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

                                   FORM 10-KSB

                 ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE

             [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                              For Fiscal Year Ended
                                December 31, 2001

                       Commission file number 033-19992-LA

                         NATIONAL EQUITIES HOLDINGS, INC.
        (Exact Name of Small Business Issuer as Specified in its Charter)


              Delaware                                       76-0539342
       (State or other jurisdiction                       (I.R.S. employer
     of incorporation or organization)                   identification no.)

            21800  I-45  North,
              Spring, Texas                                     77373
  (Address of principal executive offices)                    (Zip Code)



                   Telephone:(281) 414-8172 Fax:(281) 651-7567
                (Registrant's telephone no., including area code)

        SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON STOCK, $0.001
                                    PAR VALUE


                                                                               1
<PAGE>
Check  if there is no disclosure of delinquent filers in response to Item 405 of
Regulation  S-B not contained in this form, and no disclosure will be contained,
to  the  best  of the registrant's knowledge, in definitive proxy or information
statements  incorporated  by  reference  in  Part III of this Form 10-KSB or any
amendment  to  this  Form  10-KSB.  [ ]

Revenues  for  year  ended  December 31, 2001:  $-0-

Aggregate  market value of the voting common stock held by non-affiliates of the
registrant  as  of  July  22,  2002,  was:  $197,670.54

Number  of  shares  of  the registrant's common stock outstanding as of July 22,
2002  was:  40,205,426.

Transactional  Small  Business  Disclosure  Format  (check  one):
Yes  [ ]  No  X

DOCUMENTS  INCORPORATED  BY  REFERENCE  --  NONE


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<PAGE>
<TABLE>
<CAPTION>
NATIONAL EQUITIES HOLDINGS, INC.

INDEX TO FORM 10-KSB

                                                                             Page
<S>                                                                          <C>
PART I
Item 1.    Description of Business. . . . . . . . . . . . . . . . . . . . .     4
Item 2.    Description of Properties. . . . . . . . . . . . . . . . . . . .     9
Item 3.    Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . .     9
Item 4.    Submission of Matters to a Vote of Security Holders. . . . . . .    10

PART II
Item 5.    Market for Common Equity and Related Stockholder Matters . . . .    11
Item 6.    Managements Discussion and Analysis or Plan of Operations. . . .    12
Item 7.    Financial Statements . . . . . . . . . . . . . . . . . . . . . .  . 13
Item 8.    Changes in and Disagreements With Accountants on Accounting
           and Financial Disclosure . . . . . . . . . . . . . . . . . . . .    13

PART III
Item 9.    Directors, Executive Officers, Promoters and Control Persons;
           Compliance with Section 16(a) of the Exchange Act. . . . . . . .    13
Item 10.   Executive Compensation . . . . . . . . . . . . . . . . . . . . .    14
Item 11.   Security Ownership of Certain Beneficial Owners and Management14
Item 12.   Certain Relationships and Related Transactions . . . . . . . . .    14
PART IV
Item 13.   Exhibit List and Reports on Form 8-K . . . . . . . . . . . . . .    15
</TABLE>


                                                                               3
<PAGE>
PART I

ITEM 1. DESCRIPTION OF BUSINESS
-------------------------------
HISTORY OF COMPANY
National Equities Holdings, Inc., a Delaware corporation, ("NEHI" or the
"Company") is engaged as an independent energy company primarily engaged in the
exploration, development and exploitation of oil and natural gas properties. The
Company does business under the name "NEHI Petroleum".

The Company was initially organized in Delaware on November 24, 1987 under the
name "Asquith Venture Associates, Inc." On July 1, 1988, the Company entered
into an Agreement and Plan of Reorganization with the shareholders of Amadeus
Corporation, a Nevada corporation incorporated in April 1987, to acquire all of
the issued and outstanding shares of common stock of Amadeus. On October 27,
1988, the Company changed its name to "Amadeus Holdings, Inc."  The Company
adopted its present name on January 20, 1993.  The business purpose at that time
was to market a sub-surface irrigation system (Patent number 5,205,487), a
family educational game (Copyright Txu 516862), future real estate construction
and development, and oil and gas production and development.

In August 1996, the Company acquired the proved oil and gas assets of Erin Oil
Exploration, Inc. ("Erin"), a Texas corporation, located in west Texas and West
Virginia. With this acquisition, the business focus of the Company changed to
the oil and gas industry and an oil and gas industry management team was
installed.

On November 1, 1997, NEHI entered into a Joint Venture Agreement with HORSE
ENERGY LP ("HORSE"), a Texas registered limited partnership and on November 5,
1997, NEHI signed a joint venture agreement with ROTARY STEERABLE TOOLS (U.S.A.)
L.P.("RST (USA)"). As part of the HORSE and RST (USA) transactions, George
Sutherland, Jack Chance, Feroze Variava, and Steve McLoughlin were
simultaneously appointed to the Board of Directors of NEHI. Additionally, George
Sutherland was appointed President & COO; Jack Chance--Chairman and CEO; Feroze
Variava--Vice President Engineering; and Steve McLoughlin--Vice President
Oilfield Services.

From the year ended December 31, 1997 through June 18, 1999, NEHI experienced
losses in its oil and natural gas operations. In addition, a substantial
write-down of oil and natural gas reserves was taken for impairment, abandonment
and lease expirations. Oil and natural gas production steadily decreased during
the year in the Company's producing wells. This cycle of increasing operating
losses and the fact that the Company was unable to honor its obligations to pay
for certain services provided to the Company from December 31, 1997 through June
1999 caused the company to file for Chapter 7 Bankruptcy on June 18, 1999 in
Cause Number 99-35982-H5-7, U.S. Bankruptcy Court, Southern District of Texas,
Houston Division. On December 26, 2001, the Chapter 7 Bankruptcy proceeding was
dismissed upon a motion on the company.   Additionally, a dispute arose between
the management appointed by the HORSE and RST USA transactions and Mr. Bill
Knollenberg, a director and the largest shareholder and his affiliates. A
confidential settlement was reached between these parties on July 31, 2001 which
allowed Mr. Knollenberg and his affiliates to retain control of NEHI but NEHI
did not maintain interests in the joint ventures with HORSE and RST (USA), and
the Company gave up its interest in Horse and RST.

For the period June 18, 1999 through the first quarter of 2002, there was no
activity of any kind within NEHI.  The Company has since formulated a new
business plan with Mr. Bill Knollenberg as President and is actively pursuing
energy prospects.


                                                                               4
<PAGE>
We have not filed an Annual Report on Form 10KSB prior to this Annual Report on
Form 10KSB since November 20, 1998 for the fiscal year ended December 31, 1997.
We have not filed a Quarterly Report on Form 10QSB since November 16, 1998 for
the quarter ended September 30, 1998.

The Company's current headquarters are located at 21800 I-45 North, Spring,
Texas 77373. The telephone number of the Company is (281) 414-8172 and its
facsimile number is (281) 651-7567.

BUSINESS STRATEGY AND PLAN

The Company's business strategy is to identify and develop proven oil and
natural gas prospects to achieve reserve growth, increase cash flow, and enhance
earnings. As a means to accomplish this, the Company's focus is to exploit
proven prolific oil and natural gas reserves quickly and efficiently through the
use of advanced technology and innovation. The Company also is targeting oil and
natural gas leases where the application of re-entry, horizontal and
multilateral technology can be successfully applied; however, its present cash
deficiency may hamper this strategy.

The Company's focus will also continue to be on acquisition of upstream oil and
natural gas service business interests that specialize in areas of "enabling
technology" and have long term growth potential. Recent advances in certain key
technologies enable operators to produce reserves much more efficiently than the
past. This enables oil companies to compete during periods of depressed oil and
natural gas pricing. These technologies also allow operators to produce fields
that would have otherwise been uneconomical, increasing production as well as
proven reserve estimates.

RISK FACTORS

We have had and could have losses, deficits and deficiencies in liquidity, which
could impair our ability to continue as a going concern

In Note #2 to the audited financial statements, our independent auditors have
reported that we have suffered recurring losses from operations that raise
substantial doubt about our ability to continue as a going concern. During the
year ended December 31, 2001, we incurred an extraordinary gain as a result of
the legal proceedings referenced in Item 3 of $432,000, a gain due to the waiver
of past due compensation by former employees.  However, at December 31, 2001, we
had an accumulated deficit of $698,565 and no revenue or sales for 2000 or 2001.
These factors raise substantial doubt about our ability to continue as a going
concern. We will need approximately $100,000 in additional cash in order to
remain viable as a going concern through the end of the current fiscal year. If
we are unable to obtain these funds we could no longer function as a going
concern.

IMPLEMENTATION OF BUSINESS STRATEGY DEPENDENT ON ADDITIONAL FINANCING
We must obtain outside financing to fund the expansion of our operations and to
meet our obligations as they become due. Any additional debt or equity financing
may be dilutive to the interests of our stockholders. Such outside financing
must be provided from the sale of equity securities, borrowing, or other sources
of third party financing. Further, the sale of equity securities would
substantially dilute our existing stockholders' interests, and borrowings from
third parties could result in our assets being pledged as collateral. Loan terms
which would increase our debt service requirements could restrict our
operations. There is no assurance that we can obtain financing on favorable
terms.

JOINT OPERATIONS WITH OTHERS; NON-OPERATOR STATUS
We may own less than 100% of the working interest in many of our oil and gas
holdings. Operations are likely to be conducted jointly with other working
interest owners. Joint operating arrangements are customary in the oil and gas
industry and are generally conducted pursuant to a joint operating agreement
whereby a single working interest owner is designated the operator. We could
possibly be a non-operating working interest owner in other wells in the future.


                                                                               5
<PAGE>
For properties where we own less than 50% of the working interest, drilling and
operating decisions may not be entirely within our control. If we disagree with
the decision of a majority of working interest owners, we may be required, among
other things, to postpone the proposed activity, relinquish or farm-out its
interest or decline to participate. If we decline to participate, we might be
forced to relinquish our interest or may be subject to certain non- consent
penalties, as provided in the applicable operating agreement. Such penalties
typically allow participating working interest owners to recover from the
proceeds of production, if any, an amount equal to 200%-500% of the
non-participating working interest owner's share of the cost of such operations.

Under most operating agreements, the operator is given direct and full control
over all operations on the properly and is obligated to conduct operations in a
workman-like manner; however the operator is usually not liable to the working
interest owners for losses sustained or for liabilities incurred, except those
resulting from its own gross negligence or willful misconduct. Each working
interest owner is generally liable for its share of the costs of developing and
operating jointly owned properties. The operator is required to pay the expenses
of developing and operating the property and will invoice working interest
owners for their proportionate share of such costs. In instances where we are a
non-operating working interest owner, we may have a limited ability to exercise
control over operations and the associated costs of such operations. The success
of our investment in such non-operated activities may, therefore, be dependent
upon a number of facts that are outside of our direct control.

Under most operating agreements and the laws of certain states, operators of oil
and gas properties may be granted liens on the working interests of other
non-operating owners in the well to secure the payment of amounts due the
operator. The bankruptcy or failure of the operator or other working interest
owners to pay vendors who have supplied goods or services applicable to wells
could result in filing of mechanics' and materialmens' liens which would
encumber the well and the interests of all joint owners At this time, we do not
have Joint operating arrangements, however, we may in the future some operations
conduct operations jointly with other working interest owners.

MARKETS AND CUSTOMERS
The revenue generated by our operations are highly dependent upon the prices of,
and demand for crude oil and natural gas. Historically, the markets for crude
oil and natural gas have been volatile and are likely to continue to be volatile
in the future. The prices received by the Company for its crude oil and natural
gas production and the level of such production are subject to wide fluctuations
and depend on numerous factors beyond our control including seasonality, the
condition of the United States economy (particularly the manufacturing sector),
foreign imports, political conditions in other oil-producing and natural
gas-producing countries, the actions of the Organization of Petroleum Exporting
Countries and domestic regulation, legislation and policies. Decreases in the
prices of crude oil and natural gas could have an adverse effect on the carrying
value of any proved reserves or revenue which we may have in the future.

COMPETITION
We operate in a highly competitive environment. Competition is particularly
intense with respect to the acquisition of desirable undeveloped crude oil and
natural gas properties. The principal competitive factors in the acquisition of
such undeveloped crude oil and natural gas properties include the staff and data
necessary to identify, investigate and purchase such properties, and the
financial resources necessary to acquire and develop such properties. We compete
with major and independent crude oil and natural gas companies for properties
and the equipment and labor required to develop and operate such properties.
Many of these competitors have financial and other resources substantially
greater than ours.

Our principal competitors include major integrated oil companies and their
marketing affiliates and national and local gas gatherers, brokers, marketers
and distributors of varying sizes, financial resources and experience. Certain
competitors, such as major crude oil and natural gas companies, have capital
resources and control supplies of natural gas substantially greater than the
Company. Smaller local distributors may enjoy a marketing advantage in their


                                                                               6
<PAGE>
immediate service areas. We compete against other companies in our natural gas
processing business both for supplies of natural gas and for customers to which
we sell our products. Competition for natural gas supplies is based primarily on
location of natural gas gathering facilities and natural gas gathering plants,
operating efficiency and reliability and ability to obtain a satisfactory price
for products recovered. Competition for customers is based primarily on price
and delivery capabilities.

REGULATORY MATTERS
Our operations are affected from time to time in varying degrees by political
developments and federal, state, provincial and local laws and regulations. In
particular, oil and gas production operations and economics are, or in the past
have been, affected by price controls, taxes, conservation, safety,
environmental, and other laws relating to the petroleum industry, by changes in
such laws and by constantly changing administrative regulations.

PRICE REGULATIONS
In the recent past, maximum selling prices for certain categories of crude oil,
natural gas, condensate and NGLs in the United States were subject to federal
regulation. In 1981, all federal price controls over sales of crude oil,
condensate and NGLs were lifted. In 1993, the Congress deregulated natural gas
prices for all "first sales" of natural gas. As a result, all sales of our
United States produced crude oil, natural gas, condensate and NGLs may be sold
at market prices, unless otherwise committed by contract.

STATE AND OTHER REGULATION
All of the jurisdictions in which we lease or own producing crude oil and
natural gas properties have statutory provisions regulating the exploration for
and production of crude oil and natural gas, including provisions requiring
permits for the drilling of wells and maintaining bonding requirements in order
to drill or operate wells and provisions relating to the location of wells, the
method of drilling and casing wells, the surface use and restoration of
properties upon which wells are drilled and the plugging and abandoning of
wells. Our operations are also subject to various conservation laws and
regulations. These include the regulation of the size of drilling and spacing
units or proration units and the density of wells that may be drilled and the
unitization or pooling of crude oil and natural gas properties. In this regard,
some states and provinces allow the forced pooling or integration of tracts to
facilitate exploration while other states and provinces rely on voluntary
pooling of lands and leases. In addition, state and provincial conservation laws
establish maximum rates of production from crude oil and natural gas wells,
generally prohibit the venting or flaring of natural gas and impose certain
requirements regarding the ratability of production. Some states, such as Texas
and Oklahoma, have, in recent years, reviewed and substantially revised methods
previously used to make monthly determinations of allowable rates of production
from fields and individual wells. The effect of these regulations is to limit
the amounts of crude oil and natural gas we can produce from its wells, and to
limit the number of wells or the location at which we can drill.

State and provincial regulation of gathering facilities generally includes
various safety, environmental, and in some circumstances, non-discriminatory
take requirements, but does not generally entail rate regulation. In the United
States, natural gas gathering has received greater regulatory scrutiny at both
the state and federal levels in the wake of the interstate pipeline
restructuring under Order 636. For example, on August 19, 1997, the Texas
Railroad Commission enacted a Natural Gas Transportation Standards and Code of
Conduct to provide regulatory support for the State's more active review of
rates, services and practices associated with the gathering and transportation
of gas by an entity that provides such services to others for a fee, in order to
prohibit such entities from unduly discriminating in favor of their affiliates.

In the event we conduct operations on federal or Indian oil and gas leases, such
operations must comply with numerous regulatory restrictions, including various
non-discrimination statutes, and certain of such operations must be conducted
pursuant to certain on-site security regulations and other permits issued by
various federal agencies. In addition, in the United States, the Minerals
Management Service ("MMS") has recently issued a final rule to clarify the types


                                                                               7
<PAGE>
of costs that are deductible transportation costs for purposes of royalty
valuation of production sold off the lease. In particular, MMS will not allow
deduction of costs associated with marketer fees, cash out and other pipeline
imbalance penalties, or long-term storage fees. Further, the MMS has been
engaged in a three-year process of promulgating new rules and procedures for
determining the value of oil produced from federal lands for purposes of
calculating royalties owed to the government. The oil and gas industry as a
whole has resisted the proposed rules under an assumption that royalty burdens
will substantially increase. We cannot predict what, if any, effect any new rule
will have on its operations.

ENVIRONMENTAL MATTERS
Our operations are subject to numerous federal, state, provincial and local laws
and regulations controlling the generation, use, storage, and discharge of
materials into the environment or otherwise relating to the protection of the
environment. These laws and regulations may require the acquisition of a permit
or other authorization before construction or drilling commences; restrict the
types, quantities, and concentrations of various substances that can be released
into the environment in connection with drilling, production, and gas processing
activities; suspend, limit or prohibit construction, drilling and other
activities in certain lands lying within wilderness, wetlands, and other
protected areas; require remedial measures to mitigate pollution from historical
and on-going operations such as use of pits and plugging of abandoned wells;
restrict injection of liquids into subsurface strata that may contaminate
groundwater; and impose substantial liabilities for pollution resulting from our
operations. Environmental permits required for our operations may be subject to
revocation, modification, and renewal by issuing authorities. Governmental
authorities have the power to enforce compliance with their regulations and
permits, and violations are subject to injunction, civil fines, and even
criminal penalties. We believe that it is in substantial compliance with current
environmental laws and regulations, and that we will not be required to make
material capital expenditures to comply with existing laws. Nevertheless,
changes in existing environmental laws and regulations or interpretations
thereof could have a significant impact on us as well as the oil and gas
industry in general, and thus we are unable to predict the ultimate cost and
effects of future changes in environmental laws and regulations.

In the United States, the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), also known as "Superfund," and comparable state
statutes impose strict, joint, and several liability on certain classes of
persons who are considered to have contributed to the release of a "hazardous
substance" into the environment. These persons include the owner or operator of
a disposal site or sites where a release occurred and companies that generated,
disposed or arranged for the disposal of the hazardous substances released at
the site. Under CERCLA such persons or companies may be retroactively liable for
the costs of cleaning up the hazardous substances that have been released into
the environment and for damages to natural resources, and it is common for
neighboring land owners and other third parties to file claims for personal
injury, property damage, and recovery of response costs allegedly caused by the
hazardous substances released into the environment. The Resource Conservation
and Recovery Act ("RCRA") and comparable state statutes govern the disposal of
"solid waste" and "hazardous waste" and authorize imposition of substantial
civil and criminal penalties for failing to prevent surface and subsurface
pollution, as well as to control the generation, transportation, treatment,
storage and disposal of hazardous waste generated by oil and gas operations.
Although CERCLA currently contains a "petroleum exclusion" from the definition
of "hazardous substance," state laws affecting our operations impose cleanup
liability relating to petroleum and petroleum related products, including crude
oil cleanups. In addition, although RCRA regulations currently classify certain
oilfield wastes which are uniquely associated with field operations as "non-
hazardous," such exploration, development and production wastes could be
reclassified by regulation as hazardous wastes thereby administratively making
such wastes subject to more stringent handling and disposal requirements.

We currently will own or lease properties that for many years have been used for
the exploration and production of oil and gas. Although we utilize standard


                                                                               8
<PAGE>
industry operating and disposal practices, hydrocarbons or other wastes may be
disposed of or released on or under the properties owned or leased by us or on
or under other locations where such wastes have been taken for disposal. In
addition, many of these properties have been operated by third parties whose
treatment and disposal or release of hydrocarbons or other wastes was not under
our control. These properties and the wastes disposed thereon may be subject to
CERCLA, RCRA, and analogous state laws. Our operations are also impacted by
regulations governing the disposal of naturally occurring radioactive materials
("NORM"). The Company must comply with the Clean Air Act and comparable state
statutes which prohibit the emissions of air contaminants, although a majority
of our activities are exempted under a standard exemption. Moreover, owners,
lessees and operators of oil and gas properties are also subject to increasing
civil liability brought by surface owners and adjoining property owners. Such
claims are predicated on the damage to or contamination of land resources
occasioned by drilling and production operations and the products derived there
from, and are usually causes of action based on negligence, trespass, nuisance,
strict liability and fraud.

United States federal regulations also require certain owners and operators of
facilities that store or otherwise handle oil to prepare and implement spill
prevention, control and countermeasure plans and spill response plans relating
to possible discharge of oil into surface waters. The federal Oil Pollution Act
("OPA") contains numerous requirements relating to prevention of, reporting of,
and response to oil spills into waters of the United States. For facilities that
may affect state waters, OPA requires an operator to demonstrate $10 million in
financial responsibility. State laws mandate crude oil cleanup programs with
respect to contaminated soil.

We are not currently involved in any administrative, judicial or legal
proceedings arising under domestic or foreign federal, state, or local
environmental protection laws and regulations, or under federal or state common
law, which would have a material adverse effect on our financial position or
results of operations.

TITLE TO PROPERTIES
As is customary in the crude oil and natural gas industry, we make only a
cursory review of title to undeveloped crude oil and natural gas leases at the
time they are acquired by us. However, before drilling commences, we require a
thorough title search to be conducted, and any material defects in title are
remedied prior to the time actual drilling of a well begins. To the extent title
opinions or other investigations reflect title defects, we, rather than the
seller of the undeveloped property, is typically obligated to cure any title
defect at its expense. If we were unable to remedy or cure any title defect of a
nature such that it would not be prudent to commence drilling operations on the
property, we could suffer a loss of its entire investment in the property.

EMPLOYEES
Currently, the company has one full time employee.

ITEM 2. DESCRIPTION OF PROPERTY
-------------------------------

Since September 2001, the Company has outsourced its administrative function and
maintains an address at 21800 I-45 North, Spring, Texas 77373. The Company does
not have lease expense.

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

There are currently no legal proceedings against the Company.

On June 18, 1999, the Company filed for Chapter 7 Bankruptcy in the US
Bankruptcy Court number of case number 99-35982-H5-7, Southern District of
Texas, Houston Division.  We filed a motion to dismiss this Bankruptcy and this
Bankruptcy was dismissed on December 26, 2001.


                                                                               9
<PAGE>
Cause number 99-4166 in 281st Judicial District for the District Civil Court of
Harris County, Texas, Bill Knollenberg, Doris Knollenberg and Brad Knollenberg
vs. Jack Chance, Steve McLoughlin and George Sutherland.  On July 31, 2001, a
confidential settlement in connection with the Bankruptcy was made between the
parties in which Mr. Bill Knollenberg remained as Chief Executive Officer of
NEHI.  NEHI gave up its interest in Horse and RST and in joint ventures with
them.  Former management of NEHI gave up a claim for back wages in the amount of
$432,000.  This case was settled and dismissed.

Case No. 98-28403, 295th Judicial District for the District Civil Court of
Harris County, Texas, National Equities Holdings, Inc. vs. Bradley Knollenberg,
Erin Exploration, Inc., Gulf Minerals Exploration, Billy Knollenberg and Doris
Knollenberg. National Equities Holdings, Inc. sued Bradley Knollenberg, Erin
Exploration, Inc., Gulf Minerals Exploration, Billy Knollenberg and Doris
Knollenberg for recovery of stock. This suit was dismissed in the bankruptcy
proceeding.



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

None.


PART II

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

LIMITED TRADING MARKET
The Company's common stock is traded in the over-the-counter market and is
quoted on the Over-the-Counter ("OTC") Pink Sheets under the symbol "NEHI."  The
following table sets forth for the calendar period indicated the high the low
bid prices for the Company's common stock as quoted on the pink sheets. The
prices shown reflect inter-dealer prices, without retail mark up, mark-down or
commission and may not represent actual transactions:

<TABLE>
<CAPTION>
                               Period  High  Low
                               ------  ----  ---
<S>                            <C>     <C>   <C>
                                 2000

               First Quarter              0    0
               Second Quarter             0    0
               Third Quarter              0    0
               Fourth Quarter             0    0

                                 2001

               First Quarter              0    0
               Second Quarter             0    0
               Third Quarter              0    0
               Fourth Quarter             0    0

                                 2002

               First Quarter            .05    0
               Second Quarter           .01  .01
</TABLE>


                                                                              10
<PAGE>
There were 464 shareholders of record on July 22, 2002.

The bid price of our common stock was .013 cents per share on July 22, 2002.


THE COMPANY'S TRANSFER AGENT IS:
                     Deposit Guaranty Insurance Corporation
                                   PO Box 8207
                            Bacliff, Texas 77518-8207

DIVIDEND POLICY

The Company has not paid a cash dividend on its Common Stock and does not expect
to pay such a dividend in the foreseeable future.


ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
------------------------------------------------------------------

GENERAL
The company experienced dramatic changes during the fiscal year ended 2001. The
Company was restructured after settlement of legal disputes and the dismissal of
the Chapter 7 Bankruptcy.   The plan involved a change in company control, a
change in management, divestiture of uneconomical oil and natural gas
properties, a significant write off of impaired assets and a change in company
focus, all of which have occurred.

The Company had no revenue in 2000 or 2001.   The company's accountants have
expressed a going concern qualification in their report in the accompanying
audited financial statements.

The  Company's  future  strategic  plans  are currently being developed, but may
include  private  placements  of  the Company's common stock and the exchange of
common  stock for settlement of vendor accounts.  There can be no assurance that
any  of the plans developed by the Company will produce cash flows sufficient to
overcome  current  liquidity  problems.  The  Company's long-term viability as a
going  concern  is  dependent  on  certain  key  factors,  as  follows:

     -    The  Company's ability to obtain adequate sources of outside financing
          to  support  its emergence from bankruptcy proceedings and its efforts
          to  move  forward  with  oil  and  gas  exploration  and  production
          activities.

     -    The  Company's  ability to locate, prove and produce from economically
          viable  oil  and  gas  reserves.

     -    The Company's ability to ultimately achieve adequate profitability and
          cash  flows  to  sustain  continuing  operations.

The Company is currently a development stage corporation. Our business plan
includes focusing on oil and natural gas investments for 2002 and the
foreseeable future.  The Company is currently in a start-up phase and has no
material amount of funds from which we can satisfy any cash requirements to
commence operations. There has been no revenue for the past two years. Our
year-end financial statements and the report of our independent auditor contain
a going concern qualification. This means that because we have had little or no


                                                                              11
<PAGE>
operations to date, and because we have little or no tangible assets or
financial resources, and have incurred losses since inception, there is
substantial doubt about our ability to continue as a going concern. The Company
needs approximately $100,000.00 to sustain its operations through the year. We
anticipate the need to raise these funds, either by borrowing the funds or
through equity financing, in order to commence principal operations.


PLAN OF OPERATIONS
The Company is focusing on oil and natural gas investments for 2002 and the
foreseeable future.  Strategic lease acquisitions and equity investments by or
into the Company and joint venture drilling opportunities are all being pursued
to improve NEHI's financial condition. The identification and development of
proven oil and natural gas prospects to achieve reserve growth, increase cash
flow, and enhance share value are the central focus of the Company's business.
The Company's focus will also continue to be on acquisition of upstream oil and
natural gas service business interests that specialize in areas of "enabling
technology" and have long-term growth potential. Recent advances in certain key
technologies enable operators to produce reserves much more efficiently than the
past. This enables oil companies to compete during periods of depressed oil &
natural gas pricing. These technologies also allow operators to produce fields
that would have otherwise been uneconomical, increasing production as well as
proven reserve estimates. The Company will pursue development of these reserves
through affiliation and joint venture relationships with other companies and
will typically retain lease payments, override royalty interests and
non-operating working interest positions. The continued success of the plan
assumes the Company can overcome its lack of liquidity and need for capital.

In addition, in its efforts to acquire leases or other exploration rights in new
prospect areas, the Company faces competition from major oil companies,
independent oil firms, and oil and natural gas speculators. The ability to
acquire leases or exploration rights is generally determined by the amount of
cash required to obtain the property interest, the royalty or other interest
reserved by the transferor, and the nature of any commitment to drill or
complete other exploration.

FORWARD-LOOKING INFORMATION
This report contains a number of forward-looking statements, which reflect the
Company's current views with respect to future events and financial performance
including statements regarding the Company's projections. These forward-looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical results or those
anticipated. In this report, the words "anticipates", "believes", "expects",
"intends", "future", "plans", "targets" and similar expressions identify
forward-looking statements. Readers are cautioned to not place undue reliance on
the forward-looking statements contained herein, which speak only as of the date
hereof the Company undertakes no obligation to publicly revise these
forward-looking statements, to reflect events or circumstances that may arise
after the date hereof. Additionally, these statements are based on certain
assumptions that may prove to be erroneous and are subject to certain risks
including, but not limited to, the Company's dependence on limited cash
resources, and its dependence on certain key personnel within the Company.
Accordingly, actual results may differ, possibly materially, from the
predictions contained herein.

ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
---------------------------------------------------

The information required by this Item 7 is included in this report as set forth
in the "Index to Financial Statements on page F-2.


                                                                              12
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
-----------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------


No audits were completed for the periods between 1998 and 2000.  Ham, Langston &
Brezina, LLP, Certified Public Accountants were retained in 2002 to audit NEHI
for the year ended December 31, 2001.  We filed an 8K on June 22, 1998 reporting
the resignation of auditors Alvin L. Dahl & Associates.

PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
----------------------------------------------------------

Set forth below are the names, ages, years of service and positions of the
executive officers and directors of the Company.

Name                      Age         Office


Bill Knollenberg           76      President, Chairman of the Board, Principal
                                   Financial Officer and Director


BUSINESS EXPERIENCE OF OFFICERS AND DIRECTORS

BILL KNOLLENBERG
CHAIRMAN AND CHIEF EXECUTIVE OFFICER

In 1995, Gulf Minerals, a general partnership of which Mr. Knollenberg, Doris C.
Knollenberg and A. Bradley Knollenberg are partners, acquired controlling
interest in Erin Oil with Mr. Knollenberg assuming the position of President. In
August of 1996, Gulf Minerals became the largest shareholder of NEHI and Mr.
Knollenberg assumed the position of Director of NEHI.  In. August 1997, Mr.
Knollenberg resigned as director of Erin Oil. In August 1998, Mr. Knollenberg
resigned from NEHI and began acquiring oil and gas leases until 2001 when he
became President of NEHI and in turn disposed of the leases he had acquired.


COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") requires the Company's officers, directors and persons who own more than
10% of the Company's Common Stock to file reports of ownership and changes in
ownership with the SEC.

Bill Knollenberg and Donnie Douglas, a holder of more than 10% of our common
stock,  have not filed Forms 3,4 or 5.


ITEM 10. EXECUTIVE COMPENSATION
-------------------------------


                                                                              13
<PAGE>
During 1999, 2000, and 2001, no executive officer or director of the Company
received cash  compensation or any other form of compensation.

                                     Year           Salary           All Other


          Bill M. Knollenberg        1999           - 0 -              - 0 -

                                     2000           - 0 -              - 0 -

                                     2001           - 0 -              - 0 -



 ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL AND MANAGEMENT.

Based upon information received from the persons concerned, each person known to
us to be the beneficial owner of more than five percent of the outstanding
shares of our Common Stock, each director, each of the named executive officers
and all of our directors and officers as a group, owned beneficially as of July
23, 2002, the number and percentage of outstanding shares of our Common Stock
indicated in the following table:   All officers and directors as a group.

Name and Address of
Beneficial Owner                     Number of Shares (1)      Percentage

Mr. Bill Knollenberg(1)                  25,000,000                63%
Spring, Texas 77373

Mr. Donnie Douglas
Palestine, Texas 75801                   5,000,000                 13%

Executive officers and directors(1)     25,000,000                 63%
as a group (1 person)

(1) Includes 350,000 shares owned by Erin Oil, of which Bill M. Knollenberg is a
controlling person, and 1,000,000 shares owned by Mr. Bill Knollenberg's wife.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

On September 8, 2001, Mr. Bill Knollenberg purchased 13,700,000 shares of NEHI
from the bankruptcy trustee for $7,500.00.  This purchase was in connection with
the settlement with the Bankruptcy proceeding.  These shares were formerly owned
by Horse and Rotary Steerable Tools LP.




ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits Required by Item 601 of Regulation SB


                                                                              14
<PAGE>
     Exhibit 3

          (i)   Articles  of  Incorporation*,**
          (ii)  By-Laws*,**

     Exhibit 4.1    Specimen Stock Certificate*,**
     Exhibit 4.2    Convertible Bond/Debenture**


================================================================================


* Previously filed as an Exhibit to the Company's Form 10-KSB, as amended, for
the Year Ended December 31, 1996 and incorporated herein by reference.

** Previously filed as an Exhibit to the Company's Form 10-QSB for the Quarterly
Period Ended March 31, 1998 and incorporated herein by reference.

(b) Reports on Form 8-K: None


SIGNATURES

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

NATIONAL EQUITIES HOLDINGS, INC.


     By:  /s/ Bill Knollenberg                                   August 12, 2002
          President, Chairman of the Board, Principal
          Financial Officer and Director
          ---------------------------------------------------
          Bill Knollenberg, President, Chairman of the Board,
          Principal Financial Officer and Director

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


          By:  /s/ Bill Knollenberg                              August 12, 2002
               President, Chairman of the Board, Principal
               Financial Officer and Director
               ------------------------------------------------
               Bill Knollenberg, President, Chairman of the Board,
               Principal Financial Officer and Director


                                                                              15
<PAGE>
Certification  of  Chief  Executive  Officer of National Equities Holdings, Inc.
--------------------------------------------------------------------------------
pursuant to Section 906 of the Sarbanes-Oxley Act of 1992 and Section 1350 of 18
--------------------------------------------------------------------------------
U.S.C.  63.
----------

I,  Bill Knollenberg, the Chief Executive Officer of National Equities Holdings,
Inc.  hereby  certify that National Equities Holdings, Inc.'s periodic report on
Form  10-KSB  and  the  financial  statements  contained  therein, of which this
certification  is  Exhibit  Number 99.1, fully complies with the requirements of
Section  13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or
78o(d)  and that information contained in the periodic report on Form 10-KSB and
the  financial  statements  contained therein fairly represents, in all material
respects,  the  financial  condition  and  results of the operations of National
Equities  Holdings,  Inc.

Date:  August  12,  2002           /s/     Bill  Knollenberg
                                           Bill  Knollenberg
                                           Chief  Executive  Officer  of
                                           National  Equities  Holdings,  Inc.



Certification  of  Chief  Financial  Officer of National Equities Holdings, Inc.
--------------------------------------------------------------------------------
pursuant to Section 906 of the Sarbanes-Oxley Act of 1992 and Section 1350 of 18
--------------------------------------------------------------------------------
U.S.C.  63.
----------

I,  Bill Knollenberg, the Chief Financial Officer of National Equities Holdings,
Inc.  hereby  certify that National Equities Holdings, Inc.'s periodic report on
Form  10-KSB  and  the  financial  statements  contained  therein, of which this
certification  is  Exhibit  Number 99.1, fully complies with the requirements of
Section  13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or
78o(d)  and that information contained in the periodic report on Form 10-KSB and
the  financial  statements  contained therein fairly represents, in all material
respects,  the  financial  condition  and  results of the operations of National
Equities  Holdings,  Inc.

Date:  August  12,  2002           /s/     Bill  Knollenberg
                                           Bill  Knollenberg
                                           Chief  Financial  Officer  of
                                           National  Equities  Holdings,  Inc.


                                                                              16
<PAGE>
                        NATIONAL EQUITIES HOLDINGS, INC.
                    (A CORPORATION IN THE DEVELOPMENT STAGE)

                                   ----------




                              FINANCIAL STATEMENTS
                     WITH REPORT OF INDEPENDENT ACCOUNTANTS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000


                                      F-1
<PAGE>
<TABLE>
<CAPTION>
                        NATIONAL EQUITIES HOLDINGS, INC.
                    (A CORPORATION IN THE DEVELOPMENT STAGE)
                                TABLE OF CONTENTS

                                   ----------


                                                                    PAGE
                                                                    ----
<S>                                                                 <C>
Reports of Independent Accountants                                    3

Financial Statements:

  Balance Sheet as of December 31, 2001                               4

  Statements of Operations for the years ended December 31,
    2001 and 2000                                                     5

  Statements of Stockholders' Deficit for the years ended
    December 31, 2001 and 2000                                        6

  Statements of Cash Flows for the years ended December 31,
    2001 and 2000                                                     7

Notes to Financial Statements                                         8
</TABLE>


                                      F-2
<PAGE>
                        REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors and Stockholders
National Equities Holdings, Inc.


We  have  audited  the accompanying balance sheet of National Equities Holdings,
Inc.  (a  corporation  in the development stage) as of December 31, 2001 and the
related  statements  of operations, stockholders' deficit and cash flows for the
two  years  in  the period then years ended.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion  on  these  financial  statements  based  on  our  audit.

We conducted our audits in accordance with auditing standards generally accepted
in  the  United  States  of  America.  Those  standards require that we plan and
perform  the  audit  to  obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test  basis,  evidence  supporting  the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made  by  management,  as well as evaluating the overall
financial  statement  presentation.  We  believe  that  our  audits  provide  a
reasonable  basis  for  our  opinion.

In  our  opinion,  the financial statements referred to above present fairly, in
all  material  respects,  the  financial position of National Equities Holdings,
Inc.  as  of  December  31, 2001, and the results of its operations and its cash
flows  for the two years in the period then ended, in conformity with accounting
principles  generally  accepted  in  the  United  States  of  America.

The  accompanying  financial  statements  have  been  prepared assuming that the
Company  will  continue  as  a  going  concern.  As  discussed  in Note 2 to the
financial statements, the Company is emerging from bankruptcy proceedings, based
on a dismissal by the federal bankruptcy court, and has a net capital deficiency
at December 31, 2001. These factors, among others, raise substantial doubt about
the  Company's  ability to continue as a going concern.  Management's plans with
regard  to this matter are also discussed in Note 2.  These financial statements
do  not  include  any  adjustments  that  might  result from the outcome of this
uncertainty.


                                         /s/  Ham, Langston & Brezina, L.L.P.




Houston, Texas
June 4, 2002


                                      F-3
<PAGE>
<TABLE>
<CAPTION>
                        NATIONAL EQUITIES HOLDINGS, INC.
                    (A CORPORATION IN THE DEVELOPMENT STAGE)
                                  BALANCE SHEET
                                DECEMBER 31, 2001

                                   ----------

     ASSETS
     ------
<S>                                                        <C>
Current assets:
  Cash                                                     $          -
                                                           -------------
    Total current assets                                              -
                                                           -------------

Property and equipment                                                -
Less accumulated depreciation,
depletion and amortization                                            -
                                                           -------------

  Net property and equipment                                           -
                                                           -------------

      Total assets                                         $          -
                                                           =============


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------

Current liabilities:
  Accounts payable                                         $    570,935
  Accrued liabilities                                           116,485
  Convertible debentures                                         11,145
                                                           -------------

    Total current liabilities                                   698,565
                                                           -------------

Commitments and contingencies

Stockholders' deficit:
  Preferred stock: $.001 par value; 1,000,000 shares
    authorized                                                        -
  Common stock: $.001 par value; 49,000,000 shares
    authorized; 39,788,676 shares issued and outstanding
    at December 31, 2001                                         39,789
  Additional paid-in capital                                  9,596,622
  Accumulated deficit                                       (10,334,976)
                                                           -------------

    Total stockholders' deficit                                (698,565)
                                                           -------------
      Total liabilities and stockholders' deficit          $          -
                                                           =============
</TABLE>



   The accompanying notes are an integral part of these financial statements.


                                      F-4
<PAGE>
<TABLE>
<CAPTION>
                        NATIONAL EQUITIES HOLDINGS, INC.
                    (A CORPORATION IN THE DEVELOPMENT STAGE)
                            STATEMENT OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

                                   ----------


                                                        2001         2000
                                                     -----------  -----------
<S>                                                  <C>          <C>
Revenues:                                            $         -  $         -

Costs and expenses                                             -            -
                                                     -----------  -----------

    Total costs and expenses                                   -            -
                                                     -----------  -----------

Income (loss) before extraordinary gain on
  settlement of debt                                           -            -

Extraordinary gain on settlement of debt                 432,000            -
                                                     -----------  -----------

        Net income                                   $   432,000  $         -
                                                     ===========  ===========


Basic and diluted income per common share:

    From continuing operations before extraordinary
       gain on settlement of debt                    $         -  $         -

    Extraordinary gain on settlement of debt                0.01            -
                                                     -----------  -----------

        Net income per common share                  $      0.01  $         -
                                                     ===========  ===========

Weighted average common shares                        39,788,676   39,788,676
                                                     ===========  ===========
</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                      F-5
<PAGE>
<TABLE>
<CAPTION>
                        NATIONAL EQUITIES HOLDINGS, INC.
                    (A CORPORATION IN THE DEVELOPMENT STAGE)
                       STATEMENT OF STOCKHOLDERS' DEFICIT
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

                                   ----------


                                                                                  TOTAL
                                                  ADDITIONAL                  STOCKHOLDERS'
                              COMMON STOCK         PAID-IN      ACCUMULATED       EQUITY
                           SHARES      AMOUNT      CAPITAL        DEFICIT       (DEFICIT)
                         ----------  -----------  ----------  ---------------  ------------
<S>                      <C>         <C>          <C>         <C>              <C>
Balance at December 31,
  1999                   39,788,676  $    39,789  $9,596,622  $  (10,766,976)  $(1,130,565)

Net loss                          -            -           -               -             -
                         ----------  -----------  ----------  ---------------  ------------

Balance at December 31,
  2000                   39,788,676       39,789   9,596,622     (10,766,976)   (1,130,565)

Net income                        -            -           -         432,000       432,000
                         ----------  -----------  ----------  ---------------  ------------

Balance at December 31,
  2001                   39,788,676  $    39,789  $9,596,622  $  (10,334,976)  $  (698,565)
                         ==========  ===========  ==========  ===============  ============
</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                      F-6
<PAGE>
<TABLE>
<CAPTION>
                        NATIONAL EQUITIES HOLDINGS, INC.
                    (A CORPORATION IN THE DEVELOPMENT STAGE)
                            STATEMENT OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

                                   ----------


                                                         2001       2000
                                                      ----------  ---------
<S>                                                   <C>         <C>
Cash flows from operating activities:
  Net income                                          $ 432,000   $       -
  Adjustments to reconcile net income to net cash
    used in operating activities:                      (432,000)          -
    Extraordinary gain on settlement of debt
                                                      ----------  ---------
        Net cash from operating activities                    -           -
                                                      ----------  ---------
Net increase (decrease) in cash and cash equivalents          -           -

Cash and cash equivalents at beginning of year                -           -
                                                      ----------  ---------
Cash and cash equivalents at end of year              $       -   $       -
                                                      ==========  =========
</TABLE>


   The accompanying notes are an integral part of these financial statements.


                                      F-7
<PAGE>
                        NATIONAL EQUITIES HOLDINGS, INC.
                    (A CORPORATION IN THE DEVELOPMENT STAGE)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   ----------


1.   ORGANIZATION  AND  SIGNIFICANT  ACCOUNTING  POLICIES
     ----------------------------------------------------

     ORGANIZATION
     ------------

     National  Equities  Holdings, Inc.(the "Company") is a Delaware corporation
     that  currently has no significant business activities but is engaged in an
     effort  to  emerge  from  bankruptcy  proceedings that were filed in August
     1999.  On  December  20, 2001, the Company obtained an order dismissing the
     bankruptcy  and the Company now plans to resume oil and gas exploration and
     production  activities.  The  Company  is  a  development  stage enterprise
     because  it  currently  has  no  significant  operations  or  assets and is
     devoting  substantially  all  its efforts to a search for capital resources
     and  business  development  activities. December 20, 2001 is considered the
     inception  of the development stage for financial reporting purpose because
     on that date bankruptcy proceedings were dismissed by the bankruptcy courts
     and  the  Company  began  to  focus  on  future  activities.

     ACCOUNTING  ESTIMATES
     ---------------------

     The  preparation  of  financial  statements  in  conformity with accounting
     principles  generally  accepted  in  the  United States of America 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  revenue  and expenses during the reporting
     period.  Actual  results could differ from those estimates. These estimates
     mainly  involve  the useful lives of property and equipment, the impairment
     of  unproved  oil  and gas properties, the valuation of deferred tax assets
     and  the  realizability  of  accounts  receivable.

     OIL  AND  GAS  PRODUCING  ACTIVITIES
     ------------------------------------

     The  Company  follows the "successful efforts" method of accounting for its
     oil  and  gas  properties.  Under  this  method of accounting, all property
     acquisition  costs  (cost  to  acquire  mineral  interests  in  oil and gas
     properties)  and  costs (to drill and equip) of exploratory and development
     wells  are  capitalized when incurred, pending determination of whether the
     well has found proved reserves. If an exploratory well has not found proved
     reserves  in  commercial quantities, the costs associated with the well are
     charged  to expense. The costs of development wells are capitalized whether
     productive or nonproductive. Geological and geophysical costs and the costs
     of  carrying and retaining undeveloped properties are expensed as incurred.
     Management  estimates  that  the  salvage value of lease and well equipment
     will approximately offset the future liability for plugging and abandonment
     of  the  related  wells.  Accordingly,  no  accrual for such costs has been
     recorded.


                                      F-8
<PAGE>
                        NATIONAL EQUITIES HOLDINGS, INC.
                    (A CORPORATION IN THE DEVELOPMENT STAGE)
                          NOTES TO FINANCIAL STATEMENTS

                                   ----------


1.   ORGANIZATION  AND  SIGNIFICANT  ACCOUNTING  POLICIES,  CONTINUED
     ----------------------------------------------------------------

     Unproved  oil  and  gas  properties  that  are individually significant are
     periodically  assessed for impairment of value, and a loss is recognized at
     the time of impairment by providing an impairment allowance. Other unproved
     properties  are  amortized  based  on the Company's average holding period.
     Capitalized  costs  of  producing  oil and gas properties after considering
     estimated  dismantlement and abandonment costs and estimate salvage values,
     are  depreciated and depleted by the unit-of-production method. On the sale
     or retirement of a complete unit of a proved property, the cost and related
     accumulated  depreciation,  depletion, and amortization are eliminated from
     the property accounts, and the resultant gain or loss is recognized. On the
     retirement  or  sale  of  a  partial  unit  of proved property, the cost is
     charged  to  accumulated  depreciation,  depletion, and amortization with a
     resulting  gain  or  loss  recognized  in  the  statement  of  operations.

     On  the sale of an entire interest in an unproved property for cash or cash
     equivalent,  gain  or  loss  on  the  sale  is  recognized,  taking  into
     consideration  the  amount  of  any recorded impairment if the property had
     been  assessed  individually. If a partial interest in an unproved property
     is  sold,  the amount received is treated as a reduction of the cost of the
     interest  retained.

     OTHER  PROPERTY  AND  EQUIPMENT
     -------------------------------

     Property  and  equipment  is stated at cost. Depreciation is computed using
     the  straight-line  method  over  the estimated useful lives of 5 years for
     office  furniture  and  equipment  and  transportation and other equipment.
     Additions  or improvements that increase the value or extend the life of an
     asset  are capitalized. Expenditures for normal maintenance and repairs are
     expensed  as incurred. Disposals are removed from the accounts at cost less
     accumulated depreciation and any gain or loss from disposition is reflected
     in  operations.

     IMPAIRMENT  OF  LONG-LIVED  ASSETS
     ----------------------------------

     In  the  event  facts  and  circumstances  indicate the carrying value of a
     long-lived  asset,  including  associated  intangibles, may be impaired, an
     evaluation of recoverability is performed by comparing the estimated future
     undiscounted  cash  flows associated with the asset to the asset's carrying
     amount to determine if a write-down to market value or discounted cash flow
     is  required.  Based  upon a recent evaluation by management, an impairment
     write-down  of  the  Company's long-lived assets was recorded to write such
     assets  down  to  their  estimated  net  realizable  value.

     CASH  AND  CASH  EQUIVALENTS
     ----------------------------

     For  purposes of reporting cash flows, the Company considers all short-term
     investments  with  an  original  maturity  of  three  months  or  less when
     purchased  to  be  cash  equivalents.


                                      F-9
<PAGE>
                        NATIONAL EQUITIES HOLDINGS, INC.
                    (A CORPORATION IN THE DEVELOPMENT STAGE)
                          NOTES TO FINANCIAL STATEMENTS

                                   ----------


1.   ORGANIZATION  AND  SIGNIFICANT  ACCOUNTING  POLICIES,  CONTINUED
     ----------------------------------------------------------------

     FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS
     ---------------------------------------

     The  Company  includes  fair  value  information  in the notes to financial
     statements  when  the  fair value of its financial instruments is different
     from  the  book  value.  When  the  book  value approximates fair value, no
     additional  disclosure  is  made.

     OIL  AND  GAS  REVENUES
     -----------------------

     Oil  and  gas  revenues  are  recorded  under the sales method. The Company
     recognizes  oil  and  gas  revenues  as production occurs. As a result, the
     Company  accrues  revenue  relating to production for which the Company has
     not  received  payment.

     EARNINGS  PER  SHARE
     --------------------

     The  Company  has  adopted  SFAS No. 128, which provides for calculation of
     "Basic" and "Diluted" earnings per share. Basic earnings per share includes
     no  dilution  and  is  computed  by dividing net income available to common
     shareholders  by  the  weighted  average  common shares outstanding for the
     period.  Diluted  earnings  per  share  reflect  the  potential dilution of
     securities  that  could share in the earnings of an entity similar to fully
     diluted  earnings  per  share.

     STOCK  BASED  COMPENSATION
     --------------------------

     SFAS  No.  123,  "Accounting  for  Stock-Based  Compensation"  established
     financial  accounting  and  reporting  standards  for  stock-based employee
     compensation  plans. It defined a fair value based method of accounting for
     an  employee  stock  option or similar equity instrument and encouraged all
     entities to adopt that method of accounting for all of their employee stock
     compensation  plans  and  include  the  cost  in  the  income  statement as
     compensation  expense.  However,  it  also  allows an entity to continue to
     measure  compensation  cost for those plans using the intrinsic value based
     method  of  accounting  prescribed  by  Accounting Principles Board ("APB")
     Opinion  No.  25,  "Accounting  for Stock Issued to Employees". The Company
     accounts  for  compensation  cost for stock option plans in accordance with
     APB  Opinion  No.  25.

     INCOME  TAXES
     -------------

     The Company uses the liability method in accounting for income taxes. Under
     this  method,  deferred  tax assets and liabilities are determined based on
     differences  between financial reporting and income tax carrying amounts of
     assets  and  liabilities  and  are measured using the enacted tax rates and
     laws that will be in effect when the differences are expected to reverse. A
     valuation allowance, if necessary, is provided against deferred tax assets,
     based  upon  management's  assessment  as  to  their  realization.


                                      F-10
<PAGE>
                        NATIONAL EQUITIES HOLDINGS, INC.
                    (A CORPORATION IN THE DEVELOPMENT STAGE)
                          NOTES TO FINANCIAL STATEMENTS

                                   ----------


1.   ORGANIZATION  AND  SIGNIFICANT  ACCOUNTING  POLICIES,  CONTINUED
     ----------------------------------------------------------------

     NEW  ACCOUNTING  PRONOUNCEMENTS
     -------------------------------

     In June 2001, the Financial Accounting Standards Board issued SFAS No. 142,
     "Goodwill  and  Other  Intangible  Assets".  SFAS  No.  142  eliminates the
     amortization  of  goodwill  and requires that goodwill be reviewed annually
     for  impairment.  SFAS  No.  142  also  requires  that  the useful lives of
     previously  recognized  intangible  assets  be reassessed and the remaining
     amortization periods be adjusted accordingly. SFAS No. 142 is effective for
     fiscal years beginning after December 15, 2001 and affects all goodwill and
     other  intangible  assets  recorded  on the Company's balance sheet at that
     date,  regardless  of  when  the  assets  were  initially  recorded.  The
     implementation of SFAS No. 142 is not expected to have a material impact on
     the  Company's  results  of  operations  or  financial  position.

     In  June  2001,  the  FASB  issued  SFAS  No.  143,  "Accounting  for Asset
     Retirement  Obligations".  SFAS  No. 143 addresses accounting and reporting
     for  obligations  associated  with  the  retirement  of tangible long-lived
     assets  and  the  associated  asset  retirement  costs.  This  statement is
     effective  for fiscal years beginning after June 15, 2002. The Company does
     not  expect the implementation of SFAS No. 143 to have a material impact on
     the  Company's  results  of  operation  or  financial  position.

     In  July  2001,  the  FASB  issued SFAS No. 144, "Impairment or Disposal of
     Long-Lived  Assets",  which  is  effective for fiscal years beginning after
     December  15,  2001.  The  provisions  of  this  statement provide a single
     accounting  model for impairment of long-lived assets. The Company does not
     expect  the implementation of SFAS No. 144 to have a material impact on the
     Company's  results  of  operation  or  financial  position.


2.   GOING  CONCERN  CONSIDERATIONS
     ------------------------------

     Since  its  inception,  the  Company  has  suffered  recurring  losses from
     operations  and  has  been  dependent  on  existing  stockholders  and  new
     investors  to  provide the cash resources to sustain its operations. During
     the  years  ended  December  31,  2001  and  2000, the Company did not have
     significant  operations, but remains in a negative financial position based
     on  negative  prior  year  operations.

     The  Company's  negative operating results from prior years have produced a
     working  capital  deficit  of  $(698,565)  and  a  stockholders' deficit of
     $(698,565)  at  December  31,  2001.  Additionally, the Company is severely
     delinquent  on various accounts payable. Management is working with vendors
     to  resolve old outstanding balances, however, the results of these actions
     cannot  be  predicted.  These  factors  raise  substantial  doubt about the
     Company's  ability  to  continue  as  a  going  concern.


                                      F-11
<PAGE>
                        NATIONAL EQUITIES HOLDINGS, INC.
                    (A CORPORATION IN THE DEVELOPMENT STAGE)
                          NOTES TO FINANCIAL STATEMENTS

                                   ----------


2.   GOING  CONCERN  CONSIDERATIONS,  CONTINUED
     ------------------------------------------

     The Company's future strategic plans are currently being developed, but may
     include  private  placements of the Company's common stock and the exchange
     of  common  stock  for  settlement  of  vendor  accounts.  There  can be no
     assurance  that any of the plans developed by the Company will produce cash
     flows  sufficient  to  overcome  current  liquidity problems. The Company's
     long-term viability as a going concern is dependent on certain key factors,
     as  follows:

       -  The  Company's ability to obtain adequate sources of outside financing
          to  support  its emergence from bankruptcy proceedings and its efforts
          to  move  forward  with  oil  and  gas  exploration  and  production
          activities.

       -  The  Company's  ability to locate, prove and produce from economically
          viable  oil  and  gas  reserves.

       -  The Company's ability to ultimately achieve adequate profitability and
          cash  flows  to  sustain  continuing  operations.


3.   INCOME  TAXES
     -------------

     The Company has incurred losses since its inception and, therefore, has not
     been  subject to federal income taxes. As of December 31, 2001, the Company
     had  net  operating  loss  ("NOL") carryforwards for income tax purposes of
     approximately  $10,000,000  which expire in various tax years through 2021.
     Under the provisions of Section 382 of the Internal Revenue Code, ownership
     changes  in  the  Company in 1997 and again in 2001 will severely limit the
     Company's  ability to utilize its NOL carryforward to reduce future taxable
     income and related tax liabilities. Additionally, because United States tax
     laws  limit  the  time  during  which

     NOL carryforwards may be applied against future taxable income, the Company
     may  be  unable  to  take  full advantage of its NOL for federal income tax
     purposes  should  the  Company  generate  taxable  income.

     The  composition  of  deferred  tax  assets  and the related tax effects at
     December  31,  2001  are  as  follows:

<TABLE>
<CAPTION>
                                                      2001
                                                  ------------
<S>                                               <C>
    Net operating losses                          $ 3,400,000
                                                  ------------
      Total deferred tax assets                     3,400,000

    Less valuation allowance                       (3,400,000)
                                                  ------------
        Net deferred tax asset                    $         -
                                                  ============
</TABLE>


                                      F-12
<PAGE>
                        NATIONAL EQUITIES HOLDINGS, INC.
                    (A CORPORATION IN THE DEVELOPMENT STAGE)
                          NOTES TO FINANCIAL STATEMENTS

                                   ----------


3.   INCOME  TAXES,  CONTINUED
     -------------------------

     The difference between the income tax benefit in the accompanying statement
     of  operations  and  the  amount  that  would  result  if  the U.S. Federal
     statutory  rate  of  34% were applied to pre-tax income for the years ended
     December  31,  2001  and  2000  is  as  follows:

<TABLE>
<CAPTION>
                                          2001             2000
                                   ------------------  ---------------
                                     AMOUNT      %     AMOUNT      %
                                   ----------  ------  -------  ------
<S>                                <C>         <C>     <C>      <C>
  Benefit for income tax at
    federal statutory rate         $ 146,880    34.0%  $     -  -    %
  Increase in valuation allowance   (146,880)  (34.0)        -       -
                                   ----------  ------  -------  ------

                                   $       -      - )  $     -      -%
                                   ==========  ======  =======  ======
</TABLE>

4.   COMMITMENTS  AND  CONTINGENCIES
     -------------------------------

     LEGAL  PROCEEDINGS
     ------------------

     The  Company  may  also  be  periodically  subject to legal proceedings and
     claims that arise in the ordinary course of its business. In the opinion of
     management,  such  legal  proceedings and claims will not materially affect
     the financial position, results of operations or cash flows of the Company.

     BANKRUPTCY  PROCEEDINGS  -  OIL  AND  GAS  ACTIVITIES
     -----------------------------------------------------

     During  1996,  the  Company  became  focused on oil and gas exploration and
     production  when  the  Company  acquired the oil and gas assets of Erin Oil
     Exploration,  Inc.  In 1997, the Company acquired a 25% limited partnership
     interest  in  Horse Energy, L.P. ("Horse") and Rotary Steerable Tools (USA)
     L.P.  ("RST").  These  acquisitions  resulted in the Company incurring huge
     operating  losses  and taking substantial write-downs of oil and gas assets
     because  the acquired assets produced at unacceptable and declining levels.
     The  ensuing  cycle  of  increasing  operating  losses  and  mounting debts
     resulted  in  the Company filing for bankruptcy protection in United States
     Bankruptcy  Court  in  the  Southern  District  of  Texas  in  June  1999.
     Additionally,  a  dispute  arose between the Company's largest stockholder,
     certain  related aligned stockholders and new Company management, installed
     at  the  time  of  the Company's acquisition of interests in Horse and RST.
     Under  a  confidential  settlement agreement reached between the parties on
     July  31, 2001, the largest stockholder retained control of the Company but
     the  Company  gave  up  its  interests  in Horse and RST. The Company's new
     management  gave up claims for past wages totaling $432,000. The release of
     those claims is shown as an extraordinary gain on settlement of debt in the
     accompanying  statement  of  operations. The Company's Chapter 7 bankruptcy
     proceedings  were  dismissed  on  December  26,  2001.


                                      F-13
<PAGE>
                        NATIONAL EQUITIES HOLDINGS, INC.
                    (A CORPORATION IN THE DEVELOPMENT STAGE)
                          NOTES TO FINANCIAL STATEMENTS

                                   ----------


5.   STOCKHOLDERS'  EQUITY
     ---------------------

     PREFERRED  STOCK
     ----------------

     The  Company's  articles  of  incorporation authorize the issuance of up to
     1,000,000  shares  of  preferred stock, with a par value of $.001 and other
     characteristics  determined  by  the  Company's  board  of directors. As of
     December  31,  2001  and  2000,  there  was  no  preferred  stock issued or
     outstanding.


                                      F-14
<PAGE>