UNITED STATES
                       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 For the fiscal year ended: February 28, 2001
                                       or
      Transition  Report  Pursuant  to  Section  13  or 15 (d) of the Securities
                              Exchange Act of 1934

                         Commission File Number: 0-7900

                          LIFE PARTNERS HOLDINGS, INC.
                 (Name of small business issuer in its charter)

                   Massachusetts                  74-2962475
             (State of incorporation)      (I.R.S. Employer ID no.)

                  204 Woodhew
                  Waco, Texas                        76712
   (Address of Principal Executive Offices)        (Zip Code)

          Issuer's telephone number, including area code:  254-751-7797

           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 $0.01 PER SHARE)
                                (Title of Class)

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

Check  if  there  is  no disclosure of delinquent filers pursuant to Item 405 of
Regulation  S-B  contained  herein,  and  will  not be contained, to the best of
Registrant's  knowledge,  in  definitive  proxy  or  information  statements
incorporated  by  reference  in Part III of this Form 10-KSB or any amendment to
this  Form  10-KSB.  [  ]

Revenues  of  issuer  for  year  ended  February  28,  2001:  $3,405,751

Aggregate  market  value  of  voting  stock held by non-affiliates as of May 23,
2001:  $  42,311,100

Shares  of  Common  Stock,  $.01  par  value,  outstanding  as  of May 23, 2001:
10,000,000

DOCUMENTS  INCORPORATED  BY  REFERENCE

The  Company's  definitive proxy statement in connection with the Annual Meeting
of  Shareholders  to be filed with the Commission pursuant to Regulation 14A, is
incorporated  by  reference  into  Part  III  of  this  report.

<PAGE>
                          LIFE PARTNERS HOLDINGS, INC.

                         2001 Form 10-KSB Annual Report
                                Table of Contents

Item                                                                        Page
                                     Part I

       Special Note Regarding Forward-Looking Statements                      3
1.     Description of Business                                                3
2.     Description of Properties                                             15
3.     Legal Proceedings                                                     15
4.     Submission of Matters to a Vote of Security Holders                   16

                                     Part II

5.     Market for Our Common Stock and Related Shareholder Matters           16
6.     Management's Discussion and Analysis or Plan of Operation             17
7.     Financial Statements and Supplementary Data                           18
8.     Changes in and Disagreements with Accountants on Accounting and
       Financial Disclosures                                                 19

                                    Part III

9.     Directors, Executive Officers, Promoters and Control Persons;
       Compliance with Section 16(A) of the Exchange Act                     19
10.    Executive Compensation                                                19
11.    Security Ownership of Certain Beneficial Owners and Management        19
12.    Certain Relationships and Related Transactions                        19
13.    Exhibits and Reports on Form 8-K                                      19

       Signatures                                                            21

                                        2

<PAGE>

                                     PART I

Special  Note  Regarding  Forward-Looking  Statements

     Certain statements in this annual report on Form 10-KSB concerning our
business prospects or future financial performance; anticipated revenues,
expenses, profitability or other financial items, growth in the viatical or life
settlement markets or our projected sales in such markets, developments in
industry regulations and the application of such regulations, and our
strategies, plans and objectives, together with other statements that are not
historical facts, are "forward-looking statements" as that term is defined under
the Federal securities laws. All of these forward-looking statements are based
on information available to us on the date hereof, and we assume no obligation
to update any such forward-looking statements. Forward-looking statements
involved a number of risks, uncertainties and other factors, which could cause
actual results to differ materially from those stated in such statements.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed in this annual report on Form 10-KSB, particularly
in the sections entitled "ITEM 1 - Business - Risk Factors" and "ITEM 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations". Life Partners Holdings, Inc. does not undertake any obligation to
release publicly any revisions to such forward-looking statements to reflect
events or uncertainties after the date hereof or reflect the occurrence of
unanticipated events.


                                     PART I

ITEM  1.  DESCRIPTION  OF  BUSINESS

THE  COMPANY

     General. Life Partners Holdings, Inc. ("We", the "Company" or "Life
Partners") is the parent company of Life Partners, Inc. ("LPI") and Extended
Life Services, Inc. ("ELSI"). LPI is the oldest and one of the largest viatical
settlement companies in the United States. To supplement LPI's viatical
business, we acquired ELSI in January 2000 to engage in senior life settlement
transactions, a strongly emerging market similar to our viatical settlement
business.

     Our Viatical Settlement Business. LPI was incorporated in 1991 and has
conducted business under the registered service mark "Life Partners" since 1992.
To date, our revenues have been principally derived from fees for facilitating
the purchase of viatical settlement contracts. A viatical settlement is the sale
of a life insurance policy covering a person who is terminally ill. By selling
the policy, the insured (a viator) receives an immediate cash payment to use as
he or she wishes. The purchaser takes an ownership interest in the policy at a
discount to its face value and receives the death benefit under the policy when
the viator dies.

     As a leader in the viatical settlement industry for almost a decade, we
match viators with viatical settlement purchasers. We facilitate these
transactions by identifying, examining and purchasing viatical settlements as
agent for the purchasers. LPI locates potential viators through a network of
viatical brokers and through referrals and internet and print media advertising.
Brokers are typically compensated based on a percentage of the face amount of a
viator's policy, which is paid upon the closing of a settlement. We have
long-term relationships with most of the country's viatical settlement brokers
and believe that these brokers adhere to applicable regulatory requirements when
conducting their business. In the fiscal year ended February 28, 2001, broker
referrals accounted for 63% of our viatical settlement business, of which

                                        3
<PAGE>

31%  was  from  one broker. We do not consider ourselves to be dependent on any
single  broker  for  referrals.

     Generally, purchasers are introduced to us through a network of financial
planners, which we originate through referrals. Most of the financial planners
have long-standing relationships with us. Although these financial planners can
be compensated through fee-based consultations paid by the purchaser, most are
compensated by us on the basis of the amount of funds placed by a purchaser. The
compensation of financial planners may consist of cash paid on settlement, and
in certain cases, through a stock option plan provided by us based on the volume
of a financial planner's activity.

     To purchase a viatical settlement, a prospective purchaser first submits a
purchaser application (available on our website), which contains name and
address and background information. A purchaser will also submit an agency
agreement and special power of attorney (also available on our website), which
appoints us as a limited agent of the purchaser to act on his or her behalf in
purchasing a viatical settlement. Unless specifically waived by a purchaser, the
agency agreement limits our authority to policies issued by an insurance carrier
having an A.M. Best rating of A- or better, to policies beyond their contestable
period (generally two years or older), and to insureds diagnosed as terminally
ill and having a probable life expectancy of 48 months or less. We issue each
financial planner a user identification number and password which allows access
to our restricted website containing lists of available policies and medical
case histories (with the viator's name and other identifying information
redacted). We also make available to each financial planner standard disclosures
discussing the nature and risks of viatical settlement purchases. A purchaser
can then, in consultation with his financial planner or other professionals
available to them, select one or more policies, specify the portion of the
policy or policies to be purchased (to diversify their positions, purchasers
generally buy fractional interests in one or more policies and not an entire
policy), and submit electronically or by fax a reservation form. At the same
time, the purchaser mails or wires the acquisition price and mails or faxes a
policy funding agreement to us. The policy funding agreement identifies the
policy or policies to be purchased, the acquisition price, the administrative
services provided, and the escrow arrangements for receipt and disbursement of
funds. In essence, we act upon the instructions of the purchasers as their
purchasing agent.

     For the protection of the viator's ownership interest and the purchaser's
monetary interest, the viatical settlements are closed through an independent
escrow agent, Sterling Trust Co. ("Sterling"), which is a wholly-owned
subsidiary of Matrix Bancorp, Inc. (Nasdaq NMS: MTXC). Sterling will close a
purchase when it receives from purchasers executed policy funding agreements and
the entire acquisition price for a policy, it verifies that the policy is in
full force and effect and that no security interest has attached to the policy,
and it receives from the viator a transfer of policy ownership acknowledged by
the insurance company. Sterling then pays the viator the offer price (net of
fees and costs). After the closing, we send confirmation of the transaction to
the purchaser as well as a copy of the assignment documents.

     After closing the viatical settlement, we generally hold title to the
policy as nominee for the purchaser. Responsibility for policy premium costs
passes to the purchaser, who typically funds the premium costs through deposits
with Sterling. A viator's personal information is protected by regulations
promulgated by the Texas Department of Insurance. A purchaser will receive a
copy of the policy and the transfer of ownership (which has the viator named as
the insured), but will not receive viator contact information, which is
available only to licensed viatical companies (like Life Partners). We maintain
contact with viators and their health care providers through periodic telephone
contact and mailings. We also check social security records on a monthly basis
to determine a viator's status. We also notify purchasers in instances in which
the premium escrow account has been exhausted so that the purchaser can
replenish the account to keep the policy from lapsing.

     We  pioneered  the  foregoing  transaction  design,  which  is used by most
viatical  settlement  companies today. Since our formation, we have has assisted
in  viatical  settlements  totaling  over  $329

                                        4
<PAGE>

million  in face amount of policies giving  us a 40% market share of the
estimated $1.25 billion viatical settlement market.

     The following table shows the number of viatical settlement contracts we
have transacted, the aggregate face values and purchase prices of those
contracts, and the revenues we derived, for our fiscal years ended February 28,
1999, February 29, 2000 and February 28, 2001:

<TABLE>
<CAPTION>




<S>                                           <C>      <C>      <C>
                                              1999     2000    2001
                                            -------  -------  ------
Number of viatical settlements                 187      257     125
Face value of policies (in '000's)         $29,688  $18,539  $9,282
Acquisition costs (in '000's)(1)           $21,145  $14,507  $6,630
Revenues derived (in '000's) (2)           $ 2,048  $ 2,254  $1,807

</TABLE>
_______________

   (1)  Acquisition  costs  include  amounts  paid  to viators, the fees we have
        received  and  the  fees  paid  to the escrow agent and to originating
        financial planners.

   (2)  The  revenues  derived  are  exclusive  of referring broker commissions.

     The  Viatical  Market and Competition.  The market for viatical settlements
started  in the early 1990's with the beginning of the AIDS epidemic and rapidly
grew to a market estimated at $1.2 billion in 1999.  In recent years, the market
has  stabilized  due  to  a number of factors.  Factors moderating market growth
include  an  increase  in the life expectancy of persons living with AIDS due to
improved  medical  treatments,  changes  in  insurance policies that provide for
pre-death  cash  benefits and the increase of government regulation with respect
to  viatical  settlements.

     Despite these factors, we believe the viatical settlement market will
continue to slowly increase due to a number of contravening factors. While newer
medical treatments have improved the longevity and quality of life of some, the
treatments appear to offer only incremental improvements and do not promise the
ability to cure or suspend indefinitely the effects of the terminal illness
[AIDS]. The decline in the rates of AIDS incidence appears to be slowing (an 18%
decline between 1996 and 1997, 13% between 1997 and 1998, and 1% between 1998
and 1999) as does the number of AIDS deaths (an 18% decline between 1997 and
1998 and 9% between 1998 and 1999), which may suggest that the benefits of newer
treatments have been largely realized. The number of people living with AIDS
increased 9.5% between 1997 and 1998 and 9.0% between 1998 and 1999, as reported
by the U.S. Department of Health and Human Services. Over 90% of the viatical
settlements we facilitate are with viators afflicted with AIDS. We have
responded to the effects of the newer medical treatments by adjusting our
underwriting standards upwards and reducing the offer prices to viators.

     In response to the dramatic rise in viatical settlements, the insurance
industry has responded with policy features offering various pre-death, cash
benefits (sometimes called accelerated death benefits). While in some cases
accelerated death benefits may compete with viatical settlements, we do not
expect that the availability of accelerated death benefits to affect the
viatical market significantly at this time. The availability of accelerated
death benefits is generally more restricted than viatical settlements. For
example, policies often limit such benefits to persons who have a life
expectancy of less than one year, in contrast to viatical settlements that are
usually available to persons with remaining life expectancies of up to four
years. Viatical settlements generally offer viators greater amounts than they
would receive under accelerated death benefit provisions. An insurance company's
willingness to offer a competitive accelerated death benefit, and the amount of
such benefit, may be affected by imputed policy lapse rates.

                                        5
<PAGE>

     The availability and amount of an accelerated death benefit negatively
impacts lapse rates, which could increase policy rates. The competition for new
policies limits policy rates and may, indirectly, limit the availability and
amount of accelerated death benefits.

     The  viatical  market  has been negatively affected by some companies using
illegal or questionable business practices.  In response to these abuses and the
accompanying  adverse  publicity,  government  regulators  -  particularly state
insurance  regulators  -  have  adopted  regulations  requiring the licensing of
viatical  brokers  and  settlement companies, mandated disclosures to viators or
purchasers  or  both,  and  periodic  reporting  requirements, and setting forth
prohibited  business practices.  We believe these regulations have generally had
a  positive effect on the industry and on our ability to compete in the viatical
marketplace.  We  are  licensed  as a viatical company in the State of Texas and
information  about  us  is  available through the Texas Department of Insurance.

     The foregoing developments have decreased the number of
viatical settlement companies - both those purchasing for their own accounts and
those, like us, who act as agents for our purchasers. Industry trade groups
estimate the number of viatical companies purchasing for their own account or as
agents for purchasers at about 24, and the number of viatical brokers at about
43. Most of these are companies or brokers with small operations and limited
capital. We estimate that there are fewer than ten active companies with
operations similar to ours. While we believe we are the largest viatical
settlement company (based on face value of policies settled), the viatical
market is active and we experience substantial competition for new viators and
with respect to the prices we pay viators and referring financial planners, and
the prices we set for the acquisition of policies. We believe the overall market
for viatical settlements should maintain its estimated level of approximately
$1.2 billion. In light of our experience in the market, our purchaser network
and continued regulatory pressure within the industry (from which we benefit),
we believe our market share for viatical settlements will remain steady at
between about $10 to $20 million in face amount per year, although in our last
fiscal year, we handled only $9.3 million in face amount.

     We believe the viatical market is nearly flat with limited growth
potential. In response, we have shifted our focus to the newly emerging senior
life settlement business, which we expect will experience explosive and
sustainable growth over the next ten years.

     Our New Senior Life Settlement Business. To supplement our viatical
settlement operations, we entered the market for "senior life settlements" in
1997 under contract with ELSI. We later acquired ELSI as a wholly-owned
subsidiary to focus on this market which Conning & Co., an independent industry
analyst, estimates to be in excess of $100 billion in face amount. On behalf of
ELSI, we originated, reviewed and underwrote almost $600 million in face value
of senior life settlements in 1997. In underwriting these policies, we
quantified premium and life expectancy risks, but did not purchase any of the
policies for our own account or assume any risk associated therewith. A senior
life settlement differs from a viatical settlement in that the insured in a life
settlement is not terminally ill, is 65 years of age or older, and has a life
expectancy of ten years or more. Senior life settlements appeal to persons who
purchased life insurance for income protection or estate planning, but no longer
need the insurance due to growth in their investment portfolios or other changes
in circumstances. The settlements also appeal to persons who want to make
immediate gifts to their beneficiaries. In these instances, the insured may feel
the insurance is no longer needed.

     Senior life settlements offer several benefits. The insured who sells the
policy receives a cash settlement for a policy he or she believes is redundant
and carries a benefit that he or she will never realize personally. A seller
avoids the liability of future premiums and may realize a tax loss (if premiums
paid exceed the cash settlement), which can be used to offset investment gains.
Because the policy stays in effect rather than lapsing, the life insurance agent
who sold the policy continues to receive compensation as premiums are paid. The
agent may also be the originating settlement broker, who is compensated for

                                        6
<PAGE>

the settlement. Further, the agent may earn additional compensation from the
reinvestment of the seller's cash settlement in other insurance or investment
products, such as annuities.

     Since sellers who participate in a senior life settlement have much longer
life expectancies than viators (who are terminally ill), the amount paid to
sellers is less than in a viatical settlement - typically 5% to 25% of the
policy face value. Policies accepted by us in senior life settlements have a
face value of at least $500,000. In determining the price we will offer a senior
life seller, we will examine the policy terms to ensure enforceability and
transferability and consider the type of policy (such as term, universal or
variable life) and future premium payments. Our underwriting department will
calculate the seller's remaining life expectancy, based on his or her age and
sex and whether the seller uses tobacco products.

     We use a network of referring insurance, legal and financial professionals
to originate potential sellers. We have created this network through direct
contact with managing general insurance agents as well as other insurance and
financial professional contacts as well as by word-of-mouth contacts. We also
use print media advertising and our internet website.

     Since senior life settlements are long-term investments (typically
averaging 8-10 years), the predominant purchasers of senior life settlements are
institutional investors seeking long-term, portfolio diversity. These
settlements represent an investment alternative since their yields are not
dependent upon the domestic and global debt markets or interest rate
fluctuations. For this reason, we established a division dedicated exclusively
to attracting and interacting with large financial institutions. Our
institutional division is managed by an executive experienced in the capital
markets. We believe that our institutional funding division will have the
capacity to place in excess of $4.0 billion in face amount per year with
institutional investors through direct purchases and/or securitizations of bond
portfolios.

     As of this date, ELSI is receiving senior life settlement applications
totaling approximately $10.0 million per day in face amount of policies and we
expect this amount to increase. However, many of these policies may not pass our
underwriting standards for one reason or another. Therefore, our ability to
reach our goal of $1.0 billion dollars of face value of policies is dependent
upon the ratio of policies presented to those which pass our underwriting
standards, the ratio of sellers that accept our offer price and the ratio of
policies ultimately accepted for purchase by the institution.

     We intend to use procedures to facilitate senior life settlements that are
substantially similar to the procedures we use in viatical settlements. Sterling
Trust will act as escrow agent and will confirm receipt of the acquisition funds
and all necessary agreements and authorizations, and verify that the policy is
fully paid and that no security interest has attached. When Sterling Trust
completes these tasks, it will distribute funds to the seller and to us and send
a purchase confirmation to the purchaser. Unlike with viatical settlements, the
purchasing institutions will generally hold title to the policies and perform
all post-sale services, such as the payment of premiums and mortality tracking.
We can perform post-sale services upon request.

     Although we have not consummated any of these senior life settlements to
date, we have directed a substantial amount of our corporate resources to
preparing for such purchases by institutional purchasers. We are now in the
final stages of arranging for these types of purchases which will utilize pools
of senior life settlements as collateral for bonds. We believe this emerging
asset class will become more widely utilized by institutions as collateral for
securitized transactions and that we stand in an excellent position to
capitalize on the use of senior life settlements in this way.

     The Senior Life Market and Competition. The market for senior life
settlements is new, first appearing in 1997. Despite its newness, Conning & Co.,
an independent industry analyst, has estimated the total face amount of senior
life settlements purchased in 1998 at $0.5 billion and the potential market for
senior life settlements at over $100 billion. The attraction for senior life
brokers and settlement companies lies in the potential size of the market. The
market is expected to grow given predicted increases in the aging population and
their greater economic wealth.

                                        7

<PAGE>

     Most of the senior life settlement purchases are presently conducted by
fewer than ten companies. Of these, one is a subsidiary of a large financial
institution and has ready access to capital. [We are dependent upon outside
sources of capital for growth in this market. Failure to secure an institutional
purchaser could significantly affect our ability to compete in this market.]

     Other factors may influence the growth of the senior life market. To meet
the needs of institutional purchasers and the need for substantial amounts of
capital to service the market, settlement companies may need to reduce the risks
of senior life settlements, especially those associated with "life extension"
risks. One way to reduce this risk is to reinsure the life extension risks.
Other companies have explored reinsurance possibilities for senior life
settlements. If viable reinsurance programs evolve to reduce life expectancy
risk, we expect to see other senior life settlement companies securitizing
blocks of senior life settlements, which should increase capital availability
and assist in the development of the senior life market in general, but will
also potentially increase competition.

INDUSTRY  REGULATION  AND  TAXATION

     General. When the viatical market first arose, it was sparsely regulated.
Due in part to abuses within the industry, which were well-publicized, both the
Federal government and various states moved to regulate the market in the
mid-1990's. The regulations generally took two forms. One sought to apply
consumer protection-type regulations to the market. This application was
designed to protect both viators and purchasers. Another sought to apply
securities regulations to the market, which was designed to protect purchasers.
Various states have also used their insurance regulations to attack instances of
insurance fraud within the industry.

     Consumer Protection Licensing. The consumer protection-type regulations
arose largely from the draft of a model law and regulations promulgated by the
National Association of Insurance Commissioners (NAIC). At least 35 states have
now adopted some version of this model law or another form of regulation
governing viatical settlement companies in some way. These laws generally
require the licensing of viatical providers and brokers, require the filing and
approval of viatical settlement agreements and disclosure statements, describe
the content of disclosures that must be made to potential viators, describe
various periodic reporting requirements for viatical settlement companies and
prohibit certain business practices deemed to be abusive.

     Licensing in Texas. We are licensed by the Texas Department of Insurance.
Under the Texas requirements, we must file our transaction documents with the
state for approval, make certain disclosures to viators, offer a 15 day right of
rescission to the viator, file certain annual reports with the state, and
prohibit unfair business practices. Because all of our transactions occur in
Texas, the Department of Insurance has jurisdiction to investigate complaints
from any viator, irrespective of the state in which that viator lives.

     In 1999, Texas became the first state to regulate life settlements as well
as viatical settlements. The Texas regulatory scheme for life settlements is
similar to the regulatory scheme applicable to viatical settlements. It requires
licensing of providers and brokers, implements various reporting requirements
and mandates required disclosures. Life Partners is licensed with the State of
Texas as a life settlement company.

     Securities Regulations. Despite the apparent success of consumer
protection-type laws in regulating the viatical industry, some states and the
Securities and Exchange Commission have attempted to treat viatical settlements
as securities under Federal or state securities laws. How viatical settlements
will be regulated as securities and the effect of such regulation on the market
is uncertain. Such regulation will not significantly affect senior life
settlements involving institutional purchasers, either because of exemptions
from registration available in institutional transactions or because the
settlements collateralized bond transactions that are registered or exempt from
registration. In 1994, we were sued by

                                        8
<PAGE>

the SEC, which asserted that we were violating Federal securities laws by
selling interests in life insurance policies. In 1996, we received a favorable
decision from the U.S. Court of Appeals for the District of Columbia, which
ruled that our sales were not securities under the Federal securities laws. The
SEC's request for rehearing was denied. The SEC did not appeal the decision to
the U.S Supreme Court and the SEC's case was dismissed with prejudice in 1997.
In early 1999, the California Department of Securities issued a cease and desist
order against us based on similar assertions. However, at our challenge, the
order was immediately lifted and we continue to facilitate viatical settlements
with purchasers residing in California.

     At least 11 states have amended their securities laws to define viatical
settlements as securities. Some other states have asserted that viatical
settlements are securities and announced their intention to regulate the offer
and sale viatical settlements. To avoid these developments, we do not perform
services for investors in these states, unless it is for an entity which has
properly registered the viatical settlements as securities or complies with an
exemption to that state's securities laws. Federal and state securities laws
also provide private remedies, which permit individuals to sue under such laws
if they can establish that the settlements are securities. We have recently
encountered one such action. Having successfully defended an action by the SEC
alleging the settlements were securities, we believe that we will prevail in
suits alleging the sale of "securities", but can not give assurance that state
regulators or private individuals will not file these types of actions in the
future. See Item 3. Legal Proceedings.

     We believe that a combination of consumer protection-type laws and existing
insurance regulations provide an appropriate framework for regulation of the
industry. The widespread application of securities laws would, as a practical
matter, prevent us and other viatical settlement companies from marketing
settlements with little or no benefit to purchasers. Currently, the vast
majority of purchasers are sophisticated individuals who have little need for
the protections afforded by the securities laws. At this point, the possible
application of such laws has not had an adverse, material effect on our
business, but we cannot give assurance that our business would not be
materially and adversely impacted by a securities-based action.

     Insurance Regulation. As a senior life settlement company and as a viatical
settlement company, we facilitate the transfer of ownership in life insurance
policies, but do not participate in the issuance of policies. We are not
required to be licensed as an insurance company or an insurance professional. We
do, however, deal with insurance companies and professionals in our business and
are indirectly affected by the regulations covering them. The insurance industry
is highly regulated, and these regulations affect us in numerous ways. We must
understand the regulations as they apply to policy terms and provisions and the
entitlement to, and collectibility of, policy benefits. We rely upon the
protections against fraudulent conduct that these regulations offer and we rely
upon the licensing of companies and individuals with whom we do business.

     Taxation. In 1996, Congress passed the Health Insurance Portability and
Accountability Act. This act exempts from taxation proceeds received in a
viatical settlement paid to terminally ill viators (those having a life
expectancy of 24 months or less) and chronically ill viators (those who are
incapable of at least two daily-living activities, such as eating and bathing,
and require supervision). The tax exemption applies only if the viatical
settlement company is licensed in the state in which the viator resides, or if
the viator resides in a state that does not license viatical companies, if the
viatical company can certify that it complies with the model act provisions.
Because we are licensed in Texas, we believe that, under 1996 act, qualifying
viators will not be subject to federal income tax from viatical settlements that
we facilitate. Since most states follow the Federal income tax definitions, the
receipt of settlement proceeds is generally exempt for state income tax purposes
also.

     The act does not exempt the receipt of senior life settlement proceeds.
Senior life settlement proceeds would typically be taxed as capital gains to the
extent that the proceeds exceed the cash surrender value of the insurance
policy. If the cash surrender value exceeds the total premiums paid, the excess
is

                                        9
<PAGE>

taxed as ordinary income. In many instances, the total premiums paid will exceed
the settlement amount, allowing the seller to realize a capital loss for the
difference.

EMPLOYEES

     As of February 28, 2001, we had 24 direct employees, none of whom are
represented by a labor union, as well as over 1,000 licensees who act as
independent contractors. We continuously review benefits and other matters of
interest to our employees and consider our employee relations to be
satisfactory.

MORE  ABOUT  LIFE  PARTNERS

     Life Partners is the successor name to IGE, Inc., a publicly held,
Massachusetts corporation that was formed in 1971, but had been dormant and
without operations since 1985. On January 21, 2000, IGE, Inc. acquired LPI in a
share exchange and its name was then changed to Life Partners. Prior to January
21, 2000, we were a privately held corporation. Our executive offices are
located at 204 Woodhew, Waco, Texas 76712 and our telephone number is
254-751-7797. Our websites are www.lifepartnersinc.com, www.lpi-investments.com
                                -----------------------  -----------------------
and  www.lphiseniorsettlements.com
     -----------------------------

RISK  FACTORS

     Please remember to be cautious in reading forward-looking statements.

IMPORTANT  FACTORS  REGARDING  FORWARD-LOOKING  STATEMENTS.

     In addition to other information in this annual report on Form 10-KSB and
in the documents we are incorporating by reference, the following risk factors
should be carefully considered in evaluating Life Partners and our business
because such factors currently have a significant impact or may have a
significant impact on our business, operating results or financial condition.
This annual report on Form 10-KSB contains forward-looking statements that have
been made pursuant to the provisions of the Private Securities Litigation Reform
Act of 1995. Actual results could differ materially from those projected in the
forward-looking statements as a result of the risk factors set forth below and
elsewhere in this annual report on Form 10-KSB.

WE  ARE  OPERATING  IN  MARKETS  THAT  MAY  CHANGE  DRAMATICALLY

     We are operating in the viatical and senior life settlement markets. The
viatical settlement market is just over a decade old. While the market saw
tremendous growth in its initial years, the market growth in recent years has
moderated and future market growth we consider to be flat.

     The senior life settlement market is less than three years old and is just
now beginning to rapidly expand. How and to what extent it will develop is
uncertain. While the potential market is estimated at over $100 billion, our
ability to originate, underwrite and place senior life settlements has yet to be
tested in large numbers. The development of the senior life settlement market
will depend heavily upon the entry of institutional purchasers. Whether we can
attract institutional purchasers will depend on our ability to convince these
purchasers that we can originate sufficient numbers of sellers and that our
pricing practices are sound. The market may also depend on the ability of
purchasers to insure against "extended life" risks (the risk that sellers will
live longer than predicted). The ability to insure against extended life risks
is still undeveloped at this time.

     While we are among the most experienced and largest companies within these
markets, our prospects must be considered in light of the risks, expenses and
difficulties encountered by those attempting to operate in rapidly evolving
markets. We cannot assure you that we will be successful in addressing the risks
we face. The failure to do so could have a material adverse effect on our
business, financial condition and results of operations.

                                       10

<PAGE>

OUR OPERATING RESULTS IN ONE OR MORE FUTURE PERIODS ARE LIKELY TO FLUCTUATE AND
MAY FAIL TO MEET EXPECTATIONS.

     Our operating results in the viatical market have fluctuated in the past
and may fluctuate significantly in the future depending on purchaser demand for
viatical settlements. Our operating results in the senior life settlement market
may fluctuate significantly depending on our ability to develop this new market.
As a result of these or other factors, our operating results may, in some future
period, fall below market expectations. In such event, the market price of our
securities might fall. Moreover, fluctuations in our viatical operating results
may also result in volatility in the market price of our securities.

OUR SUCCESS DEPENDS ON MAINTAINING RELATIONSHIPS WITHIN OUR REFERRAL NETWORKS

     In the viatical market, we rely primarily upon brokers to refer potential
viators to us and upon financial planners to refer viatical purchasers to us.
These relationships are essential to our operations and we must maintain these
relationships to be successful. We do not have fixed contractual arrangements
with the brokers or financial planners and they are free to do business with our
competitors. In addition, the pool of viatical brokers and referring financial
planners is relatively small, which can increase our reliance on our existing
relationships.

     In the senior life market, we rely primarily on insurance professionals to
refer potential sellers to us. We typically compensate these professional upon
closing. Our ability to maintain these relationships will depend upon our
closing rates and the level of compensation we pay to the referring
professional. The compensation paid to the referring professional will affect
the offer price to the seller and the compensation we receive. We must balance
these interests successfully to build our referring network and attain greater
profitability.

OUR SUCCESS IN THE SENIOR LIFE SETTLEMENT MARKET DEPENDS ON INSTITUTIONAL
SOURCES OF CAPITAL

     We entered the senior life market at its inception in 1997 under contract
for ELSI. On behalf of ELSI, we originated, reviewed and underwrote almost $600
million in face value of senior life settlements in 1997. In underwriting these
policies, we quantified premium and life expectancy risks, but did not purchase
any of the policies for our own account or assumed any risk associated
therewith. Since 1997, we have shifted our corporate focus to the senior life
market by soliciting senior life sellers, creating a senior life referral
network, and establishing a division dedicated exclusively to attracting and
interacting with large financial institutions. To date, we have not consummated
any of these senior life settlements.

     In dealing with senior life settlements, we intend to "securitize" the
settlements by pooling large amounts of senior life settlements, which will
collateralize bonds to be sold to institutional investors. Our approach depends
substantially upon our ability to secure one or more underwriters to market the
bonds and the development of an institutional market for the bonds. While we
have conducted extensive discussions with several investment firms to lead a
bond issue, we do not have a commitment for a bond offering. To our knowledge,
no one has successfully conducted a bond offering securitizing senior life
settlements. While we believe the senior life settlements are well suited for
this use and have devoted substantial resources to pursuit of this approach, we
cannot assure you that an underwriter will commit to the bond issue or that the
bond issue will create sufficient institutional interest.

WE MUST EXPAND OUR SENIOR LIFE REFERRAL NETWORK

     An impediment to our expansion in the senior life settlement market could
be the difficulty in identifying a large volume of potential sellers. These
sellers are typically affluent persons over the age of 70 and not terminally or
chronically ill. The target market is relatively narrow and advertising methods
such as direct mailings or print media advertising are not likely to be
cost-effective. We believe the best way to reach this market is generally
through life insurance professionals and, to a lesser extent, through

                                       11
<PAGE>

professionals engaged in estate planning, such as attorneys, accountants and
financial planners. Our business plan focuses on insurance professionals and we
intend to rapidly expand our referring network of insurance professionals to
build our senior life market. We are expanding our network through direct
solicitation, calls to managing general insurance agents, and by word-of-mouth
contacts. To a lesser extent, we are also using advertising in estate planning
trade publications and our internet website. This is a new market and building
our referral network will depend on our ability to educate insurance
professionals about the benefits of senior life settlements to potential sellers
and to the professionals themselves. While we believe we have been successful in
publicizing the benefits of viatical settlements, we cannot assure you that our
past successes will carry over into this new market. Our business, financial
condition and results of operations could be materially adversely affected to
the extent we fail to expand the referral network.

     WE DEPEND ON GROWTH IN THE SENIOR LIFE SETTLEMENT MARKET

     We believe the viatical market is firm and will provide a stable base for
our operations. Our growth, however, will depend on growth in the senior life
settlement market. The senior life market is new and its growth uncertain. The
senior life market may fail to grow due to a variety of factors, including:

     -     the  inability  to  locate  sufficient  numbers  of  senior  life
           sellers;

     -     the inability to convince potential sellers of the benefits of senior
           life settlements;

     -     the  inability  to  attract  institutional  purchasers;

     -     the failure to develop adequate financial risk management mechanisms,
           such as  reinsurance  or  hedging  arrangements,  to mitigate "life
           extension" risks,

     -     competition  from  life  insurance companies offering comparable
           products;

     -     the  occurrence  of  illegal  or  abusive  business practices
           resulting in negative  publicity  about  the  market;  and

     -     the  adoption  of  burdensome  governmental  regulation.

     In addition, the senior life market may evolve in ways we have not
anticipated and we may be unable to respond in a timely or cost-effective
manner. If the senior life market fails to grow, or fails to grow as quickly as
we have anticipated, our business, financial condition and results of operations
would be materially adversely affected.

OUR PURCHASERS DEPEND ON OUR ABILITIES TO PREDICT LIFE EXPECTANCIES; IF WE ARE
NOT ACCURATE, WE WILL LOSE PURCHASERS; WE MUST PURCHASE IN LARGE NUMBERS

     A purchaser's investment return from a senior life settlement depends
primarily on the demise of the insured. We price settlements based on the
anticipated life expectancy of an insured. Life expectancies are determined from
actuarial data based on the historical experiences of similarly situated
persons. The data is necessarily based on averages involving the laws of large
numbers and it is impossible to predict any one insured's life expectancy
exactly. To mitigate the risk that an insured will outlive his or her predicted
life expectancy, purchasers must have the potential to buy senior life
settlements in large numbers.

     If we underestimate the average life expectancies, our purchasers will not
realize the returns they seek and will invest their funds elsewhere. Our ability
to accurately predict life expectancies is affected by a number of factors,
including:

                                       12
<PAGE>

     -     the  accuracy  of  our  actuarial  and  other  historical data, which
           must sufficiently  account for factors including an insured's age,
           medical condition, life  habits  (such  as  smoking),  and
           geographic  location;

     -     our  ability  to  anticipate  and  adjust  for trends, such as
           advances in medical  treatments,  that  affect  life  expectancy
           data;  and

     -     our  ability to balance competing interests when pricing settlements,
           such as  the  amounts  paid  to viators or senior life sellers, the
           acquisition costs paid  by  purchasers,  and  the  compensation paid
           to ourselves and our referral networks.

     To foster the integrity of our pricing systems, we use both in-house and
outside experts, including a medical doctor and published actuarial data. We
cannot assure you that, despite our experience in settlement pricing, we will
not err in underestimating average life expectancies. If we do so, we could lose
purchasers and the loss of purchasers could have a material adverse effect on
our business, financial condition and results of operations.

THE SENIOR LIFE SETTLEMENT MARKET COULD BECOME EXTREMELY COMPETITIVE AND WE MAY
NOT BE ABLE TO COMPETE EFFECTIVELY IN THE FUTURE

     We face limited competition in the senior life settlement market at this
time. One of our competitors, Viaticus, is a subsidiary of CNA Financial Corp.,
one of the nation's largest insurance companies. As a subsidiary of CNA,
Viaticus has internal sources of funding for the purchase of settlements and
market development, and access to the CNA network of insurance professionals.
Our ability to compete successfully in the market will depend greatly on our
abilities to build our referral network and to secure a low cost of funds. As a
result, present and future competitors may be able to develop and expand their
referral networks quickly, secure lower cost funding sources, or may be able to
take advantage of other opportunities more readily than we can. If we are unable
to compete successfully in the senior life settlement market, we will not
realize the growth we expect from this market.

GOVERNMENT REGULATION COULD NEGATIVELY IMPACT OUR BUSINESS

     We are licensed in the State of Texas as a viatical settlement company and
as a senior life settlement company. The Texas licensing laws and regulations
are based in part on a model law and regulations promulgated by the National
Association of Insurance Commissioners. At least 28 other states have now
adopted some version of this model law or another form of regulation governing
viatical settlement companies in some way. These laws generally require the
licensing of viatical providers and brokers, requires the filing and approval of
viatical settlement agreements and disclosure statements, and describes the
content of disclosures that must be made to potential viators, describes various
periodic reporting requirements for viatical settlement companies and prohibits
certain business practices deemed to be abusive.

     The Federal Securities and Exchange Commission and certain states have also
attempted to regulate the industry through the application of Federal and state
securities laws. In a suit filed against us, the SEC's attempts to apply the
securities laws were rebuffed by the U.S. Court of Appeals for the District of
Columbia, which ruled that our transactions were not securities under the
Federal securities laws. Based on this ruling, the SEC has discontinued any
further attempts to apply the Federal securities laws to viatical settlements as
transacted by us. The Court of Appeals decision was based on federal law and,
while persuasive authority, is not binding upon the states. Several states have
indicated that they may apply their securities laws to include viatical
settlements. In addition, both Federal and state securities laws provide private
remedies, which permit individuals to sue under such laws if they can establish
that the settlements are securities. We have recently encountered one such
action. To our knowledge, no state

                                       13
<PAGE>


or private individual has yet attempted to apply its securities laws to senior
life settlements, but such application is possible and could occur in the
future. See Item 3. Legal Proceedings.

     While we welcome reasonable regulation of the viatical and senior life
markets and believe that such regulation will benefit these markets, attempts to
regulate these markets through application of their securities laws - either
through actions by state agencies or private individuals - may adversely affect
the markets. We cannot assure you that we will not encounter regulatory
difficulties in the future, some of which could have a material adverse effect
on our business. In addition, government regulation could affect our referral
networks or settlement purchasers, which could in turn have a material adverse
effect on our business.

WE DEPEND UPON CERTAIN KEY PEOPLE

     Our success depends to a significant degree upon the continued
contributions of Mr. Brian D. Pardo, our Chairman and Chief Executive Officer.
Mr. Pardo founded Life Partners and has guided its development. His involvement
in the viatical market has greatly influenced the development of that market.
The loss of his services could have a material adverse effect on us. We have no
employment agreement with Mr. Pardo, and we have no key man life insurance on
him. Our success will also depend on the other members of our senior management
team and our technical and marketing personnel. The loss of key personnel, or
the inability to attract additional, qualified personnel, could have a material
adverse effect upon our results of operations, our ability to price settlement
offers accurately and our ability to expand our referral network.

OUR CHAIRMAN AND CHIEF EXECUTIVE OFFICER BENEFICIALLY OWNS 54.5% OF OUR COMMON
STOCK AND, AS A RESULT, CAN EXERCISE SIGNIFICANT INFLUENCE OVER OUR COMPANY

     Mr. Brian D. Pardo, our Chairman and Chief Executive Officer, beneficially
owns approximately 54.5% of our common stock. He will be able to control most
matters requiring approval by our shareholders, including the election of
directors and approval of significant corporate transactions. This concentration
of ownership may also have the effect of delaying or preventing a change in
control of Life Partners, which in turn could have a material adverse effect on
the market price of our common stock or prevent our shareholders from realizing
a premium over the market price for their shares of common stock.

OUR STOCK IS THINLY TRADED AND THE STOCK PRICE MAY BE VOLATILE

     Our common stock is traded on the Nasdaq OTC Bulletin Board, which is a
quotation service facilitating trades in over-the-counter equity securities. The
OTC Bulletin Board is generally the market for any security that is not listed
or traded on Nasdaq or a national securities exchange. The OTC Bulletin Board
does not provide the same qualitative standards available with Nasdaq or the
national securities exchanges, order execution is manually processed, and as a
result the trading and pricing of these securities is not as efficient as Nasdaq
or the national securities exchanges. Our share price during the last 90 days
has averaged about $7.00 per share, giving us a market capitalization of
approximately $60 million. During February 2001, an institution purchased
485,000 shares at various prices between $9.00 and $9.50 per share. Our total
share volume for April 2001 was approximately 55,200 shares. The trading volumes
are thin and the market presently offers shareholders little or no liquidity.

     Our share prices may be volatile due to actual or anticipated variations in
our quarterly operating results, positive or negative developments within the
industry or the general economy, and positive or negative announcements
regarding material developments in our business. We cannot assure you that the
market for our shares will be sufficient to permit you to sell our shares when
you want at the prices you want.

                                       14

<PAGE>

WE HAVE RECENTLY SOLD STOCK IN PRIVATE OFFERINGS UNDER REGISTRATION EXEMPTIONS
IN FEDERAL AND STATE SECURITIES LAWS; COMPLIANCE WITH REGULATORY REQUIREMENTS
MAY BE SUBJECTIVE

     Between September 2000 and January 2001, we sold in a private placement
37,583 shares of our restricted common stock and warrants to purchase common
stock for $541,518 (net of cost). We subsequently concluded that these sales
might not have conformed to the legal requirements for private placement under
the Securities Act of 1933 (the "Act") and applicable state securities laws. To
address this possibility, we offered purchasers the opportunity to rescind the
sales or to receive additional shares and warrants in a new private placement at
a lower purchase price. All but purchasers of 400 shares chose to participate in
the new private placement and received an additional 34,245 shares of restricted
common stock and 17,123 warrants without additional consideration. We sold an
additional 56,200 shares of restricted common stock and 28,100 warrants to new
investors in the second private placement for $391,995 (net of cost). During
this period, we issued 44,481 shares of restricted common stock to two related
parties in exchange for the conversion of notes payable by us in the amount of
$420,000, and issued 41,385 shares of restricted stock to a corporation in
exchange for a one-year note receivable in the amount of $300,041. We recently
issued 1.0 million shares of restricted common stock for $4.65 million (net of
costs) to certain institutional investors.

     We issued these shares in reliance upon the private offering exemptions
under the Act and under applicable state securities laws. While we believe we
have satisfied all applicable legal requirements, the availability of a private
offering exemption is conditioned upon certain requirements that are subjective,
such as our reliance upon investor representations of financial and investment
suitability, our reliance upon the activities of selling brokers, and the degree
of required disclosures. Because of the subjective nature of these requirements,
we cannot be certain that we have satisfied all applicable legal requirements
for the private offering exemptions.

ITEM 2. DESCRIPTION OF PROPERTIES

     Our corporate offices are located at 204 Woodhew in Waco, Texas. We own
1.068 acres at this location and our offices occupy the entire 12,012 square
foot office building, which was built on the lot in 1986. We pay a mortgage
payment of $6,638.46 per month on this property. The note carries a fixed
interest rate of 9.25% with a full amortization period of 15 years.

ITEM 3. LEGAL PROCEEDINGS

     On September 28, 2000, Bobbie J. Griffitts filed suit in the District Court
of  McLennan  County,  Texas,  on  behalf  of  herself  and all others similarly
situated,  against  Life  Partners,  Inc.

     Plaintiff is a purchaser of two viatical settlements. She alleges that LPI
has violated the registration requirements of the Texas Securities Act by
selling viatical settlements that are "securities" under the Texas Securities
Act and are unregistered. The complaint seeks certification as a class action on
behalf of a class consisting of all purchasers of viatical settlements within
the three years preceding the filing of the suit. The complaint seeks a judgment
compelling LPI to rescind all viatical settlement sales during the three-year
period, costs and attorney's fees. The registration claim is the sole claim
alleged in the complaint. The Court has not certified the action as a class
action and we have pending a summary judgment motion to dismiss the suit.

     We believe that our viatical settlements are not securities under the Texas
Securities Act and thus the plaintiff's complaint is without merit as a matter
of law. For the suit to proceed, the plaintiff must establish that our viatical
settlements are "securities". In 1996, the United States Court of Appeals for
the District of Columbia determined in SEC v. Life Partners, Inc. (87 F.2d 536,
rehearing denied, 102 F.3d 587 D.C.Cir.1996) that the viatical settlements sold
by us were not securities under the Federal Securities Act. While this decision
is not binding on the Texas court, Texas courts have held the definitions of

                                       15

<PAGE>


"securities" under the Federal Securities Act and the Texas Securities Act to be
virtually the same, and we believe the Court of Appeals' decision will be highly
persuasive. A motion hearing is set for June 22, 2001, at which the issue of
whether our viatical settlements are securities will be presented. We intend to
vigorously defend this suit and our counsel has advised us that the likelihood
of an unfavorable outcome is remote. It should be noted, however, that the
outcome of any litigation is by its nature unpredictable, and we cannot assure
you that we will ultimately prevail.

     LPI is a defendant in an action styled Hawthorne v. Life Partners, Inc.,
which was filed in Superior Court of San Luis Obispo County, California (Case
No. CV 000938). Plaintiff alleges that she was defrauded by her investment
advisor when she purchased approximately $160,000 of viatical settlements.
Plaintiff further alleges that the advisor was an agent of LPI. Although the
case is in the preliminary stages, we deny liability and intend to pursue our
defense vigorously.

     LPI is also the defendant in an action styled State of Texas v. Life
Partners, Inc., filed in the District Court of Travis County, Texas (Case No. GV
100564). Plaintiff alleges that LPI failed to disclose to purchasers of viatical
settlements prior to 1997 that the purchasers could incur additional carrying
costs in the form of premium payments if viators lived beyond their projected
life expectancies. Plaintiff claims that the nondisclosure violates the Texas
Deceptive Trade Practices Act (the "DTPA") and seeks an injunction against
future violations, civil penalties, and restitution to the affected individuals.
The case was recently filed and is in the very preliminary stage. We intend to
meet with Plaintiff to discuss resolution of the matter, but believe that we
have not violated the DTPA and that the applicable statute of limitations would
preclude most of the possible claims.

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

     No matter was submitted during the fourth quarter of the fiscal year
covered by this Annual Report to a vote of the Company's security holders.

                                     PART II

ITEM  5.  MARKET  FOR  OUR  COMMON  STOCK  AND  RELATED  SHAREHOLDER  MATTERS

     Market Information. On May 23, 2001, there were approximately 105
shareholders of record of our Common Stock. Most of our common stock is held
beneficially by broker/dealers. We believe that there are approximately 300
beneficial owners of shares of our common stock who hold in street name through
brokers. After our share exchange transaction on January 21, 2000, with our
predecessor, I.G.E., Inc., our common stock began trading on the Nasdaq OTC
Bulletin Board under the symbol "LPHI". Prior to January 21, 2000, the I.G.E.
common stock was listed on the Nasdaq OTC Bulletin Board under the symbol
"IGEE". I.G.E. was a "blank check" company with no operating business and no
income from operations. Prior to January 21, 2000, the I.G.E. common stock
traded, if at all, at nominal volumes and values, and we have not presented
market information for the prior periods believing such information is not
meaningful.

     The following table sets forth the high and low closing bid prices per
share of our common stock for each full quarterly period during the two most
recent fiscal years (beginning January 21, 2000) as reported by the Nasdaq OTC
Bulletin Board. Bid prices for the Nasdaq OTC Bulletin Board reflect
inter-dealer prices, do not include retail mark-ups, mark-downs and commissions,
and do not necessarily reflect actual transactions.

                                       16
<PAGE>

<TABLE>
<CAPTION>


                                  FISCAL YEAR ENDED

                                                               FEBRUARY 29, 2000
                              FEBRUARY 28, 2001             (FROM JANUARY 21, 2000)
                          ------------------------         --------------------------
                         HIGH                   LOW                HIGH       LOW
                  ------------------  ------------------          ------     ------
<S>               <C>                 <C>                         <C>         <C>
  First quarter.  $            32.00  $                 11.00     n/a         n/a
  Second quarter  $            24.50  $                 15.75     n/a         n/a
  Third quarter.  $            18.50  $                 12.38     n/a         n/a
  Fourth quarter  $            12.25  $                  6.50    $32.00        $0

</TABLE>

     On  May  23,  2001, the last reported sale price of our common stock on the
Nasdaq  OTC  Bulletin  Board  was  $9.75  per  share.

     Dividends. The Company has never declared a cash dividend with respect to
its Common Stock and intends to retain future earnings to support the Company's
growth. There are no contractual restrictions on the Company's present or future
ability to pay dividends. Future dividend policy is subject to the discretion of
the Board of Directors and is dependent upon a number of factors, including
future earnings, capital requirements and the financial condition of the
Company.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

     Special Note: Certain statements set forth below under this caption
constitute "forward-looking statements" within the meaning of the Reform Act.
See "Special Note Regarding Forward-Looking Statements" for additional factors
relating to such statements.

     The following discussion and analysis should be read in conjunction with
the Company's Consolidated Financial Statements and Notes thereto appearing
elsewhere in this Report.

COMPARISON OF YEARS ENDED FEBRUARY 28, 2001 AND FEBRUARY 28, 2000

     The Company reported a net loss of $(841,555) for the year ended February
28, 2001, as compared to net income of $103,020 for the year ended February 29,
2000. This decrease in net income is attributable primarily to the following
factors: (1) a 51% decrease in the number of settlements, (2) a 19% increase in
average brokerage fees per settlement from $10,777 in 2000 to $12,789 in 2001,
and (3) a 13% increase in general and administrative costs, and (4) accrued
contingency costs totaling $450,000. The decrease was offset in part by (1) a
149% increase in interest and other income and (2) a 39% increase in average
revenues per settlement.

     Revenues - Revenues decreased by $1,617,638 or 32% in 2001 as compared with
2000. This decrease was due primarily due to a 51% decrease in the number of
settlements offset in part by a 39% increase in the average revenue per
settlement from $19,546 in 2000 to $27,246 in 2001. The decrease in the number
of settlements was due to management's efforts to convert more activity to
senior life settlements and to be more selective in the cases it selected for
settlement.

     Brokerage Fees - Brokerage fees decreased 42% or $1,171,198 from $2,769,813
in 2000 to $1,598,615 in 2001. This decrease is due to primarily to a 51%
decrease in the number of settlements offset in part by a 19% increase in
average brokerage fees expense per settlement from $10,777 in 2000 to $12,789 in
2001. The increase in the average brokerage fees per settlement was due
primarily to a 19% increase in the average revenue per settlement.

     General and Administrative Expenses - General and administrative expenses
increased by 13% or $277,259 from $2,181,958 in 2000 to $2,459,217 in 2001. This
increase was due primarily to salaries and the Company's increase in staff in
preparation for acceleration of its senior life settlements business.

     Interest and Other Income - Interest and other income increased by 149% or
$195,272 from $130,726 in 2000 to $325,998 in 2001. This increase was due
primarily to the repayment of premium advances totaling $188,473, which had been
fully reserved.

                                       17

<PAGE>

     Accrued Contingency Costs - The Company has created a reserve for
contingent claims and related costs of $450,000 as of February 28, 2001. The
contingent claims relate to certain litigation against LPI. The reserve amount
provides for amounts that might be paid in settlement and for estimated
litigation costs and professional fees that might be charged.

     Interest Expense - Interest expense increased by $37,572 from $11,392 in
2000 to $48,964 in 2001. This increase is due primarily to the loan associated
with the acquisition of land and buildings by the Company during fiscal 2001.

     Income Taxes - The Company had an income tax benefit of $27,244 in 2001 as
compared to income tax expense of $61,880 in 2000. This benefit resulted from
the generation of operating losses during 2001.

LIQUIDITY AND CAPITAL RESOURCES

     Operating Activities - Net cash flows used in operating activities for the
fiscal year ended February 28, 2001 was $(667,324) compared with net cash flows
used in operating activities of $(27,416) during the fiscal year ended February
29, 2000. This decrease in cash flows from operating activities was attributable
primarily to the following factors: (1) net losses of $(841,555) for the fiscal
year ended February 28, 2001, (2) decreases in accounts payable and income taxes
payable $(100,046) and (3) a $73,683 increase in other assets, offset in part by
(4) an increase of $365,987 in accured liabilties. We anticipate a modest
increase in net cash flow from viatical settlement activities and substantial
cash flows from operating activities related to senior life settlements. We
anticipate completing the purchase of one or more pools of senior life
settlement policies to be used in an asset backed security by the end of this
fiscal year.

     Investing Activities - During the fiscal year ended February 28, 2001, the
Company invested $814,191 in land and buildings, equipment, and transportation
equipment. Of this amount $640,000 was financed.

     Financing Activities - During the fiscal year ended February 28, 2001, the
Company generated $1,038,017 in cash flows from financing activities. The
Company received loan advances totaling $426,672 of which $420,000 was converted
during the year to common stock. In addition, the Company sold additional common
stock for $933,513. These sources of funds from financing activities were offset
in part by the acquisition of treasury stock in the amount of $308,986 and
principal payments on notes payable in the amount of $13,182.

     The Company's strategy is to increase cash flows generated from operations
by increasing revenues while controlling brokerage and general and
administrative expenses.

CAPITAL REQUIREMENTS AND RESOURCES

     At February 28, 2001 the Company had a working capital deficit of
$(151,919). Management anticipates returning the Company to a profitable level
of operations during fiscal 2002. During the third and fourth quarters of fiscal
year 2001, the Company privately placed 127,761 shares of its common stock for
net proceeds of $933,513 and converted outstanding notes having a face amount of
$420,000 for 44,481 shares. These transactions were partially offset by the
Company's purchase of 19,401 shares of treasury stock for $308,986 during the
periods. In addition, subsequent to year end, the Company obtained an additional
net capital infusion of $4.65 million in return for the private placement of
1,000,000 treasury shares to institutional investors. We believe that this
capital infusion is more than sufficient to meet our anticipated operating needs
over the next 24 months even without any revenue from either viatical or life
settlement transaction fees.

ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The Company's audited financial statements, together with the report of
auditors, are included in the report after the signature page.

                                       18

<PAGE>

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

     Not applicable.

                                    PART III

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

     The information required in response to this Item is incorporated herein by
reference to the Company's proxy statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A, not later than 120 days after
the end of the fiscal year covered by this report.

ITEM 10. EXECUTIVE COMPENSATION

     The information required in response to this Item is incorporated herein by
reference to the Company's proxy statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A, not later than 120 days after
the end of the fiscal year covered by this report.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required in response to this Item is incorporated herein by
reference to the Company's proxy statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A, not later than 120 days after
the end of the fiscal year covered by this report.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required in response to this Item is incorporated herein by
reference to the Company's proxy statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A, not later than 120 days after
the end of the fiscal year covered by this report.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

     Exhibit No. 10.2 is a management contract or compensatory plans or
arrangements.

                                  EXHIBIT INDEX
                             DESCRIPTION OF EXHIBIT

<TABLE>
<CAPTION>



<S>                     <C>
NUMBER                  DESCRIPTION
------                 ------------
3.1            Articles of Incorporation, dated May 20, 1971 (1)
3.2            Bylaws (1)
4.1            Form of stock certificate for our common stock (1)
10.1           Share exchange agreement between I.G.E., Inc. and us dated January 18, 2000  (1)
10.2           LPHI Licensee Incentive Stock Reward Plan (1)
21             Subsidiaries of the Issuer

</TABLE>

                                       19

<PAGE>

     (1) These exhibits were filed with the Company's Annual Report on Form
     10-KSB for the year ended February 29, 2000, and are incorporated by
     reference herein.

(b) Reports on Form 8-K:

     We filed no Form 8-K's during the quarter ended February 28,2001.

                                       20
<PAGE>

                                   SIGNATURES

                                   By: /s/  Brian  D.  Pardo
                                      ------------------------
                                          Brian  D.  Pardo
                                   President and Chief Executive Officer


     In  accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

/s/  Brian  D.  Pardo         President,  Principal  Executive   May  29,  2001
---------------------         Officer,  and  Director

/s/  Jacquelyn  Dav           Treasurer                          May  29,  2001
-------------------------

/s/  R.  Scott  Peden         Corporate  Clerk (Secretary),      May  29,  2001
---------------------         Director


                                       21

<PAGE>


ITEM  7.



                          LIFE PARTNERS HOLDINGS, INC.


                        CONSOLIDATED FINANCIAL STATEMENTS


                          YEARS ENDED FEBRUARY 28, 2001
                              AND FEBRUARY 29, 2000

<PAGE>




                                TABLE OF CONTENTS




INDEPENDENT  AUDITORS'  REPORT
     ON  FINANCIAL  STATEMENTS                              F-1

FINANCIAL  STATEMENTS

Consolidated  Balance  Sheet                                F-2

Consolidated  Statements  of  Operations                    F-4

Consolidated  Statements  of  Shareholders'  Equity         F-5

Consolidated  Statements  of  Cash  Flows                   F-6

Notes  to  Consolidated  Financial  Statements              F-8


<PAGE>






                          INDEPENDENT AUDITORS' REPORT
                         ------------------------------


To the Board of Directors
Life Partners Holdings, Inc.

We have audited the accompanying consolidated balance sheet of LIFE PARTNERS
HOLDINGS, INC. as of February 28, 2001, and the related consolidated statements
of operations, shareholders' deficit, and cash flows for the years ended
February 28, 2001 and February 29, 2000. 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion the financial statements referred to in the first paragraph above
present fairly, in all material respects, the financial position of Life
Partners Holdings, Inc. as of February 28, 2001, and the results of its
operations and its cash flows for the years ended February 28, 2001 and February
29, 2000, in conformity with accounting principles generally accepted in the
United States of America.


                             GRAY & NORTHCUTT, INC.




April 24, 2001,
except for Notes 11 and 12,
as to which the date is June 6, 2001.

                                       F-1


<PAGE>


                           LIFE PARTNERS HOLDINGS, INC.
                            CONSOLIDATED BALANCE SHEET
                                FEBRUARY 28, 2001


                                     ASSETS

CURRENT  ASSETS:

<TABLE>
<CAPTION>




<S>                                                                 <C>
   Cash                                                             $  312,277
   Due from officers and shareholders                                   20,893
   Current portion - long-term notes receivable                          3,419
   Prepaid income taxes                                                 47,704
   Prepaid expenses                                                      8,910
                                                                    ----------

     Total current assets                                              393,203
                                                                    ----------





PROPERTY AND EQUIPMENT:
   Land and building                                                   803,328
   Machinery and equipment                                              50,322
   Transportation equipment                                            173,775
                                                                    ----------

                                                                     1,027,425
   Accumulated depreciation                                           (162,827)
                                                                    -----------

                                                                       864,598
                                                                    -----------

OTHER ASSETS
   Notes receivable, net of current portion, shown above,
     and allowance for bad debt of $40,798                               6,297
   Advances of premiums, net of reserve for uncollectable advances
     of $215,525                                                        63,198
   Other                                                                27,248
                                                                    -----------

                                                                        96,743
                                                                    -----------

                                                                    $1,354,544
                                                                    ===========

</TABLE>

                See accompanying notes to financial statements.

                                      F-2
<PAGE>

                           LIFE PARTNERS HOLDINGS, INC.
                            CONSOLIDATED BALANCE SHEET
                                FEBRUARY 28, 2001


                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT  LIABILITIES:

<TABLE>
<CAPTION>
<S>                                                  <C>
CURRENT LIABILITIES:
   Accounts payable                                  $    43,700
   Current portion of long-term debt                      22,431
   Accrued contingencies costs                           454,078
   Accrued liabilities                                    24,913
                                                     -----------

     Total current liabilities                           545,122
                                                     -----------

LONG-TERM DEBT, NET OF CURRENT PORTION SHOWN ABOVE       604,387
                                                     -----------

CONTINGENCIES                                                  -
                                                     -----------

SHAREHOLDERS' EQUITY:
   Common stock, $0.01 par value, 10,000,000 shares
     authorized; 10,000,000 shares issued                100,000
   Additional paid-in capital                          6,359,371
   Accumulated deficit                                (5,645,309)
   Less:  Note receivable issued for common stock       (300,041)
   Less:  Treasury stock - 1,410,151 shares             (308,986)
                                                     ------------

                                                         205,035
                                                     ------------

                                                     $ 1,354,544
                                                     ============


</TABLE>

                 See accompanying notes to financial statements.

                                      F-3
<PAGE>

                               LIFE PARTNERS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    FOR THE YEARS ENDED FEBRUARY 28, 2001 AND
                                FEBRUARY 29, 2000


<TABLE>
<CAPTION>




                                            2001         2000
                                         -----------  -----------
<S>                                      <C>          <C>
REVENUES                                 $3,405,751   $5,023,389

BROKERAGE FEES                            1,598,615    2,769,813
                                         -----------  -----------

REVENUES, NET OF BROKERAGE FEES           1,807,136    2,253,576
                                         -----------  -----------

OPERATING AND ADMINISTRATIVE EXPENSES:
   General and administrative             2,459,217    2,181,958
   Depreciation                              43,752       26,052
                                         -----------  -----------

                                          2,502,969    2,208,010
                                         -----------  -----------

INCOME (LOSS) FROM OPERATIONS              (695,833)      45,566
                                         -----------  -----------

OTHER INCOME (EXPENSES):
   Interest and other income                325,998      130,726
   Accrued contingency costs               (450,000)           -
   Interest expense                         (48,964)     (11,392)
                                         -----------  -----------

                                           (172,966)     119,334
                                         -----------  -----------

INCOME (LOSS) BEFORE INCOME TAXES          (868,799)     164,900
                                         -----------  -----------

INCOME TAXES
   Current tax expense (benefit)            (27,244)      61,880
                                         -----------  -----------

                                            (27,244)      61,880
                                         -----------  -----------

NET INCOME (LOSS)                        $ (841,555)  $  103,020
                                         ===========  ===========

PER SHARE EARNINGS OF
   COMMON STOCK AMOUNTS                  $    (0.10)  $     0.01
                                         ===========  ===========
AVERAGE COMMON AND COMMON
   EQUIVALENT SHARES OUTSTANDING.         8,412,100    7,086,718
                                         ===========  ===========

</TABLE>

                See accompanying notes to financial statements.

                                      F-4
<PAGE>
                          LIFE PARTNERS HOLDINGS, INC.
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
           FOR THE YEARS ENDED FEBRUARY 28, 2001 AND FEBRUARY 29, 2000



<TABLE>
<CAPTION>


                                Common Stock
                                ------------
                              Number    $0.010        Additional                                Treasury Stock           Total
                                                                                                ---------------
                                of       par           Paid-In    Accumulated      Note       Number of             Shareholders'

                              Shares    Value (1)     Capital (1)   Deficit      Receivable    Shares       Amount      Equity
                            ----------  ----------  ------------  ------------  ------------  -----------  ----------  ----------
<S>                         <C>         <C>         <C>           <C>           <C>           <C>          <C>         <C>
Balance,
  February 28, 1999          9,930,000  $   99,300  $  4,292,876  $(4,906,774)  $         -            -   $       -   $(514,598)

Common stock issued
  for note payable              70,000         700       401,363            -             -            -           -     402,063

Contribution of treasury
  shares from existing               -           -             -            -             -    3,000,000           -           -
  shareholders

Proceeds from the
  sale of treasury                   -           -        11,578            -             -   (1,395,356)          -      11,578
  stock

Net income for the
  year ended
  February 29, 2000.                 -           -             -      103,020             -            -           -     103,020
                            ----------  ----------  ------------  ------------  ------------  -----------  ----------  ----------

Balance,
  February 29, 2000.        10,000,000     100,000     4,705,817   (4,803,754)            -    1,604,644           -       2,063

Treasury stock issued
  for notes payable                  -           -       420,000            -             -      (44,481)          -     420,000

Contribution of stock.               -           -             -            -             -       75,000           -           -
  by employees

Treasury stock sold.                 -           -       933,513            -             -      (93,783)          -     933,513
  for cash

Treasury stock                       -           -             -            -             -       19,401    (308,986)   (308,986)
  purchased

Treasury stock sold
  for note                           -           -       300,041            -      (300,041)     (41,385)          -           -
  receivable

Return of stock to
  Employees                          -           -             -            -             -      (75,000)          -           -

Issuance of additonal
  shares of treasury stock
  for adjustments to                 -           -             -            -             -      (34,245)          -
  purchase price

Net loss for the
  year ended
  February 28,2001                   -           -             -     (841,555)            -            -           -    (841,555)
                            ----------  ----------  ------------  ------------  ------------  -----------  ----------  ----------

Balance,
  February 28,2001          10,000,000  $  100,000  $  6,359,371  $(5,645,309)  $  (300,041)   1,410,151   $(308,986)  $ 205,035
                            ==========  ==========  ============  ============  ============  ===========  ==========  ==========

</TABLE>

                See accompanying notes to financial statements.

                                      F-5


<PAGE>

                          LIFE PARTNERS HOLDINGS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                    FOR THE YEARS ENDED FEBRUARY 28, 2001 AND
                                FEBRUARY 29, 2000

<TABLE>
<CAPTION>



                                                             2001        2000
                                                          ----------  ----------
<S>                                                       <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                             $(841,555)  $ 103,020
   Adjustments to reconcile net income to
     net cash used in operating activities -
       Depreciation                                          43,752      26,052
       (Increase) Decrease in accounts receivable            (3,660)    179,164
       (Increase) in prepaid expenses                       (58,119)     (1,149)
       (Increase) Decrease in other assets                  (73,683)        424
       Increase (Decrease) in accounts payable              (36,546)     60,002
       Increase (Decrease) in income taxes payable          (63,500)     61,880
       (Decrease) in accrued liabilities                    365,987    (456,809)
                                                          ----------  ----------

     Net cash used in operating activities                 (667,324)    (27,416)
                                                          ----------  ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property and equipment                     (174,191)    (15,331)
                                                          ----------  ----------

     Net cash used in investing activities                 (174,191)    (15,331)
                                                          ----------  ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Advances on note payable                                 426,672           -
   Payments on note payable.                                (13,182)    (12,629)
   Purchases of treasury stock                             (308,986)          -
   Proceeds from issuance of common stock                   933,513           -
                                                          ----------  ----------

     Net cash provided by (used in) financing activities  1,038,017     (12,629)
                                                          ----------  ----------

NET INCREASE (DECREASE) IN CASH AND                         196,502     (55,376)
   CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS,
   BEGINNING OF YEAR                                        115,775     171,151
                                                          ----------  ----------

CASH AND CASH EQUIVALENTS
   END OF YEAR                                            $ 312,277   $ 115,775
                                                          ==========  ==========
</TABLE>

                See accompanying notes to financial statements.

                                      F-6
<PAGE>


                          LIFE PARTNERS HOLDINGS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                    FOR THE YEARS ENDED FEBRUARY 28, 2001 AND
                                FEBRUARY 29, 2000

<TABLE>
<CAPTION>



                                                     2001     2000
                                                    -------  ------
<S>                                                 <C>      <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Interest expense                                 $48,964  11,392
                                                    =======  ======

</TABLE>




SUPPLEMENTAL  DISCLOSURE  OF  NON-CASH  TRANSACTIONS:

     During November 1999, the Company converted a note payable due to a
     corporation of $350,000 and the related accrued interest totaling $52,063
     to 70,000 shares orcommon stock, resulting in additional paid-in capital of
     $401,363.

     During June 2000, the Company acquired land and an office building for
     $803,328 in exchange for a mortgage of $640,000 and cash of 163,328.

     During November 2000, the Company exchanged 11,148 shares of its treasury
     for notes payable totaling $170,000.

     During December 2000, the Company exchanged 41,385 shares of its treasury
     stock for shares of its treasury stock for a note receivable in the amount
     of $300,041.

     During February 2001, the Company converted a note payable due to a
     Corporation of $250,000 to 33,333 shares of common stock, which the Company
     previously held as treasury stock resulting in additional paid-in capital
     of $250,000.


                See accompanying notes to financial statements.


                                      F-7

<PAGE>
                          LIFE PARTNERS HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 2001




(1)     DESCRIPTION  OF  BUSINESS

Life Partners Holdings, Inc. (the "Company") formerly IGE, Inc. was organized
under the laws of the Commonwealth of Massachusetts in 1971, but had been
dormant and without operations since 1985. On January 18, 2000, the shareholders
of Life Partners Holdings, Inc. and Life Partners, Inc. (LPI) entered into a
share exchange agreement whereby LPI became a wholly-owned operating subsidiary
of the Company. (See Note 6 for further details.) On January 20, 2000, the
Company acquired all of the outstanding stock of Extended Life Services, Inc.
for $500. (See Note 6 for further details).

The  Company's  subsidiaries  are  as  follows:

     LPI is a viatical settlement company established in 1991 and incorporated
     in State of Texas for the purpose of assisting persons in facilitating the
     purchase of the life insurance policies of terminally ill persons at a
     discount to their face value.

     Extended Life Services, Inc. was established in 1998 and incorporated in
     the State of Texas to engage in senior life settlement transactions by
     assisting elderly individuals to reallocate their assets from insurance
     policies into assets used for long-term care coverage, annuities,
     investments, etc.

(2)     SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

The  following is a summary of significant  accounting  policies followed by the
Company:
          Cash  and  Cash  Equivalents -
          For purposes of the statement of cash flows, the Company considers all
          short-term debt securities purchased with a maturity of three months
          or less to be cash equivalents. The average balance of the Company's
          general checking account balance is generally in excess of $100,000.
          The Federal Deposit Insurance Corporation insures all bank accounts up
          to $100,000. Management believes its exposure to loss is minimal
          considering only the amounts in excess of $100,000 are at risk and the
          depository bank is a well established national bank and one of the
          nation's largest financial institutions.

          Consolidation  -
          The consolidated financial statements include the accounts of Company
          and its wholly-owned subsidiaries, as described in Note 1 above. All
          significant intercompany accounts and transactions have been
          eliminated in consolidation.

          Revenue  Recognition  -
          Revenues are recognized as of the settlement date of the viatical
          purchase by investors. During the fiscal years ended February 28, 2001
          and February 29, 2000, all settlement revenues were generated from
          viatical settlements. No settlement revenues were generated from
          senior life settlements during these years.

          Depreciation  -
          The Company's property and equipment are depreciated over their useful
          lives using the straight-line method.

          Income  Taxes  -
          Income tax expense includes federal income and Texas franchise taxes
          currently payable. Deferred timing differences between the reporting
          of income and expenses for financial and income tax reporting purposes
          are reported as deferred tax.

                                       F-8

<PAGE>
          assets, net of valuation allowances, or as deferred tax liabilities
          depending on the cumulative effect of all timing differences. See Note
          5 for further details.

          Use of estimates -
          The preparation of financial statements in conformity with generally
          accepted accounting principles requires management to make estimates
          and assumptions that affect the amounts reported and contingent assets
          and liabilities disclosed in the financial statements and accompanying
          notes. Actual results inevitably will differ from those estimates and
          such differences may be material to the financial statements.

          Earnings  (Loss)  Per  Share  -
          Basic earnings (loss) per share computations are calculated on the
          weighted-average of common shares and common share equivalents
          outstanding during the year, reduced by the Treasury Stock. Common
          stock options and warrants are considered to be common share
          equivalents and are used to calculate diluted earnings per common and
          common share equivalents except when they are anti-dilutive.

          Liquidation  of  LPI  Entertainment, Inc. -
          On September 7, 1999, LPI liquidated LPI Entertainment, Inc.
          ("Entertainment"), its wholly-owned subsidiary. Entertainment's only
          remaining asset was a motor home with a cost basis of $173,775, which
          was transferred to the Company at its net book value. Entertainment
          had been inactive since 1995. No gain or loss was recognized for
          financial reporting purposes on this liquidation.


(3)     LEASES

        The  Company  leases  office  space  and  various  equipment  under
        noncancelable operating leases expiring in various years through 2004.

        Minimum  future  rental  payments under noncancelable operating leases
        having  remaining  terms in excess of one year as of February 28, 2001
        for  each  of  the  next  five  years  and  in  the  aggregate  are:

<TABLE>
<CAPTION>



<S>                                   <C>
Twelve months ending February 28,      Amount
------------------------------------  -------

2002                                  $12,791
2003                                    6,708
2004                                      559
2005                                        -
2006                                        -
                                      -------

Total minimum future rental payments  $20,058
                                      =======

</TABLE>

Rental expense consisted of minimum lease payments of $153,010 and $158,375 for
the years ended February 28, 2001 and February 29, 2000, respectively. Included
in rent expense for the fiscal year ended February 28, 2001 is $101,650 relating
to its office lease, which expired December 2000 and was not renewed as the
Company now owns an office building.

Certain operating leases provide for renewal, and/or purchase options.
Generally, purchase options are at prices representing the expected fair market
value of the property at the expiration of the lease term. Renewal options are
for periods of one year at the rental rate specified in the lease.

(4) LONG-TERM DEBT

          As of February 28, 2001, the Company had the following long-term debt:

                                       F-9

<PAGE>

<TABLE>
<CAPTION>



<S>                                          <C>            <C>
                                             Current        Long-Term
                                             --------       ----------

9.25% note payable to a bank, due in
installments of $6,638 through June 2015,
secured by land and office building          $ 22,431       $  604,387
                                             ========       ==========
</TABLE>

Maturities  on long-term debt for each of the next five years and thereafter are
as  follows:

<TABLE>
<CAPTION>



                        Amount
                        ------
<S>                     <C>
   2002                 $ 22,431
   2003                   24,604
   2004                   26,989
   2005                   29,450
   2006                   32,458
THEREAFTER.              490,886
                         -------
                         626,818
                         =======
</TABLE>

(5)     INCOME  TAXES

               As of February 28, 2001, the Company has unused charitable
               contribution deduction carryforwards of approximately $104,069.
               These charitable contributions carryforwards will expire as
               follows:

<TABLE>
<CAPTION>



          Fiscal Year Ended
             February 28,                    Amount
                                             ------
<S>            <C>                        <C>
               2002                       $  15,312
               2003                          36,239
               2004                          34,659
               2006                          17,859
                                            -------
                                            104,069
                                            =======
</TABLE>

Temporary timing differences between the reporting of income and expenses for
financial and income tax reporting purposes give rise at February 28, 2001, to a
deferred tax asset of approximately $24,261, which was fully reserved as of that
date.

Following  are  the  components  of  this  deferred tax asset as of February 28,
2001and  February  29,  2000:

<TABLE>
<CAPTION>




                                           2001         2000
<S>                                     <C>           <C>
  Charitable deduction carryforwards    $   40,000   $ 74,200
  Net operating loss carryforward          270,000          -
  Utilization of loss carryback            (27,244)         -
  Excess tax over financial accounting
    Depreciation                           (12,000)   (20,400)
                                        -----------  ---------
  Net deferred tax asset                   270,756     53,800
  Less valuation allowance                (270,756)   (53,800)
                                        -----------  ---------
  Deferred tax asset,
    net of valuation allowance           $        -   $     -
                                         ==========  =========
</TABLE>

                                       F-10

<PAGE>
The  Company  has  an  available  tax  net  operating  loss  carry  forward  of
approximately  $700,000 as of February 28, 2001. This carryforward will begin to
expire  in  the  year  2020.

     The difference between the Company's effective income tax rate and the
     United States statutory rate is reconciled below for the years ended
     February 28, 2001 and February 29, 2000:
<TABLE>
<CAPTION>

                                                    2000         2001
                                                    ----         ----
<S>                                                  <C>         <C>
     United States statutory rate                    0.0%        34.0%
     State of Texas statutory rate                   0.0%         4.5%
                                                    -----        -----
     Expected combined rate                          0.0%        38.5%
     Benefit of utilization of net operating
      loss carryback                                (3.1)           0
     Benefit of utilization of net operating
      loss carryforward                              0.0%       (1.5%)
                                                    ------      ------
Combined effective tax rate                         (3.1)%       37.0%
                                                    ======      ======
</TABLE>

(6)  COMMON STOCK OPTIONS AND CHANGES IN CAPITALIZATION

     Conversion of debt to equity

     During November 1999, LPI converted its 5.25% note payable of $350,000 and
     the related accrued interest totaling $52,063 due to Descartes, Ltd. into
     70,000 shares of common stock in Life Partners, Inc.

     Reverse Stock Split

     On November 30, 1999, the shareholders of the Company authorized a 20-to-1
     reverse stock split, thereby decreasing the number of issued and
     outstanding shares to 500,000. The Consolidated Statement of Shareholders'
     Equity has been adjusted retroactively to reflect the effect of this
     reverse split as of February 28, 1999.

     Reverse Merger

     On January 18, 2000, the Company acquired LPI in a share exchange whereby
     LPI became a wholly-owned subsidiary of the Company. This transaction was
     treated as a pooling of interest for financial reporting purposes. The
     Company issued LPI shareholders 9,500,000 shares of common stock. The
     Company approved the transfer of its assets to LPI and the existing Board
     of Directors and Officers resigned. On January 21, 2000, the Company's
     principal shareholder contributed 3,000,000 shares of the Company's common
     stock back to the Company to be used in accordance with the terms of the
     its Omnibus Equity Compensation Plan. Any shares not optioned by January
     31, 2002 were to revert to this shareholder. As of February 28, 2001, this
     shareholder waived its reversionary right these shares.

     Acquisition of Extended Life Services, Inc.

     On January 20, 2000, the Company acquired all of the outstanding stock of
     Extended Life Services, Inc. for $500 in a transaction treated as a
     purchase for financial reporting purposes.

     Omnibus Equity Compensation Plan
                                       F-11

<PAGE>
     The Company adopted an Omnibus Equity Compensation plan. This plan allows
     the Company to issue up to 3,000,000 shares of its treasury stock to its
     employees and agents at prices and terms to be determined by the Company on
     the date of issuance.

     As of February 29, 2000, the Company had issued 1,395,356 shares under this
     plan for which it received notes receivable totaling $9,078 and recognized
     compensation expense of $2,500. No shares were issued pursuant to the terms
     of this plan during the year ended February 28, 2001.


(7)  OTHER STOCK TRANSACTIONS

     During September of 2000, three of the Company's employees contributed a
     total of 75,000 shares common stock back to the Company for no
     consideration. These shares were to be contributed back to the Company so
     that it would have shares available to issued under the terms of a private
     placement memorandum dated September 8, 2000.

     On March 1, 2001, the board of directors authorized the reissuance of the
     above described 75,000 shares of common stock back to the contributing
     employees. For financial reporting purposes, this stock was treated as
     returned to the employees as of February 28, 2001.

     Under the terms of the September 8, 2000 private placement memorandum, the
     Company could sell up to 1,000,000 units at $20 per unit, each of which was
     composed of a share of restricted common stock and one-half of a warrant to
     purchase common stock. Each full warrant is exercisable for a period of
     three years at an exercise price of $25 per share. To place the private
     offering, the Company contracted with a registered broker-dealer. The
     Company sold 37,583 units between September of 2000 and January 28, 2001
     for $541,667.

     Attorneys have advised the Company that it appears that the sales may not
     have conformed to the legal requirements for private offerings under the
     Securities Act of 1933 (the "Act") and applicable state securities laws,
     resulting in possible violations under the Act and applicable state
     securities laws. These possible violations could have resulted in
     rescission of these sales by the investors and other possible penalties. To
     address these possible violations, management took the following actions:

          1. On January 29, 2001, management issued a new private placement
          memorandum, which it believes conforms to the legal requirements for
          private offerings under the Act and applicable state securities laws.
          Under the revised offering terms, the Company can offer up to 266,668
          units at $7.50 per unit, each of which is composed of one share of
          restricted common stock and one-half of a warrant to purchase common
          stock. Each full warrant is exercisable for a period of three years at
          an exercise price of $9.38 per share.

          2. Management has offered to rescind each of the sales issued under
          the terms of the September 8, 2000 private placement memorandum. As of
          the date of this report, investors representing 37,183 units purchased
          under the terms of the September 8, 2000 private placement memorandum
          have elected to waive their rights to rescind these purchases in
          exchange for applying the purchase price to the terms of the January
          29, 2001 private placement memorandum. This will result in the
          issuance of an additional 34,245 shares of common stock and 17,123
          warrants. The February 28, 2001 financial statements have been
          adjusted to reflect these additional shares as issued from the
          Company's treasury stock.


                                       F-12

<PAGE>

     Commencing in October 2000 through December 2000, the Company purchased
     19,401 shares of its own common stock in market transactions for a total
     consideration of $308,986. The Company has ceased purchasing its own shares
     and does not anticipate further market purchases.

     During November 2000, the Company converted two notes payable to related
     parties totaling $170,000 for the issuance of 11,148 shares of its treasury
     stock.

     On December 26, 2000, the Company issued 41,385 shares of its treasury
     stock to a corporation in exchange for a one-year note receivable in the
     amount of $300,041. This note bears interest at the rate of 9.5% per annum
     and is personally guaranteed by certain individuals. For financial
     reporting purposes, this note has been reflected as a reduction in the
     Company's shareholders equity section similar to a stock subscription
     receivable.

     During February 2001, the Company converted a note payable to a related
     party totaling $250,000 to 33,333 shares of its treasury stock.

     During February of 2001, the Company issued an additional 56,200 units
     under the terms of the January 29, 2001 private placement memorandum for
     $391,995, net of brokerage commissions of $29,505.

     At February 28, 2001, the Company had 97,523 warrants outstanding at an
     exercise price of $9.375 per warrant for one share each of the Company's
     treasury stock. These warrants will expire in three years commencing in
     2003.


(8)  RELATED PARTY TRANSACTIONS

     The Company currently operates under an agreement with ESP Communications,
     Inc. (ESP), which is owned by the wife of the Company's president. Under
     the agreement, ESP performs specified administrative duties on behalf of
     the Company concerning post-transaction contact. In addition, ESP also
     provides facilities and various administrative personnel for the Company.
     Either party may cancel the agreement with a thirty day written notice. The
     Company currently pays ESP $5,000 on a bi-weekly basis for its services.
     The Company recorded management services expense concerning this agreement
     with ESP of approximately $133,500 and $91,000 for the years ended February
     28, 2001 and February 29, 2000, respectively.


(9)  EARNINGS  (LOSS)  PER  SHARE

     Basic earnings per share amounts are computed based on the weighted average
     number of shares outstanding on that date during the applicable periods.
     The number of shares used in the computations were 8,412,100 in 2001 and
     7,086,718 in 2000.

     Diluted earnings per share was not computed as of February 28, 2001and
     February 29, 2000 because it is immaterial.


(10)  CONTINGENCIES

     LPI has been named as defendant in a suit claiming it violated the Texas
     Securities Act by not complying with the registration requirements of the
     Act in connection with viatical settlements it has arranged. The plaintiff
     seeks recession of her investment. Plaintiff
                                       F-13
<PAGE>

     also seeks to certify a class of all persons who have invested in viatical
     settlements through LPI and seeks class wide relief. LPI is actively
     defending the lawsuit. Both the plaintiff and LPI have motions for summary
     judgment pending before the court. LPI believes this matter will ultimately
     be resolved in its favor. LPI has been advised by its primary legal counsel
     in this case that they feel there is no likelihood of an unfavorable
     outcome in this case and that the plaintiff's suit lacks merit.

     LPI has been named as defendant in a suit wherein the plaintiff alleges
     that her investment advisor misrepresented facts to her in purchasing
     certain viatical settlements. The plaintiff alleges that the investment
     advisor was an agent of the Company. The plaintiff claims she invested over
     $160,000 to purchase viatical settlements at issue in this case and paid
     approximately $14,000 in taxes that she contends are LPI's responsibility.
     She also includes a claim for punitive damages and recovery of attorneys'
     fees. LPI's legal counsel has advised the Company that the case is too
     preliminary to be able to competently predict the amount of the Company's
     exposure at this point. The viaticals in question are still in force and
     the Company believes that its exposure in this case is minimal.

     On May 31, 2001, LPI was named as defendant in a suit brought by the State
     of Texas. Plaintiff alleges that LPI failed to disclose to purchasers of
     viatical settlements prior to 1997 that the purchasers could incur
     additional carrying costs in the form of premium payments if viators lived
     beyond their projected life expectancies. Plaintiff claims that the
     nondisclosure violates the Texas Deceptive Trade Practices Act (the "DTPA")
     and seeks an injunction against future violations, civil penalties, and the
     restitution to the affected individuals. The Company intends to meet with
     the plaintiff to discuss resolution of this matter, but believe that it did
     not violate the DTPA and that the applicable statute of limitations would
     preclude most of the possible claims. The Company's primary legal counsel
     in this case has informed the Company that they do not anticipate the
     settlement costs in this case to exceed $400,000.

     The Company has accrued $450,000 in a loss reserve relating to the above
     descried cases. It believes this reserve will be adequate to cover all
     costs of defending itself and settling these cases.

     During the year ended February 28, 2001, the Company entered into
     settlements in connection with three other lawsuits. In the opinion of
     management, no other legal matters will have a material impact on the
     Company's financial statements.


(11)  SUBSEQUENT  EVENTS

     On May 24, 2001, the Company entered into a series of private placement
     transactions resulting in the sale of 1,000,000 shares of the Company's
     treasury stock at $5.00 per share. The Company anticipates that it will net
     $4,650,000 when this transaction is closed. As of the date of this report,
     the Company had received net proceeds totaling $4,533,750. The following
     pro forma condensed balance sheet amounts show the effect of the private
     placement transaction retroactively as if the sale had been effective as of
     February 28, 2001:


<TABLE>
<CAPTION>



                                          Actual    Pro Forma
                                          ------    ---------
<S>                                     <C>         <C>
ASSETS

CURRENT ASSETS:
  Cash                                  $  312,277  $4,962,277
  Other current assets                      80,926      80,926
                                        ----------  ----------
  Total current assets                     393,203   5,043,203
                                        ----------  ----------
PROPERTY AND EQUIPMENT, net of
  Accumulated depreciation                 864,598     864,598

OTHER ASSETS                                96,743      96,743
                                        ----------  ----------
                                        $1,354,544  $6,004,544
                                        ==========  ==========
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES                     $  545,122  $  545,122

LONG-TERM DEBT, net of current portion
  shown above                              604,387     604,387

CONTINGENCIES                                    -           -

SHAREHOLDERS' EQUITY                       205,035   4,855,035
                                        ----------  ----------
                                        $1,354,544  $6,004,544
                                        ==========  ==========
</TABLE>

                                       28