SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549


                                  FORM 10-KSB/A


(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, 2006

|_|   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

      For the transition period from _______________ to ________________

                       Commission File Number: 000-50222

                           LOGISTICAL SUPPORT, INC.
                         ----------------------------
                (Name of Small Business Issuer in its charter)

                Utah                                    41-2029935
    ---------------------------                         ----------
   (State or other jurisdiction           (I.R.S. Employer Identification No.)
 of incorporation or organization)

                             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 registered
    -------------------      -------------------------------------------------
            None                                  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 |_|

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. |_|

Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act) Yes |_| No |X|

The Issuer's revenues for the fiscal year ended December 31, 2006 were
$6,218,548________

The number of shares of the registrant's common stock, $.001 par value per
share, outstanding as of December 31, 2006, was 78,745,000. The aggregate
market value of the voting and non-voting common equity held by non-affiliates
of the registrant on December 31, 2006, based on the last sales price on the
OTC Bulletin Board as of such date, was approximately $6,457,640

DOCUMENTS INCORPORATED BY REFERENCE: None

Transition Small Business Disclosure Format: Yes |_| No |X|


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                               TABLE OF CONTENTS

                                                                          Page
                                                                          ----

PART I

      ITEM 1.  BUSINESS.................................................     4
      ITEM 2.  DESCRIPTION OF PROPERTY..................................    15
      ITEM 3.  LEGAL PROCEEDINGS........................................    15
      ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF
               SECURITY HOLDERS.........................................    16

PART II

      ITEM 5.  MARKET FOR COMMON EQUITY AND
               RELATED STOCKHOLDER MATTERS..............................    16
      ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS.....................    17
      ITEM 7.  FINANCIAL STATEMENTS.....................................    22
      ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
               ON ACCOUNTING AND FINANCIAL DISCLOSURE...................    22
      ITEM 8A. DISCLOSURE CONTROLS AND PROCEDURES.......................    22
      ITEM 8B  OTHER INFORMATION .......................................    22

PART III

      ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
               CONTROL PERSONS; COMPLIANCE WITH
               SECTION 16(a) OF THE EXCHANGE ACT........................    22
      ITEM 10. EXECUTIVE COMPENSATION...................................    25
      ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
               OWNERS AND MANAGEMENT....................................    28
      ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...........    29
      ITEM 13. EXHIBITS.................................................    29
      ITEM 14  PRINCIPAL ACCOUNTANT FEES AND SERVICES...................    31

SIGNATURES


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                  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.


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                                    PART I

ITEM 1. BUSINESS

Summary

We are an aerospace and defense contractor for divisions of the United States
military. We derive approximately 97% 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:

      o     Hill and Logistical became our wholly-owned subsidiaries;

      o     The former members of Hill and Logistical acquired more than 98.8%
            of our common stock outstanding after the transaction;

      o     Our existing directors resigned and Harry Lebovitz (who has since
            resigned) and Bruce Littell became our directors; and

      o     All of the outstanding shares of our Series A Preferred Stock and
            580,000 shares of our common stock were cancelled.

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


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We are an aerospace and defense contractor for divisions of the United States
military. We derive approximately 97% 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 and perform services 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 reduced the number of bids made during the year which
correspondingly has reduced our overhead due to fewer costs incurred to
prepare the bids. 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 5% in
2004 to 11% in 2005, although we sustained a decrease in revenue from these
contracts. During 2005, we submitted 39 bids and were awarded four contracts
with a total value of approximately $6,000,000, and in 2004, we made 105 bids
and were awarded six contracts of approximately $11,575,000. For the year
ended December 31, 2006, we were awarded two contracts by the U. S. Government
with a net value of approximately $1.8 million.

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 groups of products or repairs required for the
maintenance, upgrade and specified functioning of their aircraft, and 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.

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.


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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.

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.


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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 require additional working capital
to enable us to complete a contract. We recognize revenue on our government
contracts on the percentage of completion method although the government does
not have a payment obligation until acceptance. 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.


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 December 31, 2006 was $8.5 million. Our sales backlog as of January
31, 2007 was approximately $12.5 million (the increase from December 31, 2006
was due to us being awarded a $4.5 million contract in January 2007), 28% of
which are for parts while 72% are for repair and overhaul services. 13 of
these contracts had a backlog value of more than $150,000 as of January 31,
2007. We bid on contracts that range in dollar value from $20,000 to
$1,800,000. Based on the value of the bids (excluding options to be exercised
by the Government) submitted during 2006, approximately 20% of the bids were
for contracts valued between $250,000 and $500,000 and approximately 50% of
the bids were for contracts valued above $500,000. Based on the number of bids
submitted during the same period, approximately 29% of the bids were for
contracts that are valued between $100,000 and $250,000; approximately 14%
were bids for contracts valued between $250,000 and $500,000; and
approximately 10% were bids for contracts valued above $500,000. The average
value of our bids in 2006 was $244,577, and the median value of our bids in
2006 was $112,104. We were awarded two contracts in 2006 with a net value of
approximately $1.8 million, including options to be exercised by the
Government.

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.


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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 parts and perform repair and service
on commercial aircraft. 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).

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 31, 2007 we had a backlog of $12,500,000, most of which we
expect to be delivered during the following 24 months.

Employees


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As of December 31, 2006, we had 28 employees, of which three were
administrative, two sales and marketing and 23 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.

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 97% 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, 2006, our working capital was approximately $1.1 million.
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.


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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.

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.


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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.

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:


      o     the difficulty of integrating acquired products, services or
            operations;


      o     the potential disruption of the ongoing businesses and distraction
            of our management and the management of acquired companies;

      o     the difficulty of incorporating acquired rights or products into
            our existing business;

      o     difficulties in disposing of the excess or idle facilities of an
            acquired company or business and expenses in maintaining such
            facilities;

      o     difficulties in maintaining uniform standards, controls,
            procedures and policies;


                                      11
<PAGE>


      o     the potential impairment of relationships with employees and
            customers as a result of any integration of new management
            personnel;

      o     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;

      o     the effect of any government regulations which relate to the
            business acquired;

      o     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 requires 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 may be
required in the future 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 and a report by our independent certified public accounting firm
addressing these assessments. 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.


                                      12
<PAGE>


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.

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.


                                      13
<PAGE>


According to the SEC, the market for penny stocks has suffered in recent years
from patterns of fraud and abuse. Such patterns include:

      o     Control of the market for the security by one or a few
            broker-dealers that are often related to the promoter or issuer;

      o     Manipulation of prices through prearranged matching of purchases
            and sales and false and misleading press releases;

      o     "Boiler room" practices involving high pressure sales tactics and
            unrealistic price projections by inexperienced sales persons;

      o     Excessive and undisclosed bid-ask differentials and markups by
            selling broker-dealers; and

      o     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.

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.


                                      14
<PAGE>


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 affected 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 2007. The current annual rent is approximately $140,000 with
standard escalation provisions. We are in negotiations to lease a facility in
Valencia, California that is approximately 20,000 square feet.

ITEM 3. LEGAL PROCEEDINGS

We have been in litigation with Triumph Components-Arizona, Inc. ("Triumph")
since 2003. On July 20, 2006, Triumph and we entered into a settlement
agreement dated as of July 18, 2006 pursuant to which the parties have agreed
to settle their disputes arising from a prior settlement agreement between the
parties. Under the new 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. The
remaining unpaid balance of $649,000 is reported as Accrued Triumph settlement
obligation in the accompanying consolidated balance sheet. In connection with
the settlement agreement. 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 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, Logistical and Hill claiming among other things, that (1) Mr.
Lebovitz was mentally unfit to sign a Separation Agreement; (2) we


                                      15
<PAGE>



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 is seeking compensatory and punitive damages as well as
attorney fees. We believe that such claims are without merit and plan to
vigorously defend our self against such claims.


We filed a cross-complaint against Harry Lebovitz, Hill Inc, and other related
entities, and seek damages for breach of fiduciary, breach of contract, fraud
and other causes of action On March 22, 2007, the complaint and the
cross-complaint were dismissed without prejudice.

On June 30, 2006 we were evicted from our leased Eton facility and the
property was 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 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 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.

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
2006:

First Quarter                $0.70             $0.15
Second Quarter               $0.26             $0.15
Third Quarter                $0.35             $0.17
Fourth Quarter               $0.38             $0.14

2005:

First Quarter                $1.85             $1.65


                                      16
<PAGE>


Second Quarter               $1.80             $1.50
Third Quarter                $1.70             $1.15
Fourth Quarter               $1.60             $0.70

Holders

There are approximately 537 record holders of our common stock at March 16,
2007. 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, 2006

                                                              Number of
                           Number of                         securities
                         securities to                        remaining
                         be issued upon  Weighted-average   available for
                          exercise of     exercise price   future issuance
                          outstanding     of outstanding    under equity
                          options and      options and      compensation
Plan Category               warrants         warrants           plans
----------------------------------------------------------------------------
Equity compensation
plans approved by
security holders                     -0-              -0-                NA

Equity compensation
plan not approved by
security holders                 420,000            $0.08               -0-

We do not have any equity compensation plans for our employees, directors or
consultants. At December 31, 2006, 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


                                      17
<PAGE>


The following discussion and analysis should be read in conjunction with our
consolidated financial statements and related footnotes for the years ended
December 31, 2006 and December 31, 2005 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

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 97% 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


                                      18
<PAGE>


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 and contract value. 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.

CONTRACTS 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, 2006 Compared to Year Ended December 31, 2005

Our revenue for the year ended December 31, 2006 was $6,218,548 an increase of
$900,435, or 16.9% from $5,318,113 for the year ended December 31, 2005. The
increase in revenue is primarily due to an increase in percentage of
completion on most contracts offset by a decrease in consignment sales. In
addition, 2005 revenues were affected by the cancellation of one contract.

Our cost of sales for the year ended December 31, 2006 increased by $303,783
or 6.8% from $4,478,353 for the year ended December 31, 2005 to $4,782,136 for
the year ended December 31, 2006. Our gross margin for 2006 was 23.1% compared
to 15.8% for 2005. The increase in gross margin from 2005 to 2006 is due to
higher costs in 2005. These increased costs in 2005 were a result of the high
scrap rate on one overhaul contract and the revision of estimated cost to
complete on certain jobs by approximately $300,000, four of which were related
to adjustments made to the stages of completion of parts delivered by Triumph.


                                      19
<PAGE>


General and administrative expenses for the year ended December 31, 2006
decreased by $475,321, or 28.9%, from $1,646,845 for the year ended December
31, 2005 to $1,171,524 for the year ended December 31, 2006. The decrease is
principally due to a decrease in legal fees and officer payroll.

Sales and marketing expenses for the year ended December 31, 2006 increased by
$14,238, or 7.2%, from $198,401 for the year ended December 31, 2005 to
$212,639 for the year ended December 31, 2006. The increase is immaterial.


Our settlement with Triumph in May 2004 reduced our obligations to Triumph from
approximately $1,463,000 to $750,000, As a result, we recognized a gain on the
settlement of this matter of $483,775, net of estimated legal fees and costs to
complete. On March 2, 2006, we entered into a letter of understanding with
Triumph whereby we agreed to pay Triumph a total of $950,000 in installments. As
a result we accrued an additional amount due to Triumph of $257,892 as of
December 31, 2005.


Other income for the year ended December 31, 2006 was $85,804, an increase of
$47,647, or 124.9%, from $38,157 for the year ended December 31, 2005. The
increase is principally due to the reversal of a portion of a provision from
2005 of approximately $38,000.

During the year ended December 31, 2005, we settled a previously accrued
obligation for legal services at a discount, resulting in a gain on debt
extinguishment of $50,132.

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, 2006 was $52,965 an increase
of $42,107, or 387.8%, from $10,858 for the year ended December 31, 2005. The
increase is principally due to interest accrued on the guaranteed obligation
of related party debt.

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.

Other expense for the year ended December 31, 2006 was $66,945, a decrease of
$32,199, or 32.5%, from $99,144 for the year ended December 31, 2005. The
decrease is due to the reduction in finance charges and discounts taken on
government contracts.

Benefit for income taxes for the year ended December 31, 2005 was $37,668
which reflects a net operating loss carryback as a result of the net loss
incurred during the year ended December 31, 2005. During the year ended
December 31, 2006 there was no tax provision as the income generated during
this period can be offset by net operating loss carryforwards. During 2005 and
2006, we generated net operating losses for tax purposes due to us using the
completed contract method for tax purposes.

LIQUIDITY AND CAPITAL RESOURCES


                                      20
<PAGE>


At December 31, 2006, we had working capital of $1,162,477, as compared to
$1,131,895 at December 31, 2005. We had cash and cash equivalents of $484,414
at December 31, 2006 as compared to cash and cash equivalents of $387,216 at
December 31, 2005. As of December 31, 2006, we have net contract costs and
estimated earnings of $2,100,423 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, converting
accounts payable into notes payable and increasing the length of time that
accounts payable are relieved.

During the year ended December 31, 2006, our operating and investing
activities used cash of $386,684 and $59,070, respectively while our financing
activities provided cash of $542,952. 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
provided by financing activities was a result of proceeds received from the
exercise of warrants and net proceeds received from factoring our receivables
offset by repayment of notes payable and capital lease obligations, and the
repurchase of shares of our common stock from a related party.

We have an accounts receivable financing facility with Commerce Funding
Corporation. The interest rate at December 31, 2006 is 9.25% and the maximum
amount to be advanced under this agreement is $1 million. Commerce has agreed
to lend up to 85% of qualifying receivables. There was $321,284 outstanding
under this financing facility at December 31, 2006.

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, largely because of the problems we encountered with
Triumph. We cannot assure you that we will not have to change our estimates on
other 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 2007 and beyond will depend on our
2007 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 2006, and if we are able to raise
capital through debt or equity financings, we should generate enough cash to
maintain our operations beyond 2007. 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 affect our performance on existing and future contracts.



                                      21
<PAGE>


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

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.

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.

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:


                                      22
<PAGE>



<TABLE>
<CAPTION>
<S>                         <C>                                                                 <C>
    Name                    Positions                                                           Age
    ----                    ---------                                                           ---
Bruce Littell               Chairman, Chief Executive Officer and Chief Financial Officer       58
Joe Lucan                   Vice President - Engineering                                        54
Jerry Hill                  Vice President - Overhaul and repair operations                     54
Lisa Higgins                Vice President - Finance                                            41
</TABLE>


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
Hill since its inception in 1997. Prior to joining Hill, 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 has been our vice president of overhaul and repair operations since
January 2004. 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.

Lisa Higgins has been our vice president of finance since July 2006. From 2004
to 2006 she was the Controller at Maxxess Systems, Inc. (a private
manufacturing company) in Anaheim, CA. From 1992 to 2004 she was a Senior
Accountant for Odetics, Inc., now Iteris, Inc. (a publicly traded
international manufacturing company) in Anaheim, California. From 1987 to 1992
she was an Accounting Manager at Hawker Pacific, Inc. She has an accounting
degree from Vanguard University in Costa Mesa, California.

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. 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.


                                      23
<PAGE>


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 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 2006.


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.


                                      24
<PAGE>


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, 2006. 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.

<TABLE>
<CAPTION>
                                          Summary Compensation Table
---------------------------------------------------------------------------------------------------------------------
                                                                                Non-Equity
                                                                                 Incentive
   Name and Principal                                 Stock    Option/Warrant      Plan         All Other
        Position           Year  Salary    Bonus      Awards       Awards      Compensation    Compensation   Total
-------------------------  ----  --------  -------   --------  --------------  --------------  ------------  --------
<S>                        <C>   <C>       <C>       <C>       <C>             <C>             <C>           <C>

Bruce Littell              2006  $300,000  $2,000    $ --      $ --             $ --           $ --          $302,000
  Chairman, Chief
Executive
  Officer and Chief
Financial
  Officer

Joseph Lucan               2006  $107,115  $2,000    $ --      $ --             $ --           $ --          $109,115
  Vice President -
Engineering

Jerry Hill                 2006  $110,000  $2,000    $ --      $ --             $ --           $ --          $112,000
  Vice President
-Overhaul and
  operations
</TABLE>

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


                                      25
<PAGE>



On December 15, 2005, Bruce Littell and we entered into an employment
agreement 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 will automatically extend for
additional two-year terms unless notification is provided in accordance with
the Employment Agreement. 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 December 2006, we entered into employment agreements with four
executives that total annual compensation of $405,115. The agreements have not
been executed and include provisions for us to issue 100,000 common shares to
the employees upon execution. All four employment agreements are for the term
of one year.

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,
2006.

<TABLE>
<CAPTION>
                                    Outstanding Equity Awards at Fiscal Year-End
---------------------------------------------------------------------------------------------------------------------

                                      Options Awards                                     Stock Awards
----------------------------------------------------------------------  ---------------------------------------------

                                                                                                              Equity
                                                                                                            Incentive
                                                                                                  Equity       Plan
                                                                                                 Incentive    Awards:
                                                                                                   Plan       Market
                                                                                                  Awards:       or
                                                                                                  Number      Payout
                                                                              Number                of        Value
                                             Equity                             of     Market    Unearned       of
                                           Incentive                          Shares   Value      Shares,    Unearned
                                              Plan                              or       of       Units       Shares,
                                             Awards:                          Units    Shares       or      Units, or
               Number of      Number of     Number of                           of       Or       Other       Other
               Securities    Securities    Securities                          Stock    Units     Rights      Rights
               Underlying    Underlying    Underlying                          That     That       That       That
               Unexercised   Unexercised   Unexercised   Option     Option    Have      Have       Have       Have
                 Options       Options      Unearned    Exercise  Expiration   Not       Not       Not         Not
Name           Exercisable  Unexercisable    Options     Price       Date     Vested   Vested     Vested       Vested
-----------    -----------  -------------  -----------  --------  ----------  ------  ---------  --------   ---------
<S>            <C>          <C>            <C>          <C>       <C>         <C>     <C>        <C>        <C>
                   (#)           (#)            (#)        ($)                  (#)      (#)       (#)         ($)

Bruce Littell    9,633,937             --           --   $  0.20    02/28/09      --         --        --   $      --
</TABLE>


                                      26
<PAGE>


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.


                                      27
<PAGE>


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, 2006 by:

      o     each director;
      o     each officer named in the summary compensation table;
      o     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.

                                   Shares of Common          Percentage of
                                 Stock Beneficially           Outstanding
       Name                                   Owned          Common Stock
       -----                                  -----          -------------
Harry Lebovitz                           26,611,302                33.79%
956 Kagawa St.
Pacific Palisades, CA 90272

G. Scott Littell, trustee                18,077,365  (2)           22.96%
The Children's Trust of 1988
1452 2nd Street
Santa Monica, California 90401

Bruce Littell                             9,633,637  (1)           10.90%
19734 Dearborn Street                                (2)
Chatsworth, California 91311

Absolute Return Europe Fund               6,000,000  (3)           7.62%
Camin de Sarria 63
E-07010 Establishments
Spain

European Catalyst Fund                   11,600,000  (4)           14.73%
P.O. Box 1234
Georgetown
Grand Cayman Islands

Joseph Lucan                              3,105,666                3.94%

All directors and executive              30,816,668                34.87%
officers as a group (2
 individuals)

(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.


                                      28
<PAGE>


(3) Mr. Florian Homm has 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

Exhibit
Number      Description of Exhibit
-------     ----------------------

3.1         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)

10.2        Securities Purchase Agreement dated September 29, 2004 (3)

10.3        Form of Lock Up Agreement (3)


                                      29
<PAGE>


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)

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 1934

32.         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, 2004 and incorporated herein by reference.

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

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

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

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

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


                                      30
<PAGE>


(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

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table sets forth fees billed to us by our independent registered
accounting firm, AJ. Robbins, PC during the fiscal years ended December 31,
2006 and 2005 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
2005.

                        December 31, 2006       December 31, 2005
                        -----------------       -----------------

Audit Fees                $  70,962               $    126,782
Audit Related Fees        $      --               $     26,719
Tax Fees                  $  12,500               $     34,648


                                      31
<PAGE>


                                  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 Littell
                                         ---------------------------------------
                                         Bruce Littell
                                         Chairman, Chief Executive Officer,
                                         Chief Accounting Officer and Director


Dated:      June 25, 2007


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.


<TABLE>
<CAPTION>
    Signature                             Title                                   Date
    ---------                             -----                                   ----
<S>                           <C>                                                 <C>


/s/Bruce Littell              Chairman, Chief Executive and Financial Officer,    June 25, 2007
------------------------      (Principal executive, financial and
Bruce Littell                 accounting officer) and director
</TABLE>



                                      32
<PAGE>


                    Logistical Support, Inc. and Subsidiary
                       Consolidated Financial Statements
                    Years Ended December 31, 2006 and 2005


                                   Contents

                                                                          Page
                                                                          ----

Report of Independent Registered Public Accounting Firm                    F-1

Consolidated Financial Statements:

    Consolidated Balance Sheet as of December 31, 2006                     F-2

    Consolidated Statements of Operations for the years ended
       December 31, 2006 and 2005                                          F-3

    Consolidated Statements of Stockholders' Equity for the years ended
      December 31, 2006 and 2005                                           F-4

    Consolidated Statements of Cash Flows for the years ended
      December 31, 2006 and 2005                                           F-5

    Notes to Consolidated Financial Statements                             F-6


<PAGE>


                               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
Logistical Support, Inc. and Subsidiary
Chatsworth, California

We have audited the accompanying consolidated balance sheet of Logistical
Support, Inc. and subsidiary as of December 31, 2006, 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
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Logistical
Support, Inc. and subsidiary as of December 31, 2006, 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.


As discussed in paragraphs three through five of Note 1 to the consolidated
financial statements, the accompanying consolidated balance sheet as of December
31, 2006, and the related consolidated statements of operations and
stockholders' equity for the year ended December 31, 2006 have been restated to
properly account for the effect of repricing warrants.



/s/ AJ Robbins PC
Certified Public Accountants

Denver, Colorado


March 22, 2007 except for paragraphs three through five of Note 1, as to which
the date is June 21, 2007.



                                     F-1
<PAGE>


                    Logistical Support, Inc. and Subsidiary
                          Consolidated Balance Sheet
                            As of December 31, 2006



                                                                  December 31,
                                                                      2006
                                                                  ------------

                                    ASSETS

CURRENT ASSETS
      Cash and cash equivalents                                   $    484,414
      Accounts receivable, net of allowance for doubtful accounts      487,658
      of $13,972 Inventory                                              43,452
      Contract costs and estimated earnings in excess of billings    2,100,423
      Due from factor                                                  181,318
      Other current assets                                             105,886

                                                                  ------------
TOTAL CURRENT ASSETS                                                 3,403,151

PROPERTY AND EQUIPMENT, net                                            483,896

                                                                  ------------
TOTAL ASSETS                                                      $  3,887,047
                                                                  ============

                     LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
      Accounts payable                                            $    614,677
      Accrued Triumph settlement obligation, current portion           530,000
      Accrued payroll expenses                                         289,563
      Accrued expenses                                                 202,186
      Due to factor                                                    321,284
      Notes payable, current portion                                     4,955
      Capital lease obligations, current portion                        53,009
      Notes payable, related party                                     225,000

                                                                  ------------
TOTAL CURRENT LIABILITIES                                            2,240,674

ACCRUED TRIUMPH SETTLEMENT OBLIGATION, net of current portion          119,000
NOTES PAYABLE, net of current portion                                   10,242
CAPITAL LEASE OBLIGATIONS, net of current portion                       66,124
OTHER LONG-TERM LIABILITIES                                            113,335

                                                                  ------------
TOTAL LIABILITIES                                                    2,549,375
                                                                  ------------

COMMITMENT AND CONTINGENCIES                                                --

STOCKHOLDERS' EQUITY
      Preferred stock, $0.001 par value; 5,000,000 shares
        authorized; 0 shares issued and outstanding                         --
      Common stock, $0.001 par value; 100,000,000 shares
        authorized; 78,745,000 shares issued and outstanding            78,745
      Additional paid-in capital                                     3,470,472
      Due from officers/affiliates, net                               (114,307)
      Accumulated deficit                                           (2,097,238)

                                                                  ------------
TOTAL STOCKHOLDERS' EQUITY                                           1,337,672
                                                                  ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                        $  3,887,047
                                                                  ============


 The accompanying notes are an integral part of these consolidated financial
                                 statements.


                                     F-2
<PAGE>


                    Logistical Support, Inc. and Subsidiary
                     Consolidated Statements of Operations
                For The Years Ended December 31, 2006 and 2005



                                                     Years Ended December 31,
                                                   ----------------------------
                                                       2006            2005
                                                   ------------    ------------

SALES
     Contract sales                                $  6,016,137    $  5,130,759
     Product sales                                      202,411         187,354

                                                   ------------    ------------
     TOTAL SALES                                      6,218,548       5,318,113
                                                   ------------    ------------

COST OF SALES
     Contract sales                                   4,696,001       4,375,238
     Product sales                                       86,135         103,115

                                                   ------------    ------------
     TOTAL COST OF SALES                              4,782,136       4,478,353
                                                   ------------    ------------

GROSS PROFIT                                          1,436,412         839,760
                                                   ------------    ------------

OPERATING EXPENSES
     General and administrative expenses              1,171,524       1,646,845
     Sales and marketing                                212,639         198,401
     Loss on Triumph settlement                              --         257,892

                                                   ------------    ------------
TOTAL OPERATING EXPENSES                              1,384,163       2,103,138
                                                   ------------    ------------

INCOME (LOSS) FROM OPERATIONS                            52,249      (1,263,378)
                                                   ------------    ------------

OTHER INCOME (EXPENSE)
     Other income                                        85,804          38,157
     Gain on extinguishment of debt                          --          50,132
     Gain on settlement with NLI                        143,398              --
     Interest expense                                   (52,965)        (10,858)
     Provision for related party receivables, net       (25,800)       (587,254)
     Other expense                                      (66,945)        (99,144)

                                                   ------------    ------------
TOTAL OTHER INCOME (EXPENSE)                             83,492        (608,967)
                                                   ------------    ------------

INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES         135,741      (1,872,345)

PROVISION (BENEFIT) FOR INCOME TAXES                         --         (37,668)
                                                   ------------    ------------

NET INCOME (LOSS)                                  $    135,741    $ (1,834,677)

EFFECT OF REPRICE OF WARRANTS                          (316,694)             --

NET LOSS ATTRIBUTED TO COMMON STOCKHOLDERS         $   (180,953)   $ (1,834,677)
                                                   ============    ============

EARNINGS (LOSS) PER SHARE:
     BASIC                                         $      (0.00)   $      (0.03)
                                                   ============    ============
     DILUTED                                       $      (0.00)   $      (0.03)
                                                   ============    ============

WEIGHTED AVERAGE SHARES OUTSTANDING:
     BASIC                                           74,917,055      72,030,479
                                                   ============    ============
     DILUTED                                         74,917,055      72,030,479
                                                   ============    ============


 The accompanying notes are an integral part of these consolidated financial
                                 statements.


                                     F-3
<PAGE>


                    Logistical Support, Inc. and Subsidiary
                Consolidated Statements of Stockholders' Equity
                For The Years Ended December 31, 2006 and 2005



<TABLE>
<CAPTION>
                                                                                                         Retained
                                          Common Stock        Additional    Due From                     Earnings/      Total
                                    -----------------------    Paid-in      Officers/    Prepaid      (Accumulated   Stockholders'
                                     Shares        Amount      Capital     Affiliates   Consulting       Deficit)       Equity
                                   -----------  -----------  -----------  -----------  -------------  -------------  -------------
<S>                                <C>          <C>          <C>          <C>          <C>            <C>            <C>
Balance, December 31, 2004          72,245,000       72,245    3,271,707     (604,697)            --        (81,608)     2,657,647

Officer receivables
   charged to salaries                      --           --           --      183,084             --             --        183,084

Provision for advances to
   officers/affiliates                      --           --           --      268,793             --             --        268,793

Advances to officers/
   affiliates                               --           --           --      (75,455)            --             --        (75,455)

Repurchase of common stock
   from related party                 (700,000)        (700)    (174,300)          --             --             --       (175,000)

Fair value of warrants to
   consultants                              --           --       11,571           --        (11,571)            --              0

Amortization of prepaid
   consulting                               --           --           --           --          5,785             --          5,785

Net loss                                    --           --           --           --             --     (1,834,677)    (1,834,677)

                                   -----------  -----------  -----------  -----------  -------------  -------------  -------------
Balance, December 31, 2005          71,545,000       71,545    3,108,978     (228,275)        (5,786)    (1,916,285)     1,030,177

Provision for advances to
   officers/affiliates                      --           --           --      113,968             --             --        113,968

Repurchase of common stock
   from related party                 (400,000)        (400)     (99,600)          --             --             --       (100,000)

Exercise of warrants for
   cash                              7,600,000        7,600      144,400           --             --             --        152,000

Amortization of prepaid
   consulting                               --           --           --           --          5,786             --          5,786

Effect of reprice of warrants               --           --      316,694           --             --       (316,694)            --

Net income                                  --           --           --           --             --        135,741        135,741

                                   -----------  -----------  -----------  -----------  -------------  -------------  -------------
Balance, December 31, 2006          78,745,000  $    78,745  $ 3,470,472  $  (114,307) $          --  $  (2,097,238) $   1,337,672
                                   ===========  ===========  ===========  ===========  =============  =============  =============
</TABLE>


 The accompanying notes are an integral part of these consolidated financial
                                 statements.


                                     F-4
<PAGE>


                    Logistical Support, Inc. and Subsidiary
                     Consolidated Statements of Cash Flows
                For The Years Ended December 31, 2006 and 2005



<TABLE>
<CAPTION>
                                                                         Years Ended December 31,
                                                                        ---------------------------
                                                                            2006           2005
                                                                        ------------   ------------
<S>                                                                     <C>            <C>

CASH FLOW FROM (TO) OPERATING ACTIVITIES:
   Net income (loss)                                                    $    135,741   $ (1,834,677)
   Adjustment to reconcile net income (loss) to net cash
     (used in) operating activities:
       Depreciation expense                                                   84,276        128,805
       Provision for related party receivables, net                           25,800        268,793
       Loss on assumption of guaranteed debt of related party                     --        318,461
       Officer receivable charged to salaries                                     --        183,084
       Loss on Triumph settlements                                                --        257,892
       (Gain) on extinguishment of debt                                     (143,398)       (50,132)
       Other long-term liabilities                                           (38,335)        75,000
       Amortization of fair value of warrants issued to consultants            5,786          5,785
       Gain on write-off of liabilities                                       (9,143)            --
   Changes in operating assets and liabilities:
     Other receivables                                                        10,523          7,477
     Accounts receivable                                                      28,082        133,034
     Due from officers/affiliates                                             88,168        (75,455)
     Inventory                                                                59,439        (15,224)
     Contract costs                                                         (120,797)       285,323
     Due from factor                                                        (181,318)            --
     Other current assets                                                    (40,842)       (55,819)
     Accounts payable                                                       (114,331)       249,663
     Accrued Triumph settlement obligation                                  (301,000)            --
     Accrued expenses                                                        324,665       (149,665)
     Guaranteed obligation of related party                                 (200,000)            --
     Deferred taxes                                                               --        (37,668)

                                                                        ------------   ------------
Net cash (used in) operating activities                                     (386,684)      (305,323)
                                                                        ------------   ------------

CASH FLOW (TO) INVESTING ACTIVITIES:
   Purchase of property and equipment                                        (59,070)      (103,926)

                                                                        ------------   ------------
Net cash (used in) investing activities                                      (59,070)      (103,926)
                                                                        ------------   ------------

CASH FLOW FROM (TO) FINANCING ACTIVITIES:
   Proceeds from the exercise of warrants                                    152,000
   Proceeds (Repayments) of  factoring receivables, net                      321,284       (157,154)
   Proceeds from the issuance of notes payable to related party              225,000             --
   Repurchase of common stock from a related party                          (100,000)      (175,000)
   Payments on capital lease obligations                                     (45,088)       (24,910)
   Payments on notes payable                                                 (10,244)       (49,239)

                                                                        ------------   ------------
Net cash provided by (used in) financing activities                          542,952       (406,303)
                                                                        ------------   ------------

NET INCREASE (DECREASE) IN CASH AND
   CASH EQUIVALENTS                                                           97,198       (815,552)

CASH AND CASH EQUIVALENTS, Beginning of year                                 387,216      1,202,768
                                                                        ------------   ------------

CASH AND CASH EQUIVALENTS, End of year                                  $    484,414   $    387,216
                                                                        ============   ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:

   Interest paid                                                        $     52,965   $     10,858
                                                                        ============   ============
   Income taxes paid                                                    $         --   $     14,162
                                                                        ============   ============

SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:

   Capital lease obligations                                            $     40,220   $     77,600
                                                                        ============   ============
</TABLE>



  The accompanying notes are an integral part of these consolidated financial
                                  statements.


                                     F-5
<PAGE>


                    Logistical Support, Inc. and Subsidiary
                  Notes to Consolidated Financial Statements
                For the Years Ended December 31, 2006 and 2005


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.

      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.

      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. During the year ended December 31,
      2005, the Company incurred a substantial loss. Going into 2006, the
      Company's backlog approximated $12 million. Through December 31, 2006
      the Company shipped and billed approximately $6 million. The Company has
      changed its focus to bidding on overhaul and repair solicitations, which
      is the area that the Company has the most expertise and these orders are
      generally more profitable.

      In March the Company canceled its consignment agreement with Hill
      Industries, Inc., a related party and in June, the Company reduced its
      overhead by consolidating its operations into one facility.



                                     F-6
<PAGE>


                    Logistical Support, Inc. and Subsidiary
                  Notes to Consolidated Financial Statements
                For the Years Ended December 31, 2006 and 2005


      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 year ended December 31, 2006. As of December 31,
      2006, 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, 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
<PAGE>


                    Logistical Support, Inc. and Subsidiary
                  Notes to Consolidated Financial Statements
                For the Years Ended December 31, 2006 and 2005


      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.

      The highly competitive market for business and supplying aerospace
      products is also subject to certain business risks. These risks include
      timely development and certification of new product offerings, the
      current state of the general aviation and commuter aircraft markets, and
      government regulations affecting commuter aircraft.

      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 receivables. 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 96.6% and 96.5%of the Company's sales for the years ended
      December 31, 2006 and 2005, respectively. Management does not believe
      significant credit risk existed at December 31, 2006.

      Inventory
      ---------

      Inventory is principally parts and is stated at the lower of cost or
      market utilizing the first-in, first-out method.


                                     F-8
<PAGE>


                    Logistical Support, Inc. and Subsidiary
                  Notes to Consolidated Financial Statements
                For the Years Ended December 31, 2006 and 2005


      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 that
      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 contract.

      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
<PAGE>


                    Logistical Support, Inc. and Subsidiary
                  Notes to Consolidated Financial Statements
                For the Years Ended December 31, 2006 and 2005


      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 earnings (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 and 17,653,937 common equivalent shares outstanding at December
      31, 2006 and 2005, respectively. The Company had a net loss attributed to
      common stockholders for the years ended December 31, 2006 and 2005.
      Accordingly, the diluted per share amounts do not reflect the impact of
      warrants because the effect of each is antidilutive.



                                     F-10
<PAGE>


      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, 2006 and
      2005, 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.

      Reclassification
      ----------------

      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.

      Recently Issued Accounting Pronouncements
      -----------------------------------------


                                     F-11
<PAGE>


                    Logistical Support, Inc. and Subsidiary
                  Notes to Consolidated Financial Statements
                For the Years Ended December 31, 2006 and 2005


      In February 2006, FASB issued SFAS No. 155, "Accounting for Certain
      Hybrid Financial Instruments". SFAS No. 155 amends SFAS No 133,
      "Accounting for Derivative Instruments and Hedging Activities", and SFAS
      No. 140, "Accounting for Transfers and Servicing of Financial Assets and
      Extinguishments of Liabilities". SFAS No. 155, permits fair value
      remeasurement for any hybrid financial instrument that contains an
      embedded derivative that otherwise would require bifurcation, clarifies
      which interest-only strips and principal-only strips are not subject to
      the requirements of SFAS No. 133, establishes a requirement to evaluate
      interest in securitized financial assets to identify interests that are
      freestanding derivatives or that are hybrid financial instruments that
      contain an embedded derivative requiring bifurcation, clarifies that
      concentrations of credit risk in the form of subordination are not
      embedded derivatives, and amends SFAS No. 140 to eliminate the
      prohibition on the qualifying special-purpose entity from holding a
      derivative financial instrument that pertains to a beneficial interest
      other than another derivative financial instrument. This statement is
      effective for all financial instruments acquired or issued after the
      beginning of the Company's first fiscal year that begins after September
      15, 2006. Management believes that this statement will not have a
      significant impact on the consolidated financial statements.

      In March 2006 FASB issued SFAS 156 `Accounting for Servicing of
      Financial Assets this Statement amends FASB Statement No. 140,
      Accounting for Transfers and Servicing of Financial Assets and
      Extinguishments of Liabilities, with respect to the accounting for
      separately recognized servicing assets and servicing liabilities. This
      Statement:

      1.    Requires an entity to recognize a servicing asset or servicing
            liability each time it undertakes an obligation to service a
            financial asset by entering into a servicing contract.

      2.    Requires all separately recognized servicing assets and servicing
            liabilities to be initially measured at fair value, if
            practicable.

      3.    Permits an entity to choose `Amortization method' or Fair value
            measurement method' for each class of separately recognized
            servicing assets and servicing liabilities:

      4.    At its initial adoption, permits a one-time reclassification of
            available-for-sale securities to trading securities by entities
            with recognized servicing rights, without calling into question
            the treatment of other available-for-sale securities under
            Statement 115, provided that the available-for-sale securities are
            identified in some manner as offsetting the entity's exposure to
            changes in fair value of servicing assets or servicing liabilities
            that a servicer elects to subsequently measure at fair value.

      5.    Requires separate presentation of servicing assets and servicing
            liabilities subsequently measured at fair value in the statement
            of financial position and additional disclosures for all
            separately recognized servicing assets and servicing liabilities.

      This Statement is effective as of the beginning of the Company's first
      fiscal year that begins after September 15, 2006. Management believes
      that this statement will not have a significant impact on the
      consolidated financial statements.

      In September 2006, FASB issued SFAS 157 `Fair Value Measurements'. This
      Statement defines fair value, establishes a framework for measuring fair
      value in generally accepted accounting principles (GAAP), and expands
      disclosures about fair value measurements. This Statement applies under
      other accounting pronouncements that require or permit fair value
      measurements, the Board having previously concluded in those accounting
      pronouncements that fair value is the relevant measurement attribute.
      Accordingly, this Statement does not require any new fair value
      measurements. However, for some entities, the application of this
      Statement will change current practice. This Statement is effective for
      financial statements issued for fiscal years beginning after November
      15, 2007, and interim periods within those fiscal years. Management is
      currently evaluating the effect of this pronouncement on financial
      statements.


                                     F-12
<PAGE>


                    Logistical Support, Inc. and Subsidiary
                  Notes to Consolidated Financial Statements
                For the Years Ended December 31, 2006 and 2005


      In September 2006, FASB issued SFAS 158 `Employers' Accounting for
      Defined Benefit Pension and Other Postretirement Plans--an amendment of
      FASB Statements No. 87, 88, 106, and 132(R)' This Statement improves
      financial reporting by requiring an employer to recognize the overfunded
      or underfunded status of a defined benefit postretirement plan (other
      than a multiemployer plan) as an asset or liability in its statement of
      financial position and to recognize changes in that funded status in the
      year in which the changes occur through comprehensive income of a
      business entity or changes in unrestricted net assets of a
      not-for-profit organization. This Statement also improves financial
      reporting by requiring an employer to measure the funded status of a
      plan as of the date of its year-end statement of financial position,
      with limited exceptions. An employer with publicly traded equity
      securities is required to initially recognize the funded status of a
      defined benefit postretirement plan and to provide the required
      disclosures as of the end of the fiscal year ending after December 15,
      2006. An employer without publicly traded equity securities is required
      to recognize the funded status of a defined benefit postretirement plan
      and to provide the required disclosures as of the end of the fiscal year
      ending after June 15, 2007. However, an employer without publicly traded
      equity securities is required to disclose the following information in
      the notes to financial statements for a fiscal year ending after
      December 15, 2006, but before June 16, 2007, unless it has applied the
      recognition provisions of this Statement in preparing those financial
      statements. The requirement to measure plan assets and benefit
      obligations as of the date of the employer's fiscal year-end statement
      of financial position is effective for fiscal years ending after
      December 15, 2008. Management has determined that this statement is not
      applicable to the Company.

      In June 2006 FASB issued FASB Interpretation No. 48, "Accounting for
      Uncertainty in Income Taxes, an interpretation of FASB Statement
      No.109." Interpretation 48 prescribes a recognition threshold and a
      measurement attribute for the financial statement recognition and
      measurement of a tax position taken or expected to be taken in a tax
      return. Benefits from tax positions should be recognized in the
      financial statements only when it is more likely than not that the tax
      position will be sustained upon examination by the appropriate taxing
      authority that would have full knowledge of all relevant information.
      The amount of tax benefits to be recognized for a tax position that
      meets the more-likely-than-not recognition threshold is measured as the
      largest amount of benefit that is greater than fifty percent likely of
      being realized upon ultimate settlement. Tax benefits relating to tax
      positions that previously failed to meet the more-likely-than-not
      recognition threshold should be recognized in the first subsequent
      financial reporting period in which that threshold is met or certain
      other events have occurred. Previously recognized tax benefits relating
      to tax positions that no longer meet the more-likely-than-not
      recognition threshold should be derecognized in the first subsequent
      financial reporting period in which that threshold is no longer met.
      Interpretation 48 also provides guidance on the accounting for and
      disclosure of tax reserves for unrecognized tax benefits, interest and
      penalties and accounting in interim periods. Interpretation 48 is
      effective for fiscal years beginning after December 15, 2006. The change
      in net assets as a result of applying this pronouncement will be a
      change in accounting principle with the cumulative effect of the change
      required to be treated as an adjustment to the opening balance of
      retained earnings on January 1, 2007, except in certain cases involving
      uncertainties relating to income taxes in purchase business
      combinations. In such instances, the impact of the adoption of
      Interpretation 48 will result in an adjustment to goodwill. While the
      Company analysis of the impact of adopting Interpretation 48 is not yet
      complete, it does not currently anticipate it will have a material
      impact on the Company's consolidated financial statements.


                                     F-13
<PAGE>


                    Logistical Support, Inc. and Subsidiary
                  Notes to Consolidated Financial Statements
                For the Years Ended December 31, 2006 and 2005


Note 2 - Due From Officers/Affiliates


      Due from officers/affiliates at December 31, 2006 and 2005 of $114,307 and
      $228,275 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 Company. 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 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 does believe it has the
      legal right of offset to apply the cash collected on behalf of one of Mr.
      Lebovitz' 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.

A summary of the due from officers/affiliates is below:

<TABLE>
<CAPTION>
                                               BALANCE                                                BALANCE
                                             12/31/2005        ADDITIONS        SUBTRACTIONS        12/31/2006
<S>                                       <C>                 <C>             <C>                  <C>
Harry Lebovitz controlled/affiliated
entities                                  $       587,254     $    25,800     $       (113,968)    $    499,086
  Less:  Allowance for Losses                    (587,254)        (25,800)                  --         (613,054)
                                          ---------------     -----------     ----------------     ------------
  Net receivable/(payable)                $            --     $        --     $       (113,968)    $   (113,968)
                                          ---------------     -----------     ----------------     ------------

Other Affiliated Entities                 $       228,275         none               none          $    228,275

  Less:  Allowance for Losses                          --         none               none                    --
                                          ---------------                                          ------------
  Net receivable from other affiliates    $       228,275                                          $    228,275
                                          ---------------                                          ------------
Net Amount shown on Balance Sheet         $       228,275                                          $    114,307
                                          ===============                                          ============
</TABLE>


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, 2006 consisted of the following:

            Contract cost incurred, including
              estimated profit                       $ 15,435,208
            Less: amounts billed                      (13,334,785)
                                                     ------------
                                                     $  2,100,423
                                                     ============

      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     $  2,100,423
            Billings in excess of contract costs               --
                                                     ------------
                                                     $  2,100,423
                                                     ============

      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, 2006, total
      amount of progress payment outstanding was $200,096. 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.


                                     F-14
<PAGE>


                    Logistical Support, Inc. and Subsidiary
                  Notes to Consolidated Financial Statements
                For the Years Ended December 31, 2006 and 2005


      During the years ended December 31, 2006 and 2005, there were no
      significant differences in the Company's estimated profits on contracts
      as reported in prior year financial statements and the actual results,
      except for several contracts previously related to Triumph litigation
      and certain other contracts. The loss recognized in 2006 and 2005
      related to these Triumph contracts were approximately $62,000 and
      $264,000, respectively. Losses from other contracts in 2006 and 2005
      totaled approximately $134,000 and $159,000, respectively.

Note 4 - Property and Equipment

      The cost of property and equipment at December 31, 2006 consisted of the
      following:

            Machinery and equipment                           $    327,836
            Test Equipment                                         334,544
            Automobiles                                             54,491
            Office equipment                                        92,476
                                                              ------------
                                                                   809,347
            Less accumulated depreciation and amortization        (325,451)
                                                              ------------

                                                              $    483,896
                                                              ============


      Depreciation expense for the years ended December 31, 2006 and 2005 was
      $84,276 and $128,805, respectively.


Note 5 - Notes Payable, Related Party


      During December 2006 the Company borrowed $225,000 from the Hunter Fund an
      entity controlled by Hunter World Markets, a greater than five percent
      shareholder of the Company. The note is 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 is being
      amortized over the term of the loan. The note including the principal and
      interest at the rate of 10% is due in June, 2007. See Note 9 for
      additional related party transactions with Hunter World Markets.


Note 6 - Notes Payable

      Notes payable at December 31, 2006 were as follows:


                                     F-15
<PAGE>


                    Logistical Support, Inc. and Subsidiary
                  Notes to Consolidated Financial Statements
                For the Years Ended December 31, 2006 and 2005


              Note payable to bank, collateralized by
              automobile, interest at 8.5% per annum,
              monthly principal and interest of $446,
              note due January 2010.                       14,531

              Other                                           666
                                                       ----------
                                                           15,197
              Less: current portion                        (4,955)
                                                       ----------
                                                       $   10,242
                                                       ==========

      Principal payments on these notes payable are as follows:

            Year ending December 31,
               2007                                    $    4,955
               2008                                         4,669
               2009                                         5,130
               2010                                           443
                                                       ----------

                                                       $   15,197
                                                       ==========

Note 7 - Guaranteed Obligation of Related Party

      The Company was one of six guarantors who have 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.

      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.

Note 8 - Due from and 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
      9.25% at December 31, 2006. 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,
      2006, the Company had $321,284 outstanding under this agreement. At
      December 31, 2006 Wells had collected an additional $181,318 of the
      Company's accounts receivable that had not been placed through the
      factoring agreement and was holding those funds for the benefit of the
      Company and is reported as Due From Factor on the Company's balance
      sheet.


                                     F-16
<PAGE>


                    Logistical Support, Inc. and Subsidiary
                  Notes to Consolidated Financial Statements
                For the Years Ended December 31, 2006 and 2005


Note 9 - Stockholders' Equity

      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 may
      cease 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 12.

      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.

      Exercise of Warrants
      --------------------


                                     F-17
<PAGE>


                    Logistical Support, Inc. and Subsidiary
                  Notes to Consolidated Financial Statements
                For the Years Ended December 31, 2006 and 2005



      On July 6, 2006, the Company reduced the exercise price from $0.25 to
      $0.02 on 8,000,000 warrants held by Hunter World Markets, initially
      granted as part of a private placement of equity in 2004. 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:

                                                        Weighted
                                                        Average
                                                        Exercise
                                          Warrants       Price
                                         ----------    ----------

        Balance, December 31, 2004       17,633,937    $     0.22

          Granted                            20,000    $     1.30
                                         ----------

        Balance, December 31, 2005       17,653,937    $     0.22

           Exercised                     (7,600,000)   $     0.02
                                         ----------

        Balance, December 31, 2006       10,053,937    $     0.20
                                         ==========

        Exercisable, December 31, 2006   10,053,937    $     0.20
                                         ==========

      The weighted average remaining contractual life of warrants outstanding
      is 2.16 years at December 31, 2006. The intrinsic value of warrants
      outstanding at December 31, 2006 was $172,339. The exercise prices for
      the warrants outstanding at December 31, 2006 were as follows:

                          Number of            Exercise
                           Warrants             Price
                         ------------          ---------

                             400,000            $  0.02

                           9,633,937            $  0.20

                              20,000            $  1.30
                         -----------

                          10,053,937
                         ===========

Note 10 - 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, 2006 are as follows:


                                     F-18
<PAGE>


                    Logistical Support, Inc. and Subsidiary
                  Notes to Consolidated Financial Statements
                For the Years Ended December 31, 2006 and 2005


            Deferred tax assets:
                 Allowance for doubtful accounts            $    250,953
                 Accrued compensation                             36,701
                 Net operating loss carryforward                 774,780
                                                            ------------
            Total deferred tax assets                          1,062,434
                 Less valuation allowance                       (688,462)
                                                            ------------
                                                                 373,972
            Deferred tax liabilities:
                 Depreciation and amortization, net              (51,616)
                 Contract revenue                               (322,356)
                                                            ------------
            Net deferred tax liability                      $         --
                                                            ============

      The Components of deferred income tax expense (benefit) are as follows:

                                     December 31,  December 31,
                                        2006          2005
                                     ------------  ------------

            Accrued compensation           (4,760) $    (27,326)
            Net operating loss
               carryforward/back         (161,528)     (613,252)
            Allowance for Doubtful
            Accounts                       (9,816)     (241,137)

            Legal Settlement              103,157      (103,157)
            Depreciation &
            Amortization, net               1,350        50,265

            Contract revenue              161,973       100,908
                                     --------------------------
                Total
                                           90,376      (833,699)
              Increase (decrease)
            in valuation allowance        (90,376)      796,031
                                     ------------  ------------

            Income tax  (benefit)    $         --  $    (37,668)
                                     ============  ============

      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):


                                     F-19
<PAGE>


                    Logistical Support, Inc. and Subsidiary
                  Notes to Consolidated Financial Statements
                For the Years Ended December 31, 2006 and 2005


                                          December 31,    December 31,
                                             2006            2005
                                         ------------    ------------

Tax expense at federal statutory rates   $     46,438    $   (633,780)
Settlement of debt                            (51,864)          2,192
Contract revenue                             (137,677)        (85,771)
Accrued legal settlement                           --          87,683
Allowance for doubtful
   receivables                                  8,223         204,966
Other                                         (31,936)         (8,198)
Net operating loss carryforward               166,816         435,100
                                         ------------    ------------

                                         $         --    $         --
                                         ============    ============

      At December 31, 2006, the Company had federal and state net operating
      loss ("NOL") carryforwards of approximately $1,937,000 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 11 - 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 years ended December
      31, 2006 and 2005 of $61,367 and $26,629, respectively. This agreement
      was terminated in March 2006.

Note 12 - Commitments and Contingencies

      Litigation
      ----------

      The Company has been in litigation with Triumph Components-Arizona, Inc.
      ("Triumph") since 2003. On July 20, 2006, the Company and Triumph
      entered into a settlement agreement dated as of July 18, 2006 pursuant
      to which the parties have agreed to settle their disputes arising from a
      prior settlement agreement between the parties. Under the new 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. The
      remaining unpaid balance of $649,000 is reported as Accrued Triumph
      settlement obligation in the accompanying consolidated balance sheet. In
      connection with the settlement agreement. 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.


                                     F-20
<PAGE>


                    Logistical Support, Inc. and Subsidiary
                  Notes to Consolidated Financial Statements
                For the Years Ended December 31, 2006 and 2005


      On March 14, 2006, the Company canceled a consignment agreement with
      Hill Inc. On April 11, 2006, Mr. Lebovitz filed a lawsuit against Mr.
      Bruce Littell, 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 is seeking compensatory and punitive damages as
      well as attorney fees. The Company believes that such claims are without
      merit and plans to vigorously defend itself against such claims.

      The Company has filed a cross-complaint against Harry Lebovitz, Hill
      Inc, and other related entities, and seeks damages for breach of
      fiduciary, breach of contract, fraud and other causes of action. On March
      22, 2007, the complaint and the cross-complaint were dismissed without
      prejudice.

      On June 30, 2006 the Company was evicted from its leased Eton facility
      and the property was 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 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 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.

      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, 2006, 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 will automatically extend for additional two-year terms unless
      notification is provided in accordance with the Employment Agreement.
      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, 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.


                                     F-21
<PAGE>


                    Logistical Support, Inc. and Subsidiary
                  Notes to Consolidated Financial Statements
                For the Years Ended December 31, 2006 and 2005


      In addition, in December 2006, the Company entered into employment
      agreements with four executives that total annual compensation of
      $405,115. The agreements have not been executed and include provisions
      for the Company to issue 100,000 common shares to the employees upon
      execution. All four employment agreements are for the term of one year.

      Other Long-Term Liabilities
      ---------------------------

      Other long-term liabilities consist of a provision for parts and
      materials related to one contract completed in 2000 of $113,335.

      Leases
      ------

      The Company leases a 14,600 square foot office building in Chatsworth,
      California under an operating lease agreement that expires in May 2007.
      The lease provides for current monthly lease payments of $9,780
      increasing over the term of the lease and has been extended on a month
      to month basis beginning in June 2007. 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:
                                                         Capital    Operating
                                                         Leases       Leases
                                                      ------------  ----------
          Year ending December 31,
          2007                                        $     63,178  $   49,900
          2008                                              53,619          --
          2009                                              11,950          --
          2010                                               8,963          --
                                                      ------------  ----------

          Net Minimum Lease Payments                       137,710  $   49,900
                                                      ------------  ==========

          Less: Amounts Representing Interest and
              Sales Tax                                    (18,577)
                                                      ------------

          Present Value of Net Minimum Lease Payments      119,133
          Less: Current Portion                            (53,009)
                                                      ------------

          Long-Term Portion                           $     66,124
                                                      ============

      The Company incurred rent expense of $239,613 and $261,619 for the years
      ended December 31, 2006 and 2005, respectively. Depreciation expense for
      the assets under capital leases was $44,802 and $20,700 for the years
      ended December 31, 2006 and 2005, respectively. The cost and accumulated
      amortization of the assets under capital lease obligations are$176,356
      and $152,600, respectively, at December 31, 2006.


                                     F-22
<PAGE>


                    Logistical Support, Inc. and Subsidiary
                  Notes to Consolidated Financial Statements
                For the Years Ended December 31, 2006 and 2005

Note 13 - Subsequent Events

      On February 6, 2007, the Company received an order of approximately
      $4,500,000 from the US Army Aviation & Missile Command for overhauling
      the Utility Pump Module Assembly used on the UH-60 helicopter.

      Effective January 1, 2007, the Company adopted a 401(k) plan.


                                     F-23