UNITED STATES
                              SECURITIES AND EXCHANGE COMMISSION
                                     Washington, DC  20549



                                          FORM 10-QSB


        QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
        ACT OF 1934 for the quarterly period ended September 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       (I.R.S. Employer Identification Number)
      incorporation or organization)


     15915 Ventura Boulevard, Suite 301
          Encino, California                            91436           
  (Address of Principal Executive Offices)            (Zip Code)

 Registrant's telephone number including are       (818) 783-0393      
                          ------------------------------------------------



        Indicate  by check mark whether  the  issuer (1) has filed all  reports
        required to be filed by Section 13 or 15(d) of the Securities  Exchange
        Act of 1934 during the  preceding 12 months (or for such shorter period
        that the issuer was  required  to file such  reports), and (2) has been
        subject to such filing requirements for the past 90 days:

          YES    X       NO        


Common stock, $.00001 par value, 1,346,809 issued and outstanding as of
 October 21, 1998.




                                                

<PAGE>2



                                                INDEX

                                                                         PAGE

PART I - FINANCIAL INFORMATION

     ITEM 1.  Financial Statements (Unaudited) ..............................3

     ITEM 2.  Management's Discussion and Analysis ..........................8


PART II - OTHER INFORMATION

     ITEM 1.  Legal Proceedings.............................................10

     ITEM 2.  Changes in Securities.........................................10

     ITEM 3.  Defaults upon Senior Securities........  .....................10

     ITEM 4.  Submission of Matters to a Vote of Security Holders...........10

     ITEM 5.  Other Information.............................................10

     ITEM 6.  Exhibits and Reports on Form 8-K..............................11


                                          

<PAGE>3



                                   PART I - FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS


                                               

<PAGE>4



                                  USA INTERNATIONAL CHEMICAL, INC.
                                      BALANCE SHEET (UNAUDITED)
                                         SEPTEMBER 30, 1998


                                               ASSETS


Current Assets

        Cash                                              $ 4,779
                                                          -------

        Total Assets                                      $ 4,779
                                                          =======



                       LIABILITIES AND STOCKHOLDERS EQUITY


Current Liabilities                                       $ 1,753

Stockholders' Equity (Notes 1 and 2)

        Common stock, $.00001 par value, authorized
        50,000,000 shares, issued and outstanding
        1,346,809 shares                                       13
        Additional paid-in capital                        328,167
        Accumulated deficit                              (325,154)
                                                        ---------

        Total Stockholders Equity                           3,026
                                                        ---------

        Total Liabilities and Stockholders' Equity $        4,779
                                                        =========    



See accompanying notes.




<PAGE>5



                        USA INTERNATIONAL CHEMICAL, INC.
                      STATEMENTS OF OPERATIONS (UNAUDITED)
                 THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997


                                                    Three Months Ended
                                                     September 30,
                                                --------------------------


                                              1998                    1997
                                              ----                    ----


Sales   ..................................  $    ----                  $  ----
                                              --------                 -------- 

General Administrative Expenses...........     6,784                      6,848
                                              --------                 --------

     Loss from Operations.................    (6,784)                    (6,848)
                                              --------                 -------- 

     Loss Before Income Tax Provisions....    (6,784)                    (6,848)
                                              --------                 -------- 

Provision for Income Tax..................       800                $       800
                                              --------                 --------

Net Loss.................................. $  (7,584)               $    (7,648)
                                              --------                 -------- 

Net Loss Per Share ....................... $    (.01)               $      (.01)
                                            ===========               =========

Weighted Average Shares Outstanding....... 1,346,809                  1,341,809










See accompanying notes.



<PAGE>6



                        USA INTERNATIONAL CHEMICAL, INC.
                      STATEMENTS OF CASH FLOWS (UNAUDITED)
                 THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997




                                                        Three Months Ended
                                                           September 30,
                                                         -------------------

Operating Activities:                                                     
                                                       1998             1997
                                                    ---------         -------

     Net Cash Used in Operating Activities          $(3,831)          $(5,907)
     Financing Activities: 
          Capital Contributions                       5,000             3,000
                                                   ---------          --------
     Net Cash Provided by Financing Activities        5,000             3,000
                                                   ---------          --------

Net Increase (Decrease) in Cash                       1,169            (2,907)
Cash at beginning of period                           3,610             5,524
                                                   ---------          --------
Cash at end of period                                $4,779            $2,617
                                                   =========          ========


See accompanying notes



<PAGE>7



                        USA INTERNATIONAL CHEMICAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                      THREE MONTHS ENDED SEPTEMBER 30, 1998


NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting  principles for interim financial information
pursuant  to  Regulation  S-B.  Accordingly,  they  do  not  include  all of the
information and footnotes required by generally accepted  accounting  principles
for complete financial statements. In the opinion of management, all adjustments
(consisting  of  normal  recurring  accruals)  considered  necessary  for a fair
presentation  have been included.  Operating  results for the three months ended
September  30, 1998 are not  necessarily  indicative  of the results that may be
expected for the year ending June 30, 1999. For further information refer to the
financial  statements and footnotes thereto included in Form 10-KSB for the year
ended June 30, 1998 filed by the Company.

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.

NOTE 2 - SHAREHOLDERS' DEFICIT

During  the  three  months  ended  September  30,  1998  principal  shareholders
contributed $5,000 to the Company.


                                                

<PAGE>8



ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

      This  discussion, other than the  historical  financial  information, may
consist of  forward-looking statements  that involve  risks and  uncertainties,
including when the Company may resume business operations. Consequently, actual
results may vary from management's expectations.

        Results of Operations for the Three Months Ended September 30, 1998
        -------------------------------------------------------------------

        Operating Activities
        --------------------

        There were no sales for the three month period ended September 30, 1998.
Since the change of control of the Company in September,  1994,  the Company has
not  pursued  any of the  Company's  former  business.  Consequently,  until the
Company's  current  management  develops  or acquires  new  business  lines,  no
operating revenues are expected.

        Operating  expenses  totaled $6,784 for the quarter ended  September 30,
1998. Net cash used by operations was $3,831 and $2,000 was paid for services by
issuing  5,000  shares of  common  stock.  Operating  expenses  for the  quarter
consisted  primarily  of legal and  accounting  fees  relating to the  Company's
year-end annual report on Form 10-KSB and the material for the Company's  annual
shareholders meeting.

        Net loss totaled $7,584 for the three months ended September 30, 1998.

        In  light  of  the   foregoing,   the  Company   will  attempt  to  keep
administrative expenses to a minimum. However,  operating losses are anticipated
until the Company establishes new lines of business.

        Many  companies have older  computer  programs which  recognize only the
last two  digits of the year in any date (i.e.  "98" for  "1998"),  which  could
cause  such  software  to fail to  operate  in the year 1999 or 2000  unless the
software  is  preprogramed  or  replaced  (the "Year 2000  Problem").  Since the
Company has no active business operations, the Year 2000 Problem is not expected
to affect the Company's current limited  operations.  Consequently,  the Company
believes  that the cost of  addressing  the Year  2000  Problem  will not have a
material  effect on the Company's  financial  position,  liquidity or results of
operations.

        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 combination with the Company.  There can be
no assurance,  however,  that the Company will be successful in its efforts,  or
that other types of business transactions might not be considered.

        Capital Resources and Liquidity
        -------------------------------

        Pursuant  to the  terms  of a  Stock  Purchase  Agreement,  the  Company
liquidated its assets and  liabilities  during the three months ended  September
30, 1994.  Since  September 30, 1994, the Company has generated no revenues from
operations.  During the three  months  ended  September  30,  1998,  capital was
provided for operations from $5,000 in  contributions  from two of the Company's
principal  stockholders.  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.


                                              
<PAGE>9


Results of Operations for the Three Months Ended  September 30, 1998 as Compared
to the Three Months Ended September 30, 1997
---------------------------------------------

        Operating Activities
        --------------------

        There were no sales for the three month period ended September 30, 1998
or 1997.

        Operating  expenses  totaled $6,784 for the quarter ended  September 30,
1998,  and $6,848 for the three months  ended  September  30, 1997.  The similar
level of expenses  reflect  comparable fees for services  rendered in both three
month periods.

        During the three  months  ended  September  30,  1998,  net cash used by
operations  was $3,831.  During the three months ended  September 30, 1997,  net
cash of $5,907 was used by operations.

        Net loss totaled  $7,584 for the three months ended  September 30, 1998,
compared to a net loss of $7,648 for the three months ended  September 30, 1997.
The relatively  equal net loss incurred for both periods  reflect similar levels
of administrative expenses recognized in both quarters.

        Capital Resources and Liquidity
        -------------------------------

        During the three months ended  September 30, 1998,  capital was provided
for operations from $5,000 in contributions from two of the Company's  principal
stockholders.  During the three months  ended  September  30, 1997,  capital for
operations  was  provided  from  $3,000 in  contributions  from these  principal
shareholders or other affiliates of the Company.



<PAGE>10


                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

        There are no legal  proceedings  against  the  Company,  or to which the
Company or any of its officers or directors are a party, and to the knowledge of
the Company's management, no claims have been made against the Company.


ITEM 2.  CHANGES IN SECURITIES

        Effective  September  1, 1998,  the Company  issued  5,000 shares of its
common  stock to Arthur  Lyons in  consideration  of  services  rendered  to the
Company  valued at  $2,000.  The shares  were  issued in a private  offering  in
reliance upon the exemption  from  registration  pursuant to Section 4(2) of the
Securities  Act of 1933 as  amended.  The  reliance  on the  above  registration
exemption was based primarily upon the following facts:

        i)   the issuance was made to a single individual who was 
             previously known to the Company's then President and CEO;

        ii) the transferee was deemed capable of protecting his own interest in
            this transaction; and

        iii) the issuance was not accompanied by any general solicitation.


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

        None


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

        None


ITEM 5.  OTHER INFORMATION

`Effective  September  1, 1998,  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 seventeen fiction and non-fiction  books,
as well as numerous magazine articles, short stories and screenplays.  Mr. Lyons
is a graduate of the University of California at Santa Barbara.


<PAGE>11


As of September 1, 1998,  the  Company's  executive offices were moved to 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.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

        (a)     No Exhibits

        (b) No reports on Form 8-K were filed  during the quarter for which this
report is filed.


                                             SIGNATURES


        In accordance with the  requirements  of the Securities  Exchange Act of
1934,  the  Registrant  has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.




                                             USA INTERNATIONAL CHEMICAL, INC.


Dated:  November 2, 1998                  /s/HAROLD S. FLEISCHMAN
                                          -------------------------------------
                                          Harold S. Fleischman
                                          President and Chief Financial Officer
                                          (Principal Accounting Person)