UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-QSB
(Mark
One)
[ X ]
|
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF
1934
|
For
the
quarterly period ended: December 31,
2006
[
]
|
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
|
For
the
transition period from ______
to
______
LGA
HOLDINGS, INC.
(Exact
Name of Small Business Issuer as Specified in its Charter)
Utah
|
0-18113
|
87-0405405
|
(State
or other jurisdiction
|
(Commission
|
I.R.S.
Employer
|
of
incorporation or organization)
|
File
No.)
|
Identification
Number
|
3380 North El Paso Street, Suite G, Colorado Springs, Colorado
80907
(Address
of Principal Executive Offices) (Zip Code)
Registrant’s
telephone number including area code: (719)
630-3800
NO
CHANGE
(Former
name, former address and former fiscal year, if changed since last
report)
Check
whether the Issuer (1) filed all reports required to be filed by Section
13 or
15(d) of the Exchange Act during the last 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 [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and "large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one): Large accelerated
filer [] Accelerated
filer [] Non-accelerated filer
[X].
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes [ X ] No
[
X ]
State
the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date: 8,377,960
shares
of
common stock outstanding as of February
15, 2007
Transitional
Small Business Disclosure Format: Yes [ X ] No
[
X ]
LGA
HOLDINGS, INC.
Index
to Financial Statements
(Unaudited)
|
|
Page
|
|
|
|
|
|
|
Condensed
Balance Sheet at December 31, 2006
|
F-1
|
|
|
|
Condensed
Statements of Operations, for the six months ended
|
|
|
December
31, 2006 and 2005 and for the three months ended
|
|
|
December
31, 2006 and 2005
|
F-2
|
|
|
|
Condensed
Statement of Changes in Shareholders' Deficit for
|
|
|
the
period from July 1, 2006 through December 31, 2006
|
F-3
|
|
|
|
Condensed
Statements of Cash Flows, for the six months ended
|
|
|
December
31, 2006 and 2005
|
F-4
|
|
|
|
Notes
to Condensed Financial Statements
|
F-5
|
LGA
HOLDINGS, INC.
Condensed
Balance Sheet
December
31, 2006
(Unaudited)
|
|
Current
assets:
|
|
|
|
Cash
|
|
$
|
100,327
|
|
Account
and notes receivable
|
|
|
4,369
|
|
Inventory,
at lower of cost or market (Note 4)
|
|
|
104,170
|
|
Prepaid
expenses
|
|
|
1,914
|
|
|
|
|
|
|
Total
current assets
|
|
|
210,780
|
|
|
|
|
|
|
Property
and equipment
|
|
|
255,186
|
|
Accumulated
depreciation
|
|
|
(125,460
|
)
|
Intangible
Assets
|
|
|
97,535
|
|
Accumulated
amortization
|
|
|
(20,501
|
)
|
Other
assets
|
|
|
2,604
|
|
|
|
|
|
|
Total
assets
|
|
$
|
420,144
|
|
|
|
|
|
|
Liabilities
and Shareholders’ Equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
|
81,392
|
|
Unearned
revenue
|
|
|
27,088
|
|
Accrued
payroll and other liabilities
|
|
|
132,167
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
240,647
|
|
|
|
|
|
|
Long-term
liabilities:
|
|
|
|
|
Notes
payable, related party (Note 2)
|
|
|
60,000
|
|
Total
liabilities
|
|
|
300,647
|
|
|
|
|
|
|
Shareholders’
equity:
|
|
|
|
|
Common
stock
|
|
|
8,808
|
|
Additional
paid-in capital …
|
|
|
1,307,181
|
|
Accumulated
deficit
|
|
|
(1,196,492
|
)
|
|
|
|
|
|
Total
shareholders' equity
|
|
|
119,497
|
|
|
|
|
|
|
Total
liabilities and shareholders' equity
|
|
$
|
420,144
|
|
See
accompanying notes to condensed financial statements
LGA
HOLDINGS, INC.
Condensed
Statements of Operations
(Unaudited)
|
|
Six
months ended
|
|
Three
months ended
|
|
|
|
December
31,
|
|
December
31,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Sales
and revenue
|
|
$
|
167,428
|
|
$
|
168,085
|
|
$
|
50,413
|
|
$
|
45,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
of revenue
|
|
|
85,993
|
|
|
85,666
|
|
|
31,326
|
|
|
31,936
|
|
Research
and development
|
|
|
70,314
|
|
|
3,743
|
|
|
59,370
|
|
|
120
|
|
Selling,
general and administrative
|
|
|
258,025
|
|
|
141,730
|
|
|
140,011
|
|
|
61,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
414,332
|
|
|
231,139
|
|
|
230,707
|
|
|
93,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
|
(246,904
|
)
|
|
(63,054
|
)
|
|
(180,294
|
)
|
|
(48,259
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income
|
|
|
193
|
|
|
1,289
|
|
|
78
|
|
|
528
|
|
Interest
expense
|
|
|
(2,466
|
)
|
|
(6,183
|
)
|
|
(1,762
|
)
|
|
(3,763
|
)
|
Embezzlement
expense, net of recoveries
|
|
|
(44,764
|
)
|
|
—
|
|
|
(30,279
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before income taxes
|
|
|
(293,941
|
)
|
|
(67,948
|
)
|
|
(212,257
|
)
|
|
(51,494
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax provision
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(293,941
|
)
|
$
|
(67,948
|
)
|
$
|
(212,257
|
)
|
$
|
(51,494
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per share
|
|
$
|
(0.03
|
)
|
$
|
(0.01
|
)
|
$
|
(0.02
|
)
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of weighted average common shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
outstanding
|
|
|
8,603,198
|
|
|
8,144,963
|
|
|
8,628,793
|
|
|
8,162,222
|
|
See
accompanying notes to condensed financial statements
LGA
HOLDINGS, INC.
Condensed
Statement of Changes in Shareholders' Equity
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
Common
Stock
|
|
paid-in
|
|
Accumulated
|
|
|
|
|
|
Shares
|
|
Amount
|
|
capital
|
|
deficit
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at July 1, 2006
|
|
|
8,592,960
|
|
$
|
8,593
|
|
$
|
1,150,918
|
|
$
|
(914,613
|
)
|
$
|
244,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment
for uncorrected immaterial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
financial
statement differences (Note 2)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,062
|
|
|
12,062
|
|
Contributed
interest (Note 2)
|
|
|
—
|
|
|
—
|
|
|
6,478
|
|
|
—
|
|
|
6,478
|
|
Sale
of stock for cash (Note 2)
|
|
|
215,000
|
|
|
215
|
|
|
149,785
|
|
|
—
|
|
|
150,000
|
|
Net
loss
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(293,941
|
)
|
|
(293,941
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2006
|
|
|
8,807,960
|
|
$
|
8,808
|
|
$
|
1,307,181
|
|
$
|
(1,196,492
|
)
|
$
|
119,497
|
|
See
accompanying notes to condensed financial statements
LGA
HOLDINGS, INC.
Condensed
Statements of Cash Flows
(Unaudited)
|
|
Six
months ended
|
|
|
|
December
31,
|
|
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
$
|
(73,848
|
)
|
$
|
(55,870
|
)
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
Purchase
of equipment and other assets
|
|
|
(35,825
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(35,825
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
Proceeds
from notes payable, related party
|
|
|
60,000
|
|
|
|
|
Proceeds
from sale of common stock
|
|
|
150,000
|
|
|
29,988
|
|
|
|
|
|
|
|
|
|
Net
cash provided byfinancing activities
|
|
|
210,000
|
|
|
29,988
|
|
|
|
|
|
|
|
|
|
Net
change in cash
|
|
|
100,327
|
|
|
(25,882
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash,
beginning of period
|
|
|
—
|
|
|
25,882
|
|
|
|
|
|
|
|
|
|
Cash,
end of period
|
|
$
|
100,327
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
Cash
paid during the year for:
|
|
|
|
|
|
|
|
Income
taxes
|
|
$
|
—
|
|
$
|
—
|
|
Interest
|
|
$
|
—
|
|
$
|
—
|
|
See
accompanying notes to condensed financial statements
LGA
HOLDINGS, INC.
Notes
to Condensed Financial Statements
(Unaudited)
Note
1: Basis of presentation
The
condensed financial statements presented herein have been prepared by our
Company in accordance with the accounting policies in its Form 10-KSB with
financial statements dated June 30, 2006, and should be read in conjunction
with
the notes thereto.
In
our
opinion, all adjustments (consisting only of normal recurring adjustments)
which
are necessary to provide a fair presentation of operating results for the
interim period presented have been made. The results of operations for
the
periods presented are not necessarily indicative of the results to be expected
for the year.
Interim
financial data presented herein are unaudited.
The
accompanying statements of operations and cash flows reflect the six-month
and
three-month period ended December 31, 2006. The comparative figures for
the
six-month and three-month period ended December 31, 2005 have been included
in
the accompanying statements of operations and cash flows for comparison
on an
unaudited basis.
Recent
Accounting Pronouncements
In
July
2006, the FASB finalized and issued Interpretation No. 48 (“FIN 48”), entitled
“Accounting for Uncertainty in Income Taxes - an interpretation of FASB
Statement No. 109,” which defines the threshold for recognizing the benefits of
tax return positions as well as guidance regarding the measurement of the
resulting tax benefits. FIN 48 requires a company to recognize for financial
statement purposes the impact of a tax position if that position is “more likely
than not” to prevail (defined as a likelihood of more than fifty percent of
being sustained upon audit, based on the technical merits of the tax position).
FIN 48 will be effective as of the beginning of the Company’s fiscal year ending
December 31, 2008, with the cumulative effect of the change in accounting
principle recorded as an adjustment to retained earnings. The Company is
currently evaluating the impact of adopting FIN 48 on its financial statements.
In
September 2006, the SEC Staff issued Staff Accounting Bulletin No. 108
(“SAB
108”) to require registrants to quantify financial statement misstatements
that
have been accumulating in their financial statements for years and to correct
them, if material, without restating. Under the provisions of SAB 108,
financial
statement misstatements are to be quantified and evaluated for materiality
using
both balance sheet and income statement approaches. SAB 108 is effective
for
fiscal years ending after November 15, 2006. The Company has evaluated
the
impact of adopting SAB 108 on its financial statements as discussed in
Note 2.
In
September 2006, the FASB issued Statement of Financial Accounting Standards
No.
157 (“SFAS 157”) entitled “Fair Value Measurements”, to define fair value,
establish a framework for measuring fair value and expand disclosures about
fair
value measurements. This statement provides guidance related to the definition
of fair value, the methods used to measure fair value and disclosures about
fair
value measurements. SFAS 157 is effective for financial statements issued
for
fiscal years beginning after November 15, 2007, and interim periods within
those
fiscal years. The Company is currently evaluating the impact of adopting
SFAS
157 on its financial statements.
Note
2: Related Party
Notes
Payable, related party
During
the three months ended 31 December 2006, the Company borrowed a total of
$60,000
from Marty and Sara Williams, both of whom are company officers, directors,
and
shareholders. The loan was made in the form of an unsecured promissory
note
maturing on June 30, 2010, bearing 8% annual interest. All accrued interest
and
principal will be paid at maturity. The note carries no penalty for early
extinguishment. No commissions were paid in connection with this transaction.
LGA
HOLDINGS, INC.
Notes
to Condensed Financial Statements
(Unaudited)
Stock
sold for cash
During
the three months ended 31 December 2006, the Company raised $150,000 in
a
private placement equity offering. The buyer was Third Century II, an investment
partnership controlled by Eric Nickerson. Mr. Nickerson is an officer,
director,
and shareholder of the Company. Third Century II received 215,000 shares
of
common stock, plus a warrant to purchase up to 215,000 shares of the Company’s
common stock from the Company at a price of $1.00 per share. The option
expires
on January 31, 2012. No commissions were paid in connection with this
transaction.
Reclassification
of Notes Payable
As
of
September 30, 2006, our Board of Directors approved the reclassification
of
$87,867 from notes payable to officers to accrued payroll. Accrued interest
related to the notes payable in the amount of $6,478 as of June 30, 3006
was
forgiven by the officers and recorded as contributed capital and is shown
in the
accompanying condensed financial statements.
Note
3: Income taxes
We
record
income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes”. We
have incurred net operating losses during all periods presented resulting
in a
deferred tax asset, which was fully allowed for; therefore, the net benefit
and
expense resulted in $-0- income taxes.
Note
4: Inventory
Inventory
consists of raw materials and finished inventory, which have been accounted
for
at lower of cost or market.
[Missing
Graphic Reference]
At
December 31, 2006, the Company reduced the carrying value of inventory
by
approximately $58,000 to a lower-of-cost-or-market basis for inventory
items
that management considered excessive, obsolete or slow-moving.
Note
5: Embezzlement
During
the
three months ended December 31, 2006, a credit card company reversed a
$30,559
insurance settlement that it had credited to the Company’s account in the
previous quarter. As a result, the Company recognized a $30,559 embezzlement
loss in the current quarter.
Note
6: Subsequent Event
In
January 2007, a former employee of the Company exercised stock options
to
acquire 100,000 newly issued common shares at a price of $.70 per share.
Proceeds were $70,000.
Item
2 - Management's Discussion and Analysis of Financial Condition and Results
of
Operations.
Certain
statements made herein are forward-looking statements under the Private
Securities Litigation Reform Act of 1995. These statements are based on
management's current expectations and estimates; actual results may differ
materially due to certain risks and uncertainties. For example, the ability
of
LGA 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.
Results
of Operations
|
|
Six
Months Ended
|
|
|
|
December
31,
|
|
|
|
|
|
|
|
|
|
2006
|
|
2005
|
|
Revenue
|
|
|
167,428
|
|
|
168,085
|
|
|
|
|
|
|
|
|
|
Cost
of Revenue
|
|
|
85,993
|
|
|
85,666
|
|
|
|
|
|
|
|
|
|
SGA
|
|
|
258,025
|
|
|
141,730
|
|
|
|
|
|
|
|
|
|
R
&
D
|
|
|
70,314
|
|
|
3,743
|
|
|
|
|
|
|
|
|
|
Other
Income(expense)
|
|
|
193
|
|
|
1,289
|
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
|
(2,466
|
)
|
|
(6,183
|
)
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
(293,941
|
)
|
|
(67,948
|
)
|
Six
Months Ended December 31, 2006, Compared with Six Months Ended December
31,
2005
During
the first six months of Fiscal 2007, the Company’s revenue was steady at
$167,428, compared to $168,085 in revenue for the similar period of Fiscal
2006.
During the current period the Company’s sales resulted primarily from inquiries
generated by our web site and customer referrals.
Cost
of
revenue for the six months ended December 31, 2006, was $85,993 compared
to
$85,666 for the 2005 period.
Gross
margin on product sales of 49% for the current period remained unchanged
as
compared to the prior year’s gross margin results.
SG&A
expenses increased to $258,025 for the six months ended December 31, 2006,
compared to $141,730 for the comparable period of 2005. The increase in
SG&A
expenses for the current six-month period is primarily attributable to
the
one-time costs associated with a former bookkeeper’s embezzlement of Company
resources. These expenses include the financial impact of the financial
crimes
themselves, investigation, remediation and ongoing efforts toward corporate
recovery. The Company expects a decrease in SGA expenses associated with
the
embezzlement during the second half of fiscal 2007.
Research
and Development expense for the six months ended December 31, 2006 was
$70,314
compared to $3,743 for the prior period. The $66,571 increase in R&D costs
during the second half of 2006, is attributable to the one-time expensing
of
accumulated prototype product not necessarily intended to be resold and
the
allocation of office and employee overhead used in the creative process.
Net
loss
for the six months ended December 31, 2006, increased to ($293,941) or
($0.03)
per share as compared to ($67,948) or ($0.01) per share for the six months
ending December 31, 2005, primarily due to the reasons discussed
above.
LIQUIDITY
AND CAPITAL RESOURCES
The
Company's cash position increased from $-0- at December 31, 2005 to $100,327
at
December 31, 2006. During the first half of fiscal 2007, the Company
used
$73,848
of cash to fund its operating activities.
LGA
Capital Requirements
During
the six months ended December 31, 2006, an affiliated shareholder purchased
$150,000 of the Company’s securities at $0.70 per share. Subsequent to the end
of the December, 2006 quarter, an existing LGA shareholder exercised 100,000
options for 100,000 shares of restricted common stock equal to $70,000
or $0.70
per share. During the December, 2006 Quarter, the Company issued a $60,000
promissory note to an affiliated shareholder in exchange for a $60,000
operating
loan.
During
the 2006, calendar year the Company successfully retooled two of its marquee
GearManagement solutions: GearSpace 34 and GearWagon 125.
The
Company has ordered initial production of the LittleGiant Trailer 7 (LGT-7)
design from AutoTek Group, New York, an LGA licensee and vendor. The LGT
design
has generated adequate market interest to begin manufacturing the design
in
commercial quantities. LGA expects to begin selling LGT’s from this production
during the Spring of 2007.
The
Company’s new GearWagon 125 design is expected to be available for sale
beginning with April of 2007. The Company is discussing the GearWagon 125
design
with several recreational product related entities regarding the potential
for
branding or co-development efforts.
The
Company was recently notified by the U.S. Patent and Trade office that
its
GullWing and FoldOut claims will issue on February 20, 2007 with the patent
number 7,178,857.
The
Company is working on several product licensing opportunities, that if
completed, have the potential to generate significant growth capital for
our
business. However, no assurance can be given as to whether these discussions
will result in a completed transaction, nor can the Company give any assurances
as to the timing or financial magnitude of these transactions.
The
Company is experiencing a growing level of product interest from consumers,
dealers and OEM's. It will take time and capital to convert this interest
into
product sales and/or licensing revenue. Therefore, even though the Company
anticipates increasing sales revenue going forward, it is not able to forecast
when its sales volume will be sufficient to support the Company's operating
expenses.
LGA
is
pursuing additional growth capital from finance and/or licensing related
sources. There can be no assurance given as to whether LGA will be successful
at
generating the additional growth capital it will need from either of these
sources.
While
a
portion of the current liabilities, approximately $193,000, is owed to
present
officers and/or directors, there can be no assurances that these
officers/directors will not seek payment in the near term.
Inflation
has not had a significant impact on the Company's operations.
PART
II - OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS.
None.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS.
None
ITEM
3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM
5. OTHER INFORMATION.
None.
ITEM
6. EXHIBITS.
31.1
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Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
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31.2
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Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
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32.1
|
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Certification
of Chief Executive Officer Pursuant to Section 18 U.S.C. Section
1350
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32.2
|
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Certification
of Chief Financial Officer Pursuant to Section 18 U.S.C. Section
1350 |
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.
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LGA Holdings, Inc
(Registrant)
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Date: February
15, 2007 |
By: |
/s/ Marty
Williams |
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Marty
Williams
Chief
Executive Officer, President
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