UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-KSB/A

                                   (Mark One)

          |X|   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004

                                       OR

          |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

       For the Transition Period from _______________ to ________________

                        COMMISSION FILE NUMBER: 333-56046

                                  FBO AIR, INC.
        (Exact name of Small Business Issuer as Specified in Its Charter)


            Nevada                                         87-0617649
 (State or other jurisdiction                           (I.R.S. Employer
of incorporation or organization)                       Identification No.)



                               9087 E. Charter Oak
                              Scottsdale, AZ 85260
                    (Address of principal executive offices)

                                 (480) -634-6565
                           (Issuer's telephone number)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports) and (2) has been subject to such filing requirements for the past 90
days.
                          Yes |X|                   No |_|

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained herein, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference to Part III of this Form 10-KSB/A or any amendment to
this Form 10-KSB/A. [XX]

State issuer's revenues for its most recent fiscal year:  $0

Aggregate market value of the voting stock held by non-affiliates based on the
weighted average sale price for such stock on the ten trading days preceding
March 27, 2005: $647,005

As of March 22, 2005, the Registrant had 6,026,022 shares of its Common Stock,
$0.001 par value, issued and outstanding.

Transitional Small Business Disclosure Format

                          Yes |_|                   No |X|


<PAGE>

                                       FBO
                            AIR, INC. AND SUBSIDIARY
                        (A DEVELOPMENT STAGE ENTERPRISE)
                                   FORM 10-KSB

EXPLANATORY STATEMENT

We are filing this Amendment No. 1 on Form 10-KSB/A to provide a conformed
signature on the Report of Independent Registered Public Accounting Firm in Item
7 and to provide additional information concerning our disclosure controls and
procedures in Item 8A. As a result of the changes to Item 8A, we are filing also
new Certifications as Exhibits 31.1 and 32.1. Item 6, although there is no
change, is included here at the request of the SEC staff. There have been no
other changes to this document.

                                     PART II

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONDITION AND RESULTS OF
         OPERATIONS

                          Summary Financial Information

      The summary financial data set forth below is derived from and should be
read in conjunction with the consolidated financial statements, including the
notes thereto, filed as part of this Form 10-KSB.



                                               Year Ended     Year Ended
      Consolidated Statement                  December 31,   December 31,
        of Operations Data:                       2004           2003
(in thousands, except for share
        and per share data)
Revenues                                      $         0    $         0
Net Loss - common shares                      $      (573)   $      (104)
Net loss per common share                     $      (.14)   $      (.04)
Weighted average number of shares
 - basic and deleted                            4,136,013      2,615,375

                                             December 31,
      Balance Sheet Data:                        2004
Working capital (deficiency)                 $       (166)
Total assets                                 $         46
Total liabilities                            $        579
Stockholders' (deficiency)                   $       (533)

Forward-looking Statements

      This Report on Form 10-KSB contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements
other than statements of historical facts included in this Report, including
without limitation, the statements under "General," "Marketing and Sales,"
"Liquidity and Capital Resources" and "Plan of Operation" are forward-looking
statements. The Company cautions that forward-looking statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those indicated in the forward-looking statements, due to
several important factors herein identified. Important factors that could cause
actual results to differ materially from those indicated in the forward-looking
statements ("Cautionary Statements") include delays in product development,
competitive products and pricing, general economic conditions, risks of
intellectual property litigation, product demand and industry capacity, new
product development, commercialization of new technologies, the Company's
ability to raise additional capital, the Company's ability to obtain the various
approvals and permits for the land development and the risk factors detailed
from time to time in the Company's Annual Report on Form 10-KSB and other
materials filed with the Securities and Exchange Commission ("SEC").


                                      A-1
<PAGE>

      All subsequent written and oral forward-looking statements attributable to
the Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Statements.

(a) Plan of Operation

      (1) The Company's business strategy is to purchase and consolidate FBOs in
the secondary and tertiary markets located within the United States. In this
market, the Company would provide FBO services such as fueling, parking of
aircraft, maintenance and repair, to general aviation aircraft operators. The
Company's primary source of operating funds since inception has been provided by
its shareholders and convertible note financing. In April 2004, we entered into
a convertible note agreement with a group of investors to purchase five-year, 8%
convertible notes in the aggregate principal amount of $400,000. Through March
22, 2005, the investors have allowed us to draw down the total available amount
$400,000 against this agreement.

            (i) The Company requires additional cash to finance the purchases of
      the FBOs and is in the process of seeking to raise a minimum of $3 million
      through a private placement. Under terms of this offering and upon
      successful completion of the minimum amount, the Company shall have the
      capacity to consummate the first two acquisitions of fixed base operations
      in addition to having sufficient working capital for at least the next
      twelve months. Under the terms of this offering and successful completion
      of the maximum amount, the Company is expected to have the financial
      capacity to consummate the next two acquisitions. There can be no
      assurance that this private placement will be consummated or that the
      acquisition will be effected.

            (ii) As part of its plan to acquire fixed base operations in
      secondary and tertiary markets across the country, the Company has
      developed a database of potential target acquisitions. This database was
      compiled through publicly available and industry-specific information as
      well as from direct contact with hundreds of individual owners of FBOs.

            (iii) In connection with its anticipated transactions, the Company
      will acquire plant and equipment related to the aviation industry such as
      fuel vehicles, aircraft movement vehicles, and tools and supplies for the
      maintenance of aircraft. After each acquisition, a capital expenditure
      plan and budget would be established for each location, a portion of which
      would inevitably go toward additional plant and equipment. In connection
      therewith, the Company has negotiated and issued letters of intent for
      four potential FBO acquisitions: 1) An FBO located in Garden City, Kansas,
      requiring cash at closing of approximately $435,000 and the issuance of a
      5% note for approximately $240,000 to be paid out over 18 months; 2) An
      FBO located in the northeast region of the country, acquiring the stock of
      the company with a combination of cash and debt totaling approximately
      $2,800,000; 3) An FBO located in the southern region of the country,
      requiring cash at closing of approximately $1,250,000; and 4) A flight
      school, including certain aircraft, located in the southwest region of the
      country, requiring a combination of cash and notes totaling approximately
      $2,495,000. Completion of these acquisitions is subject to customary
      closing conditions including the raising of capital.

            (iv) In connection with its anticipated transactions, the number of
      employees in the Company will change significantly. In the first two
      anticipated acquisitions, the employee count would grow to over 50 people,
      including full-time and part-time headcount. Subsequent transactions would
      add employees in numbers ranging from 5 - 60 people per acquisition.


                                      A-2
<PAGE>

(b)   Private Offering

      The Company is seeking to offer units in a private placement pursuant to
Rule 506 of Regulation D under the Securities Act (the "Private Offering"). Each
such unit in the Private Offering will consist of:

      1. A Note (a) in the principal amount of $25,000; (b) with a maturity date
of three (3) years; (c) bearing interest at the rate of 10% per annum payable
quarterly in arrears; (d) secured by the current and to be acquired assets of
the Company and its present and future subsidiaries; and (d) subject to certain
covenants of the Company;

      2. $50,000 in face amount of shares of the Convertible Preferred Stock,
and


      3. A five-year Warrant to purchase 50,000 shares of the Common Stock at
the initial exercise price (the "Warrant Exercise Price") of $0.60 per share,
with the Warrant Exercise price and the number of shares to be adjusted in the
event of stock splits and certain other events, as provided in the agreement,
and upon the sale by the Company of additional equity securities at a price
below the Warrant Exercise Price. At the option of the Company, the Warrants may
be redeemed at any time, in whole, but not in part, at a price of $0.01 per
share provided that: (a) there is an effective registration statement under the
Securities Act covering the resale of the Warrant shares; (b) the volume
weighted average closing price of the Common Stock for the prior 20 trading days
is not less than 250% of the Warrant Exercise Price; and (c) the average daily
trading volume of the Company's Common Stock is not less than 200,000 shares per
day during such 20-day trading period.

      The foregoing description of the Company's contemplated private placement
is not an offer by the Company of any securities and such offer may be made only
in compliance with Regulation D under the Securities Act.

      There can be no assurance that the Private Offering will be consummated or
that, if consummated, it will be on the terms described.

Co-Investment Offering

      In addition, if the minimum units of the Private Offering are sold, the
Company intends to offer to other investors an additional $1,250,000 in face
amount of the Convertible Preferred Stock and to issue a five-year Warrant to
purchase 625,000 shares of the Common Stock (the "Co-Investment"). The terms of
the Convertible Preferred Stock and the Warrant are the same as those in the
Private Offering. The Co-Investment will not be a part of the Private Offering.

      During February 2005, Co-Investors purchased for cash $100,000 of the
Convertible Preferred Stock. There can be no assurance that they will purchase
any additional securities.

(c) Off-balance sheet arrangements

      The Company does not have any off-balance sheet arrangements.

Critical Accounting Policies

      The Company's consolidated financial statements and related public
financial information are based on the application of accounting principles
generally accepted in the United States ("GAAP"). GAAP requires the use of
estimates, assumptions, judgments and subjective interpretations of accounting
principles that have an impact on the assets, liabilities, revenue and expense
amounts reported. These estimates can also affect supplemental information
contained in our external disclosures including information regarding
contingencies, risk and financial condition. We believe our use of estimates and
underlying accounting assumptions adhere to GAAP and are consistently and
conservatively applied. We base our estimates on various assumptions that we
believe to be reasonable under the circumstances. Actual results may differ
materially from these estimates under different assumptions or conditions. We
continue to monitor significant estimates made during the preparation of our
consolidated financial statements.


                                      A-3
<PAGE>

      Our significant accounting policies are summarized in Note 3 of our
consolidated financial statements. The Company currently has no critical
accounting policies.

Effects of New Accounting Pronouncements

      In December 2004, the FASB issued SFAS No. 123R "Shared Based Payment."
This statement is a revision of SFAS Statement No. 123, "Accounting for
Stock-Based Compensation" and supersedes APB Opinion No. 25, "Accounting for
Stock Issued to Employees," and its related implementation guidance. SFAS 123R
addresses all forms of shared based payment ("SBP") awards, including shares
issued under employee stock purchase plans, stock options, restricted stock and
stock appreciation rights. Under SFAS 123R, SBP awards result in a cost that
will be measured at fair value on the awards' grant date, based on the estimated
number of awards that are expected to vest and will be reflected as compensation
cost in the historical financial statements. This statement is effective for
public entities that file as small business issuers - as of the beginning of the
first interim or annual reporting period that begins after December 15, 2005.
The Company is in the process of evaluating whether the SFAS No. 123R will have
a significant impact on the Company's overall results of operations or financial
position.

      In May 2003, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 150, "Accounting for Certain Financial Instruments with Characteristics of
Both Liabilities and Equity". SFAS No. 150 establishes standards for
classification and measurement in the statement of financial position of certain
financial instruments with characteristics of both liabilities and equity. It
requires classification of a financial instrument that is within its scope as a
liability (or an asset in some circumstances). SFAS No. 150 is effective for
financial instruments entered into or modified after May 31, 2003 and,
otherwise, is effective at the beginning of the first interim period beginning
after June 15, 2003. The Company adopted SFAS No. 150 in the third quarter of
2003. The adoption did not have an impact on the consolidated financial
statements.

      In January 2003, as revised in December 2003, the FASB issued
Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities,
an Interpretation of ARB No. 51." FIN 46 requires certain variable interest
entities to be consolidated by the primary beneficiary of the entity if the
equity investors in the entity do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for the entity to
finance its activities without additional subordinated financial support from
other parties. FIN 46 is effective for all new variable interest entities
created or acquired after January 31, 2003. For variable interest entities
created or acquired prior to February 1, 2003, the provisions of FIN 46 must be
applied for the first interim or annual period ending after December 15, 2004.
The adoption of FIN 46 for provisions effective during 2003 did not have a
material impact on the consolidated financial statements.

      In November 2004, the FASB ratified the release of Emerging Issue Task
Force ("EITF") Issue No. 04-08 ("EITF 04-08"), "The Effect of Contingently
Convertible Instruments on Diluted Earnings per Share." EITF 04-08 reached a
consensus that contingently convertible instruments, such as contingently
convertible debt, contingently convertible preferred stock and other such
securities should be reflected in diluted earnings per share (if dilutive)
regardless of whether the market price trigger has been met. The consensus is
effective for reporting periods ending after December 15, 2004. EITF 04-08 did
not have a material impact on the consolidated financial statements.


                                      A-4
<PAGE>

ITEM 7.     FINANCIAL STATEMENTS

      The information required by this item is incorporated by reference to
pages F-1 through F-19 of this Annual Report on Form 10-KSB/A.


                                      A-5
<PAGE>

ITEM 8A.    CONTROLS AND PROCEDURES

      The Company's principal executive officer, who is also the acting
principal financial officer, has evaluated the effectiveness of the Company's
"disclosure controls and procedures," as such term is defined in Rule 13a-15(e)
of the Securities Exchange Act of 1934, as amended, as of the end of the period
covered by this Annual Report on Form 10-KSB. The evaluation process, including
the inherent limitations on the effectiveness of such controls and procedures is
more fully discussed below. Based upon his evaluation, the principal executive
officer, who is also the acting principal financial officer, has concluded that
the Company's disclosure controls and procedures, although containing a material
weakness, were effective.

      This material weakness is the lack of the necessary corporate accounting
resources. At March 29, 2005, the Company's only full time employee, the
Company's Chief Executive Officer, solely has the responsibility for receipts
and disbursements. The Company employs a financial consultant to work closely
with the Company's Chief Executive Officer and to prepare the periodic financial
statement and public filings. Reliance on these limited resources impairs our
ability to provide for segregation of duties and the ability to ensure
consistently complete and accurate financial reporting, as well as disclosure
controls and procedures. Our Company's Chief Executive Officer who is also the
acting principal financial officer, has concluded that even though there is a
material weakness, that the disclosure controls and procedures are effective,
based upon the following: (1) The broad business experience of our Chief
Executive Officer, (2) The effective utilization of a senior level financial
consultant and (3) the limited scope of our operations at this early stage in
the Company's development. In order to correct this deficiency, we had entered
into an agreement with an executive that would become our full time Chief
Financial Officer at such time as the Company has adequate financial resources
and meets certain criteria. The agreement was not and is not, in effect at this
time. By mutual consent, the parties have agreed to cancel the agreement.
Accordingly, we are now seeking to hire a qualified Chief Financial Officer. In
addition, as the Company grows, and as resources permit, we project that the new
Chief Financial Officer will hire such additional competent financial personnel
to assist in the segregation of duties with respect to financial reporting, and
Sarbanes-Oxley Section 404 compliance.

      We believe that, for the reasons described above, we will be able to
improve our financial reporting and disclosure controls and procedures and
remedy the material weakness identified above. Because of the inherent
limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any, will
be or have been detected.

      Except as described above, there were no significant changes in our
internal controls over financial reporting that occurred during the year ended
December 31, 2004 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

      We believe that a control system, no matter how well designed and
operated, cannot provide absolute assurance that the objectives of the control
system are met, and no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud, if any, within a company have
been detected. Our disclosure controls and procedures are designed to provide a
reasonable assurance of achieving their objectives and our Chief Executive
Officer has concluded that such controls and procedures are effective at the
"reasonable assurance" level. However, we do not as yet have any operating
businesses.


                                      A-6
<PAGE>

                                    PART III

ITEM 13. EXHIBITS

(a)   Documents filed as part of this report.

      See index to Consolidated Financial Statements attached, which are filed
as part of this report.

(b)   Description of exhibits:

--------------------------------------------------------------------------------
Exhibit No. Description of Exhibit
--------------------------------------------------------------------------------
   2        Agreement  and Plan of Merger  dated as of July 26,  2004 by and
            between the Company and FBO (without schedules).(1)
--------------------------------------------------------------------------------
  3.1       Certificate  of  Amendment  to  the  Company's   Certificate  of
            Incorporation filed on July 30, 2004.(1)
--------------------------------------------------------------------------------
  3.1(a)    Certificate of Designations.(5)
--------------------------------------------------------------------------------
 10.1       Convertible  Loan  Agreement  dated  April 16, 2004 by and among
            FBO and the Investors named in Schedule A thereto.(1)
--------------------------------------------------------------------------------
 10.2       Amendatory   Agreement   dated  as  of  July  26,  2004  to  the
            Convertible Loan Agreement filed as Exhibit 10.1. (2)
--------------------------------------------------------------------------------
 10.3       Form of Convertible  Note due April 15, 2009 issued  pursuant to
            the Convertible Loan Agreement filed as Exhibit 10.1.(1)
--------------------------------------------------------------------------------
 10.4       Letter   Agreement   dated   October  21,  2004   amending   the
            Convertible  Notes,  the  form of  which  is  filed  as  Exhibit
            10.3.(2)
--------------------------------------------------------------------------------
 10.5       Employment  Agreement dated as of January 2, 2004 by and between
            Ronald J. Ricciardi and the Company.(3)
--------------------------------------------------------------------------------
 10.6       Business  Development  Agreement  dated as of January 2, 2004 by
            and between Jeffrey M. Trenk and the Company.(3)
--------------------------------------------------------------------------------
 10.7       Employment  Agreement dated October 15, 2004 by and between W.R.
            "Robert" Cumming and the Company. (4)
--------------------------------------------------------------------------------
 31.1       Officer's  Certification  Pursuant to Rule  13a-14(a)  under the
            Securities Exchange Act. (5)
--------------------------------------------------------------------------------
--------

(1)   Incorporated by reference to the Company's Current Report on Form 8-K
      filed on August 27, 2005.

(2)   Incorporated by reference to the Company's Current Report on Form 8-K/A
      filed on November 4, 2004.

(3)   Incorporated by reference to the Company's Current Report on Form 8-K
      filed on October 5, 2004.


(4)   Incorporated by reference to the Company's Current Report on Form 10-KSB
      filed on November 22, 2005.


(5)   Filed as an Exhibit with this filing.

                                      A-7
<PAGE>

--------------------------------------------------------------------------------
Exhibit No. Description of Exhibit
--------------------------------------------------------------------------------
 32.1       Certification  Pursuant to Section 906 of Sarbanes-Oxley  Act of
            2002.(5)
--------------------------------------------------------------------------------


                                      A-8
<PAGE>

                          FBO AIR, INC. AND SUBSIDIARY
                        (A Development Stage Enterprise)
             Table of Contents to Consolidated Financial Statements


Report of Independent Registered Public Accounting Firm                      F-2

Consolidated Financial Statements

  Consolidated Balance Sheet as of December 31, 2004                         F-3

  Consolidated Statements of Operations For the Period from January 17,
  2003 (Inception) to December 31, 2003, For the Year Ended December
  31, 2004 and For the Period from January 17, 2003 (Inception) to
  December 31, 2004                                                          F-4

  Consolidated Statements of Stockholders' Deficiency For the period from
  January 17, 2003 (Inception) through December 31, 2004                     F-5

  Consolidated Statements of Cash Flows For the Period from January 17,
  2003 (Inception) to December 31, 2003, For the Year Ended December
  31, 2004 and For the Period from January 17, 2003 (Inception) to
  December 31, 2004                                                          F-6

Notes to Consolidated Financial Statements                                   F-8


                                      F-1

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
FBO Air, Inc.

We have audited the accompanying consolidated balance sheet of FBO Air, Inc. and
Subsidiary (a  Development  Stage  Enterprise)  as of December 31, 2004, and the
related consolidated statement of operations, stockholders' deficiency, and cash
flows for period from January 17, 2003  (inception)  through  December 31, 2003,
the year  ended  December  31,  2004,  and the  period  from  January  17,  2003
(inception) through December 31, 2004. These consolidated  financial  statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an  opinion  on these  consolidated  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  audit  to  obtain  reasonable  assurance  about  whether  the
consolidated financial statements are free of material misstatement. The Company
is not  required  to  have,  nor were we  engaged  to  perform,  an audit of its
internal control over financial reporting.  Our audit included  consideration of
internal  control  over  financial  reporting  as a basis  for  designing  audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the  effectiveness  of the Company's  internal  control
over  financial  reporting.  Accordingly,  we express no such opinion.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the  consolidated  financial  statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall consolidated  financial statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial  position of the
Company as of December 31, 2004, and the consolidated  results of its operations
and its cash flows for period from January 17, 2003 (inception) through December
31, 2003, the year ended December 31, 2004, and the period from January 17, 2003
(inception) through December 31, 2004 in conformity with U.S. generally accepted
accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going  concern.  As more fully  described in
Note 2, the Company  has no  revenues  and has  incurred  significant  operating
losses  since  inception,  which raise  substantial  doubt  about the  Company's
ability to continue as a going  concern.  Management's  plans in regard to these
matters are also described in Note 2. The consolidated  financial  statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.


/s/ Marcum & Kliegman, LLP
-----------------------------------
Marcum & Kliegman, LLP

New York, NY
March 18, 2005

                                      F-2
<PAGE>

                          FBO AIR, INC. AND SUBSIDIARY
                        (A Development Stage Enterprise)

                           CONSOLIDATED BALANCE SHEET

                                December 31, 2004


                                     ASSETS

CURRENT ASSETS
  Cash                                                                $  14,117
  Prepaid insurance                                                       2,668
  Due from stockholder                                                   15,510
                                                                      ---------
    Total current assets                                                 32,295

OTHER ASSETS
  Deposit for acquisition                                                10,000
  Option on lease of real estate, net                                     3,400
                                                                      ---------
    Total other assets                                                   13,400
                                                                      ---------

      TOTAL ASSETS                                                    $  45,695
                                                                      =========

                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES
  Accounts payable and accrued expenses                               $ 198,693

LONG-TERM LIABILITIES
  Convertible notes                                                     380,000
                                                                      ---------

      TOTAL LIABILITIES                                                 578,693
                                                                      ---------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIENCY
  Preferred stock - $.001 par value; authorized 10,000,000;
    none issued and outstanding                                              --
  Common stock - $.001 par value; authorized 100,000,000;
    6,026,022 issued and outstanding                                      6,026
  Additional paid-in capital                                             34,475
  Deficit accumulated during development stage                         (573,499)
                                                                      ---------

      TOTAL STOCKHOLDERS' DEFICIENCY                                   (532,998)
                                                                      ---------

      TOTAL LIABILITIES AND STOCKHOLDERS'
        DEFICIENCY                                                    $  45,695
                                                                      =========

See notes to consolidated financial statements.

                                      F-3

<PAGE>

                          FBO AIR, INC. AND SUBSIDIARY
                        (A Development Stage Enterprise)

                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                           For the Period                                   For the Period
                                        from January 17, 2003          For the           from January 17, 2003
                                           (Inception) to            Year Ended             (Inception) to
                                          December 31, 2003       December 31, 2004        December 31, 2004
                                        ---------------------   ---------------------    ---------------------

<S>                                     <C>                     <C>                      <C>
REVENUE                                 $                  --   $                  --    $                  --
                                        ---------------------   ---------------------    ---------------------

EXPENSES
  General and administrative expenses                 104,393                 491,735                  596,128
  Compensatory element of stock
    issuances (for general and
    administrative expenses)                               --                  69,227                   69,227
                                        ---------------------   ---------------------    ---------------------

      TOTAL EXPENSES                                  104,393                 560,962                  665,355
                                        ---------------------   ---------------------    ---------------------

      OPERATING LOSS                                 (104,393)               (560,962)                (665,355)

INTEREST EXPENSE                                           --                  12,537                   12,537
                                        ---------------------   ---------------------    ---------------------

      NET LOSS                          $            (104,393)  $            (573,499)   $            (677,892)
                                        =====================   =====================    =====================

Basic and Diluted Loss Per
  Common Share                          $               (0.04)  $               (0.14)
                                        =====================   =====================


Weighted Average Common Shares
  Basic and Diluted                                 2,615,375               4,136,013
                                        =====================   =====================
</TABLE>

See notes to consolidated financial statements.

                                      F-4

<PAGE>

                          FBO AIR, INC. AND SUBSIDIARY
                        (A Development Stage Enterprise)

               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY

   For the Period from January 17, 2003 (Inception) through December 31, 2004


<TABLE>
<CAPTION>
                                                                                                 Deficit
                                                                                               Accumulated
                                                                              Additional         During            Total
                                                      Common Stock              Paid-in        Development     Stockholders'
                                             -----------------------------
                                                Shares          Amount          Capital           Stage         Deficiency
                                             -------------   -------------   -------------    -------------    -------------

<S>                                         <C>              <C>             <C>              <C>              <C>
BALANCE - January 17, 2003 (Inception)           2,615,375   $       2,616   $      (2,616)   $          --    $          --


  Net loss                                              --              --              --         (104,393)        (104,393)
                                             -------------   -------------   -------------    -------------    -------------

BALANCE -  December 31, 2003                     2,615,375           2,616          (2,616)        (104,393)        (104,393)


  Capitalization of deficit at
    time of incorporation                               --              --        (104,393)         104,393               --
  Conversion of advances from affiliates -
    January 4, 2004                                     --              --          94,818               --           94,818
  Common stock issued for services on
    June 27, 2004 at $.03 per share              1,906,250           1,906          67,321               --           69,227

  Common stock issued in connection with
    Shadows Bend reverse merger -
    August 20, 2004                              1,504,397           1,504         (20,655)              --          (19,151)

  Net loss                                              --              --              --         (573,499)        (573,499)
                                             -------------   -------------   -------------    -------------    -------------

BALANCE - December 31, 2004                      6,026,022   $       6,026   $      34,475    $    (573,499)   $    (532,998)
                                             =============   =============   =============    =============    =============
</TABLE>

See notes to consolidated financial statements.

                                      F-5

<PAGE>

                          FBO AIR, INC. AND SUBSIDIARY
                        (A Development Stage Enterprise)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                            For the Period                                   For the Period
                                                         from January 17, 2003          For the           from January 17, 2003
                                                             (Inception)to            Year Ended             (Inception) to
                                                           December 31, 2003       December31, 2004         December 31, 2004
                                                         ---------------------   ---------------------    ---------------------
<S>                                                      <C>                     <C>                      <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                               $            (104,393)  $            (573,499)   $            (677,892)
                                                         ---------------------   ---------------------    ---------------------
    Adjustments to reconcile net loss to net cash used
      in operating activities:
      Compensatory element of stock issuances                               --                  69,227                   69,227
      Amortization of option on lease of real estate                        --                     200                      200
    Changes in operating assets and liabilities:
      Due from stockholder                                                  --                 (15,510)                 (15,510)
      Prepaid insurance                                                     --                  (2,668)                  (2,668)
      Accounts payable and accrued expenses                              9,575                 169,967                  179,542
                                                         ---------------------   ---------------------    ---------------------

        TOTAL ADJUSTMENTS                                                9,575                 221,216                  230,791
                                                         ---------------------   ---------------------    ---------------------

        NET CASH USED IN OPERATING
          ACTIVITIES                                                   (94,818)               (352,283)                (447,101)
                                                         ---------------------   ---------------------    ---------------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase deposit for acquisition                                          --                 (10,000)                 (10,000)
  Purchase of Option on lease of real estate                                --                  (3,600)                  (3,600)
                                                         ---------------------   ---------------------    ---------------------

        NET CASH USED IN INVESTING
          ACTIVITIES                                                        --                 (13,600)                 (13,600)
                                                         ---------------------   ---------------------    ---------------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from the sale of convertible notes                               --                 380,000                  380,000
  Advances from affiliates                                              94,818                      --                   94,818
                                                         ---------------------   ---------------------    ---------------------

        NET CASH PROVIDED BY FINANCING
          ACTIVITIES                                                    94,818                 380,000                  474,818
                                                         ---------------------   ---------------------    ---------------------

        NET INCREASE IN CASH                                                --                  14,117                   14,117

CASH - Beginning                                                            --                      --                       --
                                                         ---------------------   ---------------------    ---------------------

CASH - Ending                                            $                  --   $              14,117    $              14,117
                                                         =====================   =====================    =====================
</TABLE>

See notes to consolidated financial statements.

                                      F-6

<PAGE>

                          FBO AIR, INC. AND SUBSIDIARY
                        (A Development Stage Enterprise)

                CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued


<TABLE>
<CAPTION>
                                                            For the Period                                   For the Period
                                                         from January 17, 2003          For the           from January 17, 2003
                                                             (Inception)to            Year Ended             (Inception) to
                                                           December 31, 2003       December31, 2004         December 31, 2004
                                                         ---------------------   ---------------------    ---------------------
<S>                                                      <C>                     <C>                      <C>

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  Cash paid during the periods for:

    Interest                                             $                  --   $                  --    $                  --
                                                         =====================   =====================    =====================
    Income taxes                                         $                  --   $                  --    $                  --
                                                         =====================   =====================    =====================

  Non-cash investing and financing activities:

    Accrued liabilities assumed in the merger            $                  --   $              19,151    $              19,151
                                                         =====================   =====================    =====================
    Advances from affiliates converted to equity         $                  --   $              94,818    $              94,818
                                                         =====================   =====================    =====================
</TABLE>

      In connection with the Shadows Bend merger,  liabilities  assumed exceeded
assets acquired by $19,151.

See notes to consolidated financial statements.

                                      F-7

<PAGE>

                          FBO AIR, INC. AND SUBSIDIARY
                        (A Development Stage Enterprise)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE  1 - Nature of Operations and Basis of Presentation

      Nature of Operations
      FBO Air, Inc., a Development Stage  Enterprise,  ("FBO Air") was formed on
      January 17, 2003 (date of  inception) as a  proprietorship  to acquire and
      operate  fixed  base   operations.   On  January  2,  2004,  FBO  Air  was
      incorporated in the State of Arizona. A fixed base operator ("FBO") is the
      primary provider of services to general aviation aircraft  operators.  FBO
      Air's  business  strategy  is to  purchase  and  consolidate  FBOs  in the
      secondary and tertiary markets located within the United States.

      Business and Reverse Merger
      Effective  August 20,  2004,  Shadows  Bend  Development,  Inc.  ("Shadows
      Bend"), a publicly-traded company with no active business,  entered into a
      merger  transaction  with FBO Air, a privately-held  Arizona  corporation.
      Upon completion of the merger  transaction,  Shadows Bend changed its name
      to FBO  Air,  and the  original  FBO  Air  shareholders  owned  75% of the
      outstanding  shares  of common  stock of the  Company.  Accordingly,  this
      transaction has been accounted for as a reverse merger with FBO Air as the
      acquirer, for accounting purposes, of Shadows Bend. The reverse merger was
      accounted  for as a  recapitalization  of FBO Air  and  the  stockholders'
      equity of FBO Air was  retroactively  restated to its inception on January
      17, 2003. The historical  financial  statements presented are those of FBO
      Air for all periods presented.

      In July 2004,  FBO Air formed FBO Air - Garden  City,  Inc.  ("FBO  Garden
      City") so that in the future FBO Garden City, a  wholly-owned  subsidiary,
      may acquire the net assets and/or stock of a target FBO.  Through December
      31,  2004,  FBO  Garden  City  has not  acquired  an FBO.  FBO Air and its
      wholly-owned subsidiary,  FBO Air Garden City, are hereinafter referred to
      as the "Company."

      Basis of Presentation
      The Company is in the development  stage and its efforts to date have been
      principally  devoted to the organizational  activities of raising capital,
      recruiting and hiring of key personnel,  and  identifying and screening of
      potential acquisitions.

      The  accompanying  financial  statements  have been prepared in accordance
      with Statement of Financial  Accounting Standards No. 7, Development Stage
      Enterprises, since planned principal operations have not yet commenced.

                                      F-8
<PAGE>

                          FBO AIR, INC. AND SUBSIDIARY
                        (A Development Stage Enterprise)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE  2 - Going Concern and Management's Plans

      The Company's  primary source of operating  funds since inception has been
      provided by its shareholders  and convertible note financing.  The Company
      intends  to raise  additional  capital  through  private  debt and  equity
      investors.  The Company is currently a development  stage  enterprise  and
      there is no assurance that these funds,  if raised,  will be sufficient to
      enable the Company to fully complete its  development  activities,  attain
      profitable  operations or continue as a going concern.  As of December 31,
      2004, the Company had  stockholders'  and working capital  deficiencies of
      $532,998  and  $166,398,  respectively.  The Company  had no revenues  and
      incurred an operating loss of $677,892  during the period from January 17,
      2003 (date of inception) through December 31, 2004.

      Management has taken steps to improve the Company's  liquidity.  There can
      be no assurance that the Company will be successful in these endeavors and
      therefore  may  have to  consider  other  alternatives.  The  Company  has
      obtained an extension from the holders of its  convertible  notes to defer
      the start of  interest  payments  until after the closing of the first FBO
      acquisition.  In addition, the Company has minimized its overhead costs by
      limiting its full time employees to just one, the Company's President.

      The accompanying consolidated financial statements have been prepared on a
      going concern  basis,  which  contemplates  the  realization of assets and
      satisfaction  of  liabilities  in the normal course of business.  However,
      there is  substantial  doubt about the Company's  ability to continue as a
      going concern.  These consolidated financial statements do not include any
      adjustments  relating  to the  recovery  of  the  recorded  assets  or the
      classification  of the  liabilities  that  might be  necessary  should the
      Company be unable to continue as a going concern.

NOTE  3 - Summary of Significant Accounting Policies

      Principles of Consolidation
      The consolidated  financial statements include the accounts of FBO Air and
      its wholly-owned subsidiary FBO Garden City. All significant  intercompany
      accounts and transactions have been eliminated in consolidation.

      Use of Estimates
      The  preparation of the  consolidated  financial  statements in conformity
      with U.S. generally accepted accounting  principles requires management to
      make  estimates  and  assumptions  that  affect the  amounts of assets and
      liabilities  and  disclosure of contingent  assets and  liabilities at the
      date of the financial  statements and the reported amounts of revenues and
      expenses  during the reporting  period.  Actual  results could differ from
      those estimates.


                                       F-9
<PAGE>

                          FBO AIR, INC. AND SUBSIDIARY
                        (A Development Stage Enterprise)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE  3 - Summary of Significant Accounting Policies (continued)

      Deposits
      Deposits   consists  of  advance  payments  made  to  secure   contractual
      obligations of the Company.

      Option on Real Estate Lease
      The option on a real estate  lease  consists  of a  purchased  right for a
      period  of time to enter  into a lease of real  property.  The  option  is
      amortized on a straight-line basis over the option period.

      Income Taxes
      The Company  was a  proprietorship  for the period  from  January 17, 2003
      through  December 31, 2003. The  proprietorship  itself is not a taxpaying
      entity for purposes of Federal and State income  taxes.  Federal and State
      income taxes of the  proprietor  are computed on its total income from all
      sources. Accordingly, no provision for income taxes is made for the period
      from January 17, 2003 (date of inception)  through  December 31, 2003. Tax
      expense  would not have been  different  had the Company been a tax paying
      entity.

      As of January 2, 2004 (date of  incorporation),  the Company  accounts for
      income  taxes  using the  liability  method as required  by  Statement  of
      Financial Accounting Standards No. 109, Accounting for Income Taxes ("SFAS
      109").  Under  this  method,  deferred  tax  assets  and  liabilities  are
      determined based on differences  between their financial reporting and tax
      basis of assets and  liabilities.  The Company was not required to provide
      for a provision for income taxes for the year ended  December 31, 2004, as
      a result  of net  operating  losses  incurred  during  the  period.  As of
      December 31, 2004, the Company has available approximately $500,000 of net
      operating  losses  ("NOL")  available  for income tax purposes that may be
      carried   forward  to  offset  future  taxable   income,   if  any.  These
      carryforwards  expire in various years through 2024. At December 31, 2004,
      the  Company has a deferred  tax asset of  approximately  $200,000,  which
      consists  primarily of  temporary  differences  relating to net  operating
      losses.  The  Company's  deferred  tax asset has been fully  reserved by a
      valuation  allowance  since  realization of its benefit is uncertain.  The
      difference  between the statutory rate of 35% and the Company's  effective
      tax  rate  of 0% is due to the  increase  in the  valuation  allowance  of
      approximately   $200,000.   The  Company's  ability  to  utilize  its  NOL
      carryforwards  may be subject to an annual  limitation  in future  periods
      pursuant to Section 382 of the Internal Revenue Code of 1986, as amended.


                                      F-10
<PAGE>

                          FBO AIR, INC. AND SUBSIDIARY
                        (A Development Stage Enterprise)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE  3 - Summary of Significant Accounting Policies (continued)

      Fair Value of Financial Instruments
      The reported  amounts of our  financial  instruments,  including  accounts
      payable and accrued liabilities, approximate their fair value due to their
      short  maturities.  The carrying  amounts of debt  approximate  fair value
      since the debt  agreements  provide for  interest  rates that  approximate
      market.

      Stock Options
      As  permitted  by FASB  Statement  No.  123,  Accounting  for  Stock-Based
      Compensation  ("FAS 123"),  which establishes a fair value based method of
      accounting for equity-based compensation plans, the Company has elected to
      follow  Accounting  Principles Board Opinion No. 25,  Accounting for Stock
      Issued to Employees ("APB 25") for recognizing  equity-based  compensation
      expense for financial  statement  purposes.  Under APB 25, no compensation
      expense is recognized at the time of option grant if the exercise price of
      the  employee  stock option is fixed and equals or exceeds the fair market
      value of the  underlying  Common Stock on the date of grant and the number
      of shares to be issued  pursuant to the exercise of such options are known
      and fixed at the grant date.

      The Company  accounts for equity  instruments  issued to  non-employees in
      accordance  with the  provisions  of FAS 123 and 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 which require that such equity instruments are
      recorded at their fair value on the measurement  date,  which is typically
      the date the services are performed.

      In December  2002,  the FASB issued  Statement  No.  148,  Accounting  for
      Stock-Based  Compensation-Transition  and  Disclosure  ("FAS  148").  This
      standard  amends the disclosure  requirements  of FAS 123 for fiscal years
      ending after  December 15, 2002 to require  prominent  disclosure  in both
      annual and  interim  financial  statements  about the method  used and the
      impact on  reported  results.  The  Company  follows  the  disclosure-only
      provisions of FAS 123 which require disclosure of the pro forma effects on
      net income (loss) as if the fair value method of accounting  prescribed by
      FAS 123 had been adopted, as well as certain other information.

      Option valuation models require the input of highly subjective assumptions
      including the expected life of the option.  Because the Company's employee
      stock options have characteristics  significantly  different from those of
      traded options,  and because changes in the subjective  input  assumptions
      can materially  affect the fair value estimate,  in management's  opinion,
      the existing models do not  necessarily  provide a reliable single measure
      of the fair value of its employee stock options.


                                      F-11
<PAGE>

                          FBO AIR, INC. AND SUBSIDIARY
                        (A Development Stage Enterprise)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE  3 - Summary of Significant Accounting Policies (continued)

      Net Loss Per Common Share
      Basic net loss per common share is computed based on the weighted  average
      number of shares of common stock outstanding during the periods presented.
      Common stock  equivalents,  consisting  of options and  convertible  notes
      discussed in the notes to the financial  statements,  were not included in
      the  calculation  of the diluted loss per share  because  their  inclusion
      would  have had the  effect of  decreasing  the loss per  share  otherwise
      computed. The total shares issuable upon the exercise of stock options and
      the  convertible  notes as of  December  31,  2004  and 2003  approximated
      4,168,000 and 0, respectively.

      Effect of Recent Accounting Pronouncements
      In December  2004,  the FASB issued SFAS No. 123R "Shared Based  Payment."
      This  statement is a revision of SFAS Statement No. 123,  "Accounting  for
      Stock-Based  Compensation" and supersedes APB Opinion No. 25,  "Accounting
      for Stock Issued to Employees," and its related  implementation  guidance.
      SFAS 123R  addresses  all forms of shared based  payment  ("SBP")  awards,
      including  shares  issued  under  employee  stock  purchase  plans,  stock
      options,  restricted stock and stock appreciation rights. Under SFAS 123R,
      SBP  awards  result in a cost that will be  measured  at fair value on the
      awards'  grant  date,  based on the  estimated  number of awards  that are
      expected  to  vest  and  will be  reflected  as  compensation  cost in the
      historical  financial  statements.  This statement is effective for public
      entities that file as small business  issuers - as of the beginning of the
      first interim or annual  reporting  period that begins after  December 15,
      2005.  The  Company is in the process of  evaluating  whether the SFAS No.
      123R will have a significant  impact on the Company's  overall  results of
      operations or financial position.

      In May 2003, the Financial Accounting Standards Board ("FASB") issued SFAS
      No.   150,   "Accounting   for   Certain   Financial    Instruments   with
      Characteristics of Both Liabilities and Equity".  SFAS No. 150 establishes
      standards for classification and measurement in the statement of financial
      position of certain  financial  instruments with  characteristics  of both
      liabilities  and  equity.  It  requires   classification  of  a  financial
      instrument  that is within its scope as a  liability  (or an asset in some
      circumstances).  SFAS  No.  150 is  effective  for  financial  instruments
      entered into or modified after May 31, 2003 and,  otherwise,  is effective
      at the  beginning of the first  interim  period  beginning  after June 15,
      2003.  The Company  adopted SFAS No. 150 in the third quarter of 2003. The
      adoption did not have an impact on the consolidated financial statements.


                                      F-12
<PAGE>

                          FBO AIR, INC. AND SUBSIDIARY
                        (A Development Stage Enterprise)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE  3 - Summary of Significant Accounting Policies (continued)

      Effect of Recent Accounting Pronouncements (continued)

      In  January   2003,  as  revised  in  December   2003,   the  FASB  issued
      Interpretation  No. 46 ("FIN 46"),  "Consolidation  of  Variable  Interest
      Entities,  an  Interpretation  of ARB No.  51."  FIN 46  requires  certain
      variable interest  entities to be consolidated by the primary  beneficiary
      of the  entity  if the  equity  investors  in the  entity  do not have the
      characteristics  of a  controlling  financial  interest  or  do  not  have
      sufficient equity at risk for the entity to finance its activities without
      additional  subordinated  financial support from other parties.  FIN 46 is
      effective for all new variable interest entities created or acquired after
      January 31, 2003. For variable interest entities created or acquired prior
      to  February  1, 2003,  the  provisions  of FIN 46 must be applied for the
      first  interim or annual  period  ending  after  December  15,  2004.  The
      adoption  of FIN 46 for  provisions  effective  during 2003 did not have a
      material impact on the consolidated financial statements.

      In November  2004,  the FASB  ratified the release of Emerging  Issue Task
      Force ("EITF") Issue No. 04-08 ("EITF 04-08"), "The Effect of Contingently
      Convertible Instruments on Diluted Earnings per Share." EITF 04-08 reached
      a  consensus   that   contingently   convertible   instruments,   such  as
      contingently  convertible debt,  contingently  convertible preferred stock
      and other such  securities  should be  reflected  in diluted  earnings per
      share (if  dilutive)  regardless  of whether the market price  trigger has
      been met. The consensus is effective for  reporting  periods  ending after
      December  15,  2004.  EITF  04-08  did not have a  material  impact on the
      consolidated financial statements.

NOTE  4 - Due from Stockholder

      As of December 31, 2004,  the Company had advances due from a  stockholder
      in the amount of $15,510 .

NOTE  5 - Deposit for Acquisition

      In October  2004,  the Company  paid a sum of $10,000 as an earnest  money
      deposit  to  the  two  principal  stockholders  of an FBO  located  in the
      northeast  region of the  country  (See  Note 8).  This  payment  is to be
      applied to the total purchase price of approximately $2,800,000 and may be
      refunded under certain circumstances.

                                      F-13
<PAGE>

                          FBO AIR, INC. AND SUBSIDIARY
                        (A Development Stage Enterprise)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE  6 - Convertible Notes

      In April 2004, the Company entered into a convertible  note agreement with
      a group of investors  ("Investors") to purchase five-year,  8% convertible
      notes in the  aggregate  principal  amount  of  $400,000  as  follows:  a)
      $130,000  upon  signing;  b)  $270,000  upon the later to occur of: 1) the
      reverse merger transaction, and 2) the acquisition of an FBO as defined in
      the  agreement.  The  convertible  notes mature April 2009,  with interest
      payable  quarterly,  beginning with the first interest payment,  which was
      due December 1, 2004.  During  January 2005,  the Company  entered into an
      amendment  of the  agreement  with the  holder  of the  convertible  notes
      whereby the due date of the first interest payment is deferred to the date
      of closing of the first FBO acquisition (See Note 9[A]).

      In April 2004,  the Investors  funded the sale of the initial  $130,000 of
      convertible notes under the agreement.  During August 2004,  October 2004,
      November 2004 and December 2004, the Investors  waived one provision under
      their  agreement  and funded the sale of  $125,000,  $45,000,  $40,000 and
      $40,000,  respectively of convertible  notes under the agreement (See Note
      9[A]).

      The Company has the option to pay interest in cash or shares of the Common
      Stock. For the purpose of determining the number of shares to be issued in
      payment of  interest,  such shares shall be valued at the average of their
      fair market  value during the five  trading  days  preceding  the interest
      payment date. The notes plus accrued interest are convertible  through the
      maturity  date,  into 40%, as defined in the  agreement,  of the Company's
      outstanding  shares of the Common  Stock.  In  addition,  the holders have
      certain piggyback  registration,  tag along and other rights as defined in
      the agreement.  The Company is required to maintain certain  financial and
      other covenants.

NOTE  7 - Stockholders' Deficiency

      On January 4, 2004 (date of  incorporation),  the Company  capitalized the
      deficit of $104,393 incurred for the period from January 17, 2003 (date of
      inception)  through  December  31,  2003,  during  which  time,  prior  to
      incorporation, the Company operated as a proprietorship.

      On January 4, 2004,  amounts owed to affiliates of $94,818 were  converted
      into additional paid-in capital.

                                      F-14
<PAGE>

                          FBO AIR, INC. AND SUBSIDIARY
                        (A Development Stage Enterprise)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE  7 - Stockholders' Deficiency (continued)

      During June 2004, the Company issued  1,906,250 shares of the Common Stock
      as consideration for services  performed by various  individuals valued in
      the aggregate amount of $69,227.

      On August 20, 2004, the Company issued 1,504,397 shares in connection with
      its  reverse  merger  with  Shadows  Bend and the  assumption  of existing
      Shadows Bend  liabilities  of $19,151.  In connection  therewith,  Shadows
      Bend's shareholders approved a 1 for 4 reverse stock split,  increased the
      authorized  common shares to 100,000,000 and authorized  10,000,000 shares
      of preferred stock.

      Stock Options

      During September 2004, the Board of Directors  granted options to purchase
      an aggregate  of 150,000  shares,  25,000 to each of the four  independent
      directors  and 50,000 to a  consultant/shareholder  of the Company.  These
      options  have an  exercise  price of $0.01 per share and expire four years
      from the date of grant. Options granted to non-employees are accounted for
      under SFAS No. 123, whereby  compensation  measurement of equity awards is
      based  on  their  fair  value.  The fair  market  value  of these  options
      estimated  at the date of grant  using the  Black-Scholes  option  pricing
      model was not deemed material.

NOTE  8 - Commitments and Contingencies

      Operating Lease

      In May 2004, the Company entered into a non-cancelable  operating lease of
      an automobile  for a Company  officer  expiring in August 3, 2008.  Future
      minimum lease payments under this operating lease at December 31, 2004 are
      as follows:

                     Years Ended December 31:                Amount
               ------------------------------------------------------------
                               2005                         $   5,640
                               2006                             5,640
                               2007                             3,290
                                                            ---------

                                                              $14,570
                                                            =========

                                      F-15
<PAGE>

                          FBO AIR, INC. AND SUBSIDIARY
                        (A Development Stage Enterprise)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE  8 - Commitments and Contingencies (continued)

      Proposed Acquisitions
      The Company has negotiated and issued letters of intent for four potential
      FBO acquisitions: 1) An FBO located in Garden City, Kansas, requiring cash
      at closing of  approximately  $435,000  and the  issuance of a 5% note for
      approximately $240,000 to be paid out over 18 months; 2) An FBO located in
      the  northeast  region of the country,  acquiring the stock of the company
      with a combination of cash and debt totaling approximately  $2,800,000; 3)
      An FBO located in the southern  region of the country,  requiring  cash at
      closing of  approximately  $1,250,000;  and 4) A flight school,  including
      certain  aircraft,  located  in  the  southwest  region  of  the  country,
      requiring  a  combination  of  cash  and  notes   totaling   approximately
      $2,495,000.  Completion  of these  acquisitions  is subject  to  customary
      closing  conditions  including  the  raising of  capital.  There can be no
      assurance that any or all of these acquisitions will be consummated.

      Consulting Agreements
      The  Company   entered  into  a  six-month   engagement   agreement   (the
      "Agreement") with a financial advisor in April 2004, whereby the financial
      advisor  will provide  advisory  services for  financial  structuring  and
      planning,  bridge financing,  special situation transactional services and
      private  equity  financing.  The  agreement  calls for an  initial  fee of
      $15,000 plus $5,000 per month for six months, payable after the closing of
      the first FBO  acquisition.  Included  in  accounts  payable  and  accrued
      expenses at December 31, 2004 is an obligation of $45,000 pursuant to this
      agreement.

      In  January  2004,  the  Company  entered  into  a  three-year  consulting
      agreement  ("Consulting  Agreement")  with a stockholder to provide merger
      and acquisition  advisory  services,  effective upon an  acquisition.  The
      agreement  calls for annual  consulting  fees of  $125,000,  $150,000  and
      $200,000,  respectively.  For each year of the  agreement  the  consultant
      shall be issued an option to purchase 50,000 shares of the Common Stock of
      the Company.  As of December 31, 2004, the agreement was not in effect. In
      September  2004,  in lieu of the stock  option to be  granted in the first
      year pursuant to the Consulting Agreement,  the Board of Directors granted
      an option to purchase  50,000 shares of Common Stock  exercisable  at $.01
      per share,  which shall vest on September 30, 2005 and expire on September
      29, 2008.


                                      F-16
<PAGE>

                          FBO AIR, INC. AND SUBSIDIARY
                        (A Development Stage Enterprise)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE  8 - Commitments and Contingencies, continued

      Employment Agreements
      In  January  2004,  the  Company  entered  into  a  three-year  employment
      agreement  with its  President  and Chief  Executive  Officer,  which will
      become  effective upon the closing of an FBO  acquisition and provides for
      an annual salary of $125,000, $150,000 and $200,000, respectively, plus an
      annual  incentive  bonus based upon the Company's  Earnings  Before Income
      Taxes, Depreciation and Amortization ("EBITDA"), as further defined in the
      agreement.  In addition, the executive is entitled to receive an option to
      purchase  shares of the Common Stock in an amount to be  determined by the
      Board of  Directors.  As of December 31, 2004,  the  agreement  was not in
      effect and no option has been granted.

      In  October  2004,  the  Company  entered  into  a  three-year  employment
      agreement  with an executive to serve as its Chief  Financial  Officer and
      Executive Vice President.  The executive's employment by the Company under
      this  agreement  shall  commence in two weeks from the date of the initial
      FBO acquisition and the firm commitment and written agreement by the Board
      of  Directors  in securing  no less than $20.0  million in debt and equity
      financing by the Company.  This agreement provides for an annual salary of
      $125,000,  $150,000 and $200,000,  respectively,  plus an annual incentive
      bonus upon the Company's EBITDA. In addition, the executive is entitled to
      receive an option to purchase  at the listed  price at the date of grant a
      total of 750,000 shares,  with an option to purchase  250,000 shares to be
      granted  by the  Company  on March 1 of each of the years  2005,  2006 and
      2007.  The options  shall vest at the time of issuance  and the  executive
      shall have five years to acquire the stock from the date of  issuance.  As
      of December 31, 2004,  the  agreement  was not in effect and no option has
      been granted.

NOTE  9 - Subsequent Events

      [A] Convertible Notes
      During January 2005, the Investors  waived one provision  under their loan
      agreement and funded the sale of the remaining  $20,000  convertible notes
      under the agreement.  Also,  during January 2005, the Company entered into
      an amendment of the agreement  with the Investors  whereby the due date of
      the first interest payment is deferred to the date of closing of the first
      FBO acquisition (see Note 6).

                                      F-17
<PAGE>

                          FBO AIR, INC. AND SUBSIDIARY
                        (A Development Stage Enterprise)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE  9 - Subsequent Events, continued

      [B] Due from Stockholder
      During February 2005, a stockholder  repaid advances  totaling $2,500 (See
      Note 4).

      [C] Authorization of Series A Convertible Preferred Stock
      During February 2005, the Company  authorized the issue of 1,000 shares of
      preferred stock,  designated as Series A Convertible Preferred Stock ("the
      Convertible  Preferred Stock"),  each share having a Stated Value ("Stated
      Value") of $10,000.  These shares provide for cumulative  dividends at the
      annual rate of 8%, payable  quarterly and mature three years from the date
      of issue. The cumulative  dividend,  at the option of the Company,  may be
      paid  either  in cash  or by the  issuance  of  additional  shares  of the
      Convertible  Preferred  Stock.  The holders of the  Convertible  Preferred
      Stock and the  holders of the shares of the Common  Stock  shall vote as a
      single class,  with the holders of the Convertible  Preferred Stock having
      the number of votes based upon the formula for the conversion to shares of
      the Common  Stock,  as  provided  below.  The  holders of the  Convertible
      Preferred  Stock  have the right to elect one  director  to the  Company's
      Board of Directors.

      The Convertible  Preferred Stock is convertible  into shares of the Common
      Stock.  The shares  shall  automatically  convert  upon (a) the  Company's
      realization of gross proceeds exceeding $5,000,000 from the sale of equity
      securities (a "Qualified Follow-On  Offering"),  separate and apart from a
      private  placement in which the shares of the Convertible  Preferred Stock
      are  offered  for  sale,  or (b) at such time as the  traded  price of the
      Company's  Common  Stock  exceeds 2.5 times the Initial  Conversion  Price
      ("Conversion  Price"),  and under both (a) and (b), the shares  subject to
      conversion are fully registered  shares. At the option of the holder,  the
      shares, in whole or in part, may be converted at any time.

      Subject  to  certain  adjustments  in the event of stock  splits and other
      events,  as provided  in the  agreement,  and upon the sale of  additional
      equity  securities at a price below the Conversion  Price,  the Conversion
      Price is $0.30 per share.  Each share of Preferred Stock will convert into
      that number of shares of Common  Stock  determined  by dividing the Stated
      Value  of each  share of  Convertible  Preferred  Stock by the  Conversion
      Price.  In the case of a  mandatory  conversion  on account of a Qualified
      Follow-on Offering,  then at the option of the holder, the shares shall be
      converted at (a) the Conversion  Price, or (b) at the same price that such
      securities are being sold in such Qualified Follow-On  Offering,  with the
      holder, in this case, also receiving a premium of an additional 10% in the
      number of such shares.  Under  certain  conditions  whereupon  the Company
      sells shares of Common Stock at a price below the Conversion  Price,  then
      the Conversion Price shall be reduced, as provided for in the agreement.


                                      F-18
<PAGE>

                          FBO AIR, INC. AND SUBSIDIARY
                        (A Development Stage Enterprise)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE  9 - Subsequent Events, continued

      [C] Authorization of Series A Convertible Preferred Stock, continued
      On the third  anniversary of the original date of issue of the Convertible
      Preferred   Stock,  the  Company  shall  redeem  for  cash  all  remaining
      outstanding  shares at a redemption price equal to the Stated Value,  plus
      all accrued and unpaid dividends.

      In  the  event  of a  liquidation  of  the  Company,  the  holders  of the
      Convertible  Preferred Stock then  outstanding will be entitled to receive
      115% of the  stated  value of each  share,  plus any  accrued  and  unpaid
      dividends.

      During  February  2005,  investors  purchased  for  cash  $100,000  of the
      Convertible Preferred Stock.

      [D] Seeking Financing
      The  Company  has  agreed  with a firm on a  non-exclusive  basis  to seek
      financing.

      [E] Litigation
      In early 2005,  the  Company  was served with a complaint  which names the
      Company,   among   others,   as  a  defendant  in  a  suit  brought  by  a
      broker-dealer,  seeking  damages of  approximately  $100,000  arising from
      Shadows  Bend's  cancellation  of a stock  certificate  in the year  2002,
      evidencing  shares  allegedly  sold by the  plaintiff for the account of a
      shareholder of Shadows Bend.  The Company  disputes the  allegations,  has
      engaged  local trial  counsel and intends to  vigorously  defend itself in
      this matter.

                                      F-19
<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment to the
report to be signed on its behalf by the undersigned, thereunto duly authorized.

                                    FBO Air, Inc.
                                     (Registrant)



Date: June 1, 2005                    By:   /s/ Ronald J. Ricciardi
                                           -------------------------------------
                                           Ronald J. Ricciardi,
                                           President and Chief Executive Officer
                                           (Principal Executive Officer and
                                           Principal Financial Officer)


                                       A-9