SEC File No. 33-85044-d

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-QSB

                 [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                 For the quarterly period ended August 31, 2000

        [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
             EXCHANGE ACT OF 1934 Commission File number 33-85044-d

                              NACO Industries, Inc.
--------------------------------------------------------------------------------
        (Exact Name of small business issuer as specified in its charter)

                 Utah                                 48-0836971
                 ----                                 ----------
       (State of Incorporation)           (IRS Employer Identification)

                     395 West 1400 North, Logan, Utah 84341
                     --------------------------------------
               (Address of principal executive offices)(Zip Code)


                   Registrant's Telephone Number 435-753-8020
--------------------------------------------------------------------------------

         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

As of August 31, 2000, the  Registrant had 1,902,268  shares of Common Stock and
165,412 shares of Preferred Stock outstanding.

          Transitional Small Business Disclosure Format Yes [ ] No [X]
--------------------------------------------------------------------------------


                                       1
<PAGE>



                         PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements
--------------------------------------------------------------------------------
See attached Consolidated Financial Statements





                                       2
<PAGE>





                              NACO Industries, Inc.

                              FINANCIAL STATEMENTS

                                 August 31, 2000




                                       3
<PAGE>


                              NACO INDUSTRIES, INC.
                              ---------------------
                                 BALANCE SHEETS
                                 --------------
<TABLE>
<CAPTION>

                                                         August         November
                                                           31,             30,
                                                          2000            1999
                                                       -----------    -----------
                                                       (Unaudited)     (Audited)
<S>                                                    <C>            <C>
ASSETS
------
Current assets:
  Cash                                                 $    46,714    $    58,073
  Accounts receivable, net of allowance for doubtful
    accounts of $91,002 and $67,753, respectively          568,345        862,913
  Due from related parties                                  41,933         38,385
  Inventory                                                549,267        528,461
  Other current assets                                      36,390         41,283
  Deferred income taxes                                     90,050        153,900
                                                       -----------    -----------

       Total current assets                              1,332,699      1,683,015
                                                       -----------    -----------

Property and equipment:
  Land                                                      40,700         40,700
  Buildings and improvements                               610,038        610,038
  Equipment and vehicles                                 2,415,843      2,805,455
  Equipment construction in process                         11,644
                                                       -----------    -----------

       Total property and equipment                      3,078,225      3,456,193

  Less - accumulated depreciation                       (1,937,367)    (2,076,200)
                                                       -----------    -----------

       Net property and equipment                        1,140,858      1,379,993
                                                       -----------    -----------

Other assets:
  Accounts receivable from related parties                 327,232        311,231
  Intangible and other assets, net of accumulated
  amortization of $14,433 and 12,830, respectively         153,277        167,711
  Deferred income taxes, net of allowance of $80,000       230,400        255,800
                                                       -----------    -----------

       Total other assets                                  710,909        734,742
                                                       -----------    -----------

Total assets                                           $ 3,184,466    $ 3,797,750
                                                       ===========    ===========
</TABLE>



                        See Notes to Financial Statements




                                       4
<PAGE>


                              NACO INDUSTRIES, INC.
                              ---------------------
                                 BALANCE SHEETS
                                 --------------
<TABLE>
<CAPTION>

                                                                           August        November
                                                                             31,            30,
                                                                            2000           1999
                                                                        -----------    -----------
                                                                        (Unaudited)      (Audited)
<S>                                                                     <C>            <C>
LIABILITIES:
-----------
Current liabilities:
  Accounts payable                                                      $   397,010    $   769,056
  Accrued expenses                                                          195,734        231,720
  Due to related parties                                                     10,028         15,311
  Line of credit                                                            582,299
  Current portion of long-term obligations                                   74,522         81,700
                                                                        -----------    -----------

       Total current liabilities                                          1,259,593      1,097,787
                                                                        -----------    -----------

Long-term liabilities:
  Warranty obligation                                                        48,000         48,000
  Long-term obligations, less current portion                             1,004,865      1,928,763
                                                                        -----------    -----------

       Total long-term liabilities                                        1,052,865      1,976,763
                                                                        -----------    -----------

       Total liabilities                                                  2,312,458      3,074,550
                                                                        -----------    -----------

Stockholders' equity:
Common stock, $.01 par value, 10,000,000 shares authorized; 1,902,268
shares issued                                                                19,023         19,023
Preferred Stock, 7% Cumulative, convertible  $3.00 par value, 330,000
shares authorized, and 165,412 shares issued. (Aggregate liquidation
preference $1,200,891 and $1,131,418 respectively)                          496,236        496,236
Additional paid-in capital                                                1,018,284      1,018,284
Accumulated deficit                                                        (661,535)      (810,343)
                                                                        -----------    -----------

       Total stockholders' equity                                           872,008        723,200
                                                                        -----------    -----------

Total liabilities and Stockholders' equity                              $ 3,184,466    $ 3,797,750
                                                                        ===========    ===========
</TABLE>



                        See Notes to Financial Statements




                                       5
<PAGE>


                              NACO INDUSTRIES, INC.
                              ---------------------
                            STATEMENTS OF OPERATIONS
                            ------------------------
                                   (UNAUDITED)
                                   -----------
<TABLE>
<CAPTION>

                                                         Three months ended             Nine months ended
                                                     August 31,      August 31,    August 31,     August 31,
                                                       2000            1999           2000           1999
                                                    -----------    -----------    -----------    -----------
<S>                                                 <C>            <C>            <C>            <C>
Sales, net                                          $ 1,554,361    $ 1,752,679    $ 6,112,023    $ 5,796,937

Cost of goods sold                                      983,490        985,309      3,623,994      3,125,118
                                                    -----------    -----------    -----------    -----------

       Gross profit                                     570,871        767,370      2,488,029      2,671,819

Operating expenses:
  Selling expenses                                      382,354        401,335      1,186,604      1,202,190
  General and administrative expenses                   297,562        267,196        852,748        763,483
                                                    -----------    -----------    -----------    -----------

       Total operating expenses                         679,916        668,531      2,039,352      1,965,673

       Income (loss) from operations                   (109,045)        98,839        448,677        706,146

Other income (expense):
  Interest income                                         1,211            784          2,053          1,600
  Other                                                   3,977          2,237         28,434          2,237
  Interest expense                                      (67,050)       (56,020)      (240,305)      (226,029)
                                                    -----------    -----------    -----------    -----------

       Total other income (expense)                     (61,862)       (52,999)      (209,818)      (222,192)
                                                    -----------    -----------    -----------    -----------

Income (loss) before income taxes                      (170,907)        45,840        238,859        483,954

Income tax (expense) benefit                             64,650        (17,282)       (90,050)      (182,451)
                                                    -----------    -----------    -----------    -----------

       Net income (loss)                               (106,257)        28,558        148,809        301,503

Adjustment for preferred dividends in arrears          (208,419)      (138,947)      (208,419)      (138,947)
                                                    -----------    -----------    -----------    -----------
Income (loss) from continuing operations to
common stockholders                                    (314,676)      (110,389)       (59,610)       162,556

Discontinued operations:
Loss from operations of discontinued segment, net
of income tax benefits                                      --        (241,192)           --        (670,875)
                                                    -----------    -----------    -----------    -----------
Adjusted net income (loss) to common stockholders   $  (314,676)   $  (351,581)   $   (59,610)   $  (508,319)
                                                    ===========    ===========    ===========    ===========

Earnings (loss) per common share basic:
 Earnings (loss) from continuing operations         $     (0.17)   $     (0.06)   $     (0.03)   $      0.09
 Earnings (loss) from discontinued operations       $        --    $     (0.13)   $        --    $     (0.36)
 Net Earnings (loss)                                $     (0.17)   $     (0.19)   $     (0.03)   $     (0.27)

Earnings (loss) per common share diluted:

Earnings (loss) from continuing operations          $     (0.17)   $     (0.05)   $     (0.03)   $      0.09
Earnings (loss) from discontinued operations        $        --    $     (0.13)   $        --    $     (0.36)
Net Earnings (loss)                                 $     (0.17)   $     (0.19)   $     (0.03)   $     (0.27)

Weighted average number of common
  shares outstanding:
    Basic                                             1,902,268      1,876,227      1,902,268      1,876,227
    Diluted                                           2,233,092      2,207,051      2,233,092      2,207,051
</TABLE>


                        See Notes to Financial Statements

                                       6
<PAGE>





                              NACO INDUSTRIES, INC.
                              ---------------------
                            STATEMENTS OF CASH FLOWS
                            ------------------------
                                   (UNAUDITED)
                                   -----------
<TABLE>
<CAPTION>

                                                                Nine months ended
                                                           Augusts 31,    August 31,
                                                              2000           1999
                                                          -----------    -----------
<S>                                                       <C>            <C>
Cash flows from operating activities
  Net income                                              $   148,809    $   301,503
  Adjustments to reconcile net income to
   net cash provided by (used in) operating activities:
     Depreciation                                             208,028        282,958
     Amortization                                              14,432         12,454
     Deferred income taxes                                     89,250
   (Increase) decrease in:
     Accounts receivable, net                                 294,567       (276,879)
     Receivable from related parties                           (3,548)      (102,689)
     Inventory                                                (20,805)        63,280
     Other                                                      4,893         (3,734)
   Increase (decrease) in:
     Accounts payable                                        (372,046)       556,454
     Accrued expenses                                         (35,986)       (50,586)
     Income taxes payable                                        --             (100)
                                                          -----------    -----------

Net cash provided by (used in) continuing activities          327,594        782,661

Net cash provided by (used in) discontinued activities           --         (670,875)
                                                          -----------    -----------

Net cash provided by (used in) operating activities           327,594        111,786
                                                          -----------    -----------

Cash flows from investing activities
  Net change  property and equipment                          (20,518)       (48,878)
  Loan to related parties                                     (16,001)        99,461
  Investment in intangible and other assets                      --         (155,649)
                                                          -----------    -----------

Net cash provided by (used in) investing activities           (36,519)      (105,066)
                                                          -----------    -----------

Cash flows from financing activities
  Net change in line of credit                               (205,498)      (344,108)
  Decrease in related party loan                               (5,283)             0
  Payments on long-term debt                                  (91,653)      (793,823)
  Proceeds from long-term loans                                   --       1,114,593
                                                          -----------    -----------

Net cash provided by (used in) financing activities          (302,434)       (23,338)
                                                          -----------    -----------

Increase (decrease) in cash                                   (11,359)       (16,618)

        Cash, beginning of period                              58,073         97,428
                                                          -----------    -----------

        Cash, end of period                               $    46,714    $    80,810
                                                          ===========    ===========

    Supplemental Disclosures:
         Interest Paid                                    $   237,125        158,297
         Income Taxes Paid                                          0              0
</TABLE>

                        See Notes to Financial Statements


                                       7
<PAGE>


                              NACO INDUSTRIES, INC.
                              ---------------------
                   Notes to Financial Statements (Unaudited)
                   -----------------------------------------
                                 August 31, 2000
                                 ---------------

NOTE A - INTERIM FINANCIAL STATEMENTS
-------------------------------------
In the opinion of management,  the accompanying  unaudited financial  statements
include all necessary adjustments (consisting only of normal recurring accruals)
to present fairly the financial position of NACO Industries Inc. (the "Company")
as of August 31, 2000,  the results of its  operations  for the three months and
nine months ended August 31, 1999 and 2000  respectively  and its cash flows for
the nine months ended August 31, 1999 and 2000  respectively  in conformity with
generally  accepted  accounting  principles  for interim  financial  information
applied on a consistent basis. Operating results for the nine-month period ended
August  31,  2000 are not  necessarily  indicative  of the  results  that may be
expected for the fiscal year ending November 30, 2000.

The Company's  results of operations  for the three month and nine month periods
ending August 31, 1999 have been restated to reflect the discontinued operations
of the Company's wholly owned subsidiary,  NACO Composites,  Inc. The results of
operations of the  discontinued  segment are shown  separately  as  discontinued
operations, net of applicable income taxes.

Certain  information  and footnote  disclosures  normally  included in financial
statements prepared in accordance with generally accepted accounting  principles
have been omitted.  Accordingly,  these financial  statements  should be read in
conjunction  with the Company's  financial  statements  and related notes in the
Company's Annual Report on Form 10-KSB for the year ended November 30, 1999.

NOTE B - INVENTORY
------------------
Inventory consisted of the following:

                                     August 31,      November 30,
                                       2000              1999
                                      -------          -------
Raw materials                      $  233,751          187,813
Work In Process                           884                0
Finished goods                        394,632          401,608
Less - valuation allowance            (80,000)         (60,960)
                                      -------          -------
                  Total            $  549,267          528,461
                                      =======          =======


NOTE C - DIVIDENDS
------------------
Dividends on the preferred  stock are  cumulative at 7%. At August 31, 2000, the
cumulative  amount of dividends accrued was $208,419.  Of this amount,  $208,419
was in arrears.

NOTE D - EARNINGS PER SHARE
---------------------------
The Company has adopted SFAS No. 128,  "Earnings Per Share,"  which  establishes
new standards for computing and  presenting  earnings per share.  No restatement
was required for prior year's  earnings per share  figures to conform to the new
standard.  Basic earnings per common share are  calculated by dividing  adjusted
net income by the average  number of shares of common stock  outstanding  during
the  period.  The  calculation  of diluted  earnings  per share of common  stock
assumes the dilative effect of the Company's cumulative preferred stock, options
and warrants.  During the  nine-month  period ending August 31, 2000, the market
price did not exceed the option price for the  outstanding  options and warrants
and therefore no dilution  occurred.  When conversion of potential common shares
has an  anti-dilutive  effect,  no conversion is assumed in the diluted earnings
per share calculation.


                                       8
<PAGE>

                              NACO INDUSTRIES, INC.
                              ---------------------
                   Notes to Financial Statements (Unaudited)
                   -----------------------------------------
                                 August 31, 2000
                                 ---------------

NOTE E - PREFERRED STOCK AND WARRANTS
-------------------------------------
There were no shares of  capital  stock sold or  warrants  exercised  during the
three months ending August 31, 2000.

NOTE F - DEBT AND LOAN AGREEMENTS
---------------------------------
At August 31, 2000, the outstanding  balance of the Company's  revolving line of
credit was $582,299. This line of credit was entered into on April 22, 1999 with
Wells Fargo Business  Credit.  The amounts,  available  under the facility,  are
based on a  percentage  of accounts  receivable  and  inventories.  This line of
credit matures April 30, 2002. As of August 31, 2000 the Company was technically
not in  compliance  with the  "Minimum  [Pre-tax]  Net Income"  covenant and the
"Minimum  Net Worth"  covenant.  The  $582,299  line of credit  balance has been
classified as current  because of the technical  non-compliance.  At the present
time Wells Fargo Business  Credit has not granted a waiver,  however the Company
is currently working with Wells Fargo Business Credit to reset the covenants.

NOTE G - STOCK OPTIONS
----------------------
In May 2000, the Company granted a non-qualified  stock option for 20,000 shares
to Jack Prust,  a new director of the Company.  The options  vested on the grant
date,  and are  exercisable  anytime  while  serving as a director for up to ten
years. The options have an exercise price of $3.00.

NOTE H - RELATED PARTY OPERATING LEASES
---------------------------------------
In December 1999, the Company entered into two  related-party  lease  agreements
for land,  building and equipment with PVC, Inc., a company owned by Verne Bray,
the CEO,  Chairman of the Board,  and majority  stockholder of the Company.  The
terms of the  leases are for a period of five years  commencing  December  1999.
Rentals  begin at $13,500  per month for the land and  building,  and $9,500 per
month for various pieces of equipment.  Upon each annual  anniversary  date, the
monthly rentals for each lease will be adjusted by the amount of any increase in
the Consumer  Price Index over the preceding  year. The previous lease for land,
building  and  equipment,  which was  executed  by the  Company and Mr. Bray and
expired  December 31, 1999,  required  lease  payments of $9,300 per month.  The
lease amounts were  negotiated at the  fair-market  rental value and approved by
the disinterested members of the Company's Board of Directors.

In March  2000,  Mr.  Verne  Bray,  Chairman  of the  Board  and CEO,  signed an
indemnification  agreement to hold the Company harmless for funds paid on behalf
of  Rimshot,  a  limited  liability  company  owned  by a son of Mr.  Bray.  The
agreement  covers $259,144 of costs advanced to Rimshot for startup  operations,
and $52,087 for principal and interest payments made on leased machinery used by
Rimshot through  November 30, 1999. The agreement calls for monthly  payments of
$2,500 beginning October 1, 2000. After October 1, 2001, the note bears interest
at the applicable federal rate. Pursuant to the indemnification  agreement,  Mr.
Bray  conveyed  to the  Company  a  security  interest  in all PVC.  Inc.  lease
receivables  from the  Company.  The board of directors  approved the  Company's
execution of the indemnification  agreement.  The Company also signed a security
agreement with PVC, Inc. which allows the Company to offset payments due to PVC,
Inc. in the event of default on the indemnification agreement.

The Company has paid as of August 31, 2000 an  additional  $16,001 for principle
and interest payments on leased machinery used by Rimshot.  This amount has been
added  to the  amount  recorded  as due  from Mr.  Bray in  accordance  with the
indemnification agreement.

In May 2000, one of the two lease  agreements  NACO has for equipment being used
by  Rimshot  was  transferred  to PVC,  Inc.  a Company  owned by Mr.  Bray.  On
September 5, 2000 the second lease was  transferred  to PVC,  Inc.  also.  These
leases are now the sole  obligation of PVC, Inc. and the Company was  completely
released from further obligations.


                                       9
<PAGE>


                              NACO INDUSTRIES, INC.
                              ---------------------
                   Notes to Financial Statements (Unaudited)
                   -----------------------------------------
                                 August 31, 2000
                                 ---------------


NOTE I - PROVISION FOR INCOME TAXES
-----------------------------------
The Company has loss carry forwards from previous fiscal years of  approximately
$1,285,000 that may be applied  against future taxable  income.  These operating
loss carry forwards expire in the years 2009 through 2020. The interim financial
statements  reflect a tax  provision  for net  income to date and  deferred  tax
assets have been adjusted accordingly.

NOTE J - CONTINGINCIES
----------------------
The Company is a defendant in a lawsuit filed by one of its former employees who
owned a building that had been leased by the Company.  The suit asks for damages
of approximately  $41,000.  The Company believes the suit is completely  without
merit and has  filed a  counter-claim  and  intends  to  vigorously  defend  its
position.

The Company has submitted a dispute with a subcontractor  to arbitration  before
the American  Arbitration  Association.  Management and its legal council are of
the opinion that funds in escrow,  approximately $64,500, are properly the funds
of the Company,  and that the Company should be entitled to substantially all of
such funds.




                                       10
<PAGE>


Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations


Introduction

NACO  Industries,  Inc.  ("NACO" or the "Company") is a  manufacturing  company,
which produces and sells polyvinyl  chloride "PVC" and composite  products.  The
Company's  primary line of business  consists of manufacturing PVC pipe fittings
and  valves,  which are sold  throughout  the United  States  through  wholesale
distributors to irrigation, industrial, construction and utility industries. The
Company manufactures and sells fabricated fittings (4" through 30" in diameter),
as well as molded fittings (4" though 10" in diameter). Pipefittings produced by
the Company  include tees,  reducers,  elbows,  couplers,  end caps,  and bolted
repair couplers.  NACO also manufactures and sells PVC valves (4" through 12" in
diameter).

Results of Operations

     The following  discussion relates to the three months and nine months ended
August 31, 2000 and August 31,  1999,  respectively.  For  comparison  purposes,
percentages  of  sales  will be  used  rather  than  dollars.  In the  following
discussion,  the three  months  ended  August 31,  2000 and August 31,  1999 are
referred to as 3Q00 and 3Q99,  respectively.  The nine months  ended  August 31,
2000 and August 31,1999 are referred to as 9M00 and 9M99, respectively.  Readers
are cautioned  that results of operations  for the three and nine months periods
ended August 31, 2000 are not necessarily  indicative of the results that may be
expected for the fiscal year ending November 30, 2000.

     Overview. The Company sustained an operating loss after taxes of $(106,257)
for 3Q00  compared to an operating  profit after taxes of $28,559 for 3Q99.  The
Company  sustained an operating profit after taxes of $148,809 for 9M00 compared
to an  operating  profit  after taxes of $301,503  for 9M99.  Gross  margin as a
percentage of sales for 3Q00 and 3Q99 was 36.7% and 43.8%,  respectively.  Gross
margin  as a  percentage  of  sales  for 9M00 and  9M99  was  40.7%  and  46.1%,
respectively.  The reduction in the Company's operating profit and gross margins
was  mainly  due to two  factors.  1) As  described  in  greater  detail  below,
increases  in raw  material  costs  during the past year have  continued  to put
downward  pressure on the  Company's  gross  margin and 2) the Company  believes
demand for PVC products in the Company's industry is lower than it was in 1999

     Net Sales: Net sales for 3Q00 decreased by 11.3% to $1,554,360, compared to
net sales of $1,752,679 for 3Q99.  Management believes the increase in the price
of PVC pipe from 3Q99 to 3Q00  contributed  to the  decline in sales.  Marketing
reports  indicate that bigger  projects may have been postponed or cancelled due
to higher costs.  The PVC fittings  market has been strong during the past year,
but appears to be softening.  Another contributing factor was the acquisition by
one of the Company's  large customers of a fitting  manufacturer.  In the period
since the  acquisition,  the Company's  customer has  significantly  reduced its
orders to the Company,  and appears to be  purchasing  most of its fittings from
the acquired manufacturer. The Company increased prices on its products by 5% in
October 1999 and implemented  another 5% price increase  effective April 1, 2000
in an effort to mitigate the continuing rise in raw material  prices.  Net sales
for 9M00 increased 5.4% from 9M99. Net sales were  $6,112,023 and $5,796,937 for
9M00 and 9M99 respectively.

     Gross  Margin.  Gross margin as a percentage of sales for 3Q00 and 3Q99 was
36.7% and 43.8%, respectively.  Margins decreased mainly due to increases in raw
material costs, and rent. Raw material prices continued to rise during 2Q00. Raw
materials  as a  percentage  of sales  for 3Q00 and 3Q99  were  29.6%  and 24.4%
respectively. The Company increased prices on its products by 5% in October 1999
and another 5%  effective  April 1, 2000 in an effort to offset this  continuing
rise in raw  material  prices.  However,  because of  competitive  pressure  the
Company hasn't been able to raise prices  sufficiently to completely  offset the
rise in raw material  costs.  Rent expense as a percentage of net sales for 3Q00
and 3Q99 was 4.2% and 2.1% respectively. Rent expense increased 75.7% or $28.014
from  3Q99 to  3Q00  primarily  due to  lease  payments  associated  with  lease
agreements  with PVC,  Inc.  Verne  Bray,  the  Chairman  of the Board and Chief
Executive  Officer of the Company is the principal  shareholder of PVC, Inc. The


                                       11
<PAGE>

terms of the  leases are for a period of five years  commencing  December  1999.
Rentals  begin at $13,500  per month for the land and  building,  and $9,500 per
month for various pieces of equipment.  Upon each annual  anniversary  date, the
monthly rentals for each lease will be adjusted by the amount of any increase in
the Consumer  Price Index over the preceding  year. The previous lease for land,
building  and  equipment,  which was  executed  by the  Company and Mr. Bray and
expired  December 31, 1999,  required  lease  payments of $9,300 per month.  The
lease  amounts were  negotiated at rates  considered  by the Company's  Board of
Directors to represent  the  fair-market  rental value and were  approved by the
disinterested  members of the Company's  Board of  Directors.  Labor and related
expenses  decreased  6.2%,  or  $23,639,  from 3Q99 to 3Q00  mainly  due to less
overtime  and lower  production  expenses,  mainly due to lower sales volume for
3Q00 compared to 3Q99.

     Selling:  Selling  expenses  were 24.6% of net sales for 3Q00,  compared to
22.9% for 3Q99. In actual dollars,  selling expenses decreased $18,981, or 4.7%,
from 3Q99 to 3Q00. The increase in selling expenses as a percentage of sales was
mainly due to the decline in the Company's sales identified above.  Freight as a
percentage  of net  sales  for 3Q00  and  3Q99  was 7.4% and 7.6%  respectively,
partially  due to  receiving  quantity  discounts on larger  freight  shipments.
Selling  supplies  expense  decreased  $14,497  from 2.7% in 3Q99 to 2.1% of net
sales in 3Q00  mainly  due to  timing  of  supply  purchases.  For 9M00  selling
supplies expense decreased only $8,297.

     General and administrative: General and administrative expenses represented
19.1% of net sales for 3Q00, compared to 15.3% for 3Q99. The increase was mainly
due to decreased  sales  volume and an increase in legal and outside  consulting
fees.  Overall,  general and  administrative  expenses  increased  $30,366  from
$267,196 to $297,562 from 3Q99 to 3Q00.  Legal,  accounting and outside services
as a percentage of net sales were 3.3% and 4.9% for 3Q99 and 3Q00  respectively.
The increase in dollars for legal,  accounting and outside  services was $18,387
from  3Q99 to 3Q00.  Legal  expenses  increased  mainly  due to  legal  expenses
occurred to defend  against two lawsuits  filed  against the Company by a former
vendor  and a  former  landlord.  (See  Part  II,  Item 1 for  details  on these
lawsuits).  Salaries, as a percentage of net sales,  decreased from 8.5% in 3Q99
to 7.1% in 3Q00 mainly due to two  factors:  1) Salaries  paid to the  Company's
executive  officers were held to the same levels as in fiscal 1999 and 2) salary
paid to the Company's CEO was  voluntarily  reduced by the CEO.  Lease  expenses
increased $7,322 due to new lease agreements  between NACO Industries,  Inc. and
PVC Inc.

     Other:  Other  expenses/revenues  were 3.9% for 3Q00,  compared to 3.1% for
3Q99 mainly due to increases in interest  expense.  Interest  increased  $11,031
from  3Q99 to 3Q00  mainly  due to  increased  borrowings  on the line of credit
compared to 3Q99. The effective  interest rates (interest expense divided by the
average  debt  balance for the period) for 9M00 and 9M99 were 11.87% and 13.58%,
respectively.

Liquidity and Capital Resources

         The  Company's  principal  sources  of  liquidity  have  been cash from
operations, credit facilities and equity financing. Cash provided from operating
activities  was $327,594 in 3Q00.  Cash as of August 31, 2000 was $46,714,  down
$11,359 from November 30, 1999.

         With the loss  incurred  by the  Company  during the fiscal  year ended
November 30, 1999,  primarily as a result of the  discontinued  NACO  Composites
operation, the Company's working capital position was reduced significantly. The
Company's  liquidity  position  improved during 9M00, due primarily to increased
sales and net income for the period.  The Company  decreased  trade  payables by
$372,046 from  November 30, 1999 to August 31, 2000.  At November 30, 1999,  the
Company was out over 90 days on trade  payables,  due  principally  to a lack of
operating  funds.  As of August 31,  2000,  the Company was current on its trade
payables.

         At August 31, 2000, the outstanding  balance of the Company's revolving
line of credit was  $582,299.  This line of credit was entered into on April 22,
1999 with Wells Fargo Business Credit.  The amounts available under the facility
are based on a percentage of accounts  receivable and  inventories.  The line of
credit matures April 30, 2002. As of August 31, 2000 the Company was technically
not in  compliance  with the  "Minimum  [Pre-tax]  Net Income"  covenant and the
"Minimum Net Worth"  covenant.  The covenant pre-tax income was $615,000 and the
Company's actual pre-tax net income was $238,859. The minimum net worth covenant
was $1,100,000; the Company's actual net worth was $872,007. At the present time
Wells Fargo has not granted a waiver for these defaults,  however the Company is
working with Wells Fargo to reset the covenants.


                                       12
<PAGE>

         Also,  on April 22,  1999,  a second  facility  was closed with WebBank
Corporation.  This facility was for  $1,100,000  and is secured by the Company's
current assets,  property and equipment,  and life insurance. It is payable with
interest  at 1.5% over the banks  prime  rate and  matures  April 30,  2014.  On
November 30, 1999, the Company was in default of WebBank's loan covenants.  In a
letter dated February 18, 2000,  WebBank provided a waiver that extended a grace
period to the Company with respect to meeting  certain  ratio  requirements  and
advances to affiliates  until August 31, 2000.  The waiver also extended a grace
period for the  debt-worth  requirement  until  November 30,  2000.  The Company
received a waiver of the default and has been given a twelve-month grace period.

         The  Company  currently  has plans to spend up to  $150,000  in capital
expenditures  to update and expand its  operations on the  condition  that in so
doing it will not adversely effect loan covenants.

         Management  believes  that its capital  resources on hand at August 31,
2000,  revenues from sales and bank  resources will be sufficient to satisfy its
working  capital  requirements  for  the  foreseeable  future.  There  can be no
assurance, however, that additional debt or equity financing may not be required
or that, if such financing is required,  it will be available on terms favorable
to the  Company,  if at  all.  The  Company's  inability  to  secure  additional
financing  or raise  additional  capital  would  likely have a material  adverse
effect on the  Company's  operations,  financial  condition,  and its ability to
continue to grow and expand its operations.

Factors Affecting Future Results

         The Company's operating results are subject to certain risks that could
adversely  affect the  Company's  operating  results  and its ability to operate
profitably.  The  Company's  operating  results  could be adversely  affected by
increased  competition in the markets in which the Company's  products  compete,
manufacturing delays and inefficiencies  associated with expanding the Company's
manufacturing  capacity,  adverse weather conditions,  increases in labor or raw
materials, changes in economic conditions in its markets, unanticipated expenses
or events and other  factors  discussed in this report and the  Company's  other
filings with the Securities and Exchange Commission.


                                       13
<PAGE>


PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

                  Lund  Engineering.  During its fiscal year ending November 30,
         1999, and in the ordinary course of its business, NACO Industries, Inc.
         (Company)  entered  into a series of  contracts  with a  Contractor  in
         Bountiful,  Utah known as WCI,  LLC  ("WCI"),  for the  manufacture  of
         various  premanufactured  fiberglass  materials and parts to be used in
         construction.  In order to meet its contract requirements,  the Company
         outsourced production under these contracts to a subcontractor known as
         Lund Engineering and Manufacturing,  Inc., a Utah corporation ("LUND").
         As of  November  30,  1999 the  Company had timely paid all of the LUND
         invoices  submitted to it for jobs performed by LUND, and believed that
         it had paid for such work in full.  However, on December 31, 1999, LUND
         forwarded  to  the  Company  a  demand  for  approximately  $70,000  of
         additional amounts which it claimed, based upon invoices dated December
         31, 1999, and pertaining to jobs performed and completed earlier in the
         year.  The majority of LUND's  claims appear to be based on overtime it
         claims that it was  required to work for the  Company's  jobs,  and for
         which it claims it was entitled  because a Company  employee  allegedly
         agreed that the Company would pay it.

                  During  the  spring  of  2000,  Lund  has  filed a  number  of
         materialmen's  or mechanics  liens against the  properties  where these
         materials  were  supplied.   Also,  WCI,  with  whom  the  Company  was
         contracting on these  projects,  withheld  substantial  payments to the
         Company.  Accordingly, in an effort to resolve this matter, the Company
         has now entered into an Arbitration Agreement,  effective May 15, 2000,
         with Lund,  whereby this dispute has been submitted to arbitration.  In
         connection  with the  arbitration,  all of the various  mechanics'  and
         materialmen's  liens were  released;  and, in exchange  for the deposit
         into escrow of $64,478.70 by WCI, the Company and WCI have entered into
         a mutual  release  of claims  against  each  other  pertaining  to this
         project.  This matter has now been submitted to arbitration  before the
         American Arbitration Association, and the Company's legal counsel hopes
         to schedule the dates for  arbitration  in the near future.  Management
         and its legal council are still of the opinion that the funds in escrow
         are properly the funds of the Company,  and that the Company  should be
         entitled  to  substantially  all of such  funds;  and,  the  Company in
         addition is asserting  counterclaims  against LUND, but management does
         not  believe  that  LUND has the  financial  capacity  to  satisfy  any
         significant  judgment.  The Company is primarily seeking the release of
         the escrowed funds in the arbitration.

                  Draegers: In October of 1996, NACO Composites,  Inc., a wholly
         owned subsidiary of the Company, entered into a lease agreement for the
         use of a building in Ogden,  Utah as a  manufacturing  facility for the
         production of certain  fiberglass  products.  That subsidiary has since
         been merged into the Company,  and the lease  expired on September  30,
         1999.  In  connection  with that lease,  Ronald and Rita  Draeger,  the
         owners and  landlord of the  property,  have now filed suit against the
         Company in the Second District Court of Weber County,  State of Utah on
         or about  April 3, 2000 in the amount of  $41,305,  or the amount to be
         proven  at  Court,  plus  interest,  costs  of Court  and a  reasonable
         attorney's  fee. The Company has in turn  answered  this  lawsuit,  and
         filed a counterclaim  against the Draegers on May 4, 2000 for an amount
         in excess of  $240,000,  based upon alleged  agreements  by Draegers to
         reimburse  the Company for certain  improvements  made to the building,
         and based upon Draegers' alleged breach of contract for repudiating the
         Company's  option to purchase  the  building,  and for  violation  of a
         covenant not to compete, and other miscellaneous  damages.  Although it
         may be too  early  in the  litigation  to  predict  the  outcome,  with
         discovery still to take place prior to any trial. Management is hopeful
         that this action can be settled by the parties'  good faith  efforts to
         resolve the matter before trial.  Management and legal counsel  believe
         that the Company has a reasonable basis for its defense to this action,
         and reasonable grounds for its counterclaim.

Item 2 - Changes in Securities and Use of Proceeds

         None


                                       14
<PAGE>


Item 6 - Exhibits and Reports on Form 8-K

     Exhibit No.                  Description
     -----------                  -----------

     (a)  Exhibits. The following are files as exhibits to this report.

     27                     Financial Data Schedule

     (b)  Reports on form 8-K.       None









                                       15
<PAGE>




SIGNATURES

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

Naco Industries, Inc.
Registrant

By:/s/ VERNE E. BRAY                                         October 12, 2000
--------------------                                         ----------------
       Verne E. Bray                                              Date
       CEO  (Principal executive officer)


By:/s/ W. MICHAEL HOPKINS                                    October 12, 2000
-------------------------                                    ----------------
       W. Michael Hopkins                                          Date
       President


By:/s/ JEFFREY J. KIRBY                                      October 12, 2000
-----------------------                                      ----------------
       Jeffrey J. Kirby                                            Date
       Executive Vice President/CFO
       (Principal financial and accounting officer)






                                       16