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
OF1934
For the
fiscal year ended
June 30, 2008
[
] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACTOF 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
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87-0405405
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(State
or other jurisdiction of
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
No.)
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3380 North El Paso Street,
Suite G, Colorado Springs, Colorado
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80907
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(Address
of principal executive offices)
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(Zip
Code)
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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 is not required to file reports pursuant to Section 13 or
15(d) of the Exchange Act.
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. [ ]
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. $660,151
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. September 10, 2008:
$1,144,817
State the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date. September 10,
2008: 9,247,885
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 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:
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Silent
Hitch Pin(TM) rigidly couples the connection between the trailer hitch
receiver and any inserted ball mount or accessory;
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TwinTube(TM)
provides a universal mounting structure for carrying gear and equipment
with a receiver style hitch;
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The
fully-enclosed, encapsulated, and easy-opening designs of Aero's product
enclosures for cargo safety, security, and accessibility;
and
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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. 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 up-front fees and ongoing
royalties 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:
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GearWagon
125 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.
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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 designs offer versatility, security and
safety.
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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.
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TwinTube(TM)
System. The TwinTube(TM) ("TT(TM)") System is a patented design that was
included in the technology licensed to Sport Rack International/Valley
Industries, Inc. as discussed above. 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).
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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.
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GearCrate(TM)/LittleGiant
Trailer System(TM). New 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.
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GullWing(TM)
camper. Derivative of Little Giant Trailer(TM). New 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, and the patent
was issued on February 20, 2007. LGA is in discussions
with several RV Original Equipment Manufacturers regarding the
GullWing/Foldout intellectual property.
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TENTRIS(TM)
tent and portable structure. New design for tent and portable enclosure
applications.
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GearDeck
APU(TM). New 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.
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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. During fiscal
2007, a formal licensing agreement with Onan was signed that specifies
per-unit royalty payments and the precise extent of licensing rights for
Onan for the life of LGA’s patents. Since the signing of this
agreement, revenues resulting from it have been
immaterial.
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PIXIE
™ BICYCLE CARRIER. During 2007, Aero developed and patented a
new technology for bicycle carriers. Aero licensed this
technology to Cequent Towing Products, a division of Trimas Corp., at the
prototype stage of development, in January 2008. Aero expects
to receive royalties from this license as Cequent brings products based
upon this technology to market.
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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.
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 began production and shipping of the retooled
GearWagon 125 product in May, 2007. Also in May, 2007, LGA began
shipping its new GearCage™ hitch mounted cargo carrier. In July,
2007, LGA began shipments of its new LGT-7 utility trailer. Also
during 2007, LGA developed and patented the Pixie™ hitch-mounted bicycle
carrier.
In
January 2008, the Company signed a license agreement with Cequent Towing
Products, a division of Trimas Corporation (Cequent). This license
gives Cequent exclusive manufacturing and sales rights to the Company’s entire
line of hitch-mounted cargo carriers, Silent Hitch Pin, and “Pixie” bicycle
carrier, for a two-year period. Following the two-year exclusive
period, Cequent retains non-exclusive rights for the life of the patents
contained in these products. The agreement also contains a right of
first refusal for Cequent on any license agreement that the Company may consider
with other parties for the Company’s GearWagon 125 and Little Giant trailer
products. The agreement provides for a $400,000 upfront fee and
continuing royalties paid by Cequent to the Company for the life of the
patents. Royalties are to be paid at the rate of 7% on Cequent’s net
revenues from sales of products containing the licensed
technology. The Company anticipates that these payments will
substantially alter the Company’s business model going forward throughout Fiscal
2009 and beyond. The Company’s revenue mix will shift proportionally
away from direct sales to distributors, dealers, and end users, toward
proportionally increasing royalty and fee income into the foreseeable
future. The Company plans to recognize revenue from the upfront fee
on a straight-line basis
over the
two year exclusive license period. At June 30, 2008, $100,000 of the
up-front fee has been recognized, leaving $300,000 (carried on the Balance Sheet
as “Unearned Revenue”) to be recognized over the next eighteen
months. Royalties generated under this agreement have reached
material rates of accrual as of June 30, 2008. The company
anticipates that royalties from this agreement will continue to expand for the
foreseeable future.
The
Future
Aero's
future focus is on market, partner and product development. There is a large
consumer market for Aero's products, and Aero’s approach to this market is to
enter it through partnership arrangements with large existing
participants. The license with Cequent discussed above typifies that
approach. We are offering licenses to all of our existing products
under terms similar to the Cequent license. Royalties and other
payments stemming from such licenses are currently allocated to fund continuing
development of our newer ideas.
Objectives
and Sales
Objectives
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To
establish manufacturing, sales and marketing for
Aero's products domestically and
internationally
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To
continue product development and invention work where a clear payoff is
predictable
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To
establish positive operating cash flow and
earnings
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Customer
Direct Sales
Historically,
close to 80% of Aero's revenue has come from direct-to-end-user sales that
resulted from the customer finding Aero's web site. This proportion
has declined and is expected to continue declining as a result of the Cequent
license and other similar licenses the company may issue in the
future. We make our products available directly to consumers
primarily to prove our products’ market viability to potential licensing
partners, such as Cequent.
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 them 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.
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.
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 in order 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 participates in the
roof top cargo carrier market in a limited way with a roof top version of its
GearCage line and with GearBag, a full enclosure cargo bag that works well both
on roof tops and as a full-enclosure accessory to GearCage.
In terms
of product strength, Aero believes it has several distinct advantages over the
competition:
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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.
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The
opening systems enable Aero products to enclose space more
efficiently.
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Aero
enclosed carrier products offer increased security over open
carriers.
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Aero
products are safer than rooftop carriers.
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Patent
filings protect Aero products' ergonomics and
efficiencies.
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Aero
products' aerodynamic efficiencies reduce impact on fuel
economy.
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Multiple
product offerings provide consumers with various options and price
consideration.
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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® trailers, GearSpace™, and GearDeck™ 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 out of sight 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 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 11
years remaining in their respective terms. Aero has eight issued
patents and nine pending patents.
Aero has
patents issued and patents pending protecting its GearBed intellectual
property. Nissan Motor Company has
challenged
certain GearBed claims with the US Patent and Trademark Office. While
Aero intends to pursue its claims vigorously, it 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 480 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 480
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. As a result of the
Cequent license, all significant product assembly operations formerly performed
in-house have been taken over by Cequent. In the future, Aero may
assemble new products, some trailer accessories, and possibly the GearWagon 125
trailer, in-house.
Aero
purchased its initial inventory of LGT-7 trailers from AutoTek China, and
anticipates a continuing and growing supplier relationship with Autotek China
for the LGT-7 and other products utilizing that core technology.
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, Indiana, 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.
Aero
utilizes the shipping services of Yellow, DATS, FedEx, National, LTL, and Old
Dominion among others.
Research
and Development
Aero's
expenditures for research and development have been $94,095 and $42,654. for the
fiscal years ended June 30 2007 and 2008, respectively. See Management's
Discussion and Analysis, below. Aero will continue product
development and invention work where a clear payoff is
anticipated. Aero is considering numerous ways to branch and grow its
current products depending on market opportunity and demand. Aero
continues to work on new product designs and improvements to protect and expand
Aero's existing intellectual property.
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 six 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 seven full-time employees including its officers, Marty Williams,
Sara Williams, and Eric Nickerson. 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,
administrative, 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 that contains audited financial
information) and quarterly reports (Form 10-QSB that contain unaudited 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
. Although
the Company is required to send annual reports to security holders that contain
audited financial information when it solicits proxies for annual meetings of
security holders, LGA has not held an annual meeting since 2004. LGA
has no policy of voluntarily sending such reports to security
holders.
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, 2008, and expects its facilities will be sufficient for the
one-year term of the lease. We expect the lease to be renewable on
nearly unchanged terms should we choose to do so upon its
expiration. The lease rent is $6,100 per month. The space is
currently fully built out in good condition and Aero has no plans to renovate
it. Should Aero decide or be forced to move at expiration of the
current lease, comparable properties both smaller and larger are available at
competitive rates in the same general area as the current facilities. The
current space is adequately covered by insurance.
Aero has
a month-to-month lease on approximately 15,000 square feet of combined office
and warehouse space, plus equipment and improvements, in Elkhart,
Indiana. This facility houses the bulk of Aero’s trailer inventory,
plus other raw material inventories. Pursuant to the terms of the
lease, the lessor employs two people at the facility who perform sales
fulfillment and inventory management functions for Aero.
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.
|
Quarter
Ended
|
Low
Price
|
High
Price
|
|
|
|
|
2006
|
September
30
|
1.30
|
2.95
|
|
December
31
|
.70
|
1.90
|
2007
|
March
31
|
1.01
|
1.65
|
|
June
30
|
1.31
|
1.61
|
|
September
30
|
1.45
|
1.65
|
|
December
31
|
.51
|
1.50
|
2008
|
March
31
|
.51
|
.81
|
|
June
30
|
.51
|
.51
|
|
|
|
|
The
quotations reflect inter-dealer prices, without markup, markdown or commission
and may not represent actual transactions. The sources of prices were
Yahoo.com and BigCharts.com.
The
number of shareholders of record for LGA's common stock as of June 30, 2008 was
351, which include depositories and broker/dealers who hold shares of common
stock in "nominee" or "street" names.
The
following table provides information as of the most recently completed fiscal
year with respect to compensation plans (including individual compensation
agreements) under which equity securities of the Company are authorized for
issuance.
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 compensation
plans (excluding securities reflected in column (a))
|
|
(a)
|
(b)
|
(c)
|
Equity
compensation plans approved by security holders
|
1,635,000
|
$1.01
|
189,635
|
Equity
plans not approved by security holders
*
|
1,870,308
|
$.93
|
0
|
Total
|
3,505,308
|
$..97
|
189,653
|
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
|
|
December
2006
|
|
|
215,000
|
|
|
|
150,500.00
|
|
January
2007
|
|
|
100,000
|
|
|
|
70,000.00
|
|
March
2007
|
|
|
25,000
|
|
|
|
31,250.00
|
|
April
2007
|
|
|
40,000
|
|
|
|
50,000.00
|
|
July
2007
|
|
|
40,000
|
|
|
|
50,000.00
|
|
July
2007
|
|
|
60,000
|
|
|
|
75,000.00
|
|
September
2007
|
|
|
35,350
|
|
|
|
25,100.00
|
|
January
2008
|
|
|
43,148
|
|
|
|
30,203.60
|
|
April 2008
|
|
|
30,204
|
|
|
|
21,142.80
|
|
All sales
were either negotiated and approved by the Company's Board of Directors, or
accomplished pursuant to an option exercise at the contracted exercise
price. Each of the purchases, except those occurring in July, 2007,
was made by an individual investor who was an existing
shareholder. 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. The company is not aware of any
open market purchases by affiliates.
Item
6 – Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
Selected
Operating Data
|
|
Fiscal
Year Ended
|
|
|
|
June
30,
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
660,151
|
|
|
|
408,707
|
|
|
|
|
|
|
|
|
|
|
Cost
of revenue
|
|
|
417,597
|
|
|
|
261,996
|
|
|
|
|
|
|
|
|
|
|
S
G & A (excluding Share-based compensation)
|
|
|
474,009
|
|
|
|
414,713
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation
|
|
|
453,900
|
|
|
|
295,800
|
|
|
|
|
|
|
|
|
|
|
Research
& Development
|
|
|
42,654
|
|
|
|
94,095
|
|
|
|
|
|
|
|
|
|
|
Embezzlement
(expense), net of recoveries
|
|
|
(1,700
|
)
|
|
|
(44,764
|
)
|
|
|
|
|
|
|
|
|
|
Net
(loss)
|
|
|
(741,686
|
)
|
|
|
(708,180
|
)
|
Year
Ended June 30, 2008, compared to Year Ended June 30, 2007.
During
Fiscal 2008, the Company’s revenue rose to $660,151 compared to $408,707 in
revenue for Fiscal 2007. The increase stemmed primarily from
increased inquiries generated by our website and customer referrals, from
expanded royalty and fee income, and from sales of new products in 2008 that
were not available in 2007. Due to the transition of our
hitch-mounted product line to Cequent and to the newness of our trailer
products, seasonality of our sales is difficult to detect and
predict. At least through the period during which the Cequent upfront
license fee will be amortized (through December 31, 2009), and perhaps beyond,
we anticipate that royalty and fee income will increase as a proportion of our
total revenues.
Cost of
revenue for Fiscal 2008 was $417,597 compared to $261,996 for Fiscal
2007. Gross margin held steady at approximately 36% in both years
primarily due to a slight narrowing of margins on product sales, offset by the
rising proportion of royalty revenues, carrying 100% gross margins, to total
revenue. The company anticipates continuing increases in the royalty
proportion of total revenue for the foreseeable future.
Selling,
General & Administrative expenses (excluding Share-based compensation)
increased to $474,009 for Fiscal 2008, compared to $414,713 for Fiscal
2007. The increase is primarily attributable to increases in a broad
range of overhead expenses associated with the increase in sales.
Share-based compensation (included as a
component of S G & A in the accompanying Statement of Operations) is the
cost to the Company of qualified and non-qualified stock options awarded during
the Fiscal Year, valued in accordance with the Black-Scholes option pricing
formula. The computed value of these awards totaled $453,900 in
Fiscal 2008 versus $
295,800
in Fiscal 2007. The options
awarded during both years went to management personnel and non-management
associates of the Company as incentive for services anticipated to be rendered
beyond these periods indefinitely into the future. The value of the
awards should not be considered indicative of future option award
values.
Research
and Development expense for Fiscal 2008 was $42,654 compared to $94,095 for the
prior year. The decrease is attributable to reorientation of the
Company’s product development efforts towards improvements and accessories to
our primary products, given that the relatively costly development of our
primary products was substantially completed in 2007.
The
Company suffered substantial embezzlement losses due to activities of a former
employee during fiscal 2006 and 2007. Embezzlement expenses, net of
recoveries, declined to $1,700 during Fiscal 2008, from $44,764 in Fiscal 2007,
and we anticipate no further losses or recoveries. We have
implemented internal control procedures which we believe will prevent any future
losses from embezzlement.
Net loss
for Fiscal 2008 increased to ($741,686) or ($0.08) per share compared to
($708,180) or ($0.08) in the prior year primarily due to the reasons discussed
above.
LIQUIDITY
AND CAPITAL RESOURCES
The
Company’s cash position was $19,914 at June 30, 2008, versus $-0- at June 30,
2007. Occasional reductions of our cash balance to $-0-, called an
“overdraft” condition, have all been for brief periods in immaterial amounts and
have generated no interest expenses. The company has met all of its
financial obligations in a timely manner. During Fiscal 2008, the
Company used $143,937 to fund operating activities. This negative
operating cash flow was substantially less than the $741,686 net loss in Fiscal
2008 primarily due to $453,900 of stock-based compensation (a non-cash expense),
and classification as unearned revenue of $300,000 of the $400,000 upfront
license fee paid by Cequent.
LGA
Capital Requirements
During
Fiscal 2007 and 2008, the Company raised operating capital from investors
through the following transactions: In October, 2006, an affiliated
investor (the Company President) loaned the Company $60,000 on an unsecured
promissory note carrying 8% annual interest, maturing June 30,
2010. Without this immediate capital infusion, the company would not
have been able to continue operations in the wake of the embezzlement discussed
in Note 8 to the Financial Statements. In December, 2006, an
affiliated investor purchased 215,000 units, for $150,000. Each unit
was comprised of one share of restricted common stock and one 5-year warrant
exercisable at $1.00. This purchase completed the Company’s existing
private placement offering. In January, 2007, an unaffiliated
existing shareholder exercised 100,000 options for 100,000 restricted common
shares for $70,000 or $0.70 per share. In March, 2007, an
unaffiliated investor purchased 25,000 shares of restricted common stock
for $31,250 or $1.25 per share in a private placement. In April,
2007, an unaffiliated investor purchased 40,000 shares on the same terms,
for $50,000. In July, 2007, another unaffiliated investor
purchased 60,000 shares on the same terms, for $75,000, the April purchaser
bought another 40,000 shares, again from the same offering, for $50,000, and a
director loaned the Company $36,000 in the form of an unsecured demand note
carrying 8% annual interest. In September, 2007, the January
purchaser exercised options for 35,350 restricted common shares for $24,745, and
an affiliate loaned the Company $88,056 on an unsecured note carrying 8%
interest maturing December 15, 2007. No commissions were paid on
these transactions. At June 30, 2008, all of the borrowings discussed
above, with their accrued interest, have been paid off, excepting only the
accrued interest and $55,000 remaining principal balance on the promissory note
to the Company President. These debt reductions were made possible
primarily by the $400,000 upfront license fee from Cequent, received in January,
2008. The company regards this fee as non-recurring in the ordinary
course of business.
The
Company reported shareholder equity of $65,969 as of June 30, 2008, as compared
with $152,307 as of June 30, 2007.
The
Company does not anticipate any need for additional equity capital
infusions. We anticipate that licensing and product sales revenues,
and borrowings will be sufficient to fund all of our operating activities and
present growth plans. In the event that revenues fall short of our
anticipation, or the Company decides to respond to expanding growth
opportunities in the future, additional capital may be required. The
Company cannot give any assurance that such additional capital would be
available on terms acceptable to shareholders.
The
Company is working on several product licensing opportunities that, if
completed, have the potential to generate significant revenues beyond those
figuring into our current plans. 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 anticipates improvement in operating margins due to the proportional
shift of our revenue mix toward royalties and fees described above, and a
possible reduction in SG&A as we eliminate inventory and manufacturing of
products that have been licensed to Cequent. In the event that these
anticipations prove mistaken, the Company can provide shareholders with no
assurance that any required additional capital will be available on terms
acceptable to shareholders.
Our
auditor expresses substantial doubt as to the company’s ability to continue as a
going concern. He bases this doubt on our history of operating losses
as of June 30, 2008. 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 through June 30,
2008. Based on our current operating plans, management believes
that proceeds from future revenues and future borrowings 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 obtaining borrowed funds or selling additional shares of common
stock to the public if necessary.
While a
portion of total liabilities, approximately $55,000, 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, 2008
(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
Sheets at June 30, 2008 and 2007
|
F-3
|
|
|
|
Statements
of Operations, for the years ended
|
|
|
June
30, 2008 and 2007
|
F-4
|
|
|
|
Statement
of Changes in Shareholders' Equity for the period from
|
|
|
July
1, 2006 through June 30, 2008
|
F-5
|
|
|
|
Statements
of Cash Flows, for the years ended
|
|
|
June
30, 2008 and 2007
|
F-6
|
|
|
|
Notes
to financial statements
|
F-7
|
Report
of Independent Registered Public Accounting Firm
The Board
of Directors and Shareholders
LGA
Holdings, Inc.:
We have
audited the accompanying balance sheets of LGA Holdings, Inc. as of June
30, 2008 and 2007, and the related statements of operations, changes in
shareholders’ equity, and cash flows for the years ended June 30, 2008 and
2007. 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. The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no
such opinion. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, 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,
2008 and 2007, and the results of its operations and its cash flows for the
years ended June 30, 2008 and 2007 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 since
inception, which raises substantial doubt about its ability to continue as a
going concern. Management’s plans regarding this matter are also
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
Cordovano
and Honeck LLP
Englewood,
Colorado
September
10, 2008
LGA
HOLDINGS, INC.
Balance
Sheets
|
|
For
the Years Ended
|
|
|
|
June
30,
|
|
|
|
2008
|
|
|
2007
|
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
|
|
$
|
19,914
|
|
|
$
|
—
|
|
Accounts
receivable (Note 1)
|
|
|
85,914
|
|
|
|
9,683
|
|
Inventory,
at lower cost or market (Note 3)
|
|
|
303,048
|
|
|
|
165,851
|
|
Prepaid
expenses
|
|
|
4,456
|
|
|
|
20,084
|
|
Total
current assets
|
|
|
413,332
|
|
|
|
195,618
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, at cost,
|
|
|
|
|
|
|
|
|
net
of accumulated depreciation of $177,320 and $140,860 (Note
3)
|
|
|
119,728
|
|
|
|
135,709
|
|
Intangible
assets, at cost,
|
|
|
|
|
|
|
|
|
net
of accumulated amortization of $23,856 and $20,501 (Note
3)
|
|
|
96,790
|
|
|
|
97,777
|
|
Other
assets
|
|
|
2,686
|
|
|
|
2,606
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
632,536
|
|
|
$
|
431,709
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Bank
overdraft
|
|
$
|
—
|
|
|
$
|
238
|
|
Accounts
payable
|
|
|
57,679
|
|
|
|
93,199
|
|
Accrued
payroll
|
|
|
39,825
|
|
|
|
123,160
|
|
Accrued
interest, related party (Note 2)
|
|
|
7,833
|
|
|
|
2,804
|
|
Deferred
revenue-current portion (Note 4)
|
|
|
100,000
|
|
|
|
—
|
|
Total
current liabilities
|
|
|
205,337
|
|
|
|
219,401
|
|
|
|
|
|
|
|
|
|
|
Long-term
liabilities:
|
|
|
|
|
|
|
|
|
Loan
payable (Note 3)
|
|
|
106,391
|
|
|
|
—
|
|
Notes
payable, related party (Note 2)
|
|
|
55,000
|
|
|
|
60,000
|
|
Deferred
revenue-noncurrent portion (Note 4)
|
|
|
199,839
|
|
|
|
—
|
|
Total
long-term liabilities
|
|
|
361,230
|
|
|
|
60,000
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
566,567
|
|
|
|
279,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (Note 7)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Shareholders’
equity (Notes 2 and 5):
|
|
|
|
|
|
|
|
|
Common
stock, $.001 par value; authorized 100,000,000
shares,
|
|
|
|
|
|
|
|
|
issued
and outstanding, 9,247,885 shares
|
|
|
9,182
|
|
|
|
8,973
|
|
Additional
paid-in capital
|
|
|
2,409,204
|
|
|
|
1,754,066
|
|
Retained
deficit
|
|
|
(2,352,417
|
)
|
|
|
(1,610,732
|
)
|
|
|
|
|
|
|
|
|
|
Total
shareholders' equity
|
|
|
65,969
|
|
|
|
152,307
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and shareholders' equity
|
|
$
|
632,536
|
|
|
$
|
431,709
|
|
See
accompanying notes to financial statements
LGA
HOLDINGS, INC.
Statements
of Operations
|
|
For
the Years Ended
|
|
|
|
June
30,
|
|
|
|
2008
|
|
|
2007
|
|
Sales
and Revenue:
|
|
|
|
|
|
|
Product
sales
|
|
$
|
547,879
|
|
|
$
|
345,411
|
|
Royalty
revenue (Note 4)
|
|
|
112,272
|
|
|
|
63,296
|
|
|
|
|
|
|
|
|
|
|
Total
sales and revenues
|
|
|
660,151
|
|
|
|
408,707
|
|
|
|
|
|
|
|
|
|
|
Costs
and expenses:
|
|
|
|
|
|
|
|
|
Costs
of sales and revenue
|
|
|
417,597
|
|
|
|
261,996
|
|
Research
and development
|
|
|
42,654
|
|
|
|
94,095
|
|
General
and administrative
|
|
|
927,909
|
|
|
|
710,513
|
|
|
|
|
|
|
|
|
|
|
Total
costs and expenses
|
|
|
1,388,161
|
|
|
|
1,066,604
|
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
|
(728,010
|
)
|
|
|
(657,897
|
)
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
Other
income
|
|
|
90
|
|
|
|
229
|
|
Interest
expense
|
|
|
(12,067
|
)
|
|
|
(5,748
|
)
|
Embezzlement
expense, net of recoveries (Note 8)
|
|
|
(1,700
|
)
|
|
|
(44,764
|
)
|
|
|
|
|
|
|
|
|
|
Loss
before income taxes
|
|
|
(741,686
|
)
|
|
|
(708,180
|
)
|
|
|
|
|
|
|
|
|
|
Income
tax provision (Notes 1 and 6)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(741,686
|
)
|
|
$
|
(708,180
|
)
|
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per share
|
|
$
|
(0.08
|
)
|
|
$
|
(0.08
|
)
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding
|
|
|
9,011,826
|
|
|
|
8,703,345
|
|
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, 2006
|
|
|
8,592,960
|
|
|
$
|
8,593
|
|
|
$
|
1,150,918
|
|
|
$
|
(914,612
|
)
|
|
$
|
244,899
|
|
Adjustment
for uncorrected immaterial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
financial
statement differences (Note 9)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,061
|
|
|
|
12,061
|
|
Contributed
interest (Note 2)
|
|
|
—
|
|
|
|
—
|
|
|
|
6,478
|
|
|
|
—
|
|
|
|
6,478
|
|
Common
stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
exercised
at $.70 per share (Note 5)
|
|
|
100,000
|
|
|
|
100
|
|
|
|
69,900
|
|
|
|
—
|
|
|
|
70,000
|
|
Sale
of units at $.70 per unit (Note 2)
|
|
|
215,000
|
|
|
|
215
|
|
|
|
149,785
|
|
|
|
—
|
|
|
|
150,000
|
|
Sale
of common stock at $1.25 per share (Note 5)
|
|
|
65,000
|
|
|
|
65
|
|
|
|
81,185
|
|
|
|
—
|
|
|
|
81,250
|
|
Stock
options granted (Notes 2 and 5)
|
|
|
—
|
|
|
|
—
|
|
|
|
295,800
|
|
|
|
—
|
|
|
|
295,800
|
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(708,180
|
)
|
|
|
(708,180
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at June 30, 2007
|
|
|
8,972,960
|
|
|
|
8,973
|
|
|
|
1,754,066
|
|
|
|
(1,610,731
|
)
|
|
|
152,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
exercised
at $.71 per share (Note 5)
|
|
|
35,350
|
|
|
|
35
|
|
|
|
25,065
|
|
|
|
—
|
|
|
|
25,100
|
|
Common
stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
exercised
at $.70 per share (Note 5)
|
|
|
73,352
|
|
|
|
73
|
|
|
|
51,274
|
|
|
|
—
|
|
|
|
51,347
|
|
Sale
of common stock at $1.25 per share (Note 5)
|
|
|
100,000
|
|
|
|
100
|
|
|
|
124,900
|
|
|
|
—
|
|
|
|
125,000
|
|
Stock
options granted (Notes 2 and 5)
|
|
|
—
|
|
|
|
—
|
|
|
|
453,900
|
|
|
|
—
|
|
|
|
453,900
|
|
Adjustment
(Note 5)
|
|
|
66,223
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(741,686
|
)
|
|
|
(741,686
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at June 30, 2008
|
|
|
9,247,885
|
|
|
$
|
9,182
|
|
|
$
|
2,409,204
|
|
|
$
|
(2,352,417
|
)
|
|
$
|
65,969
|
|
See
accompanying notes to financial statements
LGA
HOLDINGS, INC.
Statements
of Cash flows
|
|
For
the Years Ended
|
|
|
|
June
30,
|
|
|
|
2008
|
|
|
2007
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(741,686
|
)
|
|
$
|
(708,180
|
)
|
Adjustments
to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
used
by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
39,815
|
|
|
|
31,638
|
|
Share-based
payment (Notes 2 and 5)
|
|
|
453,900
|
|
|
|
295,800
|
|
Contributed
interest (Note 2)
|
|
|
—
|
|
|
|
6,478
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Receivables,
inventory and other assets
|
|
|
(81,740
|
)
|
|
|
12,243
|
|
Payables,
deferred income and other liabilities
|
|
|
185,775
|
|
|
|
(74,235
|
)
|
Net
cash used in
|
|
|
|
|
|
|
|
|
operating
activities
|
|
|
(143,936
|
)
|
|
|
(436,256
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase
of equipment and other assets
|
|
|
(22,848
|
)
|
|
|
(75,494
|
)
|
|
|
|
|
|
|
|
|
|
Net
cash used in
|
|
|
|
|
|
|
|
|
investing
activities
|
|
|
(22,848
|
)
|
|
|
(75,494
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds
from short-term borrowing, related party (Note 2)
|
|
|
124,056
|
|
|
|
—
|
|
Proceeds
from debt, related party (Note 2)
|
|
|
—
|
|
|
|
60,000
|
|
Repayment
of short-term borrowing, related party (Note 2)
|
|
|
(124,056
|
)
|
|
|
—
|
|
Repayment
of short-term borrowing, other
|
|
|
(9,749
|
)
|
|
|
—
|
|
Repayment
of debt, related party (Note 2)
|
|
|
(5,000
|
)
|
|
|
—
|
|
Proceeds
from collection of stock
|
|
|
|
|
|
|
|
|
subscription
receivable (Note 5)
|
|
|
—
|
|
|
|
150,500
|
|
Proceeds
from sale of common stock (Notes 2 and 5)
|
|
|
201,447
|
|
|
|
301,250
|
|
Net
cash provided by
|
|
|
|
|
|
|
|
|
financing
activities
|
|
|
186,698
|
|
|
|
511,750
|
|
|
|
|
|
|
|
|
|
|
Net
change in cash and
|
|
|
|
|
|
|
|
|
cash
equivalents
|
|
|
19,914
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents:
|
|
|
|
|
|
|
|
|
Beginning
of year
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
End
of year
|
|
$
|
19,914
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Cash
paid during the year for:
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Noncash
investing and financing transactions:
|
|
|
|
|
|
|
|
|
Debt
converted to accrued payroll (Note 2)
|
|
$
|
—
|
|
|
$
|
106,408
|
|
Purchase
of inventory with loan payable
|
|
$
|
106,391
|
|
|
$
|
—
|
|
See
accompanying notes to financial statements
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 sell our products directly
to distributors, dealers, and end-user customers.
Going
Concern
Inherent
in our business are various risks and uncertainties, including 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 through June 30, 2008. Based on our current
operating plans, management believes that proceeds from future revenues, future
debt financing, and future 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 during fiscal
2009.
Fair
Values of Financial Instruments
Statement
of Financial Accounting Standards No. 107 (“SFAS 107”),
Disclosures about Fair Value of
Financial Instruments
requires disclosure of the fair value of financial
instruments held by the Company. SFAS 107 defines the fair value of financial
instruments as the amount at which the instrument could be exchanged in a
current transaction between willing parties. The carrying value of
financial instruments including cash, receivables, prepaid expenses, and
accounts payable approximates their fair value at the reporting balance sheet
date due to the relatively short-term nature of these instruments. The
fair market value of long-term debt cannot be determined due to a lack of
comparability of similar market instruments.
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.
LGA
HOLDINGS, INC.
Notes
to Financial Statements
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, 2008, there
were no cash equivalents.
Concentrations
We
purchase our plastic shells from two suppliers. The purchases represented
approximately 5% and 20% of cost of sales for the years ended June 30, 2008 and
2007, respectively. Although there are a limited number of manufacturers of
plastic shells, management believes that other suppliers could provide similar
shells on comparable terms.
Accounts
Receivable
Trade
receivable consists of amounts due from customers, which are mainly end-users
and dealers. We generally 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, 2008, we considered accounts receivable to be fully collectible;
accordingly, no allowance for doubtful accounts is required.
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 and Middlebury, Indiana.
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.
LGA
HOLDINGS, INC.
Notes
to Financial Statements
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.
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, 2008 and 2007.
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
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, 2008, 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.
LGA
HOLDINGS, INC.
Notes
to Financial Statements
Advertising
Costs
All
advertising costs are expensed as incurred. Advertising expenses were $65,068
and $60,896 for the years ended June 30, 2008 and 2007,
respectively.
Research
and Development Expenses
Research
and development expenses were incurred in fiscal 2008 and 2007 and totaled
$42,654 and $94,095, respectively. R&D costs are expensed as
incurred.
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
Effective
July 1, 2005, the Company adopted SFAS No. 123 (Revised 2004),
Share-Based Payment
, which
requires that compensation related to all stock-based awards, including stock
options, be recognized in the financial statements based on their estimated
grant-date fair value. We have previously recorded stock compensation pursuant
to the intrinsic value method under APB Opinion No. 25, whereby
compensation was recorded related to performance share and unrestricted share
awards and no compensation was recognized for most stock option awards. We are
using the modified prospective application method of adopting SFAS
No. 123R, whereby the estimated fair value of unvested stock awards granted
prior to July 1, 2005 will be recognized as compensation expense in periods
subsequent to June 30, 2005, based on the same valuation method used in our
prior pro forma disclosures. We have estimated expected forfeitures, as required
by SFAS No. 123R, and we are recognizing compensation expense only for
those awards expected to vest. Compensation expense is amortized over the
estimated service period, which is the shorter of the award’s time vesting
period or the derived service period as implied by any accelerated vesting
provisions when the common stock price reaches specified levels. All
compensation must be recognized by the time the award vests. The cumulative
effect of initially adopting SFAS No. 123R was immaterial.
Loss
Per Share
SFAS 128,
Earnings Per Share
,
requires presentation of “basic” and “diluted” earnings per share on the face of
the statements of operations for all entities with complex capital structures.
Basic earnings per share are computed by dividing net income by the weighted
average number of common shares outstanding for the period. Diluted earnings per
share reflect the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted during the
period. Dilutive securities having an anti-dilutive effect on diluted
earnings per share are excluded from the calculation. At June 30,
2008, the company has options outstanding that could be exercised representing a
total of 3,505,310 additional shares. All have been excluded from the
weighted average share calculation because they would be
anti-dilutive.
LGA
HOLDINGS, INC.
Notes
to Financial Statements
The
weighted average number of common shares outstanding was calculated based upon
post-split shares for all periods presented.
New
Accounting Pronouncements
In
June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes” (“FIN 48”). FIN 48, which is an interpretation of
SFAS No. 109, “Accounting for Income Taxes,” provides guidance on the
manner in which tax positions taken or to be taken on tax returns should be
reflected in an entity’s financial statements prior to their resolution with
taxing authorities. The Company is required to adopt FIN 48 during the first
quarter of fiscal 2008. The Company is currently evaluating the requirements of
FIN 48 and has not yet determined the impact, if any; this interpretation may
have on its financial statements.
In
September 2006, the FASB issued SFAS No. 157, “Fair Value
Measurements” (“SFAS 157”). This statement defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
and expands disclosures about fair value measurements. The provisions of SFAS
157 apply under other accounting pronouncements that require or permit fair
value measurements. We are required to adopt SFAS 157 effective for our fiscal
year 2009. The impact on our financial statements has not been
determined.
In
February 2007, the FASB issued SFAS No.159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (“SFAS 159”). This statement permits
companies to measure many financial instruments and certain other items at fair
value. We are required to adopt SFAS 159 effective for our fiscal year 2009. The
impact on our financial statements has not been determined.
(2)
Related Party Transactions
In
September 2007, an affiliate loaned the Company $88,056 in the form of an
unsecured note carrying 8% annual interest, which matured on December 15,
2007. It was agreed that if the note is not paid on the due date, the
entire principal and accrued interest shall continue to draw interest at the
rate of 8%. In January 2008, the principal of $88,056 and accrued
interests of $2,238 were paid in full.
In July
2007, a director loaned the Company $36,000 in the form of an unsecured demand
note carrying 8% annual interest. In January 2008, the principal of
$36,000 and accrued interests of $1,433 were paid in full.
During
the year ended June 30, 2007, the Company signed promissory notes totaling
$60,000 payable to its President, for working capital
purposes. The promissory notes bear interest rates of 8% per
annum and are due on June 30, 2010. During the year ended June 30,
2008, the principal of $5,000 was paid. We incurred interest expense of $4,700
on the notes for the year ended June 30, 2008. At June 30, 2008,
accrued interest related to the promissory notes totaled $7,833 and is reflected
in the accompanying financial statements.
In March
2007, we granted to one of our directors an option to purchase a total of
100,000 shares of the Company’s common stock. The option carries an
exercise price of $1.75 per share and vested at the date of grant. We
determined the fair value of the options at $1.65 per share and recorded
share-based payment $165,000 in accordance with SFAS 123R. See
footnote 5.
In
December 2006, we conducted a private placement offering whereby we sold 215,000
units to an affiliate at $.70 per unit or $150,000. Each unit is
comprised of one share of the Company’s common stock and one option to purchase
the Company’s common stock at $1.00 per share.
LGA
HOLDINGS, INC.
Notes
to Financial Statements
In
September 2006, our Board of Directors approved the reclassification of $106,408
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 financial statements.
(3)
Balance Sheet Components
Inventory
At June
30, 2008, inventory consisted of:
Raw
materials
|
|
$
|
77,710
|
|
|
Finished
goods
|
|
|
225,339
|
|
|
|
|
$
|
303,049
|
|
|
In
February, 2008, we purchased 60 completed GearWagon 125 Sport Utility Trailers
costing $116,140 from our outsource manufacturer, Elkhart Sales and Service
(“ESS”) of Elkhart, Indiana. We financed the purchase through ESS under terms
calling for monthly interest payments at 6 percent and principal payments are
due upon the sale of trailers. The balance of loan payable, including
accrued interest, as of June 30, 2008 is $106,391. All interest under the loan
has been charged to expense in the accompanying financial
statements.
Property
and Equipment
At June
30, 2008, major classes of property and equipment were:
Leasehold
improvements
|
|
$
|
4,212
|
|
|
Furniture
and fixtures
|
|
|
25,377
|
|
|
Equipment
|
|
|
94,200
|
|
|
Tooling,
held offsite
|
|
|
173,259
|
|
|
|
|
|
297,048
|
|
|
Less:
accumulated depreciation
|
|
|
(177,320
|
)
|
|
|
|
$
|
119,728
|
|
|
Depreciation
expense during the years ended June 30, 2008 and 2007 totaled $36,460 and
$30,050, respectively.
LGA
HOLDINGS, INC.
Notes
to Financial Statements
Intangible
Assets
At June
30, 2008, intangible assets consisted of:
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
Amortization
|
|
|
|
|
Total
|
|
|
Period
|
|
|
Patents,
net of $23,856 in accumulated
|
|
|
|
|
|
|
|
amortization
|
|
$
|
43,201
|
|
|
13
years
|
|
|
Deferred
patent application costs
|
|
|
53,589
|
|
|
|
n/a
|
|
|
|
|
$
|
96,790
|
|
|
|
|
|
|
Estimated
annual amortization expenses for the next 5 years are as follows for years
ending June 30:
2009
|
|
$
|
3,172
|
|
|
2010
|
|
$
|
3,172
|
|
|
2011
|
|
$
|
3,172
|
|
|
2012
|
|
$
|
3,172
|
|
|
2013
|
|
$
|
3,172
|
|
|
Amortization
expense during the years ended June 30, 2008 and 2007 totaled $3,355 and $1,588,
respectively.
(4)
Unearned Revenue
In
January 2008, we executed a license agreement (the “Agreement”) with Cequent
Towing Products (“Cequent”), a division of Trimas
Corporation. Under the terms of the Agreement, we granted Cequent
exclusive manufacturing and sales rights to our entire line of hitch-mounted
cargo carriers, the Silent Hitch Pin, and the “Pixie” bicycle carrier, for a
two-year period in exchange for an $400,000 upfront fee and royalty rights for
the life of the related patents. Following the two-year exclusive
period, Cequent will have non-exclusive rights for the life of the related
patents. The Agreement also gives Cequent a right of first refusal on any
license agreement that the Company may consider with other parties for the
Company’s GearWagon 125 and Little Giant trailer products. We
recognize revenue from the upfront fee on a straight-line basis over the
two-year exclusive license period. We recognized $100,000 in royalty
revenue related to this license in fiscal year 2008. The balance of
unearned revenue was $299,839 and $-0- at June 30, 2008 and 2007,
respectively.
We expect
our revenue mix to shift from direct sales to distributors, dealers, and end
users, to royalty and fee income for the foreseeable future.
(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.
LGA
HOLDINGS, INC.
Notes
to Financial Statements
Sale
of Common Stock
The
adjustment of 66,223 shares shown in the Statement of Changes in Shareholders’
Equity is to correct the number of shares issued and outstanding in connection
with the reverse split effected on 2004. We determined that no restatement of
prior year financial statements is required since there is no impact on earnings
per share calculation.
In April
2008, an unaffiliated existing investor exercised options at $.70 to acquire
30,204 common shares of the Company. Cash proceeds to the Company
were $21,143.
In
January 2008, an unaffiliated existing investor exercised options at $.70 to
acquire 43,148 common shares of the Company. Cash proceeds to the
Company were $30,204.
In
September 2007, a former employee exercised options at $0.71 to acquire 35,350
common shares of the Company. Cash proceeds to the Company were
$25,100.
In July
2007, two unaffiliated investors purchased a total of 100,000 shares of our
common stock in a private placement offering for total cash proceeds of $125,000
or $1.25 per share. No commissions were paid in connection with this
transaction.
Stock
Options
On
November 26, 2007, the Company granted to certain officers and certain employees
options to purchase an aggregate of 730,000 shares of the Company’s common stock
at an exercise price of $1.50 per share under the 2005 Equity Incentive
Plan. The options vested on the date of grant and expire on November
26, 2012. The quoted market price of the stock was $0.51 per share on
the date of grant. The Company valued the options at $0.51 per share,
or $372,300, in accordance with SFAS 123(R). Stock-based compensation
of $372,300 was recorded in the accompanying financial statements.
The fair
value of the options was estimated at the date of grant using the Black-Scholes
option-pricing model with the following assumptions:
Risk-free
interest rate
|
3.23%
|
|
Dividend
yield
|
0.00%
|
|
Volatility
factor.
|
287.00%
|
|
Weighted
average expected life
|
5
years
|
|
On
November 26, 2007, the Company granted an officer and two vendors options to
purchase an aggregate of 160,000 shares of the Company’s common stock at an
exercise price of $1.50 per share. The options vested on the date of
grant and expire on November 26, 2017. The quoted market price of the
stock was $0.51 per share on the date of grant. The Company valued
the options at $0.51 per share, or $81,600 in accordance with SFAS
123(R). Stock-based compensation of $81,600 was recorded in the
accompanying financial statements.
LGA
HOLDINGS, INC.
Notes
to Financial Statements
The fair
value of the options was estimated at the date of grant using the Black-Scholes
option-pricing model with the following assumptions:
Risk-free
interest rate
|
3.83%
|
|
Dividend
yield
|
0.00%
|
|
Volatility
factor
|
287.00%
|
|
Weighted
average expected life
|
10
years
|
|
Total
compensation cost for share-based payment arrangements at June 30, 2008 and
2007:
|
|
2008
|
|
|
2007
|
|
|
Stock
options, related party
|
|
$
|
423,300
|
|
|
$
|
165,000
|
|
|
Stock
options, other
|
|
|
30,600
|
|
|
|
130,800
|
|
|
Total
compensation cost
|
|
|
453,900
|
|
|
|
295,800
|
|
|
Income
tax
|
|
|
—
|
|
|
|
—
|
|
|
Net
compensation cost
|
|
$
|
453,900
|
|
|
$
|
295,800
|
|
|
At June
30, 2008, all compensation costs have been recognized, as all options granted
were fully vested on the grant date.
A summary
of changes in the number of stock options outstanding for the years ended June
30, 2008 and 2007 is as follows:
|
|
|
|
|
|
Weighted
|
|
Weighted
|
|
|
|
|
|
|
|
|
Average
|
|
Average
|
|
|
|
|
|
|
|
|
Exercise
|
|
Remaining
|
|
Aggregate
|
|
|
|
|
|
|
Price
|
|
Contractual
|
|
Intrinsic
|
|
|
|
|
Shares
|
|
Per
Share
|
|
Life
|
|
Value
|
Outstanding
at June 30, 2006
|
2,552,547
|
|
$0.70
|
|
6.28
yeaers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
395,000
|
|
$1.34
|
|
6.6
years
|
|
|
Exercised
|
(100,000)
|
|
$0.70
|
|
N/A
|
|
|
Cancelled/Expired
|
(104,952)
|
|
$0.70
|
|
N/A
|
|
|
Outstanding
at June 30, 2007
|
2,742,595
|
|
$0.79
|
|
5.8
years
|
|
$ 333,250
|
Granted.
|
890,000
|
|
$1.50
|
|
5.32
years
|
|
|
Exercised.
|
(35,350)
|
|
$0.71
|
|
N/A
|
|
|
Exercised
|
(73,352)
|
|
$0.70
|
|
N/A
|
|
|
Cancelled/Expired
|
(18,585)
|
|
$0.70
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at June 30, 2008
|
3,505,308
|
|
$0.97
|
|
5.25
years
|
|
$ 333,250
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at June 30, 2008
|
3,505,308
|
|
$0.97
|
|
5.25
years
|
|
$ 333,250
|
LGA
HOLDINGS, INC.
Notes
to Financial Statements
(6)
Income Taxes
A
reconciliation of U.S. statutory federal income tax rate to the effective rate
follows for the years ended June 30, 2008 and 2007:
|
|
June
30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
U.S.
statutory federal rat
|
|
|
34.00
|
%
|
|
|
34.00
|
%
|
State
income tax rate
|
|
|
3.06
|
%
|
|
|
3.06
|
%
|
Deferred
income
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Net
operating loss for which no tax
|
|
|
|
|
|
|
|
|
benefit
is currently available
|
|
|
-37.06
|
%
|
|
|
-37.06
|
%
|
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
At June
30, 2008, deferred tax assets consisted of net tax asset of $2,371,429 due to
net operating loss carryforward for federal income tax purposes of approximately
$6,488,009, which was fully allowed for in the valuation allowance of
$2,371,429. 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, 2008 was
$274,838. The net operating loss carryforward will expire through
2028.
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.
(7)
Commitments
We lease
some of our office space under a non-cancelable operating lease through May
2011. Future minimum lease payments are as follow:
Date
|
|
Amount
|
|
6/30/2009
|
|
$
|
36,773
|
|
6/30/2010
|
|
$
|
18,630
|
|
6/30/2011
|
|
$
|
17,854
|
|
We
recorded rent expense in the amount of $76,686 and $36,892 for the years ended
June 30, 2008 and 2007, respectively.
(8) Embezzlement
The
Company suffered an embezzlement of $72,801 for the year ended June 30, 2006,
$44,764 for the year ended June 30, 2007, and $1,700 for the year ended June 30,
2008. We have implemented internal control procedures, which we believe will
prevent any future losses.
LGA
HOLDINGS, INC.
Notes
to Financial Statements
(9) Adjustment
for Immaterial Uncorrected Financial Statement Differences
During
the year ended June 30, 2007, we evaluated and quantified accumulated immaterial
uncorrected financial statement differences through June 30, 2006, in accordance
with SAB 108, as follows:
|
|
Financial
Statements Effect
|
|
|
|
Amount
of Over (Under) Statement of:
|
|
|
|
Total
Assets
|
|
|
Total
Liabilities
|
|
|
Loss
Before Taxes
|
|
|
Net
Loss
|
|
|
Net
Loss Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory
|
|
$
|
(7,658
|
)
|
|
$
|
-
|
|
|
$
|
7,658
|
|
|
$
|
7,658
|
|
|
$
|
0.00
|
|
Accrued
interest
|
|
|
-
|
|
|
|
12,062
|
|
|
|
(12,062
|
)
|
|
|
(12,062
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,658
|
)
|
|
|
12,062
|
|
|
|
(4,404
|
)
|
|
|
(4,404
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Unadjusted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit
Differences—June 30, 2006
|
|
|
(7,658
|
)
|
|
|
12,062
|
|
|
|
(4,404
|
)
|
|
|
(4,404
|
)
|
|
$
|
(0.00
|
)
|
Net
Audit Differences
|
|
$
|
(7,658
|
)
|
|
$
|
12,062
|
|
|
$
|
(4,404
|
)
|
|
$
|
(4,404
|
)
|
|
$
|
(0.00
|
)
|
During
the year ended June 30, 2006, basic accounting errors were made and were left
uncorrected as they were considered immaterial to our overall financial
statements. The overstatement of interest expense is corrected in
2007 as an adjustment to the opening balance of retained earnings in the
accompanying condensed financial statement. The difference in
inventory was subsequently adjusted through our physical inventory count during
the year ended June 30, 2007.
.
(10) Subsequent
Events- Financing
In August
2008, we borrowed $24,000 for working capital.
Item
8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.
Not
Applicable
Item
8A. Controls and Procedures.
Prior to
September, 2006, 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) were not effective. During the audit of the June
30, 2006 financial statements, the auditors discovered indications of
embezzlement by the Company’s bookkeeper. 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 bookkeeper 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. Internal controls over financial reporting were
implemented in late 2006 and the Company’s principal executive officer and
principal financial officer have concluded that they are now
effective.
The
Company’s principal executive officer and principal financial officer have
concluded that disclosure controls and procedures are minimal, but also
effective due to the Company’s small size and the regular communications among
its seven full-time employees.
Item
8A(T) Controls and Procedures.
Management
conducted an evaluation of the effectiveness of our internal control over
financial reporting based on advice from our auditor following our Fiscal 2008
audit. Based on this evaluation, management concluded that the
company’s internal control over financial reporting was effective as of
June 30, 2008. During Fiscal 2008, substantial changes were made in our
internal control over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
The
report does not include an attestation report of the Company's registered public
accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the
company's registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the company to provide only
management's report.
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*
|
48
|
Chief
Executive Officer,
|
June
2004
|
|
|
|
President
Director
|
|
|
|
|
|
|
|
Sara
Williams*
|
39
|
Secretary,
Treasurer,
|
June
2004
|
|
|
|
Director
|
|
|
|
|
|
|
|
Eric
Nickerson
|
57
|
Director,
Controller
|
June
1990
|
|
|
|
|
|
|
Matthew
Drabczyk
|
49
|
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, and shipping. 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 joined the Company in the
position of Controller in November, 2006. 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 and 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.
Legal
Proceedings
None.
Audit
Committee
LGA does
not have an audit committee and neither LGA nor Aero has 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
$700,000 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.
Section
16(a) Beneficial Ownership Reporting Compliance
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
|
1
|
1
|
|
|
|
|
Third
Century II
|
0
|
0
|
0
|
|
|
|
|
Marty
Williams
|
0
|
1
|
1
|
|
|
|
|
Sara
Williams
|
0
|
1
|
1
|
|
|
|
|
Floyd
Murray
|
0
|
1
|
1
|
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 7 full time employees
and limited revenues. Its three principal officers are all substantial
shareholders who together own 60% of the company’s common shares, and constitute
75% of the Board of directors. Mr. & Mrs. Williams and Mr. Nickerson 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 and Mr. Nickerson believe that they act ethically with respect to
the above categories despite the lack of a written code of
ethics. They further believe that current internal controls
adequately preclude any other employee from perpetrating material wrongdoing
against the Company.
Item
10. Executive Compensation.
The
following table sets forth information with respect to all officers of LGA and
Aero who received $100,000 or 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.
Summary
Compensation Table
Name
and Principal Position
|
Year
|
Salary
|
Bonus
|
Stock
Awards
|
Option
Awards
|
Nonequity
Incentive Plan Compensation
|
Nonqualified
Deferred Compensation Earnings
|
All
Other Compensation
|
Total
|
Marty
Williams
CEO,
President, Director
|
2008
|
$48,000
|
0
|
0
|
$255,000
|
0
|
0
|
0
|
$303,000
|
|
2007
|
$48,000
|
0
|
0
|
0
|
0
|
0
|
0
|
$48,000
|
|
|
|
|
|
|
|
|
|
|
Eric
Nickerson
Controller,
Director
|
2008
|
$30,000
|
0
|
0
|
$102,000
|
0
|
0
|
0
|
$132,000
|
|
2007
|
$18,750
|
0
|
0
|
0
|
0
|
0
|
0
|
$18,750
|
|
|
|
|
|
|
|
|
|
|
Matthew
Drabczyk, Vice President Engineering, Director
|
2008
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
2007
|
0
|
0
|
0
|
$165,000
|
0
|
0
|
0
|
$165,000
|
The
following table contains information regarding equity awards outstanding at the
end of the last completed fiscal year held by the named executive
officers.
Outstanding
Equity Awards at fiscal Year End
Name
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Number
of Securities Underlying Unexercised Options (#)
Unexercisable
|
Equity
Incentive Plan Awards: Number of Securities Underlying
Unexercised Unearned Options (#)
|
Option
Exercise Price ($)
|
Option
Expiration
Date
|
Number
of Shares or Units of Stock That Have Not Vested (#)
|
Market
Value of Shares of Units of Stock That Have Not Vested ($)
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or
Other Rights That Have Not Vested (#)
|
Equity
Incentive Plan Awards: Market or Payout Value of Unearned
Shares, Units or Other Rights That Have Not Vested ($)
|
Marty
Williams
|
500,000
|
0
|
0
|
0.70
|
2010
|
0
|
0
|
0
|
0
|
Marty
Williams
|
400,000
|
0
|
0
|
1.50
|
2012
|
0
|
0
|
0
|
0
|
Sara
Williams
|
500,000
|
0
|
0
|
0.70
|
2010
|
0
|
0
|
0
|
0
|
Sara
Williams
|
100,000
|
0
|
0
|
1.50
|
2012
|
0
|
0
|
0
|
0
|
Matthew
Drabczyk
|
250,000
|
0
|
0
|
0.70
|
2015
|
0
|
0
|
0
|
0
|
Matthew
Drabczyk
|
100,000
|
0
|
0
|
1.75
|
2017
|
0
|
0
|
0
|
0
|
Eric
Nickerson
|
200,000
|
0
|
0
|
1.50
|
2012
|
0
|
0
|
0
|
0
|
Third
Century II
|
215,000
|
0
|
0
|
1.00
|
2012
|
0
|
0
|
0
|
0
|
Marty
Williams
|
100,000
|
0
|
0
|
1.50
|
2017
|
0
|
0
|
0
|
0
|
Director
Compensation
Directors
as a group are currently not compensated as such for their
services.
Item
11. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
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 the small business
issuer are authorized for issuance.
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 compensation
plans (excluding securities reflected in column (a))
|
|
(a)
|
(b)
|
(c)
|
Equity
compensation plans approved by security holders
|
1,635,000
|
$1.01
|
189,635
|
Equity
plans not approved by security holders
*
|
1,870,308
|
$.93
|
0
|
Total
|
3,505,308
|
$..97
|
189,653
|
The
following table contains information as of September 23, 2008, 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
|
3,454,999
|
31.8%
|
5565
Teakwood Terrace
|
Executive
Officer,
|
|
|
Colorado
Springs, CO 80918
|
Director
|
|
|
|
|
|
|
Sara
Williams (1), (3)
|
Secretary,
|
|
|
5565
Teakwood Terrace
|
Treasurer,
|
3,454,999
|
31.8%
|
Colorado
Springs, CO 80918
|
Director
|
|
|
|
|
|
|
Eric
J. Nickerson (4)
|
|
|
|
1711
Chateau Ct.
|
Director
|
4,064,365
|
42.1%
|
Fallston,
MD 21047
|
|
|
|
|
|
|
|
Matthew
Drabczyk (5)
|
Vice
President
|
|
|
Restaurant
Interiors
|
Engineering,
|
|
|
5530
Joliet St.
|
Director
|
608,886
|
6.3%
|
Denver,
CO 80239
|
|
|
|
|
|
|
|
All
Officers and Directors
as a
Group (3 persons) (6)
|
NA
|
8,128,250
|
70.0%
|
|
|
|
|
Floyd
Murray
|
|
|
|
13020
Caraway Dr.
|
NA
|
2,025,921
|
21.4%
|
Sun
City West, AZ 85375
|
|
|
|
|
|
|
|
Third
Century II
|
|
|
|
1711
Chateau Ct. (7)
|
NA
|
3,692,953
|
39.0%
|
Falston,
MD 21047
|
|
|
|
|
|
|
|
________________
(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
1,000,000 shares and options to acquire 600,000 shares owned by Sara
Williams.
(3) Includes
1,854,999 shares owned as joint tenant with Marty Williams, options to acquire
600,000 shares and options to acquire 1,000,000 shares owned by Marty
Williams.
(4)
Includes 3,692,953 shares deemed 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 350,000 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.
(7) Includes
options to acquire 215,000 shares.
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.
Please
refer to Note 2 to the Financial Statements and Management’s Discussion and
Analysis of Financial Condition and Results of Operations.
In
September 2007, an affiliate loaned the Company $88,056 in the form of an
unsecured note carrying 8% annual interest, which matured on December 15,
2007. It was agreed that if the note is not paid on the due date, the
entire principal and accrued interest shall continue to draw interest at the
rate of 8%. In January 2008, the principal and accrued interests were
paid in full.
In July
2007, a director loaned the Company $36,000 in the form of an unsecured demand
note carrying 8% annual interest. In January 2008, the principal and
accrued interests were paid in full.
We
incurred interest expense of $11,172 on the notes for the year ended June 30,
2008. At June 30, 2008, accrued interest related to the promissory
notes totaled $7,833 and is reflected in the accompanying financial
statements.
In March
2007, we granted to Matt Drabczyk, a Director of the Company, an option to
purchase a total of 100,000 shares of the Company’s common stock. The
option carries an exercise price of $1.75 per share and vested at the date of
grant. We determined the fair value of the options at $1.65 per share
and recorded share-based payment $165,000 in accordance with SFAS
123R. See footnote 5.
In
December 2006, we conducted a private placement offering whereby we sold 215,000
units to Third Century II at $.70 per unit or $150,000. Each unit
comprised of one share of the Company’s common stock and one option to purchase
the Company’s common stock at $1.00 per share. This transaction was
part of a private placement that was available to other investors on the same
terms. Mr. Nickerson, Controller and a Director of the Company, is
Senior Partner of Third Century II. The sale of the call option
described in note 2 to the financial statements was to Third Century
II.
During
the year ended June 30, 2007, Mr. Williams, the Company’s Chief Executive
Officer, President and an Officer, loaned the Company $60,000 at 8% interest
with principal and interest due June 30, 2010.
In
September 2006, the Company reclassified $106,408 from a note payable to Marty
and Sara Williams to accrued payroll. This was a reversal of an
earlier transaction in order to avoid having to restate earlier financial
statements that incorrectly described the transaction. The accrued
interest of $6,478 was forgiven by the Williams and deemed a contribution to the
Company’s capital.
Item
13. Exhibits.
10.1 - License Agreement with
Cequent
Towing Products, Inc.
31.1 -
A Rule 13a-14(a)/15d-14(a) Certifications
31.2 - A Rule 13a-14(a)/15d-14(a) Certifications
32.1 -
A Certification Pursuant To 18 U.S.C. Section. 1350
32.2 -
A Certification Pursuant To 18 U.S.C. Section. 1350
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 $37,900 for 2007 and $22,210 for
2008.
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 2007 and $-0-
for 2008.
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 2007 and $-0- for 2008.
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 2007 and $-0- for
2008.
Audit
Committee Policies
Neither
LGA nor Aero has an audit committee. Such authority is exercised by the full
Boards of Directors of each company. The board has delegated hiring
authority to the Company President. All directors are intimately
involved with the day-to-day operations of the Company, which include its
financial operations. Therefore, all Directors are aware of and
involved with the engagement of the auditor. Neither Board currently has 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.
Supplemental
information to be Furnished With Reports Filed Pursuant to Section 15(d) of the
Exchange Act By Non-reporting Issuers.
No annual
report or proxy material has been sent to security holders.
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
September 29, 2008
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
September 29, 2008
By:
/s/ Sara
Williams
Sara
Williams, Treasurer (principal financial officer), Director
Date
September 29, 2008
By:
/s/ Eric
Nickerson
Eric
Nickerson, Controller (principal financial officer), Director
Date
September 29, 2008
By:
/s/ Matthew
Drabczyk
Matthew
Drabczyk, Director
Date
September 29, 2008
- 25
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