<PAGE>   1

                                 FORM 10-QSB

           QUARTERLY REPORT FOR SMALL BUSINESS ISSUERS SUBJECT TO
                     THE 1934 ACT REPORTING REQUIREMENTS

                   U.S. SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549.

      (Quarterly Report for the fiscal quarter ended December 31, 1996)

                         Commission File No. 1-6110

                     INTERNATIONAL BASIC RESOURCES, INC.
                     -----------------------------------
           (Exact name of registrant as specified in its charter)

                IDAHO                                   82-0291307 
                -----                                   ----------
     (State or other jurisdiction                    (I.R.S. Employer
     of incorporation or organization)               Identification No.)


               109 E. College Avenue
                  Tallahassee, FL                         32301 
                  ---------------                         -----
                     (address)*                         (zip code)*

               Telephone Number:* 904-222-9925

     Securities registered under Section 12(b) of the Exchange Act:

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

                  Common shares, par value $0.10 per share
                  ----------------------------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.  Yes X  No
                                                              ---   ---

Number of outstanding and subscribed shares:

          Class                          Outstanding and Subscribed
          -----                          as of December 31, 1996 
                                         -----------------------
Common Shares, with par 
value of $0.10 per share                         55,958,927

*The Company is in the process of relocating its principal executive offices
from the address of its former President, and is therefore temporarily without
principal executive offices.  In the interim period, inquiries may be forwarded
to the address and telephone number provided herein
<PAGE>   2

                                   PART I

                            FINANCIAL INFORMATION

 Item 1: FINANCIAL STATEMENTS

      a) Financial Statements of Registrant

      INDEX
      -----

      Accountants' Report

      Consolidated Balance Sheet (Unaudited) as of December 31, 1996
       and June 30, 1996

      Consolidated Statement of Operations and retained earnings
       (Unaudited) for the three and six months ended December 31, 1996
       and 1995

      Consolidated Statement of Cash Flows (Unaudited) for the six
       months ended December 31, 1996 and 1995

      Notes to Consolidated Financial Statements
       (Unaudited)
         
The consolidated financial statements of the Registrant included herein have
been prepared, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission.  Although certain information normally
included in financial statements prepared in accordance with generally accepted
accounting principles has been condensed or omitted, the Registrant believes
that the disclosures are adequate to make the information presented not
misleading.  It is suggested that these consolidated financial statements be
read in conjunction with the financial statements and the notes thereto
included in the Annual Report on Form 10-K of the Registrant for its fiscal
year ended June 30, 1996.

The consolidated financial statements included herein reflect all adjustments
(consisting only of normal recurring accruals) which, in the opinion of
management, are necessary to present a fair statement of the results for the
interim periods.

The results for interim periods are not necessarily indicative of trends or of
results to be expected for a full year.

                                    - 1 -
<PAGE>   3




                     INTERNATIONAL BASIC RESOURCES, INC.

                         CONSOLIDATED BALANCE SHEET
                     December 31, 1996 and June 30, 1996


                                   ASSETS

<TABLE>
<CAPTION>
                                                                              (Unaudited)
                                                                                Dec. 31,                    June 30,
                                                                                 1996                         1996
                                                                              ----------                   ----------
         <S>                                                                  <C>                          <C>
         CURRENT ASSETS
          Cash                                                                $      876                   $   38,173
          Pipeline revenue receivable                                                                           7,421
          Payroll advances                                                         8,000
                                                                              ----------
           Total current assets                                                    8,876                       45,594
                                                                              ----------                   ----------

         PROPERTY AND EQUIPMENT
          Mining property                                                        250,430                      250,430
                                                                              ----------                   ----------

         OTHER ASSETS
          Land, purchase rights and
           related capitalized costs                                           5,652,216                    5,129,384
          Investment in unconsolidated
           companies                                                              10,000                       10,000
                                                                              ----------                   ----------
                                                                               5,662,216                    5,139,384
                                                                              ----------                   ----------

                                                                              $5,921,522                   $5,435,408
                                                                              ==========                   ==========
</TABLE>





   See accompanying notes to consolidated financial statements (unaudited)

                                    - 2 -
<PAGE>   4

                     INTERNATIONAL BASIC RESOURCES, INC.
                          CONSOLIDATED BALANCE SHEET
                     December 31, 1996 and June 30, 1996

                     LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                   (Unaudited)
                                                                                    Dec. 31,          June 30,
                                                                                      1996              1996
                                                                                   -----------          ----
       <S>                                                                         <C>             <C>
       CURRENT LIABILITIES
         Current                                                                   $ 1,843,342     $1,131,074
         Accounts payable                                                              102,668         74,446
         Accrued payroll and related taxes                                             113,838         47,405
         Override royalty and interest payable                                          13,325         13,325
                                                                                   -----------         ------

           Total Current Liabilities                                                 2,073,173      1,266,250
                                                                                   -----------      ---------

       LONG-TERM DEBT                                                                  123,500        370,500
                                                                                   -----------        -------

       MINORITY INTEREST IN SUBSIDIARY                                                 284,183        284,183
                                                                                   -----------        -------

       STOCKHOLDERS' EQUITY
        Common stock, $.10 par value, 50,000,000
         shares authorized, 55,958,927 issued and
         subscribed at December 31, 1996 and
         55,169,007 issued and subscribed at
         June 30, 1996                                                               5,595,893      5,516,900
        Additional paid in capital                                                   2,426,394      2,110,427

        Less shares of common stock held in
         Treasury-at cost; 8,000 shares for
         1996                                                                           (2,895)        (2,895)
                                                                                   -----------        -------
                                                                                   $ 8,019,392      7,624,432
                                                                                   -----------      ---------

        Retained earnings:
         Accumulated from operations prior to
         development stage                                                          (3,191,265)    (3,191,265)
         Accumulated during the development stage                                   (1,387,461)      (918,692)
                                                                                   -----------      ---------
                                                                                    (4,578,726)    (4,109,957)
                                                                                   -----------    -----------

           Total stockholders' equity                                                3,440,666      3,514,475
                                                                                   -----------      ---------

                                                                                   $ 5,921,522     $5,435,408
                                                                                   ===========     ==========
</TABLE>





   See accompanying notes to consolidated financial statements (unaudited)

                                    - 3 -
<PAGE>   5
                     INTERNATIONAL BASIC RESOURCES, INC.

                     CONSOLIDATED STATEMENT OF OPERATIONS
                                 (Unaudited)

<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED                  SIX MONTHS ENDED
                                                    DECEMBER  31,                      DECEMBER 31,
                                               1996              1995            1996             1995
                                             ---------         ---------       ---------        ---------
    <S>                                      <C>               <C>             <C>              <C>

    REVENUES                                 $       0         $       0       $       0        $       0
                                             ---------         ---------       ---------        ---------
    EXPENSES
      Real estate acquisition
       overhead & administrative
       expenses                                124,568            75,450         150,707          112,357
      Legal and accounting                      65,087             6,507         130,190           39,800
      Office salaries                           52,450            12,000         133,450           24,000
      Office expenses                                              2,879          15,632            6,113
      Travel                                    20,771               219          26,739              507
      Rent - Office                                                1,830           1,830            3,660
      Printing                                                                     1,002
      Payroll taxes                                                                2,927
      Dues and fees                                                                  661
      Insurance                                                      550           5,031            3,088
                                             ---------         ---------       ---------        ---------
      Development Stage Loss -
       Pre-operating

                                              (262,876)          (99,435)       (468,169)        (189,525)
                                             ---------         ---------       ---------        ---------

    OTHER INCOME (EXPENSE)
      Minority interest in
       subsidiary net loss                                         1,400                            2,877
                                             ---------         ---------       ---------        ---------

    INCOME (LOSS) FROM
     CONTINUING OPERATIONS
     BEFORE INCOME TAXES                      (262,876)          (98,035)       (468,169)        (186,648)

    PROVISION (CREDIT) FOR
     INCOME TAXES
                                             ---------         ---------       ---------        ---------

    INCOME (LOSS) FROM
     CONTINUING OPERATIONS                    (262,876)          (93,035)       (468,169)        (186,648)

    DISCONTINUED OPERATIONS
     (NOTE 1)
     Loss from discontinued oil
      & gas operations                                            (2,950)           (600)          (6,289)
                                             ---------         ---------       ---------        ---------

    NET INCOME (LOSS)                        $(262,876)        $(100,985)       (468,769)        (192,937)
                                             =========         =========       =========        =========

    INCOME (LOSS) FROM
     CONTINUING OPERATIONS
     PER SHARE                               $     NIL         $     NIL       $     NIL        $     NIL
                                             =========         =========       =========        =========

    NET INCOME (LOSS) PER
     SHARE                                   $     NIL         $     NIL       $     NIL        $     NIL
                                             =========         =========       =========        =========
</TABLE>


See accompanying notes to consolidated financial statements (unaudited)


                                    - 4 -
<PAGE>   6


                     INTERNATIONAL BASIC RESOURCES, INC.

                     CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (Unaudited)

<TABLE>
<CAPTION>
                                                                                        SIX MONTHS ENDED
                                                                                           December 31,
                                                                                1996                         1995
                                                                                ----                         ----
  <S>                                                                        <C>                          <C>
  OPERATING ACTIVITIES:
    Net income (loss)                                                        $(468,769)                   $(192,937)
    Adjustments to reconcile net income (loss)
     to net cash provided by operating activities:
      Depreciation, amortization & depletion                                                                  3,029
      Minority interest in current operations of
       subsidiary                                                                                            (2,877)
      Abandoned project costs                                                                                45,000
      Net changes in assets and liabilities:
        (Increase) decrease in accounts receivable                                (579)                       2,862
        Increase (decrease) in accounts payable
         and accrued expenses                                                   94,655                       18,961
                                                                             ---------                    ---------
           Net cash provided (used) by
            operating activities                                              (374,693)                    (125,962)
                                                                             ---------                    ---------
  INVESTING ACTIVITIES:
    Pre-development capitalized costs                                         (522,832)                    (443,093)
                                                                             ---------                    ---------
           Net cash provided (used) for
            investing activities                                              (522,832)                    (443,093)
                                                                             ---------                    ---------
  FINANCING ACTIVITIES:
    Additions to debt:
      Short-term                                                               465,268                      235,450
      Proceeds from stock subscribed                                           394,960                      335,000
                                                                             ---------                    ---------
           Net cash provided (used) by
            financing activities                                               860,228                      570,450
                                                                             ---------                    ---------
  INCREASE (DECREASE) IN CASH                                                  (37,297)                      10,395

  CASH AT BEGINNING OF PERIOD                                                   38,173                        1,616
                                                                             ---------                    ---------
  CASH AT END OF PERIOD                                                      $     876                    $   3,011
                                                                             =========                    =========
</TABLE>





   See accompanying notes to consolidated financial statements (unaudited)

                                    - 5 -
<PAGE>   7


                     INTERNATIONAL BASIC RESOURCES, INC.

                     CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (Unaudited)



<TABLE>
<CAPTION>
                                                                               Dec. 31,                     Dec. 31,
                                                                                 1996                         1995
                                                                               --------                     -------
<S>                                                                            <C>                          <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
 Cash paid during the year for:
  Interest                                                                     $   -0-                      $   -0-
  Income taxes                                                                     -0-                          -0-
</TABLE>

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

In fiscal year ended June 30, 1995 the Company issued 205,373 shares to retire
$200,000 in advance payable to Doggart Trading, Ltd. and to pay $5,373 in
accrued interest at $1.00 per share.  The Company also subscribed 1,225,300
shares to retire $1,225,300 in advances from Doggart Trading, Ltd. related to
Mexico real estate development costs.

In fiscal year ended June 30, 1995 the Company issued 3,000,000 shares of its
stock at $.67 per share in settlement of the acquisition price of $2,000,000
for the purchase rights to the Los Bucaneros property.

During the quarter ended December 31, 1996, the Company subscribed 789,920
shares to retire $394,960 in advances from Doggart Trading, Ltd., at $.50 per
share.





   See accompanying notes to consolidated financial statements (unaudited)

                                    - 6 -
<PAGE>   8

                     INTERNATIONAL BASIC RESOURCES, INC.
                       (A DEVELOPMENT STAGE ENTERPRISE)

                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)


1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Business Organization: The Company was incorporated in the State of
     Idaho on August 12, 1968 as Fourth of July Silver, Inc. and changed its
     name on August 8, 1983 to International Basic Resources, Inc.  At this time
     the Company was engaged in mining and development of basic metals and other
     natural resources. From August 1983 to May 1996 the Company acquired land
     holdings, oil and gas leases, and a pipeline gathering facility. In April
     1994, the Company decided to pursue real estate acquisition and development
     in addition to its oil and gas and mining operations. In May 1996, the
     Company sold all of its oil and gas leases and related pipeline gathering
     facilities.  Subsequent to the sale, the Company had no operations and was
     focusing solely on real estate development. The Company considers itself to
     be a development stage enterprise and considers inception of this
     development stage to be April,1994, when it began its current real estate
     and development activities.

     Principles of Consolidation: The consolidated statements include the
     accounts of International Basic Resources, Inc. and subsidiaries (Carson
     Industries Corporation, Texas NGPP, Inc., Langer Holdings, Ltd.,, and
     Playas Palmeras, S.A.). All significant intercompany accounts and
     transactions are eliminated.

     Net Income Per Share: Earnings per share is computed using the weighted
     average number of common shares outstanding during each period. 
     Outstanding common stock equivalents, consisting of shares under option and
     outstanding warrants, do not have a significant dilutive effect on earnings
     per share.  Any shares subscribed but unissued at year end are included in
     the weighted average number of shares outstanding for purposes of computing
     earnings per share.

     Development Stage Activities of Real Estate Segment: As discussed in
     Note 2, the Company's stock ownership changed significantly during March,
     1994.  Since April, 1994, the Company has been in the development stage
     related to its real estate acquisition and development activities through
     its wholly owned subsidiary Langer holdings, Ltd.  Operations related to
     real estate activities in the development stage are as follows:

     The Company has undertaken acquisition and development of the Playas
     Palmeras Bucaneros Properties discussed in Note 2.  The Company also
     incurred pre-development costs associated with certain properties in the
     Yucatan and Campeche area of Mexico it intended to jointly develop with
     DSC, S.A. de C.V. (DSC) during 1995.  During 1996 these projects were
     abandoned and the related capitalized pre-development costs of $303,514
     were expensed.

     On December 14, 1995, the Company entered into an agreement to
     effectively acquire the concession rights to build and operate a cruise
     ship terminal and marina village at the harbor in Ensenada, Baja
     California, Mexico.

                                    - 7 -
<PAGE>   9


                     INTERNATIONAL BASIC RESOURCES, INC.
                       (A DEVELOPMENT STAGE ENTERPRISE)

                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)


1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


     In May 1996, the Company sold all of its oil and gas leases and related
     pipeline gathering facilities.  Subsequent to this sale the Company had no
     operations and focused solely on the real estate development.  The Company
     considers itself to be development stage enterprise and considers the
     inception of this development stage to be April, 1994, when it began its
     current real estate and development activities.

     Statement of Cash Flows: For purposes of the statement of cash flows,
     the Company considers all highly liquid instruments with an initial
     maturity of three months or less to be cash equivalents.

     Use of Estimates in the preparation of Financial Statement Amounts: The
     process of preparing financial statements in conformity with generally
     accepted accounting principles requires the use of estimates and
     assumptions regarding certain types of assets, liabilities, revenues and
     expenses.  Such estimates primarily relate to unsettled transactions and
     events as of the date of the financial statements.  Accordingly, upon
     settlement, actual results may differ from estimated amounts.

2.   LAND HELD FOR DEVELOPMENT AND RESALE

     During March, 1994, the Company entered into an acquisition agreement
     with Doggart Trading, LTD, a Grand Cayman, B.W.I.  Corporation (Doggart) to
     acquire its 100% interest in Langer Holdings, LTD. (Langer) and Langer's
     99% owned subsidiary Playas Palmeras, S.A. (Playas) in exchange for
     33,000,000 common shares of the Company being issued to the shareholders of
     Doggart.  The agreement also includes a commitment to issue an additional
     4,000,000 shares of the Company when the board of directors approves an
     increase in the authorized shares of the Company in an equal or greater
     amount.  In June, 1996, the authorized shares were increased and the
     additional 4,000,000 were issued.

     Playas is a Mexican corporation which owns fee simple title to two
     parcels of land situated within the Municipality of Champoton, State of
     Campeche, Yucatan Peninsula, Mexico.  The Company acquired directly the
     additional 1% interest in Playas at the date of closing.  The property held
     by Playas is described as approximately 8.5 miles of unimproved beach
     property located along the Gulf of Mexico.

     The Company's obligation, under its acquisition agreement with Doggart,
     to issue 33,000,000 shares, as above referenced, was conditioned upon the
     obligation of Doggart to obtain and furnish to the Company an appraisal of
     the property indicating appraised value of no less than $10,000,000 U.S.
     Since the transaction resulted in the shareholders of the transferor
     (Doggart) receiving approximately 71% of the shares of the Company as
     consideration, the transaction is considered to be a reverse acquisition. 
     Accordingly, the Playas land is valued at the transferor's cost, which at
     June 30, 1994 was $80,321.

                                    - 8 -
<PAGE>   10

                     INTERNATIONAL BASIC RESOURCES, INC.
                       (A DEVELOPMENT STAGE ENTERPRISE)

                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)


2.   LAND HELD FOR DEVELOPMENT AND RESALE (continued)

     During May 1995 the Company purchased the acquisition right to
     approximately 3.5 miles of contiguous unimproved beach property known as
     Los Bucaneros.  The Company assumed the seller's underlying debt of
     $1,050,000 and issued 3,000,000 shares of stock at $.67 per share of a
     total acquisition price of $3,050,000.  During May, 1995, $50,000 was paid
     by the Company for the matured portion of the note payable assumed.  The
     balance of $1,000,QOO is payable on May 27, 1997.

     On December 14, 1995, the Company entered into an agreement to effectively
     acquire the concession rights to develop and operate a cruise ship
     terminal and marina village at the harbor in Ensenada, Baja California,
     Mexico.  The acquisition price was $854,000 which the Company agreed to
     pay with subscribed shares of stock for $360,000 at $.50 per share and an
     obligation to pay the balance of $494,000 in cash or with shares at the
     option of the sellers.  The sellers exercised their right to receive cash
     and have agreed to be paid in twelve equal principal installments starting
     April 1, 1997 plus interest at 8% (Note 5).

3.   MINING PROPERTY

     The mining property consists of:

     a)  A contiguous group of twenty-one (21) unpatented mining claims
     situated in the St. Joe Mining District, Shoshone County, Idaho;

     (b) A multi-year leasehold interest on three Daddy Lode claims and
     ownership of three Mother Lode patented mining claims situated in the
     Summit mining District, Shoshone County, State of Idaho, together with fee
     ownership of fifty-five (55) unpatented mining claims contiguous to the
     Company for purported gold potential.  In May 1989, the Company executed a
     lease/joint venture contract with Newmont Exploration Company for the
     entire Mother Lode and Daddy Lode group of patented and unpatented mining
     claims in Shoshone County, Idaho.  Newmont subsequently reassigned all the
     Mother Lode and Daddy Lode group properties to IBR.  IBR started to
     develop the vein found by Newmont in June 1990 by contracting General Mine
     Services Corp. to work an this property.  Work has been suspended on this
     property until additional funding for development can be obtained.

                                    - 9 -
<PAGE>   11


                     INTERNATIONAL BASIC RESOURCES, INC.
                       (A DEVELOPMENT STAGE ENTERPRISE)

                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)

4.   CURRENT AND LONG-TERM DEBT

     Current and long-term debt of the Company consist Of the following:

<TABLE>
<CAPTION>
                                                      December 31,              June 30,
                                                          1996                   1996 
                                                          ----                   ---- 
         <S>                                          <C>                    <C>                     
         Deed of trust payable to Granjas Los
         Bucaneros to complete the acquisition
         of 3.5 miles of Beach-front property
         which is adjacent to the Company's
         property known as Playas Palmeras
         (Note 2). The balance is due
         May 24, 1997. If the Company does
         not make this payment it may lose its
         rights to acquire and develop this
         property and would realize a reduction
         of shareholder equity of approximately
         $2,000,000.                                  $1,000,000             $1,000,000
                                                                        

         Note payable to the sellers of 55% of the
         shares of Ensenada Nautico Turistica, S.A.
         de D.V. (Note 2). This note is payable in
         twelve equal principal payments starting
         April 1, 1997 plus interest at 8%. If the
         Company does not make these payments it
         would be in default on the stock purchase
         agreement that allowed it to acquire the
         concession rights in Ensenada.  If the
         Ensenada concessions were terminated the
         Company would realize a reduction of
         shareholders, equity of approx-imately
         $1,293,000.                                     494,000                494,000                     
                                                                                                            
         Advances received from Potomac Corporation      472,842                                            
         Other Advances Payable                                                   7,574                     
                                                      ----------             ----------                     
                                                       1,966,842              1,501,574                     
         Less Current Portion                          1,843,342              1,131,074                     
                                                      ----------             ----------                     
                                                                                                            
         Long-term Debt                               $  123,500             $  370,500                     
                                                      ==========             ==========                     
</TABLE> 

All long-term debt becomes current during the year ended June 30, 1997.

                                    - 10 -
<PAGE>   12


                     INTERNATIONAL BASIC RESOURCES, INC.
                       (A DEVELOPMENT STAGE ENTERPRISE)

                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)




5.   RELATED PARTY TRANSACTIONS
     
     As discussed in Note 2, the Company purchased certain undeveloped real
     estate in Mexico from Doggart with approximately 71% of its common stock
     in June, 1994.  Doggart had advanced the Company $150,000 by June 30,
     1994, with interest at 7%, payable December, 1994.  During September
     1994, Doggart agreed to convert this debt of the Company into common
     shares at $1 per share.  During the year ended June 30,, 1995 Doggart
     advanced an additional $1,390,300.  Stock has been issued totalling
     205,373 shares to retire $200,000 of advances plus accrued interest of
     $5,373.  During the year ended June 30, 1996 additional shares totalling
     1,225,300 and 774,700 have been issued at $1.00 per share to retire
     $2,000,000 in advances.  At June 30, 1996 shares totalling 235,286 have
     been subscribed at $1.00 per share to retire an additional $235,286 in
     advances.
     
6.   INCOME TAX
     
     The Company does not file a consolidated income tax return.  Each
     corporation in the group files a separate return.  Thus the tax benefits
     from net operating loss and general business credit carryovers are
     limited to the separate returns of the respective corporations.
     
     The components of the provision (benefit) for income taxes are as
     follows:

<TABLE>
<CAPTION>
                                                          December 31,   June 30,
                                                             1996          1996
                                                           --------      --------
         <S>                                               <C>           <C>      
         Current                                                                  
          Federal                                          $    -0-      $    -0- 
          State                                                 -0-           -0- 
                                                           --------      -------- 
         Total current provision                                -0-           -0- 
                                                           --------      -------- 
                                                                                  
         Deferred                                                                 
          Federal                                               -0-           -0- 
          State                                                 -0-           -0- 
                                                           --------      -------- 
                                                                                  
         Total deferred provision                               -0-           -0- 
                                                           --------      -------- 
         Total provision for                                                      
          income taxes                                     $    -0-      $    -0- 
                                                           ========      ======== 
</TABLE>   

                                    - 11 -
<PAGE>   13


                     INTERNATIONAL BASIC RESOURCES, INC.
                       (A DEVELOPMENT STAGE ENTERPRISE)

                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)



6.     INCOME TAX

       The items of carryover remaining, for the separate corporations, for
       which no tax benefit has been provided are as follows:


<TABLE>
<CAPTION>
                                                      International                  Carson       Texas
                                                             Basic                Industries      NGPP,
                                                          Resources               Corporation      Inc.
                                                      -------------               -----------      ----
          <S>                                           <C>                       <C>              <C>     
          Net operating loss                            $1,518,000                $1,475,000       $ 7,600 
          Capital loss                                          --                   142,000            -- 
          General Business credit                               --                    12,000        16,000 
</TABLE>

     The net operating losses above expire beginning in 1999.  The capital
     loss carry forward of Carson Industries Corporation expires in 1997.
     The general business credit of Carson Industries Corporation expires in
     1998 of Texas NGPP, Inc. in 2000.
     
7.   MINORITY INTEREST IN SUBSIDIARY
     
     The minority interest in subsidiary represents interests of outsiders
     (29.66%) in the stock of Carson Industries Corporation.
     
S.   INVESTMENT IN UNCONSOLIDATED COMPANIES
     
     The Company owns 100 shares of Investmark stock.  The investment in this
     unconsolidated company is presented by the Company at a cost of $10,000.
     
9.   ARTICLES OF INCORPORATION AMENDED
     
     On March 22, 1993 the Company's Articles of Incorporation were amended
     to increase the authorized capital of the Company from 20,000,000 to
     50,000,000 common shares, par value $0.10 per share, with rights and
     privileges of the common shares remaining the same.  On January 8, 1996
     the Company again amended its articles of incorporation to increase the
     authorized capital of the Company from 50,000,000 to 100,000,000 common
     shares.
     
10.  COMMITMENTS, CONTINGENCIES AND SUBSEQUENT EVENTS
     
     During the year ended June 30, 1996, Doggart agreed to convert the
     current debt of the Company to Doggart ($235,286) into common shares at
     $1 per share.  Additionally, the Company has exercised its option to
     convert advances by Doggart to the Company during the first six months
     of the current fiscal year, in the total amount of $394,960, into common
     shares at $.50 per share (a total of 789,920 shares).

                                    - 12 -
<PAGE>   14


                     INTERNATIONAL BASIC RESOURCES, INC.
                       (A DEVELOPMENT STAGE ENTERPRISE)

                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)



10.  COMMITMENTS, CONTINGENCIES AND SUBSEQUENT EVENTS
     
     Pursuant to its acquisition of concession rights to develop and operate
     a cruise ship terminal and marina village at the Port of Ensenada (Note
     2), the Company, through its subsidiary Ensenada Cruiseport Village,
     S.A. de C.V.  ("Cruiseport"), on December 19, 1995, entered into a
     concession agreement with A.P.I. Ensenada S.A. de C.V. (the "Port
     Authority" of Ensenada), specifically setting forth the Company's rights
     and obligations with respect to the concession.  This agreement was
     modified by modification agreement between Cruiseport and the Port
     Authority on November 31, 1996.  Pursuant to the concession agreement,
     as modified, the Company is obligated to pay the Port Authority the
     following concession rent.
<TABLE>
<CAPTION>
                                        Amount of                                       Amount of
                                       Concession                                       Concession
                       Year               Rent                  Year                       Rent
                       ----           ------------              ----                    ----------
                     <S>               <C>                      <C>                     <C>
                          1            $  54,000                11-15                   $1,430,000
                          2              108,000                16-24                    1,999,000
                      3 & 4              280,000                25-32                    2,500,000
                     5 - 10              560,000                33-35                    2,999,000
</TABLE>

     In addition to the foregoing amounts, the Company is obligated to pay to
     the Part Authority a variable rent, based upon anchorage and port fees
     attributable to gross tonnage of cruise ships that call at the Port of
     Ensenada in any year in excess of 18,900,00 tons.
     
     The Company and various of its former officers and directors have been
     named in a lawsuit, pending in the United States District Court for the
     District of Idaho, alleging violations of various federal and state
     laws, including claims under the Securities Act of 1933 and the Exchange
     Act of 1934 and state securities laws, and under the consumer protection
     laws of the states of Idaho and Washington.  Plaintiffs seek actual
     damages, as well as punitive and treble damages, court costs and
     reasonable attorney's fees. The pleadings in the case do not specify a
     dollar amount of damages. However, counsel for the plaintiffs have
     indicated that plaintiffs consider their claim to be worth $4,000,000
     and that their demand for settlement is $800,000.  Management has
     indicated its intent to vigorously defend the action.
     
     The Company incurred net losses of $1,080,885 and $2,206,902 for the
     years ended June 30, 1996 and 1995, respectively.  At June 30, 1996, the
     Company's current liabilities exceed its current assets by $1,220,656.
     In order to retain its rights to acquire the Bucaneros Property and its
     rights to develop and operate the Ensenada Property, the company will
     need to make timely debt payments (Note 4) and timely concession rent
     payments discussed above.  Failure to do so may require the Company to
     write off approximately $3,293,000 of equity in related assets.  The
     Company is currently dependent on infusions of cash from Doggart
     Trading, Ltd., to fund its operations.  Doggart has made a commitment to
     continue to fund the base operations of the Company through June 30,
     1997.

                                    - 13 -
<PAGE>   15


                     INTERNATIONAL BASIC RESOURCES, INC.
                       (A DEVELOPMENT STAGE ENTERPRISE)

                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)


10.  COMMITMENTS, CONTINGENCIES AND SUBSEQUENT EVENTS continued)
     
     Payment of these obligations and any significant development of the
     Company's real estate property will require obtaining bank financing or
     third party debt or equity funding to the Company.  The Company is
     currently negotiating with a Mexican banking institution for long-term
     financing to pay its obligations timely and allow development of its
     real estate projects.
     
     
     
     
     
11.  INCENTIVE STOCK OPTION PLAN
     
     In addition to the compensation presented above, on April 19, 1996, the
     Company adopted the International Basic Resources, Inc. 1996 Incentive
     Stock Option Plan whereby the Company reserved 10,000,000 of its common
     stock for use in granting stock options to officers and key employees.
     
     As of December 31, 1996 the following options are outstanding:

<TABLE>
<CAPTION>
                                                 Number of           Exercise           Date         Options
                                                Shares under           Price           Option       Exercised
                                                  Option             Per Share         Expire        To Date
                                                  ------             ---------         ------        -------
          <S>                                   <C>                  <C>               <C>             <C>
          Alton E. Jones                        3,000,000            $ 0.359           4/18/2006       None
          Stephen Barker                          750,000              0.359           4/18/2006       None
</TABLE>

       The option price of $0.359 was determined based upon the NASDAQ trading
       share price at the date the options were granted.



                                    - 14 -

<PAGE>   16


Item 2.  Management's Discussion and Analysis or Plan of Operation

         a) Results of Operations and Financial Condition

         During the quarter ended December 31, 1996, the Company's loss from
operations was $262,876, and for the six month period ended December 31, 1996,
was $468,169, compared with $100,985 for the quarter ended December 31, 1995
and $192,937 for the six-month period ended December 31, 1995.
         The loss experienced by the Company does not include capitalized
expenditures, amounting to $522,832 in the six-month period ended December 31,
1996, and $443,093 in the six-month period ended December 31, 1995, incurred in
the Company's pre-development activities in Mexico.  The policy of the Company,
insofar as capitalizing of costs, is that costs specifically identified with a
project or property in the development or pre-development stage (e.g.
fees/salaries of consultants, engineers or Company staff directly engaged in
the planning of the Company's Ensenada Project, discussed below, or
pre-development site work such as clearing of debris and moving fill dirt) are
capitalized until and unless the acquisition or future development of the
project becomes improbable.  Indirect costs that do not clearly relate to
project acquisition or development, including general and administrative
expenses, are charged to expense as incurred.
         During the six-month period ended December 31, 1996, the Company
accounted for 81.25% of its expenditures in Mexico which were incurred in
connection with its Ensenada Project as capital





                                     15
<PAGE>   17

expenditures, and 18.75% of its expenditures incurred in connection with that
Project as general and administrative expenses.
         The increase in the Company's loss for the six-month period ended
December 31, 1996, compared with the six- month period of a year earlier, is
primarily attributable to the following: (i) total real estate acquisition
overhead and administrative expenses, associated with the Company's Mexican
real estate activities, which were expensed, being $120,707 in the six-month
period ending December 31, 1996, compared with $112,357 (including a write-off
of $45,000 of project costs) in the year earlier period (the total amount of
expenditures, in Mexico, with respect to the Company's Ensenada project, being
$643,539 in the first six months of fiscal 1996, compared with $510,500 in the
first six months of fiscal 1995); (ii) greater legal and accounting fees
($130,190 versus $39,880 during the respective six-month periods), (iii) a
higher level of executive salaries over and above those included in real estate
acquisition overhead and administrative expenses ($133,450 versus $24,000
during the respective six-month periods), and (iv) greater travel and office
expenditures ($42,201 versus $10,280 during the respective six-month periods).
Additionally, in the current fiscal year, the Company expensed a non-refundable
deposit of $30,000 made to Heritage Distribution Corporation in connection with
a proposed financing which did not materialize (see discussion below).
         In the Company's restated annual report for fiscal 1996, it reported
three proposed transactions, one with Heritage





                                     16
<PAGE>   18
Distribution Group ("Heritage") for a prospective $30 million financing of the
Company's development activities, and proposed acquisitions of RBC Enterprises,
Inc. ("RBC") and Prime Interests, Inc. ("Prime"), two companies which have been
engaged in real estate development activities in the United States.  These
proposed transactions did not materialize, and negotiations were terminated
with respect to all three in December, 1996 (see discussion below).  
        The Company has not included as expenses in the Statement of Operations
(or otherwise reflected as a liability) $172,000 which New York counsel, which
represented the Company in connection with the prospective transactions
described in the previous paragraph, has indicated to Company it accrued as
legal fees for such representation.  Management does not believe that these
fees are properly due and owing.  As of this time, the matter has not been
resolved, and management does not know whether New York counsel will pursue
payment by the Company of a portion or all of said amount. 
        The negative working capital position of the Company (current
liabilities in excess of current assets), as of December 31, 1996, was
$2,064,297, compared to $1,220,656 at June 30, 1996 and $1,153,210 at December
31, 1995.  The explanation for the increase since June 30, 1996 is set forth in
the following three paragraphs. 
        Accrued payroll rose from $47,405 at June 30, 1996 to $113,838 at
December 31, 1996 (approximately $106,000 of which is owed to Alton Jones, the
chief executive officer of the Company, who


                                     17
<PAGE>   19

resigned after the close of the second quarter).
         Current debt (other than accounts payable) rose from $1,131,074 at
June 30, 1996 to $1,843,342 at December 31, 1996.  This increase is
attributable primarily to $472,842 advanced during the quarter by a British
resident, Hugh Downey, to fund operations of the Company in Mexico (see
discussion below).  The balance of the increase in current debt is
attributable to an increase of $247,000, since June 30, 1996, in the current
portion of an obligation of $494,000 payable, beginning in April, 1997 (in
twelve equal monthly installments with interest at 8% on the unpaid balance) to
the sellers of the shares of two corporations in connection with the Company's
acquisition of its concession in the Port of Ensenada (see discussion in Item
1, pages 9 - 15 of the Company's restated annual report for fiscal 1996).
         Accounts payable of the Company increased from $74,446 at June 30,
1996 to $102,668 at December 31, 1996, representing travel expenses due to
Alton Jones, former President of the Company in the amount of $21,075, and the
balance almost entirely accrued legal and accounting fees.
         A debt of the Company to Doggart Trading, Ltd., a substantial
shareholder of the Company, in the amount of $239,996, which was incurred
during the first quarter of the current fiscal year and which was reflected as
current debt at September 30, 1996, is no longer reflected in current debt, but
rather as stockholders' equity, as the result of the exercise by the Company of
its option to issue stock in repayment of such debt (see discussion below).





                                     18
<PAGE>   20

         The portion of the Company's current debt of $1,843,342, reflected on
its balance sheet at December 31, 1996, which reflects debt already on its
balance sheet at June 30, 1996, is as follows: $1,000,000 is a payable of the
Company to Granjas Los Bucaneros, S.A., due May 24, 1997, and $123,500
represents the portion of the above-described debt of $494,000 which was
current debt as of June 30, 1996.  Respecting the payable to Granjas Los
Bucaneros of $1,000,000, this amount is due for the completion of the purchase
by the Company of 3.5 miles of coastal property adjoining the Company's 8.5
miles of coastal property in Campeche, Mexico which the Company acquired in
1994.  The Company does not have the right to develop or otherwise use the
property being purchased from Granjas Los Bucaneros, S.A. until the $1,000,000
payment has been made; and the Company's contract with Granjas Los Bucaneros,
S.A. provides that the Company will lose its rights in the land if the payment
is not made by that time.
         During the six-month period ended December 31, 1996, Doggart Trading,
Ltd. ("Doggart"), a substantial shareholder in the Company, which has advanced
substantial funds to the Company for administrative overhead and pre-
development expenditures in previous years (see discussion below), continued to
advance funds to the Company to meet such needs.  Patrick Magee, the President
and Chief Executive Officer of the Company, who succeeded Alton Jones in those
positions and as a director of the Company in the first quarter of 1997, is
also the President and sole shareholder of Doggart.  Doggart is the entity
which conveyed to the Company





                                     19
<PAGE>   21

8.5 miles of coastal property in Campeche, Mexico, in 1994, which the Company
continues to own through its subsidiary Playas Palmeras, S.A. (see pages 1 -9
of Item 1 of the Company's restated annual report for fiscal 1996).
         During the quarter ended September 30, 1996, the amount of advances
from Doggart was $239,966.  During the quarter ended December 31, 1996, the
amount of advances from Doggart was $155,000.  As reported in the restated
annual report of the Company for fiscal 1996, the Company's understanding with
Doggart, with respect to funds loaned to the Company during the current fiscal
year, has been that the Company would have the option to convert such advances
into equity at the rate of $0.50 per share.  The Company has decided to
exercise its option to convert such advances, namely a total of $394,966, into
stock to be issued to Doggart; and accordingly, the advances are reflected as
subscriptions to capital, rather than liabilities, on the balance sheet of the
Company as of December 31, 1996.
         Due to the fact that the current bid price of the Company's common
stock on NASDAQ is approximately $0.10, the Company and Doggart have
renegotiated their arrangement, with respect to the Company's option to convert
advances by Doggart in quarters succeeding the second fiscal quarter.  With
respect to advances after January 1, 1997, the Company's option to convert
advances made during each quarter will be at the average bid price for the
Company's stock during the last five trading days of the respective quarter.





                                     20
<PAGE>   22

         During fiscal 1996, the Company's loss from continuing operations
(namely its operations other than oil and gas, which were discontinued) was
$616,216, and its capitalized expenditures in connection with its Mexican
real-estate activities amounted to $747,000.
         Losses in fiscal 1996 from discontinued oil and gas operations,
including loss on the disposal of such assets, were $464,669, bringing the
total net loss of the Company for fiscal 1996 to $1,080,885.
         The auditors' report accompanying the financial statements of the
Company as of June 30, 1996 indicate that the financial condition of the
Company raises substantial doubt about the Company's ability to continue as a
going concern.  More specifically, the Company's ability to continue as a going
concern is dependent upon securing very substantial financing, in the near
future, to undertake its large planned capital projects in Ensenada, as well as
its ability to secure necessary funding to satisfy its working capital
deficiency and to meet ongoing working capital needs.
         Doggart has advanced substantial funds to the Company during the last
two fiscal years ($1,225,300 in fiscal 1995 and $1,009,986 in fiscal 1996), for
the conduct by the Company of its pre-development activities in Mexico and to
meet administrative and overhead expenditures.  All of such advances, prior to
June 30, 1996, have been converted, or agreed to be converted, into stock in
the Company at the rate of $1.00 per share.  Doggart has agreed to





                                     21
<PAGE>   23

continue to fund administrative and/or pre-development needs of the Company
during the current fiscal year (or to arrange for such funding from other
persons, such as Mr. Hugh Downey, as described below), at a level comparable to
the level of Doggart's advances in previous years, with an option by the
Company to issue stock in repayment of advances from Doggart as described
above.  Such advances, however, would not cover the very substantial capital
expenditures which the Company must make to continue its rights with respect to
the Ensenada Project (discussed further below), and to meet other capital
commitments such as the purchase of the 3.5 miles of coastal property, as above
described, from Granjas Los Bucaneros, S.A.  Furthermore, the Company cannot
warrant the continuing ability of Doggart or others to finance needs of the
Company.
         During the first six months of the current fiscal year, the Company's
need for advances to fund administrative expenses and pre-development
activities was larger than previous quarters, because of additional
expenditures incurred in connection with pursuing agreements with Heritage
Distribution Corporation, RBC Enterprises and Prime Interests, Inc.,  as well
as activities engaged in by the Company in moving fill-dirt at its Ensenada
concession (see below).  As a result, the Company borrowed funds from an
individual named Hugh Downey, a British resident, in the amount of $472,000
during the first six months of the current fiscal year, on a demand basis, in
addition to securing advances from Doggart.  The advances from Mr. Downey are
unsecured, and bear





                                     22
<PAGE>   24

interest at 6% per annum.  As of the filing of this report, advances from Mr.
Downey total approximately $550,000.  However, Mr. Downey has made no
commitment to continue advancing funds to the Company; and the Company must
pursue, elsewhere, the very substantial financing commitment necessary to
commence construction on Phase I of the Ensenada Project, as discussed below.
         The Company's subsidiary, in Mexico, Ensenada Cruiseport Village, S.A.
de C.V. ("Cruiseport"), pursuant to its concession agreement with the Port
Authority of Ensenada, is committed to an investment program of $25,000,000
over a five year period, in fulfillment of a conceptual plan embodying three
phases of construction of pier facilities, terminal building facilities, marina
facilities, and commercial and retail development at the Port of Ensenada.
(See Company's restated annual report for fiscal 1996, pages 9 - 15).   In
particular, as described in more detail below, the Company is obligated to
commence construction with respect to Phase I of that conceptual plan,
constituting an estimated $16,000,000 program, on or before March 15, 1997.
Its failure to do so will constitute a default under the agreement pursuant to
which Cruiseport holds its concession rights at the Port, and will therefore
give the Port Authority the right to terminate the concession.  The Company's
ability to continue as a going concern, including its ability to maintain its
Ensenada concession, therefore depends upon its ability to secure a commitment
or commitments for very substantial capital financing before that time.





                                     23
<PAGE>   25

         The Company's ability, as well, to meet its obligation to Granjas Los
Bucaneros, S.A. with regard to the above- described 3.5 miles of coastal
property in Campeche, Mexico, and its ability to develop that 3.5 miles of
coastal property as well as the adjoining 8.5 miles of coastal properties in
Campeche which the Company acquired in 1994, depends upon the ability of the
Company to secure capital financing.

         b) Further Analysis of Company's Business Events and Uncertainties.

          The restated annual report of the Company for fiscal 1996, including
in particular Item 1 ("Description of Business") and Item 6 ("Management's
Discussion and Analysis of Financial Condition and Results of Operation"),
contains a detailed description of, and management's analysis of, the state of
the business of the Company through that date, which is incorporated herein by
reference.
         In particular, the annual report of the Company describes the focus of
the Company's business, which is its 35- year concession in the Port of
Ensenada, Mexico.  Pursuant to an agreement dated December 19, 1995 between the
Company's subsidiary, Ensenada Cruiseport Village, S.A. de C.V. ("Cruiseport")
and the Port Authority of Ensenada (the "concession agreement"), Cruiseport has
been granted the right to build and operate a pier and cruiseship terminal and
marina and marina village, together with associated commercial and tourist
development, in a designated area of approximately 47 acres in the Port of
Ensenada, in consideration of annual rental payments to the Port Authority.
The concession





                                     24
<PAGE>   26

agreement grants to Cruiseport the right to render extensive services in the
Port, and to charge and receive anchorage fees from cruise ships which arrive
in the concession area.
          The Company reported in its restated annual report for fiscal 1996
that pursuant to the concession agreement, Cruiseport had delivered a "design
of the works" to the Port Authority, constituting a conceptual plan describing
three phases of construction by the Company at the Port.  Phase I, at an
estimated cost of $16,000,000, encompasses the construction of a pier
(approximately 1,000 feet in length) suitable for use by large cruise ships,
with related dredging and construction of a sea (retaining) wall, together with
a smaller pier along the sea wall for small to medium size cruise ships.  Phase
II, at an estimated cost of $4,800,000, encompasses the construction of a
terminal building and commercial, specialty, retail and office space.  Phase
III, at an estimated cost of $8,900,000, encompasses the construction of
additional specialty space, marina dredging, marina slips, timeshare units and
specialty docks.
         The Company further reported that the concession agreement, as
originally executed, provided that within two months of the time the Company's
"design of the works" was accepted by the Port Authority and Cruiseport had
received necessary environmental approvals for the design from the Mexican
federal government, Cruiseport would deliver the "executive project" of the
works, namely detailed technical and engineering specifications and plans with
respect to the works to be constructed and performed; and that





                                     25
<PAGE>   27

Cruiseport was to "start the works," namely commence construction, within two
calendar months of the time the Port Authority gave its written approval to the
"executive project" submitted by Cruiseport.
         The concession agreement also provides for staged annual rental
payments by Cruiseport to the Port Authority, for its concession rights.  Under
the agreement as originally executed, these payments were to be $63,500 per
month, commencing in January, 1997, and rising to substantially higher levels
in later years.  As described below, the timing and amounts of these payments
have been modified.
         Between April and July of 1996, the Company received approval of its
"design of the works" by the Port Authority and necessary environmental
approval from the Mexican federal government.
          In November, 1996, the concession agreement between Cruiseport and
the Port Authority was modified by formal agreement, which is attached hereto
as an Exhibit.  The modified agreement provides that Cruiseport would deliver
the "executive project" of the works (i.e. technical specifications),
respecting Phase I, on or before December 31, 1997, and respecting Phase II, on
or before September 30, 1997.  The Company has complied with its obligations
regarding Phase I.
         The modified agreement further provides that Cruiseport is obligated
to begin work on Phase I by no later than March 15, 1997, and on Phase II
within two months of the time it receives necessary





                                     26
<PAGE>   28

approvals for that Phase, after submission of the "executive project" relating
thereto.
         Cruiseport's ability to commence construction on Phase I by March 15,
1997 depends primarily upon the Company's ability to secure necessary financing
commitments for the estimated $16,000,000 cost of that Phase prior to March 15,
1997.  As of the present time, the Company has not secured commitments for
financing of any portion of the Project, although the Company is actively
working with a project financing subsidiary of a major banking institution in
Mexico to secure such a commitment or commitments.  The ability of the Company
to secure such a commitment or commitments is very likely to depend, in part,
on the Company's ability to secure equity capital for a portion of the
estimated $16,000,000 cost, in an amount up to approximately 1/3 thereof.  As
of the present time, the Company does not have such equity capital, or any
commitments therefor, although it is in negotiations with possible sources
thereof.
         The concession agreement provides that if Cruiseport is not able to
commence construction by March 15, 1997, the Port Authority may cancel the
concession, without further notice or extension, and without need of judicial
resolution or arbitration.  Cruiseport's ability to commence construction by
March 15, 1997 depends as well upon other factors, such as the ability to enter
into a contract with a Mexican general contractor, and the ability of that
contractor to gear up to start work, before March 15.  Notwithstanding the
logistical difficulties in meeting such a time





                                     27
<PAGE>   29

schedule, the Company's discussions with major Mexican contractors leads
management to believe that it would be able to proceed rapidly to enter into a
construction contract were it able to secure necessary capital, including
financing commitments, for Phase I.  However, the Company, at this time, cannot
represent that it is likely it will be able to secure the necessary equity
capital and financing commitments in time to meet the March 15 deadline.
         The modified concession agreement provides for a revised schedule of
rental payments by Cruiseport, which substantially reduces such payments by
Cruiseport in the earlier years of the concession, and increases payments in
later years to compensate for the reduction in the earlier years.
Specifically, the annual rental payments by Cruiseport, under the modified
agreement, are $54,000, $108,000, $280,000 and $560,000, in years one through
four, respectively, and rising steadily thereafter to a level of $2,500,000 per
year in years 25 through 32 and $2,999,000 per year in years 33 through 35.  In
addition to the fixed rental payments, the modified concession agreement
provides that Cruiseport will pay an additional variable rental fee of 20% of
the anchorage and port fees received by Cruiseport with respect to the total
weight of cruise ships in excess of 18,900,000 gross tons in any year.
         The modified concession agreement provides, as before, for other
rights of recision on the part of the Port Authority for non-performance by
Cruiseport of its obligations under the concession, as well as financial
penalties for non-compliance.





                                     28
<PAGE>   30

         In its restated annual report for fiscal 1996, the Company reported a
proposed financing agreement with an offshore corporation named Heritage
Distribution Corporation for initial financing of $4.8 million, less closing
fees; and further draws in subsequent quarters to meet working capital and
development capital needs of the Company, up to $30 million dollars.
Negotiations did not result in a final agreement, and the proposed agreement,
and all negotiations relating thereto, have been terminated.  In its restated
annual report, the Company also described other proposed transactions, namely
proposed transactions with RBC Enterprises and with Prime Interests, Inc.
These proposed agreements have also been terminated.
         With respect to activities of the Company in its Ensenada Project, the
Company reported in its restated annual report for fiscal 1996 that it had been
engaged in clearing debris from the above-water portion of its concession area,
and was also engaged in moving dirt from its above-water concession area to an
adjoining portion of the harbor for use as foundation fill for a federal Navy
training center.  Pursuant to its modified concession agreement, the activities
of Cruiseport in supplying foundation fill for the federal Navy training center
were formalized into an obligation to provide and move to the Navy site 200,000
cubic meters of such fill on or before December 31, 1996.  Cruiseport met that
commitment, and incurred approximately $450,000 of expenses in regard to its
clearing and dirt moving activities, as of the end of the second quarter of
1996.





                                     29
<PAGE>   31

        Changes in Management.  Subsequent to the end of the second quarter of
the current fiscal year, Alton Jones resigned as an officer and director of the
Company, and Brian Miller also resigned as a director, leaving as the sole
director of the Company Pieter Oosthuizen.  Mr. Oosthuizen, as sole director,
elected Patrick Magee as a director, to serve until the next election of
directors by the shareholders, and also appointed Mr. Magee as President, Chief
Executive Officer and Chief Financial Officer of the Company.  Mr. Magee,
who is 52 years of age, is an entrepreneurs whose particular experience is in
construction and development and project finance.  His principal activities
during the past five years have been the development and funding of two
shopping centers in Ireland.  Mr. Magee is a resident of Ireland.  He is also
the President and sole shareholder of Doggart Trading, Ltd., a substantial
shareholder of the Company.

                                    PART II
Item 1. Legal Proceedings
         In the Company's restated annual report for fiscal year 1996, the
Company described a legal action pending in the United States District Court
for the District of Idaho, against the Company, various of its present and
former officers and directors, and other individuals named Barry Gill and
Stephen Bailey and their spouses, alleging violations of various federal and
state laws, including claims under the Securities Act of 1933, the Securities
Exchange Act of 1934, and state securities laws, and under the consumer





                                     30
<PAGE>   32

protection laws of the states of Idaho and Washington.  Plaintiffs seek actual
damages, as well as punitive and treble damages, court costs and reasonable
attorneys fees.  The pleadings in the case do not specify a dollar amount of
damages.  However, the Company indicated, in its annual report, its belief,
based upon previous communications between counsel, that plaintiffs were
claiming approximately $300,000 in damages.
         Counsel for the plaintiffs, by letter of December 5, 1996, have
indicated that plaintiffs consider their claim to be worth $4,000,000.  In so
doing, plaintiffs' counsel have also indicated that plaintiffs' current demand
for settlement is $800,000.
          The Company intends, as it has consistently indicated, to vigorously
defend against the claims.  Recently, the magistrate of the Court has
recommended that various of the federal securities laws claims against the
defendants, as well as the state law claims, be remanded to state court in
Idaho.  That recommendation has not yet been confirmed by the Court.  

Items 2, 3, 4.
         There are no reportable events in the quarter, concerning changes in
securities, defaults upon senior securities, or submission of matters to a vote
of security holders.  

Item 6.  Exhibits and Reports on Form 8-K.
         Concession Modification Agreement, dated November 21, 1996, between
API Ensenada, S.A. de C.V. and Ensenada Cruiseport Village, S.A. de C.V.
         A Form 8-K was filed during the quarter on October 17, 1996.





                                     31
<PAGE>   33


                                  SIGNATURE

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

                                  INTERNATIONAL BASIC RESOURCES, INC.


February 10, 1997                 By: /s/ Patrick Magee           
-----------------                     ----------------------------
date                                  Patrick Magee, President and
                                      Chief Financial Officer





                                     32