        4,979        1,241 (1)         859

Net loss                                         (266)      (1,906)      (4,241)(2)      (8,081)(3)

Basic and diluted net loss per share      $     (0.04) $     (0.26) $     (0.58)    $     (1.10)
</TABLE>

<TABLE>
<S>                                       <C>          <C>             <C>         <C>
                                             First       Second          Third       Fourth
                                            Quarter      Quarter        Quarter      Quarter
                                          ------------ ------------   ------------ -----------
Year ended January 31, 2006

Net sales                                 $    31,981  $    32,706     $   33,611  $   33,227

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

Net income                                        153          432 (4)         90         349

Basic and diluted net income per share    $      0.02  $      0.06     $     0.01  $     0.05


     (1) Includes a $4.0 million increase in inventory reserves in the third quarter of fiscal year 2007.
     (2) Includes a $0.8 million tax benefit from a reversal of a tax reserve in the third quarter of fiscal year 2007.
     (3) Includes a $1.9 million increase in bad debt allowance in the fourth quarter of fiscal year 2007.
     (4) Includes $0.4 million in income from a litigation settlement.
</TABLE>

                                      F-19
<PAGE>

Schedule II - Valuation and Qualifying Accounts

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

<TABLE>
<S>                                       <C>            <C>            <C>            <C>
                                     Balance at
                                     beginning of                              Balance as of
                                        period     Additions     Deductions     end of period
                                    ------------- -----------   ------------   ---------------

Description:

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, 2007
  Allowance for doubtful accounts         $  596       2,555          1,136 (a)        $2,015



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         489            227 (b)        $1,918
Year ended January 31, 2007
  Slow moving and obsolete inventory      $1,918       4,487              3 (b)        $6,402

     (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.
</TABLE>

                                      F-20
<PAGE>

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 dated as of December 31, 2003, to Sublease  Agreement
          dated as of December 31, 1996, between First Equity and the Company.

10.8  *   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).

<PAGE>

10.9  *   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).

10.10     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).

10.11     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).

10.12     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>

10.13     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).

10.14     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).

10.15     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).

10.16     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).

10.17     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).

10.18     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).

10.19     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
          10.1 to the Company's Current Report on Form 8-K dated July 29, 2005
          (No. 0-21995), and incorporated herein by reference).

<PAGE>


10.20     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).

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

10.22     Second Amended and Restated Loan and Security Agreement, dated as of
          January 11, 2007, by and among Aerospace Products International Inc.
          and Aerospace Produits International LTEE (d/bla Aerospace Products
          International Ltd.) (each direct wholly-owned subsidiaries of First
          Aviation Services Inc.) and TD Bankworth, N.A.

10.23     Ratification Confirmation and Amendment, dated as of January 11, 2007
          entered into by First Aviation Services Inc. (on hehalf of Aerospace
          Products International Inc. and Aerospace Products International LTEE
          (d/bla Aerospace Products International Ltd.) and TD Bankworth, N.A.

10.24 *   Employment Agreement, dated as of January 12, 2007, by and between
          Bill Reznieck and Aerospace Products International Inc.

10.25 *   Compensation arrangements with named certain executive officers as
          of February 1, 2007.

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.