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>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE STATEMENTS FOR THE YEAR ENDED SEPTEMBER 30, 1999 AND AS OF
SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000911317
<NAME> LAS VEGAS AIRLINES, INC.
<MULTIPLIER> 1
<CURRENCY> US dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Sep-30-1999
<PERIOD-START> Oct-01-1998
<PERIOD-END> Sep-30-1999
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 3,937
<OTHER-SE> (3,937)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 2,322
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,322)
<INCOME-TAX> 0
<INCOME-CONTINUING> (858,173)
<DISCONTINUED> (217,106)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 819,914
<EPS-BASIC> .19
<EPS-DILUTED> .19
</TABLE>
