SECURITIES AND EXCHANGE COMMISSION

            					  Washington, D.C. 20549

               						    FORM 10-K

               						  ANNUAL REPORT

         				Pursuant to Section 13 or 15(d) of the
	        			    Securities Exchange Act of 1934
 
	        			     Date of Report August 31, 1996

       				  MERIT DIVERSIFIED INTERNATIONAL, INC.
			(exact name of registrant as specified in its charter)

          Nevada                   0-12423                  94-2906927
(state or other jurisdiction    (commission file          (IRS Employer
      of incorporation)           number)            Identification No.)


    25320 Bellanca Way, Torrance CA                     90505
(address of principal executive office)              (zip code)

                                   (310) 326-3871
                          (registrant's telephone number)

           Securities registered pursuant to Section 12(g) of the Act:
                         Common Stock, no par value
                              (Title of class)

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

             	Yes    _____       	No___X_____

The aggregate market value of the voting stock held by non-affiliates
of the  registrant: Currently the Company's stock is thinly traded. There 
are 942,423  shares held by non-affiliates. The average bid and ask price for 
the period  covered by this Form 10-K was $1.125 per share. Using this 
value of $1.125  per share, the aggregate market value is estimated at 
$1,060,226.  Number of common shares, without par value, outstanding as 
of August 31,  1996 was 16,209,316.













                      MERIT DIVERSIFIED INTERNATIONAL, INC.
                                  FORM 10-K

                       FISCAL YEAR ENDED AUGUST 31, 1996
                              TABLE OF CONTENTS

                  		       	                      		      	Page
Part I	

	Item 1	Business                                      								3

	Item 2	Properties								                                    3
	
	Item 3	Legal Proceedings							                              4
	
	Item 4	Submission of Matters to a Vote of Security	    
		     	Holders			                                            4

Part II	

	Item 5	Market for Registrant's Common Stock and Related
		     	Stockholder Matters			                                4
		
	Item 6	Selected Financial Data						                         4

	Item 7	Management's Discussion and Analysis of Financial
		     	Condition and Results of Operations			               5-6
		
	Item 8	Consolidated Financial Statements and Supplementary
		     	Data			                                              7-18

	Item 9	Changes in and Disagreements with Accountants on
     			Accounting and Financial Disclosure	                   19

Part III	

	Item 10	Directors and Executive Officers of the Registrant	    19

	Item 11	Executive Compensation						                           19

	Item 12	Security Ownership of Certain Beneficial Owners
		      	and Management							                               19-20

	Item 13	Certain Relationships and Related Transactions		       20

Part IV	

	Item 14	Exhibits, Financial Statements, Schedules and Reports
		      	on Form 8-K							                                    	20

Signatures											                                           21





                    MERIT DIVERSIFIED INTERNATIONAL, INC.
                                    PART I

ITEM 1:	BUSINESS (General)					

A. The Company

Merit Diversified International, Inc. ("the Company") currently has
no  operations and no cash flow or operating capital.  The Company is
considered  to be a development stage company and will continue to be
classified as  such until  the Company initiates business operations.

B.  History of Operations

The Company was incorporated in the State of Utah in 1983,
subsequently  reincorporating in the State of Nevada. Initially the
Company published a  telephone directory, but this operation was
suspended in 1987 due to lack of  operating funds and revenues. Since
1988 the Company has made several  attempts to acquire and operate
various businesses. All efforts have proven  to be unsuccessful. 

In 1994, the Company purchased from Phalanx, Ltd., certain rights to
molds and  designs of exclusive jewelry. These were purchased with
27,000,000 shares of  the Company's common stock. Originally valued
at $270,000 this investment  proved to be worthless. Major
shareholders of the Company sued for return of  the shares. On
February 9, 1995 the Superior Court of the County of Maricopa, 
Arizona decided that the 27,000,000 shares were improperly given and
denied  those shares voting rights. On March 23, 1995 a shareholders
meeting was held  where those shares were rescinded and returned to
the Company. 

In April 1996, the Company approved a 20 to 1 reverse stock split.
Subsequent  to the stock split, the Company approved a merger with a
company, NEAT, Inc.,  a Nevada corporation, through the issuance of
13,000,000 shares of common  stock, with the intent of marketing a
certain new technology and combining  the companies. Both parties
chose not to continue the merger, however NEAT,  Inc. intends to
infuse new technology and business operations into the  Company. 
During February 1997, NEAT, Inc. returned 13,000,000 shares to the 
Company. There is no assurance that the potential business will be 
successful or placed into operation by the Company.

As of August 31, 1996, the Company has no employees and no operating
assets.   The Company continues to meet its organizational
obligations through the  contribution of capital by major
shareholders.

The Company has continued its efforts to acquire, merge with or enter
into  other forms of business combinations.  It is presently unknown
whether any  transaction will be successfully concluded. 

ITEM 2:	PROPERTIES					

None



ITEM 3:	LEGAL PROCEEDINGS					

None

ITEM 4:	SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS	

None

ITEM 5:	MARKET FOR THE REGISTRANT'S COMMON STOCK AND 		
	      	RELATED STOCKHOLDER MATTERS					

The Company's common stock is traded on the OTC Bulletin Board.

The quote below is from the "Pink Sheets" and the OTC Bulletin Board. 
These numbers represent an average. The Company's stock was thinly
traded  in fiscal year ended August 31, 1996.

Bid              High                .25             Low              .25

Ask              High               2.25             Low             1.75

ITEM 6:	SELECTED FINANCIAL DATA					

The following information is derived from the consolidated financial 
statements included elsewhere herein.  All information presented
below  should be read in conjunction with the Consolidated Financial
Statements  and Notes included elsewhere in this Form 10K.

<TABLE>
<S>
<S>
For Year Ended August 31      1996      1995       1994       1993        1992

Net Sales                        0         0          0          0           0
Net Income (Loss)                0         0    (21,418)   (17,650)   (247,760)

Earnings (Loss) per Share      NIL       NIL          0          0        (.02)

Cash Dividends per Share         0         0          0          0           0

Total Assets                     0         0          0     16,418      16,300

Long Term Notes Payable          0         0          0          0           0 
Total Stockholders' Equity  (8,000)   (8,000)  (109,677)   (93,269)   (103,464)

</TABLE>




Balance of Page Left Blank Intentionally











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

The information set forth in "Management's Discussion and Analysis of
Financial Condition and  Results of Operations" below includes
"forward looking statements" within the meaning of  Section 27A of
the Securities Act, and is subject to the safe harbor created by that
section.   Factors that could cause actual results to differ
materially from these contained in the forward  looking statements
are set forth in "Management's Discussion and Analysis of Financial 
Condition and Results of Operations".

Year Ended August 31, 1996 and 1995

The Company has no assets and has not engaged in any operational
activities during the past five  years.  At present, the Company has
no employees.   The Company does not expect any changes  unless the
Company concludes a merger or other business combination.

During the years ended August 31, 1996 and 1995, the Company had no
operations.  The  Company maintained its existence through
contributions from its shareholders to satisfy its  general and
administrative expenses.  As detailed on the accompanying
consolidated statements  of cash flows, there were no significant
adjustments between the net loss and net change in cash.
			
Due to the nature of the Company's activities, the Company's
prospects for the future are  dependent on a number of variables
which cannot be predicted.  Generally, after identifying a  potential
business opportunity, the Company could incur significant costs in
evaluating the  desirability of an acquisition or other form of
business combination. Should the Company  determine to proceed with
the business combination, the transaction costs could be significant.  
Thereafter, results of operation would likely be materially affected
by the business acquired or  merge with the Company.

The Company has continued its efforts to acquire, merge with or enter
into another form of  business combination with another entity, and
the Company plans to continue these efforts in the  future fiscal
year.  It is presently unknown whether any transaction will be
successfully  concluded. 

Liquidity and Capital Resources

Year Ended August 31, 1996

The Company currently does not have adequate reserves to satisfy its
short term obligations. The  Company is currently seeking private
placement funding to maintain its obligation until such time  as its
operations can generate cash flow. No guarantee can be made that the
current development  stage search for an operational business or
private funding will be successful. The Company is  able to continue
because the major shareholders continue to cover administrative
expenses. No  guarantee can be made that the major shareholders will
continue to cover these expenses.        






ITEM 7:	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 	 	  	      
        CONDITION RESULTS OF OPERATIONS (Continued)			  

The Company considers it current cash and cash equivalent balances
inadequate to satisfy its cash  requirements for the next twelve
months.  Legal and accounting and other expenses required  could
increase significantly in connection with any contemplated business
combination.  The  Company may not have the liquidity and capital
resources to consummate such business  combination.  Due to the
nature of the Company's present activities, however the Company is 
unable to predict its likely expenditure for professional fees and
other expenses.  The Company  has no major capital commitments nor
access to mechanisms to fund working or operating  capital, and there
can be no assurance that it will be successful in its efforts to
raise additional  capital to maintain its plan of operation.



























(Balance of  Page Left Blank Intentionally)


















			         	MERIT DIVERSIFIED INTERNATIONAL, INC.
				           (A Developmental Stage Company)


Item 8-Financial Statements
Index to Consolidated Financial Statements					


1996, 1995 and 1994 Consolidated Financial Statements:

                                                      					        Page

	Report of Independent Certified Public Accountants				               8


	Balance Sheets as of August 31, 1996 and 1995 					                  9


	Statements of Operations for the Years Ended August 31,			
		1996, 1995 and 1994								                                        10


	Statements of Stockholders' Equity for the Years Ended
		March 31, 1996, 1995 and 1994							                               11


	Statements of Cash Flows for the Years Ended August 31,
		1996, 1995 and 1994								                                        12


	Summary of Accounting Policies and Notes to Consolidated 
		Financial Statements			         			                             13-17


Schedules-	


	II Valuation and Qualifying Accounts						                          18


























                             Mark Shelley CPA
                            110 S. Mesa Dr. #1
                              Mesa, AZ 85210
                              (602) 833-4054


                       INDEPENDENT AUDITOR'S REPORT


To the Board of Directors
Merit Diversified International, Inc.

I have audited the accompanying balance sheet of Merit Diversified
International, Inc., a  development stage company, as of August 31,
1996 and 1995 and the related statements of  operations,
stockholders' equity and cash flows for the three years ended August
31, 1996.  My  responsibility is to express an opinion on these
financial statements based on my audit.  I did not  audit the
statements prior to the year ended August 31, 1992.  Other auditors
audited those  statements.

I have conducted my audit in accordance with generally accepted
auditing standards.  Those  standards require that I 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.  I believe that my audit  provides a
reasonable for my opinion.

In my opinion, the financial statements referred to above present
fairly, in all material respects,  the financial position of Merit
Diversified International, Inc. as of August 31, 1996 and 1995 and 
the results of their operations and their cash flows for the three
years ended August 31, 1996 in  conformity with generally accepted
accounting principles.


							Mark Shelley CPA



April 7, 1997


















                   MERIT DIVERSIFIED INTERNATIONAL, INC.
                       (A Developmental Stage Company)

                        CONSOLIDATED BALANCE SHEETS
												

August 31,	                         						1996	                 	1995		


Assets							                           $	-		                   $	-
												
Total Assets						                      $	-		                   $	-
												

Liabilities and Shareholders' Equity

Current liabilities

	Accounts and taxes payable			          $  8,000		              $    8,000

Total current liabilities           				   8,000              		     8,000

Commitments and contingencies

Shareholders' Equity

	Common Stock-no par value; 	
50,000,000 shares authorized, 
16,209,316 and 23,225,554
issued and outstanding as of 
1996 and 1995,
respectively					                      1,332,349		               1,332,349

	Additional paid-in capital			         1,122,215		               1,122,215

	Accumulated deficit-accumulated
	during the developmental stage		     (2,462,564)		             (2,462,564)

Total shareholders' equity			             (8,000)	                  (8,000)
												
Total liabilities and shareholders' 
equity	                               $	-		                      $	-	
												
	



See Notes to Consolidated Financial Statements












                     MERIT DIVERSIFIED INTERNATIONAL, INC.
                         (A Developmental Stage Company)

                      CONSOLIDATED STATEMENTS OF OPERATIONS
												

	                                                       									  	Inception
Years Ended August 31,	 	          1996	        1995	       1994	     to 1995		

Net revenue				                  $	-	        $	-	         $	-	      $	-

Costs and expenses:

  General and administrative	      -	     	    -	           5,000	    2,244,147
  Depreciation and amortization	   -  		       -	    	      -   	         6,200

Income (loss) from operations		    -	    	     -	          (5,000)   (2,250,347)

Other income (expense):

  Interest expense			              -		         -	     	     -	          (22,518)
  Loss on sale of fixed assets	    -	     		   -             (918)		       (918)
  Loss on sale of investments		    -	  	       -          (15,500)     (269,800)
  Income from debt adjustment		    -		         -	    	      -  	         86,419

Total other income (expense)		     -	  	       -	         (16,418)	    (206,817)

Income before taxes
 on income					                    -	  	       -	         (21,418)   (2,457,164)

Taxes on income				                -		         -	     	     -	            5,400

Net income (loss)				              -	  	       -	         (21,418)   (2,462,564)

Net income (loss) per share		     nil		       nil	            0.00

Weighted average number of shares 
  and share equivalents 
  outstanding			           19,717,435	 36,525,554	      30,962,450	



See Notes to Consolidated Financial Statements


















                   MERIT DIVERSIFIED INTERNATIONAL, INC.
                     (A Developmental Stage Company)

              CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
																
<TABLE>
<S>
<S>

Years ended August 31, 1995, 1994, and 1993:
                      			  	 Common Stock	      Paid in     Accumulated    Treasury    Stockholders'
                     			   Shares	   Amount     Capital	    (Deficit)	      Stock	     Equity	
Balance, August 31,
 1993		                22,825,554	 1,318,349   1,033,528	   (2,441,146)	    4,000	    (93,269)

Purchase of Phalanx
 rights			             27,000,000		        -	          -		           -	         -		         -
Contribution to paid-
 in-capital			                  -		        -       5,010		           -	         -	      5,010
Cancellation of
 treasury shares		              -	    (4,000)	         -		           -	    (4,000)		        -
Net loss			                     -		        -	          -	      (21,418)	        -	     21,418)	
Balance, August 31,
 1994			               49,825,554	 1,314,349   1,038,538	   (2,462,564)	        -	 	 (109,677)

Issuance of stock	        400,000	    18,000	          -		           -	         -	     18,000
Contribution to paid-
 in-capital			                  -		        -	     83,677		           -	         -	     83,677
Rescission of Phalanx
 shares	              (27,000,000)		       -	          -		           -	         -		         -
Net loss			                     -		        -	          -		           -	         -		         -	
Balance, August 31,
 1995			               23,225,554	$1,332,349  $1,122,215	  ($2,462,564)         -	     (8,000)	

Purchase of consulting	 25,000,000
Reverse stock split   	(45,814,276)
Purchase of stock	      13,000,000
Purchase of consulting	    798,038
Net loss								                 -
														                        
Balance, August 31,
 1996			               16,209,316	$1,332,349  $1,122,215	  ($2,462,564)         -	   	 (8,000) 	



See Notes to Consolidated Financial Statements

</TABLE>























                      MERIT DIVERSIFIED INTERNATIONAL, INC.
                          (A Developmental Stage Company)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                 Increase (Decrease) in Cash and Cash Equivalents

Years ended August 31,		             1996		       1995		         1994	       
	
				    			       

Operating activities:

  Net income (loss)			             $  -			      $	-	          $ (21,418)	   
  Adjustments to reconcile net loss
    to cash used in operating activities:
    Depreciation expense 	            -				       -		   	             -
    Loss on devaluation			            -				       -		            16,418	
Changes in operating assets and
     liabilities:
    Accounts payable       		         -			       (40,323)	        5,000	
Cash provided by (used in)
 operating activities			              -			       (40,323)			          -	
Investing activities:
 Net decrease in notes payable	       -		       	(61,354)		      (5,010)	
 Purchase of fixed assets		           -				       -			                -	
Cash used in investing activities	    -		       	(61,354)	   	   (5,010)	 
Financing activities:
  Net change in common stock	     	   -	     	  	 18,000           			-	
  Paid-in-capital				                 -		  	      83,677	         5,010	
Cash provided by financing
 activities					                      -	         101,677		        5,010	
Net increase (decrease) in 
 cash and cash equivalents       		   -	       			-                			-	
Cash and cash equivalents,
 beginning of period			               -				       -			                -	
Cash and cash equivalents,
 end of period			                $	   -		      $		-		               $	-	

Significant non cash transactions
	Fiscal year ended August 31, 1996:
		Reverse stock split 20 to 1
		Issuance of 13,000,000 common shares to NEAT, Inc.
	Fiscal year ended August 31, 1995:
		Rescission of Phalanx shares
	Fiscal year ended August 31, 1994:
		Purchase of Phalanx rights for 27,000,000 shares of common stock
See Notes to Consolidated Financial Statements











                  MERIT DIVERSIFIED INTERNATIONAL, INC.
                   (A Developmental Stage Company)
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
												
Note 1.		General Company Information and Summary of Significant
Accounting Policies

The Company was organized August 23, 1983 in the State of Utah.
Initially the Company  published and attempted to market a telephone
directory, but this operation was suspended in  1987 due to lack of
operating funds and revenues. Since 1988 the Company has made several 
attempts to acquire and operate various businesses. These have proven
thus far to be  unsuccessful. Note 2 below lists some of the
attempted acquisitions and the results. The  Company continues to
pursue a path of merger with an operating business.

The Company has incurred significant losses since its inception and
as of August 31, 1996, has  no source of revenue.  The Company has no
cash and has maintained its existence and paid  ongoing expenses
through the issuance of common stock.

The Company has been able to continue because major shareholders have
continued to invest in  the Company to meet its expenses.  

The Company is considered a development stage Company and will remain
in this status until  operations begin.  There can be no assurance
that the Company will be able to merge with an  operating company,
acquire an ongoing business, or that the major shareholders will
continue to  pay the expenses of the Company.


Basis of Presentation

The accompanying consolidated financial statements have been prepared
in accordance with  United States generally accepted accounting
principles.

Property and Equipment

As of August 31, 1996 the Company had no fixed assets. Previously the
Company depreciated its  fixed assets over their useful lives on a
straight line basis.

Development Stage Company

The Company has had no revenue or operations during the previous five
years and because of  this has considered itself a development stage
company. It will remain in this status until such  time as it
initiates or merges with operations of some kind. In the early years
the Company  generated nominal revenue from the sale of its telephone
directory. These minimal revenues have  been netted with general and
administrative expenses of those years.











                 MERIT DIVERSIFIED INTERNATIONAL, INC.
                   (A Developmental Stage Company)
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
												

Net Loss Per Share

Loss per share is computed based on the average number of shares
outstanding during each year.

Revenue Recognition

The Company has had no revenue during the past five years.

Provision for Income Taxes

	The provision for income taxes is the total of the current
taxes payable and the net of the  change in the deferred income
taxes. Provision is made for deferred income taxes where  differences
exist between the period in which transactions affect current taxable
income and the  period in which they enter into the determination of
net income in the financial statements. The  Company has a net
operating loss carry forward of approximately $2,000,000 available to
offset  future taxable income. The last of the carry forward expires
in 2009. No benefit has been  recorded on the face of the balance
sheet for this benefit.

Note 2.		Investments and Acquisitions

Marketable securities at August 31, 1992 and 1991 had an original
cost basis of $240,000. The  stock is currently considered worthless.

	Investments in 1992
                       							        Original       Carrying       Carrying
							                                Basis	       Value as of    Value as of
									                                            August 31,	    August 31,
								   	                                            1992	          1994

Western Airlines (38% equity position)	$80,000	     $  -		         $ -
Publishing Companies				               165,000	       7,500	         -
Art Works						                         24,000	       8,000	         -

Totals						                           269,000	      15,500	         -

	Investments in 1991
Art Works						                         21,900	      21,900	         -
Distribution Rights				                  5,000	       5,000	         -

Total Investments in 1991			           $26,000      $26,000	       $ -













                 MERIT DIVERSIFIED INTERNATIONAL, INC.
                    (A Developmental Stage Company)
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
												

	Investment in Western Airlines 1992
	
	The Company acquired a 38% interest in Western Airlines for
$80,000 cash paid for by a  stockholder on behalf of the Company.
Currently Western Airlines is in bankruptcy and is not  expected to
come out of bankruptcy in the near future.

	
	Purchase of Phalanx, Ltd. Rights

	In 1994 the Company purchased from Phalanx, Ltd., certain
rights to molds and designs  of exclusive jewelry. These were
purchased with 27,000,000 shares of the Company's common  stock.
Originally valued at $270,000 this investment proved to be worthless.
Major shareholders  of the Company sued for return of the shares. On
February 9, 1995 the Superior Court of the  County of Maricopa,
Arizona decided that the 27,000,000 shares were improperly given and 
denied those shares voting rights. On March 23, 1995 a shareholders
meeting was held where  those shares were rescinded and returned to
the Company.

	Proposed Merger

	As part of a proposed merger the Company issued 1,250,000
shares to various parties for  consulting. This merger was not
successful, however the shares of stock for consulting are still 
outstanding.

Note 3.		Related Party Transactions
	
The Company has been able to continue in existence and to remove most
of its debts because  some of the major shareholders have continued
to cover the administrative expenses and to pay  outstanding debts.
There is no guarantee that these shareholders will continue to fund
the  Company.

There are no outstanding obligations due to or from related parties
as of August 31, 1996.








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                  MERIT DIVERSIFIED INTERNATIONAL, INC.
                     (A Developmental Stage Company)
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
												

Note 4.		Notes Payable


                                             8/31/96		    8/31/95		    8/31/94

Hanson			                                    -			         -			        $10,354

10% annual interest, $150 monthly payment 
secured by 533,670 shares of Merit common stock, 
also secured by personal guarantee of Alfred 
Cassidy


Wurtz				                                    -			         -			         33,000

10% annual interest, secured by 162,000 shares of 
Merit common stock, also secured by personal 
guarantee of Alfred Cassidy


Eureka Federal Savings	                      -			         -			          5,010

amount based on a suit filed 10/1/86 in California, 
settled in 9/93 for $5,010


Jackson, Private Note	                       -			         -			         18,000

Total				                                    -			         -			         66,364


Note 5.		Commitments and Contingencies

The Company has no commitments or contingencies as of August 31, 1996
except for its  outstanding debt as noted on the balance sheet.

Note 6. 	Going Concern

The Company has incurred significant losses since its inception and
as of the August 31, 1996  had no source of revenue. The Company also
had no cash and has paid for all of its ongoing  expenses with the
issuance of its common stock.

The Company has been able to continue because the major stockholders
have been willing to  continually invest in the Company to cover
expenses. The Company is to be considered a  development stage
company and will remain in this status until operations have been
established.  No guarantee can be made that the Company will be able
to merge with an operational company 






               MERIT DIVERSIFIED INTERNATIONAL, INC.
                  (A Developmental Stage Company)
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
												

or that the major stockholders will continue to pay the expenses of
the Company. As of August  31, 1995 and 1996, the Company had no
assets. 

Due to the nature of the Company's activities, the Company's
prospects for the future are  dependent on a number of variables
which cannot be predicted.  Generally, after identifying a  potential
business opportunity, the Company could incur significant costs in
evaluating the  desirability of an acquisition or other form of
business combination. Should the Company  determine to proceed with
the business combination, the transaction costs could be significant.  
Thereafter, results of operation would likely be materially affected
by the business acquired or  merge with the Company.


Note 7.		Subsequent Events

The Company is currently seeking additional funding through debt and
equity financing. The  Company is also seeking a suitable merger
candidate. No guarantees can be made that the  Company will be
successful in its attempts to obtain funding or acquire or start an
operational  business.

In February 1997 major stockholders contributed $8,000 to pay old
payable.















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               MERIT DIVERSIFIED INTERNATIONAL, INC.
                 (A Developmental Stage Company)
          SCHEDULE II- VALUATION AND QUALIFYING ACCOUNTS
												


NONE































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ITEM 9:	CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON 	
       	ACCOUNTING AND FINANCIAL DISCLOSURES				

None


ITEM 10:	DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY	

	The officers and directors of the Company were the following:

Name			       Age				     Title

Mike Neri		   47		        President/Sec./Treasurer/Director

	Mike Neri is a mechanical engineer who speaks four languages.
Currently he is Vice  President of N.E.A.T. Inc..

ITEM 11:	EXECUTIVE COMPENSATION					

	No officer or director receives compensation for services
rendered except that the  directors are authorized to receive 100
shares of R-144 Company stock for each directors meeting  that they
attend. No such stock has been issued.

ITEM 12:	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND 	
       		MANAGEMENT					

	As of August 31, 1996 the following were beneficial owners of
more than five percent of  the Company's common stock.

Stock		      Name and Address			         Ownership			     %

Common	      Alfred H. Cassidy			        1,016,893			     6
             25 Poncetta Dr. #307
             Daley City, CA 94015

Common	      N.E.A.T. Inc.			           13,000,000			     80
             850 South Boulder Hwy.
             Suite 300
             Henderson, NV 89015

Common 	     New World Equities		        1,250,000			     8


             Total as a Group			        15,266,893			    94




	The table below sets forth those directors and officers who own
shares of Company stock.

Common	      Mike Neri				               1,000,000			      5
             25320 Bellanca Way 
             Torrance, CA 90505






ITEM 13:	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS		

	No director of officer, directly or indirectly, is indebted to
the Company in an amount in  excess of $60,000 as of the close of the
fiscal year August 31, 1996.

ITEM 14:	EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS	

a.  Audited financial statements.
b.  Reverse split amendment.















Balance of Page Left Blank Intentionally


































                        SIGNATURES

	The signature below is that of Mr. Michael. Neri. Mr. Neri did
not become involved with  the Company until  April 1996. Mr. Neri
disclaims any knowledge or liability for any transaction  prior to
this time. Mr. Neri signs below as a current officer and director.
The actual officers and  directors were not available to sign.

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

			Merit Diversified International, Inc.
			(registrant)


		
	_____________/S/_____________________
	Michael Neri, Chief Accountant

Dated:    April 10, 1997

	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.


Signature					                Title			                   Date



_____________/S/_________
Michael Neri			               Chief Accountant