UNITED STATES
                   SECURITIES AND EXCHANGE COMMISSION
                         Washington, D.C. 20549

                                FORM 10-K

[ x ]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
          EXCHANGE ACT OF 1934 [Fee Required]

             For the fiscal year ended   DECEMBER 31, 1996 
                                        -----------------------
                                   or

[   ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
          SECURITIES EXCHANGE ACT OF 1934 [Fee Required]

               For the transition period from   N/A    to    N/A      
                                              --------    --------

                 Commission File Number      0-13817 
                                          -------------

                       MARGATE INDUSTRIES, INC.
         ----------------------------------------------------
        (Exact Name of Registrant as specified in its Charter)

                DELAWARE                               84-8963939
     ------------------------------            ---------------------------
     State or Other Jurisdiction of            (IRS Employer Identification
     Incorporation or Organization                      Number)
                                   
             129 NORTH MAIN STREET, YALE, MICHIGAN  48097
          ----------------------------------------------------
         (Address of Principal Executive Offices)   (Zip Code)
                                   
  Registrant's Telephone Number, including area code  (810) 387-4300
                                                     -----------------

   Securities registered pursuant to Section 12(b) of the Act: NONE
                                   
      Securities registered pursuant to Section 12(g) of the Act:
                                   
                     COMMON STOCK, $.005 PAR VALUE
                     -----------------------------
                            Title of Class

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

                             Yes  X       No
                               -----       -----

At March 14, 1997, 4,593,637 shares of Common Stock , no par value, were
outstanding.  The aggregate market value of the Common Stock held by 
non-affiliates of the Registrant on that date was approximately $2,802,950.

Documents incorporated by reference:  NONE

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.

                             Yes  X       No
                               -----       -----

Page 1 of 49 pages                       Exhibits are indexed on page 20.

<PAGE>

                                 PART I

ITEM 1.   BUSINESS
          --------

     (a)  GENERAL DEVELOPMENT OF BUSINESS.  Margate Industries, Inc. (the
"Company"), was formed under the laws of the State of Delaware on April 4,
1984.  The Company sold 4,000,000 Units, at $0.02 per Unit, for total
proceeds of $80,000 in a public offering which closed in May of 1985.  Each
Unit consisted of one share of common stock of the Company and one Warrant
to purchase an additional share of common stock.  The Warrants expired by
their terms unexercised.

     On November 17, 1986, the Company issued 12,515,580 shares of its
$.001 par value common stock to the holders of 100% of the outstanding
common stock of New Haven Foundry, Inc., ("NHF") in a merger transaction in
which NHF became a wholly-owned subsidiary of the Company.  The shares of
common stock issued to the shareholders of NHF represented approximately
70% of the Company's common stock outstanding after the completion of the
transaction.  The shares of the Company's common stock issued to the
shareholders of NHF were registered under the Securities Act of 1933, as
amended, in a Registration Statement on Form S-4 (SEC File No. 33-5294),
which was initially filed on April 29, 1986 and declared effective on
October 8, 1987.

     During 1987, the Company established a wholly-owned subsidiary, 
Michigan Casting Corporation, ("MCC") which provides finishing services on
castings manufactured by NHF and other foundries.

     In June of 1989, Brown City Casting Corporation ("BCCC"), a 
wholly-owned subsidiary, commenced operations to provide finishing services
on castings produced by foundries in the Michigan area.  In June, 1993, the
Company transferred its operations to Yale, Michigan and now conducts
business under the name of Yale Industries.  BCCC ceased all operations in
Brown City, Michigan in June, 1993.

     On July 19, 1990, the Company sold 55% of the common stock of NHF to
Wesley Industries, Inc., ("Wesley"), for $1,589,000 consisting of
$1,500,000 cash and an $89,000 five-year Promissory Note.  Wesley is
50%-owned by Mr. Delbert W. Mullens, currently a Director of the Company and
50%-owned by Ms. Lula Mullens.  The promissory note called for interest at
2% over the prime rate, with no principal payments required until
September, 1991.  The Company extended the term of the note and payments
begin in April, 1994.  Upon repayment of the promissory note, Wesley has
the right to purchase an additional 20% of the shares of NHF held by the
Company for $800,000 or the then current book value, whichever is greater. 
Upon such purchase, the Company can require Mr. Mullens to purchase the
remaining shares for $1,800,000 or the then current book value, whichever
is greater.

     The terms of the sale also provided for an annual commission contract
between NHF and the Company and between NHF and Wesley relating to sales in
excess of $35,000,000 annually.  The Company receives $150,000 each year
plus 3% on the difference between actual sales in excess of $35,000,000 but
less than $40,000,000 plus 2% on actual sales that exceed $40,000,000. 
This commissions contract will be in effect for a period of not less than
fifteen (15) years.  Also, for a minimum period of fifteen (15) years, the
Company and its subsidiaries will provide cleaning services on all castings
produced by NHF on an exclusive basis, so long as the Company retains an
ownership interest in NHF.

     Pursuant to the sale, Mr. Mullens was elected to the Company's Board
of Directors.  Conversely, the Company has representatives that account for
forty five percent (45%) of the Directors/Voters on the

                                   -2-

<PAGE>

NHF Board of Directors.  In addition, Mr. Mullens is restricted from
transferring his interest in NHF stock without the consent of the Company
and also he has a first right of refusal to purchase the balance of the NHF
common stock in the event the Company wishes to sell or transfer any of its
remaining NHF stock.

     Pursuant to the agreement for the sale of NHF common stock, Mr.
Mullens has the option to purchase 100,000 shares of the Company's common
stock at $1.50 per share and an additional 100,000 shares at $2.50 per
share upon purchase of the first 100,000 shares.  Mr. Mullens' shares
subject to option and the exercise price thereof were adjusted to reflect
the reverse stock split described below.

     Effective June 21, 1993, the Company initiated operations at Yale,
Michigan and relocated its corporate offices to that location.  Yale
Industries provides specialized cleaning and testing of metal castings for
foundries and machine shops.

     On January 12, 1994, pursuant to a vote at a Special Meeting of
Shareholders, the Company approved a one for five reverse split of the
outstanding shares of the Company and reduced the authorized shares of the
Company from 50,000,000 to 25,000,000.  Unless otherwise indicated,
information in this Report reflects one for five reverse split of the
Company's Common Stock effective in January, 1994.

     On February 1, 1995, the Company obtained forty percent (40%) interest
in Complete Engineering Development Services, Inc. (CEDS).  Due to
disappointing results, the Board of Directors elected to divest its
interest in CEDS as of December 31, 1995.

     In November 1995, the Company established a wholly-owned subsidiary,
Fort Atkinson Industries, which provides finishing services on castings
manufactured in the Iowa-Wisconsin area.  Operations began on March 1,
1996.  Fort Atkinson employs approximately ninety (90) workers at this
site.

     In August 1996, the Company consolidated MCC with Yale Industries and
operates as one company.  The combined company employs approximately 160
employees.

     (b)  FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.  The Company's
activities are confined to the finishing and testing of grey iron castings
for the automotive and other industries, hence the Company has no other
industry segments other than as stated herein.  See Financial Statements
for additional information concerning the Company's business.

     (c)  NARRATIVE DESCRIPTION OF BUSINESS.

GENERAL
-------

     The Company engages in the business of performing finishing operations
on grey iron castings for the foundry industry and owns a minority interest
in NHF, a foundry located in New Haven, Michigan that manufactures grey
iron castings for the automotive industry.  The following is a description
of the Company's two wholly-owned subsidiaries and NHF.

     Brown City doing business as Yale Industries, a Michigan corporation,
is engaged in the business of performing finishing operations for the
foundry industry.  Such operations include the cleaning, grinding and
testing of castings prior to shipment to the end purchaser.  Yale commenced
operations in June of 1987, and its facilities are currently located in
Yale, Michigan, approximately 30 miles from New Haven, Michigan where NHF's
facilities are located.  NHF uses the services of Yale for approximately

                                   -3-

<PAGE>

80% of the castings and cylinder heads they manufacture for Chrysler
Corporation and others.  The Company formed this subsidiary because a
separate company and facility provided NHF, and other foundries, certain
advantages over handling finishing functions in-house.  Over the past
several years, automobile manufacturers have begun to require that
additional finishing work and water testing be done on castings prior to
shipment.  These requirements have increased the amount of time and labor
spent on these services.  Management has found that Yale, as a separate
company devoted to these activities, has been able to handle these
functions more cost effectively.  In addition, since Yale is capable of
providing these services to other customers as well as NHF, Yale generates
additional revenues for the Company.

     Fort Atkinson Industries is also engaged in the business of performing
finishing operations on grey iron castings for the foundry industry.  The
Company believes there exists a significant potential for additional sales
volume for finishing operations from non-affiliated foundries and from NHF
as it continues to grow and diversify into the non-automotive industries.

     New Haven Foundry, a 45% owned subsidiary of the Company, is a
manufacturer of grey iron castings for the North American automotive
industry and is currently a supplier of cylinder heads, manifolds, bearing
caps, flywheels, and transmission casings for Detroit-based car
manufacturers.  Its principal customers include the Chrysler Corporation
and Detroit Diesel Corporation.  Approximately 90% of NHF's total sales are
to Chrysler Corporation to whom it is the only supplier of grey iron
cylinder heads.  Although NHF is presently attempting to expand its
customer base, the loss of this customer could have a materially adverse
effect on NHF and consequently the Company.

          (i)  PRINCIPAL PRODUCTS PRODUCED AND SERVICE RENDERED AND
PRINCIPAL MARKETS.  The principal service rendered by the Company is the
finishing, cleaning and testing of grey iron castings produced by NHF for
the automotive industry and other component manufacturers in the United
States and Canada.

          (ii) STATUS OF NEW PRODUCTS OR INDUSTRY SEGMENTS.  The Company
announced it would begin cleaning  operations at Fort Atkinson in early
1996.  Except as to Fort Atkinson, there has been no public announcement
of, and no information otherwise has been made public about, a new product
or industry segment, which would require the investment of a material
amount of the Company's assets, or which otherwise is material.

          (iii)  SOURCES AND AVAILABILITY OF RAW MATERIALS.  The Company as
a service orientated entity is not dependant on the availability of raw
materials, however, the Company is dependant on the availability of
qualified, trained manpower.  The raw materials utilized by NHF are
supplied by domestic suppliers and there does not appear to be any shortage
of the three major raw materials used by NHF namely coke, scrap steel and
sand.

          (iv)  PATENTS, TRADEMARKS, LICENSES, FRANCHISES AND CONCESSIONS. 
The Company does not own any patents, trademarks, licenses, franchises, or
concessions.

          (v)  SEASONAL NATURE OF BUSINESS.  The Company's business is not
seasonal in nature.

          (vi) WORKING CAPITAL ITEMS.  Practices and conditions with
respect to specific working capital items are not relevant to an
understanding of the Company's business.  Working capital is required for
inventories and accounts receivable, to meet rapid delivery requirements,
or to assure continuous allotments of goods from suppliers.

                                   -4-

<PAGE>

          (vii)  MAJOR CUSTOMERS.  The following table sets forth
information concerning customers, or any group of customers under common
control, or customers which are affiliates of each other, to which sales
were made by the Company during the fiscal year ended December 31, 1996, in
an amount which equals 10% or more of the Company's revenue and the
Company's relationship to each:

                              RELATIONSHIP                       PERCENT
                                  TO             AMOUNT OF      OF TOTAL
           CUSTOMER             COMPANY            SALES        REVENUE
           --------             -------            ------       -------

   New Haven Foundry, Inc.    Subsidiary         $7,075,541       74.9%

  The Company believes that if it should lose any of its present
customers, primarily NHF, such loss would have a material adverse effect on
the Company.

       (viii)  BACKLOG.  Backlog is not relevant to an understanding of
the Company's business.

       (ix) RENEGOTIATION OR TERMINATION OF GOVERNMENTAL CONTRACTS.  No
portion of the Company's business is subject to renegotiation of profits or
termination of contracts or subcontracts at the election of the Government.

       (x)  COMPETITION.  The Company's domestic competition is limited
primarily to cleaning operations and captive foundries of the automobile
industry.  For the most part, these domestic foundries have older
facilities and are not a significant threat to the Company's competitive
position.  Internationally, the Company faces competition from similar
operations located in Europe, South America and Mexico.  The Company's most
serious threat of competition is from state-of-the-art operations located
in Mexico and Brazil.  These companies in Brazil present a competitive
threat because they are subsidized by their respective governments, have
labor cost advantages, and modern facilities.

       (xi) RESEARCH AND DEVELOPMENT.  The Company has not engaged and
does not currently engage in any research and development activities.

       (xii)  ENVIRONMENTAL PROTECTION.  The Company is subject to
various federal, state, and local provisions regarding environmental
matters, the existence of which has not hindered nor adversely affected the
Company's business.  Although the Company does not believe its business
operations presently impair environmental quality, compliance with federal,
state and local regulations which have been enacted or adopted regulating
the discharge of materials into the environment could have an adverse
effect upon the capital expenditures, earnings and competitive position of
the Company.  Since inception, the Company has not made any material
capital expenditures for environmental control facilities and does not
expect to make any such expenditures during the current and following
fiscal years.  However, the Company has agreed to administer the
expenditure of $253,000 which the city of Yale, Michigan received as a
community development block grant to perform an investigation to determine
the extent of contamination at the Yale plant site and to clean up soil
contamination left by previous owners and operators to a maximum of
$253,000.  The Company estimates the costs of administering the grant to be
less than $50,000.  As a result of its agreement to perform these
procedures, the city of Yale, Michigan will transfer the property to the
Company for use for casting, cleaning and foundry support operations within
two years subject to certain conditions set forth in Item 7 of this Report. 
The Company has also received a hold harmless for any existing conditions
at the facility.  The property was transferred to the Company in 1995.

                                   -5-

<PAGE>

  As more fully described in Note 11 of the Financial Statements, NHF,
the Company's 45% owned subsidiary, is reporting the following
contingencies in relation to environmental problems:

  NHF is party to an action brought by PIRGIM and the United States of
America ("U.S.") which alleges that the Company discharged potentially
contaminated water into a stream which flows to settling ponds maintained
by NHF, in violation of the Federal Clean Water Act.  NHF estimates that a
civil penalty approximating $500,000 will be incurred by NHF to settle the
litigation, and NHF has provided reserves for this amount.

  NHF is party to an action brought by the U.S. and is also currently
negotiating with the Michigan Department of Environmental Quality ("MDEQ")
regarding alleged violations of environmental laws pertaining to air and
waste issues, including used foundry sand on its property.  NHF is
negotiating a consent decree with these agencies which encompasses most of
these alleged violations and is also working with the MDEQ to resolve any
remaining alleged violations.

  NHF has identified several options to remediate the sand including on-site
treatment or capping in place.  Costs associated with these alternatives
are estimated at $2.1 to $2.5 million, and NHF has recorded a
reserve of $2.5 million.  Of this amount, approximately $1.8 million was
provided in the current year and is included in selling, general and
administrative expenses in the accompanying statement of operations.  The
estimate of the range assumes that no additional portions of the sand pile
will contain heavy metals which exceed environmental standards.  Although
the ultimate outcome of this matter is not known at this time, on the basis
of investigations performed to date by NHF and its environmental
consultants, NHF does not believe that future costs associated with
remedial action, in excess of reserves provided, will ultimately have a
materially adverse impact on NHF's financial position or future results of
operations.

       (xiii)  EMPLOYEES.  As of December 31, 1996, the Company had
approximately 250 hourly employees and 21 salaried employees at Yale
Industries, Fort Atkinson Industries and Margate Industries.  None of these
employees are presently represented by a union.  The Company also used
approximately 50 employees from employee leasing service companies.

  (d)  FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND
EXPORT SALES.  The Company has no operations in foreign countries and no
portion of its sales or revenues is derived from customers in foreign
countries except Yale had sales of approximately $19,133 1996, $1,300 in
1995 and $532,000 in 1994 to Western Foundry, a Canadian company and
$122,450 in 1996, $53,700 in 1995 and $968,000 in 1994 to Ford of Canada.

                                   -6-

<PAGE>

ITEM 2.     PROPERTIES
            ----------

  Yale Industries' facilities, which consist of a plant and the
Company's corporate offices, are located in Yale, Michigan and are provided
by the city of Yale, Michigan in consideration of the Company administering
the expenditure of $253,000 for the investigation and cleanup at the plant
site.  The Company believes its plant at Yale is suitable for its present
and future needs.  The plant consists of approximately 70,000 square feet.

  Fort Atkinson's facilities are located in Fort Atkinson, Wisconsin. 
It leases facilities covering approximately 73,000 square feet.  The
Company has leased this facility for a ten (10) year period beginning in
December 1995.  Base rent is $11,212.50 per month.  The Company believes
the plant is suitable for its present and future needs.

ITEM 3.     LEGAL PROCEEDINGS
            -----------------

  The Company knows of no pending or threatened legal proceeding to
which it is or will be a party which, if successful, might result in a
material adverse change in the business, properties, or financial condition
of the Company or its subsidiaries.

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

  No response required.







                                   -7-

<PAGE>

                                 PART II

ITEM 5.     MARKET PRICE AND DIVIDENDS ON THE COMPANY'S COMMON EQUITY AND
            -------------------------------------------------------------
            RELATED STOCKHOLDER MATTERS
            ---------------------------

  (a)  PRINCIPAL MARKET OR MARKETS.  The Company's common stock is
traded on the over-the-counter market and, commencing on January 28, 1987,
has been listed on the National Association of Securities Dealers, Inc.,
Automated Quotation System ("NASDAQ") under the symbol, "CGUL".  The
following tables set forth the range for high and low bid quotations for
the Company's common stock, as reported by NASDAQ 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.

                                                          BID PRICE
                                                    --------------------
                                                       HIGH       LOW 
                                                       ----       --- 

     Quarter ended March 31, 1996                      $1.25     $0.88
     Quarter ended June 30, 1996                       $1.06     $0.78
     Quarter ended September 30, 1996                  $1.25     $0.91
     Quarter ended December 31, 1996                   $1.16     $0.44

     Quarter ended March 31, 1995                      $2.56     $1.75
     Quarter ended July 30, 1995                       $2.00     $1.38
     Quarter ended September 30, 1995                  $1.63     $1.06
     Quarter ended December 31, 1995                   $1.19     $0.75

     Quarter ended March 31, 1994                      $3.75     $2.38
     Quarter ended June 30, 1994                       $3.31     $2.88
     Quarter ended September 30, 1994                  $3.13     $2.38
     Quarter ended December 31, 1994                   $2.06     $1.63


  (b)  APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK.  The approximate
number of holders of record or the Company's common stock at March 14, 1997
was 482.

  (c)  DIVIDENDS.  The Company began paying quarterly dividends of
$.00625 per share in August of 1991.  Subsequently in August, 1992 the
Board of Directors increased the dividend to $.0075 and in August, 1993,
the quarterly dividend was increased to $.01 per share.  On November 15,
1993 the quarterly dividend was increased to $.0125.  On February 15, 1995
the quarterly dividend was increased to $.0150.  On September 21, 1995 the
quarterly dividend was suspended and will be decided at the Annual Meeting
in June of each year if, or when the Company will pay a dividend.



                                   -8-

<PAGE>

  The following table sets forth certain selected financial data with
respect to the Company.

(In Thousands, Except for Share Data)

                                        Year Ended December 31
                            -----------------------------------------------
 
                              1996      1995       1994      1993     1992 
                             ------    ------     ------    ------   ------

Net sales                   $ 9,442   $ 9,311    $ 8,486   $ 8,183  $ 6,122

Net income (loss)           $  (773)  $(1,744)   $ 1,552   $ 1,246  $ 1,682

Net income (loss) per
 common share               $ (0.17)  $ (0.37)   $  0.33   $  0.27  $  0.37

Dividends declared per
 common share               $     0   $0.0300    $0.0525   $0.0425  $0.0288

Total assets                $ 6,195   $ 5,465    $ 7,328   $ 6,162  $ 5,119

Long-term debt              $   344   $   184    $    26   $     -  $     4

Stockholders' equity        $ 3,662   $ 4,465    $ 6,338   $ 5,068  $ 4,002







                                   -9-

<PAGE>

ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            ---------------------------------------------------------------
            RESULTS OF OPERATIONS
            ---------------------

  THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS INCLUDING CERTAIN
PREDICTIONS AND PROJECTIONS WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT OF 1933 AND THE SECURITIES EXCHANGE ACT OF 1934.  SUCH
FORWARD-LOOKING STATEMENTS MAY BE FOUND IN THIS SECTION AND UNDER "ITEM 1.
DESCRIPTION OF BUSINESS."   ACTUAL EVENTS OR RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS AS A
RESULT OF VARIOUS FACTORS INCLUDING ECONOMIC, COMPETITIVE, GOVERNMENTAL AND
TECHNOLOGICAL FACTORS AFFECTING THE COMPANY'S PROPERTIES, OPERATIONS,
MARKETS, PRODUCTS, SERVICES AND PRICES.


  The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial condition
and results of operations during the periods included in the accompanying
consolidated financial statements.

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

  The current and quick ratios, which provide an indication of the
Company's short-term assets in relation to its short-term obligations, for
the comparable periods are as follows:

                                               1996           1995
                                             --------       --------

 Working Capital                            $ 396,626      $1,899,110

 Current Ratio                              1.25 : 1       4.62 : 1

 Quick Assets (Cash, Securities
   and Receivables)                         $1,588,659    $2,146,995

 Quick Ratio                                 .99 : 1       4.09 : 1 

  As noted by the above computations, the current ratio has decreased
from 4.62:1 to 1.25:1 and working capital has decreased by $1,502,484 for
the period from December 31, 1995 to December 31, 1996.  The quick ratio
has decreased from 4.09:1 to .99:1.  The largest single factor contributing
to the decrease in working capital is the investment in  property, plant
and equipment of approximately $1,775,000.

  Receivables increased by $105,991 from December 31, 1995 to December
31, 1996.  The increase was due primarily to the increased sales volume.

  The Company has a facility line of credit of $1,000,000, with monthly
interest payments at the prime rate.  This line of credit is collateralized
by substantially all the assets of the Company.  Borrowings as of December
31, 1996 were $585,000.

  The Company believes its cash flow from operations is sufficient to
fund its current level of operations.

  The Company has in the past and will in the future seek qualified
acquisitions in similar and related industries for expansion opportunities
and larger market penetration.  The Company currently has no agreement or
arrangement to acquire any other business entity.

                                  -10-

<PAGE>

RESULTS OF OPERATIONS
---------------------

YEAR ENDED DECEMBER 31, 1996 VS. YEAR ENDED DECEMBER 31, 1995
-------------------------------------------------------------

  Sales increased by $130,967 or 1.4% from December 31, 1995 to December
31, 1996.  The Company's net loss decreased by $970,441 over the prior
year's loss of $1,743,914.  The growth rate in sales for 1996 is mostly
attributable to increased activity in the automobile industry.

  Cost of sales as a percentage of sales was 93.3% for the year ending
December 31, 1996 as compared to 84.3% for the year ending December 31,
1995.  The major reasons for the increase was higher labor costs (9.1%) and
the start up of a new operation at Fort Atkinson in Wisconsin.

  Selling, general and administrative expenses decreased by $129,541
from 1995 to 1996.  This was mainly due to reduced single business tax due
to losses in the last two (2) years.

  Interest and dividend for the year ending December 31, 1996 decreased
by $88,199.  This decrease was a result of increased interest expense to
finance the Fort Atkinson plant and use of operating funds.

  Related party services and sales commissions decreased from $28,388 in
1995 to $6,316 in 1996.  This decrease was in sales volume from customers
from outside sales representatives (Casting Sales, Inc.).

YEAR ENDED DECEMBER 31, 1995 VS. YEAR ENDED DECEMBER 31, 1994
-------------------------------------------------------------

  Sales increased by $824,115 or 10.0% from December 31, 1994 to
December 31, 1995.  The Company's net income decreased by $3,188,781 over
the prior year's net income of $1,444,770.  The growth rate in sales for
1995 is mostly attributable to increased activity in the automobile
industry.

  Cost of sales as a percentage of sales was 84.3% for the year ending
December 31, 1995 as compared to 79.5% for the year ending December 31,
1994.  The major reasons for the increase was higher labor costs.  The
higher labor costs are a result of inefficiencies by major customers due to
increased sales and the use of temporary employees due to low unemployment
rates.

  Selling, general and administrative expenses increased by $169,978
from 1994 to 1995.  This was mainly due to the above noted increase in
sales, as most of these costs are variable and increased costs in merger
and acquisition activities.

  Interest and dividend income for the year ending December 31, 1995
decreased from $43,945 in 1994 to $40,311 in 1995.

  Related party services and sales commissions decreased from $79,222 in
1994 to $23,388 in 1995.  The decreases was in sales volume from customers
from outside sales representatives.

EFFECTS OF CHANGES IN PRICES
----------------------------

  When possible, the Company attempts to adjust the selling prices of
its products in response to increases in its costs of labor, raw materials
and capital.  However, the market served by the Company is competitive and
that competition may limit the allowance of price increases.

                                  -11-

<PAGE>

  During 1996, 1995 and 1994 there were no significant changes in
prices.

  The Company had commitments for the purchase of, or the installation
of, fixed assets at the Yale Industries facility.  The Company had agreed
to purchase $1.5 million in assets between July 1, 1993 and June 30, 1995. 
This commitment had been met as of December 31, 1994.  The Company had an
option to buy the facility for $1.00.  The Company met its commitments and
exercised the option in 1995.

ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
            -------------------------------------------

  Information with respect to this item is contained in the financial
statements appearing on Item 14 of this Report.  Such information is
incorporated herein by reference.

ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
            ---------------------------------------------------------------
            FINANCIAL DISCLOSURE
            --------------------

  None.

ITEM 10.    IDENTIFICATION OF OFFICERS AND DIRECTORS
            ----------------------------------------

  The following table sets forth the names and ages of all Officers and
Directors of the Company, indicating all positions and offices with the
Company held by each such person, and any periods during which he has
served as such:
                                  All Positions         Position Served
                                     with                 as Director
      Name               Age      the Company             of Company
      ----               ---      -----------             ----------

Frederick G. Schriever   72   Chairman of the Board    November 1987 to
                               and Director of the     present
                               Company, MCC and 
                               Yale Industries

Delbert W. Mullens       52   Vice Chairman of the     July 1990 to present
                               Board and Director 
                               of the Company, MCC,
                               and Yale Industries

William H. Hopton        62   President and Director   January 1986 to
                               of the Company, MCC,    present
                               and Yale Industries

Frederick G. Berlet      68   Treasurer and Director   November 1987 to
                               of the Company, MCC,    present
                               and Yale Industries

David A. Widlak          48   Secretary and Director   November 1987 to
                               of the Company, MCC,    present
                               and Yale Industries

BUSINESS EXPERIENCE OF DIRECTORS AND OFFICERS
---------------------------------------------

  FREDERICK G. SCHRIEVER has been Chairman of the Company's Board of
Directors since November of 1987.  He has been President of Casting Sales,
Inc. from 1972 to present.  Casting Sales, Inc. acts

                                  -12-

<PAGE>

as a manufacturer's representative of foundries.  Since 1955 to the
present, Mr. Schriever has also been President of Amber Tool and
Engineering which holds real estate and owns an interest in several
companies and President of Trio Machine Products Corp., a production
machine shop.  Since 1960 to the present, he has also been President of
J.P. Bell Co., a company specializing in machine levelers, Vice President
of Casting Industries, Inc. and Chairman of Arrow Exit Systems, Inc.  Mr.
Schriever received a Bachelor of Science Degree in chemistry in 1949 from
the University of Michigan.  Mr. Schriever devotes as much time as
necessary to the business of the Company and its subsidiaries.

  DELBERT W. MULLENS has been a Director since July of 1990 and
President of NHF since September 1, 1992.  He has been the President,
Director, and principal shareholder of Flint Coatings of Flint, Michigan,
a company engaged in painting automotive parts for major car manufacturers
including General Motors Corporation.  Mr. Mullens is also Chairman of
Product-SDL Chemical, Inc.  Mr. Mullens received a Bachelor of Science
Degree in Business Administration from Tennessee State University.  Mr.
Mullens devotes as much time as is necessary to the business of the Company
and its subsidiaries.

  WILLIAM H. HOPTON has been President of the Company since April of
1988, and a Director of the Company since January of 1986.  Mr. Hopton also
served as the Company's vice President from January of 1986 to April of
1988.  Since 1984, Mr. Hopton has been President of NHF.  Effective
September 1, 1992, Mr. Hopton retired as President of NHF but will provide
consulting services to NHF as needed.  Also, as of that date, he is
devoting his business time to the management of Margate Industries, Inc. 
Mr. Hopton received a B.A. Degree in Business Administration from the
University of Detroit in 1964.

  FREDERICK G. BERLET has been a Director of the Company since November
of 1987 and its Treasurer since April of 1988.  He also serves as Director
of numerous Canadian and U.S. corporations and is President of S.W.O.
Managements Consultants Limited.  He graduated with a Masters Degree in
Business Administration in 1953 from the University of Western Ontario. 
Mr. Berlet devotes as much time as is necessary to the business of the
Company and its subsidiaries.

  DAVID A. WIDLAK has been Secretary and a Director of the Company since
November of 1987.  In February 1994 he was named Vice President of Mergers
and Acquisitions.  He received a Bachelors Degree from Wayne State
University in 1969 and a juris doctorate Degree in Law from the University
of Michigan in 1972.  Mr. Widlak devotes as much time as is necessary to
the business of the Company and its subsidiaries.

  The Directors of the Company and its subsidiaries hold office for a
three year term until the annual meeting of the shareholders and until
their successors have been elected and qualified in the year in which their
term expires.  The term of two Directors expire each year.

  The Officers of the Company and its subsidiaries are elected by the
respective Board of Directors at the first meeting after each annual
meeting of shareholders and hold office until the next annual meeting of
directors or their earlier resignation or removal.

  The date of the next annual meeting of the Company will be determined
by the Company's Board of Directors in accordance with Delaware law.

  No Director holds a directorship in any company with a class of
securities registered pursuant to Section 12 of the Securities Exchange Act
of 1934 or subject to the requirements of Section 15(d) of

                                  -13-

<PAGE>

such Act or any company registered as an investment company under the
Investment Company Act of 1940.

  COMMITTEES, MEETINGS OF THE BOARD OF DIRECTORS.  The Company has an
audit and compensation committee consisting of Frederick Berlet and David
Widlak, which consults with and reviews the reports of the Company's
independent auditors and the Company's internal financial staff.  This
committee also makes recommendations to the Company's Board of Directors as
to compensation matters.  The audit and compensation committee held one
meeting during the year.  The Company's Board of Directors held four
regular meetings during the fiscal year ended December 31, 1996, at which
time all of the then Directors were present or consented in writing to the
actions taken at such meetings.

  COMPLIANCE WITH SECURITIES EXCHANGE ACT REPORTING REQUIREMENTS.  To
the Company's knowledge, during the fiscal year ended December 31, 1996,
the Company's Officers and Directors complied with all applicable Section
16(a) filing requirements.  This statement is based solely on a review of
the copies of such reports furnished to the Company by its Officers and
Directors and their written representations that such reports accurately
reflect all reportable transactions.







                                  -14-

<PAGE>

ITEM 11.    EXECUTIVE COMPENSATION
            ----------------------

  CASH COMPENSATION.  The following table sets forth the total
remuneration paid during the Company's last fiscal year ended December 31,
1996 and the prior two years to the Chief Executive Officer, the only
executive office whose total cash and non cash compensation exceeded
$100,000 prior to 1995.  In 1995 David Widlak's, Vice President of Mergers
and Acquisitions, compensation exceeded $100,000.


<TABLE>
<CAPTION>
==========================================================================================================
                       SUMMARY COMPENSATION TABLE
----------------------------------------------------------------------------------------------------------
                                                                    Long Term Compensation
                                                                 ------------------------------
                     Annual Compensation                                  Awards        Payouts
-----------------------------------------------------------------------------------------------

      (a)             (b)      (c)          (d)         (e)         (f)          (g)     (h)        (i)

                                                       Other                                        All
      Name                                             Annual   Restricted              LTIP       Other
      and                                              Compen-     Stock      Options/  Pay-      Compen-
   Principal                  Salary       Bonus       sation     Award(s)     SARs     outs      sation
   Position         Year (1)    ($)         ($)        ($)(2)       ($)       (#)(3)    ($)       ($)(4)
----------------------------------------------------------------------------------------------------------
<S>                  <C>     <C>          <C>          <C>                                        <C>   
William H. Hopton    1996    $ 85,000     $ -0-        $ 24,000                                   $  8,257
 President and CEO   1995    $ 82,500     $ 12,500     $ 27,000                                   $  7,687
                     1994    $ 75,000     $ 18,000     $ 24,000                                   $  8,342

David Widlak         1996    $ 80,000     $ -0-        $ 24,000                                   $  6,995
 Vice President of   1995    $ 55,000     $  8,300     $ 27,000                                   $ 10,490
 Mergers & 
 Acquisitions
===========================================================================================================
</TABLE>

(1)  Periods presented are for the year ended December 31.
(2)  Represents Directors fees.
(3)  Number of shares of Common Stock subject to options granted during the
     year indicated.
(4)  Represents employer contributions for insurance, disability insurance,
     pension and car allowance.


COMPENSATION OF DIRECTORS

     The Directors receive $6,000 for each meeting they attend plus
expenses.  The Chairman of the Board of Directors receives $7,000 per
meeting.  Special Board Meetings are paid at $3,000 per meeting.

                                  -15-

<PAGE>

OPTIONS GRANTED

     The following table sets forth the options that have been granted to
the Chief Executive Officer and President listed in the Executive
Compensation Table during the Company's last fiscal year ended December 31,
1996.

              Option/SAR Grants in Last Fiscal Year (1996)
              --------------------------------------------
                            Individual Grants
----------------------------------------------------------------------------
       (a)              (b)           (c)            (d)             (e)
                                    % of Total                       
                      Options/    Options/SARs     Exercise           
                       SARs         Granted to      or Base           
                     Granted        Employees       Price         Expiration
     Name              (#)       in Fiscal year   ($/Share)         Date
     ----            -------     --------------     --------     ----------

William H. Hopton      N/A             N/A            N/A           N/A
President and CEO


AGGREGATE OPTIONS EXERCISED IN 1995 AND OPTION VALUES AT DECEMBER 31, 1996

     The following table sets forth certain information regarding options
to purchase shares of Common Stock exercised during the Company's 1996
fiscal year and the number and value of exercisable and unexercisable
options to purchase shares of Common Stock held as of the end of the
Company's 1996 fiscal year by the Executive Officers of the Company named
in the Summary Compensation Table:






                 Aggregated Options Exercised in 1996
                and Option Values at December 31, 1996
----------------------------------------------------------------------------
       (a)              (b)          (c)          (d)             (e)
                                                                 Value of
                                              Number of       Unexercised
                                             Unexercised      In-the-Money
                                               Options at       Options at
                                                12/31/96        12/31/96
                 Shares Acquired    Value    Exercisable/      Exercisable/
     Name          on Exercise   Realized(1) Unexercisable  Unexercisable(2)
     ----          -----------   ----------- -------------  ----------------

William H. Hopton      16,000        $3,000     0/16,000         $0/$960
President and CEO

(1)    Value realized is equal to the difference between the fair market
       value per share of Common Stock on the date of exercise and the option
       exercise price per share multiplied by the number of shares acquired
       upon exercise of an option.

                                  -16-

<PAGE>

(2)    Value of exercisable/unexercisable in-the-money options is equal to
       the difference between the fair market value per share of Common Stock
       of $.56 at December 31, 1996, and the option exercise price per share
       multiplied by the number of shares subject to options.

  STOCK OPTION AND STOCK APPRECIATION RIGHTS PLANS.  As of December 31,
1996, Mr. Hopton held options to purchase 16,000 shares of the Company's
common stock, at a price of $.50 per share.  These options are exercisable
through December 15, 1997.  Delbert W. Mullens, Vice-Chairman, held options
to purchase 100,000 shares at a price of $1.50 per share and 100,000 shares
at a price of $2.50 per share.  Mr. Mullens' options are exercisable at any
time, provided that he holds a minimum 55% ownership interest in NHF and
the Company also holds an ownership interest in NHF.







                                  -17-

<PAGE>

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
       --------------------------------------------------------------

  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.  The
following table sets forth as of March 15, 1997, information with respect
to the ownership of the Company's $.005 par value common stock by each
person known by the Company to own beneficially more than 5% of the
outstanding common stock, and by each of its officers and directors and by
all officers and directors collectively as a group:

                                       Amount and
                                        Nature of
Name and Address of                     Beneficial            Percent of
 Beneficial Owner                       Ownership              Class (1)
-------------------                     ----------             ---------
Paul L. Cosper                             284,120 (2)            6.2%
P.O. Box 96050
Wixom, MI  48096

Charles H. Raches, Jr.                     252,840                5.5%
6600 Tepee Ridge Road
Bozeman, MT 59715

Frederick G. and
 Patricia W. Schriever                     795,147               17.3%
64 Clairview
Grosse Pointe Shores,
 MI  48236

Frederick G. Berlet                        225,416 (3)            4.9%
S.W.O. Management Consultants, Ltd.
35 Parkwood Drive
Tillsonburg, Ontario
Canada N4G 2B7

David A. Widlak                            100,000                2.2%
P.O. Box 482
Washington, MI  48094

Delbert W. Mullens                          15,000 (4)            0.3%
2888 Bloomfield Crossings
Bloomfield Hills, MI  48013

William H. Hopton                          136,059 (5)            3.0%
5448 North River Rd.
Marine City, MI  48039

All Officers and Directors               1,271,622               27.7%
of the Company & Subsidiaries
as a Group (5 Persons)
__________________________

(1)    Each person has sole voting and investment power with respect to the
       shares shown except as noted.

                                  -18-

<PAGE>

(2)    The shares beneficially owned by Mr. Cosper are held in the name of
       Paul L. Cosper, Trustee under an Agreement of Trust executed by Paul
       L. Cosper as Grantor.  The beneficiaries of this trust are Mr.
       Cosper's wife and children.

(3)    Mr. Berlet owns 40,000 shares directly and 185,416 shares are held in
       a trust for Mr. Berlet's children.  Mr. Berlet has no voting or
       dispositive power over the trust and hence, discloses no beneficial
       interest in those shares held in trust.

(4)    Does not include 200,000 options to purchase common stock.

(5)    Includes 80,060 shares held by William Hopton, individually, 40,000
       shares held by his four children, and does not include 16,000 options
       not exercised as of this date.


  CHANGES IN CONTROL.  The Company knows of no contractual arrangements,
including any pledge by any person of securities, which may at a subsequent
date result in a change in control of the Company.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
            ----------------------------------------------

  The terms of the sale of NHF common stock by the Company provide for
a commission contract between NHF and the Company relating to sales in
excess of $35,000,000 annually.  The Company will receive $150,000 per year
plus 3% on the difference between actual sales in excess of $35,000,000 but
less than $40,000,000 plus 2% on actual sales that exceed $40,000,000. 
This commissions contract will be in effect for a period of not less than
fifteen (15) years beginning in June 1990.  The Company earned commissions
from NHF in 1996 of $688,706 and accordingly, has a receivable in the
amount of $124,865 as of December 31, 1996.  Also, for a minimum period of
fifteen (15) years beginning in June 1990, the Company and its subsidiaries
will provide cleaning services on all castings produced by NHF on an
exclusive basis, provided the Company retains an ownership interest in NHF. 
Consolidated net sales to NHF in 1996 amounted to $6,386,835.

  Effective September 1, 1992, William Hopton retired as President of
NHF but provides consulting services to NHF, as needed.  Since that date,
he has devoted his full time to the management of the Company and its
subsidiaries.



                                  -19-

<PAGE>

                                 PART IV

ITEM 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
            ----------------------------------------------------------------

(a)    (1). The following Financial Statements are filed as part of this
       Report:
                                                                     Page
                                                                     ----

  Independent Auditors' Report . . . . . . . . . . . . . . . . . . . .F-1

  Consolidated Balance Sheets, December 31, 1996 and 1995. . . . . . .F-2

  Consolidated Statements of Income, Years ended 
  December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . .F-4

  Consolidated Statements of Stockholders' Equity For the Years
  ended December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . .F-5

  Consolidated Statements of Cash Flows, Years ended 
  December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . .F-6

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


(a)    (3)  Exhibits:

  27   Financial Data Schedule


(b)    Reports on Form 8-K:

  During the last quarter of the period covered by this report, the
  Company filed an 8-K on a change of Auditors.







                                  -20-

<PAGE>

                                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                                                                 ________

                                                 FINANCIAL STATEMENTS AND
                                             INDEPENDENT AUDITORS' REPORT
                                                                 ________

                                                        DECEMBER 31, 1996







<PAGE>

                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                                ________

                          FINANCIAL STATEMENTS
                                   AND
                      INDEPENDENT AUDITORS' REPORT
                                ________

                            DECEMBER 31, 1996







<PAGE>

                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES


                              - CONTENTS -








                                                              PAGE NUMBER
                                                              -----------

Independent Auditors' Report                                          1


Financial Statements:

  Consolidated Balance Sheet                                          2

  Consolidated Statement of Operations                                3

  Consolidated Statement of Changes in Stockholders' Equity           4

  Consolidated Statement of Cash Flows                                5

  Notes to Consolidated Financial Statements                        6 - 23



<PAGE>

                      Independent Auditors' Report
                      ----------------------------


To the Board of Directors
Margate Industries, Inc. and Subsidiaries
Yale, Michigan


We have audited the accompanying consolidated balance sheets of MARGATE
INDUSTRIES, INC. AND SUBSIDIARIES as of December 31, 1996, 1995 and 1994,
and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for the years 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 did not audit the financial statements of NEW HAVEN
FOUNDRY, the investment in which, as discussed in Note 1 to the financial
statements, is accounted for by the equity method of accounting.  The
financial statements of NEW HAVEN FOUNDRY were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it
relates to the amounts included for NEW HAVEN FOUNDRY, is based solely on
the report of the other auditors.  The consolidated financial statements of
MARGATE INDUSTRIES, INC. AND SUBSIDIARIES as of December 31, 1994 were
audited by other auditors whose report dated March 22, 1995 expressed an
unqualified opinion on those statements.

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 MARGATE INDUSTRIES,
INC. AND SUBSIDIARIES at December 31, 1996, 1995 and 1994, and the results
of its operations and its cash flows for the years then ended in conformity
with generally accepted accounting principles.


/s/ PERRIN, FORDREE & COMPANY, P.C.
------------------------------------
PERRIN, FORDREE & COMPANY, P.C.



Troy, Michigan
March 18, 1997

<PAGE>

                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                              BALANCE SHEET
                            DECEMBER 31, 1996




                                 ASSETS
                                 ------

                                                      December 31,
                                                -----------------------
                                                 1996             1995
                                                --------        --------

CURRENT ASSETS:
  Cash and cash equivalents                   $     2,086     $  513,700
  Marketable securities                              -           152,713
  Accounts receivable:
    Trade                                         595,603        505,849
    Related parties                               990,970        974,733
  Note receivable - related party                  22,250         17,800
  Inventories                                      32,464         55,333
  Prepaid expenses and other                       84,133         78,879
  Prepaid federal income tax                      264,300        105,457
  Deferred tax assets                              14,300         19,000
                                               ----------     ----------
      Total current assets                      2,006,106      2,423,464

INVESTMENT IN NEW HAVEN FOUNDRY                      -           531,711

OTHER                                              59,135         48,419

NOTES RECEIVABLE FROM RELATED PARTY - 
  Less current portion                             17,800         35,600

PROPERTY, PLANT AND EQUIPMENT - At cost,
  net of accumulated depreciation and 
  amortization of $981,705 and $711,193 at 
  December 31, 1996 and 1995, respectively      4,112,295      2,607,593


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

                                               $6,195,336     $5,646,787
                                               ==========     ==========



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

                                   -2-

<PAGE>

                  LIABILITIES AND STOCKHOLDERS' EQUITY
                  ------------------------------------

                                                      December 31,
                                                -----------------------
                                                  1996            1995
                                                --------        --------

CURRENT LIABILITIES:
  Notes payable                               $  582,000     $     -    
  Current portion of long term debt              462,914        165,663 
  Accounts payable                               513,071        182,246 
  Accrued salaries and wages                      42,000         47,232 
  Accrued workers' compensation                    6,654        108,260 
  Accrued single business tax                       -             1,000 
  Other accrued liabilities                        2,841         19,953 
                                              ----------     ---------- 
        Total current liabilities              1,609,480        524,354 

DEFERRED TAX LIABILITIES                         207,200        141,000 

OTHER POSTRETIREMENT BENEFITS                    371,957        330,739 

NOTE PAYABLE - Long-term                         344,231        183,770 

STOCKHOLDERS' EQUITY:
  Common stock - $.005 par value:
    Authorized - 25,000,000 shares
    Issued and outstanding - 4,573,637
      and 4,653,637 at December 31, 1996
      and 1995, respectively                      22,868         23,268 
  Paid-in for common stock in excess of 
    par value                                  7,410,725      7,499,980 
  Accumulated deficit                         (3,771,125)    (3,056,324)
                                              ----------     ---------- 
        Total stockholders' equity             3,662,468      4,466,924 
                                              ----------     ---------- 

                                              $6,195,336     $5,646,787 
                                              ==========     ========== 



<PAGE>

                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENT OF OPERATIONS
              YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


                                            1996         1995        1994
                                           ------       ------      ------
NET SALES (Including related 
  party sales and commissions
  of $7,075,541, $6,763,353 and 
  $5,660,167 in 1996, 1995 and
  1994, respectively)                    $9,441,452   $9,310,525  $8,486,410 

COST OF SALES                             8,812,222    7,844,506   6,742,792 
                                         ----------   ----------  ---------- 

GROSS PROFIT                                629,230    1,466,019   1,743,618 

SELLING, GENERAL AND ADMINISTRATIVE
  EXPENSES                                  947,423    1,076,964     906,986 

RELATED PARTY SERVICES AND SALES
  COMMISSIONS                                 6,316       23,388      79,222 
                                         ----------   ----------  ---------- 

INCOME (LOSS) FROM OPERATIONS              (324,509)     365,667     757,410 

DIVIDEND AND INTEREST INCOME
  (EXPENSE) - NET                           (47,888)      40,311      43,945 

EQUITY  INCOME (LOSS) OF INVESTEE
  COMPANIES                                (531,712)  (2,055,133)    858,313 

GAIN (LOSS) ON SALE OF MARKETABLE
  SECURITIES                                (41,721)      83,244        -    

OTHER INCOME -  Net                           7,303         -          4,202 
                                         ----------   ----------  ---------- 

INCOME (LOSS) BEFORE PROVISION FOR
  INCOME TAXES                             (938,527)  (1,565,911)  1,663,870 

PROVISION FOR FEDERAL INCOME TAXES         (165,057)     178,000     219,000 
                                         ----------   ----------  ---------- 

INCOME (LOSS)                            $ (773,470) $(1,743,911) $1,444,870 
                                         ==========   ==========  ========== 

EARNINGS (LOSS) PER COMMON SHARE -

  Primary                                $     (.17)  $     (.37) $     0.31 
                                         ==========   ==========  ========== 




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

                                   -3-

<PAGE>

                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
        CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
              YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994



<TABLE>
<CAPTION>
                              COMMON STOCK         PAID-IN FOR
                          --------------------     COMMON STOCK                  TOTAL STOCK-
                           NUMBER OF               IN EXCESS OF   ACCUMULATED      HOLDERS'
                            SHARES      AMOUNT       PAR VALUE       DEFICIT        EQUITY
                           --------    --------     -----------     ---------      --------
<S>                       <C>         <C>          <C>             <C>            <C>
Balance - December 31, 
 1993                     4,632,303   $  23,161    $7,359,039      $(2,314,337)   $5,067,863 
Stock options exercised      33,334         167        16,499             -           16,666
Tax benefit of options 
 exercised                     -           -          160,758             -          160,758 
Stock purchase              (10,000)        (50)      (18,547)            -          (18,597)
Adjustment to fair value 
 of equity securities 
 available for sale            -           -             -             (35,413)      (35,413)
Net income                     -           -             -           1,444,870     1,444,870 
Cash dividends declared, 
 ($.0525 per share)            -           -             -            (244,529)     (244,529)
                         ---------- -----------    ----------       ----------    ---------- 
Balance - December 31, 
 1994                     4,655,637      23,278     7,517,749       (1,149,409)    6,391,618 
Stock options exercised      20,000         100         9,900             -           10,000 
Tax benefit of options  
 exercised                     -           -           10,699             -           10,699 
Stock purchase              (22,000)       (110)      (38,368)            -          (38,478)
Adjustment to fair value
 of equity securities
 available for sale            -           -             -             (23,256)      (23,256)
Net loss                       -           -             -          (1,743,911)   (1,743,911)
Cash dividends declared
 ($.03 per share)              -           -             -            (139,748)     (139,748)
                         ---------- -----------    ----------       ----------    ---------- 
Balance - December 31,
 1995                     4,653,637      23,268     7,499,980       (3,056,324)    4,466,924 
Stock options exercised      20,000         100         9,900             -           10,000 
Tax benefit of options
 exercised                     -           -            4,000             -            4,000 
Stock purchase             (100,000)       (500)     (103,155)            -         (103,655)
Prior year unrealized
 losses on marketable
 equity securities
 realized                      -           -             -             58,669         58,669 
Net loss                       -           -             -           (773,470)      (773,470)
                         ----------  ----------    ----------        ----------   ---------- 

                          4,573,637  $   22,868    $7,410,725      $(3,771,125)   $3,662,468 
                         ==========  ==========    ==========       ==========    ========== 
</TABLE>




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

                                   -4-

<PAGE>

                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENT OF CASH FLOWS
              YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994


                                            1996          1995        1994
                                           ------        ------      ------
CASH FLOWS FROM OPERATING
 ACTIVITIES:
  Cash received from customers           $9,335,461   $8,839,986  $8,730,519 
  Cash paid to suppliers
   and employees                         (9,220,793)  (8,635,588) (7,938,392)
  Interest and dividends received            23,021       41,803      61,298 
  Interest paid                             (70,908)      (1,492)    (17,353)
  Income taxes (paid) refunded               81,113       75,000    (324,242)
                                         ----------   ----------  ---------- 
        Net cash from operating
         activities                         147,894      319,709     511,830 

CASH FLOWS FROM INVESTING
 ACTIVITIES:
  Purchase of marketable securities            -            -       (229,956)
  Proceeds from sale of securities          169,661      373,142     289,095 
  Deposits made                             (10,716)        -           -    
  Proceeds from sale of assets              175,100         -           -    
  Purchase of property, plant
    and equipment                        (1,952,960)    (578,911)   (906,027)
                                        -----------   ----------  ---------- 
        Net cash to investing
         activities                      (1,618,915)    (205,769)   (846,888)

CASH FLOWS FROM FINANCING
 ACTIVITIES:
  Proceeds from issuance of
    common stock                             10,000       10,000      16,666 
  Purchase of treasury stock               (103,655)     (38,478)    (18,597)
  Proceeds from short term debt             582,000         -           -    
  Proceeds from long term debt              692,000         -           -    
  Principal payments under
    long-term obligations                  (234,288)     (23,771)    (21,219)
  Net proceeds from notes
    receivable                               13,350       17,800     217,800 
  Payment of dividends                         -        (139,748)   (232,603)
                                        -----------   ----------  ---------- 
        Net cash to financing
         activities                         959,407     (174,197)    (37,953)
                                        -----------   ----------  ---------- 

NET DECREASE IN CASH AND
  CASH EQUIVALENTS                         (511,614)     (60,257)   (373,011)

CASH AND CASH EQUIVALENTS:
  Balance - beginning of year               513,700      573,957     946,968 
                                        -----------   ----------  ---------- 

  Balance - end of year                 $     2,086   $  513,700  $  573,957 
                                        ===========   ==========  ========== 


 SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING TRANSACTIONS
 -----------------------------------------------------------------------

FIXED ASSET ACQUIRED UNDER CAPITAL 
  LEASE OBLIGATION                      $     -       $     -     $   67,466 
                                        ===========   ==========  ========== 

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

                                   -5-

<PAGE>

                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                      NOTES TO FINANCIAL STATEMENTS
                            DECEMBER 31, 1996




NOTE 1 -  NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:

          This summary of significant accounting policies of Margate
          Industries, Inc. (the Company) is presented to assist in
          understanding the Company's financial statements.  The financial
          statements and notes are representations of the Company's
          management which is responsible for their integrity and
          objectivity.  These accounting policies conform to generally
          accepted accounting principles and have been consistently applied
          in the preparation of the financial statements.

          BUSINESS ACTIVITY
          -----------------

          Margate Industries, Inc. is a holding company for subsidiaries
          involved in the cleaning of small and medium-sized grey iron
          castings that are sold primarily to the North American automobile
          industry.

          Export sales totaled approximately $141,600, $54,500 and $532,000
          for the years ended December 31, 1996, 1995 and 1994,
          respectively.  Net sales to certain major customers that
          represented 10% or more of the consolidated net sales are as
          follows:

                                            1996          1995        1994
                                           ------        ------      ------

          Western Foundry, Ltd.           $     -      $    1,300  $  532,000
          New Haven Foundry                6,386,835    6,057,933   5,065,000
          Ford Motor Company                    -          53,200     968,000

          PRINCIPLES OF CONSOLIDATION
          ---------------------------

          The consolidated financial statements include the accounts of the
          Company and its wholly-owned subsidiaries, Michigan Casting
          Corporation (MCC), Brown City Castings Corporation d/b/a Yale
          Industries (Yale), and Fort Atkinson Industries, Inc. (FAI).  All
          intercompany accounts and transactions have been eliminated in
          the accompanying consolidated financial statements.

                                   -6-

<PAGE>

                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31, 1996




NOTE 1 -  NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -
          CONTINUED:

          PRINCIPLES OF CONSOLIDATION - CONTINUED
          ---------------------------------------

          In November 1995, the Company established a wholly-owned
          subsidiary, Fort Atkinson Industries, Inc., which provides
          finishing services on castings manufactured in the Iowa-Wisconsin
          area.  Operations began on March 1, 1996.

          The Company follows the equity method of accounting for its 45%
          investment in New Haven Foundry (NHF) and it 40% interest in
          Complete Engineering Development Services, Inc. (CEDS).  The
          carrying value of the Company's investment reflects its
          underlying equity in the net assets of NHF and CEDS.

          CASH EQUIVALENTS
          ----------------

          The Company considers all highly liquid investments purchased
          with a maturity of three months or less to be cash equivalents.

          INVENTORIES
          -----------

          Inventories, consisting primarily of grinding wheels, are stated
          at the lower of cost, determined on the first-in, first-out
          method, or market.

          PROPERTY, PLANT AND EQUIPMENT
          -----------------------------

          Property, plant and equipment are recorded at cost.  Costs of
          maintenance and repairs are charged to expense when incurred.

          Depreciation and amortization of plant and equipment is recorded
          using the straight-line method over the estimated useful lives of
          the assets.  Depreciation and amortization expense totaled
          $280,460, $211,599 and $157,548 in 1996, 1995 and 1994,
          respectively.  Estimated useful lives of assets in the various
          classes of property, plant and equipment are as follows:

          Buildings and improvements                             40 years
          Machinery and equipment                                12 years
          Furniture and fixtures                                 12 years
          Automobiles                                             5 years

                                   -7-

<PAGE>

                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31, 1996




NOTE 1 -  NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -
          CONTINUED:

          REVENUE RECOGNITION
          -------------------

          Revenues derived from the cleaning of castings are recognized as
          services are provided.

          Sales commissions are recognized as revenue when earned.

          NET INCOME PER SHARE OF COMMON STOCK
          ------------------------------------

          Net income per share of common stock is computed based on the
          weighted average number of shares of common stock outstanding
          during each year, plus the shares that would be outstanding
          assuming exercise of dilutive stock options and warrants.  The
          total weighted average number of shares of common stock and
          common stock equivalents was 4,578,528, 4,658,206 and 4,677,652
          for the years ended December 31, 1996, 1995 and 1994,
          respectively.

          On January 12, 1994, the Company's Board of Directors approved a
          proposal to reduce the authorized number of shares of common
          stock from 50,000,000 shares to 25,000,000 shares.  In addition,
          a reverse stock split of one share of common stock for each five
          shares presently issued to and held by each stockholder was
          declared and the par value of the common stock was increased from
          $.001 to $.005 per share.  All references in the financial
          statements to average number of shares outstanding, per share
          amounts, and stock option plan data have been restated to reflect
          the reverse-split.


          USE OF ESTIMATES
          ----------------

          The preparation of financial statements in conformity with
          generally accepted accounting principles requires management to
          make estimates and assumptions that affect the reported amounts
          of assets and liabilities at the date of the financial statements
          and the reported amounts of revenues and expenses during the
          reporting period.  Actual results could differ from those
          estimates.

                                   -8-

<PAGE>

                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31, 1996




NOTE 2 -  RELATED PARTY TRANSACTIONS:

          The Company provides cleaning services to NHF for products
          manufactured by that Company.  Pursuant to the July 1990
          agreement for the sale of NHF common stock, the Company provides
          exclusive cleaning services on all castings produced by NHF for
          a minimum period of 15 years, provided the Company maintains an
          ownership interest in NHF.

          The terms of the sale also provided for a commission contract
          between NHF and the Company.  The Company will receive a minimum
          of $150,000 per year, plus 3% of actual sales in excess of
          $35,000,000 but less than $40,000,000, plus an additional 2% on
          the actual sales that exceed $40,000,000.  This commission
          contract is in effect for a period of not less than 15 years. 
          The Company earned commissions from NHF amounting to $688,706,
          $705,420 and $607,149 in 1996, 1995 and 1994, respectively.

          During 1996, 1995 and 1994, the Company earned interest income of
          $-0-, $2,116 and $2,125, respectively on notes receivable and
          past due accounts receivable from NHF.

          Any unpaid balances of the aforementioned amounts are included in
          the related party balances on the accompanying balance sheet.

          NHF has received authorization from the Internal Revenue Service
          to defer funding requirements for its hourly pension plan for the
          years 1981 through 1984 and 1986.  These deferred obligations are
          being funded over a 15-year period.  The Pension Benefit Guaranty
          Corporation (PBGC) has required that the Company guarantee the
          deferred obligations and has second and third liens on
          substantially all of the Company assets as collateral for the
          funding waivers.  Accordingly, the Company is contingently liable
          for the following contributions, including interest, to be made
          by NHF.

                                                      ANNUAL
         YEARS                                     CONTRIBUTION
         -----                                     ------------

         1997                                        $191,878
         1998                                         126,209
         1999 and 2000                                 60,422


          The Company also has a note receivable from a related party (see
          Note 5).

                                   -9-

<PAGE>

                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31, 1996



NOTE 3 -  INVESTMENT IN UNCONSOLIDATED COMPANY:

          As described in Note 1, the Company accounts for its 45%
          investment in NHF using the equity method.  Summarized financial
          information of NHF is as follows as of December 31:

                                            1996         1995        1994
                                           ------       ------      ------
          ASSETS:
            Current assets              $14,085,521  $13,626,618 $12,613,943 
            Net property, plant
               and equipment             12,282,716   11,982,268   8,886,886 
            Other assets                    392,000      392,363   1,201,933 
                                         ----------   ----------  ---------- 
               Total assets             $26,760,237  $26,001,249 $22,702,762 
                                         ==========   ==========  ========== 

          LIABILITIES AND STOCKHOLDERS' 
           EQUITY:
            Current liabilities         $17,407,355  $18,214,820 $12,624,715 
            Noncurrent liabilities       10,325,990    6,603,140   4,940,482 
            Stockholders' equity           (973,108)   1,183,289   5,137,565 
                                         ----------   ----------  ---------- 

               Total liabilities
                and stockholders'
                equity                  $26,760,237  $26,001,249 $22,702,762 
                                         ==========   ==========  ========== 


                                            1996         1995        1994
                                           ------       ------      ------
          NET SALES                     $62,700,025  $60,035,860 $55,816,957 

          OPERATING EXPENSES             64,529,422   65,303,136  52,656,595 
                                         ----------   ----------  ---------- 

          INCOME (LOSS) BEFORE
              INCOME TAXES               (1,829,397)  (5,267,276)  3,160,362 

          INCOME TAXES (BENEFIT)            327,000   (1,313,000)  1,253,000 
                                         ----------   ----------  ---------- 

          NET INCOME                    $(2,156,397) $(3,954,276) $1,907,362 
                                         ==========   ==========  ========== 

                                  -10-

<PAGE>

                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31, 1996



NOTE 3 -  INVESTMENT IN UNCONSOLIDATED COMPANY - CONTINUED:

          NHF implemented Statement of Financial Accounting Standards No.
          106, EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN
          PENSIONS (SFAS 106) in the first quarter of 1993.  The estimated
          liability as of the adoption date was $10.4 million, based on
          available actuarial valuations.  NHF elected to amortize the
          transition obligation over 20 years.  The annual expense for
          future postretirement employee benefits will include the annual
          amortization of this liability, future years' service cost and
          interest expense.  The adoption of this statement had a
          significant impact on the Company's equity in the income of NHF.

          The Company accounts for its investment in NHF using the equity
          method.  During 1996, NHF  generated a net loss resulting in a
          negative equity position.  Accordingly, the investment in NHF has
          been written down to zero.

          In connection with Wesley Industries' purchase of 55% of NHF (in
          1990), a stockholder of Wesley received an option to purchase an
          additional 20% of NHF's stock from Margate for a price equal to
          the greater of $800,000 or book value.  If this option is
          exercised, Margate can require that the stockholder purchase all
          of the NHF shares held by Margate for an amount equal to the
          greater of $1,800,000 or book value.

          As described in Note 1, the Company accounts for its 40%
          investment in CEDS, acquired January 1995, using the equity
          method.  During 1995, CEDS became insolvent and terminated
          operations.  Therefore, at December 31, 1995, no financial
          information is presented and the investment in CEDS has been
          written down to net realizable value, $-0-.


NOTE 4 -  MARKETABLE SECURITIES:

          Effective January 1, 1994, the Company adopted Statement of
          Financial Accounting Standards No. 115, ACCOUNTING FOR CERTAIN
          INVESTMENTS IN DEBT AND EQUITY SECURITIES (SFAS 115).  The effect
          of adopting the provisions of SFAS 115 on the Company's financial
          statements was immaterial.  This statement requires management to
          classify investments in equity and debt securities as either: 
          held-to-maturity securities and reported at amortized cost;
          trading securities and reported at fair value, with unrealized
          gains and losses included in earnings; or as available-for-sale
          securities and reported at fair value, with unrealized gains and
          losses excluded from earnings and reported as a separate
          component of stockholders' equity.  At January 1, 1995, the
          Company classified its securities  as available-for-sale.  At
          December 31, 1996, the Company recognized the previously recorded
          unrealized loss of $58,669 when it sold those assets.  At
          December 31, 1995, the fair market value of the marketable
          securities as shown on the balance sheet aggregated $152,713 with
          a corresponding unrealized loss of $23,256 included in
          stockholders' equity.   At December 31, 1994, investments in
          equity securities were valued at lower of aggregate cost or
          market and totaled $465,867.

                                  -11-

<PAGE>

                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31, 1996



NOTE 4 -  MARKETABLE SECURITIES - CONTINUED::

          Proceeds from the sale of marketable equity securities in 1996
          aggregated $169,661.  The sale resulted in realized losses of
          $41,721.  For purposes of calculating the realized loss on sale
          of securities, cost of the securities is determined by use of the
          specific identification method.


NOTE 5 -  NOTE RECEIVABLE - RELATED PARTY:

          Note receivable - related party consisted of the following at
          December 31:

                                                      1996          1995
                                                    --------      --------

          Wesley Industries, Inc. - principal
          payable $4,450 per quarter beginning
          April 30, 1994, and expiring 
          January 31, 1999, plus interest at 
          the prime rate established by 
          National Bank of Detroit.  Interest 
          is payable quarterly.  This note is 
          unsecured.                                $  40,050    $   53,400

          Less current portion                          22,250       17,800
                                                    ----------   ----------

                                                    $   17,800   $   35,600
                                                    ==========   ==========

          The prime rate at December 31, 1996, was 8.25%.

NOTE 6 -  PROPERTY, PLANT AND EQUIPMENT:

          Property, plant and equipment are summarized as follows as of
          December 31:

                                                      1996          1995
                                                    --------      --------

          Building and improvements                 $1,657,007   $  691,687
          Machinery and equipment                    3,253,651    2,487,765
          Automotive equipment                          77,297       43,327
          Furniture and fixtures                       106,045       96,007
                                                    ----------   ----------
               Total cost                            5,094,000    3,318,786
          Less accumulated depreciation and 
           amortization                                981,705      711,193
                                                    ----------   ----------

               Net property, plant and 
               equipment                            $4,112,295   $2,607,593
                                                    ==========   ==========


                                  -12-

<PAGE>

                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31, 1996



NOTE 6 -  PROPERTY, PLANT AND EQUIPMENT - CONTINUED:

          The Company received Community Development Block Grant (CDBG)
          funds through the City of Yale totaling $387,035 and land with a
          value of $25,000.  These grants have been recorded as a credit in
          the property accounts and will be amortized into income over the
          life of the assets acquired.


NOTE 7 -  NOTES PAYABLE:

          Notes payable consist of the following at December 31:

                                                      1996          1995
                                                    --------      --------

          Note payable - bank, due in monthly
          principal installments of $7,583,
          plus interest at prime in payment
          of loan guarantee for investment
          in CEDS, uncollateralized, maturing
          December 1998.                              $189,583     $323,000

          Mortgage payable - bank, due in
          monthly installments of $8,300
          including interest at 9% through
          December, 2000.  The loan is 
          collateralized by substantially
          all Company assets.                          332,879         -   

          Note payable, due in monthly
          installments of $3,992 including
          interest at 4% through July, 2003.           282,913         -   

          Capital lease - related party, due
          in monthly installments of $2,102, 
          including interest at 3.7%,
          maturing February 1997.                        1,770       26,433
                                                    ----------   ----------
                                                       807,145      349,433
          Less current portion                         462,914      165,663
                                                    ----------   ----------

                                                      $344,231     $183,770
                                                    ==========   ==========

                                  -13-

<PAGE>

                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31, 1996


NOTE 7 -  NOTES PAYABLE - CONTINUED:

          Maturities of notes payable obligations are as follows:
          Year ending December 31:
           1997                                        $  462,914
           1998                                           129,784
           1999                                            47,948
           2000                                            42,009
           2001                                            43,720
           Thereafter                                      80,770
                                                       ----------

                                                       $  807,145
                                                       ==========

          The Company maintains a bank line-of-credit of $1,000,000 for
          working capital requirements.  The applicable interest rate is at
          the prime lending rate, currently 8.25% at December 31, 1996. 
          The line-of-credit is secured by all accounts receivable,
          inventories and equipment of the Company.  Additionally, certain
          required financial ratios must be maintained.  The Company is not
          in compliance with all covenant requirements as of December 31,
          1996.  Accordingly, all loans outstanding to this lender have
          been reclassified as current debt.  The Company had borrowings
          against the line of $582,000 and $0 at  December 31, 1996 and
          1995, respectively.


NOTE 8 -  FAIR VALUE OF FINANCIAL INSTRUMENTS:

          The estimated fair values of the Company's financial instruments,
          none of which are held for trading purposes, are as follows at
          December 31, 1996 and 1995:

                                      1996                     1995
                               ---------------------    --------------------
                               Carrying       Fair      Carrying      Fair
                                Amount        Value       Amount     Value
                                ------        -----       ------     -----
            ASSETS
            ------

          Cash and cash
           equivalents        $    2,086  $    2,086   $  513,700  $  513,700
          Marketable
           securities               -           -         152,713     152,713
          Notes
           receivable             40,050      40,050       53,400      53,400
                              ----------  ----------   ----------  ----------

                              $   42,136  $   42,136   $  719,813  $  719,813
                              ==========  ==========   ==========  ==========
            LIABILITIES
            -----------

          Notes payable       $  582,000  $  582,000   $     -     $     -   
          Long-term debt         807,145       N/A        349,433       N/A  
          Post-retirement
            benefits             371,957     371,957      330,739     330,739
                              ----------  ----------   ----------  ----------

                              $1,761,102  $  953,957   $  680,172  $  330,739
                              ==========  ==========   ==========  ==========

                                  -14-

<PAGE>

               MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
               NOTES TO FINANCIAL STATEMENTS - CONTINUED
                           DECEMBER 31, 1996



NOTE 8 -  FAIR VALUE OF FINANCIAL INSTRUMENTS - CONTINUED:

          The carrying values of cash and equivalents approximate fair
          values.  The fair values of marketable securities are estimated
          based on quoted market prices.  The notes receivable due from a
          related party bear interest at the prime rate  and payments are
          received when due.  Therefore, the carrying value approximates
          fair value.

          The notes payable bear interest at prime rate which is deemed to
          approximate fair value.  It is currently not practicable to
          estimate the fair value of the long-term debt obligations. 
          Because these note agreements contain unique terms, conditions,
          covenants and restrictions which were negotiated at arm's-length
          with the Company's lenders, there is no readily determinable
          similar instrument on which to base an estimate of fair value. 
          Accordingly, no adjustment to fair value has been determined.

          The postretirement benefits obligation has been determined by an
          outside actuary based on the actuarial present value of the
          expected benefits' liability.

NOTE 9 -  CAPITAL LOSS:

          Margate Industries, Inc. (the Company) acquired 40% of the stock
          of Complete Engineering Development Services, Inc. (CEDS) in
          January 1995.  Under the provisions of the agreement, the Company
          became a guarantor of CEDS' line-of-credit agreement.  On
          December 21, 1995, CEDS defaulted on the line-of-credit and
          demand payment was made by the lender.  The Company, as
          guarantor, negotiated a term note agreement with the bank for
          $273,000 along with a required payment of $50,000 which relieved
          them of all principal and interest due under the line-of-credit
          agreement.  As a result, the Company incurred a capital loss of
          approximately $275,000 of which $83,000 was utilized for federal
          tax purposes in 1995.  The remaining unused capital loss of
          $192,000 is available for carryforward and expires in 2000.


NOTE 10 - INCOME TAXES:

          The Company accounts for income taxes under the provisions of
          Statement of Financial Accounting Standards No. 109, ACCOUNTING
          FOR INCOME TAXES, which requires recognition of deferred tax
          assets and liabilities for the expected future tax consequences
          of events included in the financial statements or tax returns. 
          Under this method, deferred tax assets and liabilities are
          determined based on the difference between the financial
          statement and tax basis of assets and liabilities using enacted
          tax rates in effect for the year in which the differences are
          expected to reverse.

                                  -15-

<PAGE>

                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31, 1996


NOTE 10 - INCOME TAXES - CONTINUED:

          At December 31, components of deferred income taxes include the
          following:

                                                     1996           1995
                                                    --------      --------

          Current deferred taxes -
           gross assets                            $   14,300   $   19,000 
                                                   ----------   ---------- 
               Current deferred tax -
                assets                                 14,300       19,000 
                                                   ----------   ---------- 

          Noncurrent deferred taxes:
           Gross assets                               163,100      178,000 
           Gross liabilities                         (305,300)    (254,000)
                                                   ----------   ---------- 
                                                     (142,200)     (76,000)

               Valuation allowance                    (65,000)     (65,000)
                                                   ----------   ---------- 
               Net noncurrent deferred
               tax - assets (liabilities)            (207,200)    (141,000)
                                                   ----------   ---------- 

          Total deferred tax - 
           assets (liabilities)                    $ (192,900)  $ (122,000)
                                                   ==========   ========== 

          The 1995 acquisition of CEDS, as discussed in Note 8, resulted in
          a federal tax capital loss to Margate.  Due to the uncertainty of
          the future realization, a valuation allowance was established for
          this deferred asset in 1995.  This loss carryforward expires in
          2010.

          Deferred income taxes, included in the accompanying balance
          sheets, result from temporary differences related to the
          following items which are treated differently for financial
          reporting and tax reporting purposes.

                                            1996          1995        1994
                                           ------        ------      ------
          Depreciation and
           amortization                   $(333,600)   $(254,000)  $(186,000)
          Capital loss carryforward          65,000       65,000        -    
          Other postretirement
           benefits                         126,400      113,000      98,000 
          Workers' compensation
           expense                             -           3,000      17,000 
          Vacation expense                   14,300       16,000      17,000 
                                         ----------   ----------  ---------- 

              Total                      $ (127,900)  $  (57,000) $  (54,000)
                                         ==========   ==========  ========== 

                                  -16-

<PAGE>

                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31, 1996




NOTE 10 - INCOME TAXES - CONTINUED:

          The components of the provision for income taxes are as follows
          for the years ended December 31:

                                            1996          1995        1994
                                           ------        ------      ------
          Current tax expense
               (benefit)                  $(264,300)   $ 110,000   $ 170,000 
          Deferred tax expense 
              (benefit)                      99,243       68,000      49,000 
          Operating and capital
              loss carryforwards               -         (65,000)       -    
          Adjustment to valuation
              allowance                        -          65,000           -    
                                         ----------   ----------  ---------- 

          Provision for income
           taxes                          $(165,057)   $ 178,000   $ 219,000 
                                         ==========   ========== =========== 

          A reconciliation of the statutory tax rate to the effective tax
          rates recorded as follows:

                                                         1996    1995    1994
                                                         ----    ----    ----
          Statutory rate                                 (34)%   (34)%    34%
          (Earnings) losses of unconsolidated 
              subsidiaries                                19      45    (17)
          Deferred income related to CDBG 
              proceeds                                     -       -     (1)
          Recognition of previously deferred gain          -       -      -  
          Other                                           (3)      -      (3)
                                                         -----   -----  -----

          Effective rate                                 (18)%     11%    13%
                                                         =====   =====  =====


NOTE 11 - DIVIDENDS PAYABLE:

          As of December 31, 1996, there were no dividends declared or
          payable to stockholders.

                                  -17-

<PAGE>

                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31, 1996


NOTE 12 - CASH FLOWS:

          A reconciliation of net income (loss) to net cash flows from
          operating activities is as follows for the years ended December
          31:

                                            1996         1995        1994
                                           ------       ------      ------

     Net income (loss)                   $ (773,470) $(1,743,911) $1,444,870 
     Adjustments to reconcile net
       income (loss) to net cash
       from operating activities:
          Depreciation and
           amortization                     280,460      211,599     157,548 
          Gain (loss) on sale of
           marketable securities             41,721      (83,244)       -    
          Gain on sale of property,
           plant and equipment               (7,302)        -           -    
          Equity in (income) loss
           of investee companies            531,711    2,103,000    (858,313)
          Deferred income tax
           provision                        (43,000)      68,000      49,000 
          Tax benefit of stock
           options exercised                  4,000       10,699     160,758 
     Changes in assets and liabilities:
       (Increase) decrease in
          accounts receivable:
            Trade                           (89,754)    (197,212)    142,643 
            Related parties                 (16,237)    (322,776)    101,466 
       (Increase) decrease in
          inventories                        22,869       49,239     (59,107)
       (Increase) decrease in
          prepaid expenses and other         (5,254)     335,280    (464,973)
       Increase (decrease) in
          accounts payable                  330,825     (143,339)     99,992 
       Increase (decrease) in
          accrued income tax                (44,943)        -       (351,000)
       Increase (decrease) in
          accrued workers'
          compensation                     (101,606)      59,260      14,420 
       Increase (decrease) in
          accrued salaries and wages         (5,232)      (6,122)    (25,318)
       Increase (decrease) in
          accrued single business tax        (1,000)      (6,000)      1,500 
       Increase (decrease) in other 
          accrued liabilities               (17,112)     (57,479)    (67,653)
       Increase in accrued pension
          and retiree health
          benefits                           41,218       42,715      25,997 
       Increase in deferred taxes              -            -        140,000 
                                         ----------   ----------   --------- 

     Net cash from operating
      activities                         $  147,894   $  319,709   $ 511,830 
                                         ==========   ==========  ========== 

                                  -18-

<PAGE>

                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31, 1996



NOTE 13 - STOCK OPTIONS:

          The following table sets forth stock options granted, exercised
          and canceled during the years ended December 31:

<TABLE>
<CAPTION>

                                       1996                1995               1994
                                -------------------  ------------------  ------------------
                                          EXERCISE            EXERCISE            EXERCISE
                                NUMBER      PRICE    NUMBER     PRICE    NUMBER     PRICE
                                ------     -------   ------    -------   ------    -------
<S>                             <C>       <C>        <C>       <C>      <C>       <C>
     Stock options outstanding
      at the beginning of
      the year                  240,000   $  .6875   260,000   $  .50   333,334   $  1.45

     Stock options granted         -          -         -         -        -          -  

     Stock options exercised    (20,000)       .50   (20,000)     .50   (33,334)      .50

     Stock options canceled        -          -         -         -     (40,000)      -  
                               --------             --------           --------
   Stock options outstanding
      at the end of the year    220,000              240,000            260,000
                               ========             ========           ========
</TABLE>

          Outstanding employee options of 20,000 shares of stock are
          exercisable  through 1997 at a price of $.50 per share.

          In addition, pursuant to the agreement for the sale of 55% of NHF
          (in 1990), stock options were granted to the owner of Wesley
          Industries for 100,000 shares at a price of $1.50 and 100,000
          shares at a price of $2.50.  The options are exercisable at any
          time, provided that the owner of Wesley Industries holds a
          minimum 55% ownership interest in NHF and the Company also holds
          an ownership interest in NHF.

                                  -19-

<PAGE>

               MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
               NOTES TO FINANCIAL STATEMENTS - CONTINUED
                           DECEMBER 31, 1996



NOTE 13 - STOCK OPTIONS - CONTINUED:

          The Financial Accounting Standards Board issued Statement No. 123
          "Accounting for Stock Based Compensation" which is effective in
          1996.  The Statement provides a fair value method of accounting
          for stock based compensation plans rather than the intrinsic
          value method contained in APB Opinion No. 25 which the Company
          currently uses.  The new Statement does not require an entity to
          adopt the new method but, provides the option to either continue
          with the current method of accounting under APB 25 or adopt the
          fair value mehtod of accounting under FASB 123.  The Company will
          continue using the current method of accounting.   Since the
          Company granted no options in 1995 and 1996 there would be no
          effect on adopting the fair value accounting under FASB 123 to
          the Company's financial statements.


NOTE 14 - LEASE COMMITMENTS:

          MCC leases its building under an operating lease agreement which
          expires in September 1998.  FAI also leases its building under an
          operating lease agreement that expires in December, 2005.  These
          leases require the Company to pay all maintenance and insurance
          expenses.  The Company also leases certain vehicles under two or
          three year agreements.

          Minimum payments under these leases are as follows:

           1997                                          $276,200
           1998                                           229,719
           1999                                           135,750
           2000                                           135,750
           2001                                           135,750
           Thereafter                                     543,000

          Rental expense for these leases in 1996, 1995 and 1994, was
          approximately $264,000, $109,000 and $103,000, respectively.


NOTE 15 - OTHER POSTRETIREMENT BENEFITS:

          The Company sponsors certain health-care and life insurance
          benefits for all retired employees.  In December 1990, the
          Financial Accounting Standards Board issued Statement of
          Financial Accounting Standard No. 106 on ACCOUNTING FOR
          POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (SFAS 106).  The new
          standard requires that the expected cost of these benefits be
          charged to expense during the years that the employees render
          service.

                                  -20-

<PAGE>

                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31, 1996


NOTE 15 - OTHER POSTRETIREMENT BENEFITS - CONTINUED:

          The following table sets forth the Plan's funded status
          reconciled with the amount shown  in  the  Company's 
          consolidated  balance  sheet at December 31:

                                                      1996          1995
                                                    --------      --------

          Accumulated postretirement benefit
           obligation:
               Fully-eligible active plan
                participants                         $129,457     $ 85,114 
               Other active plan participants         203,645      229,892 
                                                     --------     -------- 
                                                     $333,102     $315,006 
                                                     ========     ======== 

                                                     1996           1995
                                                    --------      --------
          Unrecognized net loss from past 
           experience different from that
           assumed and from changes in
           assumptions                               $ 38,855     $ 15,733 
          Accrued postretirement benefit 
           obligation                                 333,102      315,006 
                                                     --------     -------- 

          Accrued postretirement benefit cost        $371,957     $330,739 
                                                     ========     ======== 

          The Company's postretirement healthcare and life insurance plan
          is not funded as the Company funds benefits on a pay-as-you-go
          basis.

          Net periodic postretirement benefit costs included the following
          components:

                                                     1996           1995
                                                    --------      --------

          Service cost - benefits attributed
           to service during the period              $ 20,494     $ 21,623 
          Interest cost on accumulated other
           postretirement benefit obligation           21,207       21,061
          Amortization of net losses                     (483)        -    
          Recognition of transition obligation           -              31 
                                                     --------     -------- 
          Net periodic other postretirement
           benefit cost                              $ 41,218     $ 42,715 
                                                     ========     ======== 

                                  -21-

<PAGE>

                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31, 1996

NOTE 15 - OTHER POSTRETIREMENT BENEFITS - CONTINUED:

          For measurement purposes, an  8% annual rate of increase in the
          per capita cost of covered healthcare benefits was assumed for
          1996 and 1995;  the rate was assumed to decrease to 6% over ten
          years and remain at that level thereafter.  The healthcare cost
          trend rate assumption has a significant effect on the amounts
          reported.  To illustrate, increasing the assumed healthcare cost
          trend rate by 1 percentage point in each year would increase the
          accumulated postretirement benefit obligation as of December 31,
          1996 and 1995, by $86,869 and $87,687, respectively, and the
          aggregate of the service and interest cost components of net
          periodic postretirement benefit cost for  the years then ended by
          $5,404 and $13,259, respectively.

          The discount rate used in determining the accumulated
          postretirement benefit obligation was 7.25% as of December 31,
          1996 and 1995.


NOTE 16 - CONTINGENCIES:

          NHF, the Company's 45%-owned equity investee, is party to an
          action brought by PIRGIM and the United States of America
          ("U.S.") which alleges that NHF discharged potentially
          contaminated water into a stream which flows to settling ponds
          they maintain, in violation of the Federal Clean Water Act.  NHF
          estimates that a civil penalty approximating $500,000 will be
          incurred by NHF to settle the litigation and the Company has
          provided reserves for this amount.

          NHF is party to an action brought by the U.S. and is also
          currently negotiating with the Michigan Department of
          Environmental Quality (MDEQ) regarding alleged violations of
          environmental laws pertaining to air and waste issues, including
          used foundry sand on its property.  NHF is negotiating a consent
          decree with these agencies which encompasses most of these
          alleged violations and is also working with the MDEQ to resolve
          any remaining alleged violations.

          NHF has identified several options to remediate the sand
          including on-site treatment or capping in place.  Costs
          associated with these alternatives are currently estimated to
          range from $2,100,000 to $2,500,000, and NHF has recorded a
          reserve of $2,500,000, of which $1,800,000 was provided in the
          current year.  The estimate of the range assumes that no
          additional portions of the sand pile will contain heavy metals
          exceeding environmental standards.  Although the ultimate outcome
          of this matter is not known at this time, on the basis of
          investigations performed to date by the Company and its
          environmental consultants, NHF does not believe that future costs
          associated with remedial action in excess of reserves provided
          will ultimately have a materially adverse impact on the Company's
          financial position or future results of operations.

                                  -22-

<PAGE>

                MARGATE INDUSTRIES, INC. AND SUBSIDIARIES
                NOTES TO FINANCIAL STATEMENTS - CONTINUED
                            DECEMBER 31, 1996



NOTE 17 - EMPLOYEE BENEFIT PLANS:

          The Company maintains a 401(k) plan covering all employees that
          satisfy the Plan's eligibility requirements.  The Company is
          required to match 25% of each employee's contribution, not to
          exceed 8% of the participant's compensation.  Employer's
          contribution for the years ended December 31, 1996 and 1995, was
          $ 22,539 and $23,264, respectively.

          Margate maintains a Defined Contribution Plan covering
          substantially all employees that satisfy the Plan's eligibility
          requirements.  Under the provisions of the Plan, Margate is
          required to make an annual contribution of 5% of each
          participant's eligible compensation.  Plan contributions for the
          years ended December 31, 1996 and 1995, were $21,712 and $22,386,
          respectively.

          During 1995, MCC adopted a Cafeteria Plan under Section 125 of
          the Internal Revenue Code which allows employees that participate
          to pay for their portion of health benefits with before tax
          dollars.  The Plan covers all employees that meet the
          requirements of coverage under MCC's group health benefit plan.

                                  -23-

<PAGE>

                               SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.


                                        MARGATE INDUSTRIES, INC.



Dated: March 27, 1997                   By: /s/ William H. Hopton
                                           --------------------------------
                                             William H. Hopton

        Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.


          Signature                    Title                 Date
          ---------                    -----                 ----



/s/ Frederick G. Schriever     Chairman of the Board    March 27, 1997
---------------------------    and Director
Frederick G. Schriever



/s/ Delbert W. Mullens         Vice Chairman and        March 27, 1997
---------------------------    Director
Delbert W. Mullens



/s/ William H. Hopton          President, Chief         March 27, 1997
---------------------------    Financial Officer
William H. Hopton              and Director



/s/ David A. Widlak            Secretary and Director   March 27, 1997
---------------------------
David A. Widlak



/s/ Frederick G. Berlet        Treasurer and Director   March 27, 1997
--------------------------- 
Frederick G. Berlet