UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-KSB
(Mark
One)
[X]
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the
fiscal year ended June
30, 2006
[
]
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF
1934
For
the
transition period from _________ to _________
Commission
file number 0-18113
LGA
HOLDINGS, INC.
(Exact
name of small business issuer in its charter)
Utah
|
|
87-0405405
|
(State
or other jurisdiction of
|
|
(I.R.S.
Employer
|
incorporation
or organization)
|
|
Identification
No.)
|
3380
North El Paso Street, Suite G, Colorado Springs, Colorado
80907
(Address
of principal executive offices) (Zip Code)
Issuer's
telephone number (719)
630-3800
Securities
registered under Section 12(b) of the Exchange Act:
None
Securities
registered under Section 12(g) of the Exchange Act:
Common
Stock
(Title
of
class)
Check
whether the issuer (1) filed all reports required to be filed by Section
13 or
15(d) of the Exchange Act 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.
Yes
[X]
No []
Check
if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained,
to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB or any amendment to this Form 10-KSB. [
]
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes [] No [X]
State
issuer's revenues for its most recent fiscal year. $336,721
State
the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity
was
sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. October 19, 2006: $
1,180,033
State
the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date. June 30, 2006: 8,592,960
DOCUMENTS
INCORPORATED BY REFERENCE
None
Transitional
Small Business Disclosure Format (Check one): Yes [ ] No
[X]
Certain
statements made herein are forward-looking statements under the Private
Securities Litigation Reform Act of 1995. They include statements based on
management's current expectations and estimates; actual results may differ
materially due to certain risks and uncertainties. For example, the ability
of
Let's Go Aero, Inc. to achieve expected results may be affected by external
factors such as competitive price pressures, conditions in the economy and
industry growth, and internal factors, such as future financing of the acquired
operations and the ability to control expenses.
PART
I
Item
1. Description of Business.
LGA
Holdings, Inc., ("LGA" or the "Company") is the sole owner of its operating
subsidiary, Let's Go Aero, Inc. ("Aero"). LGA acquired Aero effective June
30,
2004 through a stock for stock exchange under which the former shareholders
of
Aero were issued new LGA shares of common stock in exchange for all of Aero's
outstanding shares and $1,518,440 of debt. The former Aero shareholders and
debt
holders ended up with 85% of the outstanding common stock of LGA. Prior to
the
acquisition, LGA had no business or operations after having sold what business
it did have October 22, 2003, several months before the acquisition of Aero.
Therefore, at the time of the acquisition of Aero, LGA was what is known
as a
publicly held shell company. LGA changed its name to LGA, Inc. from Tenet
Information Services, Inc. by a vote of shareholders on May 27, 2005, but
the
name was not available according to the Utah Secretary of State. By consent
of
shareholders owning in excess of a majority of shares, the name was changed
to
LGA Holdings, Inc. in October, 2005. LGA was formed on February 24,
1984.
Upon
the
acquisition of Aero, two of LGA's three Directors resigned and two Directors
of
Aero were appointed to fill those positions. The third LGA director was and
is a
director of both companies. In addition, all of the officers of LGA resigned
and
members of Aero's management team were appointed to those positions. See
Item 9,
below. For accounting purposes, however, the transaction was deemed to have
been
an acquisition of LGA by Aero. Further information on the details of the
transaction can be had by reviewing LGA's Form 8-K filed July 21, 2004 and
Form
8-K/A filed October 20, 2004 available at the EDGAR website of the Securities
and Exchange Commission (www.sec.gov) or from LGA upon request. Copies may
also
be read and copied at the SEC's Public Reference Room, Headquarters Office,
100
F Street, N.E., Room 1580, Washington, DC 20549. Call (800) SEC-0330 for
further
information.
Let's
Go Aero, Inc.
Aero,
LGA's wholly owned subsidiary, is LGA's only operating business. Aero is
in the
business of designing and selling gear management solutions for automotive,
recreation and commercial uses. Aero's family of products uses patented designs,
and includes the GearWagon(R) line of Sport Performance Trailers(R), the
GearSpace(TM) line of hitch-mount cargo carriers, the Silent Hitch Pin line,
the
LittleGiant Trailer line and the GullWing line of RV technology. Aero was
formed
in 1998.
Aero
was
founded as a product design, development and engineering company. It specializes
in providing novel solutions for vehicular cargo carrying enhancements. Aero
has
patents issued and pending that protect its intellectual property. These
patents
and claims relate to how cargo can be attached and carried on a vehicle's
hitch
receiver, frame, or body surface. Some examples are:
o
Silent
Hitch Pin(TM) rigidly couples the connection between the trailer hitch receiver
and any inserted ball mount or accessory;
o
TwinTube(TM) provides a universal mounting structure for carrying gear and
equipment with a receiver style hitch;
o
The
fully-enclosed, encapsulated, and easy-opening designs of Aero's product
enclosures for cargo safety, security, and accessibility; and
o
Extensive designs for the use of C-Channel for making "Hardpoint(TM)"
attachments to Aero's carriers, trailers, and all vehicular
surfaces.
Aero
also
has numerous product extensions and accessories that complement and expand
these
core technologies.
Aero's
intellectual property has broad application in the automotive industry, and
several automotive Original Equipment Manufacturers are in various stages
of
integrating aspects of Aero's technology into their product lines. In May,
2002,
Aero licensed three pieces of its intellectual property to Sport Rack
International/Valley Industries, Inc., an affiliate of Thule, AB, the largest
supplier to automotive manufacturers worldwide of products similar to Aero's
products. Aero's product licenses with Sport Rack International/Valley
Industries, Inc. resulted in the payment to Aero of $300,000 in 2004 and
an
ongoing royalty of 10% of the revenues (after $300,000) Sport Rack generates
with the technology until May, 2007. The $300,000 is reflected in the financial
statements at $60,000 per year. See note 4 to Financial Statements.
At
the
November, 2002, Specialty Equipment Manufacturers Association (SEMA) annual
trade show, Aero won the GMC Professional Grade Challenge for the Best New SUV
Accessory Idea. This prestigious award from General Motors Corp. is for the
Company's TwinTube system technology. At the November, 2003, SEMA show, Aero
again won the GMC Professional Grade Challenge award for Aero's GearBed cargo
management hardware. See “Patent Protection,” below.
Aero
has
developed and will continue to develop intellectual property for the Automotive,
RV and commercial industries. It is Aero's intent to license its technology
to
the industry leaders that can most effectively bring the licensed technology
to
market. Aero plans to license the production and sales of its products for
an
up-front fee and an ongoing royalty based on unit sales.
Products
Aero
currently has several product lines that it has been selling for several
years
and other product lines that are emergent. These product lines are described
as
follows:
o |
GearWagon
AT(TM) Sport Performance Trailers(R). Aero's GearWagon(R) line
of Sport
Performance Trailers(R) are designed for carrying all types of
personal,
recreational, and commercial gear in an aerodynamic, weather-resistant,
secure and attractive transport.
|
o |
GearSpace(TM)
Carriers. The GearSpace(TM) hitch based carrier line consists of
two fully
enclosed cargo carrier models, GearSpace 34(TM) and GearSpace 20(TM),
with
three structural options to choose from for varying function while
on the
vehicle's hitch receiver. These patented and patent pending designs
offer
versatility, security and safety.
|
o |
SILENT
HITCH PIN(TM). This anti-vibration device takes all movement out
of the
connection between the vehicle towing system and what's being towed
or
carried. In short, it freezes the attachment securely in place.
It works
with most consumer vehicle towing
systems.
|
o |
TwinTube(TM)
System. The TwinTube(TM) ("TT(TM)") System is a new, patent pending
design
that has been licensed to Sport Rack International/Valley Industries,
Inc.
for sale to the automotive Original Equipment Manufacturers and
the
after-market. TwinTube(TM) is a universal mounting structure for
carrying
gear and equipment with a hitch receiver. TwinTube(TM) is also
available
as a UBI(TM) system (U-Build-It).
|
o |
GearDeck(TM)
System. Incorporating Aero's novel TwinTube(TM) technology, GearDeck(TM)
is a modular carrier that functions as an open platform carrier
or a
fully-enclosed carrier through the use of a modular hardtop lid
enclosure
that is easily attached and removed. The open platform can carry
bicycles,
among many other large items; the full enclosure system carries
all kinds
of general cargo as well as items such as power
generators.
|
o |
GearBag
18(TM). Novel patent pending TwinTube(TM) based fully enclosed
gear
carrier that is value based and price-point competitive.
|
o |
GearCrate(TM)/LittleGiant
Trailer System(TM). New patent pending design for both a stand
alone
recyclable shipping crate, a stand alone utility trailer and the
novel
function of a shipping crate that can be easily converted into
a trailer
at destination for the device being shipped; for example, ATV's,
motorcycles, generators, welders, etc. The design debuted at the
April,
2005, Canton Fair in Guangzhou,
China.
|
o |
GullWing(TM)
camper. Derivative of Little Giant Trailer(TM). New patent pending
design
for personal motor sport and RV applications. The GullWing(TM)
design
allows a cargo trailer to convert into a new category of camping
trailer.
GullWing(TM) intellectual property also has application for pickup
toppers
and pickup campers. On October 7, 2006 the U.S. Patent and Trade
Office
notified LGA of its acceptance of LGA's GullWing claims. LGA is
in
discussions with several RV Original Equipment Manufacturers regarding
the
GullWing/Foldout intellectual
property.
|
o |
TENTRIS(TM)
tent and portable structure. New patent pending design for tent
and
portable enclosure applications.
|
o |
GearDeck
APU(TM). New patent pending derivative of Aero's GearDeck 17 system.
APU
is an all-in-one electrical generator storage, transportation and
organization solution designed initially for recreational vehicles.
The
APU system may also have application with the broader portable
generator
market.
|
o |
ONAN
JUICEBOX. During 2006, Aero completed a product development effort
with
the Onan division of Cummins, Inc resulting in Onan's JuiceBox
product The
licensed design is based on LGA's Silent Hitch Pin, TwinTube, GearDeck
and
LandingGear Intellectual Property. LGA began receiving product
royalties
in July, 2006.
|
o |
HARDPOINT(TM)
Technology. Aero has patents issued and patents pending for the
integration of C-Channel onto vehicle surfaces, including pickup
truck
beds, vehicle roofs and trailers. The Hardpoint(TM) system is another
potential source of royalty revenue for Aero. See “Patent Protection,”
below.
|
Business
History
The
impetus for Aero was a 1990 concept by its principal founder for a lightweight
aerodynamic trailer to carry recreational gear. This concept led to the creation
of a prototype product that was tested in 1997. In the fall of 1997, work
began
on what came to be the GearWagon(R) line of Sport Performance Trailers(R)
(SPT).
Aero was incorporated in April 1998, the first GearWagon(R) SPT hit the road
in
July, 1998, and Aero debuted two GearWagon(R) SPT's at the Interbike Trade
Show
in October, 1998.
During
the development of the GearWagon(R) product, several additional product
opportunities became apparent. The GearWagon(R) Hardpoint(TM) system was
designed using Unistrut(TM) and/or B-Line(TM) engineering C-Channel. The
Hardpoint(TM) system appeared to have great promise for use in the motor
vehicle
and recreation vehicle industries, and Aero filed patent claims for the
integration of C-Channel on vehicular surfaces in 1998. The original patent
claims for Hardpoint(TM) technology were issued in 2001. Aero has also filed
many continuation claims for this technology. See "Patent Protection",
below.
After
the
Interbike Show in the Fall of 1998, Aero began receiving orders for GearWagon(R)
trailers. Medallion Plastics in Elkhart, IN, became Aero's manufacturer of
GearWagon(R) trailers in January, 1999.
In
early
1999, Aero joined the Specialty Equipment Market Association (SEMA). SEMA
is the
largest trade organization for the automotive after-market industry. Basically,
SEMA is the entire automotive industry worldwide, less new vehicle sales.
Aero
displayed its products at SEMA's industry convention in November, 1999, as
a
debut to the automotive industry.
During
the development of the GearWagon(R) line, the Company developed a concept
for a
hitch based cargo carrier line that resulted in Aero's GearSpace(TM) product
line. The GearSpace(TM) 34 capsule also debuted at the 1999 SEMA
convention.
Aero
went
on to design the Silent Hitch Pin(TM). Aero's patent application for the
Silent
Hitch Pin(TM), which was filed in mid-2000, was granted in May,
2003.
After
the
SEMA 2001 convention, Aero entered into a relationship with J.S. Chamberlain
and
Associates. Chamberlain and Associates has been an automotive supplier developer
since the early 1960's. Through a series of meetings arranged by Chamberlain,
Aero and Sport Rack International/Valley Industries, Inc. agreed to a product
license for Aero's Silent Hitch Pin(TM) and Twin-Tube(TM) Technology in May,
2002.
At
the
SEMA 2002 convention Aero won the Best New SUV Accessory Idea from General
Motors Corporation for its TwinTube(TM) carrier system. At the SEMA 2003
convention Aero won the Best New Idea award from General Motors Corporation
for
its GearBed surface attachment system. See “Patent Protection,”
below.
With
the
Tenet combination, Aero began redesigning and retooling its GearDeck, TwinTube,
GearSpace and GearWagon products in order to meet market pricing, durability,
assembly and shipping expectations. Retooled GearDeck production began in
early
2005, TwinTube production began in May, 2006, GearSpace production began
in
June, 2006, and the company is just completing the retooled GearWagon 125
product. LGA expects to begin shipping the new GearWagon 125 in early 2007.
LGA
will be displaying these products, and others, at the 2006 SEMA show. This
will
be the first show LGA has attended since 2003.
The
Future
Aero
has
the GearWagon(R) trailer line, GearSpace(TM) line, Silent Hitch Pin(TM) line,
the GearDeck(TM) system, and TwinTube(TM) UBI(TM), GearCrate(TM), LittleGiant
Trailer System(TM), GullWing(TM)
that are patent protected and patent pending. Aero's Hardpoint(TM) technology
may also be a significant royalty generator for Aero in the future.
Aero's
future focus is on market, partner and product development. There is a very
large consumer market for Aero's products, and its approach to this market
is to
enter it through partnership arrangements with large existing
participants.
Aero
is
in discussions with various automotive and recreation vehicle Original Equipment
Manufacturers for custom versions of its products and technology that compliment
and extend the capabilities of the Original Equipment Manufacturers'
vehicles.
Objectives
and Sales
Objectives
o |
To
establish manufacturing, sales and marketing partners for Aero's
products
domestically and internationally
|
o |
To
continue product development and invention work where a clear payoff
is
predictable
|
o |
To
establish positive operating cash flow and
earnings
|
Aero
has
licensed Sport Rack International/Valley Industries, Inc. to manufacture
and
sell three Aero designs in the consumer market. At the same time, Aero is
focusing on opportunities to customize its products for business and
governmental use.
Customer
Direct Sales
Close
to
80% of Aero's sales revenue currently comes from direct-to-customer sales
that
are the result of the customer finding Aero's web site. Aero has exhibited
products at several trade shows over the last five years. Primarily, Aero
has
attended the SEMA automotive trade show that is held annually in early November
in Las Vegas. Aero has also displayed its products at the Denver International
Auto Show and the Denver Sportsman’s Show.
Aero
has
promoted its products primarily through a "Public Relations" approach. As
a
result of these efforts, Aero has spent little on direct advertising, yet
has
been featured in many national magazines, newspapers, and TV and radio shows.
Because Aero's product designs are novel, publishers of magazines frequently
feature its products in the magazines "New Product Review" sections along
with
Aero's address and web site. This approach has been important to Aero's products
getting discovered, while keeping its promotional expenses low.
Aero's
customers also provide great leads for product sales. In addition to current
owners giving Aero positive reviews to prospective new owners, Aero's products
all feature its web site address on its product logo. Aero regularly gets
inquiries from individuals who have seen Aero products in the
field.
It
is
Aero's intent to establish a sales relationship with market partners or an
Original Equipment Manufacturer to promote, manage and distribute its product
lines for gear transport through the partners' established market
channels.
Market
for Products
For
many
years, people have been increasing their recreation time and recreation
interests. This trend has spurred a dramatic increase in the purchase of
sport
utility vehicles (SUV's), mini-vans, and pick-up trucks. The purchase of
these
style vehicles reflects, in part, the consumers' perceived need for increased
cargo capacity.
Auto
industry research indicates that nearly 50% of American households own a
SUV,
mini-van, or pick-up truck, and 70% of these vehicles are equipped with tow
packages from the factory in addition to after-market hitch installations
of
nearly 6 million estimated for 2003 alone.(1) Accessory item sales for these
vehicles, a segment of the automotive specialty equipment industry, grew
nearly
60% between 1990 and 2000, and hitch accessories continue to represent the
fastest growing segment of the SUV's after-market accessory sales.(2) Aero's
Sport Performance Carriers(TM) and products serve this expanding market.
According to the Specialty Equipment Manufacturers Association (SEMA), the
overall automotive retail after-market equipment sales for 2000 exceeded
$23
billion.(3) Accessory and appearance products are estimated to represent
54% of
those sales.(4) In addition, SEMA reports that the marketplace expanded nearly
60% between 1990 and 2000.(5) Based on SEMA research, in 1999 there were
3,800,000 receiver style hitches either installed by the after-market or
delivered on new vehicles. In 2002, that number climbed to 4,900,000 and
for
2005 it's projected that the number increased to 5,800,000 units.
___________________________
(1)
Specialty Equipment Market Association, Market Highlights, 2001 & 2002
Market Study.
(2)
Ibid.
(3)
Ibid.
(4)
Ibid.
(5)
Ibid.
___________________________
The
installed base of receiver style hitches presents a large latent market for
Aero's products. Further, Aero believes that the automotive Original Equipment
Manufacturers would like to migrate the accessories currently being carried
on
the roofs of SUVs to the receiver hitch to reduce the roll-over risk of SUVs
and
provide consumers with more convenient cargo carrying solutions.
Competition
The
sport
equipment carrier market is a competitive environment with more than ten
participants that are larger than Aero and have the following advantages
relative to Aero:
Name
Recognition
Several
competitors, like Yakima Products and Thule have established names with the
public. Aero is still relatively unknown. It can take years to establish
a Brand
name, and Aero is at the beginning of exposing its products and brand to
the
public. Aero’s success against these competitors can not be
assured.
Product
Lines
Several
competitors have broad product lines compared to Aero. Aero does not participate
in the roof top cargo carrier market and does not plan to participate in
this
market, except, potentially, in a limited way with a roof top version of
its
GearCage line.
In
terms
of product strength, Aero believes it has several distinct advantages over
the
competition:
o |
Large
cargo capacities and lightweight designs easily surpass the cargo
transport capabilities of roof top products and other receiver
based
products currently on the market.
|
o |
The
opening systems enable Aero products to enclose space more
efficiently.
|
o |
Aero
enclosed carrier products offer increased security over open
carriers.
|
o |
Aero
products are safer than rooftop carriers, their primary
competitors.
|
o |
Patent
filings protect Aero products' ergonomics and
efficiencies.
|
o |
Aero
products' aerodynamic efficiencies reduce impact on fuel
economy.
|
o |
Multiple
product offerings provide consumers with various options and price
consideration
|
Opening
Systems
Aero's
GearWagon(R) and GearSpace(TM) capsules represent a new category of container.
These containers have shells that are concave so that the lids open by dropping
and "nesting" under the base. This allows easy content access for customers.
When closed, the shells are "self-reinforcing" and very tough.
Content
Security
Aero's
GearWagon(R) and GearSpace(TM) carriers are lockable and fully enclosed so
the
owner's gear is in a water and dust free environment. When traveling, having
gear out of sight is one of the best theft-prevention steps to take. This
means
high-value, lightweight objects like cameras and computers can be stowed
in
Aero's carriers.
Safety
Factor
Safety
comes in many forms for Aero customers. When compared to roof-based systems,
Aero carriers do not raise a vehicle's center of gravity and therefore, when
compared to a similar weight on the roof of a vehicle, make the vehicle less
prone to rollover.
Aero's
carriers are also loaded by standing on the ground. Roof carriers are commonly
loaded by standing on a running board, a doorsill or a stepladder--all
precarious positions from which to be lifting and moving gear. Most roof
systems
are limited to 100 pounds of gear weight. Most SUV hitch receivers are rated
for
500 pounds of load carrying.
Patent
Protection
Starting
in 1998, Aero has been diligent at protecting its technology with "utility"
patent protection, which is the highest form of invention protection. Utility
patents are issued for truly novel technological achievements. The method
by
which Aero's product capsules open, the Hardpoints(TM) used on Aero's products,
the way Aero's GearSpace(TM) carrier platforms telescope and pivot, and the
features of the Silent Hitch Pin(TM) are all patented aspects of Aero's
products. All Aero's patents have at least 12 years remaining in their
respective terms. Aero has 7 issued patents and nine pending
patents.
The
advantages of patent protection can be seen most clearly with the Silent
Hitch
Pin(TM) and the TwinTube(TM) system. Aero has licensed this technology to
Sport
Rack International/Valley Industries, Inc. which is selling to industry
participants. Other industry participants sell these Aero designs through
private label supply agreements with Aero. Aero believes that private label
supply agreements with "Brand Name" entities for its designs, will have a
financially significant impact on the company's future.
Aero
has
patents issued and patents pending protecting its GearBed intellectual property.
Nissan has challenged certain GearBed claims with the US Patent and Trademark
Office. Aero cannot forecast the outcome of the GearBed patent review at
this
time.
Aerodynamic
Efficiencies and Fuel Economy
It
appears from informal evidence that Aero's GearWagon(R) line of Sport
Performance Trailers(R) is fuel efficient. It also appears from informal
evidence that Aero's GearSpace(TM) carriers have no noticeable effect on
fuel
economy. When used on an SUV, these carriers sit in the vehicle's
draft.
Volume
and Weight Advantages
Because
of Aero's capsular designs, its products offer high "space-to-weight" ratios
relative to other cargo carrying products currently on the market. The
GearWagon(R) 125 weighs in at 350 pounds empty, encloses approximately 125
cubic
feet and has a carrying capacity of 1,000 pounds. A standard "box" trailer
with
similar storage capability typically weighs close to 1,000 pounds empty,
meaning
that a fully loaded GearWagon(R) 125 weighs only 350 pounds more than a
comparable empty box trailer. Aero's GearSpace(TM) line attaches to one of
the
strongest points on a vehicle, the hitch receiver. Aero rates its GearSpace(TM)
carriers for 300 pounds of cargo carrying, which gives the owner of a standard
SUV more than twice the weight carrying ability of a typical roof top
box.
Manufacturing
and Development
Manufacturing
Aero's
focus is on product and technology development. In some of Aero's licensing
arrangements, the licensee is responsible for manufacturing. Aero does have
numerous vendors it utilizes to manufacture or fabricate its products. Aero
has
utilized numerous vendors that have produced over 100,000 Silent Hitch Pins(TM).
Aero has begun GearSpace 34 production with a Colorado based rotational molder.
Aero has reduced the retail price of its GearSpace 34 by more than 25% with
this
production technique change. Aero has also successfully converted the production
of GearWagon, with this vendor, from a thermoformed to a rotational molded
design.
Aero
recently began a contract manufacturing relationship with Red Horse Performance
(RHP) of Shanghai, China. RHP is currently one of Aero's TwinTube(TM) system
vendors. Aero is evaluating RHP as a potential vendor for the Silent Hitch
Pin
product line, the LittleGiant product line and the GearCage product line.
Aero
and RHP anticipate providing LGA's designs to known industry brands under
private label supply agreements.
Aero
is
in the final stages of completing an agreement with AutoTek Group Inc., New
York
that will allow AutoTek N.Y.'s manufacturing partnership, AutoTek China of
Yantai, China, to begin producing and selling Aero's GearCrate (GC) and
LittleGiant Trailer system (LGT) intellectual property. Aero and AutoTek
China
displayed two LGT's at the April, 2005, Canton Fair in Guangzhou, China.
Beginning April 5, 2005, Chinese citizens can now tow lightweight trailers
(under 1,500 pound load) on China's roads. Aero and AutoTek N.Y. have agreed
on
a non-exclusive license program whereby AutoTek China produces GC and LGT
based
designs for exclusive sale by LGA and AutoTek N.Y., in the domestic China
market
and for the worldwide export market. Aero receives preferred pricing for
the
LGT's and GC's it purchases from AutoTek China. Aero has reached final terms
on
this license with AutoTek N.Y. and anticipates signing the final agreements in
the near future. AutoTek
China is displaying LGT at its world debut in the Canton Fair starting October
15, 2006,: http://www.cantonfair.org.cn/en/index.asp
AutoTek
China, one of LGA's non-exclusive manufacturing partners, can be viewed at
their
website:http://www.autotekchina.com/
Aero
is
actively engaged in specifying sources for all its assembly services, raw
materials and parts in order to ensure that its products meet its quality
and
performance standards. All specified raw materials and parts or acceptable
substitutions are available from many suppliers, and Aero does not rely on
any
one supplier the loss of which would cause any long term adverse consequences
to
Aero.
Shipping
The
shipping cost of Aero's products is reasonable considering some of the products'
sizes. Aero has shipped over 1,000 units from Elkhart to destinations throughout
the United States. Aero has had few freight claims for damaged goods and
believes it has the packaging adequate to properly protect the
product.
Both
GearWagon(R) and GearSpace(TM) products have modest final assembly requirements
for the customer or dealer to complete.
Aero
utilizes the shipping services of Roadway and R&L Carriers among
others.
Research
and Development
Aero's
expenditures for research and development have been $31,112 and $13,779
for the
fiscal years ended June 30, 2005 and 2006, respectively. See Management's
Discussion and Analysis, below. Aero will continue product development
and
invention work where a clear payoff is anticipated. LGA has no R&D plans
currently. Aero's staff is considering numerous ways to branch and grow
its
current products depending on market opportunity and demand. Aero's staff
continues to work on new product designs and improvements to protect and
expand
Aero's existing intellectual property. LGA's R&D activity changes based on
market opportunities.
Regulation
Aero
has
adopted all applicable standards from United States National Highway
Transportation Safety Administration regulations and maintains adherence
to
Society of Automotive Engineers guidelines and specifications. In addition,
both
federal and state authorities regulate the manufacturers and sellers of
recreational and family cargo transports. Aero is a licensed vehicle
manufacturer in the State of Colorado and has obtained the state permits,
licenses, and bonds required to operate.
Aero's
products have been independently tested for impact and temperature extremes.
Aero's Silent Hitch Pin(TM) and GearSpace(TM) Spine and Frame structural
systems
have been independently tested for load carrying strength.
Aero
has
had Corporate and Product Liability insurance for the last five years and
has
not had a product liability claim. Further, as Aero successfully licenses
its
designs, generally the licensee will be responsible for carrying manufacturer
and product liability insurance.
Aero
has
registered with or obtained memberships, licenses, permits, or certificates
from
the following organizations and agencies:
Society
of Automotive Engineers (SAE); National Highway Transportation Safety
Administration (NHTSA); Dealer Section of the Department of Motor Vehicles,
State of Colorado; and Specialty Equipment Market Association
(SEMA).
Aero
anticipates no material effects on its business from federal, state or local
environmental regulation.
Employees
Aero
currently has four full-time employees including its officers, Marty Williams
and Sara Williams. Aero's Vice President of Engineering and Board member,
Matthew Drabczyk, who is also a major LGA shareholder, works on a project
basis
for Aero. Aero anticipates adding sales and production employees as
needed
Reports
Filed with the Securities and Exchange Commission.
LGA
is
registered with the SEC under the Securities Exchange Act of 1934. As a
registrant, LGA files annual (Form 10-KSB) and quarterly (Form 10-QSB) that
contain financial information. LGA also files proxy statements for its meetings
of shareholders and reports of material current events (Form 8-K). This
information may be requested or read through sources described above in this
Item 1 or from the Company free of charge. The Company does not maintain
copies
of its Securities and Exchange Commission reports on its website, www.letsgoaero.com,
because
the reports are easily available at www.sec.gov.
Item
2. Description of Property.
Aero
currently leases 7,500 square feet of combined office and warehouse space
at its
principal place of business in Colorado Springs, Colorado, that it uses for
storage of some inventory and light product assembly. Aero entered into this
lease in June, 2004, and expects its facilities will be sufficient for the
three-year term of the lease. The lease rent is $5,500 per month. The space
is
currently fully built out in good condition and Aero has no plans to renovate
it. Comparable properties are available at competitive rates in the same
general
area as the current facilities. The current space is adequately covered by
insurance.
Item
3. Legal Proceedings.
None
Item
4. Submission of Matters to a Vote of Security Holders.
None.
PART
II
Item
5. Market for Common Equity and Related Stockholder
Matters.
LGA's
common stock is currently thinly traded "over-the-counter" and is listed
in the
Pink Sheets(R) published by the National Quotation Bureau, Inc. as well as
on
the OTC Bulletin Board operated by the NASDAQ Stock Market, Inc. The following
table sets forth the high and low bid prices for LGA's common stock for each
of
the quarters ending on the indicated date adjusted for LGA's reverse split
of
1:20 that was effective October 22, 2003.
|
Quarter
Ended
|
Low
Price
|
High
Price
|
|
|
|
|
|
September
30
|
.20
|
.35
|
|
|
|
|
|
December
31
|
.20
|
.40
|
|
|
|
|
2005
|
March
31
|
.25
|
.94
|
|
|
|
|
|
June
30
|
.40
|
1.00
|
|
|
|
|
|
September
30
|
.81
|
1.20
|
|
|
|
|
|
December
31
|
1.15
|
1.20
|
|
|
|
|
2006
|
March
31
|
1.15
|
1.40
|
|
|
|
|
|
June
30
|
1.10
|
2.25
|
|
|
|
|
The
quotations reflect inter-dealer prices, without markup, markdown or commission
and may not represent actual transactions. The source of prices were Yahoo.com
and BigCharts.com.
The
number of shareholders of record for LGA's common stock as of June 30, 2006,
was
359, which include depositories and broker/dealers who hold shares of common
stock in "nominee" or "street" names.
Sales
of Unregistered Securities
The
following table sets forth information regarding recent sales of unregistered
securities.
|
Shares
of Common
|
|
Date
|
Stock
Sold
|
Aggregate
Price
|
|
|
|
August
2005
|
43,148
|
$
29,987.86
|
|
|
|
January
2006
|
215,738
|
149,937.91
|
|
|
|
June
2006
|
215,000
|
$150,500.00
|
|
|
|
All
sales
were negotiated and approved the Company's Board of Directors. Each of the
purchases was made by an individual investor and who was existing
shareholders. All purchasers represented that they were accredited investors
as defined in the United States securities laws. The sales were exempt from
registration under Section 4(2) and/or 4(6) of the Securities Act of 1933,
as
amended and/or Rule 506 or Regulation D.
Item
6. Management's Discussion and Analysis or Plan of
Operation.
Results
of Operations
Fiscal
2006 Compared with Fiscal 2005
|
|
FY
06
|
|
FY
05
|
|
Product
sales and Royalty
|
|
|
|
|
|
Revenue
|
|
|
336,721
|
|
|
286,197
|
|
|
|
|
|
|
|
|
|
Cost
of Revenues
|
|
|
183,163
|
|
|
173,207
|
|
|
|
|
|
|
|
|
|
SGA
|
|
|
309,588
|
|
|
374,512
|
|
|
|
|
|
|
|
|
|
DEV
|
|
|
13,779
|
|
|
31,112
|
|
|
|
|
|
|
|
|
|
Stock
Option Expense
|
|
|
-0-
|
|
|
309,756
|
|
|
|
|
|
|
|
|
|
Costs
and Expenses
|
|
|
506,530
|
|
|
888,587
|
|
|
|
|
|
|
|
|
|
Operating
Loss
|
|
|
(169,809
|
)
|
|
(602,39
|
0) |
During
fiscal year 2006 the Company had revenues of $336,721, which represented
an
increase of $50,524 or 18% over prior year revenues of $286,197. This increase
is attributable to higher end user sales generated from the Company’s web site,
beginning sales of Aero’s retooled GearSpace 34, the launch of Onan’s JuiceBox
product and increased Silent Hitch Pin sales.
Cost
of
revenues increased 6% from $173,207 in 2005 to $183,163 in 2006. The 6%
increase
in cost of goods sold, relative to a
18%
increase in sales, reflects reduced costs for the Company’s GearSpace 34 product
stemming from the Company’s 2006 retooling effort, reduced costs for the
Company’s TwinTube system and modestly lower costs for GearDeck 17.
The
gross
margin on product sales increased to 32% in 2006 from 23% in 2005. Aero’s 2006
increase in gross margin on product sales resulted from the above cited
improvements in manufacturing costs and component sourcing.
Including
royalty income, gross margin increased from 39% in 2005 to 47% in 2006.
Aero’s
business model is to generate revenue from both product sales, including
end
user direct, Original Equipment Manufacturer and dealer sales and from
licensing
revenue and royalties for the Company’s intellectual property portfolio. Aero
has been successful at generating revenue from both sources, but not, as
yet, to
a degree sufficient for ongoing profitable operations. Late in the 2006
fiscal
year, Aero began receiving royalty payments from Onan for the Aero intellectual
property contained in Onan’s new JuiceBox product.
Aero’s
sales revenue growth for 2006 is the result of growing end user purchases
of the
Company’s products, modest improvements in Aero’s dealer sales and growing use
of Aero’s Silent Hitch Pin by hitch equipment Original Equipment Manufacturers.
Aero’s internet based sales initiatives, begun during the 2005 year, have
resulted in higher inquiries and sales volumes for the Company. Plastic
shells where 50% of the respective product cost for 2006.
G&A
expenses decreased to $309,588 in 2006 as compared to $374,512 in 2005.
Aero
anticipates that G&A expenses will increase for 2007.
Aero’s
financial profile has improved over the last year. During
2006 Aero sold out of it's original GearWagon and GearSpace ABS plastic
formed
products. During the second half of fiscal 2006, Aero successfully retooled
its
GearSpace 34 product and is experiencing acceptable unit sales. Aero will
exhibit its retooled GearSpace 34 and GearWagon 125 products, along with
debuting the LittleGiant trailer design in North America, with other new
products at the 2006 SEMA Show starting October 30, 2006. Aero's
inventory consist primarily of finished goods that have no more than 90
day lead
times. It is very rare for Aero to have a product return.
Based
on
Aero’s operating history, it is probable that the Company will need additional
capital in order to achieve and sustain profitable operations. Aero has
a
history of obtaining growth capital from three sources, 1) equity sales,
2)
product margin 3) licensing revenue. Aero prefers to obtain operating capital
from operating margin and licensing revenue. Aero has opportunities, exclusive
of equity sales, to generate the capital required for growth from licensing
revenue. Aero is currently in licensing discussions with several companies
regarding the company’s intellectual property. No assurance can be given as to
whether these discussions will result in actual licenses and revenue for
the
company.
Product
development expenses decreased 56% to $13,779 in 2006 from $31,112 in 2005.
An
important element of Aero’s business model is its ability to create novel
product designs that include patentable attributes. In the ideal, the actual
accountable dollar cost of developing valuable intellectual property is
negligible. The process of creating new intellectual property and improving
existing Aero technology will result in ongoing expenses for the Company.
The
timing and amount of these expenses will vary from period to
period.
Net
loss
for the 2006 year was ($261,477) or ($0.03) per share as compared to ($590,323)
or ($0.08) per share in 2005. A significant component of the Company’s 2005
reported loss was the $309,756 charge for the expensing of stock
options.
The
2006
net loss includes a cash charge for employee embezzlement during the fiscal
year
in the amount of ($72,801). Through September, 2006, a former accountant
for the
Company stole a total of $134,000 of the Company’s cash using various fraudulent
techniques. In the 12 business days since Aero's discovery of this crime,
Aero
has recovered $17,000 in cash and reasonably expects to recover another
approximate $50,000 in the next 120 days. Interest
expense increased in 2006 versus 2005 due to the interest charged on credit
card
balances fraudulently incurred by the Company's former accountant.
Liquidity
and Capital Resources
The
Company's cash position decreased from $25,882 at year-end 2005 to $-0- at
year-end 2006. The reduction in cash from 2005 to 2006 year-end, is primarily
the result of a former employee embezzling $72,801 in cash from the Company
during 2006.
Aero
is
increasing product sales by increasing the profile of the Company’s products
with the public, retailers and Original Equipment Manufacturers. Aero’s retail
sales and promotion efforts are focused on web based promotion and direct
to
customer related activities. Aero is currently meeting with recreational
product
Original Equipment Manufacturers and distributors for the purpose of adding
our
products, or products containing Aero’s intellectual property, to their sales
programs. During fiscal 2007, Aero anticipates adding personnel in Colorado
Springs to support its selling effort.
Aero
regularly evaluates its intellectual property portfolio in light of product
and
licensing opportunities for the Company’s intellectual property. The royalties
derived from the Company’s intellectual property licenses obtained to date have
not been sufficient to achieve ongoing profitable operations. Aero is reviewing
licensing opportunities with Original Equipment Manufacturers for, among
other
patented/patent pending intellectual property, the following
designs:
A.
Improved Crate System
B.
GullWing/FoldOut
C.
A
modified GearDeck 17(TM) system for storing, transporting and organizing
portable generators
D.
GearDeck 17(TM), GearCage, GearVault, CamLok, TwinTube UBI, and Silent Hitch
Pin(TM) designs under private label
E.
GearCrate(TM) and the related LittleGiant Trailer System
F.
GearBed surface mount accessory for pickup truck beds
G.
Tentris tent/portable structure designs
H.
CamLok
Silent Hitch Pin design
No
assurances can be made as to whether the Company will successfully convert
these
opportunities into meaningful revenue for the Company.
The
Company reported positive shareholder equity of $244,898 as of June 30,
2006,
compared to a shareholder deficit for 2005 of ($24,051).
Cash
was
$-0- at year-end 2006 as compared to $25,882 at year end 2005. Net cash
used in
operating activities was ($309,777) in 2006 as compared to ($415,969) for
2005.
During 2006, the Company recorded a cash charge for embezzlement in the
amount
of ($72,801).
While
approximately $106,408, is owed to present officers and/or directors, there
can
be no assurance that these officers/directors will not seek payment in
the near
term.
Inflation
has not had a significant impact on the Company's operations.
Item
7. Financial Statements.
LGA
HOLDINGS, INC.
Financial
Statements
June
30,
2006
(with
Report of Independent Registered Public Accounting Firm Thereon)
LGA
HOLDINGS, INC.
Index
to
Financial Statements
|
|
Page
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
F-2
|
|
|
|
Balance
Sheet at June 30, 2006
|
F-3
|
|
|
|
Statements
of Operations, for the years ended
|
|
|
June
30, 2006 and 2005
|
F-4
|
|
|
|
Statement
of Changes in Shareholders' Equity for the period from
|
|
|
July
1, 2004 through June 30, 2006
|
F-5
|
|
|
|
Statements
of Cash Flows, for the years ended
|
|
|
June
30, 2006 and 2005
|
F-6
|
|
|
|
Notes
to financial statements
|
F-7
|
F-1
Report
of Independent Registered Public Accounting Firm
The
Board
of Directors and Shareholders
LGA
Holdings, Inc.:
We
have
audited the accompanying balance sheet of LGA Holdings, Inc. as of June
30, 2006, and the related statements of operations, shareholders’ equity,
and cash flows for the years ended June 30, 2006 and 2005. These financial
statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based
on
our audits.
We
conducted our audits in accordance with the standards of the Public Companies
Accounting Oversight Board (United States). Those standards require that
we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. 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 financial position of LGA Holdings, Inc. as of June
30,
2006, and the results of its operations and its cash flows for the years
ended
June 30, 2006 and 2005 in conformity with accounting principles generally
accepted in the United States.
The
accompanying financial statements have been prepared assuming that the
Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has incurred recurring operating losses and has
a
working capital deficit at June 30, 2006, which raises substantial doubt
about
its ability to continue as a going concern. Management’s plans regarding those
matters also are described in Note 1. The financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.
/s/
Cordovano
and Honeck LLP
Englewood,
Colorado
October
13, 2006
F-2
LGA
HOLDINGS, INC.
Balance
Sheet
June
30, 2006
|
|
Current
assets:
|
|
|
|
Accounts
and note receivable: |
|
|
|
Trade,
net of allowance for doubtful accounts of $-0- (Note 1)
|
|
$
|
18,576
|
|
Note
receivable, current portion
|
|
|
5,770
|
|
Other
receivables (Note 8)
|
|
|
17,379
|
|
Stock
subscription receivables (Note 5)
|
|
|
150,500
|
|
Inventory,
at lower cost or market (Note 3)
|
|
|
159,595
|
|
Prepaid
expenses
|
|
|
6,542
|
|
Total
current assets
|
|
|
358,362
|
|
|
|
|
|
|
Property
and equipment, at cost,
|
|
|
|
|
net
of accumulated depreciation of $110,442 (Note 3)
|
|
|
108,172
|
|
Intangible
assets (Note 3)
|
|
|
81,079
|
|
Other
assets
|
|
|
2,605
|
|
|
|
|
|
|
Total
assets
|
|
$
|
550,218
|
|
|
|
|
|
|
Liabilities
and Shareholders’ Equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Bank
overdraft
|
|
$
|
8,472
|
|
Accounts
payable
|
|
|
107,573
|
|
Accrued
payroll
|
|
|
27,867
|
|
Unearned
revenue
|
|
|
55,000
|
|
Total
current liabilities
|
|
|
198,912
|
|
|
|
|
|
|
Long-term
debt, related party (Note 2)
|
|
|
106,408
|
|
|
|
|
|
|
Total
liabilities
|
|
|
305,320
|
|
|
|
|
|
|
Commitments
and contingencies (Note 6)
|
|
|
—
|
|
|
|
|
|
|
Shareholders’
equity (Notes 2 and 5):
|
|
|
|
|
Common
stock, $.001 par value; authorized 100,000,000 shares,
|
|
|
|
|
issued
and outstanding, 8,592,960 shares
|
|
|
8,593
|
|
Additional
paid-in capital
|
|
|
1,150,918
|
|
Retained
deficit
|
|
|
(914,613
|
)
|
|
|
|
|
|
Total
shareholders' equity
|
|
|
244,898
|
|
|
|
|
|
|
Total
liabilities and shareholders' equity
|
|
$
|
550,218
|
|
See
accompanying notes to financial statements
F-3
LGA
HOLDINGS, INC.
Statements
of Operations
|
|
For
the Years Ended
|
|
|
|
June
30,
|
|
|
|
2006
|
|
2005
|
|
Sales
and Revenue:
|
|
|
|
|
|
Product
sales
|
|
$
|
270,071
|
|
$
|
226,197
|
|
Royalty
revenue (Note 4)
|
|
|
66,650
|
|
|
60,000
|
|
|
|
|
|
|
|
|
|
Total
sales and revenues
|
|
|
336,721
|
|
|
286,197
|
|
|
|
|
|
|
|
|
|
Costs
and expenses:
|
|
|
|
|
|
|
|
Costs
of sales and revenue
|
|
|
183,163
|
|
|
173,207
|
|
Stock-based
compensation (Note 5)
|
|
|
—
|
|
|
309,756
|
|
Research
and development
|
|
|
13,779
|
|
|
31,112
|
|
General
and administrative
|
|
|
309,588
|
|
|
374,512
|
|
|
|
|
|
|
|
|
|
Total
costs of sales and revenues
|
|
|
506,530
|
|
|
888,587
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
|
(169,809
|
)
|
|
(602,390
|
)
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
Other
income
|
|
|
833
|
|
|
15,287
|
|
Interest
expense
|
|
|
(19,700
|
)
|
|
(3,220
|
)
|
Embezzlement
expense, net of recoveries (Note 8)
|
|
|
(72,801
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
Loss
before income taxes
|
|
|
(261,477
|
)
|
|
(590,323
|
)
|
|
|
|
|
|
|
|
|
Income
tax provision (Notes 1 and 7)
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(261,477
|
)
|
$
|
(590,323
|
)
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per share
|
|
$
|
(0.03
|
)
|
$
|
(0.08
|
)
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding
|
|
|
8,216,424
|
|
|
7,264,971
|
|
See
accompanying notes to financial statements
LGA
HOLDINGS, INC.
Statement
of Changes in Shareholders' Equity
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
Common
Stock
|
|
Paid-in
|
|
Retained
|
|
|
|
|
|
Shares
|
|
Par
Value
|
|
Capital
|
|
Deficit
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at July 1, 2004
|
|
|
6,779,074
|
|
$
|
6,779
|
|
$
|
—
|
|
$
|
(62,813
|
)
|
$
|
(56,034
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of shares for cash (Note 2 and 5)
|
|
|
1,340,000
|
|
|
1,340
|
|
|
311,210
|
|
|
—
|
|
|
312,550
|
|
Common
stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
granted
(Note 5)
|
|
|
—
|
|
|
—
|
|
|
309,756
|
|
|
—
|
|
|
309,756
|
|
Net
loss
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(590,323
|
)
|
|
(590,323
|
)
|
Balance
at June 30, 2005
|
|
|
8,119,074
|
|
|
8,119
|
|
|
620,966
|
|
|
(653,135
|
)
|
|
(24,051
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
exercised
at $.695 per share (Note 2)
|
|
|
258,886
|
|
|
259
|
|
|
179,667
|
|
|
—
|
|
|
179,926
|
|
Sale
of call option (Note 2)
|
|
|
—
|
|
|
—
|
|
|
200,000
|
|
|
—
|
|
|
200,000
|
|
Sale
of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at
$.70 per share (Note 2)
|
|
|
215,000
|
|
|
215
|
|
|
150,285
|
|
|
—
|
|
|
150,500
|
|
Net
loss
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(261,477
|
)
|
|
(261,477
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at June 30, 2006
|
|
|
8,592,960
|
|
$
|
8,593
|
|
$
|
1,150,918
|
|
$
|
(914,613
|
)
|
$
|
244,898
|
|
See
accompanying notes to financial statements
F-5
LGA
HOLDINGS, INC.
Statements
of Cash flows
|
|
For
the Years Ended
|
|
|
|
June
30,
|
|
|
|
2006
|
|
2005
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
Net
loss
|
|
$
|
(261,477
|
)
|
$
|
(590,323
|
)
|
Adjustments
to reconcile net loss to net cash
|
|
|
|
|
|
|
|
used
by operating activities:
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
15,872
|
|
|
26,237
|
|
Stock-based
compensation (Notes 2 and 5)
|
|
|
—
|
|
|
309,756
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
Receivables,
inventory and other assets
|
|
|
(65,990
|
)
|
|
(36,786
|
)
|
Payables,
deferred income and other liabilities
|
|
|
1,818
|
|
|
(124,853
|
)
|
Net
cash used in
|
|
|
|
|
|
|
|
operating
activities
|
|
|
(309,777
|
)
|
|
(415,969
|
)
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
Purchase
of equipment and other assets
|
|
|
(96,031
|
)
|
|
(41,176
|
)
|
|
|
|
|
|
|
|
|
Net
cash used in
|
|
|
|
|
|
|
|
investing
activities
|
|
|
(96,031
|
)
|
|
(41,176
|
)
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
Repayments
on long-term debt
|
|
|
—
|
|
|
(10,142
|
)
|
Proceeds
from issuance of common stock
|
|
|
379,926
|
|
|
312,550
|
|
Net
cash provided by
|
|
|
|
|
|
|
|
financing
activities
|
|
|
379,926
|
|
|
302,408
|
|
|
|
|
|
|
|
|
|
Net
change in cash and
|
|
|
|
|
|
|
|
cash
equivalents
|
|
|
(25,882
|
)
|
|
(154,737
|
)
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents:
|
|
|
|
|
|
|
|
Beginning
of year
|
|
|
25,882
|
|
|
180,619
|
|
|
|
|
|
|
|
|
|
End
of year
|
|
$
|
—
|
|
$
|
25,882
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
Cash
paid during the year for:
|
|
|
|
|
|
|
|
Income
taxes
|
|
$
|
—
|
|
$
|
—
|
|
Interest
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Noncash
investing and financing transactions:
|
|
|
|
|
|
|
|
Accrued
salaries and interest converted to debt
|
|
$
|
106,408
|
|
$
|
|
|
See
accompanying notes to financial statements
F-6
LGA
HOLDINGS, INC.
Notes
to Financial Statements
(1)
Organization and summary of significant accounting
policies
Organization,
basis of presentation and Liquidity
LGA
Holdings, Inc. (“LGA”, “We”, “Us” or “Our”) was incorporated in Colorado on
April 14, 1998 as Let’s Go Aero, Inc. We develop intellectual property for the
automotive, recreation vehicle and recreation industries. We also manufacture
and distribute various types of specialty trailers and cargo carrying
enhancements as well as related parts, accessories and services for the
automobile, recreational vehicle and recreational equipment industries. Our
specialty trailers are manufactured by third party vendors and assembled in
our
facilities in Colorado Springs. We also sell our products directly to end-user
customers.
Reverse
Acquisition
Effective
June 30, 2004, we acquired Tenet Information Services, Inc., a Utah public
shell
company, in a reverse acquisition in order to access the capital markets to
fund
our business plans. We exchanged 100 percent of our outstanding shares of common
stock for 5,762,214 shares of the common stock of Tenet Information Services,
Inc. (“TIS”) in a reverse acquisition. This acquisition has been treated as a
recapitalization of LGA, a Colorado corporation, with TIS the legal surviving
entity. Since TIS had, prior to recapitalization, minimal assets (consisting
principally of cash and receivables) and no operations, the recapitalization
has
been accounted for as the sale of 1,016,860 shares of LGA common stock for
the
net assets of TIS. Costs of the transaction have been charged to the period.
This acquisition also provided $125,999 in net assets including $164,094 in
cash. On May 27, 2005 the shareholders of TIS approved a name change to LGA
Inc.
When LGA Inc. filed this name change with the State of Utah, the name LGA Inc.,
was rejected for being in use by another Utah corporation. Pursuant to Utah
statute 16-10a-100, LGA’s Board subsequently adopted the name, “LGA Holdings,
Inc.” in order to resolve this situation.
In
2004,
we changed our year-end from December 31 to June 30.
Going
Concern
Inherent
in our business are various risks and uncertainties, including our limited
operating history, historical operating losses and dependence upon strategic
alliances. The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business.
We
have
experienced negative cash flow from operations since our inception and we have
expended, and expect to continue to expend, substantial funds to continue our
research and development and marketing efforts. As a result, we have suffered
recurring losses at June 30, 2006. Based on our current operating plans,
management believes that proceeds from future revenues and futures sales of
common stock, will be sufficient to meet operating needs for the foreseeable
future. The actual funds that we will need to operate during this period will
be
determined by many factors, some of which are beyond our control. Lower than
anticipated sales of our products or higher than anticipated expenses could
require us to need additional financing sooner than expected. There is no
assurance that we will be successful in selling additional shares of common
stock to the public. Our business plan projects profits in June 2007.
LGA
HOLDINGS, INC.
Notes
to Financial Statements
Fair
Values of Financial Instruments
The
carrying values of accounts receivable, notes receivable, accounts payable
and
accrued liabilities approximate fair value due to (1) the short-term maturities
of these assets and liabilities or (2) their terms.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the period.
The more significant estimates are used for such items as: recoverability of
inventory and property and equipment, valuation allowance for doubtful accounts,
reserves for warranty, and fair valuation of stock options. As better
information becomes available or as actual amounts are determinable, the
recorded estimates are revised. Ultimate results could differ from these
estimates.
Cash
and Cash Equivalents
We
consider all highly liquid securities with original maturities of three months
or less when acquired to be cash equivalents. At June 30, 2006, there were
no
cash equivalents.
Reclassifications
Certain
balances for the year ended June 30, 2005, have been reclassified to conform
with the current year presentation with no effect on net income. These balances
included reclassifying a portion of an officer’s salary to research and
development expense and a portion of rent, utilities, and labor to cost of
sales.
Concentrations
We
purchase our plastic shells from two suppliers. The purchases represented
approximately 50%
and 59%
of cost of sales for the years ended June 30, 2006 and 2005, respectively.
Although there are a limited number of manufacturers of plastic shells,
management believes that other suppliers could provide similar shells on
comparable terms.
During
the year ended June 30, 2006, we changed our suppliers and reengineered the
designs of certain plastic shells to utilize more efficient plastic forming
techniques that simplify the production of the products, strengthen the products
and significantly reduce the product’s manufacturing cost.
Accounts
Receivable
Trade
receivable consists of amounts due from customers, which are mainly end-users
and dealers. We consider accounts more than 30 days old to be past due. We
allow
for estimated losses on accounts receivable based on prior bad debt experience
and a review of existing receivables. Bad debt recoveries are charged against
the allowance account as realized. At June 30, 2006, we considered accounts
receivable to be fully collectible; accordingly, no allowance for doubtful
accounts is required.
LGA
HOLDINGS, INC.
Notes
to Financial Statements
Inventories
Inventories
are stated at the lower of cost, as determined on average cost basis, or market.
Raw materials consist of the cost of materials required to produce trailers
and
accessories and to support parts sales and service.
Prepaid
expenses
Prepaid
expenses primarily include the unamortized portion of annual casualty and third
party liability insurance premiums. These premiums are amortized to expense
over
the insurance year.
Property
and Equipment
Property
and equipment are stated at cost. Expenditures that extend the useful lives
of
assets are capitalized. Repairs, maintenance and renewals that do not extend
the
useful lives of the assets are expensed as incurred. Depreciation is provided
for financial reporting purposes using straight-line method over estimated
useful lives ranging from 3 to 7 years for machinery, tooling, furniture and
equipment.
Certain
tooling used to make our plastic shells is held for use at our subcontractors’
facilities in Denver, Colorado.
Intangible
Assets
We
have
patents issued and pending to protect our intellectual property. These patents
relate to how cargo can be attached and carried on a vehicle’s hitch receiver,
frame, or body surface. Patent costs are amortized on a straight-line basis
and
charged to amortization expense over the expected useful life of the patent.
Costs of patent applications are deferred until the patent is granted. We will
begin amortization when the patent is granted.
Impairment
of Long-Lived Assets
In
accordance with Statement of Financial Accounting Standards (SFAS) No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, we evaluate
our
long-lived assets, including related intangibles, of identifiable business
activities for impairment when events or changes in circumstances indicate,
in
management's judgment, that the carrying value of such assets may not be
recoverable. The determination of whether impairment has occurred is based
on
management's estimate of undiscounted future cash flows attributable to the
assets as compared to the carrying value of the assets. If impairment has
occurred, estimating the fair value for the assets and recording a provision
for
loss if the carrying value is greater than fair value determine the amount
of
the impairment recognized. For assets identified to be disposed of in the
future, the carrying value of these assets is compared to the estimated fair
value less the cost to sell to determine if impairment is required. Until the
assets are disposed of, an estimate of the fair value is re-determined when
related events or circumstances change.
LGA
HOLDINGS, INC.
Notes
to Financial Statements
When
determining whether impairment of one of our long-lived assets has occurred,
we
must estimate the undiscounted cash flows attributable to the asset or asset
group. Our estimate of cash flows is based on assumptions that could change
in
the future.
Any
significant variance in any of the above assumptions or factors could materially
affect our cash flows, which could require us to record an impairment of an
asset. No impairment charges were recognized during each of the years ended
June
30, 2006 and 2005.
Revenue
Recognition
We
recognize revenue from the sale of trailers and accessories when there is
persuasive evidence that title and risks of ownership are transferred to the
customer, which generally is upon shipment or customer pick-up. Accordingly,
no
provision for sales allowances or returns is normally required except in unusual
circumstances.
Revenue
from sales of parts is recognized when the part has been shipped. Revenues
related to shipping and deliveries are included as a component of net sales
and
the related shipping costs are included as a component of cost of sales.
Royalty
income is recognized based on the terms specified in contractual settlement
agreements.
Product
Warranty
Our
products are covered by product warranties for one year after the date of sale.
At the time of sale, the Company recognizes estimated warranty costs, based
on
prior history and expected future claims, by a charge to cost of sales and
records an accrued liability. The accrued liability is reduced as actual
warranty costs are paid and is evaluated periodically to validate previous
estimates and known requirements and adjusted as necessary. At June 30, 2006,
we
have not accrued a reserve for warranty expense as management determined the
amount to be immaterial with respect to overall operations and financial
position.
Advertising
Costs
All
advertising costs are expensed as incurred. Advertising expenses
were
$13,046
and $9,816 for the years ended June 30, 2006 and 2005,
respectively.
Research
and Development Expenses
Research
and development expenses were incurred in fiscal 2006 and 2005 and totaled
$13,779 and $31,112, respectively. R&D costs are expensed as incurred.
LGA
HOLDINGS, INC.
Notes
to Financial Statements
Income
Taxes
We
account for income taxes under the provisions of Statement of Financial
Accounting Standards No. 109, Accounting
for Income Taxes
(SFAS
No. 109). SFAS No. 109 requires recognition of deferred tax liabilities and
assets for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred
tax liabilities and assets are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to
reverse.
Stock-based
Compensation
We
account for stock-based compensation arrangements in accordance with Statement
of financial Accounting Standards (“SFAS”) No. 123, “Accounting for
Stock-Based Compensation,” which permits entities to recognize as expense over
the vesting period the fair value of all stock-based awards on the date of
grant. Alternatively, SFAS No. 123 allows entities to continue to apply the
provisions of Accounting Principle Board (“APB”) Opinion No. 25 and provide
pro forma net earnings (loss) disclosures for employee stock option grants
as if
the fair-value-based method defined in SFAS No. 123 had been applied. The
Company has elected to apply the provisions of APB Opinion No. 25 and
provide the pro forma disclosure provisions of SFAS No. 123. For options
granted prior to the year ended June 30, 2005, the fair value of option grants
was determined using the Black-Scholes option-pricing model with a zero
volatility assumption. For options granted subsequent to June 30, 2005, the
fair
value of option grants was determined using the Black-Scholes option-pricing
model with volatility assumptions based on actual or expected fluctuations
in
the price of our common stock.
Generally
accepted accounting principles require companies who choose to account for
stock
option grants using the intrinsic value method to also determine the fair value
of option grants using an option-pricing model, such as the Black-Scholes model,
and to disclose the impact of fair value accounting in a note to the financial
statements. In December 2002, the Financial Accounting Standards Board, or
FASB, issued Statement of Financial Accounting Standards No. 148,
“Accounting for Stock-Based Compensation Transition and Disclosure, an Amendment
of FASB Statement No. 123.” We did not elect to voluntarily change to the
fair value based method of accounting for stock based employee compensation
and
record such amounts as charges to operating expense.
We
account for stock-based arrangements issued to non-employees using the fair
value based method, which calculates compensation expense based on the fair
value of the stock option granted using the Black-Scholes option pricing model
at the date of grant, or over the period of performance, as
appropriate.
Loss
Per Share
We
report
loss per share using a dual presentation of basic and diluted loss per share.
Basic loss per share excludes the impact of common stock equivalents. Diluted
loss per share uses the average market price per share when applying the
treasury stock method in determining common stock equivalents. However, the
Company has incurred operating losses; therefore, there is no variance between
the basic and diluted loss per share.
LGA
HOLDINGS, INC.
Notes
to Financial Statements
New
Accounting Pronouncements
SFAS
No. 151, “Inventory Costs,” is effective for fiscal years beginning after
June 15, 2005. This statement amends the guidance in Accounting Research
Bulletin (“ARB”) No. 43, Chapter 4, Inventory Pricing, to clarify the
accounting for abnormal amounts of idle facility expense, freight, handling
costs, and wasted material (spoilage). The adoption of SFAS 151 is expected
to have an impact on the Company’s financial statements.
SFAS No. 123(R),
“Share-Based Payment,” replaces SFAS No. 123, “Accounting for Stock-Based
Compensation,” and supersedes APB Opinion No. 25, “Accounting for Stock
Issued to Employees.” This statement requires that the compensation cost
relating to share-based payment transactions be recognized in the financial
statements. The Company is required to apply this statement in the first interim
period that begins after December 15, 2005. The adoption of
SFAS No. 123(R) is expected to have an impact on the Company’s future
financial statements.
SFAS No. 153,
“Exchanges of Nonmonetary Assets”—an amendment of APB Opinion No. 29, is
effective for fiscal years beginning after June 15, 2005. This
statement addresses the measurement of exchange of nonmonetary assets and
eliminates the exception from fair-value measurement for nonmonetary exchanges
of similar productive assets in paragraph 21(b) of APB Opinion No. 29,
“Accounting for Nonmonetary Transactions,” and replaces it with an exception for
exchanges that do not have commercial substance. The adoption of
SFAS No. 153 is expected to have no impact on the Company’s financial
statements.
FIN
No. 46(R) revised FIN No. 46, “Consolidation of Variable Interest
Entities,” requiring the consolidation by a business of variable interest
entities in which it is the primary beneficiary. The adoption of FIN No. 46
did not have an impact on the Company’s financial statements.
The
Emerging Issues Task Force (“EITF”) reached consensus on Issue No. 03-1,
“The Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments” (“EITF 03-1”) which provides guidance on determining when an
investment is considered impaired, whether that impairment is other than
temporary and the measurement of an impairment loss. The FASB issued FSP EITF
03-1-1, “Effective Date of Paragraphs 10-20 of EITF Issue No. 03-1, ‘The
Meaning of Other-Than-Temporary Impairment and Its Applications to Certain
Investments’” (“FSP”) which delays the effective date for the measurement and
recognition criteria contained in EITF 03-1 until final application
guidance is issued. The Company does not expect the adoption of this consensus
or FSP to have a material impact on its financial statements.
The
EITF
reached a consensus on Issue No. 04-8, “The Effect of Contingently
Convertible Debt on Diluted Earnings Per Share” (“EITF 04-8”), which
addresses when the dilutive effect of contingently convertible debt instruments
should be included in diluted earnings (loss) per share. EITF 04-8 is
effective for reporting periods ending after December 15, 2004. The
adoption of EITF 04-8 did not have an impact on diluted earnings (loss) per
share.
LGA
HOLDINGS, INC.
Notes
to Financial Statements
(2)
Related Party Transactions
In
2005,
we issued three promissory notes to our officers in exchange for accrued, but
unpaid, salaries. The notes payable at June 30, 2006 were:
Notes
payable to officers with a borrowing base of
|
|
|
|
$200,000,
interest compounded monthly at |
|
|
|
8%,
maturing on June 30, 2010 |
|
$
|
73,500
|
|
|
|
|
|
|
Notes
payable to an officer with a borrowing base of
|
|
|
|
|
$100,000,
interest compounded monthly at |
|
|
|
|
8%,
maturing on June 30, 2010 |
|
|
18,614
|
|
|
|
|
|
|
Notes
payable to an officer with a borrowing base of
|
|
|
|
|
$100,000,
interest compounded monthly at |
|
|
|
|
8%,
maturing on June 30, 2010 |
|
|
14,294
|
|
|
|
$
|
106,408
|
|
The
note
balances may be increased by additional compensation deferments and may be
decreased by cash payments. Interest expense incurred during the year ended
June
30, 2006 was $18,541.
In
August
2005, an affiliate exercised its option to purchase 43,148 restricted shares
of
common stock at the price of $.692 or $29,988.
In
January 2006, an affiliate exercised its option to purchase 215,738 restricted
shares of common stock at the price of $.695 or $149,938.
In
December 2004, we sold 1,250,000 shares of our restricted common stock, callable
at $.40 per share through November 2006, to an affiliate for $.20 per share
or
$250,000. In April 2006, we sold the call option on the 1,250,000 shares for
$200,000.
In
March
2005, we sold 18,000 shares of restricted common stock to one of our directors,
for $12,510 cash at $0.695 per share.
In
March
2005, we granted our officers options to purchase a total of 1,000,000 shares
of
the Company’s common stock. See footnote 5.
LGA
HOLDINGS, INC.
Notes
to Financial Statements
(3)
Balance Sheet Components
Note
Receivable
At
June
30, 2006, note receivable consisted of:
Unsecured
note receivable from an unrelated third
|
|
|
|
party
with interest at 8 percent, with quarterly |
|
|
|
installments
of $2,000, maturing |
|
|
|
in
February 2007 |
|
$
|
5,770
|
|
Inventory
At
June
30, 2006, inventory consisted of:
Raw
materials
|
|
$
|
35,111
|
|
Finished
goods
|
|
|
124,484
|
|
|
|
$
|
159,595
|
|
Property
and Equipment
At
June
30, 2006, major classes of property and equipment were:
Leasehold
improvements
|
|
$
|
4,212
|
|
Furniture
and fixtures
|
|
|
25,377
|
|
Equipment
|
|
|
90,818
|
|
Tooling,
held offsite
|
|
|
98,575
|
|
|
|
|
218,982
|
|
Less:
accumulated depreciation
|
|
|
(110,810
|
)
|
|
|
$
|
108,172
|
|
Depreciation
expense during the years ended June 30, 2006 and 2005 totaled $13,517 and
$22,957, respectively.
Intangible
Assets
At
June
30, 2006, intangible assets consisted of:
Patents,
net of $18,913 in accumulated
|
|
|
|
amortization |
|
$
|
44,631
|
|
Deferred
patent application costs
|
|
|
36,448
|
|
|
|
$
|
81,079
|
|
LGA
HOLDINGS, INC.
Notes
to Financial Statements
Estimated
annual amortization expenses are as follows for years ending June
30:
2007
|
|
$
|
3,172
|
|
2008
|
|
$
|
3,172
|
|
2009
|
|
$
|
3,172
|
|
2010
|
|
$
|
3,172
|
|
2010
|
|
$
|
3,172
|
|
Amortization
expense during the years ended June 30, 2006 and 2005 totaled $2,314 and $3,280,
respectively.
(4)
Unearned Revenue
In
May
2002, we licensed certain intellectual property to Advanced Accessory Systems,
LLC, (AAS) for five years. We received an upfront payment against future
royalties of $300,000, which we deferred. For accounting purposes, we reflect
the payment in royalty income, pro-rata, over the life of the licenses. In
fiscal years 2006 and 2005, respectively, we recognized $60,000 and $60,000
in
royalty revenue. The balance of unearned revenue was $55,000 as of June 30,
2006.
(5)
Shareholders’ Deficit
Features
of Preferred Stock
Our
preferred stock may be issued from time-to-time in one or more series. Our
Board
of Directors is authorized to (1) divide the preferred stock into series; (2)
establish the number of preferred shares in a series; and (3) fix and determine
the relative rights and preferences of any series of our preferred
stock.
Sale
of Common Stock
In
June
2006, we conducted a private placement offering whereby we sold 215,000 shares
of common stock at the price of $.70 per share or $150,500. The investor
received for each share purchased, an option until July 31, 2011, to purchase
additional shares of common stock at $1.00 per share. At June 30, 2006, we
recorded stock subscription receivable in the amount of $150,500 in the
accompanying financial statements.
During
March 2005, we sold 72,000 shares of restricted common stock to an unrelated
third party, for $50,040 cash at $0.695 per share.
Stock
Options
A
summary
of changes in the number of stock options outstanding for the years ended June
30, 2006 and 2005 is as follows:
LGA
HOLDINGS, INC.
Notes
to Financial Statements
|
|
|
|
|
|
|
|
Weighted
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Average
|
|
Average
|
|
|
|
|
|
|
|
Exercise
|
|
Exercise
|
|
Remaining
|
|
|
|
Awards
Outstanding
|
|
Price
|
|
Price
|
|
Contractual
|
|
|
|
Total
|
|
Exercisable
|
|
Per
Share
|
|
Per
Share
|
|
Life
|
|
Outstanding
at July 1, 2004
|
|
|
1,508,008
|
|
|
1,508,008
|
|
$
|
0.70
|
|
$
|
0.70
|
|
|
1.22
years
|
|
Granted
|
|
|
1,768,000
|
|
|
1,768,000
|
|
$
|
0.40
- $1.00
|
|
$
|
0.66
|
|
|
8.06
years
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
N/A
|
|
Cancelled/Expired
|
|
|
-
|
|
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
N/A
|
|
Outstanding
at June 30, 2005
|
|
|
3,276,008
|
|
|
3,276,008
|
|
$
|
0.40
- $1.00
|
|
$
|
0.67
|
|
|
6.39
years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
215,000
|
|
|
215,000
|
|
$
|
1.00
|
|
$
|
1.00
|
|
|
5.08
years
|
|
Exercised.
|
|
|
(258,886
|
)
|
|
(258,886
|
)
|
$
|
-
|
|
$
|
-
|
|
|
N/A
|
|
Cancelled/Expired
|
|
|
(679,575
|
)
|
|
(679,575
|
)
|
$
|
-
|
|
$
|
-
|
|
|
N/A
|
|
Outstanding
at June 30, 2006
|
|
|
2,552,547
|
|
|
2,552,547
|
|
$
|
0.40
- $1.00
|
|
$
|
0.70
|
|
|
6.28
years
|
|
Stock
options - employees
During
the year ended June 30, 2005, we granted our officers options to purchase a
total of 1,000,000 shares of the Company’s common stock. The options carry
exercise price of $0.70 per share and are vested at the date of grant. The
Company’s common stock had a market price of $0.51 on the date of grant. As a
result, we recognized stock-based compensation of $-0- in accordance with APB
25.
Pro
forma
information regarding net income and earnings per share is required by SFAS
123
as if the Company had accounted for the granted stock options under the fair
value method of that Statement. The fair value for these options was estimated
at the date of grant using the Black-Scholes option-pricing model with the
following assumptions:
Risk-free
interest rate
|
|
|
3.60%
|
Dividend
yield
|
|
|
0.00%
|
Volatility
factor
|
|
|
103.120%
|
Weighted
average expected life
|
|
|
Ranging
from 1,740 to 3,650 days
|
The
Black-Scholes options valuation model was developed for use in estimating the
fair value of traded options, which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company’s stock options have characteristics significantly different from
those of traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management’s opinion, the
existing models do not necessarily provide a reliable single measure of the
fair
value of its stock options. However, we have presented the pro forma net loss
and pro forma basic and diluted loss per common share using the assumptions
noted above.
LGA
HOLDINGS, INC.
Notes
to Financial Statements
|
|
For
the Years Ended
|
|
|
|
June
30,
|
|
|
|
2006
|
|
2005
|
|
Net
income (loss), as reported
|
|
$
|
(261,477
|
)
|
$
|
(590,323
|
)
|
|
|
|
|
|
|
|
|
Pro
forma net income (loss
|
|
$
|
(261,477
|
)
|
$
|
(1,048,323
|
)
|
|
|
|
|
|
|
|
|
Basic
and diluted net income (loss)
|
|
|
|
|
|
|
|
per
common share, as reported
|
|
$
|
(0.03
|
)
|
$
|
(0.08
|
)
|
|
|
|
|
|
|
|
|
Pro
forma basic and diluted net income
|
|
|
|
|
|
|
|
(loss)
per common share.
|
|
$
|
(0.03
|
)
|
$
|
(0.14
|
)
|
The
following schedule reflects the calculation of the pro forma compensation
expense on employee stock options:
Date
of Grant
|
|
Number
of Options Granted
|
|
Total
Fair Value
|
|
Options
Vested Through June 30, 2006
|
|
Fair
Value Incurred Through June 30, 2006
|
|
3/31/2005
|
|
|
1,000,000
|
|
$
|
458,000
|
|
|
1,000,000
|
|
$
|
458,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000,000
|
|
$
|
458,000
|
|
|
1,000,000
|
|
$
|
458,000
|
|
Stock
options - nonemployees
During
the year ended June 30, 2005, we granted five consultants options to purchase
a
total of 768,000 shares of the Company’s common stock. The options carry
exercise price ranging from $0.40 to $0.70 per share and are vested at the
date
of grant. We determined the fair value of the options ranging from $0.35 to
$0.46 per share and recorded stock based compensation of $309,756 in accordance
with SFAS 123.
The
fair
value for these options was estimated at the date of grant using the
Black-Scholes option-pricing model with the following
assumptions:
Risk-free
interest rate.
|
|
|
|
|
3.60%
|
Dividend
yield
|
|
|
|
|
0.00%
|
Volatility
factor
|
|
|
|
|
103.120%
|
Weighted
average expected life
|
|
|
|
|
Ranging
from 1,740 to 3,650 days
|
LGA
HOLDINGS, INC.
Notes
to Financial Statements
(6)
Commitments
We
lease
our office space under a non-cancelable operating lease. On January 2006, we
signed an additional non-cancelable operating lease to expand our warehouse
space for a period of 17 months. Future minimum lease payments are as follows
for the year ending June 30:
We
recorded rent expense in the amount of $48,167 and $31,003 for the years ended
June 30, 2006 and 2005, respectively.
(7)
Income Taxes
In
tax
years prior to June 30, 2005, we operated as an S Corporation. Accordingly,
any
resulting tax liabilities or tax benefits resulting from operations are those
of
the individual shareholders. In connection with the termination of S Corporation
tax status, the Company determined that there were no deferred income
taxes.
A
reconciliation of U.S. statutory federal income tax rate to the effective rate
follows for the years ended June 30, 2006 and 2005:
|
|
June
30,
|
|
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
U.S.
statutory federal rate
|
|
|
30.49
|
%
|
|
34.00
|
%
|
State
income tax rate
|
|
|
3.22
|
%
|
|
3.06
|
%
|
Deferred
income
|
|
|
-7.09
|
%
|
|
-3.77
|
%
|
Net
operating loss for which no tax
|
|
|
|
|
|
|
|
benefit
is currently available
|
|
|
-26.62
|
%
|
|
-33.29
|
%
|
|
|
|
0.00
|
%
|
|
0.00
|
%
|
At
June
30, 2006, deferred tax assets consisted of net tax asset of $69,608 due to
net
operating loss carryforward for federal income tax purposes of approximately
$851,800, which was fully allowed for in the valuation allowance of $69,608.
The
valuation allowance offsets the net deferred tax asset for which there is no
assurance of recovery. The change in the valuation allowance for the year ended
June 30, 2006 was $126,907. The net operating loss carryforward will expire
through 2026.
The
valuation allowance is evaluated at the end of each year, considering positive
and negative evidence about whether the deferred tax asset will be realized.
At
that time, the allowance will either be increased or reduced; reduction could
result in the complete elimination of the allowance if positive evidence
indicates that the value of the deferred tax assets is no longer impaired and
the allowance is no longer required.
LGA
HOLDINGS, INC.
Notes
to Financial Statements
(8)
Embezzlement
The
Company suffered an embezzlement of $90,180 during the year ended June 30,
2006
and an additional $40,611 for the period from July 2006 through September
28,
2006, the day the embezzlement was discovered. Insurance proceeds, totaling
$17,379 collected subsequent to year end but prior to the issuance of the
accompanying financial statements, offset the losses for the year ended June
30,
2006. We recorded no additional insurance income, as we are unable to accurately
estimate future recoveries at this time. The net loss for the year ended
June
30, 2006 was $72,801 and $17,379 is reflected as other receivables in the
accompanying financial statements.
We
have
implemented internal control procedures which we believe will prevent any
future
losses.
Item
8. Changes In and Disagreements With Accountants on Accounting and Financial
Disclosure.
Not
Applicable
Item
8A. Controls and Procedures.
LGA’s
internal disclosure controls and procedures (as defined in Rule 13a-15(e)
or
Rule 15d-15(e) under the Exchange Act) and internal control over financial
reporting (as defined in Rule 13a-15(f) or Rule 15d-15(f) under the Exchange
Act) have not been effective. As part of the audit of the June 30, 2006,
financial statements, the auditors discovered indications of embezzlement
by the
Company’s bookeeper. The embezzled amount was approximately $134,000 and
occurred between June, 2005, and October, 2006. .
Internal
control over financial reporting (as defined in Rule 13a-15(f) or Rule 15d-15(f)
under the Exchange Act) should be adequate and effective to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles and include those policies and procedures that:
(1)
Pertain to the maintenance of records that in reasonable detail accurately
and
fairly reflect the transactions and dispositions of the assets of the issuer;
(2)
Provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the issuer are
being made only in accordance with authorizations of management and directors
of
the issuer; and
(3)
Provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the issuer's assets that could
have a material effect on the financial statements.
LGA
did
not have formal internal control over financial reporting (as defined in
Rule
13a-15(e) or Rule 15d-15(e) under the Exchange Act) as of June 30, 2006,
and
through September, 2006, when the embezzlement was discovered. The weaknesses
in
internal controls and procedures that were exploited by the Company’s bookeeper
were (1) a lack of segregation of duties over cash management (including
credit
cards) and (2) insufficient supervision by management over accounting functions.
Management
is responsible for establishing and maintaining adequate internal control over
financial reporting.
Management
has relied on its auditors and legal counsel for an evaluation of the
effectiveness on the Company’s disclosure controls and procedures as well as its
internal control over financial reporting under the framework available from
the
Public Company Accounting Oversight Board, but, as stated in prior Forms 10-KSB
and filings with the Securities and Exchange Commission, LGA's Chief Executive
Officer and Treasurer had believed that LGA's and Aero's informal controls
and
procedures were adequate and effective. That assessment, however, has proven
to
have been ill founded.
As
set
forth in the Form 10-KSB for the year ended June 30, 2005, LGA's management
had
planned to review its controls and procedures with the aim of implementing
more
formal controls and procedures required by paragraph (b) of Rule 13a-15 or
Rule
15d-15 under the Exchange Act during the first half of fiscal year 2005, but
determined that due to the Company's size and amount of revenue, its resources
would better serve shareholders if dedicated to more revenue producing
activities. Although management stated in its Form 10-KSB for the year ended
June 30, 2005, that the restatement of the 2004 financial statements had
resulted in a change of management's opinion and discussions were to be held
regarding improvements to internal controls and procedures, little change was
actually made.
Management
has made a full report regarding the embezzlement to the Company’s Board of
Directors. In addition, the Company’s auditors have made a similar financial
report to the Company and written a letter to management identifying material
weaknesses in internal control over financial reporting with recommendations
to
remedy the problems. Management has implemented the recommendations of its
auditors. Management’s report and the letter are included as exhibits to this
Form 10-KSB.
Item
8B. Other Information.
None
Part
III
Item
9. Directors, Executive Officers, Promoters and Control Persons; Compliance
With
Section 16(a) of the Exchange Act.
Directors
serve terms of 1 year or until his or her successor has been elected and
qualified.
Name
|
Age
|
Position
|
Director
Since
|
|
|
|
|
|
|
Marty
Williams*
|
45
|
Chief
Executive Officer,
|
June
2004
|
|
|
|
President
Director
|
|
|
|
|
|
|
|
Sara
Williams*
|
36
|
Secretary,
Treasurer,
|
June
2004
|
|
|
|
Director
|
|
|
|
|
|
|
|
Eric
Nickerson
|
54
|
Director
|
June
1990
|
|
|
|
|
|
|
Matthew
Drabczyk
|
46
|
Vice
President Engineering,
|
May
2006
|
|
|
|
Director
|
|
|
__________
*
Marty
Williams and Sara Williams are husband and wife.
_________
MARTY
WILLIAMS, Chief Executive Officer, President, Director. Mr. Williams was
appointed to his positions upon the acquisition of Aero by LGA effective June
30, 2004. Mr. Williams has been Chief Executive Officer, President and a
Director of Aero since its inception in 1998. At Aero he is responsible for
establishing and maintaining the corporate mission and culture. He is
responsible for product creation, strategic planning, and the entrepreneurial
spirit. He also directs and coordinates Aero's financing to provide funding
for
new and continuing operations. Mr. Williams' professional experience includes
many different areas in the securities industry where he applied his knowledge
of small business operations, finance, strategic development and business
modeling. As an independent broker at Schneider Securities, Inc., Denver,
Colorado, from 1988 to 1991 and again from 1993 to 1999, Marty was principally
involved in development of private placement offerings for early stage companies
and the subsequent sales of those offerings. From 1991 to 1993 he was a stock
broker with RAF Financial, Denver, Colorado. He has a Bachelor of Science in
Business Administration, University of South Dakota.
SARA
WILLIAMS, Secretary, Treasurer, Director. Ms. Williams was appointed to her
positions upon the acquisition of Aero by LGA effective June 30, 2004. Ms.
Williams has been Treasurer and a Director of Aero since its inception in 1998.
She has been Secretary of Aero since June 30, 2004. At Aero Ms. Williams manages
daily business flow, business development, product inquiries, marketing,
promotions, account management, dealer relations, sales and customer service,
order fulfillment, shipping and accounting. Mrs. Williams' professional
experience includes many areas in sales, advertising, software development,
operations, and product development. She has been involved in direct sales,
account management and start-up business management in the areas of print
advertising, new business development, customer relations, and marketing. At
Sunset Publishing Corporation, Menlo Park, California, as a Direct Sales
Representative from 1993 to 1995 and 1996 to 1998, Mrs. Williams was responsible
for generating sales of new advertising programs and account management. While
working for Saligent, Inc., Colorado Spring, Colorado for a short period in
1995, Mrs. Williams was occupied with inside sales management, program
development, supervision and training. She has a Bachelor of Arts in Political
Science, The Colorado College.
ERIC
J.
NICKERSON has served as a Director of LGA since June of 1990 and as a Director
of Aero since April 2001. Mr. Nickerson was a member of the faculty of the
United States Military Academy at West Point, New York from 1989 to 1993. In
June 1993, Mr. Nickerson retired as a United States Air Force officer.
Currently, Mr. Nickerson is a private investor and directs personal accounts
in
an investing partnership, Third Century II. Third Century II is a major
shareholder in LGA.
MATTHEW
DRABCZYK has served as Vice President and Director of LGA since May, 2006.
Mr.
Drabczyk has been President of Restaurant Interiors, Inc. for more than five
years where he is responsible for sales, engineering and accounting. Restaurant
Interiors constructs and installs commercial dining facilities.
Audit
Committee
LGA
does
not have an audit committee and neither LGA nor Aero have a financial expert
on
their respective Boards of Directors or as an employee. LGA's Board of Directors
acts as its audit committee. LGA is a company with annual revenue of less than
$350,000 and its accounting is relatively simple. Therefore, the Company's
management did not believe having a financial expert offered shareholders much
benefit considering the costs that would have been involved. See Item 8A, above.
None of the Board of Directors is independent as defined in Rule 10A-3 of the
Exchange Act.
Compliance
With Section 16(a) of the Exchange Act
The
following table sets forth information determined by LGA with respect to the
indicated person's requirements to file Forms 3, 4 and 5 for LGA's most recent
fiscal year.
Name
|
Number
of
Late
Reports
|
Number
of Transactions
That
Were Not Reported
|
Known
Failures to File
|
|
|
|
|
Eric
Nickerson
|
0
|
2
|
3
|
|
|
|
|
Third
Century II
|
0
|
2
|
3
|
|
|
|
|
Code
of Ethics
LGA
has
not adopted a code of ethics that applies to its principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions. The Company has only 4 full time employees
and limited revenues. Its two principal officers, majority shareholders and
half
of the Board of directors are husband and wife. Mr. & Mrs. Williams do not
believe that the Company presently needs written standards that are reasonably
designed to deter wrongdoing and to promote:
(1)
Honest and ethical conduct, including the ethical handling of actual or apparent
conflicts of interest between personal and professional
relationships;
(2)
Full,
fair, accurate, timely, and understandable disclosure in reports and documents
that a small business issuer files with, or submits to, the Commission and
in
other public communications made by the small business issuer;
(3)
Compliance with applicable governmental laws, rules and
regulations;
(4)
The
prompt internal reporting of violations of the code to an appropriate person
or
persons identified in the code; and
(5)
Accountability for adherence to the code.
Mr.
&
Mrs. Williams believe that they act ethically with respect to the above
categories despite the lack of a written code of ethics.
Item
10. Executive Compensation.
The
following table sets forth information with respect to all officers of LGA
and
Aero who received $100,000 more of annual compensation for all services rendered
in all capacities in the three most recent fiscal years and for the CEO
regardless of compensation.
|
|
|
|
Annual
Compensation
|
|
Long-Term
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
Awards
|
|
Payouts
|
|
|
|
Name
and
Principal
Position
|
|
Year
|
|
Salary
|
|
Bonus
|
|
Other
Annual
Compensation
|
|
Restricted
Stock
Awards
|
|
Securities
Underlying
Options/
SARs
|
|
LTIP
Payouts
|
|
All
Other Compensation
|
|
LGA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marty
Williams CEO (1)
|
|
|
2006
|
|
|
48,000
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
48,000
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
500,000
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
48,000
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
64,722
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
(1.)
Marty Williams was CEO of Aero for the entire fiscal years 2003 and 2004. Aero
was not a registered company during that period. Mr. Williams became CEO of
LGA
effective June 30, 2004, under the terms of the Acquisition Agreement by which
LGA acquired Aero. Aero is a wholly owned subsidiary of LGA.
The
following table contains information regarding the value of stock options and
freestanding SARs outstanding at the end of the last completed fiscal year
held
by the named executive officers.
Aggregate
Option/SAR Exercises in Last Fiscal Year and F-Y End Option SAR
Values
|
Name
|
|
Shares
Acquired on
Exercise
|
Value
Realized
|
Number
of Securities
Underlying
Unexercised
Options/SARs
at FY End
Exercisable/Unexercisable
|
Value
of Unexercised
In-the-Money
Options/SARs at
F-Y
End
Exercisable/Unexercisable
|
Marty
Williams (1),
|
CEO
|
0
|
0
|
500,000
/ 0
|
650,000
/ 0
|
No
other
Long Term Incentive Plan awards were made by the Company to any
person.
Director
Compensation
Directors
are currently not compensated as such for their services.
Item
11. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
Compensation
Plans
The
following table provides information as of the end of the most recently
completed fiscal year with respect to compensation plans (including individual
compensation arrangements) under which equity securities of LGA are authorized
for issuance, aggregated as follows:
i.
All
compensation plans previously approved by security holders; and
ii.
All
compensation plans not previously approved by security holders.
Plan
category
|
|
Number
of securities to be
issued
upon exercise of
outstanding
options,
warrants
and rights
|
|
Weighted
average exercise
price
of outstanding
options,
warrants and
rights
|
|
Number
of securities
remaining
available for
future
issuance
under
equity compensation
plans
(excluding securities
reflected
in column (a))
|
Equity
compensation plans
|
|
|
|
|
|
|
approved
by security
|
|
|
|
|
|
|
holders
|
|
|
1,000,000
|
|
|
0.70
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans
|
|
|
|
|
|
|
|
|
|
not
approved by security
|
|
|
|
|
|
|
|
|
|
holders
|
|
|
983,739
|
|
|
0.622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,983,739
|
|
|
0.662
|
|
|
500,000
|
Of
the
983,739 securities listed as not approved by security holders, 200,000 were
issued to Matthew Drabczyk (a Director of the Company and Vice President of
Engineering, before he took either position with the Company) as partial
compensation for his prior engineering efforts on behalf of the Company. The
balance were issued to six other individuals or companies as partial
compensation for services.
The
following table contains information as of June 30, 2006, summarizing the
beneficial ownership of LGA common stock by (1) each person known to LGA to
be
the beneficial owner of more than 5% of its issued and outstanding common stock,
(2) LGA's executive officers and directors individually, and (3) all LGA's
executive officers and directors as a group. Except as stated in the footnotes
to the table, each of these persons exercises sole voting and investment power
over the shares of common stock listed for that person.
Name
and Address
|
|
Position
|
|
Number
of LGA
Common
Shares
Held
|
|
Percentage
of
Outstanding
Share
Held
|
|
|
|
|
|
|
|
|
|
Marty
Williams 1, (2)
|
|
|
President,
Chief
|
|
|
2,854,999
|
|
|
29.8
|
%
|
5565
Teakwood Terrace
|
|
|
Executive
Officer,
|
|
|
|
|
|
|
|
Colorado
Springs, CO 80918
|
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sara
Williams 1, (3)
|
|
|
Secretary,
|
|
|
|
|
|
|
|
5565
Teakwood Terrace
|
|
|
Treasurer,
|
|
|
2,854,999
|
|
|
29.8
|
%
|
Colorado
Springs, CO 80918
|
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric
J. Nickerson (4)
|
|
|
|
|
|
|
|
|
|
|
1711
Chateau Ct.
|
|
|
Director
|
|
|
3,383,560
|
|
|
39.4
|
%
|
Fallston,
MD 21047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew
Drabczyk (5)
|
|
|
Vice
President
|
|
|
|
|
|
|
|
Restaurant
Interiors
|
|
|
Engineering,
|
|
|
|
|
|
|
|
5530
Joliet St.
|
|
|
Director
|
|
|
458,886
|
|
|
7.4
|
%
|
Denver,
CO 80239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Officers and Directors
as
a Group (3 persons) (6)
|
|
|
NA
|
|
|
6,697,445
|
|
|
68.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Floyd
Murray
|
|
|
|
|
|
|
|
|
|
|
13020
Caraway Dr.
|
|
|
NA
|
|
|
1,788,610
|
|
|
20.3
|
%
|
Sun
City West, AZ 85375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew
Tynan
|
|
|
|
|
|
|
|
|
|
|
Tynan's
VW
|
|
|
|
|
|
|
|
|
|
|
700
S. Havana
|
|
|
NA
|
|
|
488,389
|
|
|
5.7
|
%
|
Denver,
CO 80012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third
Century II
|
|
|
|
|
|
|
|
|
|
|
1711
Chateau Ct.
|
|
|
NA
|
|
|
3,229,403
|
|
|
37.6
|
%
|
Falston,
MD 21047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
to
Table:
(1)
Sara
Williams and Marty Williams are husband and wife.
(2)
Includes 1,854,999 shares owned as joint tenant with Sara Williams, options
to
acquire 500,000 shares and options to acquire 500,000 shares owned by Sara
Williams.
(3)
Includes 1,854,999 shares owned as joint tenant with Marty Williams, options
to
acquire 500,000 shares and options to acquire 500,000 shares owned by Marty
Williams.
(4)
Includes 3,229,403 shares owned by Third Century II. Mr. Nickerson is Senior
Partner of the investment company Third Century II. Mr. Nickerson disclaims
beneficial ownership of all of the shares and options owned by Third Century
II.
(5)
Includes options to acquire 200,000 shares.
(6)
The
Directors are Marty Williams, Sara Williams, Eric J. Nickerson and Matthew
Drabczyk and includes the shares deemed directly or indirectly beneficially
owned by each of them.
Note:
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares subject to options, warrants and
convertible notes currently exercisable or convertible, or exercisable or
convertible within 60 days are deemed outstanding for computing the percentage
of the person or entity holding such securities, but are not outstanding for
computing the percentage of any other person or entity. Except as indicated
by
footnote, and subject to community property laws where applicable, the persons
named in the table above have sole voting and investment power with respect
to
all shares shown as beneficially owned by them.
Item
12. Certain Relationships and Related Transactions.
None
Item
13. Exhibits.
Exhibit
Number Description
31.1
|
Rule
13a-14(a)/15d-14(a) Certifications - CEO
|
|
|
31.2
|
Rule
13a-14(a)/15d-14(a) Certifications - CFO
|
|
|
32.1
|
Certification
Pursuant To 18 U.S.C. Section. 1350 - CEO
|
|
|
32.2
|
Certification
Pursuant To 18 U.S.C. Section. 1350 - CFO
|
|
|
99.1
|
Report
of Management Regarding Embezzlement
|
|
|
99.2
|
Auditor’s
Letter to Management
|
Item
14. Principal Accountant Fees and Services.
Audit
Fees
The
aggregate fees billed in each of the last two fiscal years for professional
services rendered by the principal accountant for the audit of LGA's and
Aero's
annual financial statements and review of financial statements included in
the
registrant's Form 10-QSB or services that are normally provided by the
accountant in connection with statutory and regulatory filings or engagements
for those fiscal years were $11,720 for 2005 and $16,296 for
2006.
Audit-Related
Fees
The
aggregate fees billed in each of the last two fiscal years for assurance and
related services by the principal accountant that are reasonably related to
the
performance of the audit or review of the registrant's financial statements
and
are not reported under Item 9(e)(1) of Schedule 14A were $-0- for 2005 and
$-0-
for 2006.
Tax
Fees
The
aggregate fees billed in each of the last two fiscal years for professional
services rendered by the principal accountant for tax compliance, tax advice,
and tax planning were $-0- for 2005 and $-0- for 2006.
All
Other Fees
The
aggregate fees billed in each of the last two fiscal years for products and
services provided by the principal accountant, other than the services reported
in Items 9(e)(1) through 9(e)(3) of Schedule 14A were $-0-for 2005 and $-0-
for
2006.
Audit
Committee Policies
Neither
LGA nor Aero has an audit committee. Such authority is exercised by the full
Boards of Directors of each company. Neither Board, however, currently
has:
(i)
Any
pre-approval policies and procedures described in paragraph (c)(7)(i) of Rule
2-01 of Regulation S-X; or (ii) approved any services described in each of
Items
9(e)(2) through 9(e)(4) of Schedule 14A that were subject to approval by the
audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation
S-X.
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
LGA
Holdings, Inc.
(Registrant)
By:
/s/
Marty Williams
Marty
Williams, Chief Executive Officer, President
Date
October 25, 2006
In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the
dates indicated.
By:
/s/
Marty Williams
Marty
Williams, Chief Executive Office, Director
Date
October 25, 2006
By:
/s/
Sara Williams
Sara
Williams, Treasurer (principal financial officer), Director
Date
October 25, 2006
By:
/s/
Eric Nickerson
Eric
Nickerson, Director
Date
October 25, 2006
By:
/s/
Matthew Drabczyk
Matthew
Drabczyk, Director
Date
October 25, 2006
26