SECURITIES AND EXCHANGE COMMISSION
                                              WASHINGTON, D.C. 20549

                                                    FORM 10-KSB

[x]     Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
 Act of 1934 [Fee Required]

For the fiscal year ended September 30, 1999

[ ]     Transition Report Pursuant to Section 13 or 15(d) of the Securities
 Exchange Act of 1934 [No Fee Required]

For the transition period from                          to

Commission file number 0-22310

                                             LAS VEGAS AIRLINES, INC.
                          (Exact name of small business issuer in its charter)

                         DELAWARE                                    33-0564327
(State or other jurisdiction of incorporation or organization)  (I.R.S. Employer
                                                   Identification No.)

                                                201 1736-152 Street
                           Surrey, British Columbia, Canada           V4A 4N4
                 (Address of principal executive offices)             (Zip Code)

Registrant's telephone number, including area code:               (604) 541-6253
                                                             -------------------

Securities registered pursuant to Section 12(b) of the Act:              None
                                                             ----------------

Securities registered pursuant to Section 12(g) of the Act:
  Common Stock, par value $.001
            -----------------------------

           Indicate  by check  mark  whether  the  registrant  (1) has 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 is not contained in this form, and no disclosure will
be contained,  to the best of  registrant's  knowledge,  in definitive  proxy or
information  statements  incorporated by reference in part III of this Form 10-K
or any amendment to this Form 10-K. [ X ]

           State issuer's revenues for its most recent fiscal year: None

           The aggregate market value of the voting stock held by non-affiliates
of the registrant as of May 16, 2000 was $2,768,203 based on the closing average
bid and asked price of $.70313.

           The number of shares  outstanding  of the issuer's  classes of Common
Stock as of May 10, 2000:

Common Stock, $.001 Par Value - 3,937,000 shares

                                    DOCUMENTS INCORPORATED BY REFERENCE:  NONE


<PAGE>



                                                      PART I

Item 1.   DESCRIPTION OF BUSINESS

 Las  Vegas  Airlines,   Inc.,  a  Delaware   corporation  (the  "Company")  was
incorporated as Hermaton  Company on May 4, 1992. The Company was formed for the
purpose of either merging with or acquiring an operating  company with operating
history and assets.

 The Company  acquired  51% of the common stock of Las Vegas  Airlines,  Inc., a
non-affiliated  Nevada  corporation  ("LVA-Nevada") on April 28, 1998. Under the
Acquisition  the Company  paid  $500,000 to acquire  51% of  LVA-Nevada  and the
rights to use the LVA-Nevada operating permit. The remaining 49% was acquired by
merger with another  subsidiary,  Acquisition Corp. 2500, on September 30, 1998.
LVA Nevada had been in business for over 24 years,  primarily  operating  Navajo
aircraft in a commuter  service  between Las Vegas,  Nevada and the Grand Canyon
and in charter  operations  in the area.  The Company  intended to continue  the
Grand Canyon business, but its primary business focus is the expansion of routes
in niche markets.  The first market is the U.S. Virgin Islands to be followed by
routes in Northern  California and other  locations to be  determined.  Due to a
changing  regulatory  climate under FAA Part 121, and the failure of an aircraft
lessee to timely deliver aircraft, the Virgin Islands expansion was indefinitely
postponed.  At the same time,  subsequent to year end, the Company evaluated its
Las Vegas business and determined  that it was not profitable and was not likely
to become profitable in the foreseeable future. In the belief of management, the
prior  owner of  LVA-Nevada  made  several  material  misrepresentations  to the
Company. The Company sued Donald J. Donohue, Sr. ("Donohue"),  the former owner,
in Nevada state court for these  misrepresentations and for embezzling cash from
LVA-Nevada.  In response,  on December 11, 1998, the former owner of LVA-Nevada,
and 4 other persons filed an involuntary  petition for relief under Chapter 7 of
the Federal  Bankruptcy  Code against LVA. The petition was filed in  bankruptcy
court in Las  Vegas,  Nevada.  As a result of this  filing and its effect on the
Company, it was obligated to cease operations in December 1998. Subsequently the
bankruptcy  petition was dismissed.  The Company has evaluated the situation and
has determined that Donohue is likely  judgment  proof,  and has determined that
collectibility  of any claim  against  Donohue is  unlikely.  In  addition,  the
Company has determined  that the value of LVA-Nevada is nominal and any recovery
from it is unlikely,  and has decided not to waste  additional funds on recovery
efforts. The Company is seeking another acquisition at this time.



                                                         2

<PAGE>



Item 2.   DESCRIPTION OF PROPERTY

 The Company receives the use of office space from an officer at no charge.

Item 3.   LEGAL PROCEEDINGS

 Not Applicable.

Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 No matters  were  submitted  to a vote of  security  holders  during the fourth
quarter of the fiscal year ended September 30, 1999.


                                                         3

<PAGE>



                                                      PART II


Item 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
          MATTERS

 The  Company's  Common  Stock  has  traded  only  infrequently  and  it is  not
 considered to have an  established  trading  market.  As of September 30, 1999,
 there were approximately 310 stockholders of record.

Item 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

 The  Company has  minimal  cash on hand and does not intend to  continue  prior
 operations have been liquidated. See Note 2 to Financial Statements.

Item 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 The consolidated financial statements of the Company required to be included in
 Item 7 are set forth in the Financial Statements Index.

Item 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

 Not Applicable.


                                                         4

<PAGE>



                                                     PART III

Item 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
          COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

Directors and Executive Officers

 The members of the Board of Directors of the Company serve until the next
annual meeting of
stockholders, or until their successors have been elected. The officers serve at
the  pleasure  of the  Board of  Directors.  The  following  are the  directors,
executive officers and significant employees of the Company as of May 10, 2000.

         Name                             Position

         Robert Abbott                   President and Director
         Brian Koehn                     Secretary and Director
         Allan Davis                     Chief Financial Officer and Director

         Robert  Abbott,  age 54, has held his positions  with the Company since
April 2000.  From 1996 to 1999 he was  Director of  Operations  of Fraser  Downs
Raceway,  supervising  approximately  850  persons.  In 1995 he was  Promotional
Special  Events   Coordinator  for  Hastings  Park  Recourse  and  was  also  an
Occupational Safety Specialist for Perley  Hospital/Rideau  Vet's Health Center.
He was Health and Safety Coordinator for Scott Paper Ltd. from 1989 to 1994.

         Brian  Koehn,  age 45, has held his  positions  with the Company  since
April  2000.  He has been  director,  International  Marketing  and  Sales,  for
Professional  Services,  Inc.  Since 1989,  he was Director of Tab  Ventures,  a
publisher,  from 1985 to 1989 and Manager,  Market  Development of  Astrographic
Industries from 1980 to 1985.
He received a BA in Contract Law from the University of Alberta.

         Allan Davis, age 38, was elected as Chief Financial Office and Director
in May  2000.  From  March  1999  to the  present  he has  been  Executive  Vice
President,   Finance  and   Administration  of  The  Whistler  Group,  a  mobile
electronics  manufacturer.  He was  Senior  Vice  President  - Finance of Member
Services,  Inc. from  September  1996 to March 1999 and prior thereto held other
accounting  positions  with  Member  Services,  Inc.  since  1993.  He  received
bachelors' degrees in Finance and Insurance from the University of Arkansas.


                                                         5

<PAGE>



Item 10. EXECUTIVE COMPENSATION

         The Company  currently  did not pay any  compensation  to its executive
officers and director in fiscal 1999.

         Directors  currently  receive  no  compensation  for  their  duties  as
directors.

         The Company,  by resolution of its Board of Directors and stockholders,
adopted a 1992 Stock Option Plan (the  "Plan") on May 4, 1992.  The Plan enables
the  Company  to offer an  incentive  based  compensation  system to  employees,
officers and  directors  and to employees of companies  who do business with the
Company.

         In the discretion of a committee  comprised of  non-employee  directors
(the "Committee"), directors, officers, and key employees of the Company and its
subsidiaries  or  employees of  companies  with which the Company does  business
become  participants  in the Plan  upon  receiving  grants  in the form of stock
options or restricted  stock.  A total of 2,000,000  shares are  authorized  for
issuance  under the Plan, of which 780,000 shares were granted in fiscal 1998 at
an exercise  price of $2.50 per share.  These options all lapsed in fiscal 1999.
The Company may increase the number of shares  authorized for issuance under the
Plan or may make other material  modifications  to the Plan without  shareholder
approval.  However,  no amendment  may change the existing  rights of any option
holder.

         Any shares  which are subject to an award but are not used  because the
terms and  conditions  of the award are not met, or any shares which are used by
participants to pay all or part of the purchase price of any option may again be
used for awards  under the Plan.  However,  shares with respect to which a stock
appreciation right has been exercised may not again be made subject to an award.

         Stock  options  may  be  granted  as  non-qualified  stock  options  or
incentive  stock  options,  but incentive  stock options may not be granted at a
price  less  than 100% of the fair  market  value of the stock as of the date of
grant (110% as to any 10% shareholder at the time of grant); non-qualified stock
options may not be granted at a price less than 85% of fair market  value of the
stock as of the date of grant.  Restricted  stock may not be  granted  under the
Plan in connection with incentive stock options.

         Stock  options  may be  exercised  during a period of time fixed by the
Committee except that no stock option may be exercised more than ten years after
the date of grant or three years after death or disability,  whichever is later.
In the discretion of the Committee, payment of the purchase price for the shares
of stock  acquired  through the  exercise of a stock option may be made in cash,
shares of the Company's Common Stock or by delivery or recourse promissory notes
or a combination  of notes,  cash and shares of the Company's  common stock or a
combination  thereof.  Incentive  stock options may only be issued to directors,
officers and employees of the Company.

         Stock  options  may be granted  under the Plan may include the right to
acquire an Accelerated Ownership Non-Qualified Stock Option ("AO"). If an option
grant  contains  the AO  feature  and if a  participant  pays all or part of the
purchase  price of the option with shares of the Company's  common  stock,  then
upon exercise of the option the participant is granted an AO to purchase, at the
fair market value as of the date of the AO grant, the number of shares of common
stock the  Company  equal to the sum of the number of whole  shares  used by the
participant in payment of the purchase price and the number of whole shares,  if
any,  withheld  by the Company as payment for  withholding  taxes.  An AO may be
exercised  between the date of grant and the date of  expiration,  which will be
the same as the date of expiration of the option to which the AO is related.

         Stock  appreciation  rights and/or  restricted  stock may be granted in
conjunction  with, or may be unrelated to stock  options.  A stock  appreciation
right entitles a participant to receive a payment,  in cash or common stock or a
combination  thereof,  in an amount equal to the excess of the fair market value
of the stock at the time of exercise  over the fair market  value as of the date
of grant.  Stock  appreciation  rights may be exercised  during a period of time
fixed by the  Committee not to exceed ten years after the date of grant or three
years after death or disability,  whichever is later.  Restricted stock requires
the  recipient  to  continue  in service as an  officer,  director,  employee or
consultant  for a fixed period of time for  ownership of the shares to vest.  If
restricted  shares or stock  appreciation  rights  are  issued  in  tandem  with
options,  the  restricted  stock or stock  appreciation  right is canceled  upon
exercise

                                                         6

<PAGE>



of the option and the option will likewise terminate upon vesting of the
 restricted shares.

Item 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

           The following table sets forth information relating to the beneficial
ownership of Company  common stock by those  persons  beneficially  holding more
than 5% of the Company  capital  stock,  by the Company's  directors,  executive
officers and  significant  employees and by all of the  Company's  directors and
executive  officers as a group,  as of May 10, 2000. All  information  regarding
shares held by persons  other than  executive  officers  and  directors is based
solely upon a review of the  stockholder  list.  The  information  herein  gives
effect  to a  one-for-six  reverse  stock  split  effected  in May  2000 and the
proposed issuance of 12 million post split shares.
<TABLE>
<CAPTION>

                                                                           Percentage
Name of                                       Number of                of Outstanding
Stockholder                                Shares Owned                  Common Stock

<S>          <C>                               <C>                            <C>
Robert Abbott(2)                                     --                            --

Brian Koehn(2)                                       --                            --

Allan Davis(2)                                  100,000                           .8%

Patrick Strasburger                           1,800,000                         14.2%
1406 Lofty Maple Trail
Kingwood, Texas 77345

Patrick Hood                                  1,000,000                          7.9%
915 Whitby Court
Sugar Land, Texas 77479

Net Interest, Inc.(3)                         9,100,000                         71.9%
Houston, Texas
All officers and directors as
  a group (3 persons)(2)(3)                     100,000                           .8%
</TABLE>

(1)  Unless  otherwise noted below,  the Company believes that all persons named
     in the table have sole  voting  and  investment  power with  respect to all
     shares of Common Stock  beneficially  owned by them. For purposes hereof, a
     person is  deemed  to be the  beneficial  owner of  securities  that can be
     acquired  by such  person  within  60 days  from the date  hereof  upon the
     exercise  of  warrants  or  options  or  the   conversion  of   convertible
     securities.  Each beneficial owner's percentage  ownership is determined by
     assuming that any such warrants, options or convertible securities that are
     held by such person (but not those held by any other  person) and which are
     exercisable within 60 days from the date hereof, have been exercised.
(2)  The address of this person is c/o the Company.
(3)  The President and Sole Shareholder of Net Interest, Inc. is S.J. Hood.



                                                         7

<PAGE>



Item 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         An officer of the Corporation has advanced  certain  expenses on behalf
of the Company. As of March 31, 1998 and 1999 such expenses totalled $15,188 and
$26,329.

                                                      PART IV


Item 13.    EXHIBITS AND REPORTS ON FORM 8-K

            (a) Exhibits.  The following exhibits of the Company are included
 herein.


    Exhibit No.            Document Description


                           2.       Plan of acquisition, reorganization,

 arrangement, liquidation or succession.

                           2.1.     Share Purchase Agreement, between the
 Registrant and David J. Donohue, Sr.(2)

                                                         8

<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 report to be signed on
its behalf by the undersigned, thereunto duly authorized on May 17, 2000.


                                              LAS VEGAS AIRLINES, INC.


                                                By:    /s/ Robert Abbott
                                                        Robert Abbott


        Pursuant to the  requirements  of the  Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities on May 17, 2000.


By:     /s/ Robert Abbott   President and Director (principal executive officer)
        Robert Abbott


By /s/ Allan Davis Chief Financial Officer and Director(principal accounting and
        Allan Davis                                  financial officer)


By:     /s/ Brian Koehn                              Secretary and Director
        Brian Koehn


                                                         9

<PAGE>



                                             LAS VEGAS AIRLINES, INC.
                                           (A DEVELOPMENT STAGE COMPANY)

                                               FINANCIAL STATEMENTS

                                      YEARS ENDED SEPTEMBER 30, 1999 AND 1998

                                                        AND

                                           INDEPENDENT AUDITORS' REPORT


<PAGE>
<TABLE>
<CAPTION>



                                             LAS VEGAS AIRLINES, INC.
                                           (A Development Stage Company)

                                                 Table of Contents



<S>                                                                                                       <C>
Independent Auditors' Report                                                                              1

Financial Statements

         Balance Sheets                                                                                   2

         Statements of Operations                                                                         3

         Statement of Changes in Stockholders' Equity                                                     4

         Statements of Cash Flows                                                                         6

Notes to Financial Statements                                                                             7
</TABLE>


<PAGE>



                                           INDEPENDENT AUDITORS' REPORT



To the Board of Directors and Shareholders
Las Vegas Airlines, Inc.
Surrey, British Columbia, Canada


We have audited the balance sheets of Las Vegas  Airlines,  Inc. ( a development
stage company) as of September 30, 1999 and 1998, and the related  statements of
operations,  changes in  stockholders'  equity and cash flows for the years then
ended and  cumulative  for the period May 4, 1992  (date of  inception)  through
September 30, 1999.  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  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. 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 financial  position of Las Vegas Airlines,  Inc. (a
development stage company) as of September 30, 1999 and 1998, and the results of
its operations,  changes in  stockholders'  equity and cash flows for the period
May 4, 1992 (date of inception)  through  September 30, 1999, in conformity with
generally accepted accounting principles.



THURMAN SHAW & CO. LLC
Bountiful, Utah
May 15, 2000

                                                         1

<PAGE>

<TABLE>
<CAPTION>


                                              LAS VEGAS AIRLINES, INC.
                                           (A Development Stage Company)
                                                   Balance Sheets
                                            September 30, 1999 and 1998


                                                                                        1999              1998
                                                                                    -------------    ---------

ASSETS

Current assets
<S>                                                                                 <C>              <C>
     Cash                                                                           $        -       $      141,599
     Accounts receivable                                                                     -               58,709
     Expendable parts, at cost                                                               -              126,313
     Refundable taxes based on income                                                        -               90,416
     Refundable excise taxes                                                                 -                2,463
     Prepaid insurance                                                                       -              231,363
                                                                                    -------------    --------------

           Total current assets                                                              -              650,863
                                                                                    -------------    --------------


Furniture, vehicles and equipment, at cost
     Furniture and equipment                                                                 -               28,749
     Transportation                                                                          -               66,158
     Engines                                                                                 -              122,608
                                                                                    -------------    --------------

                                                                                             -              217,515

     Less accumulated depreciation                                                           -             (180,510)
                                                                                    -------------    --------------

                                                                                             -               37,005
                                                                                    -------------    --------------

Other assets
     Deposits                                                                                -              542,000
     Other                                                                                   -               14,737
                                                                                    -------------    --------------

                                                                                             -              556,737
                                                                                    -------------    --------------

                                                                                    $        -       $    1,244,605
                                                                                    =============    ==============

</TABLE>

                                See accompanying notes to financial statements

                                                         2

<PAGE>
<TABLE>
<CAPTION>



                                              LAS VEGAS AIRLINES, INC.
                                           (A Development Stage Company)
                                                   Balance Sheets
                                            September 30, 1999 and 1998






                                                                                        1999              1998
                                                                                    -------------    ---------


LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)

Current liabilities
<S>                                                                                 <C>              <C>
     Accounts payable                                                               $        -       $      210,331
     Insurance payable                                                                       -              228,033
     Accrued payroll and payroll taxes                                                       -              235,733
     Other accrued liabilities                                                               -               59,415
     Current portion of long-term debt                                                       -              408,486
     Loan from shareholder                                                                   -              966,100
                                                                                    -------------    --------------

                  Total current liabilities                                                  -            2,108,098

Long-term debt, net of current portion                                                       -                7,421
                                                                                    -------------    --------------

                  Total liabilities                                                          -            2,115,519
                                                                                    -------------    --------------


Stockholder's equity (deficit):
     Preferred stock, $0.001 par value; 1,000,000 shares
         authorized; no shares issued and outstanding                                        -                 -

     Common stock, $0.001 par value; 20,000,000 shares
         authorized; 3,937,000 shares issued and outstanding                                3,957             3,937

     Paid in capital                                                                      217,530           166,550

     Retained earnings (deficit)                                                         (221,487)       (1,041,401)
                                                                                    -------------    --------------

                                                                                             -             (870,914)
                                                                                    -------------    --------------

                                                                                    $        -       $    1,244,605
                                                                                    =============    ==============

</TABLE>

                                 See accompanying notes to financial statements

                                                         3

<PAGE>

<TABLE>
<CAPTION>



                                              LAS VEGAS AIRLINES, INC.
                                           (A Development Stage Company)
                                              Statements of Operations
                                        Years Ended September, 1999 and 1998
                                and Cumulative from Inception to September 30, 1999


                                                                                                       Cumulative
                                                                                                          From
                                                                                                        Inception
                                                                                                            (May 4, 1992)
                                                                                                     to September 30,
                                                                       1999             1998              1999
                                                                  --------------    -------------    ---------

<S>                                                                   <C>              <C>            <C>
Revenues                                                                    -                -                 -

Cost of revenues                                                            -                -                 -
                                                                  --------------    -------------    -----------

Gross profit                                                                -                -                 -

Selling, general and administrative expenses                               2,322          231,212           240,614
                                                                  --------------    -------------    --------------

Operating loss                                                            (2,322)        (231,212)         (240,614)
                                                                  ---------------   -------------    --------------

Loss before extraordinary items                                           (2,322)        (231,212)         (240,614)

Extraordinary items
     Loss from discontinued operations                                  (217,106)        (579,738)       (1,020,215)
     Gain from transfer of assets                                        450,929             -              450,929
     Gain from relief of liabilities                                     588,413             -              588,413
                                                                  --------------    -------------    --------------

                                                                         822,236             -               19,127
                                                                  --------------    -------------    --------------

Net income (loss)                                                 $      819,914    $    (810,950)   $     (221,487)
                                                                  ==============    =============    ==============

Basic and diluted net (loss) per share
     From continuing operations                                            (0.00)           (0.06)            (0.08)
     From discontinued operations                                           0.19            (0.16)             0.00
                                                                  --------------    --------------   --------------

                                                                  $         0.19    $       (0.22)   $        (0.08)
                                                                  ==============    =============    ==============

Weighted average number of common
     shares used in per share calculation                              4,226,291        3,624,600         2,778,031
                                                                  ==============    =============    ==============
</TABLE>


                                See accompanying notes to financial statements

                                                         4

<PAGE>

<TABLE>
<CAPTION>


                                              LAS VEGAS AIRLINES, INC.
                                           (A Development Stage Company)
                                    Statement of Changes in Stockholders' Equity
                              From Inception (May 4, 1992) Through September 30, 1999




                                                                                                       Accumulated
                                                                                                         Deficit
                                                              Common StockAdditional      During the
                                                                                       Paid-In         Development
                                                    Shares            Amount           Capital            Stage             Total

Issuance of common stock
<S>                <C>                                 <C>        <C>               <C>              <C>               <C>
     for cash, May 4, 1992                             400,000    $          400    $         100    $         -       $         500

Net (loss)                                                -                 -                -                 (269)           (269)
                                                 -------------    --------------    -------------    --------------    -------------

Balances at March 31, 1993                             400,000               400              100              (269)             231

Contribution to capital                                   -                 -                 500              -                 500

Sale of shares in private placement
   on September 30, 1993                                24,600                25              221              -                 246

Net (loss)                                                -                 -                -               (1,661)         (1,661)
                                                 -------------    --------------    -------------    --------------    -------------

Balances at March 31, 1994                             424,600               425              821            (1,930)           (684)

Issuance of shares - Failed acquisition
   June 1, 1994                                      3,200,000             3,200             -                 -               3,200

Net (loss)                                                -                 -                -               (4,280)         (4,280)
                                                 -------------    --------------    -------------    --------------    -------------

Balances at March 31, 1995                           3,624,600             3,625              821            (6,210)         (1,764)

Net (loss)                                                -                 -                -                 (588)           (588)
                                                 -------------    --------------    -------------    --------------    -------------

Balances at March 31, 1996                           3,624,600             3,625              821            (6,798)         (2,352)

Net (loss)                                                -                 -                -                 (247)           (247)
                                                 -------------    --------------    -------------    --------------    -------------

Balances at March 31, 1997                           3,624,600             3,625              821            (7,045)         (2,599)

Net (loss)                                                -                 -                -                  (35)            (35)
                                                 -------------    --------------    -------------    --------------    -------------

Balances at September 30, 1997                       3,624,600             3,625              821            (7,080)         (2,634)

</TABLE>

                                  See accompanying notes to financial statements

                                                                  5

<PAGE>
<TABLE>
<CAPTION>



                            LAS VEGAS AIRLINES, INC.
                          (A Development Stage Company)
            Statement of Changes in Stockholders' Equity (continued)
             From Inception (May 4, 1992) Through September 30, 1999

                                                                                                       Accumulated
                                                                                                         Deficit
                                                              Common StockAdditional      During the
                                                                                       Paid-In         Development
                                                    Shares            Amount           Capital            Stage             Total


<S>                                                    <C>                   <C>          <C>              <C>              <C>
Issuance of stock for cash                             312,400               312          630,688              -             631,000

Acquisition of Las Vegas Airlines, Inc.
   for cash                                               -                 -            (464,959)         (223,371)       (688,330)

Net (loss)                                                -                 -                -             (810,950)       (810,950)
                                                 -------------    --------------    -------------    --------------    -------------

Balances at September 30, 1998                       3,937,000             3,937          166,550        (1,041,401)       (870,914)

Issuance of stock for cash                              20,400                20           50,980              -              51,000

Net (loss)                                                -                 -                -              819,914          819,914
                                                 -------------    --------------    -------------    --------------    -------------

Balances at September 30, 1999                       3,957,400    $        3,957    $     217,530    $     (221,487)   $        -
                                                 =============    ==============    =============    ==============    ==========

</TABLE>

                                 See accompanying notes to financial statements

                                                                  6

<PAGE>
<TABLE>
<CAPTION>



                            LAS VEGAS AIRLINES, INC.
                          (A Development Stage Company)
                            Statements of Cash Flows
                     Years Ended September 30, 1999 and 1998
               and Cumulative from Inception to September 30, 1999

                                                                                                       Cumulative
                                                                                                          From
                                                                                                        Inception
                                                                                                            (May 4, 1992)
                                                                                                     to September 30,
                                                                       1999             1998              1999
                                                                  --------------    -------------    ---------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                               <C>               <C>              <C>

     Net income (loss)                                            $      819,914    $    (810,950)   $     (221,487)
     Adjustments to reconcile net income (loss) to net
       cash used in operating activities
         Depreciation                                                       -              50,089            50,089
         Gain on transfer of assets                                     (450,929)            -             (450,929)
         Gain on relief from liabilities                                (588,413)            -             (588,413)
         Changes in operating assets and liabilities
              (Increase) decrease in operating assets                    561,006         (596,170)             -
              Increase (decrease) in operating liabilities              (561,006)         204,443              -
                                                                  --------------    -------------    -----------

                  Net cash used in operating activities                 (219,428)      (1,152,588)       (1,210,740)
                                                                  --------------    -------------    --------------

CASH FLOWS FROM INVESTING ACTIVITIES
     Sale of aircraft - net                                                 -               3,306             3,306
                                                                  --------------    -------------    --------------
                  Net cash provided by investing activities                 -               3,306             3,306
                                                                  --------------    -------------    --------------

CASH FLOWS FROM FINANCING ACTIVITIES
     Contribution to capital                                                -                -                  500
     Proceeds from debt                                                     -             285,967           285,967
     Proceeds from issuance of stock                                      51,000          131,000           185,946
     Proceeds from advances from shareholder                              26,829          966,100           992,929
     Principal payments on long-term debt                                   -            (105,617)         (105,617)
                                                                  --------------    -------------    --------------
                  Net cash provided by financing activities               77,829        1,277,450         1,359,725
                                                                  --------------    -------------    --------------

Net increase (decrease) in cash                                         (141,599)         128,168              -

Cash, beginning                                                          141,599           13,431              -
                                                                  --------------    -------------    -----------

Cash, ending                                                      $         -       $     141,599    $         -
                                                                  ==============    =============    ===========

SUPPLEMENTAL CASH FLOW DISCLOSURES
     Interest paid                                                $         -       $     113,419    $      113,419
                                                                  ==============    =============    ==============

</TABLE>



                                  See accompanying notes to financial statements

                                                         7

<PAGE>



                                              LAS VEGAS AIRLINES, INC.
                                           (A Development Stage Company)
                                           Notes to Financial Statements
                                      Years Ended September 30, 1999 and 1998



1.       ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

         The Company was incorporated under the laws of the State of Delaware on
         May 4, 1992,  for the  purpose of seeking out  business  opportunities,
         including  acquisitions.  The Company is in the  development  stage and
         will be  very  dependent  on the  skills,  talents,  and  abilities  of
         management  to  successfully  implement its business  plan.  Due to the
         Company's  lack of capital,  it is likely that the Company  will not be
         able to compete with larger and more experienced  entities for business
         opportunities  which are lower  risk and are more  attractive  for such
         entities.  Business  opportunities in which the Company may participate
         will  likely be highly  risky and  speculative.  Since  inception,  the
         Company's  activities  have been  limited  to  organizational  matters.
         Organizational  costs are amortized on a straight-line  basis over five
         years.

         On January  23,  1998 and  September  30,  1998,  Hermaton  Corporation
         acquired all of the outstanding  stock of Las Vegas Airlines,  Inc. for
         $500,000.  Subsequent to the purchase, Hermaton Corporation changed its
         name to Las Vegas  Airlines  and also  changed  its fiscal  year-end to
         September 30.

         The Company was engaged in the business of offering scheduled Commute
 and Charter airline services through
         its subsidiary, Las Vegas Airlines, Inc. (Nevada).

         Basic and Diluted Loss Per Share

         The Company has adopted  Statement  of Financial  Accounting  Standards
         ("SFAS")  No.128,  Earnings  Per Share.  Statement  No. 128 revised the
         manner in which loss per share is  calculated.  Basic and diluted  loss
         per common share was restated for all periods presented;  however,  the
         effect  of the  change to loss per share as  previously  presented  for
         those periods was not material.

         Basic loss per common  share is computed  by  dividing  net loss by the
         weighted average number of common shares outstanding during the period.
         Diluted loss per share is calculated  to give effect to stock  options.
         There were no stock  options  outstanding  as of  September  30,  1999.
         Therefore, basic and diluted loss per share is the same.

         Development Stage Enterprise

         Since  inception,  the  Company  has  spent  most  of  its  efforts  in
         developing and marketing various  products,  however it has not yet had
         sales  sufficient to sustain  operations  and has relied upon financing
         from  shareholders  and  occasional   issuance  of  its  common  stock.
         Therefore, the Company is considered to be in the development stage.

         Cash and Cash Equivalents

         The  Company  considers  all  short-term  investments  with an original
         maturity of three months or less to be cash equivalents.


                                                         8

<PAGE>


Notes (continued)


         Estimates

         The  preparation of financial  statements in conformity  with generally
         accepted  accounting  principles  requires management to make estimates
         and assumptions that affect certain reported amounts and disclosures.
         Accordingly, actual results could differ from those estimates.

         Income Taxes

         The  Company  has  adopted  Financial  Accounting  Standards  No.  109,
         "Accounting  for Income  Taxes."  Deferred  tax assets and deferred tax
         liabilities  have not been  recorded  since  the  subsidiary  which has
         generated  the net  operating  losses is out of  business.  The  parent
         company, Las Vegas Airlines,  Inc. (formerly Hermaton  Corporation) has
         not filed income tax  returns.  If it had,  the net  operating  loss of
         $240,614 would begin to expire in 2008.


2.       DISCONTINUED OPERATIONS

         In December 1998, the Company's Board of Directors made the decision to
         shut  down the  operations  of its 100%  owned  subsidiary,  Las  Vegas
         Airlines,  Inc.  (See Note 1) The  Company  transferred  its  rights to
         $542,000 in deposits  and rights  pertaining  to its  ownership  of its
         subsidiary,  Las Vegas  Airlines,  Inc., to a related party in exchange
         for their  assumption  of $992,992 in debt of the  Company.  Summarized
         results of operations and resulting gains are as follows:
<TABLE>
<CAPTION>

                                                                                        1999              1998
                                                                                    -------------    ---------

<S>                                                                                 <C>              <C>
                      Net sales                                                     $     110,462    $    1,816,307
                                                                                    =============    ==============

                      Operating loss                                                     (217,106)         (579,738)
                                                                                    =============    ==============

                      Gain from transfer of assets and debt to a
                         related party                                              $     450,929    $         -
                                                                                    =============    ===========

                      Gain resulting from relief of liabilities in
                         shut down of business                                      $     588,413    $         -
                                                                                    =============    ===========

                      Income (loss) from discontinued operations                    $     822,236    $     (579,738)
                                                                                    =============    ==============
</TABLE>

                                                         9

<PAGE>