SECURITIES AND EXCHANGE COMMISSION
                         Washington, DC  20549

                              FORM 10-KSB

                ANNUAL REPORT UNDER SECTION 13 OR 15(D)
                OF THE SECURITIES EXCHANGE ACT OF 1934

For The Fiscal Year Ended JUNE 30, 1998   Commission File Number 33-24608-LA

                        USA INTERNATIONAL CHEMICAL, INC.
        (Exact name of Registrant as specified in its charter)

              DELAWARE                          95-4068292
   (State of other jurisdiction of   (I.R.S. Employer Identification Number)
   incorporation or organization)

      20720 Ventura Boulevard, Suite 210
          Woodland Hills, California                  91364
   (Address of Principal Executive Offices)         (Zip Code)
      Registrant's telephone number including area code: (818) 346-9595

     Securities registered under Section 12(b) of the Exchange Act:  None
     Securities registered under Section 12(g) of the Exchange Act:  None

     Indicate  by check mark whether the issuer (1) has filed all reports
     required to be filed by Section 13
     or 15(d) of the Exchange Act during the past 12 months  (or  for  such
     shorter period that the issuer was
     required to file such  reports), and (2) has been subject to such filing
     requirements for the past 90 days.

       YES    X       NO

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

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

     The aggregate market value of the issuer's voting stock held by non-
     affiliates of the issuer based upon the average bid and asked prices of
     such stock as of July 31, 1998, was $346,319.

     The number of shares outstanding of the issuer's common stock as of 
     August 21, 1998, was 1,341,809.

     Documents Incorporated By Reference:
           S-18 Registration Statement effective November 10, 1988.

     Transitional Small Business Disclosure Format: Yes      No   X




<PAGE>2
                                   PART I

ITEM 1.  BUSINESS

THE COMPANY
-----------

USA International Chemical,  Inc. (the "Company" was originally incorporated in
the State of California on June  25,  1986.   On  August  22, 1988, the Company
changed its corporate domicile to the State of Delaware, through  a merger into
a newly formed Delaware corporation named "USA International Chemical, Inc."

In  April,  1989, the Company completed a public offering of 22,481,000  units,
each unit consisting  of  one  share  of  common stock and one Class A purchase
warrant,  at an offering price of $.01 per Unit.   The  net  proceeds  of  that
offering to the Company were approximately $155,000.

On August 27,  1994,  the  Company's  three  largest shareholders (the "Selling
Shareholder  Group")  entered into a Stock Purchase  Agreement  in  which  they
agreed to sell 88,200,000  shares  of  the  Company's  common  stock  to  Shane
Investment  Company,  Inc.  for  $69,000  in  cash.   These  shares represented
approximately 78% of the Company's then outstanding common shares.   This Stock
Purchase  Agreement closed on September 23, 1994 at which time Shane Investment
Company, Inc.  assumed  ownership  of  the  88,200,000  shares of the Company's
common stock becoming the Company's largest single shareholder.

At  that  time  Yale  Farar became Chairman of the Board, President  and  Chief
Financial Officer of the  Company  while Harold S. Fleischman became a Director
and the Company's Secretary.

PAST OPERATIONS
--------------- 

In  December 1989 the Company sold its  customer  list  for  sales  of  various
chemicals  and  other  product  lines for the maintenance of aircraft to Gerald
Fields & Co., an unaffiliated company,  for  $6,000.   Gerald Fields & Co. also
received  certain  equipment  and fixtures related to this  business  from  the
Company and took over the Company's  obligations  under its lease on facilities
located  in Rancho Cucamonga, California.  The purchase  price  for  the  above
assets was  $6,000,  plus  a  five year earnout provision based on annual gross
sales in excess of $200,000.  The  earnout  period  expired  in  1995  with  no
additional consideration earned or paid to the Company.

Until  September  1994  the Company sold a line of skin care products through a
foreign distributor.  The  Epicuren line of skin care products was manufactured
by Epicuren, Inc. of Mission Viejo, California, and includes a six step program
of scrub, cleanser, conditioner, concentrate, gel and moisturizer.  The Company
had no written agreement with  the manufacturer, but understood that it had the
sole right to distribute these products in Singapore.

Between July and September, 1994 the Company expanded its product line and sold
lint free cloth to a foreign customer.

The Company was also involved in  the  purchase  and resale of various chemical
products  to  the  Government  of  Taiwan.   This  line of  business  was  also
discontinued in September 1994.

The  Company's  warranty obligations under its former  lines  of  business  are
limited to the replacement of defective products, which in turn are replaced by
the manufacturer.

<PAGE>3

PRESENT OPERATIONS
------------------ 

As a result of the change of control of the Company in September 1994, all past
business operations were discontinued and the Company does not expect to pursue
any of the Company's  former  lines of business.  Consequently, since September
1994,  the Company has had no operating  revenues  and  the  Company  does  not
anticipate  any revenues from business operations until the Company develops or
acquires new business lines.

Since September  1994  and  for  the  foreseeable  future,  the  Company's sole
activity  is  expected  to  be  the  identification  and evaluation of suitable
business opportunities which could result in an acquisition by or a combination
with  the  Company.   Pursuant  to  this  activity,  Management  is  constantly
evaluating and holding discussions with a variety of companies  and individuals
that could result, in the near or distant future, in a business acquisition  or
combination.   Because  of  this  approach, the announcement of a definitive or
consummated transaction involving the  Company could happen at any time.  There
can be no assurance as to when or if such  an  acquisition or combination might
occur or that other types of business transactions  might not be considered and
entered into by the Company.

EMPLOYEES
---------

At present, the Company has one part-time employee.   Yale Farar, the President
of  the  Company,  devotes  approximately  10%  of  his time to  the  Company's
business.   Harold  Fleischman, the Company's Secretary,  is  employed  by  the
Company on an as-needed basis.

ITEM 2.  PROPERTIES

The Company's President  currently  provides  office space to the Company at no
cost to the Company.

ITEM 3.  LEGAL PROCEEDINGS

The Company is not a party to any material legal proceedings.

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

None

                                   PART II

ITEM 5.  MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

a.   PRINCIPAL MARKET OR MARKETS.  The Company's  common  stock  is  listed for
     trading  on  the  OTC  Market's  Electronic  Bulletin  Board  where  it is
     currently  listed under the symbol "USXC."  The following table sets forth
     the high and  low  bid  quotations for the Company's stock, as reported by
     the National Quotation Bureau,  Inc.  for  the  periods  indicated.  These
     prices are believed to be representative inter-dealer quotations,  without
     retail  markup,  markdown  or  commissions,  and  may not represent actual
     transactions.


<PAGE>4

                                   COMMON STOCK
                                   ------------ 
                               BID           ASK
                           -----------    -----------
    QUARTER ENDED          HIGH    LOW    HIGH   LOW
    -------------          ----    ---    ----   ----
September 30, 1996         5/8     1/2    1 5/8  7/8
December 31, 1996          5/8     5/8    1 5/8  3/4
March 31, 1997             5/8     5/8    1 5/8  1 5/8
June 30, 1997              5/8     5/8    1 5/8  1 5/8

September 30, 1997         3/8     1/4    1 5/8  1 1/4
December 31, 1997          7/16    1/4    1 5/8  1
March 31, 1998             3/8     1/4    1 5/8  1 5/8
June 30, 1998              5/16    3/16   1 1/4  1 1/4


b.   APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK.  The  approximate number of
     ----------------------------------------------
     holders of the Company's common stock at August 21, 1998 was 250.

c.   DIVIDENDS.  Holders of common stock are entitled to receive such dividends
     ----------
     as may be declared by the Company's Board of Directors.  No dividends have
     been paid with respect to the Company's common stock and  no dividends are
     anticipated to be paid in the foreseeable future.

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

CAPITAL RESOURCES AND LIQUIDITY
-------------------------------

Since September, 1994 the Company has generated no revenues from operations.

At  June  30,  1998,  the  Company  had  cash  (and working capital) of $3,610,
compared to cash (and working capital) of $5,524  at  June  30,  1997.   During
fiscal   1998   and   1997,  capital  contributions  of  $10,000  and  $41,000,
respectively were made  to  the  Company  by principal stockholders in order to
provide working capital necessary to continue operations.

The Company expects to fund its ongoing capital needs through investments in or
advances to the Company by its principal stockholders  or  other  affiliates of
the Company.

During the fiscal years ended June 30, 1998 and 1997, the Company used  cash of
$11,914  and $38,889, respectively, in operations.

The  Company  has  no  current  operations  which  generate  sales.  Due to the
Company's current status, the "Year 2000 Problem" is not expected  to  have any
affect  on  the  Company's  current  financial  condition.   Until  the Company
develops or acquires new business lines, no operating revenues are expected and
operating losses are anticipated.

For  the foreseeable future the Company's sole activity is expected to  be  the
identification  and  evaluation  of suitable business opportunities which could
result  in an acquisition or other  business  combination.   There  can  be  no
assurance, however, that the Company will be successful in its efforts, or that
another type of business transaction might not be considered.

FINANCING ACTIVITIES
--------------------

Net cash  provided  by financing activities was $10,000 for the year ended June
30, 1998, and $41,000 for the year ended June 30, 1997.

<PAGE>5

RESULTS OF OPERATIONS  FOR  THE  FISCAL YEAR ENDED JUNE 30, 1998 AS COMPARED
----------------------------------------------------------------------------
TO THE FISCAL YEAR ENDED JUNE 30, 1997
--------------------------------------

There were no sales nor cost of sales  for the year ended June 30, 1998 or June
30, 1997.

General and Administrative expenses amounted to $11,114 for the year ended June
30, 1998, a decrease of $26,779 from the  $37,893  for  the year ended June 30,
1997.   The  decrease  was principally the result of legal expenses  and  other
costs incurred in the 1997  fiscal  year  in  connection with the evaluation of
potential merger opportunities.

Net loss amounted to $11,914 for the year ended  June  30,  1998,  compared  to
$38,648 for the year ended June 30, 1997.  The decrease in the net loss was the
result of reduced expenses discussed in the preceding paragraph.

RESULTS  OF  OPERATIONS  FOR THE FISCAL YEAR ENDED JUNE 30, 1997 AS COMPARED 
----------------------------------------------------------------------------
TO THE FISCAL YEAR ENDED JUNE 30, 1996
--------------------------------------

There were no sales or cost  of  sales for the year ended June 30, 1997 or 
June 30, 1996.

General and administrative expenses  increased  $11,692 to $37,893 in 1997 from
$26,201 in 1996.  The increase was principally from  legal  expenses  and other
costs  in  1997 in seeking and evaluating various opportunities to recapitalize
the Company as a going concern.

The net loss  for  the year ended June 30, 1997 was $38,648 compared to $27,051
for the fiscal year  ended  June  30,  1996.   The  increase in the net loss of
$11,597  was  the  result  of  increased expenses discussed  in  the  preceding
paragraph.

The Company issued 6,000 shares  of  its  common stock each to a director and a
financial consultant who rendered services  to  the  Company  during  the  1996
fiscal year.


<PAGE>6

ITEM 7.   FINANCIAL STATEMENTS

The financial statements are set forth on pages F-1 through F-7 attached as  an
exhibit to this document.  See "Item 13. Exhibits and Reports on Form 8-K."

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

Not Applicable.

                                   PART III

ITEM 9.   DIRECTORS AND EXECUTIVE OFFICERS

The Directors and Officers of the Company are as follows:

   NAME                 AGE       POSITION
   ---------            ----      ---------------
   Yale Farar            60       Chairman of the Board, President and
                                  Chief Financial Officer

   Harold S. Fleischman  56       Director and Secretary

YALE FARAR has  served  as  the  Company's  President, Chief Financial Officer,
Treasurer and Chairman since September 1994.   Mr.  Farar  has  been engaged in
venture  capital and real estate activities for over 24 years.  Mr.  Farar  has
been involved  in,  either  directly or indirectly, loaning money to and taking
equity positions in various private and public companies.

HAROLD S. FLEISCHMAN has served  as  a  Director  and Secretary since September
1994.   Mr. Fleischman has been an attorney for over  25  years  and  currently
maintains  his  own  private  practice in Encino, California.  He earned both a
Bachelor's degree and Law degree from UCLA.

All directors of the Company hold  office  until the next annual meeting of the
shareholders or until their successors have been elected and qualified.

The officers of the Company are appointed by  the  Board  of Directors and hold
office until their death, resignation or removal from office.

ITEM 10.  EXECUTIVE COMPENSATION

During  the  last three fiscal years ended June 30, 1998, 1997  and  1996,  the
Company did not  pay  or  accrue  any amounts for compensation to its Executive
Officers.  The Company does not anticipate any salary to its Executive Officers
for the current fiscal year.

In  fiscal  year 1996 one officer of  the  Company  received  6,000  shares  of
restricted common  stock  as compensation for services as a Director.  Although
Directors do not receive compensation  for  their services as such, they may be
reimbursed for expenses incurred in attending Board meetings.

On May 10, 1996 the Board of Directors adopted  the USA International Chemical,
Inc.  1996 Stock Option Plan which is a non-qualified  option  plan  under  the
Internal  Revenue  Code  (i.e.  certain  advantageous  tax  provisions  are not
available  to  participants).   The  Company allocated 500,000 shares of common

<PAGE>7

stock  which  may  be issued pursuant to  the  Stock  Option  Plan.   Officers,
directors, employees  and  other  persons  rendering  valuable  services to the
Company are eligible to receive options pursuant to the Stock Option  Plan.  As
of June 30, 1998, no options had been granted under this Plan.


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

The  following  table sets forth, as of August 21, 1998 the stock ownership  of
each person known  by the Company to be the beneficial owner of five percent or
more of the Company's Common Stock.

TITLE OF   NAME AND ADDRESS OF           AMOUNT AND NATURE OF      PERCENT
CLASS      BENEFICIAL OWNERS             BENEFICIAL OWNERSHIP      OF CLASS
--------   --------------------          --------------------      --------
Common     Yale Farar, President(1)             419,550              31.3%
           20720 Ventura Blvd., Ste. 210
           Woodland Hills, California 91364

Common     Sim Farar(1)(2)                      369,500              27.5%
           20501 Ventura Blvd., Ste. 116    (Individually)
           Woodland Hills, CA  91364

Common    Justin B. Farar(2)                     85,000               6.3%
          20501 Ventura Blvd., Ste. 116    (Individually)
          Woodland Hills, CA  91364

Common    Joel D. Farar(2)                       85,000               6.3%
          20501 Ventura Blvd., Ste. 116    (Individually)
          Woodland Hills, CA  91364

Common    Beth Farar(3)                          99,059               7.4%
          15915 Ventura Blvd., Ste. 301    (Individually)
          Encino, CA  91436

------------------
(1)  Yale Farar and  Sim  Farar  are  brothers  but  disclaim  any  beneficial
     ownership of each others shares.

(2)  Justin Farar and Joel Farar are the sons of Sim Farar.  Sim Farar  may be
     deemed to have beneficial ownership of the shares held by his younger son,
     Joel, but disclaims beneficial ownership of shares held by his older  son,
     Justin.

(3)  Beth  Farar is the daughte  of Yale Farar.  Mr. Farar disclaims any
     beneficial ownership of shares held by Ms. Farar.

The following table sets forth, as of August 21,  1998,  the stock ownership of
each officer and director individually and all directors and  officers  of  the
Company as a group.


<PAGE>8

TITLE OF  NAME AND ADDRESS OF         AMOUNT AND NATURE OF     PERCENT
CLASS     BENEFICIAL OWNERS           BENEFICICAL OWNERSHIP    OF CLASS
--------  --------------------        ---------------------    --------

Common    Yale Farar, President             419,550              31.3%
          20720 Ventura Blvd., Ste. 210
          Woodland Hills, CA  91364

Common    Harold S. Fleischman, Director      6,000               0.4%
          15915 Ventura Blvd., Ste. 301
          Encino, California  91436    

Common    Ownership by Management as a      425,550              31.7%
          Group (2 persons)

-------------------------------------------------------

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Yale  Farar and Sim Farar (principal shareholders of the Company) have invested
funds in  the  Company  to  pay  for  operating expenses and to provide working
capital to the Company.  During fiscal  year  1998, these contributions totaled
$10,000 which were reflected in the financial statements  as additional paid in
capital.

The Company's principal shareholders anticipate making additional contributions
or advances to the Company on an as-needed basis until such time as the Company
establishes or acquires an operating business.

Subsequent to the Company's fiscal year-end, Yale Farar resigned  his positions
as a Board member and as President and Chief Financial Officer of the  Company.
Mr.  Farar  will  continue  to  assist  the  Company  in achieving its business
objectives  but  will  now share his time to pursue other  business  interests.
Harold Fleischman assumed the position of President and Chief Financial Officer
effective September 1, 1998.  Also effective September 1, 1998, Mr Arthur Lyons
was appointed to the Company's  Board  of  Directors  and  appointed  corporate
Secretary.

Mr.  Lyons has been a businessman and restauranteur in Southern California  for
over twenty  years.   Mr.  Lyons  served  on  the Palm Springs, California City
Council  from 1992 to 1996.  He is the author of  twelve  mystery  novels/short
stories and has written screenplays for television.  Mr. Lyons is a graduate of
the University of California at Santa Barbara.

As of September  1, 1998, the Company's executive offices will be maintained at
15915 Ventura Boulevard,  Suite  301,  Encino, California 91436.  The Company's
new phone number will be (818) 783-0393.   Such space and phone service will be
provided by Mr. Fleischman at no charge.


<PAGE>9


ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

   (a)   The following documents are being filed as part of this report:
                                                                   PAGE
         (1)  FINANCIAL STATEMENTS


              Report of Independent Auditors - Ernst & Young LLP....F-1

              Balance sheet as of June 30, 1998.....................F-2

              Statements of Operations for the years ended
              June 30, 1998 and 1997................................F-3

              Statements of Stockholders' Equity for the
              years ended June 30, 1998 and 1997....................F-4

              Statements of Cash Flows for the years ended
              June 30, 1998 and 1997................................F-5

              Notes to Financial Statements..................F-6 to F-7

         (2)  EXHIBITS


EXHIBIT    
NO.         DESCRIPTION                       LOCATION
-------     ---------------------------       --------------------------
3.1         Articles of Incorporation and     Incorporated by reference to
            Bylaws                            Exhibit No. 3.1 to the
                                              Registrant's S-18 Registration
                                              Statement (No. 33-24608-LA)

      (b) Reports on Form 8-K:

           None.




<PAGE>10


SIGNATURES
----------

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.


                                      USA INTERNATIONAL CHEMICAL, INC.



Dated: September 4, 1998               By: HAROLD S. FLEISCHMAN
                                           ---------------------
                                           Harold S. Fleischman, President


In accordance with the Exchange Act, this report has been signed below by the
following persons  on behalf of the Registrant and in the capacities and on the
dates indicated.

SIGNATURE                  CAPACITY                      DATE


HAROLD S. FLEISCHMAN    President, Chief Executive       September 4, 1998
--------------------    Officer, Treasurer, (Principal 
Harold S. Fleischman    Financial and Accounting Officer)
                        and Director



ARTHUR LYONS            Secretary and Director           September 8, 1998
------------
Arthur Lyons



<PAGE>11

Supplemental Information to be Furnished with Reports Filed Pursuant to Section
15(d) of the Act by Non-reporting Issuers.

No annual report or proxy material has been sent to security holders during the
last fiscal year.



<PAGE>12


                             Financial Statements
 
                       USA International Chemical, Inc.
          
                      YEARS ENDED JUNE 30, 1998 AND 1997
                      WITH REPORT OF INDEPENDENT AUDITORS





<PAGE>F-1

                  Report of Independent Auditors

Board of Directors
USA International Chemical, Inc.

We have audited the accompanying balance sheet  of  USA  International
Chemical, Inc. as of June 30, 1998, and the  related statements of operations,
stockholders' equity, and cash flows for each of the two years in the period
then ended. 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 audit.

We  conducted  our  audit  in  accordance  with  generally  accepted  auditing
standards. Those  standards  require  that  we  plan  and perform the audit 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 audit provides a reasonable basis
for our opinion.

In our opinion, the financial statements referred  to above present fairly, in
all   material   respects,   the  financial  position  of  USA   International
Chemical, Inc. as of June 30,  1998, and the results of its operations and its
cash flows for each of the two years  in  the  period then ended in conformity
with generally accepted accounting principles.

The accompanying financial statements have been  prepared  assuming  that  USA
International Chemical, Inc. will continue as a going concern. As discussed in
Note 1 to the financial statements, under existing circumstances, there is
substantial doubt about the ability  of  USA  International  Chemical, Inc. to
continue as a going concern at June 30, 1998. Management's plans  in regard to
that  matter  also  are described in Note 1. The financial statements  do  not
include  any  adjustments   that   might  result  from  the  outcome  of  this
uncertainty.


                                        ERNST & YOUNG


Los Angeles, California
August 6, 1998




<PAGE>F-2

                 USA International Chemical, Inc.

                          Balance Sheet

                          June 30, 1998
ASSETS

Current assets:
 Cash                                             $    3,610
                                                  ----------
Total assets                                      $    3,610
                                                  ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities                               $        -

Stockholders' equity:
 Common Stock, $.00001 par value,
  authorized 50,000,000                                   13
   shares, issued and outstanding 1,341,809 
   shares (NOTE 4)

  Additional paid-in capital                         321,167

 Retained deficit                                   (317,570)
                                                   ----------

Total stockholders' equity                             3,610
                                                  ----------

Total liabilities and stockholders' equity        $    3,610
                                                   ==========
SEE ACCOMPANYING NOTES.



<PAGE>F-3

                 USA International Chemical, Inc.

                     Statements of Operations


                                                YEAR ENDED JUNE 30
                                               1998             1997
                                             --------------------------

Sales                                       $       -          $       -

General and administrative expenses            11,114             37,893
                                             ---------------------------
                                               11,114             37,893
                                             ---------------------------

Loss before income tax provision              (11,114)           (37,893)

Income tax provision                              800                755
                                             ---------------------------
Net loss                                    $ (11,914)         $ (38,648)
                                             ===========================

Net loss per share (basic and diluted)      $    (.01)         $    (.03)
                                            ============================

Weighted average shares outstanding         1,341,809          1,341,809
                                           =============================

SEE ACCOMPANYING NOTES.



<PAGE>F-4

                 USA International Chemical, Inc.

                Statements of Stockholders' Equity


                                          Additional

                           Common Stock              
                        -------------------   Paid-In    Retained
                        Shares      Amount    Capital    Deficit   Total
                        -------------------------------------------------
Balance at 
  June 30, 1996         1,341,809   $  13     $270,167 $(267,008) $  3,172

 Capital contributions          -       -       41,000         -    41,000

 Net loss for year ended                                
   June 30, 1997                -       -            -   (38,648)  (38,648)
                         ----------------------------------------------     
   
Balance at 
   June 30, 1997        1,341,809      13      311,167  (305,656)    5,524

 Capital contributions                          10,000              10,000

 Net loss for year ended                                 
   June 30, 1998                                         (11,914)  (11,914)
                        ---------------------------------------------------  

Balance at 
 June 30, 1998          1,341,809    $ 13     $321,167  $(317,570) $  3,610
                        ===================================================

SEE ACCOMPANYING NOTES.




<PAGE>F-5
                 USA International Chemical, Inc.
                     Statements of Cash Flows



                                                  YEAR ENDED JUNE 30

                                           1998                     1997
                                          --------------------------------

OPERATING ACTIVITIES

Net loss                                 $ (11,914)            $ (38,648)

Adjustments to reconcile net loss
 to net cash used in
 operating activities:

   Changes in operating assets 
   and liabilities:

   Accounts payable and accrued 
   expenses                                      -                 (241)
                                        --------------------------------

Net cash used in operating activities       (11,914)            (38,889)

FINANCING ACTIVITIES

Capital contributions                        10,000               41,000
                                         -------------------------------     

Net cash provided by financing activities    10,000               41,000
                                         -------------------------------

Net increase (decrease) in cash              (1,914)               2,111

Cash at beginning of year                     5,524                3,413
                                          -----------------------------
Cash at end of year                      $    3,610             $  5,524
                                          ==============================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the year for:

  Income taxes                           $     800               $   755
                                          ==============================

SEE ACCOMPANYING NOTES.

<PAGE>F-6

           USA International Chemical, Inc.

            Notes to Financial Statements
                         
                         June 30,   1998


1. BASIS OF PRESENTATION

USA  International  Chemical, Inc. (the Company) was incorporated
in the state of Delaware and since September 1994 the Company has
no operating revenue  and  does  not anticipate any revenues from
business operations until the Company  develops  or  acquires new
business  lines.  Management  recognizes that the Company  has  a
history  of  losses  and is evaluating  various  alternatives  to
recapitalize the Company  which  may  provide the opportunity for
the Company to continue as a going concern.

It  is  not  possible  to  predict  the success  of  management's
efforts. If management is unable to achieve any of its goals, the
Company will find it necessary to undertake  actions  as  may  be
appropriate  to  continue operations. The financial statements do
not reflect any adjustments that might result from the outcome of
this uncertainty.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INCOME TAXES

At June_30, 1998,  the  Company  has  federal and state operating
loss  carryforwards  of  approximately  $260,000   and  $109,000,
respectively, expiring in years 2004 through 2014. As a result of
a  change in ownership in 1994, the Company does not  believe  it
will  be  able  to  utilize  approximately $177,000 (federal) and
$67,000 (state) of these operating  loss  carryforwards to reduce
future  taxable income. With respect to the  remaining  operating
loss carryforwards  of  $83,000  (federal)  and  $48,000 (state),
future ownership changes would result in an annual  limitation on
their utilization. No benefit has been recorded in the  financial
statements  related to such operating losses as their realization
is not assured.

NET LOSS PER SHARE

Net loss per  share  has  been  computed  based  on  the weighted
average common shares outstanding during each year.

CASH EQUIVALENTS

Cash and cash equivalents include cash on hand and on deposit and
highly  liquid  investments  with  maturities of three months  or
less.





<PAGE>F-7

            USA International Chemical, Inc.

             Notes to Financial Statements

                          June 30, 1998



2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

USE OF ESTIMATES AND ASSUMPTIONS

The  preparation  of  financial  statements  in  accordance  with
generally accepted accounting principles  requires  management to
make  estimates and assumptions that affect the amounts  reported
in  the  financial  statements  and  accompanying  notes.  Actual
results could differ from those estimates.

3. RELATED PARTY TRANSACTIONS

The Company  maintains its executive offices in space provided by
the Company's President at no charge.

During 1997 and  1998,  the  Company  did  not  pay or accrue any
amounts for compensation to officers.

4. STOCKHOLDERS' EQUITY

The  Company  has a USA International Chemical, Inc.  1996  Stock
Option Plan (Plan).  The  Plan is a nonqualified plan under which
options to purchase up to 500,000  shares  of Common Stock may be
issued.  The  exercise  price  shall be determined  by  the  Plan
administrator; however, in the case  of  Incentive  Stock  Option
grants, the exercise price shall be 100% of the fair market value
at  date  of  grant  (110%  in  the case of options granted to an
optionee who owns more than 10% of  the  Company's Common Stock).
Option terms shall be determined by the Plan  administrator,  but
no  later  than  10  years  after date of grant or five years for
Incentive Stock Options to optionees who own more than 10% of the
Company's Common Stock.

No options have been granted under the Plan.