**SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
 
 **FORM
        10-KSB**
 **(Mark
        One)**
 
 **x**
              **ANNUAL
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934**
 
 For
        the
        Fiscal Year Ended December 31, 2007
 
 **o**
              **TRANSITION
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934**
 
 For
        the
        transition period from _______________ to ________________
 
 Commission
        File Number: 000-50222
 
 **LOGISTICAL
        SUPPORT, INC.** ****
 (Name
        of
        Small Business Issuer in its charter)
  Utah
              
              41-2029935(State
                  or other jurisdiction
                of
                  incorporation or organization)
              
              (I.R.S.
                  Employer
                Identification
                  No.)
 
 19734
        Dearborn Street
 Chatsworth,
        California 91311
 (Address
        of principal executive offices)(Zip code)
 
 Issuer’s
        telephone number, including area code: (818) 885-0300
 
 Securities
        to be registered pursuant to Section 12(b) of the Act:
  Title
                  of each class
              
              Name
                  of each exchange on which each is
                  registeredNone
              
              None
  Securities
        to be registered pursuant to Section 12(g) of the Act:
 
 Common
        Stock, $0.001 par value
 (Title
        of
        class)
 
 Check
        whether the issuer: (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 12 months (or for such shorter
        period
        that the registrant was required to file such reports); and (2) has been
        subject
        to such filing requirements for the past 90 days. Yes x No
o
 
 Check
        if
        disclosure of delinquent filers in response to Item 405 of Regulation S-B
        is not
        contained in this form, and will not 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.  o
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act) Yes o No x
  The
        Issuer’s revenues for the fiscal year ended December 31, 2007 were
        $6,611,412
 
 The
        number of shares of the registrant’s common stock, $.001 par value per share,
        outstanding as of December 31, 2007, was 79,345,000. The aggregate market
        value
        of the voting and non-voting common equity held by non-affiliates of the
        registrant on December 31, 2007, based on the last sales price on the OTC
        Bulletin Board as of such date, was approximately $2,195,000.
 
 DOCUMENTS
        INCORPORATED BY REFERENCE: None
 
 Transition
        Small Business Disclosure Format:  Yes o No
x
  
  **TABLE
        OF CONTENTS**
 PART
                    I
                
                4ITEM
                    1 - BUSINESS
                
                4ITEM
                    2 - DESCRIPTION OF PROPERTY
                
                16ITEM
                    3 - LEGAL PROCEEDINGS
                
                16ITEM
                    4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
                
                17PART
                    II
                
                17ITEM
                    5 - MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER
                    MATTERS
                
                17ITEM
                    6 - MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
                    OPERATIONS
                
                19ITEM
                    7- FINANCIAL STATEMENTS
                
                24ITEM
                    8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                    AND
                    FINANCIAL DISCLOSURE
                
                24ITEM
                    8A - CONTROLS AND PROCEDURES
                
                24ITEM
                    8B - OTHER INFORMATION
                
                25PART
                    III
                
                25ITEM
                    9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
                    COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE
                    ACT
                
                25ITEM
                    10 - EXECUTIVE COMPENSATION
                
                27ITEM
                    11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                    MANAGEMENT
                
                29ITEM
                    12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
                
                29ITEM
                    13 - EXHIBITS
                
                29ITEM
                    14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES
                
                31SIGNATURES
                
                32
  2
 
  **Note
            Regarding Forward Looking Statements**
 
 In
            this
            Annual Report on Form 10-KSB we make a number of statements, referred
            to as
            "forward-looking statements", which are intended to convey our expectations
            or
            predictions regarding the occurrence of possible future events or the
            existence
            of trends and factors that may impact our future plans and operating
            results.
            These forward-looking statements are derived, in part, from various assumptions
            and analyses we have made in the context of our current business plan
            and
            information currently available to us and in light of our experience
            and
            perceptions of historical trends, current conditions and expected future
            developments and other factors we believe to be appropriate in the
            circumstances. You can generally identify forward-looking statements
            through
            words and phrases such as "seek", "anticipate", "believe", "estimate",
            "expect",
            "intend", "plan", "budget", "project", "may be", "may continue", "may
            likely
            result", and similar expressions. When reading any forward looking statement
            you
            should be mindful that all forward-looking statements are inherently
            uncertain
            as they are based on current expectations and assumptions concerning
            future
            events or future performance of our company, and that actual results
            or
            developments may vary substantially from those expected as expressed
            in or
            implied by that statement for a number of reasons or factors.
 
 Forward
            looking statements may involve known and unknown risks, uncertainties,
            and other
            factors that may cause our actual results, performance, or achievements
            to be
            materially different from the future results, performance, or achievements
            expressed or implied by any forward-looking statements. Actual events
            or results
            may differ materially from those discussed in forward-looking statements
            as a
            result of various factors, including, without limitation, the risks outlined
            under "Risk Factors" and "Management's Discussion and Analysis of Financial
            Condition and Results of Operations" and matters described in this Annual
            Report
            generally.
 
 Each
            forward-looking statement should be read in context with, and with an
            understanding of, the various other disclosures concerning our company
            and our
            business made elsewhere in this Annual Report as well as other pubic
            reports
            filed with the United States Securities and Exchange Commission (the
            "SEC"). You
            should not place undue reliance on any forward-looking statement as a
            prediction
            of actual results or developments. We are not obligated to update or
            revise any
            forward-looking statement contained in this Report to reflect new events
            or
            circumstances unless and to the extent required by applicable law.
 
 **Available
            Information**
 
 Information
            regarding the Company’s annual reports on Form 10-KSB, quarterly reports on Form
            10-QSB, current reports on Form 8-K, and any amendments to these reports,
            are
            available to the public from the SEC’s website at http://www.sec.gov as soon as
            reasonably practicable after the Company electronically files such reports
            with
            the Securities and Exchange Commission. Any document that the Company
            files with
            the SEC may also be read and copied at the SEC’s public reference room located
            at 100
            F
            Street, NE Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further
            information on the public reference room.
 
 3
 
 **PART
            I** ****
 
 **ITEM
            1 - BUSINESS** ****
 
 **Summary**
  We
            are an
            aerospace and defense contractor for divisions of the United States military.
            We
            derive approximately 98% of our revenues from government contracts pursuant
            to
            which we supply aircraft replacement parts for turbine engines, landing
            gear,
            structural components, and repair and overhaul services for hydraulics,
            mechanical systems and support equipment. We only produce parts pursuant
            to
            contracts; we do not produce parts for inventory.
  From
            time
            to time we have provided parts and services as a subcontractor to other
            defense
            contractors. We also provide a limited number of parts and services to
            commercial aircraft. However, our revenue from these sources has not
            been
            material.
 
 **Corporate
            Information**
  We
            are a
            Utah corporation, organized under the name Bikini Team International,
            Inc. in
            May 2001. Our corporate name was changed to Logistical Support, Inc.
            in June
            2004. On May 27, 2004, in a transaction characterized as a reverse acquisition,
            we entered into a share exchange agreement with the members of Hill Aerospace
            & Defense, LLC (Hill), a California limited liability company, and
            Logistical Support, LLC (Logistical), a California limited liability
            company,
            pursuant to which the members of Hill and Logistical acquired an aggregate
            of
            63,200,000 shares of our common stock and warrants to purchase 20,997,574
            shares
            of common stock. This transaction is referred to as the "reverse acquisition."
            At the time of the reverse acquisition we had no operations. From and
            after the
            reverse acquisition, our business was the business conducted by Hill
            and
            Logistical. Because the transaction is treated as a reverse acquisition,
            our
            historical financial statements reflect the operations of Hill and Logistical,
            and for accounting purposes, Hill and Logistical are consolidated as
            the
            surviving entities. On March 31, 2006, Hill was merged into
            Logistical.
  As
            a
            result of the reverse acquisition:
  ·
                  Hill
                      and Logistical became our wholly-owned
                      subsidiaries;
  ·
                  The
                      former members of Hill and Logistical acquired more than 98.8%
                      of our
                      common stock outstanding after the
                      transaction;
  ·
                  Our
                      existing directors resigned and Harry Lebovitz (who has since
                      resigned)
                      and Bruce Littell became our directors;
                      and
  ·
                  All
                      of the outstanding shares of our Series A Preferred Stock and
                      580,000
                      shares of our common stock were
                      cancelled.
  4
  Our
            offices are located at 19734 Dearborn Street, Chatsworth, California
            91311,
            telephone (818) 885-0300. Our website is www.Logistical-Support.com.
            Information
            on our website or any other website does not constitute a portion of
            this Form
            10-KSB.
  **United
            States Government Contracts**
  We
            are an
            aerospace and defense contractor for divisions of the United States military.
            We
            derive approximately 98% of our revenues from government contracts pursuant
            to
            which we supply aircraft replacement parts for turbine engines, landing
            gear,
            structural components, and repair and overhaul services for hydraulics,
            mechanical systems and support equipment. We only produce parts pursuant
            to
            contracts; we do not produce parts for inventory. Our contracts are principally
            with the Department of Defense and various military acquisition organizations
            including the Air Force Logistics Material Command, the Defense Logistics
            Agency
            and other acquisition, supply and repair centers for the Air Force, Navy
            and the
            Army Aviation and Missile Command. We provide parts for military aircraft
            (known
            as "fixed wing aircraft") including the F-5, the F-16, the C-5, the C-130,
            and
            the KC-135 and for helicopters (known as "rotary wing aircraft") such
            as the
            UH-1, the UH-60 and the CH-47. We also perform repair and overhaul services
            for
            various aircraft including the UH-60, the CH-47 and the OH-58. We perform
            on
            contracts through a combination of assigning work to subcontractors,
            overhauling, repairing and producing or finalizing production of parts
            for
            delivery in our own facilities with our own engineers and
            machinists.
  From
            time
            to time we have provided parts and services as a subcontractor to other
            defense
            contractors. We also provide a limited number of parts and services to
            commercial aircraft. However, our revenue from these sources has not
            been
            material.
  **Our
            Strategy**
  **Strategy**
  Our
            contracts are awarded through a competitive bidding process. Our strategy
            is to
            bid competitively on contracts that offer us highest potential profit
            including
            contracts for flight critical parts and services, in categories of parts
            and
            services where we can be qualified as a bidder and have a history of
            successful
            performance. We believe that for us to remain competitive we must pursue
            a plan
            for growth which would include raising additional capital to fund expansion
            of
            our facilities and personnel, and possible acquisitions in complementary
            businesses.
  We
            are
            developing a more focused strategy in our bid selection criteria and
            have
            accordingly focused on bids for the manufacturing or overhauling and
            repairing of flight safety items that match our capabilities and
            experience. Flight safety items have limited competition and accordingly
            are
            more profitable. However, we cannot assure you that we will be able to
            maintain
            or increase our success rate. Based on our bidding strategy, our success
            rate of
            awarded contracts to bids submitted has improved from 8% in 2006 to 11%
            in 2007.
            During 2007, we submitted 102 bids and were awarded eleven contracts
            with a
            total value of approximately $4,020,000 and in 2006, we made 50 bids
            and were
            awarded four contracts of approximately $1,800,000.
  **Contract
            Solicitation and Bids**
  All
            of
            our contracts are sourced through United States government contracting
            protocols. The military contracting agencies or departments periodically
            publish
            public solicitations for bids on required parts and services. The solicitations
            identify parts for manufacture, repairs, overhaul and upgrade. We
            bid on selected solicitations for contracts. The entire solicitation,
            bid and
            fulfillment process for government contracts is regulated by the Federal
            Acquisitions Regulations, known as "FAR." The United States government
            and the
            parties it contracts with must comply with FAR in all aspects of the
            government
            contracting industry.
  5
  In
            order
            to submit a bid, all bidding entities must have a "CAGE" code, which
            means the
            bidder has registered with the Central Contractor Registration Website,
            and if
            the solicitation includes data that is restricted from public access
            for
            security purposes, the bidder must also have a military criticality technical
            data agreement. We have both a CAGE code and a military criticality technical
            data agreement.
 
 As
            part
            of the contract solicitation and bid protocol, we must establish that
            we are a
            qualified contractor for the specific types of parts or services in the
            solicitation. Such substantiation includes evidence of our capability
            to perform
            the contract in terms of personnel and materials, evidence that our company
            has
            previously and successfully performed similar contracts and produced
            similar
            products, and other matters, including our company's overall financial
            condition. We seek to bid on "flight critical" contracts, which are contracts
            for parts that are critical to the flight safety of the aircraft. We
            have in the
            past successfully substantiated our qualification to perform flight critical
            contracts. We believe that these contracts generally have a higher dollar
            value
            and are less competitive because of their requirements and accordingly
            yield
            higher profits than other contracts for which we are qualified.
 
 In
            preparing a bid, we must work within the design specifications for the
            product
            that is the subject of the solicitation, as well as general military
            and
            Department of Defense product guidelines to develop the manufacturing
            process
            from start to finish. We must also determine the quantity and identity
            of
            materials, subparts and subcontractors to best meet the specifications
            for the
            production of the particular item. This step of the preparation of the
            bid is
            critical, since it determines many of the cost and timing considerations
            of
            performing the contract including the subparts, assemblies and materials
            required to fulfill the contract, as well as the required subcontracting
            for
            production. Ultimately, this step in the process will determine whether
            the
            contract can be successfully performed, at what cost, and at what projected
            rate
            of profit to our company. If we do not correctly assess the engineering
            and
            production costs for the contracts we have bid on we may face losses
            or
            increased costs if we are awarded the contract.
  Our
            bid
            includes a complete cost estimate for materials, labor hours and delivery
            specifications, and we may be required to update or refresh our bid.
            The cycle
            of time in the bid and award process can be many months and may at times
            exceed
            a year.
  **Bid
            Selection Criteria**
  In
            selecting the winning bid and awarding the contract, the government looks
            at a
            group of factors including qualification of the contractor to bid on
            the type of
            contract under consideration, identification of subcontractors and suppliers,
            overall price, delivery and history of performance on similar contracts
            by that
            company and the proposed subcontractors. The government also has the
            right to
            perform a review of bidders and the proposed subcontractors. Such a review,
            or
            survey, can include the bidder's financial condition, other contracts
            in
            process, history of contract performance and any other matters which
            the
            government deems relevant to assessing that company's qualifications,
            ability to
            perform on the contract as bid and likelihood of delivering acceptable
            parts or
            services in compliance with specifications and certifications under quality
            assurance programs. The government may perform the same review and survey
            of the
            subcontractors and suppliers selected by the bidding company. We believe
            that we
            maintain all required quality assurance certifications for the contracts
            on
            which we bid. We and our sub-contractors are routinely subject to review
            and
            quality audits by the United States government.
  6
  **Payment
            Structure**
  Each
            product we produce must meet the specifications of the acquiring organization,
            known as the "contractor inspector requirements," for us to be paid.
            Because
            these are fixed price contracts, to the extent that we have to incur
            unplanned
            expenses on a contract, we will not be able to recoup these costs unless
            the
            contract is modified by the contracting agency.
  We
            bear
            the financial burden of performing on the contract and accordingly our
            cash flow
            needs can be significant if we are performing on a number of contracts
            that will
            not reach completion or be eligible for progress payments in the near
            future.
  We
            have
            not received progress payments since 2003 and have recently experienced
            reluctance on the part of the government to pay us progress payments.
            We may
            have difficulty performing under our contracts, especially if we are
            required to
            make significant expenditures or if there is a significant delay between
            the
            completion of work and our receipt of payment. Since our contracts do
            not
            generally provide progress payments, the government does not have any
            payment
            obligations until acceptance. As a result we may require additional working
            capital to enable us to complete a contract.
  Additional
            delays in payment occur the first time we deliver a part that we have
            not
            manufactured within the previous three years. Under FAR, the first article
            must
            be approved before we can go into full production, and the rate of rejection
            by
            the government on these parts is higher than on production parts and
            is
            sometimes a cause of delays in delivery and increased expenses.
 
 Under
            the
            applicable procurement regulations, our contracts are subject to the
            right of
            the government to terminate for convenience.
 
 **Contracts
            for Repair and Overhaul**
 
 Contracts
            for "repair and overhaul" services are performed on a fixed price basis.
            If we
            underestimate the extent of the repairs, we must absorb that price difference
            to
            complete the repairs. However, if the repairs are more extensive than
            originally
            represented by the government, we can renegotiate the contract price
            or submit a
            request for equitable adjustment although the contracting agency may
            not agree
            to an adjustment in the price or any adjustment it approves may not cover
            our
            increased cost.
  Historically,
            approximately 70% of our government contracts were for parts, and 30%
            were for
            repair and overhaul services. Since 2004, our overhaul division has been
            expanding faster than the fabrication division. Our sales backlog at
            January 5,
            2008 was $11.5 million, 40% of which are for parts while 60% are for
            repair and
            overhaul services. 15 of these contracts had a backlog value of more
            than
            $150,000 each as of January 5, 2008. We bid on contracts that range in
            dollar
            value from $25,000 to $2,400,000. Based on the value of the bids (excluding
            options to be exercised by the Government) submitted during 2007, approximately
            31% of the bids were for contracts valued between $250,000 and $500,000
            and
            approximately 40% of the bids were for contracts valued above $500,000.
            Based on
            the number of bids submitted during the same period, approximately 26%
            of the
            bids were for contracts that are valued between $100,000 and $250,000;
            approximately 19% were bids for contracts valued between $250,000 and
            $500,000;
            and approximately 9% were bids for contracts valued above $500,000. The
            average
            value of our bids in 2007 was $225,153 , and the median value of our
            bids in
            2007 was $120,000. We were awarded eleven contracts in 2007 with a net
            value of
            approximately $4 million, including options to be exercised by the
            Government.
  7
  **Project
            Management**
  Much
            of
            our manufacturing work and processing services under government contract
            are
            performed by our subcontractors, and we must manage and monitor their
            work.
  We
            have
            several important criteria we use in selecting our subcontractors, including
            their holding required certifications, our past experience with the
            subcontractors and their location in relation to our facilities. In some
            cases,
            the government can dictate which subcontractors we must use and in such
            case, we
            must contract with that entity.
  **Certifications
            and Qualifications**
  In
            August
            2005, we passed the ISO 9001:2000 quality system audit and our quality
            system is
            now registered with the ISO 9001: 2000 standard. In addition, we have
            been
            granted a "Quality System Certification" by the United States military.
            This
            certification is recognized and accepted by all of the United States
            government
            agencies that we regularly contract with. The United States military
            has the
            right to periodically review our (and our subcontractors') manufacturing
            processes to determine if we remain in compliance with the military's
            quality
            standards under this certification. If we are not in compliance, we would
            not be
            permitted to continue performing on any contracts which require such
            certification.
  We
            are
            also certified by the Federal Aviation Administration to operate a commercial
            aircraft repair station within the "Limited Accessory" Ratings. This
            certification permits us to produce certain parts and perform repair
            and service
            on commercial aircraft parts. The FAA certification must be applied for
            and
            renewed every two years. However, these services constitute an immaterial
            portion of our revenues.
  **Competition**
 
 We
            face
            intense competition. Our competitors include small and medium sized companies,
            as well as large, internationally known aerospace companies, such as
            Lockheed
            Martin, General Electric and Honeywell. Some of the advantages that large
            competitors have include their financial resources, government contacts,
            and
            marketing organizations which provide them with greater opportunity to
            provide
            input in the development of specifications.
 
 Our
            competitors on any specific contract will vary according to the type
            of
            contractor the bid is open to, in addition to the type of part or service
            that
            is the subject of the bid. The United States may open bids to certain
            categories
            of bidders. Those categories include small businesses and entities that
            are
            pre-qualified for certain types of contracts. The United States can also
            open
            the bid to everyone, meaning there are no specific requirements to be
            a bidder
            (other than the customary requisite certifications).
  8
  We
            generally bid on contracts where we anticipate fewer competitors including
            contracts set aside for small business.
  **Licenses,
            Patents and Trademarks**
  Our
            business is not dependent upon the development, ownership or protection
            of
            proprietary intellectual property rights or licenses.
  **Product
            Liability and Warranty**
  We
            do not
            carry product liability insurance, and we do not provide any warranty
            on our
            parts or services. Our products are inspected and or tested by the Government
            before payment is made and our liability to the contracting agency on
            the parts
            terminates on delivery and acceptance. However, we may nonetheless be
            held
            liable for damage, including loss of life, resulting from a faulty
            part.
  **Backlog**
  As
            of
            January 5, 2008 we had a backlog of $11,400,000, most of which we expect
            to be
            delivered during the following 24 months.
  **Employees**
  As
            of
            December 31, 2007, we had 29 employees, of which three were administrative,
            one
            sales and marketing and 25 manufacturing. All salaries and wages are
            paid by
            Logistical Support, LLC. None of our employees are represented by a labor
            union,
            and we believe that our employee relations are good.
  The
            loss
            of services of any of our executive officers or engineering employees,
            or our
            inability to hire and retain a sufficient number of qualified employees,
            will
            harm our business. Specifically, the loss of Bruce Littell, Chairman,
            Director
            and Chief Executive Officer, whose specialized knowledge of government
            contracting in the aerospace and defense industry is essential to our
            business,
            would be detrimental. Mr. Littell has extensive experience and understanding
            of
            government contracting in defense and aerospace with regard to reviewing
            solicitations, overseeing the preparation of bids, managing contract
            projects
            and achieving acceptance of our products and securing payment. The skills,
            experience and reputation of Mr. Littell are integral to successfully
            operating
            our company.
 
 **Risk
            Factors**
  An
            investment in our common shares involves a high degree of risk and is
            subject to
            many uncertainties. These risks and uncertainties may adversely affect
            our
            business, operating results and financial condition. In such an event,
            the
            trading price for our common shares could decline substantially, and
            you could
            lose all or part of your investment. In order to attain an appreciation
            for
            these risks and uncertainties, you should read this Form 10KSB in its
            entirety
            and consider all of the information and advisements contained in this
            Form
            10KSB, including the following risk factors and uncertainties.
  9
 
 **Risks
            Relating to our Business**
 
 **Because
            our ability to generate revenue is dependent upon our success in obtaining
            awards for a very narrow category of aerospace and defense contracts,
            our
            failure for any reason to obtain such awards could impair our
            business.**
  We
            derive
            approximately 98% of our revenues from United States government military
            contracts in the area of aerospace and defense which are obtained through
            a
            competitive bidding process. If we are not successful in receiving contracts
            for
            any reason, including our failure to meet eligibility requirements, competition,
            our failure to perform under prior contracts, and changes in government
            contracting policies, we would not generate sufficient revenue to continue
            in
            business.
  **Because
            of our lack of working capital and available financing and our inability
            to
            receive progress payments, we may require additional funding for us to
            continue
            our operations.**
  At
            December 31, 2007, our working capital was approximately $936,000. Included
            in
            working capital is approximately $2.1 million of contract costs and estimated
            earnings in excess of billings. This amount represents work performed
            and
            services rendered pursuant to government contracts. For almost all of
            our
            government contracts, we do not receive interim progress payments. As
            a result,
            we must finance the cost of the work over the length of the contract,
            which can
            continue, in some cases, for more than a year. If we are not able to
            obtain
            necessary financing, we may be unable both to meet our obligations under
            our
            existing contracts and to obtain additional contracts, which could impair
            our
            business and could result in a cessation of business.
  **Our
            failure to obtain and maintain required certifications could impair our
            ability
            to bid on aerospace and defense contracts.**
  We
            are
            required to maintain quality certifications and to meet production standards
            in
            order to be eligible to bid on government contracts. If we fail to maintain
            these certifications or meet these standards, we will be ineligible to
            bid for
            contracts which would impair our ability to continue in business.
 
 **Because
            many of our contracts provide for a fixed price, our failure to accurately
            estimate costs could result in losses on the contracts.**
 
 In
            bidding on fixed price contracts, we must accurately estimate the cost
            of
            performance. To the extent that our costs exceed our estimate, we will
            lose
            money on the contracts. Such cost overruns could result from a number
            of factors
            including increases in costs of materials, an underestimation of the
            amount of
            labor required and design or production problems.
  **To
            the extent that we subcontract work under our contracts, any failures
            by our
            subcontractors could impair our relations with the contracting
            agencies.**
  We
            frequently use subcontractors to perform work or provide materials for
            our
            contracts. We are dependent upon the subcontractors to meet the quality
            and
            delivery requirements of the contracting agency. To the extent that the
            products
            or services provided by the subcontractors do not meet the required
            specifications or are delivered late, the contract may be terminated
            by the
            Government for default. Such a default could result in our disqualification
            from
            bidding on contracts. We have in the past had problems with a supplier,
            Triumph
            Components-Arizona, Inc. (Triumph) and, although we no longer use the
            services
            of Triumph, our past problems with them have negatively affected our
            on time
            delivery rating with the government and impairs our ability to obtain
            future
            contracts. Although we settled the dispute with Triumph, we believe that
            this
            dispute may have had, and may continue to have, a negative impact on
            our
            relationship with the United States government since our deliveries of
            products
            for which Triumph performed services were late and continue to be
            late.
  10
  **We
            may be subject to claims and government investigations as a result of
            actions of
            an affiliate.**
  During
            2005 we were a defendant, along with Hill Industries, Inc. which is controlled
            by Harry Lebovitz and therefore is an affiliate, in an action brought
            by Bell
            Helicopter Textron, Inc. claiming that we delivered a part labeled as
            a Bell
            Helicopter part together with a compliance certificate which was not
            authorized
            as a result of action taken by an affiliate. Although the complaint was
            dismissed against us, we cannot assure you that we will not be affected
            by
            similar problems in the future or that we will not be subject to any
            government
            investigation arising out of conduct by Hill Industries, Inc.
  **Our
            inability to attract and retain qualified engineering personnel could
            impair our
            ability to continue our business.**
  Our
            business is dependent upon our engaging and retaining engineering personnel
            with
            experience in the aerospace and defense industries. To the extent that
            we are
            unable to hire and retain these engineers, our ability to bid on and
            perform
            contracts will be impaired.
  **We
            rely on our senior executive officer.**
  We
            are
            dependent upon the continued employment of certain key employees, including
            our
            chief executive officer, Bruce Littell. Although we have an employment
            agreement
            with Mr. Littell, the agreement does not assure us that he will continue
            to work
            for us. The loss of Mr. Littell could materially impair our
            operations.
  **Because
            of our small size and our historical financial problems, we may have
            difficulty
            competing for business.**
  We
            compete for contract awards directly with a number of large and small
            domestic
            and foreign defense contractors, including some of the largest national
            and
            international defense companies, as well as a large number of smaller
            companies.
 
 **The
            terms on which we may raise additional capital may result in significant
            dilution and may impair our stock price.**
 
 Because
            of our financial condition, it may be difficult for us to raise additional
            capital if required for our present businesses and for any planned expansion.
            We
            cannot assure you that we will be able to obtain additional financing
            on any
            terms, and, if we are able to raise funds, it may be necessary for us
            to sell
            our securities at a price which is at a significant discount from the
            market
            price and on other terms which may be disadvantageous to us. In connection
            with
            any such financing, we may be required to provide registration rights
            to the
            investors and pay damages to the investor in the event that the registration
            statement is not filed or declared effective by specified dates. The
            price and
            terms of any financing which would be available to us could result in
            both the
            issuance of a significant number of shares and significant downward pressure
            on
            our stock price.
  11
 
 **We
            may not be able to continue to grow through acquisitions.**
 
 An
            important part of our growth strategy is to expand our business and to
            acquire
            other businesses, which may or may not be related to our current businesses.
            Such acquisitions may be made with cash or our securities or a combination
            of
            cash and securities. To the extent that we require cash, we may have
            to borrow
            the funds or sell equity securities. The issuance of equity, if available,
            would
            result in dilution to our stockholders. We have no commitments from any
            financing source and we may not be able to raise any cash necessary to
            complete
            an acquisition. If we fail to make any acquisitions, our future growth
            may be
            limited. As of the date of this Form 10KSB, we do not have any agreement
            or
            understanding, either formal or informal, as to any acquisition.
  **If
            we make any acquisitions, they may disrupt or have a negative impact
            on our
            business.**
  If
            we
            make acquisitions, we could have difficulty integrating the acquired
            companies'
            personnel and operations with our own. In addition, the key personnel
            of the
            acquired business may not be willing to work for us. We cannot predict
            the
            affect expansion may have on our core business. Regardless of whether
            we are
            successful in making an acquisition, the negotiations could disrupt our
            ongoing
            business, distract our management and employees and increase our expenses.
            In
            addition to the risks described above, acquisitions are accompanied by
            a number
            of inherent risks, including, without limitation, the following:
  ·
                  the
                      difficulty of integrating acquired products, services or
                      operations;
  ·
                  the
                      potential disruption of the ongoing businesses and distraction
                      of our
                      management and the management of acquired
                      companies;
  ·
                  the
                      difficulty of incorporating acquired rights or products into
                      our existing
                      business;
  ·
                  difficulties
                      in disposing of the excess or idle facilities of an acquired
                      company or
                      business and expenses in maintaining such
                      facilities;
  ·
                  difficulties
                      in maintaining uniform standards, controls, procedures and
                      policies;
  ·
                  the
                      potential impairment of relationships with employees and customers
                      as a
                      result of any integration of new management
                      personnel;
  ·
                  the
                      potential inability or failure to achieve additional sales
                      and enhance our
                      customer base through cross-marketing of the products to new
                      and existing
                      customers;
  12
  ·
                  the
                      effect of any government regulations which relate to the business
                      acquired;
  ·
                  potential
                      unknown liabilities associated with acquired businesses or
                      product lines,
                      or the need to spend significant amounts to retool, reposition
                      or modify
                      the marketing and sales of acquired products or the defense
                      of any
                      litigation, whether or not successful, resulting from actions
                      of the
                      acquired company prior to our
                      acquisition.
  Our
            business could be severely impaired if and to the extent that we are
            unable to
            succeed in addressing any of these risks or other problems encountered
            in
            connection with these acquisitions, many of which cannot be presently
            identified, these risks and problems could disrupt our ongoing business,
            distract our management and employees, increase our expenses and adversely
            affect our results of operations.
  **Because
            we are not subject to compliance with rules requiring the adoption of
            certain
            corporate governance measures, our stockholders have limited protections
            against
            interested director transactions, conflicts of interest and similar
            matters.**
  The
            Sarbanes-Oxley Act of 2002, as well as rule changes proposed and enacted
            by the
            SEC, the New York and American Stock Exchanges and the Nasdaq Stock Market
            as a
            result of Sarbanes-Oxley require the implementation of various measures
            relating
            to corporate governance. These measures are designed to enhance the integrity
            of
            corporate management and the securities markets and apply to securities
            which
            are listed on those exchanges or the Nasdaq Stock Market. Because we
            are not
            presently required to comply with many of the corporate governance provisions
            and because we chose to avoid incurring the substantial additional costs
            associated with such compliance any sooner than necessary, we have not
            yet
            adopted all of these measures. Because we only have one director who
            is not an
            independent director, we do not have independent audit or compensation
            committees. We also are not in compliance with requirements relating
            to the
            distribution of annual and interim reports, the holding of stockholders
            meetings
            and solicitation of proxies for such meeting and requirements for stockholder
            approval for certain corporate actions. Until we comply with such corporate
            governance measures, regardless of whether such compliance is required,
            the
            absence of such standards of corporate governance may leave our stockholders
            without protections against interested director transactions, conflicts
            of
            interest and similar matters and investors may be reluctant to provide
            us with
            funds necessary to expand our operations.
  **Failure
            to achieve and maintain effective internal controls in accordance with
            Section
            404 of the Sarbanes-Oxley Act could have a material adverse effect on
            our
            business and operating results and stockholders could lose confidence
            in our
            financial reporting.**
  Effective
            internal controls are necessary for us to provide reliable financial
            reports and
            effectively prevent fraud. If we cannot provide reliable financial reports
            or
            prevent fraud, our operating results could be harmed. We are required
            to
            document and test our internal control procedures in order to satisfy
            the
            requirements of Section 404 of the Sarbanes-Oxley Act, which requires
            increased
            control over financial reporting requirements, including annual management
            assessments of the effectiveness of such internal controls. Failure to
            achieve
            and maintain an effective internal control environment, regardless of
            whether we
            are required to maintain such controls, could also cause investors to
            lose
            confidence in our reported financial information, which could have a
            material
            adverse effect on our stock price.
  **Because
            we have only one director, we may be unable to generate any interest
            in our
            common stock.**
  In
            general, investors, particularly institutional investors, do not invest
            in
            companies that do not have an independent board of directors, a view
            which is
            more notable for companies whose stock is not traded on the Nasdaq Stock
            Market
            or is listed on the New York or American Stock Exchange. Further, since
            we have
            only one director, Mr. Bruce Littell, he has the sole ability to make
            all
            determinations relating to our business, including the issuance of shares
            of
            common stock and stock options and compensation of officers, including
            his own
            compensation.
  13
 
 **Risks
            Relating to an Investment in Our Securities**
  **The
            rights of the holders of common stock may be impaired by the potential
            issuance
            of preferred stock.**
 
 Our
            certificate of incorporation gives our board of directors the right to
            create
            new series of preferred stock. As a result, the board of directors may,
            without
            stockholder approval, issue preferred stock with voting, dividend, conversion,
            liquidation or other rights which could adversely affect the voting power
            and
            equity interest of the holders of common stock. Preferred stock, which
            could be
            issued with the right to more than one vote per share, could be utilized
            as a
            method of discouraging, delaying or preventing a change of control. The
            possible
            impact on takeover attempts could adversely affect the price of our common
            stock. Although we have no present intention to issue any additional
            shares of
            preferred stock or to create any new series of preferred stock, we may
            issue
            such shares in the future.
 
 **The
            issuance of shares through our stock compensation and incentive plans
            may dilute
            the value of existing stockholders.**
  We
            anticipate using stock options, stock grants and other equity-based incentives,
            to provide motivation and compensation to our officers, employees and
            key
            independent consultants. The award of any such incentives will result
            in an
            immediate and potentially substantial dilution to our existing stockholders
            and
            could result in a decline in the value of our stock price.
  **We
            do not anticipate paying dividends on our common stock.**
  If
            dividends are not paid, the market price of the common stock can be
            affected.
  **Because
            there is a limited market for our common stock, you may have difficulty
            selling
            common stock that you own.**
  Although
            we are registered pursuant to the Securities Exchange Act of 1934, there
            is a
            limited public market for our common stock. Accordingly we cannot assure
            you
            that there will be any public market for our common stock.
  **Because
            we are subject to the "penny stock" rules, you may have difficulty in
            selling
            our common stock.**
  Our
            stock
            is subject to the SEC's penny stock rules, which impose additional sales
            practice requirements and restrictions on broker-dealers that sell our
            stock to
            persons other than established customers and institutional accredited
            investors.
            These rules may affect the ability of broker-dealers to sell our common
            stock
            and may affect your ability to sell any common stock you may own.
  14
  According
            to the SEC, the market for penny stocks has suffered in recent years
            from
            patterns of fraud and abuse. Such patterns include:
  ·
                  Control
                      of the market for the security by one or a few broker-dealers
                      that are
                      often related to the promoter or
                      issuer;
  ·
                  Manipulation
                      of prices through prearranged matching of purchases and sales
                      and false
                      and misleading press releases;
  ·
                  "Boiler
                      room" practices involving high pressure sales tactics and unrealistic
                      price projections by inexperienced sales
                      persons;
  ·
                  Excessive
                      and undisclosed bid-ask differentials and markups by selling
                      broker-dealers; and
  ·
                  The
                      wholesale dumping of the same securities by promoters and broker-dealers
                      after prices have been manipulated to a desired level, along
                      with the
                      inevitable collapse of those prices with consequent investor
                      losses.
  **As
            an issuer of "penny stock" the protection provided by the federal securities
            laws relating to forward looking statements may not apply to us**
 
 Although
            the federal securities law provide a safe harbor for forward-looking
            statements
            made by a public company that files reports under the federal securities
            laws,
            this safe harbor is not available to issuers of penny stocks. As a result,
            we
            will not have the benefit of this safe harbor protection in the event
            of any
            matter based upon a claim that the material provided by us, contained
            a material
            misstatement of fact or was misleading in any material respect because
            of our
            failure to include any statements necessary to make the statements not
            misleading.
  **Fluctuations
            in our operating results and announcements and developments concerning
            our
            business affect our stock price.**
  Historically,
            there has been volatility in the market price for common stock of companies
            such
            as ours. Our quarterly operating results, the number of stockholders
            desiring to
            sell their shares, changes in general economic conditions and the financial
            markets, the execution of new contracts and the completion of existing
            agreements and other developments affecting us, could cause the market
            price of
            our common stock to fluctuate substantially. Further, since a majority
            of our
            operating expenses, particularly personnel and related costs, depreciation
            and
            rent, are relatively fixed in advance of any particular quarter, the
            underutilization of our technical personnel may cause significant variations
            in
            our operating results in any particular quarter and could result in losses
            for
            the quarter.
  **We
            cannot predict when or whether an active market for our common stock
            will
            develop.**
  In
            the
            absence of an active trading market, you may have difficulty buying and
            selling
            or obtaining market quotations; the market visibility for our stock may
            be
            limited, and the lack of visibility for our common stock may have a depressive
            effect on the market price for our common stock.
  15
  **Our
            stock price may be affected by our failure to meet projections and estimates
            of
            earnings developed either by us or by independent securities
            analysts.**
  Although
            we do not make projections relating to our future operating results,
            our
            operating results may fall below the expectations of securities analysts
            and
            investors. In this event, the market price of our common stock would
            likely be
            materially adversely affected.
  **Volatility
            in our common share price may subject us to securities
            litigation.**
  The
            market for our common stock is characterized by significant price volatility
            when compared to seasoned issuers, and we expect that our share price
            will
            continue to be more volatile than a seasoned issuer. In the past, plaintiffs
            have often initiated securities class action litigation against a company
            following periods of volatility in the market price of its securities.
            We may in
            the future be the target of similar litigation. Securities litigation
            could
            result in substantial costs and liabilities and could divert management's
            attention and resources.
  **The
            sale of a large amount of common shares received upon exercise of outstanding
            warrants to finance the exercise price or to pay associated income taxes,
            or the
            perception that such sales could occur, could substantially depress the
            prevailing market prices for our shares.**
  In
            the
            event that a large amount of common shares are sold into the market in
            connection with the exercise of outstanding warrants, those sales could
            have the
            effect of depressing the price of our common stock. The availability
            of large
            quantities of shares in light of the thin trading volume of our common
            stock
            could cause the price of our common stock to fall, as persons exercising
            the
            warrants seek to sell in the absence of a corresponding demand for purchase.
            If
            sales of our common stock occur in large quantities in connection with
            the
            exercise of our outstanding warrants, the price of our common stock could
            be
            negatively effected and the value of your investment could be
            harmed.
 
 **ITEM
            2 - DESCRIPTION OF PROPERTY** ****
 
 We
            lease
            14,600 square feet of office space and a machine and repair facility
            at 19734
            Dearborn Street, Chatsworth, California pursuant to a lease which expires
            in May
            2008. The current annual rent is approximately $140,000 with standard
            escalation
            provisions. We are in negotiations to lease a facility in Chatsworth
            that is
            approximately 24,000 square feet.
 
 **ITEM
            3 - LEGAL PROCEEDINGS** ****
 
 We
            have
            been in litigation with Triumph Components-Arizona, Inc. ("Triumph")
            for
            approximately three years, where on July 20, 2006, Triumph and us entered
            into a
            settlement agreement dated as of July 18, 2006 pursuant to which the
            parties
            agreed to settle their disputes. Under the settlement agreement, we agreed
            to
            pay an aggregate of $950,000 to Triumph in monthly installments ranging
            from
            $39,000 to $65,000 from August 2006 to March 2008. If we accelerate these
            payments we will be entitled to discount the amount paid to Triumph by
            up to
            $50,000. Triumph has a security interest in virtually all of our assets
            that
            have not been previously encumbered by other UCC-1 Financing Statements. On
            March
            17, 2008, we paid off all amounts owing to Triumph and they released
            their
            security interest.
  16
 
 On
            March
            14, 2006, we canceled a consignment agreement with Hill Inc. On April
            11, 2006,
            Mr. Lebovitz filed a lawsuit against Mr. Bruce Littell, us and our subsidiaries
            claiming among other things, that (1) Mr. Lebovitz was mentally unfit
            to sign a
            Separation Agreement; (2) we failed to remit amounts due under a consignment
            agreement with Hill Inc.; and (3) we failed to provide an accounting
            for amounts
            that Mr. Lebovitz loaned to us. Mr. Lebovitz was seeking compensatory
            and
            punitive damages as well as attorney fees. We believe that such claims
            are
            without merit and are vigorously defending ourselves against such claims.
 
 We
            filed
            a cross-complaint against Harry Lebovitz, Hill Inc, and other related
            entities,
            and sought damages for breach of fiduciary duty, breach of contract,
            fraud and
            other causes of action. On March 22, 2007, the complaint and the cross-complaint
            were dismissed without prejudice. On or about June 18, 2007, Mr. Lebovitz
            re-filed his complaint. We responded by filing a demurrer to the complaint,
            to
            which we have responded by filing another demurrer, which is set for
            hearing on
            April 21, 2008. The case is set for trial on July 7, 2008.
 
 On
            June
            30, 2006 we were forcefully evicted from our leased Eton facility and
            the
            property turned over to Mr. Lebovitz. In July 2006, we filed litigation
            against
            the landlord for alleged wrongful eviction and damages. On February 6,
            2007, the
            landlord filed a cross-complaint for equitable indemnity and contribution
            against us. On March 9, 2008, our landlord and we reached an agreement,
            whereby
            the landlord agreed to settle the case by paying us a total of
            $25,000.
  On
            December 26, 2006, we filed an action against Hill, Inc., Hill Aviation
            Worldwide, LLC, Mr. Lebovitz and others for the non-payment of a promissory
            note
            previously held in the name of National Loan Investors (“NLI”) that was
            purchased by us in December 2006. In January 2007, the court issued a
            temporary
            restraining order precluding the defendants from transferring any inventory
            that
            would be subject to various security agreements securing payment under
            the
            promissory note. On June 21, 2007, the court denied our preliminary injunction
            without prejudice. We re-filed our complaint in July 2007. On September
            20, 2007
            the court issued a Right to Attach Order and Order for Issuance of Writ
            of
            Attachment in favor of us. The case is set for trial April 28,
            2008.
  **ITEM
            4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**
 
 No
            matters were put before our shareholders for a vote during the last quarter
            of
            our fiscal year.
 
 **PART
            II**
 
 **ITEM
            5 - MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED** **STOCKHOLDER
            MATTERS**
  Our
            common shares are currently quoted on the OTC Bulletin Board under the
            symbol
            "LGSL." Our common stock has had a limited and sporadic trading history.
            The
            following table sets forth the quarterly high and low bid prices for
            our common
            shares on the OTC Bulletin Board for the periods indicated. The prices
            set forth
            below represent inter-dealer quotations, without retail markup, markdown
            or
            commission and may not be reflective of actual transactions.
 **BID
                        PRICE****PERIOD
                        (1)**
                    
                    **HIGH**
                    
                    **LOW****2007:**First
                        Quarter
                    
                    $
                    0.25
                    
                    $
                    0.13Second
                        Quarter
                    
                    $
                    0.25
                    
                    $
                    0.11Third
                        Quarter
                    
                    $
                    0.20
                    
                    $
                    0.05Fourth
                        Quarter
                    
                    $
                    0.18
                    
                    $
                    0.06**2006:**First
                        Quarter
                    
                    $
                    0.70
                    
                    $
                    0.15Second
                        Quarter
                    
                    $
                    0.26
                    
                    $
                    0.15Third
                        Quarter
                    
                    $
                    0.35
                    
                    $
                    0.17Fourth
                        Quarter
                    
                    $
                    0.38
                    
                    $
                    0.14
 17
 
 **Holders**
 
 There
            are
            approximately 540 record holders of our common stock at January 31, 2008.
            The
            number of registered shareholders includes an estimate of the number
            of
            beneficial owners of common shares held in street name. The transfer
            agent and
            registrar for our common stock is Interwest Transfer Company, 1981 East
            Murray
            Holladay Road, Suite 100, Salt Lake City, Utah 84117; telephone (801)
            272-9294
 
 **Dividend
            Policy**
 
 We
            have
            never paid any cash dividends on our common shares, and we do not anticipate
            that we will pay any dividends with respect to those securities in the
            foreseeable future. We intend to retain any future earnings to finance
            the
            expansion and development of our business. Any future determination to
            pay cash
            dividends will be at the discretion of our board of directors, and will
            be
            dependent upon our financial condition, results of operations, capital
            requirements and other factors as our board may deem relevant at that
            time.
 
 **Equity
            Compensation Plan**
 
 The
            following table sets forth information relating to equity compensation
            plans as
            of December 31, 2007
 
 Plan
                      Category
                  
                  Number
                      of securities to be issued upon exercise of outstanding options
                      and
                      warrants
                  
                  Weighted-average
                      exercise price of outstanding options and warrants
                  
                  Number
                      of securities remaining available for future issuance under
                      equity
                      compensation plansEquity
                      compensation plans approved by security holders
                  
                  
                  -0-
                  
                  
                  -0-
                  
                  
                  NAEquity
                      compensation plannot
                      approved by security holders
                  
                  
                  420,000
                  
                  $
                  0.08
                  
                  
                  -0-
  18
  We
            do not
            have any equity compensation plans for our employees, directors or consultants.
            At December 31, 2007, there were: (1) 20,000 shares of common stock issuable
            upon exercise of a warrant granted in 2005 for financial consulting services;
            (2) 400,000 shares of common stock issuable upon exercise of a warrant
            granted
            for services as placement agent in connection with a private placement
            of our
            common stock in 2004.
 
 **ITEM
            6 - MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
            OPERATIONS**
  The
            following discussion and analysis should be read in conjunction with
            our
            consolidated financial statements and related footnotes for the years
            ended
            December 31, 2007 and December 31, 2006 included in this Form 10KSB.
            The
            discussion of results, causes and trends should not be construed to imply
            any
            conclusion that such results or trends will necessarily continue in the
            future.
  The
            following information specifies certain forward-looking statements.
            Forward-looking statements are statements that estimate the happening
            of future
            events and are not based on historical fact. Forward-looking statements
            may be
            identified by the use of forward-looking terminology, such as "may,"
            "shall,"
            "could," "expect," "estimate," "anticipate," "predict," "probable," "possible,"
            "should," "continue," or similar terms, variations of those terms or
            the
            negative of those terms. The forward-looking statements specified in
            the
            following information have been compiled by the company on the basis
            of
            assumptions considered by management to be reasonable. Our future operating
            results, however, are impossible to predict and no representations, guaranty,
            or
            warranty is to be inferred from those forward-looking statements.
  The
            assumptions used for purposes of the forward-looking statements specified
            in the
            following information represent estimates of future events and are subject
            to
            uncertainty as to possible changes in economic, legislative, industry
            and other
            circumstances. As a result, the identification and interpretation of
            data and
            other information, their use in developing and selecting assumptions
            from and
            among reasonable alternatives require the exercise of judgment. To the
            extent
            that the assumed events do not occur, the outcome may vary substantially
            from
            anticipated or projected results and accordingly, no opinion is expressed
            on the
            achievability of those forward-looking statements
  19





**OVERVIEW**




Our
      acquisition in May 2004 was treated as a reverse acquisition with the effect
      of
      Logistical Support, LLC and Hill Aerospace & Defense, LLC being treated as
      the acquiring party for accounting purposes and the acquisition being treated
      as
      a recapitalization. Hill Aerospace & Defense, LLC was merged into Logistical
      Support, LLC on March 31, 2006.




Our
      primary customer is the United States Government, for whom we are an aerospace
      and defense contractor. Approximately 98% of our revenue is derived from these
      contracts.




Our
      ability to generate revenue and profit is dependent upon our ability to obtain
      the contract award and to accurately estimate our costs. Since our contracts
      generally do not provide for progress payments, there is a significant delay
      between the time we commence work on a project, and receive payment. Our modest
      working capital and the government's payment policies make it difficult for
      us
      to operate profitably.




During
      2005, we had a dispute with Triumph, one of our contractors. As a result of
      the
      problems with Triumph, we incurred substantial legal fees, unanticipated costs
      in reworking of parts as well as delays in delivery. In addition to the costs
      we
      incurred, our reputation in the industry was affected.




**CRITICAL
      ACCOUNTING POLICIES AND ESTIMATES**




**Use
      of Estimates**




Our
      discussion and analysis of our financial condition and results of operations
      are
      based upon our consolidated financial statements, which have been prepared
      in
      accordance with accounting principles generally accepted in the United States
      of
      America. The preparation of these consolidated financial statements requires
      us
      to make estimates and judgments that affect the reported amounts of assets,
      liabilities, revenues and expenses, and related disclosures of contingent assets
      and liabilities. On an ongoing basis, we evaluate our estimates, including
      those
      related to impairment of long-lived assets, estimated profits on long-term
      contracts, revenue recognition and allowance for doubtful accounts. We base
      our
      estimates on historical experience and on various other assumptions that we
      believe to be reasonable under the circumstances, the results of which form
      the
      basis for making judgments about the carrying value of assets and liabilities
      that are not readily apparent from other sources. Actual results may differ
      from
      these estimates under different assumptions or conditions; however, we believe
      that our estimates, including those for the above-described items, are
      reasonable.




**Revenue
      Recognition**




Sales
      under long-term government contracts are recorded under the percentage of
      completion method. Contract sales and contract costs of sales are recorded
      as
      contract work is performed based on the percentage that incurred costs bear
      to
      estimated total costs utilizing our estimates of costs. Cost estimates include
      direct and indirect costs such as labor, materials and factory overhead. Since
      many contracts extend over a long period of time, revisions in cost and contract
      value estimates during the progress of work have the effect of adjusting
      earnings applicable to performance in prior periods in the current period.
      When
      the current contract estimate indicates a loss, provision is made for the total
      anticipated loss in the current period.




20




**Contract
      Costs**




For
      each
      of our contracts we determine our costs and our estimated profit. Estimated
      profits are based on our historical experience fulfilling similar contracts,
      expected cost of materials and labor, and an allocation of our estimated
      overhead. Most of our government contracts do not provide for progress payments.
      As a result, we have no billing for those contracts until the acceptance and
      delivery of the finished products and we have significant amount shown on our
      balance sheet as costs and estimated profit in excess of billings. Although
      reflected as a current asset, there may be a considerable delay between the
      time
      the costs are incurred and the actual billing. To a significantly lesser extent,
      we have contracts that do provide for interim payments. To the extent that
      the
      payments exceed our costs and estimated profit, that amount is reflected as
      a
      current liability. The actual results could differ significantly from our
      estimates and these differences could be material to our financial statements.
      We account for the change in estimate in the period of change, so that the
      balance sheet at the end of the period of change and the accounting for revenue
      recognition in subsequent periods are as they would have been if the revised
      estimate had been the original estimate.





**RESULTS
      OF OPERATIONS**





**Year
      Ended December 31, 2007 Compared to Year Ended December 31,
      2006**





Our
      revenue for the year ended December 31, 2007 was $6,611,412 an increase of
      $392,864, or 6.3% from $6,218,548 for the year ended December 31, 2006. The
      increase in revenue is primarily due to work performed on new contracts in
      2007.





Our
      cost
      of sales for the year ended December 31, 2007 increased by $420,950 or 8.8%
      from
      $4,782,136 for the year ended December 31, 2006 to $5,203,086 for the year
      ended
      December 31, 2007. Our gross margin for 2007 was 21.3% compared to 23.1% for
      2006. The decrease in gross margin from 2006 to 2007 is due to higher costs
      in
      2007. These increased costs in 2007 were incurred due to performance on new
      contracts which increased our 2007 revenues and cost overruns.




General
      and administrative expenses for the year ended December 31, 2007 decreased
      by
      $62,547, or 5.3%, from $1,171,524 for the year ended December 31, 2006 to
      $1,108,977 for the year ended December 31, 2007.  The decrease is
      principally due to reduction in payroll and payroll expenses due to the decrease
      in number of employees, decrease in property taxes as well as professional
      fees.





Sales
      and
      marketing expenses for the year ended December 31, 2007 decreased by $28,985,
      or
      13.6%, from $212,639 for the year ended December 31, 2006 to $183,654 for the
      year ended December 31, 2007. The decrease is immaterial.





Other
      income for the year ended December 31, 2007 was $169,757 compared to $85,804
      for
      a change of $83,953 or 97.8%. The change is principally due to writing off
      a
      contingent liability due to the expiration of the Statute of
      Limitations.




During
      the year ended December 31, 2006 we purchased the loan on which we were a
      guarantor for an affiliated company for $200,000 which we paid in full on
      December 28, 2006. We had previously recorded the obligation on our books and
      recognized a gain on the settlement of this note of $143,398.




Interest
      expense for the year ended December 31, 2007 was $63,164 an increase of $10,199,
      or 19.3%, from $52,965 for the year ended December 31, 2006. The increase is
      principally due to increased borrowings in 2007 which resulted in higher
      interest expenses.





During
      the fourth quarter of 2005, we established an allowance for net receivables
      from
      Harry Lebovitz and entities controlled by Harry Lebovitz in the amount of
      $268,793 by charging provision for related party receivables. We are also one
      of
      the six guarantors that have guaranteed the debt of an entity controlled by
      Mr.
      Lebovitz. The debt of the affiliated company arose from a note payable issued
      to
      a financial institution in 1999. During the fourth quarter of 2005, we
      determined that the likelihood of the affiliated company being able to pay
      the
      debt was remote and therefore have recorded the outstanding obligation of
      $318,461 which has also been charged to the provision for related party
      receivables. During the year ended December 31, 2006 we took an additional
      charge of $25,800 to provision for related party receivables.




21




Other
      expense for the year ended December 31, 2007 was $154,377, an increase of
      $87,432, or 130.6%, from $66,945 for the year ended December 31, 2006. The
      increase is due to the increase in finance charges related to accounts
      receivables factoring and amortization of loan fees from notes payable to a
      related party and purchase order financing.




During
      the year ended December 31, 2007 and 2006, there was no tax provision as the
      income generated during this period can be offset by net operating loss
      carryforwards. Due to the use of the completed contract method for tax purposes,
      net operating losses for tax purposes were generated in 2007 and 2006.





**LIQUIDITY
      AND CAPITAL RESOURCES**





At
      December 31, 2007, we had working capital of $936,393, as compared to $1,162,477
      at December 31, 2006. We had cash and cash equivalents of $98,496 at December
      31, 2007 as compared to cash and cash equivalents of $484,414 at December 31,
      2006. As of December 31, 2007, we have net contract costs and estimated earnings
      of $2,072,340 that we expect to issue invoices for within the next twelve
      months, therefore we have classified all these amounts as current assets.
      Historically, we have financed our operations through the use of financing
      accounts receivables with a third party lender, purchase order financing and
      increasing the length of time that accounts payable are relieved.




During
      the year ended December 31, 2007, our operating, investing and financing
      activities used cash of $414, $156,566 and $228,938, respectively. The cash
      used
      in operating activities was principally a result of our net incomes, offset
      by
      an increase in current assets and a decrease in current liabilities. Cash used
      in investing activities was a result of the purchase of property and equipment.
      Cash used by financing activities was a result of net repayment of our factored
      receivables, repayment of notes payable to a related party, payment of deferred
      financing costs, repayment of notes payable and capital lease obligations offset
      by net proceeds from our purchase order financing.




In
      August
      2007, we entered into a purchase order financing agreement with Dutchess Private
      Equities Fund, Ltd. (“Dutchess”) a private equity firm which allows us to borrow
      a maximum of $2,000,000 to finance certain purchase orders. The term of the
      agreement is two years. The obligations are secured by our guarantee and a
      grant
      of a first priority security interest in the parts and supplies from the orders
      and all finished goods with respect to the purchase orders. The interest rate
      charged on any outstanding advances is 2% per month and 3% per annum on any
      unused portion of the line of credit. The loan agreement also contains certain
      covenants including not changing our corporate structure and not incurring
      any
      liens upon any collateral of the debtor other than those permitted by the
      agreement. If we default on the line of credit and remain in default for sixty
      days, Dutchess has the right to switch the borrowed amount to a 3 year, 15%,
      interest bearing, convertible debenture. If we remain in default, Dutchess
      has
      the right to convert the debenture amount plus accrued interest, anytime after
      the debenture has been issued but before the maturity date of the debenture,
      into our common stock at the rate of eighty percent (80%) of the lowest closing
      bid price during the twenty (20) days immediately preceding the date of
      conversion. At December 31, 2007, we had $313,404 outstanding under this
      agreement as shown in our financial statements.




22




As
      an
      inducement to the lender, we issued 500,000 shares of its common stock valued
      at
      $55,000, and paid an administration fee of $35,000 to the lender. Those amounts
      plus additional legal fees of $1,584 were charged to deferred financing costs
      and are being amortized over the term of the financing agreement. At December
      31, 2007 the unamortized portion of deferred financing costs totaled $76,320,
      of
      which $45,792 is current and $30,528 is long-term as shown in our financial
      statements.




We
      have
      an accounts receivable financing facility with Wells Fargo (Wells) formerly
      known as Commerce Funding Corporation. The interest rate on this financing
      agreement is prime plus 1% (8.25% at December 31, 2007) and the maximum
      amount to be advanced under this agreement is $1 million. Wells has agreed
      to
      lend up to 85% of qualifying receivables. The qualifying receivables are sold
      to
      Wells "non recourse" unless an event of default exists under the agreement
      in
      which case the qualifying receivable is sold with "recourse". There was $106,984
      outstanding under this financing facility at December 31, 2007.





Our
      ability to generate cash flow from our business is dependent upon a number
      of
      factors, including our ability to receive awards and to estimate accurately
      our
      costs. Because of the government's payment policies and the extended period
      of
      time between the commencement of work on a contract and our receipt of payment,
      we believe that our ability to grow is dependent upon obtaining funding, either
      through the sale of our securities or a credit facility that is not based on
      accounts receivable. To the extent that we receive more awards, we will require
      additional funding to finance the performance of these contracts. Our thin
      trading market and our stock price may make it difficult to obtain capital
      except on terms that are highly dilutive to our stockholders. Further, during
      the past year, we have changed our estimates on our contract costs. We cannot
      assure you that we will not have to change our estimates on other contracts.
      However, we believe that the purchase order financing agreement with Dutchess
      Private Equities Fund, Ltd. as mentioned above will provide us with the working
      capital required for our current and future contracts.




**Cash
      on Hand**





We
      believe that the current cash on hand along with cash expected to be generated
      from our operations will be sufficient to fund our operations for the next
      twelve months. Our cash balance in 2008 and beyond will depend on our 2008
      deliveries, the number of new government contracts and our ability to raise
      additional capital through debt or equity financings, or to finance our
      receivables. If we are able to obtain sufficient contracts to generate revenue
      at least equal to the amounts generated in 2007, and if we are able to raise
      capital through debt or equity financings, when and if needed, we should
      generate enough cash to maintain our operations beyond 2008. As we obtain new
      contracts our working capital needs increase and we will need to find ways
      to
      finance new contracts through raising additional equity or debt capital or
      both.





**Seasonality
      and Quarterly Results**





Our
      results of operation are not affected by seasonal influence or quarterly
      fluctuations.





**Inflation**





Our
      results of operation are not materially affected by inflation. From time to
      time, we may experience a reduction in profits on specific contracts if such
      contracts are delayed in performance and as a result the costs of acquiring
      parts or services from subcontractors to meet delivery requirements on overdue
      or extended contracts increases due to inflation. Because of an increase in
      worldwide demand there has been a significant increase in material costs which
      could effect our performance on existing and future contracts.




23





**ITEM
      7- FINANCIAL STATEMENTS**




The
      financial statements, together with the report of our independent registered
      public accounting firm, appear beginning on page F-1 of this report.





**ITEM
      8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE**





N/A





**ITEM
      8A - CONTROLS AND PROCEDURES**





**Disclosure
      Controls and Procedures**





As
      of the
      end of the period covered by this report, our chief executive officer and chief
      financial officer (who is the same individual) evaluated the effectiveness
      of
      our disclosure controls and procedures (as defined in Rule 13a - 15(e) of the
      Exchange Act). Based on his evaluation, the chief executive officer and chief
      financial officer concluded that our disclosure controls and procedures are
      effective to ensure that information that is required to be disclosed in the
      reports that we file or submit under the Exchange Act is recorded, processed,
      summarized and reported within the required time periods.





**Management’s
      Annual Report on Internal Control Over Financial Reporting**




Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting as defined in Rules 13a-15(f) under the
      Exchange Act. Our internal control over financial reporting is designed to
      ensure that material information regarding our operations is made available
      to
      management and the board of directors to provide them reasonable assurance
      that
      the published financial statements are fairly presented. There are limitations
      inherent in any internal control, such as the possibility of human error and
      the
      circumvention or overriding of controls. As a result, even effective internal
      controls can provide only reasonable assurance with respect to financial
      statement preparation. As conditions change over time so too may the
      effectiveness of internal controls.




Our
      management, with the participation of our chief executive officer and chief
      financial officer, has evaluated our internal control over financial reporting
      as of December 31, 2007 based on the framework in Internal Control - Integrated
      Framework issued by the Committee of Sponsoring Organizations (COSO) of the
      Treadway Commission. Based on this assessment, our management concluded that
      our
      internal control over financial reporting was effective as of December 31,
      2007.




This
      annual 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
      in this annual report.




**Internal
      Control Over Financial Reporting**





There
      has
      been no change in our internal control over financial reporting that occurred
      during our last fiscal quarter that has materially affected, or is reasonably
      likely to materially affect, our internal control over financial
      reporting.




24




**ITEM
      8B - OTHER INFORMATION**





**None**





**PART
      III**





**ITEM
      9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
      WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT**





The
      names, ages and positions of our directors and executive officers as, are listed
      below:





Name
            
            Positions
            
            AgeBruce
                Littell
            
            Chairman,
                Chief Executive Officer and Chief Financial Officer
            
            59Joseph
                Lucan
            
            Vice
                President - Engineering
            
            55Jerry
                Hill
            
            Executive
                Vice President
            
            55Agnes
                Houng
            
            Vice
                President of Operations
            
            37





Directors
      will be elected for one-year terms at the annual shareholders meeting. Officers
      will hold their position at the pleasure of the board of directors. There is
      no
      arrangement or understanding between any of our directors or officers and any
      other person pursuant to which any director or officer was or is to be selected
      as a director or officer, and there is no arrangement, plan or understanding
      as
      to whether non-management shareholders will exercise their voting rights to
      continue to elect the current board of directors.





There
      is
      no family relationship among any of our directors and executive
      officers.





**BIOGRAPHICAL
      INFORMATION**





Bruce
      Littell has been our chief executive and accounting officer and a director
      since
      the reverse acquisition in 2004. He was an executive officer at Logistical
      Support, LLC since its inception in 1997. Prior to joining Logistical Support,
      LLC and its affiliates, he owned and operated various privately held companies
      in industries including oil and gas, lending and distressed real estate
      reorganization and asset recovery. Prior to those engagements, Mr. Littell
      owned
      his own accounting firm. Mr. Littell worked for Eisner & Lubin in New York
      City and with Kenneth Leventhal in Los Angeles as a Certified Public Accountant.
      Mr. Littell is a Certified Public Accountant in California. He holds a Bachelor
      of Science degree from the New York Institute of Technology, New York and a
      Masters of Business Administration from Henley Management College,
      UK.




Joseph
      Lucan has been our vice president - engineering since 1996 Mr. Lucan has been
      involved in the manufacturing of precision aerospace products since 1972, and
      has hands-on experience in all aspects of the business, from CNC programming
      and
      machining to production planning and control.




Jerry
      Hill joined Logistical Support in 2004 for overseeing the overhaul and repair
      operations. He was appointed as the Executive Vice President in February 2008.
      He has operations experience in landing gear and hydraulics. Before joining
      us,
      Mr. Hill held operations management positions at Hawker Pacific Aerospace and
      Helicopter Accessory Service.




Agnes
      Houng joined Logistical Support in 1998.  She administers all our
      Government and non-Government bids and contracts.  She also provides system
      support to our operations and oversees the Accounting Department. 
 She received her Bachelor of Social Sciences degree from the University of
      Hong Kong and her Master of Business Administration degree from California
      State
      University, Northridge.




25





**Committees**





Since
      we
      only have one director, we do not have an audit or compensation
      committee.




Our
      sole
      board member does not possess all of the attributes of an audit committee
      financial expert and no one on our board of directors is deemed to be an audit
      committee financial expert. Our business model is not complex and our accounting
      issues are straightforward with the exception of contract cost estimation which
      can be affected by various factors and requires regular review by the
      management.





Responsibility
      for our operations is centralized within management, which is comprised of
      4
      people. We rely on the assistance of an outside financial consultant to help
      us
      with the preparation of our financial information. We recognize that having
      a
      person who possesses all of the attributes of an audit committee financial
      expert would be a valuable addition to our board of directors, however, we
      are
      not, at this time, able to compensate such a person and therefore, we may find
      it difficult to attract such a candidate.





**Compliance
      With Section 16(a) of Exchange Act**





Section
      16(a) of the Securities Exchange Act of 1934, requires our directors and
      executive officers, and other persons who own more than 10% of a registered
      class of our equity securities, to file with the SEC initial reports of
      ownership and reports of changes in ownership of common stock and other of
      our
      equity securities. To our knowledge, based solely on our review of the copies
      of
      the Section 16(a) reports furnished to the Company and written representations
      that no other reports were required, we believe that all individual filing
      requirements applicable to our directors and executive officers were complied
      with under Section 16(a) during 2007.





**Code
      of Ethics**





On
      November 12, 2004, we adopted a code of ethics that applies to our principal
      executive officer, principal financial officer, principal accounting officer
      or
      controller, or persons performing similar functions, as well as our employees,
      generally. A copy of our code of ethics is posted on our Web site.




26





**ITEM
      10 - EXECUTIVE COMPENSATION**





The
      following table sets forth compensation information for services rendered to
      us
      by certain executive officers (collectively, the Company’s “Named Executive
      Officers”) in all capacities, other than as directors, during the fiscal year
      ended December 31, 2007. Other than as set forth below, no executive officer’s
      salary and bonus exceeded $100,000 in such year. The following information
      includes the dollar value of base salaries, bonus awards, the number of stock
      options granted and certain other compensation, if any, whether paid or
      deferred.





**Summary
                Compensation Table****Name
                and Principal Position**
            
            **Year**
            
            **Salary**
            
            **Bonus**
            
            **Stock
                Awards**
            
            **Option/Warrant
                Awards**
            
            **Non-Equity
                Incentive Plan Compensation**
            
            **All
                Other Compensation**
            
            **Total**Bruce
                Littell
            
            
            2007
            
            $
            300,000
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            300,000Chairman,
                Chief Executive
            
            
            2006
            
            $
            300,000
            
            $
            2,000
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            302,000Officer
                and Chief FinancialOfficerJoseph
                Lucan
            
            
            2007
            
            $
            116,331
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            116,331Vice
                President - Engineering
            
            
            2006
            
            $
            107,115
            
            $
            2,000
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            109,115Jerry
                Hill
            
            
            2007
            
            $
            119,809
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            119,809Executive
                Vice President
            
            
            2006
            
            $
            110,000
            
            $
            2,000
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            112,000





No
      officer received perquisites and other personal benefits, securities, or
      property received in excess of 10% of his salary.




On
      December 15, 2005, we entered into an employment agreement with Bruce Littell
      pursuant to which Mr. Littell will act as our Chief Executive Officer. Unless
      terminated earlier in accordance with its terms, the Employment Agreement has
      a
      term of two years beginning on January 1, 2006 and ending on December 31, 2007,
      and the term has been automatically extended for an additional two-year. We
      will
      pay Mr. Littell an annual base salary of $300,000 for the first year of the
      Employment Agreement, and thereafter Mr. Littell's salary will be determined
      in
      the sole discretion of the Board of Directors of the Subsidiary. Mr. Littell’s
      salary is unchanged for the year ended December 31, 2007 In the event that
      Mr.
      Littell's employment is terminated by Logistical without cause; Mr. Littell
      is
      entitled to receive a lump-sum severance payment in an amount equal to two
      year's salary then in effect at the time of termination.




In
      addition, in April 2007, the Company entered into employment agreements with
      three executives with total annual compensation of $317,115. One of
      the agreements includes a provision for the Company to issue 50,000
      common shares to one of these employees upon execution. All three
      employment agreements are for the term of one year and will be automatically
      extended for an additional year. As of December 31, 2007, two of the three
      employment agreements remained in effect.




27





**Outstanding
      Equity Awards at Fiscal Year-End**





The
      following table summarizes the amount of our executive officers’ equity-based
      compensation outstanding at the fiscal year ended December 31,
      2007.





**Outstanding
                Equity Awards at Fiscal Year-End****Options
                Awards**
            
            **Stock
                Awards****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 Or Units 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**(#)
            
            (#)
            
            (#)
            
            (
                $
                )
            
            
            
            (#)
            
            (#)
            
            (#)
            
            ($)Bruce
                Littell
            
            
            9,633,937
            
            
            -
            
            
            -
            
            $
            0.20
            
            
            02/28/09
            
            
            -
            
            
            -
            
            
            -
            
            $
            -




We
      do not
      have any plan or program for the grant of options, restricted stock or other
      equity-based incentives.




**Director
      Compensation**




We
      have
      no non-employee directors and our sole director does not receive any additional
      compensation for serving as a director.




28


**ITEM
      11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND** **MANAGEMENT** ****




The
      following table and discussion provides information as to the shares of common
      stock beneficially owned on December 31, 2007 by:


·
            each
                director; 
 ·
            each
                officer named in the summary compensation
                table; 
 ·
            each
                person owning of record or known by us, based on information provided
                to
                us by the persons named below, to own beneficially at least 5% of
                our
                common stock; and all directors and executive officers as a group.


**Name******
            
            **Shares
                of Common**
              **Stock
                Beneficially**
              **Owned**
            
            **Percentage
                of**
              **Outstanding**
              **Common
                Stock**Harry
                Lebovitz
              956
                Kagawa St.
              Pacific
                Palisades, CA 90272
            
            
            26,611,302
            
            
            33.54
            %G.
                Scott Littell, trustee
              The
                Children’s Trust of 1988
              1452
                2nd Street
              Santa
                Monica, California 90401
            
            
            18,077,365
            (2)
            
            22.78
            %Bruce
                Littell
              19734
                Dearborn Street
              Chatsworth,
                California 91311
            
            
            9,633,637
            (1)(2)
            
            10.83
            %Absolute
                Return Europe Fund Camin de Sarria 63
              E-07010
                Establishments
              Spain
            
            
            6,000,000
            (3)
            
            7.56
            %European
                Catalyst Fund
              P.O.
                Box 1234
              Georgetown
              Grand
                Cayman Islands
            
            
            11,600,000
            (4)
            
            14.62
            %Agnes
                Houng
            
            
            50,000
            
            
            0.06
            %Joseph
                Lucan
            
            
            3,105,666
            
            
            3.91
            %Jerry
                Hill
            
            
            50,000
            
            
            0.06
            %All
                directors and executive
              officers
                as a group (4
              individuals)
            
            
            30,916,668
            
            
            34.75
            %




(1)
      Includes 9,633,637 warrants that have an exercise price of $0.20.




(2)
      Mr.
      G. Scott Littell is the brother of Bruce Littell. Mr. Bruce Littell's children
      are the beneficiaries of The Children's Trust of 1988. The shares beneficially
      owned by Bruce Littell do not include any shares which are owned by The
      Children's Trust of 1988, as to which Mr. Bruce Littell disclaims beneficial
      interest.




(3) John
      Fleming and Ronald Tompkins have sole voting and dispositive power with
      respect to the securities owned by Absolute Return Europe Fund.




(4)
      Mr.
      Darius Parsi has sole voting and dispositive power with respect to the
      securities owned by European Catalyst Fund.





**ITEM
      12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**




Effective
      June 1, 2005, we entered into a Separation Agreement with Mr. Harry Lebovitz,
      Hill Industries, Inc. ("Hill Industries") and Hill Industries, LLC ("Hill LLC").
      Hill Industries and Hill LLC are entities owned and controlled by Mr. Lebovitz.
      Pursuant to the terms of the Separation Agreement, Mr. Lebovitz resigned
      effective immediately from our Board of Directors and effective July 1, 2005
      he
      no longer served in any management or service role at the Company or its
      subsidiaries, Hill and Logistical.




In
      addition, we agreed to purchase from Mr. Lebovitz, or Hill Industries or Hill
      LLC (at our discretion) shares of our common stock owned by such persons at
      a
      price per share of $0.25 (the "Purchase Price"), at the rate of $25,000 per
      month for a period of twelve months commencing on June 15, 2005. The aggregate
      purchases were not to exceed $300,000 over a twelve-month period, resulting
      in
      our acquiring up to 1,200,000 shares of common stock under the Agreement. Under
      certain conditions set forth in the Agreement, we could cease such purchases
      and
      would have no obligation to resume them. As of June 30, 2006, we purchased
      1,100,000 shares of common stock for $275,000. These 1,100,000 shares were
      retired upon repurchase. We ceased purchasing the stock after Harry Lebovitz
      filed a lawsuit against us.





**ITEM
      13 - EXHIBITS**





(a)  Exhibits


ExhibitNumber
              
              Description
                  of Exhibit3.1
              
              Articles
                  of Incorporation, as Amended and filed in the state of Utah
                  (1)3.2
              
              Bylaws
                  of the Registrant (5)4.1
              
              Form
                  of Warrant Agreement (2)4.2
              
              Form
                  of Warrant Certificate (2)4.3
              
              Registration
                  Rights Agreement dated September 29, 2004 (3)4.4
              
              Form
                  of Warrant issued to Hunter World Markets, Inc. (3)10.1
              
              Stock
                  Exchange Agreement dated as of May 27, 2004 by and among the Registrant
                  and the other parties listed therein
                  (1)
  29
  10.2
              
              Securities
                  Purchase Agreement dated September 29, 2004 (3)10.3
              
              Form
                  of Lock Up Agreement (3)10.4
              
              General
                  Release and Settlement Agreement dated October 15, 2004
                  (4)10.5
              
              Settlement
                  Agreement dated as of July 18, 2006 between Logistical Support,
                  LLC and
                  Triumph Engineered Solutions, Inc. (11)10.6
              
              Settlement
                  Agreement with Triumph Components-Arizona, Inc. (7)10.7
              
              General
                  Release and Settlement Agreement (6)10.8
              
              Lease
                  Agreement for Eton Road Facility (8)10.9
              
              Settlement
                  Agreement and Conditional Release of Claims between Bell Helicopter
                  Textron Inc. and Logistical Support, LLC (9)10.10
              
              Settlement
                  Agreement and Conditional Release of Claims between Bell Helicopter
                  Textron Inc. and Hill Aerospace & Defense, LLC (9)10.11
              
              Separation
                  Agreement dated June 1, 2005 (10)10.12
              
              Loan
                  Sale Agreement between Logistical Support LLC and National Loan
                  Investors
                  L.P. (12)10.13
              
              Purchase
                  Order Financing Agreement between Logistical Support, LLC and Dutchess
                  Private Equities Fund, Ltd. (13)10.14
              
              Security
                  Agreement (13)10.15
              
              Continuing
                  Unconditional Guaranty of Logistical Support, Inc. (13)21.1
              
              List
                  of subsidiaries (7)31.
              
              Certification
                  of Chief Executive Officer/Chief Financial Officer Pursuant to
                  Rules
                    13a-14 and 15d-14 of the Securities Exchange Act of
                  193432.
              
              Certification
                  Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 2002


(1)
              Filed
                  as an exhibit to the Registrant's Current Report on Form 8-K dated
                  May 27,
                  2004and
                  incorporated herein by
                  reference.





(2)
            Filed
                as an exhibit to the Registrant's Quarterly Report on Form 10-QSB
                for the
                periodended
                June 30, 2004 and incorporated herein by
                reference.




30




(3)
            Filed
                as an exhibit to the Registrant's Current Report on Form 8-K dated
                September 29, 2004and
                incorporated herein by reference.





(4)
            Filed
                as an exhibit to the Registrant's Current Report on Form 8-K dated
                November 8, 2004and
                incorporated herein by reference.





(5)
            Filed
                as an exhibit to the Registrant's Form 10-SB Registration Statement
                on
                March 27, 2003and
                incorporated herein by reference.





(6)
            Filed
                as an exhibit to the Registrant's Current Report on Form 8-K dated
                November 3, 2004and
                incorporated herein by reference





(7)
            Filed
                as an exhibit to the Registrant's Registration Statement on Form
                SB-2/Amendment No. 2,declared
                effective February 11, 2005, and incorporated herein by
                reference.





(8)
            Filed
                as an exhibit to the Registrant’s Annual Report on Form 10-KSB dated April
                15, 2005, as amended, and incorporated herein by
                reference.





(9)
            Filed
                as an exhibit to the Registrant’s Current Report on Form 8-K dated May 18,
                2005, and incorporated herein by
                reference.





(10)
            Filed
                as an exhibit to the Registrant’s Current Report on Form 8-K dated June 1,
                2005, and incorporated herein by
                reference





(11)
            Filed
                as an exhibit to the Registrant's Current Report on Form 8-K dated
                July
                25, 2006, and incorporated herein by
                reference





(12)
            Filed
                as an exhibit to the Registrant's Current Report on Form 8-K dated
                December 11, 2006, and incorporated herein by
                reference





(13)
            Filed
                as an exhibit to the Registrant's Current Report on Form 8-K dated
                August
                31, 2007, and incorporated herein by
                reference




**ITEM
      14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES**





The
      following table sets forth fees billed to us by our independent registered
      public accounting firm, AJ. Robbins, PC during the fiscal years ended December
      31, 2007 and 2006 for: (i) services rendered for the audit of our annual
      financial statements and the review of our quarterly financial statements,
      (ii)
      services by our auditor that are reasonably related to the performance of the
      audit or review of our financial statements and that are not reported as Audit
      Fees, and (iii) services rendered in connection with tax compliance, tax advice
      and tax planning. We did not engage our auditors for any other services during
      2007.


December
                  31, 2007
              
              December
                  31, 2006Audit
                  Fees
              
              $
              73,734
              
              $
              70,962Audit
                  Related Fees
              
              
              
              
              $
              -Tax
                  Fees
              
              $
              10,000
              
              $
              12,500
  31




**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.


**LOGISTICAL
              SUPPORT, INC.**By:
            /s/
              Bruce LittellBruce
                Littell
              Chairman,
                Chief Executive Officer,
              Chief
                Accounting Officer and Director




Dated:  March
      31,
      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.


Signature
              
              Title
              
              Date/s/
                  Bruce Littell
              
              Chairman,
                  Chief Executive and Finacial Officer,
              
              March
                  31, 2008Bruce
                  Littell
              
              (Principal
                  executive, financial and accounting officer) and director
    32






**Logistical
        Support, Inc. and Subsidiary**
 **Consolidated
          Financial Statements**
 **Years
          Ended December 31, 2007 and 2006**
 
 
 **Contents**
 
 Page**Report
                    of Independent Registered Public Accounting Firm**
                F-1**Consolidated
                    Financial Statements:**Consolidated
                    Balance Sheet as of December 31, 2007
                F-2Consolidated
                    Statements of Operations for the years endedDecember
                    31, 2007 and 2006
                F-3Consolidated
                    Statements of Stockholders’ Equity for the years endedDecember
                    31, 2007 and 2006
                F-4Consolidated
                    Statements of Cash Flows for the years endedDecember
                    31, 2007 and 2006
                F-5Notes
                    to Consolidated Financial Statements
                F-6
 
 
 AJ.
          ROBBINS, P.C.
 CERTIFIED
          PUBLIC ACCOUNTANTS
 216
          SIXTEENTH STREET
 SUITE
          600
 DENVER,
          CO 80202
 
 **REPORT
          OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 Board
          of
          Directors and Stockholders
 Logistical
          Support, Inc.
 Chatsworth,
          California
 
 We
          have
          audited the accompanying consolidated balance sheet of Logistical Support,
          Inc.
          and subsidiary as of December 31, 2007, and the related consolidated statements
          of operations, stockholders’ equity and cash flows for each of the years in the
          two year period then ended. 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 Company
          Accounting Oversight Board (United States). Those standards require that
          we plan
          and perform the audits to obtain reasonable assurance about whether the
          consolidated 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 audits included consideration
          of
          internal control over financial reporting as a basis for designing audit
          procedures that are appropriate in the circumstances, but not for the purpose
          of
          expressing an opinion on the effectiveness of the Company’s internal control
          over financial reporting. Accordingly, we express no such opinion. An audit
          also
          includes examining, on a test basis, evidence supporting the amounts and
          disclosures in the consolidated 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 consolidated financial statements referred to above present
          fairly,
          in all material respects, the consolidated financial position of Logistical
          Support, Inc. and subsidiary as of December 31, 2007, and the results of
          their
          operations and their cash flows for each of the years in the two year period
          then ended, in conformity with accounting principles generally accepted
          in the
          United States of America.
 
  /s/
          AJ
          Robbins PC
 **Certified
          Public Accountants**
 
 Denver,
          Colorado
 March
          25,
          2008
 
 F-1
  **Logistical
                  Support, Inc. and Subsidiary****Consolidated
                  Balance Sheet****As
                  of December 31, 2007**
  **December
                  31,****2007****ASSETS**CURRENT
                  ASSETSCash
                  and cash equivalents
              
              $
              98,496Accounts
                  receivable, net of allowance for doubtful accounts of
                  $13,972
              
              
              205,468Inventory
              
              
              43,452Contract
                  costs and estimated earnings in excess of billings
              
              
              2,089,027Due
                  from factor
              
              
              15,088Deferred
                  financing cost, current portion
              
              
              45,792Other
                  current assets
              
              
              145,596TOTAL
                  CURRENT ASSETS
              
              
              2,642,919PROPERTY
                  AND EQUIPMENT, net
              
              
              607,042DEFERRED
                  FINANCING COST, LONG TERM
              
              
              30,528TOTAL
                  ASSETS
              
              $
              3,280,489**LIABILITIES
                  AND STOCKHOLDERS' EQUITY**CURRENT
                  LIABILITIESAccounts
                  payable
              
              $
              755,623Accrued
                  Triumph settlement obligation
              
              
              119,000Accrued
                  payroll expenses
              
              
              154,040Accrued
                  expenses
              
              
              172,296Billings
                  in excess of contract costs and estimated earnings
              
              
              16,687Line
                  of credit
              
              
              313,404Due
                  to factor
              
              
              106,984Notes
                  payable, current portion
              
              
              4,669Capital
                  lease obligations, current portion
              
              
              63,823TOTAL
                  CURRENT LIABILITIES
              
              
              1,706,526NOTES
                  PAYABLE, net of current portion
              
              
              5,524CAPITAL
                  LEASE OBLIGATIONS, net of current portion
              
              
              82,856TOTAL
                  LIABILITIES
              
              
              1,794,906COMMITMENT
                  AND CONTINGENCIES
              
              
              -STOCKHOLDERS'
                  EQUITYPreferred
                  stock, $0.001 par value; 5,000,000 sharesauthorized;
                  0 shares issued and outstanding
              
              
              -Common
                  stock, $0.001 par value; 100,000,000 sharesauthorized;
                  79,345,000 shares issued and outstanding
              
              
              79,345Additional
                  paid-in capital
              
              
              3,549,872Due
                  from officers/affiliates, net
              
              
              (114,307
              )Accumulated
                  deficit
              
              
              (2,029,327
              )TOTAL
                  STOCKHOLDERS' EQUITY
              
              
              1,485,583TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY
              
              $
              3,280,489
  The
          accompanying notes are an integral part of these consolidated financial
          statements.
 F-2
  **Logistical
                  Support, Inc. and Subsidiary****Consolidated
                  Statements of Operations****For
                  The Years Ended December 31, 2007 and
                  2006**
  **Years
                  Ended December 31,****2007**
              
              **2006**SALESContracts
              
              $
              6,527,952
              
              $
              6,016,137Products
              
              
              83,460
              
              
              202,411TOTAL
                  SALES
              
              
              6,611,412
              
              
              6,218,548COST
                  OF SALESContracts
              
              
              5,138,282
              
              
              4,696,001Products
              
              
              64,804
              
              
              86,135TOTAL
                  COST OF SALES
              
              
              5,203,086
              
              
              4,782,136GROSS
                  PROFIT
              
              
              1,408,326
              
              
              1,436,412OPERATING
                  EXPENSESGeneral
                  and administrative
              
              
              1,108,977
              
              
              1,171,524Sales
                  and marketing
              
              
              183,654
              
              
              212,639TOTAL
                  OPERATING EXPENSES
              
              
              1,292,631
              
              
              1,384,163INCOME
                  FROM OPERATIONS
              
              
              115,695
              
              
              52,249OTHER
                  INCOME (EXPENSE)Other
                  income
              
              
              169,757
              
              
              85,804Gain
                  on settlement with NLI
              
              
              -
              
              
              143,398Interest
                  expense
              
              
              (63,164
              )
              
              (52,965
              )Provision
                  for related party receivables
              
              
              -
              
              
              (25,800
              )Other
                  expense
              
              
              (154,377
              )
              
              (66,945
              )TOTAL
                  OTHER INCOME (EXPENSE)
              
              
              (47,784
              )
              
              83,492INCOME
                  BEFORE PROVISION FOR INCOME TAXES
              
              
              67,911
              
              
              135,741PROVISION
                  FOR INCOME TAXES
              
              
              -
              
              
              -NET
                  INCOME
              
              $
              67,911
              
              $
              135,741EFFECT
                  OF REPRICE OF WARRANTS
              
              
              -
              
              
              (316,694
              )NET
                  INCOME (LOSS) ATTRIBUTED TOCOMMON
                  STOCKHOLDERS
              
              $
              67,911
              
              $
              (180,953
              )EARNINGS
                  (LOSS) PER SHARE:BASIC
              
              $
              0.00
              
              $
              (0.00
              )DILUTED
              
              $
              0.00
              
              $
              (0.00
              )WEIGHTED
                  AVERAGE SHARES OUTSTANDING:BASIC
              
              
              78,987,740
              
              
              74,917,055DILUTED
              
              
              79,336,502
              
              
              74,917,055
  The
          accompanying notes are an integral part of these consolidated financial
          statements.
  F-3
  **Logistical
                    Support, Inc. and Subsidiary****Consolidated
                    Statements of Stockholders' Equity****For
                    The Years Ended December 31, 2007 and
                    2006**
  **Additional**
                
                **Due
                    From**
                
                
                
                
                
                **Total****Common
                    Stock**
                
                **Paid-in**
                
                **Officers/**
                
                **Prepaid**
                
                **Accumulated**
                
                **Stockholders'****Shares**
                
                **Amount**
                
                **Capital**
                
                **Affiliates**
                
                **Consulting**
                
                **Deficit**
                
                **Equity**Balance,
                    December 31, 2005
                
                
                71,545,000
                
                $
                71,545
                
                $
                3,108,978
                
                $
                (228,275
                )
                $
                (5,786
                )
                $
                (1,916,285
                )
                $
                1,030,177Provision
                    for advances to officers/affiliates
                
                
                -
                
                
                -
                
                
                -
                
                
                113,968
                
                
                -
                
                
                -
                
                
                113,968Repurchase
                    of common stockfrom
                    related party
                
                
                (400,000
                )
                
                (400
                )
                
                (99,600
                )
                
                -
                
                
                -
                
                
                -
                
                
                (100,000
                )Exercise
                    of warrants for cash
                
                
                7,600,000
                
                
                7,600
                
                
                144,400
                
                
                -
                
                
                -
                
                
                -
                
                
                152,000Amortization
                    of prepaid consulting
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                5,786
                
                
                -
                
                
                5,786Effect
                    of reprice of warrants
                
                
                -
                
                
                -
                
                
                316,694
                
                
                -
                
                
                -
                
                
                (316,694
                )
                
                -Net
                    income
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                135,741
                
                
                135,741Balance,
                    December 31, 2006
                
                
                78,745,000
                
                
                78,745
                
                
                3,470,472
                
                
                (114,307
                )
                
                -
                
                
                (2,097,238
                )
                
                1,337,672Issuance
                    of stock for compensation
                
                
                100,000
                
                
                100
                
                
                24,900
                
                
                -
                
                
                -
                
                
                -
                
                
                25,000Issuance
                    of stock for financing agreement
                
                
                500,000
                
                
                500
                
                
                54,500
                
                
                -
                
                
                -
                
                
                -
                
                
                55,000Net
                    income
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                67,911
                
                
                67,911Balance,
                    December 31, 2007
                
                
                79,345,000
                
                $
                79,345
                
                $
                3,549,872
                
                $
                (114,307
                )
                $
                -
                
                $
                (2,029,327
                )
                $
                1,485,583
  The
          accompanying notes are an integral part of these consolidated financial
          statements.
  F-4
  **Logistical
                    Support, Inc. and Subsidiary****Consolidated
                    Statements of Cash Flows****For
                    The Years Ended December 31, 2007 and
                    2006**
  **Years
                    Ended December 31,****2007**
                
                **2006**CASH
                    FLOW FROM OPERATING ACTIVITIES:Net
                    income
                
                $
                67,911
                
                $
                135,741Adjustment
                    to reconcile net income to net cashused
                    in operating activities:Depreciation
                    expense
                
                
                122,420
                
                
                84,276Provision
                    for related party receivable
                
                
                -
                
                
                25,800Amortization
                    of fair value of warrants issued to consultants
                
                
                -
                
                
                5,786Gain
                    on write-off of liabilities
                
                
                -
                
                
                (9,143
                )(Gain)
                    on extinguishment of debt
                
                
                -
                
                
                (143,398
                )Other
                    long-term liabilities
                
                
                (113,335
                )
                
                (38,335
                )Common
                    stock issued for services
                
                
                25,000
                
                
                -Amortization
                    of deferred financing costs
                
                
                15,264
                
                
                -Changes
                    in operating assets and liabilities:Other
                    receivables
                
                
                -
                
                
                10,523Accounts
                    receivable
                
                
                282,190
                
                
                28,082Due
                    from officers/affiliates
                
                
                -
                
                
                88,168Inventory
                
                
                -
                
                
                59,439Contract
                    costs
                
                
                11,396
                
                
                (120,797
                )Due
                    from factor
                
                
                166,230
                
                
                (181,318
                )Other
                    current assets
                
                
                (39,710
                )
                
                (40,842
                )Accounts
                    payable
                
                
                140,946
                
                
                (114,331
                )Accrued
                    Triumph settlement obligation
                
                
                (530,000
                )
                
                (301,000
                )Accrued
                    payroll expenses
                
                
                (135,523
                )
                
                -Accrued
                    expenses
                
                
                (29,890
                )
                
                324,665Billings
                    in excess of contract costs
                
                
                16,687Guaranteed
                    obligation of related party
                
                
                -
                
                
                (200,000
                )Net
                    cash used in operating activities
                
                
                (414
                )
                
                (386,684
                )CASH
                    FLOW FROM INVESTING ACTIVITIES:Purchase
                    of property and equipment
                
                
                (156,566
                )
                
                (59,070
                )Net
                    cash used in investing activities
                
                
                (156,566
                )
                
                (59,070
                )CASH
                    FLOW FROM FINANCING ACTIVITIES:Proceeds
                    from exercise of warrants
                
                
                -
                
                
                152,000Proceeds
                    (Repayments) of factoring receivables, net
                
                
                (214,300
                )
                
                321,284Proceeds
                    from the issuance of notes payable to related party
                
                
                -
                
                
                225,000Repayment
                    of notes payable to related party
                
                
                (225,000
                )Proceeds
                    (Repayments) of line of credit, net
                
                
                313,404
                
                
                -Payment
                    of deferred financing costs
                
                
                (36,584
                )Repurchase
                    of common stock from a related party
                
                
                -
                
                
                (100,000
                )Payments
                    on capital lease obligations
                
                
                (61,454
                )
                
                (45,088
                )Payments
                    on notes payable
                
                
                (5,004
                )
                
                (10,244
                )Net
                    cash provided by (used in) financing activities
                
                
                (228,938
                )
                
                542,952NET
                    INCREASE (DECREASE) IN CASH ANDCASH
                    EQUIVALENTS
                
                
                (385,918
                )
                
                97,198CASH
                    AND CASH EQUIVALENTS, Beginning of year
                
                
                484,414
                
                
                387,216CASH
                    AND CASH EQUIVALENTS, End of year
                
                $
                98,496
                
                $
                484,414SUPPLEMENTAL
                    DISCLOSURES OF CASH FLOWS INFORMATION:Interest
                    paid
                
                $
                55,382
                
                
                52,965Income
                    taxes paid
                
                $
                -
                
                $
                -SUPPLEMENTAL
                    NON-CASH INVESTING AND FINANCING ACTIVITIES:Capital
                    lease obligation
                
                $
                89,000
                
                $
                40,220Issuance
                    of Line of credit for financing costs and interest
                
                $
                18,723
                
                $
                -Issuance
                    of common stock for financing costs
                
                $
                55,000
                
                $
                -
  The
          accompanying notes are an integral part of these consolidated financial
          statements.
  F-5
 **Logistical
        Support, Inc. and Subsidiary**
 **Notes
        to Consolidated Financial Statements**
 **For
        the Years Ended December 31, 2007 and 2006**
  
 **Note
        1 - Organization and Significant Accounting Policies**
 
 Organization
        and Line of Business
 
 Logistical
        Support, Inc. (the “Company”) was created as a result of a business combination
        between Bikini Team International (“Bikini”), Logistical Support, LLC
        (“Logistical”) and Hill Aerospace & Defense, LLC (“Hill”). Logistical is a
        California limited liability company formed on January 29, 1997. Hill was
        a
        California limited liability company formed on November 19, 1997. Logistical
        and
        Hill were two entities under common control. On March 31, 2006, Hill merged
        into
        Logistical. On May 27, 2004, Logistical and Hill entered into a Share Exchange
        Agreement with Bikini Team International, Inc. (“Bikini”), a publicly traded
        company. Effective June 2, 2004, Bikini changed its name to Logistical Support,
        Inc. (the “Company”). Since the members of Logistical and Hill obtained control
        of Bikini, according to FASB Statement No. 141 - “ *Business
        Combinations* ,”
this
        acquisition has been treated as a recapitalization for accounting purposes,
        in a
        manner similar to reverse acquisition accounting.
 
 The
        Company has a manufacturing facility located in Chatsworth, California. It
        manufactures, overhauls, repairs and sells military spare parts under government
        contracts. The Company’s primary customer is the United States Government.
  Restatement
  As
        a
        result of recognizing a charge to net income of $316,694 to arrive at net
        loss
        attributed to common stockholders at December 31, 2006 for the effect of
        repricing warrants held by Hunter World Markets, initially granted as part
        of a
        private placement of equity in 2004 (See Note 9) the Company restated its
        previously issued financial statements as of and for the year ended December
        31,
        2006. The impact of such restatement is summarized below.
  w
              For
                  the year ended December 31, 2006, net loss attributed to common
                  stockholders increased $316,694 ($0.00 per share) from net income
                  of
                  $135,741 to net loss attributed to common stockholders of $180,953.
                  Cash
                  flows from operating activities did not
                  change.
  w
              As
                  of December 31, 2006, additional paid in capital increased by $316,694
                  to
                  $3,470,472 from $3,153,778 and accumulated deficit increased from
                  $1,780,544 to $2,097,238. Assets and liabilities did not
                  change.
 
 Basis
        of Presentation
 
 The
        accompanying consolidated financial statements have been prepared in conformity
        with and in accordance with accounting principles generally accepted in the
        United States of America, which contemplate continuation of the Company as
        a
        going concern.
 
 F-6
 **Logistical
          Support, Inc. and Subsidiary**
 **Notes
          to Consolidated Financial Statements**
 **For
          the Years Ended December 31, 2007 and 2006**
 
 Consolidated
        Financial Statements
 
 The
        accompanying consolidated financial statements include the accounts of the
        Company and Logistical. The accompanying consolidated financial statements
        have
        been prepared in accordance with accounting principles generally accepted
        in the
        United States of America. All inter-company accounts and transactions have
        been
        eliminated.
 
 Stock
        Based Compensation to Employees
  
 The
        Company accounts for its stock-based compensation in accordance with Statement
        of Financial Accounting Standards (“SFAS”) No. 123R, "Share-Based Payment, an
        Amendment of Financial Accounting Standards Board (“FASB”) Statement No. 123."
        The Company recognizes in the statement of operations the grant-date fair
        value
        of stock options and other equity-based compensation issued to employees
        and
        non-employees. The
        Company did not grant any options and no options were cancelled or exercised
        during the years ended December 31, 2007 and 2006. As of December 31, 2007,
        there were no options outstanding.
 
 Stock
        Based Compensation to Other than Employees
 
 The
        Company accounts for equity instruments issued in exchange for the receipt
        of
        goods or services from other than employees in accordance with Statement
        of
        Financial Accounting Standards No. 123, “Accounting *for
        Stock-Based Compensation* ,”
and
        the conclusions reached by the Emerging Issues Task Force in Issue No. 96-
        18,
“Accounting for Equity Instruments That Are Issued to Other Than Employees
        for
        Acquiring or in Conjunction with Selling Goods or Services” (“EITF 96-18”).
        Costs are measured at the estimated fair market value of the consideration
        received or the estimated fair value of the equity instruments issued, whichever
        is more reliably determinable. The value of equity instruments issued for
        consideration other than employee services is determined on the earlier of
        a
        performance commitment or completion of performance by the provider of goods
        or
        services as defined by EITF 96-18. In the case of equity instruments issued
        to
        consultants, the fair value of the equity instrument is recognized over the
        term
        of the consulting agreement.
  Use
        of
        Estimates
 
 The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America 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 revenue and expenses
        during
        the reporting periods. As of December 31, 2007 and for the years ended December
        31, 2007 and 2006, the Company used estimates in determining the realization
        of
        its accounts receivable and inventory, valuation of contract costs in excess
        of
        billings and recognition of revenue based on a percentage of completion.
        Actual
        results could differ from these estimates.
  F-7
 
 **Logistical
            Support, Inc. and Subsidiary**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2007 and 2006**
 Risks
        and Uncertainties
 
 The
        Company is engaged in supplying and repairing aerospace products to the United
        States military, and is subject to certain business risks specific to that
        industry. Sales to the government may be affected by changes in procurement
        policies, budget considerations, changing concepts of national defense,
        political developments abroad, and other factors.
  Fair
        Value of Financial Instruments
 
 For
        certain of the Company's financial instruments, including cash and cash
        equivalents, accounts receivable, accounts payable and accrued expenses,
        the
        carrying amounts approximate fair value due to their short maturities. The
        amounts shown for notes payable also approximate fair value because current
        interest rates and terms offered to the Company for similar debt are
        substantially the same.
 
 Cash
        and Cash Equivalents
 
 For
        purposes of the statements of cash flows, the Company defines cash equivalents
        as all highly liquid debt instruments purchased with a maturity of three
        months
        or less, and all certificates of deposit.
 
 Concentration
        of Credit Risk
 
 Financial
        instruments, which potentially subject the Company to concentrations of credit
        risk, consist of cash and cash equivalents and accounts receivable. The Company
        places its cash with high quality financial institutions and at times may
        exceed
        the FDIC $100,000 insurance limit. The Company has not experienced a loss
        in
        such accounts. The Company extends credit based on an evaluation of the
        customer's financial condition, generally without collateral. Exposure to
        losses
        on receivables is principally dependent on each customer's financial condition.
        The Company monitors its exposure for credit losses and maintains allowances
        for
        anticipated losses, as required. The Company’s principal customer is the United
        States government which accounted for 98.3% and 96.6% of the Company’s sales for
        the years ended December 31, 2007 and 2006, respectively. Management does
        not
        believe significant credit risk existed at December 31, 2007.
 
 Accounts
        Receivable
 
 The
        Company maintains an allowance for doubtful accounts resulting from the
        inability, failure or refusal of customers to make required payments. The
        Company determines the adequacy of this allowance by regularly reviewing
        the
        accounts receivable aging and applying various expected loss percentages
        to
        certain accounts receivable categories based upon historical bad debt
        experience.
 
 Inventory
 
 Inventory
        is principally parts and is stated at the lower of cost or market utilizing
        the
        first-in, first-out method.
 
 F-8
 
 **Logistical
            Support, Inc. and Subsidiary**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2007 and 2006**
   Contract
        Costs/Contract Billings
 
 Contract
        costs are stated at cost plus estimated profits, but not in excess of realizable
        value, less amounts billed on the contract. The estimated profits on a contract
        are based on the Company’s historical experience fulfilling similar contracts,
        expected cost of materials and labor, and an allocation of the Company’s
        estimated overhead. The actual results could differ significantly from the
        Company’s estimates and these differences could be material to the Company’s
        financial statements. The Company accounts for the change in estimate in
        the
        period of change so that the balance sheet at the end of the period of change
        and the accounting for revenue recognition in subsequent periods are as they
        would have been if the revised estimate had been the original estimate.
 
 Property
        and Equipment
 
 Property
        and equipment are stated at cost and are depreciated using the straight-line
        method over their estimated useful lives of 5-7 years. Test stands are stated
        at
        cost and are depreciated using the units of productions method over the
        estimated number of parts to be produced under the relevant
        contracts.
 
 Expenditures
        for maintenance and repairs are charged to operations as incurred while renewals
        and betterments are capitalized. Gains and losses on disposals are included
        in
        the results of operations.
 
 Revenue
        Recognition
 
 Sales
        under long-term government contracts are recorded under the percentage of
        completion method. Contract sales and contract cost of sales are recorded
        as
        contract work is performed based on the percentage that incurred costs bear
        to
        estimated total costs utilizing the Company’s estimates of costs and contract
        value. Cost estimates include direct and indirect costs such as labor, materials
        and factory overhead. Contract change orders and claims are included when
        they
        can be reasonably estimated and realization is probable. Since many contracts
        extend over a long period of time, revisions in cost and contract value
        estimates during the progress of work have the effect of adjusting earnings
        applicable to performance in prior periods in the current period. When the
        current contract estimate indicates a loss, provision is made for the total
        anticipated loss in the current period.
 
 On
        a
        contract by contract basis, the Company presents those contracts where the
        contract cost plus estimated profit exceeds current billings as a current
        asset
        in the accompanying consolidated balance sheet and presents those contracts
        where the current billings exceed the contract costs plus estimated profits
        as a
        current liability in the accompanying consolidated balance sheet.
  Product
        sales are to non-governmental entities and are recognized at the time the
        product is shipped and do not require customer acceptance prior to
        shipment.
 
 Shipping
        and handling charges that are billed to customers are included in gross sales,
        with the related costs included in cost of sales.
  F-9
 **Logistical
          Support, Inc. and Subsidiary**
 **Notes
          to Consolidated Financial Statements**
 **For
          the Years Ended December 31, 2007 and 2006**
 
 Impairment
        of Long-Lived Assets
 
 Statement
        of Financial Accounting Standards No. 144, “Accounting for the Impairment or
        Disposal of Long-Lived Assets” (“SFAS No. 144”)
        requires that long-lived assets to be disposed of by sale,
        including those of discontinued operations, be measured at the lower
        of carrying amount or fair value less cost to
        sell, whether reported in continuing operations or in
        discontinued operations.   SFAS No. 144 broadens
        the reporting of discontinued operations to include all components of an
        entity with operations that can be distinguished from the rest of the entity
        and
        that will be eliminated from the ongoing operations of the entity in
        a disposal transaction.  SFAS No. 144 also establishes
        a "primary-asset" approach to determine the cash flow
        estimation period for a group of assets and liabilities that represents the
        unit of accounting for a long-lived asset to be held and used. The Company
        has no impairment issues to disclose.
 
 Income
        Taxes
 
 The
        Company accounts for income taxes in accordance with SFAS No. 109, "Accounting
        for Income Taxes." Deferred taxes are provided on the liability method whereby
        deferred tax assets are recognized for deductible temporary differences,
        and
        deferred tax liabilities are recognized for taxable temporary differences.
        Temporary differences are the differences between the reported amounts of
        assets
        and liabilities and their tax bases. Deferred tax assets are reduced by a
        valuation allowance when, in the opinion of management, it is more likely
        than
        not that some portion or all of the deferred tax assets will be realized.
        Deferred tax assets and liabilities are adjusted for the effects of changes
        in
        tax laws and rates on the date of enactment.
 
 Earnings
        (Loss) Per Share
 
 The
        Company reports earnings (loss) per share in accordance with SFAS No. 128,
        "Earnings per Share." Basic earnings (loss) per share is computed by dividing
        income (loss) available to common shareholders by the weighted average number
        of
        common shares available. Diluted earnings (loss) per share is computed similar
        to basic loss per share except that the denominator is increased to include
        the
        number of additional common shares that would have been outstanding if the
        potential common shares had been issued and if the additional common shares
        were
        dilutive. There
        were 10,053,937 potentially dilutive securities outstanding of which 348,762
        were considered c ommon
        equivalent shares outstanding at December 31, 2007 and 2006.
  F-10
 
 **Logistical
            Support, Inc. and Subsidiary**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2007 and 2006**
 
 The
        following is an analysis of the differences between basic and diluted earnings
        per common share in accordance with Statement of Financial Accounting Standards
        No. 128, “Earnings Per Share”.
 
 **Year
                  Ended December 31,****2007**
              
              **2006****Per**
              
              
              
              
              
              **Per****Income**
              
              **Shares**
              
              **Share**
              
              **Income**
              
              **Shares**
              
              **Share****Basic
                  earnings (loss) per share**Net
                  income (loss) attributedto
                  common stockholders
              
              $
              67,911
              
              
              
              
              
              
              
              $
              (180,953
              )Weighed
                  shares outstanding
              
              
              
              
              
              78,987,740
              
              
              
              
              
              
              
              
              74,917,055$
              0.00
              
              
              
              
              
              
              
              $
              (0.00
              )**Diluted
                  earnings (loss) per share**
              
              
              
              
              
              
              
              **N/A**Net
                  income (loss) attributed to
                  common stockholders
              
              $
              67,911Weighed
                  shares outstanding
              
              
              
              
              
              78,987,740Effect
                  of dilutive securitiesWarrants
              
              
              
              
              
              348,76279,336,502$
              0.00
  Comprehensive
        Loss
 
 SFAS
        No.
        130, "Reporting Comprehensive Loss," establishes standards for the reporting
        and
        display of comprehensive income and its components in the financial statements.
        For the years ended December 31, 2007 and 2006, the Company does not have
        items
        that represented other comprehensive income and, accordingly, has not included
        in the statement of stockholders equity the change in comprehensive
        loss.
  Reclassifications
  Certain
        amounts in the prior period financial statements have been reclassified for
        comparative purposes to conform to the presentation in the current period
        financial statements, none of which had a material effect on the consolidated
        financial statements.
  Recently
        Issued Accounting Pronouncements
  In
        September 2006, the Securities and Exchange Commission issued Staff Accounting
        Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when
        Quantifying Misstatements in Current Year Financial Statements,” (“SAB
        108”),which provides interpretive guidance on the consideration of the effects
        of prior year misstatements in quantifying current year misstatements for
        the
        purpose of a materiality assessment. The Company adopted SAB 108 in the fourth
        quarter of 2006 with no impact on its financial statements.
  F-11
 **Logistical
          Support, Inc. and Subsidiary**
 **Notes
          to Consolidated Financial Statements**
 **For
          the Years Ended December 31, 2007 and 2006**
 
  In
        February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
        Financial Assets and Financial Liabilities“. This Statement permits entities to
        choose to measure many financial assets and financial liabilities at fair
        value.
        Unrealized gains and losses on items for which the fair value option has
        been
        elected are reported in earnings. SFAS No. 159 is effective for fiscal years
        beginning after November 15, 2007. Management is currently evaluating the
        effect
        of this pronouncement on the consolidated financial statements.
  In
        June
        2007, the FASB issued FASB Staff Position No. EITF 07-3, “Accounting for
        Nonrefundable Advance Payments for Goods or Services Received for use in
        Future
        Research and Development Activities” (“FSP EITF 07-3”), which addresses whether
        nonrefundable advance payments for goods or services that used or rendered
        for
        research and development activities should be expensed when the advance payment
        is made or when the research and development activity has been performed.
        Management is currently evaluating the effect of this pronouncement on the
        consolidated financial statements.
  In
        December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
        Consolidated Financial Statements”, which is an amendment of Accounting Research
        Bulletin (“ARB”) No. 51.  This statement clarifies that a
        noncontrolling interest in a subsidiary is an ownership interest in the
        consolidated entity that should be reported as equity in the consolidated
        financial statements.  This statement changes the way the consolidated
        income statement is presented, thus requiring consolidated net income to
        be
        reported at amounts that include the amounts attributable to both parent
        and the
        noncontrolling interest.  This statement is effective for the fiscal
        years, and interim periods within those fiscal years, beginning on or after
        December 15, 2008.  Based on current conditions, the Company does not
        expect the adoption of SFAS 160 to have a significant impact on its results
        of
        operations or financial position. Management is currently evaluating the
        impact
        of FASB 160 on the consolidated financial statements.
  In
        December 2007, the FASB issued FASB 141R, Business Combinations (“ FASB 141R”).
        Under FASB 141R,
        an
        entity is required to recognize the assets acquired, liabilities assumed,
        contractual contingencies and contingent consideration measured at their
        fair
        value at the acquisition date for any business combination consummated after
        the
        effective date. It further requires that acquisition-related costs are to
        be
        recognized separately from the acquisition and expensed as incurred. This
        statement is effective for financial statements issued for fiscal years
        beginning after December 15, 2008. Accordingly, the Company will adopt FASB 141R
        effective January 1, 2009.
  **Note
        2 - Due From Officers/Affiliates**
  The
        amounts due from officers/affiliates was $114,307 at both December 31, 2007
        and
        2006 and is principally advances made to certain of the Company's executives
        and
        to certain companies that are owned or partially owned by individuals who
        had a
        membership interest in the Logistical and Hill. These advances are non-interest
        bearing and are payable upon the demand of the Company. The change in the
        due
        from officer/affiliates balance from December 31, 2005 to December 31, 2006
        of
        $113,968 is entirely due to cash collected by the Company from consignment
        sales
        for an affiliate of Harry Lebovitz. As of December 31, 2005, the Company
        established an allowance for net receivables from Harry Lebovitz and entities
        controlled by Harry Lebovitz for the full amount of $587,254. During 2006
        the
        Company made $25,800 in cash payments to third parties under terms of existing
        guarantee agreements on behalf of the Lebovitz controlled entities. A provision
        for loss of those amounts has been provided and correspondingly added to
        the
        allowance for net receivables. As of December 31, 2006, affiliates of Mr.
        Lebovitz owe the Company a total of $613,054 which is fully offset by an
        allowance for uncollectible accounts. The Company owes an affiliate of Mr.
        Lebovitz $113,968 related to consignment sales. The Company believes it has
        the
        legal right of offset to apply the cash collected on behalf of one of Mr.
        Lebovitz's affiliates against balances due from the same affiliate of Mr.
        Lebovitz; however, due to the pending litigation with Mr. Lebovitz, the Company
        has recorded the liability in the amount of $113,968 which is netted with
        other
        related party receivables and payables.
 
 F-12
 
 **Logistical
            Support, Inc. and Subsidiary**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2007 and 2006**
   A
        summary
        of the due from officers/affiliates is below:
 **Balance**
              
              
              
              
              
              **Balance****12/31/2005**
              
              **Additions**
              
              **Subtractions**
              
              **12/31/2006**Harry
                  Lebovitz controlled/affiliated entities
              
              $
              587,254
              
              
              25,800
              
              
              (113,968
              )
              $
              499,086Less:
                  Allowance for Losses
              
              
              (587,254
              )
              
              (25,800
              )
              
              -
              
              
              (613,054
              )Net
                  receivable/(payable)
              
              $
              -
              
              
              -
              
              
              (113,968
              )
              $
              (113,968
              )Other
                  Affiliated Entities
              
              $
              228,275
              
              
              none
              
              
              none
              
              $
              228,275Less:
                  Allowance for Losses
              
              
              -
              
              
              none
              
              
              none
              
              
              -Net
                  receivable from other affiliates
              
              $
              228,275
              
              
              
              
              
              
              
              $
              228,275Net
                  Amount shown on Balance Sheet
              
              $
              228,275
              
              
              
              
              
              
              
              $
              114,307
  
 **Balance**
              
              
              
              
              
              **Balance****12/31/2006**
              
              **Additions**
              
              **Subtractions**
              
              **12/31/2007**Harry
                  Lebovitz controlled/affiliated entities
              
              $
              499,086
              
              
              none
              
              
              none
              
              $
              499,086Less:
                  Allowance for Losses
              
              
              (613,054
              )
              
              none
              
              
              none
              
              
              (613,054
              )Net
                  receivable/(payable)
              
              $
              (113,968
              )
              
              none
              
              
              none
              
              $
              (113,968
              )Other
                  Affiliated Entities
              
              $
              228,275
              
              
              none
              
              
              none
              
              $
              228,275Less:
                  Allowance for Losses
              
              
              -
              
              
              none
              
              
              none
              
              
              -Net
                  receivable from other affiliates
              
              $
              228,275
              
              
              
              
              
              
              
              $
              228,275Net
                  Amount shown on Balance Sheet
              
              $
              114,307
              
              
              
              
              
              
              
              $
              114,307
   F-13
 **Logistical
          Support, Inc. and Subsidiary**
 **Notes
          to Consolidated Financial Statements**
 **For
          the Years Ended December 31, 2007 and 2006**
   The
        Company believes that the $228,275 due from affiliates is collectible since
        the
        amount is due from long-term employees who have employment contracts with
        the
        Company. In addition, the Company has determined that the individual employees
        are capable of repaying these advances.
  **Note
        3 - Contract Costs**
 
 Contract
        costs at December 31, 2007 consisted of the following:
  Contract
                  cost incurred, including estimated profit
              
              $
              14,242,183Less:
                  amounts billed
              
              
              (12,169,843
              )$
              2,072,340
 
 Contract
        costs are grouped by those contracts where contract costs exceed billings
        and
        where billings exceed contract costs as follows:
  Contract
                  costs in excess of billings
              
              $
              2,089,027Billings
                  in excess of contract costs
              
              
              (16,687
              )$
              2,072,340
 
 The
        United States government has title to the assets related to unbilled amounts
        on
        contracts that provide for progress payments, up to the total amount of progress
        payment outstanding. As of December 31, 2007, the total amount of progress
        payment outstanding was $149,700. Unbilled amounts are primarily recorded
        on the
        percentage of completion method and are recoverable from the customer upon
        shipment of the product, presentation of billings, or completion of the
        contract.
 
 During
        the years ended December 31, 2007 and 2006, there were differences in the
        Company’s estimated profits on contracts as reported in prior year financial
        statements and the actual results, for both Triumph litigation (See Note
        13)
        related contracts and other contracts. The loss recognized in 2007 and 2006
        related to these Triumph contracts were approximately $243,000 and $62,000,
        respectively. Losses from other contracts in 2007 and 2006 totaled approximately
        $424,000 and $134,000, respectively. The 2007 losses on certain contacts
        resulted from adjustments made in total material and labor costs, a 20% increase
        in 2007 of the future factory overhead burden rate as well as a reduction
        of
        contract revenue for two overhaul contracts due to a higher scrap rate. The
        change in estimated labor costs amounted to $247,000 on these contracts.
 
 **Note
        4 - Property and Equipment**
  Machinery
                    and equipment
                
                $
                458,317Test
                    Equipment
                
                
                438,223Automobiles
                
                
                54,491Office
                    equipment
                
                
                103,8821,054,913Less
                    accumulated depreciation and amortization
                
                
                (447,871
                )$
                607,042
 
 Depreciation
        expense for the years ended December 31, 2007 and 2006 was $122,420 and $84,276,
        respectively.
  F-14
 **Logistical
            Support, Inc. and Subsidiary**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2007 and 2006**
 
 **Note
        5 - Note Payable, Related Party**
  During
        December 2006 the Company borrowed $225,000 from the Hunter Fund, which was
        an
        entity controlled by a significant shareholder of the Company. The note was
        secured by all of the assets of the Company, not previously given as collateral.
        The Company paid a placement fee of $22,500 in connection with the note that
        was
        amortized over the term of the loan. The note including the principal and
        interest of $22,500 was repaid in June, 2007.
 
 **Note
        6 - Notes Payable**
 
 Notes
        payable at December 31, 2007 were as follows:
 
 Note
                  payable to bank, collateralized by automobile, interest at 8.5%
                  per annum,
                  monthly principal and interest of $446, note due January 2010.
              
              
              10,193Less:
                  current portion
              
              
              (4,669
              )$
              5,524
  Principal
        payments on these notes payable are as follows:
 
 Year
                  ending December 31,2008
              
              $
              4,6692009
              
              
              5,0812010
              
              
              443$
              10,193
  **Note
        7 - Guaranteed Obligation of Related Party**
  The
        Company was one of six guarantors who guaranteed the debt of Hill Industries,
        Inc.(“Hill Industries”), an affiliated company. The debt of Hill Industries
        arose from a note payable issued to a financial institution in 1999. The
        Company
        was making the required interest payments on this debt, but ceased making
        such
        payments in May 2006. Consequently, National Loan Investors ("NLI"), the
        finance
        company that made the original loan to Hill Industries, discovered that the
        modification of the original note agreement dated January 25, 2005 was not
        executed by Hill Industries because of its not having been in good standing
        with
        the state of California. This in turn made the note modification of January
        25,
        2005 ineffective which resulted in the acceleration of the balance due. It
        was
        not until NLI's investigation was it known by both the Company and NLI that
        Hill
        Industries did not execute the note.
  F-15
 **Logistical
            Support, Inc. and Subsidiary**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2007 and 2006**
 On
        December 5, 2006, the Company entered into a Loan Sale Agreement with NLI
        pursuant to which the Company agreed to purchase from NLI all rights of NLI
        to
        the promissory note of Hill Industries. The balance due on the Note was
        $338,365, representing $313,381 in principal, $17,928 in accrued interest,
        $935
        in late charges and $3,120 in legal fees. The purchase price for the Note
        was
        $200,000 and was paid in full on December 28, 2006. The Company recognized
        a
        gain on the settlement of this note of $143,398 in 2006.
 
 **Note
        8 - Line of Credit**
  In
        August
        2007, the Company entered into a purchase order financing agreement with
        Dutchess Private Equities Fund, Ltd. (“Dutchess”) a private equity firm which
        allows the Company to borrow a maximum of $2,000,000 to finance certain purchase
        orders. The term of the agreement is two years. The obligations are secured
        by a
        guarantee of the Company and a grant of a first priority security interest
        in
        the parts and supplies from the orders and all finished goods with respect
        to
        the purchase orders. The interest rate charged on any outstanding advances
        is 2%
        per month and 3% per annum on any unused portion of the line of credit. The
        loan
        agreement also contains certain covenants including not changing the corporate
        structure of the Company and not incurring any liens upon any collateral
        of the
        debtor other than those permitted by the agreement. If the Company defaults
        on
        the line of credit and remains in default for sixty days, Dutchess has the
        right
        to switch the borrowed amount to a 3 year, 15%, interest bearing, convertible
        debenture. If in default, Dutchess has the right to convert the debenture
        amount
        plus accrued interest, anytime after the debenture has been issued but before
        the maturity date of the debenture, into common stock of the Company at the
        rate
        of eighty percent (80%) of the lowest closing bid price during the twenty
        (20)
        days immediately preceding the date of conversion. At December 31, 2007,
        the
        Company had $313,404 outstanding under this agreement as shown in the Company’s
        financial statements.
  As
        an
        inducement to the lender, the Company issued 500,000 shares of its common
        stock
        valued at $55,000, and paid an administration fee of $35,000 to the lender.
        Those amounts plus additional legal fees of $1,584 were charged to deferred
        financing costs and are being amortized over the term of the financing
        agreement. At December 31, 2007 the unamortized portion of deferred financing
        costs totaled $76,320, of which $45,792 is current and $30,528 is long-term
        as
        shown in the Company’s financial statements.
  Also
        see
        Note 14.
  **Note
        9 - Due to Factor**
 
 The
        Company has an agreement with Wells Fargo Business Credit Services (f/k/a
        Commerce Funding Corporation) ("Wells") for the financing of its accounts
        receivable. The interest rate on this financing agreement is prime plus 1%
        (8.25% at December 31, 2007). The maximum amount to be advanced under this
        agreement is $1 million. Wells has agreed to loan up to 85% of qualifying
        receivables. The qualifying receivables are sold to Wells "non recourse"
        unless
        an event of default exists under the agreement in which case the qualifying
        receivable is sold with "recourse". At December 31, 2007, the Company had
        $106,984 outstanding under this agreement and had amounts collected by the
        factor but not yet remitted to the Company of $15,088 recorded as due from
        factor.
 
 F-16
 **Logistical
          Support, Inc. and Subsidiary**
 **Notes
          to Consolidated Financial Statements**
 **For
          the Years Ended December 31, 2007 and 2006**
  
 **Note
        10 - Stockholders’ Equity**
 
 Issuance
        of Common Stock
 
 In
        connection with the financing agreement on August 27, 2007, the Company issued
        500,000 restricted shares of the Company’s Common Stock at $0.11 per share, the
        market value of the stock.
 
 In
        connection with stock bonus agreements on April 12, 2007, the Company issued
        100,000 shares of the Company’s Common Stock at $0.25 per share as compensation,
        the market value of the stock.
 
 Repurchase
        of Common Stock
  Effective
        June 1, 2005, the Company entered into a Separation Agreement by and between
        the
        Company, Logistical and Mr. Harry Lebovitz, Hill Industries, Inc. ("Hill
        Inc")
        and Hill Industries, LLC ("Hill LLC"). Hill Inc and Hill LLC are entities
        owned
        and controlled by Mr. Lebovitz. Pursuant to the terms of the Separation
        Agreement, Mr. Lebovitz resigned effective immediately from the Board of
        Directors of the Company and effective July 1, 2005 he no longer served in
        any
        management or service role at the Company or its subsidiary,
        Logistical.
  In
        addition, the Company agreed to purchase from Mr. Lebovitz, or Hill Inc or
        Hill
        LLC (at the discretion of the Company) shares of common stock of the Company
        owned by such persons at a price per share of $0.25 (the "Purchase Price"),
        at
        the rate of $25,000 per month for a period of twelve months commencing on
        June
        15, 2005. The aggregate purchases shall not exceed $300,000 over a twelve-month
        period, resulting in the Company acquiring up to 1,200,000 shares of common
        stock under the Agreement. Under certain conditions set forth in the Agreement,
        the Company could cease to make such purchases and would have no
        obligation to resume them. As of December 31, 2006, the Company purchased
        1,100,000 shares of common stock for $275,000. These 1,100,000 shares were
        retired upon repurchase.
  The
        Company ceased purchasing the stock after Harry Lebovitz filed the lawsuit
        disclosed in Note 13.
 
 Warrants
 
 On
        September 29, 2005, the Company entered into an agreement with Hawk Associates,
        Inc. to provide investor relations, financial media relations and other
        appropriate consulting and advisory services for a period of six months.
        In
        connection with this agreement the Company issued to Hawk Associates 20,000
        warrants to purchase shares of the Company’s common stock at $1.30 per share.
        These warrants were valued using the Black-Scholes option pricing model using
        the following assumptions: term of 5 years, a risk-free interest rate
        of 4.0%, a dividend yield of 0% and volatility of 45%. The value
        of these warrants of $11,571 was amortized into expense over the six month
        term
        of the agreement.
  F-17
 **Logistical
            Support, Inc. and Subsidiary**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2007 and 2006**
 Exercise
        of Warrants
  In
        2004,
        the Company granted 8,000,000 warrants exercisable by Hunter World Markets
        at
        $0.25 per share as part of a private placement of equity. The value of the
        original warrants was considered part of the placement agent's compensation
        and
        therefore no expense was recorded for the issuance of these warrants. In
        July
        2006, the Company reduced the exercise price of the warrants from $0.25 to
        $0.02
        as incentive for Hunter to exercise the warrants for cash in order for the
        Company to generate sufficient funds to make a payment on the Triumph settlement
        obligation. In July 2006, Hunter exercised 7,600,000 of these warrants which
        resulted in gross proceeds to the Company of $152,000. The Company calculated
        the change in the fair value of the old warrants ($0.25 exercise price) and
        the
        new warrants ($0.02 exercise price) to be $316,694. The value was determined
        using the Black-Scholes pricing model using the following assumptions: term
        of
        3.25 years, a risk-free interest rate of 4.5%, a dividend yield of 0% and
        volatility of 138%. The Company has recorded the change in fair value as
        a
        reduction of net income in computing net loss attributed to common
        stockholders.
 
 The
        following table summarizes the warrants outstanding:
 
 **Warrants**
              
              **Weighted**
                **Average**
                **Exercise**
                **Price**Balance,
                  December 31, 2005
              
              
              17,653,937
              
              $
              0.22Exercised
              
              
              (7,600,000
              )
              $
              0.02Balance,
                  December 31, 2006
              
              
              10,053,937
              
              $
              0.20Balance,
                  December 31, 2007
              
              
              10,053,937
              
              $
              0.20Exercisable,
                  December 31, 2007
              
              
              10,053,937
              
              $
              0.20
 
 The
        weighted average remaining contractual life of warrants outstanding is 1.19
        years at December 31, 2007. The intrinsic value of warrants
        outstanding at December 31, 2007 was $20,000. The exercise prices for the
        warrants outstanding at December 31, 2007 were as
        follows:
  F-18
 **Logistical
            Support, Inc. and Subsidiary**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2007 and 2006**
 **Number
                  of**
                **Warrants**
              
              **Exercise**
                **Price**400,000
              
              $
              0.029,633,937
              
              $
              0.2020,000
              
              $
              1.3010,053,937
 
  **Note
        11 - Income Taxes**
 
 Deferred
        income taxes reflect the net tax effects of temporary differences between
        the
        carrying amounts of assets and liabilities for financial statement purposes
        and
        the amounts used for income tax purposes. Significant components of the
        Company's deferred tax liabilities and assets as of December 31, 2007 are
        as
        follows:
  Deferred
                    tax assets:Allowance
                    for doubtful accounts
                
                $
                250,953Accrued
                    compensation
                
                
                35,921Net
                    operating loss carryforward
                
                
                818,693Total
                    deferred tax assets
                
                
                1,105,567Less
                    valuation allowance
                
                
                (731,850
                )373,717Deferred
                    tax liabilities:Depreciation
                    and amortization, net
                
                
                (65,749
                )Accrued
                    legal settlement
                
                
                (10,000
                )Contract
                    revenue
                
                
                (297,968
                )Net
                    deferred tax liability
                
                $
                -
 
 The
        Components of deferred income tax expense (benefit) are as follows:
 
 December
                  31,
              
              December
                  31,2007
              
              2006Accrued
                  compensation
              
              
              780
              
              $
              (4,760
              )Net
                  operating losscarryforward/back
              
              
              (43,913
              )
              
              (161,528
              )Allowance
                  for Doubtful Accounts
              
              
              -
              
              
              (9,816
              )Legal
                  Settlement
              
              
              10,000
              
              
              103,157Depreciation
                  & Amortization, net
              
              
              14,133
              
              
              1,350Contract
                  revenue
              
              
              (24,388
              )
              
              161,973Total
              
              
              (43,388
              )
              
              90,376Increase
                  (decrease) in valuation allowance
              
              
              43,388
              
              
              (90,376
              )Income
                  tax (benefit)
              
              $
              -
              
              $
              -
 
 F-19
 **Logistical
        Support, Inc. and Subsidiary**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2007 and 2006**
 Following
        is a reconciliation of the amount of income tax expense (benefit) that would
        result from applying the statutory federal income tax rates to pre-tax income
        and the reported amount of income tax expense (benefit):
  December
                  31,
              
              December
                  31,2007
              
              2006Tax
                  expense at federal statutory rates
              
              $
              23,091
              
              $
              46,438Settlement
                  of debt
              
              
              -
              
              
              (51,864
              )Contract
                  revenue
              
              
              20,730
              
              
              (137,677
              )Change
                  in liabilities
              
              
              (38,534
              )
              
              -Allowance
                  for doubtful
                receivables
              
              
              -
              
              
              8,223Other
              
              
              (15,463
              )
              
              (31,936
              )Net
                  operating loss carryforward
              
              
              10,176
              
              
              166,816$
              -
              
              $
              -
  At
        December 31, 2007 and 2006, the Company had federal and state net operating
        loss
        ("NOL") carryforwards of approximately $2,046,000 and $1,937,000, respectively.
        Federal NOLs could, if unused, expire in varying amounts in the years through
        2025. State NOLs, if unused, could expire in varying amounts through
        2019.
  **Note
        12 - Related Party Transactions**
 
 On
        November 30, 2004, the Company entered into a consignment agreement with
        Hill
        Inc, a related party, whereby Hill Inc will deliver products to the Company
        to
        be sold on a consignment basis. The Company had consignment sales under this
        agreement during the year ended December 31, 2006 of $61,367. This agreement
        was
        terminated in March 2006.
  **Note
        13 - Commitments and Contingencies**
 
 Litigation
 
 The
        Company had been in litigation with Triumph Components-Arizona, Inc. ("Triumph")
        for approximately three years, where on July 20, 2006, the Company and Triumph
        entered into a settlement agreement dated as of July 18, 2006 pursuant to
        which
        the parties agreed to settle their disputes. Under the settlement agreement,
        the
        Company agreed to pay an aggregate of $950,000 to Triumph in monthly
        installments ranging from $39,000 to $65,000 from August 2006 to March 2008.
        If
        the Company accelerates these payments it will be entitled to discount the
        amount paid to Triumph by up to $50,000. Triumph has a security interest
        in
        virtually all of the Company's assets that have not been previously encumbered
        by other UCC-1 Financing Statements. On
        March
        17, 2008, the Company fulfilled its obligations to Triumph.
 
 F-20
 
 **Logistical
            Support, Inc. and Subsidiary**
 **Notes
                to Consolidated Financial Statements**
 **For
                the Years Ended December 31, 2007 and 2006**
 On
        March
        14, 2006, the Company canceled a consignment agreement with Hill Inc. (and
        entity controlled by Mr. Lebovitz). On April 11, 2006, Mr. Lebovitz filed
        a
        lawsuit against Mr. Bruce Littell, the Company’s Chief Executive Officer, the
        Company, Logistical and Hill claiming among other things, that (1) Mr. Lebovitz
        was mentally unfit to sign a Separation Agreement; (2) the Company failed
        to
        remit amounts due under a consignment agreement with Hill Inc.; and (3) the
        Company failed to provide an accounting for amounts that Mr. Lebovitz loaned
        to
        Logistical. Mr. Lebovitz was seeking compensatory and punitive damages as
        well
        as attorney fees. The Company believes that such claims are without merit
        and is
        vigorously defending itself against such claims.
 
 The
        Company filed a cross-complaint against Harry Lebovitz, Hill Inc, and other
        related entities, and sought damages for breach of fiduciary duty, breach
        of
        contract, fraud and other causes of action. On March 22, 2007, the complaint
        and
        the cross-complaint were dismissed without prejudice. On or about June 18,
        2007,
        Mr. Lebovitz re-filed his complaint. The Company responded by filing a demurrer
        to the complaint, which is set for hearing on April 21, 2008. The case is
        set
        for trial on July 7, 2008.
 
 On
        June
        30, 2006 the Company was forcefully evicted from its leased Eton facility
        and
        the property turned over to Mr. Lebovitz. In July 2006, the Company filed
        litigation against the landlord for alleged wrongful eviction and damages.
        On
        February 6, 2007, the landlord filed a cross-complaint for equitable indemnity
        and contribution against the Company. On March 9, 2008, the Company and its
        landlord reached an agreement, whereby the landlord agreed to settle the
        case by
        paying the Company a total of $25,000. This amount has been recorded as a
        receivable in the accompanying financial statements.
 
 On
        December 26, 2006, the Company filed an action against Hill, Inc., Hill Aviation
        Worldwide, LLC, Mr. Lebovitz and others for the non-payment of a promissory
        note
        previously held in the name of National Loan Investors (“NLI”) that was
        purchased by the Company in December 2006. In January 2007, the court issued
        a
        temporary restraining order precluding the defendants from transferring any
        inventory that would be subject to various security agreements securing payment
        under the promissory note. On June 21, 2007, the court denied the Company’s
        preliminary injunction without prejudice. The Company re-filed its complaint
        in
        July 2007. On September 20, 2007 the court issued a Right to Attach Order
        and
        Order for Issuance of Writ of Attachment in favor of the Company. The case
        is
        set for trial April 28, 2008.
 
 F-21
 
 **Logistical
            Support, Inc. and Subsidiary**
 **Notes
                to Consolidated Financial Statements**
 **For
                the Years Ended December 31, 2007 and 2006**
 In
        addition to the foregoing, the Company in the ordinary course of business
        is
        generally subject to claims, complaints, and legal actions. At December 31,
        2007, management believes that the Company is not a party to any action,
        except
        as discussed above, that would have a material impact on its financial
        condition, operations, or cash flows.
 
 Employment
        Agreements
  On
        December 15, 2005, Logistical and Bruce Littell entered into an employment
        agreement pursuant to which Mr. Littell will act as Logistical’s Chief Executive
        Officer. Unless terminated earlier in accordance with its terms, the Employment
        Agreement has a term of two years beginning on January 1, 2006 and ending
        on
        December 31, 2007, and the term has been automatically extended for an
        additional two-year term. Logistical will pay Mr. Littell an annual base
        salary
        of $300,000 for the first year of the Employment Agreement, and thereafter
        Mr.
        Littell's salary will be determined in the sole discretion of the Board of
        Directors of the Subsidiary. Mr. Littell’s salary is unchanged for the year
        ended December 31, 2008. In the event that Mr. Littell's employment is
        terminated by Logistical without cause, Mr. Littell is entitled to receive
        a
        lump-sum severance payment in an amount equal to two year's salary then in
        effect at the time of termination.
  In
        addition, in April 2007, the Company entered into employment agreements with
        three executives with total annual compensation of $317,115. One of
        the agreements also includes a provision for the Company to issue 50,000
        common shares to one employee upon execution. All three employment
        agreements are for the term of one year and will be automatically extended
        for
        an additional year. As of December 31, 2007, two of the three employment
        agreements remained in effect.
  Leases
 
 The
        Company leases a 14,600 square foot office building in Chatsworth, California
        under an operating lease agreement. In May 2007, the Company extended the
        lease
        for its office building in Chatsworth, California for an additional year.
        Base
        rent for the period June 1, 2007 to May 31, 2008 will be $11,680 per month.
        The
        Company also leases office equipment and an automobile under non-cancelable
        operating leases. In addition, the Company leases office equipment under
        capital
        lease obligations.
 
 Future
        minimum lease payments under non-cancelable capital and operating leases
        with
        initial or remaining terms of one year or more are as follows:
 
 F-22
 
 **Logistical
            Support, Inc. and Subsidiary**
 **Notes
                to Consolidated Financial Statements**
 **For
                the Years Ended December 31, 2007 and 2006**
  Capital
              
              OperatingLeases
              
              LeasesYear
                  ending December 31,2008
              
              $
              75,664
              
              $
              58,4002009
              
              
              33,995
              
              
              -2010
              
              
              31,008
              
              
              -2011
              
              
              22,0452012
              
              
              9,172
              
              
              -Net
                  Minimum Lease Payments
              
              
              171,884
              
              $
              58,400Less:
                  Amounts Representing Interest and Sales Tax
              
              
              (25,205
              )Present
                  Value of Net Minimum Lease Payments
              
              
              146,679Less:
                  Current Portion
              
              
              (63,823
              )Long-Term
                  Portion
              
              $
              82,856
 
 The
        Company incurred rent expense of $169,437 and $239,613 for the years ended
        December 31, 2007 and 2006, respectively. Depreciation expense for the assets
        under capital leases was $46,420 and $44,802 for the years ended December
        31,
        2007 and 2006, respectively. The cost and accumulated amortization of the
        assets
        under capital lease obligations are $176,356 and $152,600, respectively,
        at
        December 31, 2007.
  **Note
        14 - Subsequent Events**
 
 Effective
        January 22, 2008, Logistical entered into an amendment to Purchase Order
        Financing Agreement (the “Amendment”) with Dutchess Private Equities Fund Ltd.
        (“Dutchess”) pursuant to which the Company agreed to provide 500,000 additional
        restricted shares of the Company’s Common Stock in consideration of the
        agreement by Dutchess to extend payment on the advances as set forth in the
        Amendment. Also see note 8.
   F-23