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 March 31, 1998

[ ]     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.)

                 24901 Dana Point Harbor Drive, Suite 200
                 Dana Point, California                               92629
           (Address of principal executive offices)                (Zip Code)

Registrant's telephone number, including area code:               (949) 488-8494
                                                             -------------------

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 March 31, 1998 was not  determinable  since the Common
Stock was not traded.

           The number of shares  outstanding  of the issuer's  classes of Common
Stock as of March 31, 1998:

Common Stock, $.001 Par Value - 3,624,600 shares

                                    DOCUMENTS INCORPORATED BY REFERENCE:  NONE


<PAGE>



                                                      PART I

Item 1.   DESCRIPTION OF BUSINESS

Background

 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  (the  "LVA-Nevada")  on April 28, 1998. LVA
Nevada  has 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 intends 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.

 The Federal Aviation  Administration  has created steep regulatory  barriers to
the issuance of the operating permits for new airlines. The regulatory regime is
known as "Part  121" after the  nomenclature  for that  portion  of the  Federal
Aviation  Regulations (the "FARs")  LVA-Nevada has a long operating history as a
commuter  air carrier  under Part 135 of the FARs but,  like many other Part 135
carriers, already operates in conformity with Part 121 regulations.

 Under the  Acquisition  the Company paid  $500,000 to acquire 51% of LVA-Nevada
and the rights to use the LVA-Nevada  operating  permit.  This purchase price is
significantly  less than the cost of  obtaining  an  operating  permit under the
current regulatory climate at the FAA.

 The Company has completed a business plan for the  initiation of an air carrier
service in the  Caribbean  with its hub in St.  Thomas,  Virgin  Islands via its
subsidiary Virgin Islands International Airlines ("VIIA"). The principal carrier
in the Virgin  Islands is American  Eagle (an  affiliate of American  Airlines),
where  it  holds a  monopoly  position  which  to date  has  been  unchallenged.
Management  believes that the  demographics and current load factor will support
its air service.

 VIIA will initiate  regional air carrier  service to several cities in the U.S.
Virgin Islands area (St. Thomas, St. Croix, Antigua, and San Juan, Puerto Rico).
The timing of these  flights  will  correspond  to business  commuter  schedules
(which are  determined  by the  schedules of the major  airlines with which VIIA
flights will be connecting).  The growth of the Virgin Islands'  economy coupled
with strong tourist volume  indicates that growth in inter-island  air travel is
highly  probable.  The Company's  primary  competitor  in this region,  American
Eagle,  only  coordinates  the timing of its flights  with its parent,  American
Airlines.

 In  addition,  VIIA will  expand  its  current  freight  division  and  charter
activities to supplement the passenger revenue. This service and revenues to the
Company  generated  therefrom would be at nominal  additional direct or indirect
cost to VIIA.

 The U.S.  Virgin Islands is a robust  business and tourist  economy with nearly
1.8 million visitors  annually (1996).  Hurricanes have impacted the area in the
past few years and have  stimulated  the economy to fully  re-build and grow. In
1996,  approximately  180,000 people engaged in inter-island  travel by air, and
they spent $34.7 million in the process.  This averages $193 per person spent on
air travel for each of the approximately 180,000 known air travelers. The market
for inter-island  travel by air is increasingly  accessible and growing (Source:
Bureau of  Economic  Research,  Virgin  Islands  of the United  States).  As the
economy  continues to re-build and grow, the need for  high-quality,  affordable
air transportation is projected to increase.

Marketing Strategy

 The Company's projected route structure affords two distinct targets for its 
marketing and sales efforts;

                                                         2

<PAGE>



the leisure and business  traveler.  Because the Company  plans to continue as a
full participant in the airline  community (with  inter-line  ticket and baggage
agreements,   joint  fare  agreements,  and  memberships  in  numerous  industry
associations) the airline sales and reservation  community will also be targeted
for specific marketing programs.

 The  Company  will market and promote  its  services  throughout  the medium of
listings in various  industry  publications  utilized by air carriers and travel
agencies, as well as radio commercials, newspaper advertising, billboard display
and  public  relations  functions  (including  the  local  Chamber  of  Commerce
organization  and  related  trade  associations).  Direct  sales  will  be  made
throughout the Company's  reservation  facilities and at ticket  counters at the
airports  served,  by travel  agents,  corporate and  government  transportation
offices,  and by other  airlines  pursuant to  inter-line  agreements.  Packages
including variations of air transportation,  ground tours, hotel accommodations,
meals, golf, and meetings will be offered.

 To bring its services to the attention of the passenger, who is the end user of
its product,  the Company will participate in national and  international  trade
shows where it has been determined that passenger  originations  exist or can be
developed.  It is  management's  philosophy  that  an  effective  identity  is a
tangible asset, and that a properly  structured identity program will enable the
Company  to  maximize  communication  channels  within the  industry  which will
beneficially influence the building and selling of its services.

Implementation

 It is  projected  that a minimum of ninety days will be  required to  implement
scheduled  operations  upon  funding.  This  time  period  will be  required  to
accomplish the following prerequisites:

1.        Locate appropriate aircraft;
2.        Certify aircraft for scheduled carrier use;
3.        Interview and hire pilots, cabin crew, a ground personnel;
4.  Complete  FAA ground and flight  training  and  operational  experience;  5.
Publish,  schedule and implement  initial  sales,  promotional  and  advertising
activities;  6.  Complete  negotiations  with  airport  administrations,  set-up
reservations, office system, security system, and
          related procedures;
7.        Interview and hire other required personnel.

Competition

 There  is only one  competitor  who  provides  scheduled  inter-island  flights
throughout  the U.S.  Virgin  Islands area - American  Eagle,  owned by American
Airlines.  American Eagle operates the Alenia Turboprop aircraft,  a twin-engine
turboprop with a capacity of 46 passengers.  The Company intends to compete with
American  Eagle on the  basis of  price  and  service  and  better  connections,
however,  there can be no assurance that the Company will be able to effectively
compete with American Eagle or other competitors which may enter the market.

 Competition  in the air  transportation  industry is intense.  Any domestic air
carrier deemed fit by the DOT is allowed to operate scheduled  passenger service
in the  United  States.  Most of the  Company's  competitors  are  substantially
larger, have greater financial resources and have more extensive route systems.

 Most major U.S.  carriers have developed,  independently or in partnership with
others,  large  computerized  reservation  systems  (CRS).  Due  to  contractual
requirements imposed by CRSs, most travel agencies contract with a single CRS to
sell  tickets.  Airlines  are  charged  industry-set  fees to have their  flight
schedules included in the various CRS displays.  These systems are currently the
predominant  means  of  distributing   airline  tickets.   In  order  to  reduce
anti-competitive  practices,  the  DOT  regulates  the  display  of all  airline
schedules and fares.

Flight Crews

 Las Vegas Airlines is not unionized and will utilize pilots hired specifically 
for the airline on an as-needed

                                                         3

<PAGE>



basis.  The Company will  supplement  these  pilots with flight crew staff.  All
pilots are required to possess a current Airline Transport  Rating,  the highest
rating  available  from the FAA (requiring a minimum of 1500 hours of total time
with priority given to military trained pilots).  Maintenance and enhancement of
pilot  proficiency  through ongoing training programs required by the FAA. These
programs include all flight maneuvers,  systems descriptions,  and operating and
emergency procedures. The minimum total time for initial and transition training
is 30 hours.  A minimum of ten hours of  recurrent  ground  training,  performed
annually, is required of all pilots in addition to their regular flight duties.

Aircraft Maintenance

 A full maintenance and crew training program for the de Havilland Dash-8 Series
100  aircraft is  presently  available  under  contract  in the Virgin  Islands.
Aircraft  inspection and maintenance will be performed by these  organization or
will be handled through  inter-line  agreement or contract with a major aircraft
maintenance  facility.  FAA  inspectors  may  conduct  ramp  inspections  of any
aircraft  at any  airport at any time.  The  aircraft  operated  by VIIA will be
inspected at 50-hour and 100-hour intervals.

Inter-line Agreements

 Las Vegas Airlines is negotiating  inter-line  agreements with several regional
and major air carriers. The agreements include tickets,  baggage handling,  gate
space,  reservations,  other customer  services,  fuel, and other ground support
services.

Regulation

 All airlines are subject to  regulation  by the  Department  of  Transportation
(DOT) and the  Federal  Aviation  Administration  (FAA) in  accordance  with the
Federal Aviation Act of 1958. The DOT's regulatory  authority  relates primarily
to the economic aspects of air  transportation.  The FAA's regulatory  authority
relates primarily to safety aspects of air  transportation,  including  aircraft
operating standards, maintenance, and personnel.

 Las Vegas Airlines is  certificated  under FAR Part 135 and is approved for all
weather operations to all of its scheduled destinations.

Aircraft

 VIIA intends to lease three de Havilland Dash-8 Series 100 aircraft. Management
has determined  that these  aircraft have the ideal  capability for the proposed
mission profile and geographical areas of operations  consistent with reasonable
acquisition and operating costs and passenger  appeal.  There are also very well
established support organizations and facilities for the Dash-8 (for maintenance
and training)  presently in the Virgin  Islands.  Aircraft  will be  permanently
stationed at St. Thomas (STT).

 The de Havilland  Dash-8  Series 100 aircraft has been in executive and airline
service  for  many  years.   The  aircraft   will  be   configured  to  have  34
forward-facing  adjustable and reclining  passenger  seats. The aircraft is air-
conditioned and heated through and  environmental  control system and is de-iced
through  pneumatic  boots  installed on wings and tail  leading  edge  surfaces;
electric  propeller and windshield  de-icing is also provided.  Depending on the
aircraft  selected,  the aircraft  will be equipped with weather  radar.  Flight
operations are typically suspended in the event of severe weather.

 The  aircraft  are  powered  by two  counter-rotating  Pratt & Whitney  PW 120A
turboprop engines, each driving a Hamilton Standard 14SF-7 four-bladed composite
propeller.  The  aircraft  are  full  IFR  (Instrument  Flight  Rated)  equipped
including the most advanced  navigational and autopilot systems.  These aircraft
have excellent baggage capacity.

Airports


                                                         4

<PAGE>



 The primary  airports used are located in St. Thomas (STT), San Juan (SJU), St.
Croix  (STX),  and  Antigua  (ANU).  The  Department  of  Transportation,  since
deregulation,  has adopted a policy of granting  discretionary  authority to all
qualified  applicants  for new routes.  One or more  regional  air  carriers are
currently serving all of the above airports.

Freight Operations and Charter Operations

 It is projected that freight operations will comprise 5% of the total passenger
revenues.  Although  scheduled  passenger  service  operations will comprise the
Company's major  activities,  attention will also be given to the enlargement of
the package/freight division. There appears to be a very profitable niche market
here. This revenue accruing to the Company from this service would be at minimal
additional direct or indirect costs to the Company.

Reservations

 Reservations  will be handled,  initially,  through  installation  of the ARINC
(Aeronautical Radio Incorporated)  system,  thereby providing the Company direct
communication  with virtually every carrier in the nation. The Company will have
the capability  virtually every carrier in the nation. The Company will have the
capability  of  receiving  and  sending  reservations  to  airlines  pursuant to
interline  agreements.  As  requirements  increase as a result of  increases  in
business volume, the Company will become integrated into one the major carriers'
computerized reservation systems.

Station Operations

Aircraft will be permanently stationed at St. Thomas (STT).


                                                         5

<PAGE>



Item 2.   DESCRIPTION OF PROPERTY

 The  Company  leases  office,  passenger  and hanger  space at Las Vegas  North
Airport for its Las Vegas operations.  Negotiations are being conducted to lease
240 square feet of office space at Cyril E. King  Airport in St.  Thomas for the
Virgin Islands operations.

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 March 31, 1998.


                                                         6

<PAGE>



                                                      PART II


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

 The  Company's  Common Stock has not traded.  As of March 31, 1998,  there were
 approximately 310 stockholders of record.

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

 The Company estimates that it will require approximately  $1,750,000 in capital
 to expand  operations in the Virgin  Islands.  Such funds are being supplied by
 placements of its  securities,  and are expected to be sufficient  for the next
 twelve months.

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.  The Company is retaining Thurman Shaw & Co. LC as its 
principal auditors for its next fiscal year.  The Company intends to change its
fiscal year to September 30.


                                                         7

<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.

         Name                   Position

         Jehu Hand              President, Chief Financial Officer and Director
         William H. Prince      Executive Vice President
         Marvin Winograde       Vice President-Industry Affairs
         Don Donohue, Sr.       President of LVA-Nevada
         Don Donohue, Jr.       Vice President, Sales and Marketing - LVA Nevada

         The Company intends to add additional members to its board of directors
and to add a full time Chief Financial Officer.

         Jehu Hand has been  President  and  Secretary of the Company  since its
inception and Chief  Financial  Officer since January 1, 1995. Mr. Hand has been
engaged in corporate and  securities  law practice and has been a partner of the
law  firm  of  Hand &  Hand  since  1992.  Hand  &  Hand  incorporated  as a law
corporation  in May 1994.  Mr.  Hand has been a  registered  principal  of SoCal
Securities,  an NASD registered broker dealer,  since 1992. From January 1992 to
December 1992 he was the Vice President-Corporate Counsel and Secretary of Laser
Medical Technology, Inc., which designs,  manufactures and markets dental lasers
and endodontics equipment. He was a director of Laser Medical from February 1992
to February 1993.  From January to October,  1992 Mr. Hand was Of Counsel to the
Law Firm of Lewis,  D'Amato,  Brisbois & Bisgaard.  From January 1991 to January
1992 he was a shareholder of McKittrick,  Jackson, DeMarco & Peckenpaugh,  a law
corporation. Jehu Hand received a J.D. from New York University School of Law in
1984 and a B.A. from Brigham Young University in 1981.

         William H.  Prince has served as managing  director  of Prince  Capital
Corporation  since 1989.  Prince  Capital is an  investment  banking  firm which
provides corporation financing services to emerging and middle market companies.
From 1985 to 1989, Mr. Prince was Director of Corporate Finance for P.B. Jameson
&  Company,  Inc.  From 1978 to 1985 he was an  institutional  broker  for three
national  New York  Stock  Exchange  firms:  Smith  Barney,  Dain  Bosworth  and
Prudential  Bache.  From 1966 to 1978 he was a retail  broker for an NYSE member
firm and conducted  wholesale  activities for a national mutual fund with assets
in  excess  of  $1  billion.  He  graduated  in  1966  with  a  BA  in  Business
Communications  from  Brigham  Young  University.  Mr.  Prince  is a  registered
representative of SoCal Securities.

         Mr.  Marvin  Winograde  is a graduate  of the  University  of  Southern
California  with a Bachelor  of Science  Degree in Finance  and  Economics.  Mr.
Winograde  has had a diverse  career  with  other  regional  airlines  including
assignments in corporate  finance,  commercial  aircraft  financing,  as well as
being an officer and director for two air carriers.  Since 1987,  Mr.  Winograde
has  served  as Vice  President  of Las  Vegas  Airlines  with  responsibilities
including organizational and fiscal management, preparation of corporate budgets
and forecasts, and industry affairs. Further, Mr. Winograde has been responsible
for  development  and  implementation  of the  Company's  interline  agreements,
marketing  objectives of the Company,  and  implementation  of the marketing and
development strategies.
He has also provided decision-making support to the President.

         Don  Donohue,   Sr.,  has  a  University  of   Cincinnati   engineering
background.  He returned  from the Air Force after 23 years of active duty where
he  received  training  and  experience  in  administrative  management,   Pilot
Training, Aircraft Maintenance Engineering, and Maintainability and Reliability.
He has also been an instructor in T-33's of

                                                         8

<PAGE>



the  German  Air  Force  and F-4s in the Far East.  His  maintenance  management
experience  include route line maintenance (both  reciprocating and jet overhaul
facilities),  fabrication shops,  production control analysis,  quality control,
and  experimental  aircraft (which include the SR-71 at Kelley  Johnson's "Skunk
Works" and electronics systems testing).  Civilian pilot ratings include Airline
Transport  Pilot  and  Instructor/Instrument   Flight  Instructor,   single  and
multi-engine.  Mr.  Donohue  founded Las Vegas  Airlines  in 1973 and  currently
performs  all  airline  pilot  checkouts  and test  flights and  actively  flies
scheduled flights.

         Don Donohue,  Jr., is a Political  Science major from the University of
Idaho.  After graduation,  he worked for Woolworth's Food and Beverage Division.
In 1978,  he was  promoted to a management  level  position  with the  Woolworth
organization.  In February  1979, he resigned  from  Woolworth to join Las Vegas
Airlines, Inc. as Managing Director with oversight in the Marketing and Business
Development areas.



                                                         9

<PAGE>



Item 10. EXECUTIVE COMPENSATION

         The Company  currently does not pay any  compensation  to its executive
officers  and  director.  No  compensation  is expected to be paid until  Virgin
Islands operations commences.

         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 are issuable under the Plan as
of June 30,  1998 at an  exercise  price of $2.50 per  share.  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

                                                        10

<PAGE>


<TABLE>
<CAPTION>

rights  are  issued  in  tandem  with  options,  the  restricted  stock or stock
appreciation  right is canceled  upon exercise 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 March 31, 1998.

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

<S>                                           <C>                               <C>  
Jehu Hand(2)                                  1,410,000                         34.1%
24901 Dana Point Harbor Drive, #200
Dana Point, CA 92629

William H. Prince(3)                            620,000                         16.4%

Marvin Winograde                                400,000                         11.0%

Don Donohue Sr.                                      --                            --

Don Donohue Jr.                                      --                            --

All officers and directors as
  a group (2 persons)(2)(3)                   2,030,000                         47.4%
</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)  Includes 500,000 shares issuable upon exercise of options at $2.50 per
     share.
   --
(3)  Includes 150,000 shares issuable upon exercise of options at $2.50 per 
     share.
   --



                                                        11

<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, 1995, 1996, 1997 and 1998 such expenses totalled
$1,877, $2,411, $2,604 and $15,188.

         The  Company was  originally  incorporated  in Delaware  under the name
Hermaton  Company  on May 4,  1992  for  the  purpose  of  seeking  out  various
acquisitions.

         On January 23, 1998, the Company loaned $50,000 to LVA Nevada. The note
is due on demand and bears interest of 6% per annum.  An officer and director of
the Company,  Jehu Hand,  has advanced  $50,000 to the Company for the loan.  An
additional $100,000 was loaned to LVA-Nevada on the same terms in April 1998.


                                                        12

<PAGE>



                                                      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)

        3.                 Certificate of Incorporation and Bylaws

                           3.1.     Articles of Incorporation(1)
                           3.2      Bylaws(1)

                                                        13

<PAGE>
<TABLE>
<CAPTION>



LAS VEGAS AIRLINES, INC.
(A Development Stage Company)Statements of Financial Position

                                                      ASSETS

                                                                                     March 31,         March 31,
                                                                                       1997              1998


CURRENT ASSETS

<S>                                                                                  <C>              <C> 
    CASH                                                                             $                $
                                                                                     ---------        -

    NOTE RECEIVABLE                                                                                       50,000

    OTHER ASSETS
          Organization  costs, net of accumulated  amortization of $266 and $271
          (Note 1)

TOTAL ASSETS                                                                         $       5        $   50,000


                                       LIABILITIES AND STOCKHOLDERS' EQUITY


CURRENT LIABILITIES
    Accounts payable                                                                 $   2,604        $   15,188
    Note payable - related party                                                                          50,000


          Total Current Liabilities                                                  $   2,604        $   65,188

STOCKHOLDERS' EQUITY
Preferred Stock, $.001 par value; 1,000,000 shares
   authorized; no shares issued and outstanding

Common Stock, $.001 par value; 20,000,000 shares
   authorized; 3,624,600 shares issued and outstanding                                   3,625             3,625

Additional paid-in Capital                                                                 821               821

Accumulated deficit during the development stage                                       (7,045)          (19,634)


      TOTAL STOCKHOLDERS' EQUITY                                                       (2,599)          (15,188)
                                                                                     ---------        ----------


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                           $       5        $   50,000





                     The  accompanying   notes  are  an  integral  part  of  the
financial statements.

                                                        14
</TABLE>

<PAGE>

<TABLE>
<CAPTION>


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



                                                                                                     CUMULATIVE
                                                                                                        FROM
                                                            FOR THE                                   INCEPTION
                                                          YEAR ENDED                                (May 4, 1992)
                                                              TO                                         TO
                                                        March 31, 1997        March, 31, 1998      March 31, 1998
                                                        --------------        ---------------      --------------

<S>                                                    <C>                   <C>                  <C>    
REVENUES                                               $                     $                    $
                                                       --------------        ---------------      -

OPERATING EXPENSES

     General and Administrative                                   193                 12,584               19,363
     Amortization                                                  54                      5                  271
                                                       --------------        ---------------      ---------------
TOTAL OPERATING EXPENSES                                          247                 12,589               19,634


NET (Loss)                                             $        (247)        $      (12,589)      $      (19,634)

NET (Loss) PER SHARE                                   $        (Nil)        $         (Nil)      $         (Nil)


WEIGHTED AVERAGE NUMBER OF
     SHARES OUTSTANDING                                     3,624,600              3,624,600            2,867,364






                     The  accompanying   notes  are  an  integral  part  of  the
financial statements.

                                                        15
</TABLE>

<PAGE>
<TABLE>
<CAPTION>



LAS VEGAS AIRLINES, INC.               Statement of Changes in Stockholders'
(A Development Stage Company)           Equity From Inception (May 4, 1992)
                                               Through March 31, 1998



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

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

Net (loss)                                                                                    (269)          (269)

Balances at
    March 31, 1993                              400,000            400            100         (269)            231
Net (loss)                                                                                  (1,661)        (1,661)

Contribution to capital                                                           500                          500

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

Balances at
    March 31, 1994 (Unaudited)                  424,600     $      425    $       821    $  (1,930)     $    (684)
Net (Loss)(Unaudited)                                                                       (4,280)        (4,280)

Issuance of Shares - Failed
    Acquisition - June 1, 1994                3,200,000          3,200                                       3,200

Balances at
    March 31, 1995 (Unaudited)                3,624,600     $    3,625    $       821    $  (6,210)     $  (1,764)
Net (Loss) (Unaudited)                                                                        (588)          (588)

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

Net (Loss)(Unaudited)                                                                         (247)          (247)

Balances at
    March 31, 1997 (Unaudited)                3,624,600     $    3,625    $       821    $  (7,045)     $  (2,599)
Net (Loss)(Unaudited)                                                                      (13,589)       (12,589)

Balances at
    March 31, 1998 (Unaudited)              $ 3,625,600     $    3,625    $       821    $ (19,634)     $ (15,188)




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

                                                        16
</TABLE>

<PAGE>
<TABLE>
<CAPTION>



LAS VEGAS AIRLINES, INC.
(A Development Stage Company)                                                              Statements of Cash Flows



                                                                                                  CUMULATIVE
                                                                 FOR THE           FOR THE      FROM INCEPTION
                                                                  YEAR              YEAR          May 4, 1992
                                                                  ENDED             ENDED             TO
                                                             March 31, 1997    March 31, 1998   March 31, 1998
                                                             --------------    --------------   --------------

CASH FLOWS FROM OPERATING ACTIVITIES

<S>                                                          <C>               <C>             <C>           
    Net (Loss)                                               $      (247)      $      (247)    $     (19,634)

    Add item not requiring the use of cash
         Amortization                                                  54                54               271

    Increase (decrease) in accounts payable                           193               193            15,188

    Net cash flows from operating activities                                                          (4,175)

CASH FLOWS FROM INVESTING ACTIVITIES
    Loan to Subsidiary                                                             (50,000)          (50,000)
    Organization Costs                                                                                  (271)
                                                                                                     (50,271)

CASH FLOWS FROM FINANCING ACTIVITIES
    Contribution to Capital                                                                               500
    Sale of common stock                                                                                3,946
    Proceeds from related party loan                                                 50,000            50,000


    Net Cash flows from financing activities                                         50,000            54,446

NET INCREASE IN CASH

CASH BALANCE AT BEGINNING OF PERIOD

CASH BALANCE AT END OF PERIOD                                $                 $               $













                     The  accompanying   notes  are  an  integral  part  of  the
financial statements.

                                                        17
</TABLE>

<PAGE>



LAS VEGAS AIRLINES, INC.
(A Development Stage Company)                      Notes to Financial Statements

NOTE 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.

            The  financial  statements  as of and for the years  ended March 31,
            1998 and 1997 are unaudited,  pursuant to the exemption  provided by
            Rule 3-11 of Regulation S-X.


NOTE 2      CASH AND CASH EQUIVALENTS

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


NOTE 3      RELATED PARTY TRANSACTIONS

            The  officers and director of the Company  currently  serve  without
compensation.

            An officer of the  Corporation  has  advanced  certain  expenses  on
            behalf  of the  Company.  As of March 31,  1996,  1997 and 1998 such
            expenses totalled $2,411, $2,604 and $15,188.

            An officer  and  director  has loaned  $50,000 to the Company due on
demand at 6% interest.


NOTE 4      INCOME TAXES

            The fiscal  year end of the  Company is March 31st and an income tax
return has not been filed.


NOTE 5      STOCK OPTION PLAN

            The  Company  has  stock  option  plans  for  directors,   officers,
            employees,  advisors,  and  employees of companies  that do business
            with the Company,  which  provide for  non-qualified  and  qualified
            stock options.  The Stock Option  Committee of the Board  determines
            the option  price which cannot be less than the fair market value at
            the  date of the  grant  of 110% of the  fair  market  value  if the
            Optionee holds 10% or more of the Company's  common stock. The price
            per share of share  subject to a  Non-Qualified  Option shall not be
            less  than 85% of the fair  market  value at the date of the  grant.
            Options  generally  expire either three months after  termination of
            employment,  or ten years  after  date of grant  (five  years if the
            optionee holds 10% or more of the Company's common stock at the time
            of grant).


                                                        18

<PAGE>



LAS VEGAS AIRLINES, INC.
(A Development Stage Company)                      Notes to Financial Statements

Options outstanding:
            Shares allocated                          2,000,000

            Option price                             $      .50

            Balance at Inception                             --
            Granted                                      40,000

            Balance outstanding at
            March 31, 1993                               40,000
            Granted                                          --
                                                     ----------

            Balance outstanding at
            March 31, 1994                               40,000
                                                     ----------

            Lapsed                                       40,000

            Balance outstanding at
            March 31, 1995                                   --

            Year Exercisable:
                  1997                                       --


NOTE 6.     SUBSEQUENT EVENT

            On April 28, 1998 the Company  acquired  51% of Las Vegas  Airlines,
            Inc., a Nevada  Corporation,  as disclosed in a Form 8-K dated April
            28, 1998, as amended on July 9, 1998.

                                                        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 report to be signed on
its behalf by the undersigned, thereunto duly authorized July 13, 1998.


                                                       LAS VEGAS AIRLINES, INC.


                                                       By:    /s/ Jehu Hand
                                                              Jehu Hand
                                                              President

        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 July 13, 1998.


By:     /s/ Jehu Hand                     President, Secretary, Chief Financial
        Jehu Hand                         Officer and Director
        


                                                        20

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