SECURITIES AND EXCHANGE COMMISSION
                      Washington, D.C. 20549
                                     
                           FORM 10-KSB

     (Mark One)
     [X] Annual Report Pursuant to Section 13 or 15(d) of the     
         Securities Exchange Act of 1934

     [ ] Transitional Report Under Section 13 or 15(d) of the     
         Securities Exchange Act of 1934

               For the fiscal year ended May 31, 1997

                    Commission File No. 0-26920

                      USASURANCE GROUP, INC.
          (Name of small business issuer in its charter)

          Colorado                                84-1298212    
(State or other jurisdiction of                (I.R.S. Employer
Incorporation or Organization)               Identification Number)

                       7345 E. Peakview Ave.
                     Englewood, Colorado 80111
                          (303) 689-0123
(Address, including zip code and telephone number, including area 
             code, of registrant's executive offices)

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

Securities registered under Section 12(g) of the Exchange Act: 
                           Common Stock
                         (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 preceding 12 months (or for such shorter period that the
Company 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 disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this
Form 10-KSB.  X 

Issuer's revenues for its most recent fiscal year: $ 9,109        
       

               (Continued on Following Page)

<PAGE>

State the aggregate market value of the voting stock held by non-
affiliates, computed by reference to the price at which the stock
was sold, or the average bid and asked prices of such stock, as of
a specified date within the past 60 days: As of September 9, 1997:
$1,173,000.

State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:  As of
September 9, 1997 there were 1,566,000 shares of the Company's
common stock issued and outstanding.                  

Documents Incorporated by Reference: None

               This Form 10-KSB consists of 34 pages.
                Exhibit Index is Located at Page 33.

                                                                2

<PAGE>

                        TABLE OF CONTENTS

                     FORM 10-KSB ANNUAL REPORT 

                       USASURANCE GROUP, INC.

                                                              PAGE

Facing Page
Index
PART I
Item 1.    Description of Business...........................    4
Item 2.    Description of Property...........................   10
Item 3.    Legal Proceedings.................................   10
Item 4.    Submission of Matters to a Vote of
               Security Holders..............................   10

PART II
Item 5.    Market for the Registrant's Common Equity
               and Related Stockholder Matters...............   10
Item 6.    Management's Discussion and Analysis of 
               Financial Condition and Results of
               Operations....................................   11
Item 7.    Financial Statements..............................   13
Item 8.    Changes in and Disagreements on Accounting
               and Financial Disclosure......................   25

PART III
Item 9.    Directors, Executive Officers, Promoters 
               and Control Persons, Compliance with 
               Section 16(a) of the Exchange Act.............   25
Item 10.   Executive Compensation............................   27
Item 11.   Security Ownership of Certain Beneficial
               Owners and Management.........................   28
Item 12.   Certain Relationships and Related 
               Transactions..................................   29

PART IV
Item 13.   Exhibits and Reports of Form 8-K..................   31


SIGNATURES...................................................   32

                                                                3

<PAGE>

                             PART I

ITEM 1. DESCRIPTION OF BUSINESS.

     USAsurance Group, Inc. (the "Company"), is a company
incorporated pursuant to the laws of the State of Colorado on
January 15, 1991, for the purpose of engaging as an insurance
brokerage company.  The Company did not undertake any business
activities relevant thereto and in June 1995, the Company's Board
of Directors elected to change the Company's principal business
activities to the viatical settlement industry.  Viatical
settlements are made to persons who are terminally ill and who want
to sell their life insurance to obtain the benefit of the money
provided by the settlement during the remainder of their life.  The
term viatical is derived from the Latin word viaticum which means
money for traveling expenses.  In the business context, a viatical
settlement provides financial comfort and dignity to the terminally
ill person.

     Since June 1995, the Company has purchased, for its own
account, 10 different insurance policies with a face value of
$538,294 from individuals, for an aggregate purchase price of
$489,795.  During the fiscal year ended May 31, 1996, three of
these policies with a face amount of $151,100 matured and the
proceeds from these policies were paid to the Company, which
received the net aggregate amount of $39,903.  During the fiscal
year ended May 31, 1997, one additional policy matured, which
provided the Company with approximately $9,000.  Subsequent to the
end of the Company's most recent fiscal year, an additional policy
did mature, with the Company receiving approximately $27,000 as a
result of such maturity.

     Of the policies purchased by the Company since June 1995, all
of these policies have been purchased from individuals diagnosed
with Human Immunodeficiency Virus (HIV).  Subsequent to May 31,
1997 and in deference to new treatments involving combinations of
various drugs for treating HIV positive patients, the Company has
ceased further participation in the viatical settlement industry
due to extended life expectancies resulting in lower returns.  The
Company is presently in the process of creating a new wholly owned
foreign subsidiary for the purpose of pursuing opportunities in the
reinsurance of program business and special groups.

New Business Plan

     As of the date of this report, management is creating a new
wholly owned subsidiary company, Insurenational, Inc., an Aruba
chartered insurance company ("Insurenational"), which is being
undertaken as a result of the aforesaid changes in the viatical
settlement industry.  It is anticipated that Insurenational will
provide reinsurance to insurance companies who provide coverage to
small associations or associated groups where loss experience is

                                                                4

<PAGE>

available and predictable.  For example only, if a group of small
businesses in a common business have individual policies with total
annual premiums of $4 million, a typical insurance company would
base this premium on a loss ratio of 50-55%, or $2 to 2.2 million
of losses annually.  Insurenational intends to work with that
association to arrange for a domestic insurance company to insure
the predictable portion of the annual claims and to reinsure the
excess with Insurenational.  The association will continue to have
their insurance coverage underwritten on the same policy with their
then current carrier.  The association would put the remaining $2
million into a trust account.  Insurenational would then reinsure
the domestic insurance company for all losses exceeding $2 million,
but not to exceed $2.7 million.  In consideration for
Insurenational's assumption of this risk a premium of $1 million
would be charged.  Under this arrangement, Insurenational would
save the association $1 million annually.

     The aforesaid illustration is indicative of the premium volume
that Insurenational could underwrite based on its existing
capitalization.  With additional capital, additional volume can be
undertaken.  However, there are no assurances that the Company will
generate profits from its proposed operations, or that if it does
become profitable, that the Company will be able to obtain
additional funding, either debt or equity, to increase its proposed
business.

     Shareholders and other investors should also be advised that
the risks of the above approach to the reinsurance business is very
high.  The market is subject to wide swings in premiums charged and
is highly competitive.  The Company may be unable to find such a
small insurance company, or if such a company is located, there are
no assurances that such a company will agree to engage in business
with the Company as outlined hereinabove.  Additionally, domestic
insurance companies large enough to do nation-wide program business
may not want to do business with a small foreign insurance company.

     In addition, management also intends to cause the Company to
become involved in the business of financial services, to a limited
extent.  The Company may make small commercial loans to, and equity
investments in, emerging growth companies which are unable to
obtain financing from traditional sources.  The Company may also
furnish financial consulting services and advice as an incidental
part of its business plan.

     The Company intends to focus its financing and capital
arrangement activities on emerging growth companies which plan to
raise capital in the public markets within a reasonably short
period of time, i.e., one or two years.  Management has not
identified any particular industry within which the Company will
focus its efforts.  Rather, management intends to identify any
number of candidates which may be brought to its attention through
present associations or by word of mouth.

                                                                5

<PAGE>

     The Company's operating strategies will be to provide
innovative financing solutions to privately and publicly held
corporations and other companies which, in all likelihood, do not
meet the overall credit standards typically required by commercial
banks in today's restrictive credit environment.  Management
believes that commercial banks are reluctant to make loans to small
and newly organized companies and, in the instances in which such
loans are made, they are heavily collateralized by homes and other
personal assets in virtually every case.  Commercial bankers
typically do not lend to companies with limited assets or which
have been in business for less than three or four years.  Most, if
not all, of the companies which will be candidates for loans and/or
equity investments by the Company, or for other sources of capital
known to management, will not have an operating history which will
support bank loans.  These companies, primarily privately held
corporations to be targeted by the Company, may have negative
working capital positions, negative cash flow, recurring losses or
other negative characteristics relating to their past performance
which would result, in all probability, in a bank's refusal to lend
funds.  The Company may consider as candidates for financing
corporations and entities which are affiliated with the Company or
in which the Company or its executive officers, directors and/or
controlling shareholders have an equity interest.

     While the Company may require, as a condition to making a loan
to any particular candidate, adequate collateral as security, the
Company will rely upon the expertise and experience of its
management on a case-by-case basis in making the determination
regarding the issue of collateral.  Management will not employ any
specific formula for collateral coverage and may make unsecured
signature loans under circumstances deemed acceptable by
management.  Banks, on the other hand, traditionally require
collateral coverage of approximately 133% for accounts receivable,
300% for inventory and 200% of liquidation value for real estate,
equipment and other tangible assets.  The Company intends to charge
interest rates on loans in a range from 5% to 18% and to obtain
equity participation in the form of warrants or options to purchase
shares of the common stock of the entity financed or other forms of
securities in order to provide additional yield enhancements. 
Where the Company receives such warrants, options or other
securities, the Company may distribute such securities to its
shareholders as a stock dividend, subject to compliance with
applicable state and federal securities laws.  In addition to or in
lieu of the aforementioned types of securities, the Company may
seek to obtain an interest in revenues, a carried working interest
or other carried interest.

Operating Strategy

     Management of the Company will evaluate the future potential,
credit worthiness and, if required, collateral of prospective
candidates for funding by the Company or other sources, including

                                                                6

<PAGE>

corporate and individual lenders and investors, known to
management.  The fact that a corporation or other entity is
affiliated with the Company or an equity interest in a prospective
borrower is owned by one or more of the executive officers,
directors and/or controlling shareholders of the Company will not
disqualify such entity from consideration as a potential borrower
or recipient of investment capital.  In order to minimize conflicts
of interest, the Company has adopted a policy that any contracts or
other transactions with entities with whom management is
affiliated, or in which they have a financial interest, will be
approved by a majority of the disinterested members of the Board of
Directors and will be fair and reasonable, but that no such
transactions by the Company shall be affected or invalidated solely
because of such relationship or interest of directors or officers. 
For purposes herein, the term "disinterested directors" are those
directors who have no direct, pecuniary interest in a proposed
transaction.  The Company's Board of Directors has adopted a policy
requiring any director of the Company to advise the Board of his
personal interest in a proposed transaction by the Company, either
direct or indirect.  In an instances where a disinterested majority
of the members of the Board of Directors is unavailable to approve
a financing transaction with an affiliated or related party, the
Company will require that the transaction be approved by a majority
of the Company's shareholders at a special meeting of shareholders
called for such purpose.

     Prior to funding any loans for equity investments, management
of the Company will conduct a comprehensive credit investigation of
the potential financing candidate.  The investigation will
generally include, but not necessarily be limited to, the
following:  (i) a review of the prospective candidate's financial
statements and operating and prior credit history; (ii) an analysis
of the prospect's projected cash flow; (iii) a survey of the
performance of other companies engaged in the candidate's business;
(iv) a analysis of the value of the collateral, if any, proposed to
secure a loan; and (v) the source of repayment for the loan.  In
addition, management intends, as part of its credit procedures, to
conduct a complete due diligence review of the prospective
candidate's business at its offices, during which management
proposes to review the prospect's record keeping systems and
procedures, the historical and projected financial condition of the
borrower/recipient of investment capital and its industry and any
collateral offered to secure a loan.  Management may, in its
discretion, conduct a formal, independent appraisal of any
collateral offered to assure that the collateral can be liquidated
without a loss in the event of a downturn in the economy, which
appraisal may include an assessment of auction liquidation and/or
fair market value.  Management intends to make the decision whether
to arrange or fund a loan or purchase common stock of a financing
candidate only after completing the number and type of credit
procedures described above and as deemed necessary or appropriate,

                                                                7

<PAGE>

in the discretion of management, in order to determine the
candidate's business potential and credit worthiness.

     In instances deemed appropriate by management, the Company may
require security in the form of inventory, accounts receivable,
manufacturing and other operating equipment, and other tangible
assets and/or real estate used in the financing candidate's
business.  With respect to asset-based loans which the Company may
fund, management will have no fixed policy as to the percentage of
collateral coverage required.  However, in almost every such case,
management envisions that the percentage of collateral coverage
required by it will be in excess of 100% of the amount of loan. 
Additionally, management may require that any one or more of the
officers, directors and principal shareholders of the borrower to
personally guarantee the indebtedness and, depending upon the
prospective borrower's financial strength and the nature and value
of any collateral, require, in addition, that the personal
guarantees be collateralized separately.

     Management of the Company will closely monitor the borrower's
performance after funding a loan or equity investment and, with
respect to a secured loan, intends to monitor the adequacy of the
collateral at least on a monthly basis.  If the primary collateral
is accounts receivable, management may require direct verification
and a monthly aging of the receivables.  Company management intends
to conduct aspects of its monitoring process, including, if
necessary, a reappraisal of any collateral, periodically at the
borrower's place of business.  Regardless of whether the financing
provided by the Company takes the form of a loan, stock purchase or
a combination thereof, management will maintain close contact with
management of the financing recipient to ensure that the financial
condition and overall performance of the borrower are acceptable
and that any collateral remains adequate.  In the event of default
in the payment of principal or interest on a loan, management may
notify the borrower's customers to make payments directly to the
Company via a lock box established for the borrower.  In a case
where the Company arranges financing for, but does not itself fund,
a development-stage company, management will also endeavor to
monitor the borrower's performance if an equity interest in the
form of common stock, warrants, options or any other type of
security is received as part of the finder's or consulting fee.

     Management has not adopted any policy regarding the maximum
size of any loan or stock purchases which it may make with respect
to a single company.  Further, management has not determined any
maximum percentage of its loans or stock portfolio which may be
committed to loans or investments in excess of a specified amount. 
Management, in its sole discretion, will determine guidelines for
levels of concentration as to the diversity of companies which it
funds and types of assets required as collateral for loans in order
to attempt to minimize credit losses.  However, management intends
to employ a policy of maintaining a diversity of companies financed

                                                                8

<PAGE>

and types of collateral accepted as security for loans in order to
minimize undue exposure.

     The Company is, and will remain for the foreseeable future, an
insignificant participant among those firms which are also engaged
in the businesses of the Company.  There are many established
entities and financial concerns which have significantly greater
financial and personnel resources and technical expertise than the
Company.  Management will rely upon their own ability to generate
potential lending candidates, either through their own personal
relationships or through limited advertising in trade journals for
industries which management has had prior experience.  For a
detailed discussion concerning management's experience in this
area, see "Item 9, Directors, Executive Officers, Promoters and
Control Persons."  In view of the Company's extremely limited
financial resources, it should be expected that the Company will
continue to be at a significant competitive disadvantage compared
to the Company's competitors.

Other Matters

     In June 1995, the Company's former President, Terry Whiteside,
loaned the Company the principal sum of $42,342, which the Company
utilized to purchase its initial insurance policy with a face value
of $58,000.  Repayment of this obligation was originally due in
June 1996, but was extended to August 1998 by mutual agreement.  In
August 1995, Ms. Whiteside loaned the Company the principal sum of
$58,000, which was due in August 1996.  Repayment of this note was
also extended until August 1998.  Additionally in August 1995, a
minority shareholder of the Company loaned the Company the
principal sum of $75,000.  This loan is now due in August 1998. 
Each of these aforesaid loans accrue interest at the rate of 7% per
annum.  The Company utilized the proceeds of these loans to
purchase insurance policies.

     In August 1995, the Company successfully completed a private
placement of its common stock pursuant to an exemption from
registration provided by Rule 504 of Regulation  D, as promulgated
under the Securities Act of 1933, as amended.  The Company sold
66,000 shares of its common stock, par value $0.0001 per share, to
7 investors for aggregate gross proceeds of $330,000 ($5.00 per
share).

Employees

     During the fiscal year ended May 31, 1997, the Company had no
salaried employees.  However, it did have two non-salaried
employees, including its President, Thomas Chase, and one
administrator.  However, during the fiscal years ended May 17, 1997
and 1996, the Company recorded approximately $33,000 in salary
expense in each year.  See "Item 7, Notes to Financial Statements"

                                                                9

<PAGE>

and "Item 9, Directors, Executive Officers, Promoters and Control
Persons."

ITEM 2.  DESCRIPTION OF PROPERTY 

     Facilities.  The Company subleases its offices at 7345 E.
Peakview Ave., Englewood, Colorado 80111, a building owned jointly
by unaffiliated parties.  Beginning in December, 1996, the Company
began to pay rent in the sum of $1,000 per month pursuant to an
oral lease arrangement, on a month-to-month basis.  The Company's
offices consist of approximately 1,200 square feet of executive
office space and secretarial area.  It is anticipated that the
Company will open additional offices in Aruba after creating its
new wholly owned subsidiary, described hereinabove.  Management
believes that this space will meet the Company's needs for the
foreseeable future.  The Company did not pay any rent during its
1996 fiscal year.

     Other Property.  The Company owns no other property.

ITEM 3.   LEGAL PROCEEDINGS

     There are no material legal proceedings which are pending or
have been threatened against the Company of which management is
aware.

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

     None.

                          PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS

     (a) Market Information.  The following table sets forth the
range of high and low bid prices as reported on the OTC Bulletin
Board operated by the NASD commencing March 1, 1996 (the date the
Company's Common Stock commenced trading).  On September 9, 1997,
the last reported sales price was $1.50 bid, $2.25 asked.

        Quarter Ended                      Bid Price
                                         Low       High
                                        _____     _____

        May 31, 1996                    $5.00     $6.00
        August 31, 1996                  4.00      6.00
        November 30, 1996                2.00      4.50
        February 28, 1997                 .50      2.00
        May 31, 1997                      .50      2.75

                                                               10

<PAGE>

     (b) Holders.  There are 24 holders of the Company's Common
Stock, not including those shareholders holding their securities in
"street name". 

     (c) Dividends.  The Company has not paid any dividends on its
Common Stock. The Company does not foresee that the Company will
have the ability to pay a dividend on its Common Stock in the
fiscal year ended May 31, 1998.

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

     The following discussion should be read in conjunction with
the Financial Statements and notes thereto included herein.

Introduction

     The Company was organized and has been engaged in the business
of investing in the viatical settlement industry by acquiring life
insurance policies from individuals or pools of policies from other
companies.  During the fiscal year ended May 31, 1997, the industry
has changed due to advances in medication that prolongs life for
these individuals and the Company has ceased further participation
in the viatical settlement business due to the extended life
expectancies resulting in lower returns.

     In order for the Company to continue operations in the
insurance area, the Board of Directors decided to pursue the
reinsurance business.  The Company applied for licensing in Aruba
using a wholly owned subsidiary, Insurenational, A.V.V., and was
approved to commence operations on September 8, 1997.  The Company
will use the life insurance policies that it now holds as admitted
assets in Insurenational, A.V.V. which are needed to become a
licensed reinsurer in Aruba.

Comparison of Results from Operations for the Fiscal Years Ended
May 31, 1997 and May 31, 1996

     General and administrative expenses remained relatively
constant during the fiscal year ended May 31, 1997, at $59,370
compared with $57,560 for the fiscal year ended May 31, 1996, an
increase of approximately 3%.  This included $34,100 in contributed
salaries and rent for fiscal year ended May 31, 1997, and $33,000
for the fiscal year ended May 31, 1996.

     As discussed hereinabove, during the fiscal year ended May 31,
1997, the Company adopted a plan to cease further participation in
the viatical settlement industry.  This was the Company's only
operating segment since its inception.  The results of its
activities in the viatical settlement business for the current and
prior comparative periods have been restated in the Company's

                                                               11

<PAGE>

audited Financial Statements included herein to present the
viatical settlement business as a discontinued operation.

     The Company, while incorporated in January 1991, did not
commence business operations until June 1995, when the discontinued
viatical settlement business plan of the Company was adopted. 
Since June 1995, the Company purchased, for its own account, 10
different insurance policies with a face value of $538,294 from
individuals, for an aggregate purchase price of $489,795.  During
the fiscal year ended May 31, 1996, three of these policies with a
face amount of $151,100 matured and the proceeds from these
policies were paid to the Company.  During the fiscal year ended
May 31, 1997, one additional policy matured and the Company
recognized approximately $9,000 in revenues.  As a result, the
Company incurred a net loss of $58,889 during fiscal year 1997
($.04 per share), as compared to a net loss of $36,152 for the 1996
fiscal year ($.02 per share).

Liquidity and Capital Resources

     The Company's primary need for capital has been the funding of
policy purchases.  In the future, it will be for the establishment
of business operations in the reinsurance industry.  Since its
inception, the Company has relied upon the proceeds from the sale
of common stock of $329,448 derived from a private offering and
loans from related parties of $175,340.  During the fiscal year
ended May 31, 1997, the Company did not sell additional stock or
borrow any additional funds.

     In June 1995, Terry Whiteside, the Company's former President
loaned the Company the principal sum of $42,340, which the Company
utilized to purchase its initial insurance policy with a face value
of $58,000.  In August 1995, Ms. Whiteside loaned the Company the
principal sum of $58,000.  Additionally in August 1995, a minority
shareholder of the Company loaned the Company the principal sum of
$75,000.  Each of these aforesaid loans are unsecured and all have
been extended until August 1998 by the mutual consent of the
parties, with interest accruing at the rate of 7% per annum.  The
Company utilized the proceeds of these loans to purchase insurance
policies.  

     At May 31, 1997, the Company had a decrease in cash flow of
$123,811 compared to an increase in cash flow of $124,540 at May
31, 1996.  The Company did not produce enough cash flow from its
now discontinued operations to cover cash outflow and, therefore,
utilized existing cash resources.  Current assets consists mostly
of Purchased Life Insurance Policies for May 31, 1997 and May 31,
1996.  Current liabilities consists mostly of accrued interest to
related parties.

     The Company's cash requirements have been and will continue to
be significant in order to finance its new business plan.  The

                                                               12

<PAGE>

Company will consider borrowing additional funds or selling
additional stock if the cash requirements exceed cash reserves. 
However, there can be no assurances that the Company will be able
to successfully borrow such additional funds on terms beneficial to
the Company, or at all.  Additionally, there are no assurances that
the Company will be able to generate any funds from sale of its
securities.

     It is not anticipated that the Company will expend any of its
present financial resources on the purchase of any significant
equipment in the future, nor is it anticipated that the number of
employees of the Company will increase to any significant degree in
the future.

Inflation

     Although the operations of the Company are influenced by
general economic conditions, the Company does not believe that
inflation had a material affect on the results of its discontinued
operations during the fiscal years ended May 31, 1997 and 1996.
     
Plan of Operation

     The foregoing discussion relates to the Company's results of
operations for the preceding two fiscal years.  However, as
indicated in Item 1, Description of Business, the Company has
adopted a new business plan, and a discussion of the Company's plan
of operation for the ensuing fiscal year as required by Item 303(a)
of Regulation S-B is included therein.

Trends

     As described above herein, the Company's principal business
was in the viatical settlement industry, where it purchased life
insurance policies from terminally ill patients, including patients
diagnosed with AIDS.  However, as treatment of AIDS patients has
allowed these patients to increase their respective life
expectancies, this has resulted in management making the election
to change the principal business of the Company, as also described
herein.

     Management is unaware of any existing trends which may have
any impact on the proposed business of the Company, either negative
or positive.  Management believes that it will have more
understanding of such trends, if any, once the Company has
implemented its proposed new business plan.

ITEM 7.  FINANCIAL STATEMENTS

                                                               13

<PAGE>















                     USAsurance Group, Inc.

                     Financial Statements
                        May 31, 1997



                                                               14

<PAGE>

                  INDEX TO FINANCIAL STATEMENTS






                                                           PAGE


Independent Auditor's Report . . . . . . . . . . . . . . .  F-2

Balance Sheet - May 31, 1997 . . . . . . . . . . . . . . .  F-3

Statements of Operations -
   For the Years Ended May 31, 1997 and 1996  . . . . . . . F-4

Statement of Changes in Stockholders' Equity -
   For the Period from June 1, 1995 through May 31, 1997  . F-5

Statements of Cash Flows - 
   For the Years Ended May 31, 1997 and 1996  . . . . . . . F-6

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



























                               F-1

                                                               15

<PAGE>



                  INDEPENDENT AUDITOR'S REPORT
   





Board of Directors
USAsurance Group, Inc.
Denver, Colorado


We have audited the accompanying balance sheet of USAsurance Group,
Inc. as of May 31, 1997, and the related statements of operations,
changes in stockholders' equity and cash flows for the years ended
May 31, 1997 and 1996.  These financial statements are the
responsibility of the Company's management.  Our responsibility is
to express an opinion on these financial statements based on our
audits.

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

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
USAsurance Group, Inc. as of May 31, 1997, and the results of its
operations and its cash flows for the year then ended, in
conformity with generally accepted accounting principles.





Hein + Associates llp 

Denver, Colorado
August 13, 1997





                               F-2

                                                               16

<PAGE>
<TABLE>

                     USAsurance Group, Inc.

                         BALANCE SHEET
                          MAY 31, 1997


<CAPTION>

                             ASSETS
<S>                                                      <C>
Current Assets:
     Cash                                                $    729
     Purchased life insurance policies                    407,000
     Matured policies receivable - related party           27,000
     Deposits - related party                              38,476
     Other assets                                          18,040
                                                         --------

Total Current Assets                                     $491,245
                                                         ========



               LIABILITIES AND STOCKHOLDERS' EQUITY
                    
Current Liabilities:
     Accounts payable - trade                            $  3,969
     Accrued interest                                       9,229
                                                         --------
          Total current liabilities                        13,198
                    
Long-Term Debt, Related Parties                           175,340
                    
Stockholders' Equity:
     Preferred stock, $.01 par value;
        1,000,000 shares authorized, none
        outstanding                                             -
     Common stock, $.0001 par value;
        900,000,000 shares authorized,
        1,566,000 shares issued and outstanding               157
     Additional paid-in capital                           399,091
     Accumulated deficit                                  (96,541)
                                                         --------
          Total stockholders' equity                      302,707
                                                         --------
                    
Total Liabilities and Stockholders' Equity               $491,245
                                                         ========
<FN>


          See accompanying notes to these financial statements.

</TABLE>

                               F-3 

                                                                17

<PAGE>
<TABLE>

                     USAsurance Group, Inc.

                    STATEMENTS OF OPERATIONS

<CAPTION>
                                             For the Years Ended
                                                   May 31,
                                            ---------------------
                                               1997       1996
                                            ---------  ---------
<S>                                         <C>        <C>        
General and Administrative Expenses         $  59,370  $  57,560
                    
Other Income (Expense):                    
     Interest income                               96      1,760
     Interest expense                         (12,024)    (9,205)
                                            ---------  ---------
          Other, net                          (11,928)    (7,445)
                                            ---------  ---------
Loss Before Taxes
     and Discontinued Operations              (71,298)   (65,005)
                    
Income Tax Benefit (Expense):                    
     Current                                    3,000     13,000
     Deferred                                   4,800     (4,800)
                                            ---------  ---------
                                                7,800      8,200
                                            ---------  ---------
Loss Before Discontinued Operations           (63,498)   (56,805)
                    
Discontinued Operations -                    
     Income from discontinued operations,
        net of income tax expense of
        income tax expense of $2,500 and
        $14,000 for the years ended May
        31, 1997 and 1996, respectively         4,609     20,653
                                            ---------  ---------
Net Loss                                    $ (58,889) $ (36,152)
                                            =========  =========

Net income (loss) per common share:                    
     Before discontinued operations         $    (.04) $    (.04)
     Discontinued operations                        -        .02
                                            ---------  ---------
        Net income (loss) per common share  $    (.04) $    (.02)
                                            =========  =========

Weighted Average Common Shares Outstanding  1,566,000  1,548,000

<FN>

          See accompanying notes to these financial statements.

</TABLE>
                               F-4

                                                               18

<PAGE>
<TABLE>

                          USAsurance Group, Inc.

                STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
            FOR THE PERIOD FROM JUNE 1, 1995 THROUGH MAY 31, 1997



       <CAPTION>
                          Common Stock   Additional
                       -----------------   Paid-in  Accumulated
                         Shares   Amount   Capital    Deficit    Total
                       ---------  ------  ---------  ---------  --------
<S>                    <C>        <C>     <C>        <C>        <C>         
                                        
Balances, June 1, 1995 1,500,000  $  150  $   1,350  $ (1,500)  $      -

  Contributed services
    and rent                   -       -     34,200         -     34,200
  Issuance of common
    stock August 1995 -
    for cash              66,000       7    329,441         -    329,448
  Net loss                     -       -          -   (36,152)   (36,152)
                       ---------  ------  ---------  --------  ---------
                                                  
Balances, May 31, 1996 1,566,000     157    364,991   (37,652)   327,496

  Contributed services
    and rent                   -       -     34,100         -     34,100
  Net loss                     -       -          -   (58,889)   (58,889)
                       ---------  ------  ---------  --------  ---------
                                                  
Balances, May 31, 1997 1,566,000  $  157  $ 399,091  $(96,541) $ 302,707
                       =========  ======  =========  ========  =========















<FN>


          See accompanying notes to these financial statements.

</TABLE>
                               F-5

                                                                    19

<PAGE>
<TABLE>

                          USAsurance Group, Inc.

                         STATEMENTS OF CASH FLOWS

<CAPTION>
                                             For the Years Ended
                                                    May 31,
                                            ---------------------
                                               1997       1996
                                            ----------  ---------
<S>                                         <C>         <C>                 
Cash Flows from Operating Activities:          
  Net loss                                  $ (58,889)  $ (36,152)
  Adjustments to reconcile net loss to
     net cash used in operating activities:          
       Contributed services and rent           34,100      34,200
       Earned discount on purchased
         life insurance policies               (9,109)    (39,903)
       Deferred tax expense                    (4,800)      4,800
       Changes in operating assets
         and liabilities:     
           Purchased life insurance
             policies                         (77,486)   (489,795)
           Collections on matured 
             life insurance policies           59,000     151,000
           Matured policies receivable        (27,000)          -    
           Deposits                           (38,476)          -    
           Other assets                        (3,610)    (14,430)
           Accounts payable and
             accrued expenses                   2,435         827
           Accrued interest payable                24       9,205
                                            ---------   ---------
     Net cash used in operating activities   (123,811)   (380,248)
                    
Cash Flows from Financing Activities:          
     Proceeds from issuance of common stock         -     329,448
     Proceeds from issuance of notes payable        -     175,340
                                            ---------   ---------
       Net cash provided by financing
         activities                                 -     504,788
                    
Increase (Decrease) in Cash                  (123,811)    124,540
                    
Cash, at beginning of year                    124,540           -    
                                           ----------    --------
                    
Cash, at end of year                       $      729    $124,540
                                           ==========    ========

<FN>

          See accompanying notes to these financial statements.

</TABLE>
                               F-6

                                                                    20

<PAGE>

                                USAsurance Group, Inc.

                             NOTES TO FINANCIAL STATEMENTS

1.   Summary of Significant Accounting Policies:

     Organization and Nature of Operations - USAsurance Group, Inc. (the
     Company) was incorporated as a Colorado Corporation in 1991 and commenced
     business in June 1995.  The Company's principal business activities are
     currently in the viatical settlement industry.  Viatical settlements are
     made to persons who are terminally ill and who want to sell their life
     insurance to obtain the benefit of the money provided by the settlement
     during the remainder of their life.  The Company has ceased further
     participation in the viatical settlement business due to extended life
     expectancies resulting in lower returns.  Revenues applicable to the
     discontinued viatical settlement segment were $9,109 and $39,903 for the
     years ended May 31, 1997 and 1996, respectively.  Management of the Company
     does not expect to recognize any gain or loss from the discontinuance of 
     the viatical settlement segment.  Generally, all assets and liabilities as 
     of May 31, 1997 relate to the viatical settlement segment.  Subsequent to
     May 31, 1997, the Company created a wholly owned foreign subsidiary for the
     purpose of pursuing opportunities in the reinsurance of program business 
     and special groups. 

     Purchased Life Insurance Policies - The Company recognizes income (earned
     discount) on each purchased policy by accruing, over the period between the
     acquisition date of the policy and the Company's estimated date of
     collection of the face value of the policy (the Accrual Period), the
     difference (the unearned discount) between, (a) the death benefit payable
     (face value) under the policy less the amount of fees, if any, payable to
     a referral source upon collection of the face value, and (b) the carrying
     value of the policy.  The carrying value of each policy is reflected on the
     Company's balance sheet under "purchased life insurance policies" and
     consists of the purchase price, other capitalized costs, and the earned
     discount on the policy accrued to the balance sheet date.  The Company
     capitalizes as incurred the following costs of a purchased policy (not to
     exceed the face amount of the policy):  (i) the purchase price paid for the
     policy, (ii) policy premiums, if any, paid by the Company, (iii) amounts,
     if any, paid to referral sources upon acquisition of the policy, and (iv)
     amounts paid to the Company retained physicians or other medical 
     consultants who estimated the insured's life expectancy.  The carrying 
     value of a policy will change over time, and is adjusted quarterly to 
     reflect the earned discounts accrued on the policy, amounts paid for any 
     additional future increases in coverage, any additional premium payments 
     and any premium refunds, if the policy becomes covered by premium waiver 
     provisions.  The length of the Accrual Period is determined by the Company 
     based upon its estimate of the date on which it will collect the face value
     of the policy.
 
     This estimate is based upon the Company's estimate of the life expectancy
     of the insured, after review of the medical records of the insured by one
     or more Consultants, and also takes into account the historical accuracy of
     the life expectancies estimated by the Company's Consultants and the 
     typical period (collection period) between the date of the insured's death 
     and the date on which the Company collects the face value of the policy.

     The unearned discount is accrued over the accrual period using the straight
     -line method.  Under the straight-line method, the unearned discount is
     earned evenly throughout the accrual period and the unearned discount will
     be fully accrued as earned discount by the end of the accrual period.

     Differences will arise between the timing of estimated and actual
     collections.  The Company recalculates the accrual periods periodically,

                                      F-7

                                                                          21

<PAGE>


                                USAsurance Group, Inc.

                            NOTES TO FINANCIAL STATEMENTS

     based on medical analyses and using actual collection experience and, if
     necessary, adjusts prospectively the period over which income is 
     recognized.

     The Company will purchase both group and individual policies that will
     include term, whole life, and universal life insurance.  Upon maturity of
     the policies the Company will then receive the face amount of the policy in
     the form of a cashiers check made out to the Company usually within 30 
     days.

     In July 1996, the International AIDS conference reported there were a 
     number of studies which indicated that treatments involving various drugs
     were substantially reducing and perhaps eradicating the levels of Human
     Immunodiffiency Virus (HIV) detectable in the blood of persons previously
     diagnosed with HIV and AIDS.  All of the Company's historical purchases 
     have involved policies insuring the lives of individuals with HIV or AIDS.
     The Company continues to analyze the effect of such research results on its
     business and in particular, purchases by the Company of policies, the 
     timing of collections on owned policies and the appropriateness of the 
     accrual period over which the Company recognizes income or earned 
     discounts. 

     Income Taxes - The Company accounts for income taxes in accordance with the
     provision of Statement of Financial Accounting Standards No. 109 
     "Accounting for Income Taxes" (SFAS No. 109).  Under the asset and 
     liability method prescribed by SFAS No. 109, deferred tax assets and 
     liabilities are recognized for the future tax consequences attributable to 
     differences between the financial statement carrying amounts of existing 
     assets and liabilities and their respective tax basis (temporary 
     differences). 

     Deferred tax assets and liabilities are measured using enacted tax rates
     expected to apply to taxable income in the years in which those temporary
     differences are expected to be recovered or settled.  The effect on 
     deferred tax assets and liabilities of a change in tax rates is recognized 
     in income in the period that includes the enactment date of the tax change.

     Under SFAS No. 109, deferred tax assets are recognized for deductible
     temporary differences and operating loss and tax credit carryforwards, and
     then a valuation allowance is established to reduce that deferred tax asset
     if it is "more likely than not" that the related tax benefits will not be
     realized.

     Concentration of Credit Risk - Financial instruments that subject the
     Company to concentration of credit risk consist primarily of receivables
     from insurance companies which are the obligors under insurance policies
     purchased by the Company.  As of May 31, 1997, the Company had seven
     purchased life insurance policies with individual insurers with aggregate
     face values that individually represented greater than 5% of the total
     purchased life insurance policies. 

     Fair Value of Financial Instruments - The estimated fair values for
     financial instruments are determined at discrete points in time based on
     relevant market information.  These estimates involve uncertainties and
     cannot be determined with precision.  The carrying amounts of notes 
     payable, account payable and accrued liabilities approximate fair value.  
     The carrying amount of purchased life insurance policies may be in excess
     of fair value as the total of all policies are carried $15,000 less than
     maturity value, however, the contracts have not yet matured.  Fair value on
     these policies are estimated at approximately $400,000.




                                      F-8

                                                                            22

<PAGE>

                                USAsurance Group, Inc.

                            NOTES TO FINANCIAL STATEMENTS

     Use of Estimates - The preparation of the Company's financial statements in
     conformity with generally accepted accounting principles requires the
     Company's management to make estimates and assumptions that affect the
     amounts reported in these financial statements and accompanying notes.  The
     Company makes significant assumptions concerning accrual period of the
     Company's purchased policies.  Due to uncertainties inherent in the
     estimation process, it is at least reasonably possible that the accrual
     period on purchased life insurance policies be further revised in the near
     term and such revisions could be material.  Actual results could differ 
     from those estimates. 

2.   Purchased Life Insurance Policies:

     Purchased life insurance policies consist of the following as of May 31,
     1997:

          Capitalized costs of purchased life insurance policies    $ 378,800
          Earned discount                                              28,200
                                                                    ---------
             Purchased life insurance policies                      $ 407,000
                                                                    =========
     Included in the above table are life insurance policies totaling $137,000
     which were purchased by the Company at the face amount of the policies and
     as such, will generate no revenues for the Company.  Management of the
     Company believes that all of the purchased life insurance policies as of
     May 31, 1997 will mature in fiscal 1998.

     As of May 31, 1997, the Company has purchased life insurance policies
     totaling $62,000 at face value from an entity which is a 2% stockholder of
     the Company.  Additionally, the Company has a matured policy receivable
     totaling $27,000 and a deposit totaling $38,476 to purchase life insurance
     policies from this stockholder.  Subsequent to May 31, 1997, the receivable
     was collected and the deposit was returned. 

3.   Stockholders' Equity:

     The Company has the authority to issue 1,000,000 shares of preferred stock
 .
     The Board of Directors has the authority to issue such preferred shares in
     series and determine the rights and preferences of the shares as may be
     determined by the Board of Directors. 

     During August 1995, the Company sold, in a private placement, 66,000 shares
     of common stock for $5.00 per share.  Proceeds of $329,448 is net of $552
     of offering costs.

     During the years ended May 31, 1997 and 1996, the Company's management
     contributed $33,000 of services for both years and $1,200 and $1,100,
     respectively, of office space, both of which have been recorded as a
     contribution to equity and as general and administrative expenses. 

                                      F-9

                                                                            23

<PAGE>

                                USAsurance Group, Inc.

                            NOTES TO FINANCIAL STATEMENTS

4.   Long-Term Debt:

     Notes payable as of May 31, 1997 consist of the following:

     Note payable to stockholder and officer of the Company, with
     interest at 7%.  Principal and interest due August 1997.
     Subsequent to year-end, the note payable was extended to
     August 1998.                                                    $  58,000

     Note payable to the stockholder and officer of the Company,
     with interest at 7%.  Principal and interest due June 1997.
     Subsequent to year-end, the note payable was extended to June
     1998.                                                              42,342
          
     Note payable to stockholder, with interest at 7%.  Principal
     and interest due September 1997.  Subsequent to year-end, the
     note payable was extended to September 1998.                       75,000
                                                                     ---------
          Total long-term debt                                       $ 175,342
                                                                     =========
5.   Income Taxes:

     As of May 31, 1997, the Company has a net operating loss carryforward of
     approximately $53,000  which, if not used, expire in the years 2010 and
     2012.

     The amounts which give rise to the net deferred tax asset (liability) as of
     May 31, 1997, are as follows:

          Deferred assets (liabilities):          
               Purchased life insurance policies          $ (10,000)
               Net operating loss carryforward               20,000
               Other                                          1,000
                                                          ---------
                  Net deferred tax asset (liability)         11,000
                    
               Valuation allowance                          (11,000)
                                                          ---------
                                                          $       -    
                                                          =========

     There was no valuation allowance at May 31, 1996, resulting in an increase
     of $11,000 during the year ended May 31, 1997.

















                                     F-10

                                                                            24

<PAGE>


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

     On May 31, 1996, Kish, Leake & Associates, P.C., the Company's
independent accountant for the two fiscal years prior to May 31,
1996, resigned.  The Company's financial statements for the two
fiscal years ended May 31, 1994 and 1995 were prepared by Kish,
Leake & Associates, P.C. and contained no adverse opinion or
disclaimer of opinion, nor were qualified as to uncertainty, audit
scope, or accounting principles.

     Also on May 31, 1996, the Company engaged the accounting firm
of Hein + Associates LLP as the independent public accountants to
audit the Company's fiscal year ended May 31, 1996, as well as
future financial statements, to replace the firm of Kish, Leake &
Associates, P.C.  This change in independent accountants was
approved by the Board of Directors of the Company.

     There were no disagreements during the fiscal years ended May
31, 1994 and 1995 and subsequent periods with Kish, Leake &
Associates, P.C. on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope of
procedure, which disagreement(s), if not resolved to the
satisfaction of Kish, Leake & Associates, P.C., would have caused
that firm to make reference in connection with its reports to the
subject matter of the disagreement(s) or any reportable events.

               PART III

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

     Directors are elected for one-year terms or until the next
annual meeting of shareholders and until their successors are duly
elected and qualified.  Officers continue in office at the pleasure
of the Board of Directors.  

     The Directors and Officers of the Company as of the date of
this report are as follows:

              Name                 Age            Position
     _______________________       ___       ___________________

     Thomas J. Chase                57       President, Director
     Matthew J. Kavanagh III        62       Secretary, Director

     All Directors of the Company will hold office until the next
annual meeting of the shareholders and until their successors have
been elected and qualified.  Officers of the Company are elected by
the Board of Directors and hold office until their death or until
they resign or are removed from office. 

                                                               25

<PAGE>

     There are no family relationships among the officers and
directors.  There is no arrangement or understanding between the
Company (or any of its directors or officers) and any other person
pursuant to which such person was or is to be selected as a
director or officer.

     In December 1996, Duane C. Peterson resigned his position as
a director of the Company for personal reasons.  There were no
disagreements between Mr. Peterson and the Company's Board of
Directors.  No replacement has yet been appointed to replace Mr.
Peterson, but it is anticipated that a new director will be so
appointed in the near future.  It is expected that such director
will have experience in the Company's proposed new business,
described hereinabove under Item 1.

     (b) Resumes:

     Thomas J. Chase, President and a director.  Mr. Chase has been
a director of the Company since its inception.  Also, from
inception through May 31, 1996, Mr. Chase held the position of
Secretary of the Company.  He was appointed President of the
Company on May 31, 1996.  Since March 1988, Mr. Chase has been
President and sole owner of Tom Chase & Co., Inc., a privately held
Colorado corporation engaged as a broker of insurance and financial
services.  Primarily, this company functions as a broker for
property and casualty insurance, life insurance and commercial
mortgages.  Mr. Chase received a Bachelor of Science degree in
business administration from Miami University (Ohio) in 1963.  He
devotes only such time as necessary to the business of the Company.

     Matthew J. Kavanagh III, Secretary and a director.  Mr.
Kavanagh was appointed to his positions with the Company on May 31,
1996. Since September 1982, Mr. Kavanagh has been the President of
The Amherst Group Ltd., a privately held corporation located in
Englewood, Colorado, engaged in consulting services, including
sales, marketing, franchising, real estate development and fund
raising to growth and development stage companies.  Mr. Kavanagh
holds a Bachelor of Arts degree from Southern Methodist University
in Dallas, Texas.  Mr. Kavanagh received a professional
certification as a Chartered Life Underwriter in 1969. 
Additionally, he is a licensed real estate broker and insurance
broker in the State of Colorado.  Mr. Kavanagh devotes only such
time as is necessary to the business of the Company.

     Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's officers, directors and person who own more than 10%
of the Company's Common Stock to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. 
All of the aforesaid persons are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they
file.

                                                               26

<PAGE>

     Based solely on review of the copies of such forms furnished
to the Company, the Company believes that the Form 5 annual reports
of the Company's officers, directors and holders of 10% or more of
the outstanding shares of the Company, which are required to be
filed within 45 days after the end of the Company's fiscal year,
were timely filed.  These reports reflected no changes in the
securities holdings of any person.

ITEM 10.  EXECUTIVE COMPENSATION.

Remuneration

     The following table reflects all forms of compensation for
services to the Company for the years ended May 31, 1997 and 1996
of the chief executive officer of the Company.

<TABLE>

               SUMMARY COMPENSATION TABLE


         <CAPTION>
                                           Long Term Compensation
                                          ____________________________

                   Annual Compensation          Awards         Payouts
                  _____________________   ____________________ _______
                                                    Securities
                                 Other                Under-               All
Name                             Annual   Restricted   lying              Other
and                              Compen-    Stock    Options/    LTIP    Compen-
Principal         Salary  Bonus  sation     Award(s)     SARs   Payouts   sation
Position    Year   ($)     ($)    ($)         ($)        (#)      ($)      ($)
__________  ____  ______  _____  ______    ________   _______   _______  _______
<S>         <C>   <C>     <C>    <C>       <C>        <C>       <C>      <C>
Thomas J.
Chase, Pres.(1)(2)
& Director  1997  $    0  $   0  $    0    $      0     $  0     $  0     $  0
Terry A.          
Whiteside
Pres. &     (1)(2)
Director    1996  $    0  $   0  $    0    $      0     $   0    $  0     $  0
_________________________

<F1>

(1)  Ms. Whiteside did not receive any salary during the fiscal year ended May
     31, 1996 from the Company.   She resigned her positions with the Company
     effective May 31, 1996 and was replaced by Thomas Chase, who did not
     receive any salary during the fiscal year ended May 31, 1997.

<F2>

(2)  It is not anticipated that any executive officer of the Company will
     receive compensation exceeding $100,000 during the fiscal year ending May
     31, 1998.

</TABLE>

                                                                    27

<PAGE>

     The Company maintains a policy whereby the directors of the
Company may be compensated for out of pocket expenses incurred by
each of them in the performance of their relevant duties.  The
Company did not reimburse any director for such expenses during the
fiscal year ended May 31, 1997.

     In addition to the cash compensation set forth above, the
Company reimburses each executive officer for expenses incurred on
behalf of the Company on an out-of-pocket basis.  The Company
cannot determine, without undue expense, the exact amount of such
expense reimbursement.  However, the Company believes that such
reimbursements did not exceed, in the aggregate, $1,000 during
fiscal year 1997.

     There are no bonus or incentive plans in effect, nor are there
any understandings in place concerning additional compensation to
the Company's officers.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.

     (a) and (b) Security Ownership of Certain Beneficial Owners
and Management.

     The table below lists the beneficial ownership of the
Company's voting securities by each person known by the Company to
be the beneficial owner of more than 5% of such securities, as well
as beneficial ownership for each class of equity securities of the
Company beneficially owned by all directors and officers of the
Company.  Unless otherwise indicated, the shareholders listed
possess sole voting and investment power with respect to the shares
shown and there are no outstanding arrangements which would result
in change of control of the Company.

                  Name and            Amount and
                  Address of           Nature of
Title of          Beneficial          Beneficial         Percent of
 Class               Owner             Ownership            Class
________       ____________________   __________         __________
                                                                  
Common         Terry Whiteside          775,000             49.5%
               7345 E. Peakview Ave
               Englewood, CO 80111

Common         Thomas J. Chase(1)         5,000                 *
               7345 E. Peakview Ave.
               Englewood, CO  80111

Common         Matthew Kavanagh(1)        4,000                 *
               3140 S. Peoria, #230
               Aurora, CO 80014

                                                               28

<PAGE>

                  Name and            Amount and
                  Address of           Nature of
Title of          Beneficial          Beneficial         Percent of
 Class               Owner             Ownership            Class
________       ____________________   __________         __________

Common         All Officers and           9,000                *
               Directors as a 
               Group (2 persons)
_________________________
* Less than 1%
(1)  Officer and/or director of the Company.

(2)  The information relating to beneficial ownership of the
     Company's common stock is based on information furnished by
     them using the definition of "beneficial ownership" set forth
     in rules promulgated by the Securities and Exchange Commission
     under Section 13(d) of the Securities Exchange Act of 1934. 
     Except where there may be special relationships with other
     persons, including share voting or investment power, the
     directors and nominees possess sole voting and investment
     power with respect to the shares set forth beside their names.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     In June 1995, Terry Whiteside, the Company's former President,
loaned the Company the principal sum of $42,340, which the Company
utilized to purchase its initial insurance policy with a face value
of $58,000.  In August 1995, Ms. Whiteside loaned the Company the
principal sum of $58,000.  Additionally in August 1995, a minority
shareholder of the Company loaned the Company the principal sum of
$75,000.  Each of these aforesaid loans are unsecured and all have
been extended until August 1998 by the mutual consent of the
parties, with interest accruing at the rate of 7% per annum.  The
Company utilized the proceeds of these loans to purchase insurance
policies.  

     Management believes that because the Company had no assets or
other collateral at the time such loans were made, no established
financial institution would have undertaken to make any loans to
the Company.  Further, management believes that the terms of these
loans are more favorable to the Company than could have been
provided by any other financing entity, had such a financing entity
been amenable to undertaking such lending activities.

     Between July and September 1995, the Company successfully
concluded a private placement of its common stock pursuant to
exemptions from registration included under Rule 504 of Regulation
D, promulgated under the Securities Act of 1933, as amended.  In
this private offering, the Company sold an aggregate of 66,000
shares of its common stock to 7 investors for total subscriptions
of $330,000 ($5.00 per share).

                                                               29

<PAGE>

     The Company reimburses its executive officers and directors
from time to time for out-of-pocket expenditures, including travel,
long distance telephone, photocopying and similar such costs and
expenses, paid by them on behalf of the Company.  The total amount
of expense reimbursements by the Company to any executive officer
and/or director did not exceed $10,000 in the Company's fiscal year
ended May 31, 1997.

     During the fiscal year ended May 31, 1996, the Company
purchased life insurance policies totalling $146,000 at the face
value of the policy from an entity which is approximately a 2%
stockholder of the Company.


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<PAGE>

                            PART IV

Item 13.  EXHIBITS AND REPORTS ON FORM 8-K.

(a)  Exhibits

     *3.1   Certificate and Articles of Incorporation 

     *3.2   Bylaws

     EX-27  Financial Data Schedule

* Filed with the Securities and Exchange Commission in the Exhibits
to Form 10-SB, filed on October 3, 1995 and are incorporated by
reference herein.

(b)     Reports on Form 8-K 

     The Company did not file any reports on Form 8-K during the
three month period ending May 31, 1997.

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<PAGE>

                          SIGNATURES

     In accordance with Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on
September 15, 1997.

                                        USASURANCE GROUP, INC.
                                        (Registrant)


                                        By:/s/ Thomas J. Chase    
                                           Thomas J. Chase,
                                           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 indicated on September 15, 1997.


/s/ Thomas J. Chase              
Thomas J. Chase, Director            


/s/ Matthew J. Kavanagh, III      
Matthew J. Kavanagh, III, Director


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<PAGE>

                     USASURANCE GROUP, INC.

         Exhibit Index to Annual Report on Form 10-KSB
            For the Fiscal Year Ended May 31, 1997

EXHIBITS                                                  Page No.

  EX-27     Financial Data Schedule . . . . . . . . . . . . .  34


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