SEC File No. 33-85044-d

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-QSB

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

                  For the quarterly period ended August 31,1996

                        Commission File number 33-85044-d

                              NACO Industries, Inc.
             (Exact Name of Registrant as specified in its charter)

                      Utah                        48-0836971
           (State of Incorporation)           (Federal I.R.S. No.)

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

                   Registrant's Telephone Number 801-753-8020


         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, 1996, the  Registrant  had 1,500,000  shares of Common
Stock and 126,412 shares of Preferred Stock outstanding.






                                       1



<PAGE>




                         PART I - FINANCIAL INFORMATION


Item 1 - Financial Statements
See attached Financial Statements for August 31, 1996.






                                       2

<PAGE>











                              NACO Industries, Inc.

                              FINANCIAL STATEMENTS


                                 August 31, 1996





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PART 1 - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS
(UNAUDITED)

NACO INDUSTRIES, INC.
BALANCE SHEETS (UNAUDITED)
                                               Aug. 31           November 30
                                              ---------          ------------ 
ASSETS                                           1996                1995
------                                          ------              ------    
Current assets:
  Cash                               $          248,402   $         133,481
  Accounts receivable, net of
   allowances of $72,075 / $47,257              499,881             444,970
  Inventory                                     596,312             644,711
  Prepaid income taxes                                0             120,226
  Deferred income taxes                          17,440                   0
  Other current assets                          138,641              51,455
                                            -----------          ----------
       Total current assets                   1,500,676           1,394,843
                                            -----------          ----------
Property and equipment:
  Land                                           40,700              40,700
  Buildings and improvements                    516,889             508,978
  Equipment and vehicles                      1,770,306           1,692,388
  Equipment construction in progress            116,718              28,438
                                            -----------         -----------
       Total property and equipment           2,444,613           2,270,504
                                      
  Accumulated depreciation                  (1,180,416)         (1,022,553)
                                            ----------          ----------
       Net property and equipment            1,264,197           1,247,951
                                            ----------          ---------- 
Other assets:
  Intangible and other assets                   18,175             210,105
                                            ----------          ----------
       Total other assets                       18,175             210,105
                                            ----------          ----------
       Total assets                 $        2,783,048   $       2,852,899
                                    ==================   =================   



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<PAGE>



NACO INDUSTRIES, INC.
BALANCE SHEETS (UNAUDITED)
                                                 Aug. 31           November 30
                                                ---------         -------------
LIABILITIES:                                       1996                 1995
--------------                                    -------             ------- 
Current liabilities:
  Accounts payable                           $     347,410    $       81,289
  Accrued expenses                                 106,104           144,700
  Income taxes payable                                 200                 0
  Line of credit                                   684,756           805,000
  Current portion of long-term 
   obligations                                     187,817           344,727
  Payable to related party                           4,649             9,206
                                            --------------    --------------  
       Total current liabilities                 1,330,936         1,384,922

Long-term liabilities:
  Long-term obligations, less 
   current portion                                745,662         1,290,479
  Deferred income taxes                            75,000            81,250
                                            -------------     -------------
       Total long-term liabilities                820,662         1,371,729
                                            -------------     -------------
       Total liabilities                        2,151,598         2,756,651

Stockholder's equity:
  Common stock, $.01 par value;             
    10,000,000 shares authorized;           
    2,060,073 and 2,127,758 shares 
    issued (including 504,695 and 
    560,073 shares in treasury)                   20,047            20,047
  Preferred Stock,  7% Cummulative, 
    convertible $3.00 par value
    Shares authortized; 330,000. 
    Shares issued 126,412
    (Aggregate liquidation preference 
     $758,472)                                   379,236                 0
  Additional paid-in capital                      85,037                 0
  Retained earnings                              317,833           246,904
                                            ------------      ------------
                                                 802,153           266,951
  Less: treasury stock - at cost,
   504,695 and 560,073 shares                   (170,703)         (170,703)
                                            ------------      ------------
       Total stockholder's equity                631,450            96,248
                                            ------------      ------------

       Total liabilities and
         stockholder's equity            $     2,783,048    $    2,852,899
                                         ===============    ============== 

See Notes to Financial Statements.




                                        5






<PAGE>




NACO INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS  (UNAUDITED)

                                                   Nine months ended
                                                August 31         August 31
                                              -----------------------------
                                                  1996               1995
                                                 -------           -------
Cash flows from operating activities
  Net income                               $     70,929      $    (63,563)
  Adjustments to reconcile net 
   income to net cash provided by 
   (used in) operating activities:
     Depreciation                               161,441            149,351
     Amortization                                     0             22,222
     Deferred income taxes                      (23,690)             1,550
   (Increase) decrease in:
     Accounts receivable, net                   (54,911)           (30,897)
     Inventory                                   48,399            (88,241)
     Prepaid income taxes                                          (21,893)
     Taxes Receivable                           120,226                  0
     Other                                      (87,186)           (49,567)
   Increase (decrease) in:
     Accounts payable                           266,121           (136,198)
     Accrued expenses                           (38,596)           (54,808)
     Income taxes payable                           200            (30,942)
                                           ------------      -------------
        Net cash provided by (used 
         in) operating activities               462,933           (302,986)
                                           ------------      -------------
Cash flows from investing activities
  Net change  property and equipment           (177,687)          (494,259)
  Investment in intangible and other 
    assets                                      191,930            (54,912)
                                           ------------     --------------
        Net cash used in investing 
         activities                              14,243           (549,171)

Cash flows from financing activities
  Net change in line of credit                 (120,244)           520,000
  Payments on related party loan                 (4,557)           (27,556)
  Payments on long-term debt                   (815,452)
  Proceeds from short term notes 
   payable
  Proceeds from long-term loans                 113,725            428,936
  Proceeds from issuance of common stock                              (677)
  Proceeds from issuance of preferred stock     464,273            (13,449)
  Purchase of treasury stock                          0             22,891
                                           ------------       ------------  
        Net cash provided by (used in)
         financing activities                  (362,255)           930,145
                                           ------------       ------------
Increase (decrease) in cash                     114,921             77,988

        Cash, beginning of period               133,481              1,846
                                           ------------       ------------
        Cash, end of period               $     248,402        $    79,834
                                          =============       ============
See Notes to Financial Statements

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<PAGE>




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

                                                   Three months ended                 Nine months ended
                                                       August 31,                          August 31,
                                            --------------------------------    ------------------------------    
                                                 1996             1995             1996               1995
                                              --------          --------         --------           -------- 

<S>                                     <C>              <C>               <C>               <C>             
Sales, net                              $     1,488,340  $     1,278,521   $     4,943,961   $      4,330,838

Cost of goods sold                              866,258          803,307         2,847,281          2,557,258
                                        ---------------  ---------------   ---------------   ----------------      
       Gross profit                             622,082          475,214         2,096,680          1,773,580

Operating expenses:
  Selling expenses                              400,947          297,835         1,016,138            943,715
  General and administrative
   expenses                                     276,178          270,851           827,018            787,646
  Other                                               0                0                 0             (8,857)
                                        ---------------  ---------------   ---------------   ----------------
       Total operating expenses                 677,126          568,686         1,843,156          1,722,504
                                        ---------------  ---------------   ---------------   ----------------
       Income (loss) from operations            (55,044)         (93,472)          253,524             51,076

Other income (expense):
  Interest income                                   491              507             1,997              2,508
  Interest expense                              (45,229)         (65,604)         (157,592)          (161,847)
                                        ---------------  ---------------   ---------------   ----------------   
       Total other income (expense)             (44,738)         (65,097)         (155,595)          (159,339)
                                        ---------------  ---------------   ---------------   ---------------- 
Income (loss) before income taxes               (99,782)        (158,569)           97,929           (108,263)

Income tax expense (benefit)                    (42,159)         (32,732)           27,000            (44,700)
                                        ---------------  ---------------   ---------------   ----------------
       Net income (loss)                 $      (57,623)  $     (125,837)    $      70,929    $       (63,563)
                                        ===============  ===============   ===============   ================ 
Earning per common share:
  Primary:
    Earning from net income              $        (0.04)           (0.08)             0.05              (0.04)
    Dividends in arrears                          (0.02)                             (0.02)
                                         --------------    -------------    --------------   ----------------
    Net Earnings                         $        (0.06)           (0.08)             0.03              (0.04)
                                         ==============    =============    ==============   ================ 
  Fully Diluted:
    Earning from net income             $        (0.03)   $        (0.08)   $         0.04    $         (0.04)
    Dividends in arrears                         (0.02)                              (0.02)
    Net Earnings                        $        (0.05)   $        (0.08)   $         0.02    $         (0.04)
                                        ==============    ==============    ==============    ===============
Weighted average number of common 
 shares outstanding:
    Primary                                   1,500,000        1,500,000         1,500,000          1,500,000
    Fully Diluted                             1,752,824        1,500,000         1,752,824          1,500,000

</TABLE>


See Notes to Financial Statements


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<PAGE>





                              NACO INDUSTRIES, INC.
                    Notes to Financial Statements (Unaudited)
                                 August 31, 1996


NOTE A - BASIS OF PRESENTATION

Management has elected to omit  substantially  all footnotes to these  unaudited
quarterly financial  statements.  In the opinion of management,  all adjustments
(consisting only of normal recurring accruals)  considered  necessary for a fair
presentation have been included.  Operating results for the three and nine month
periods ended August 31, 1996 are not necessarily indicative of the results that
may be expected for the fiscal year ending November 30, 1996.

NOTE B - DIVIDENDS

Dividends on the  preferred  stock are  cumulative at 7%. At August 31, 1996 the
cumulative amount of dividends in arrears was $34,452.

NOTE C - EARNINGS PER SHARE

Primary earnings per common share is calculated by dividing  adjusted net income
by  the  average  shares  of  common  stock  of the  Company  and  Common  Stock
equivalents  outstanding  during the period.  Net income has been  adjusted  for
dividends in arrears as of August 31, 1996. Common stock  equivalents  represent
certain  outstanding  stock options and  warrants.  During the period the market
price did not exceed the option price for the  outstanding  options and warrants
and therefore no dilution occurred,

The calculation of fully diluted  earnings per share of Common Stock assumes the
dilutive effect of the Company's Cumulative Preferred Stock.

NOTE D - CONSULTING AGREEMENTS, WARRANTS AND OPTIONS

In January 1996 the Company  entered into an agreement with Extol  International
corporation  ("Extol") to provide  investor  relations and financial  consulting
services to the Company. As compensation for its services,  Extol will be paid a
monthly retainer of $3,000, for an initial term of six (6) months, beginning Jan
1, 1996. Thereafter,  it shall continue on a month to month basis. Out of pocket
expenses for travel, telephone and postage will also be reimbursed. In addition,
Extol  will  purchase  for $100,  a warrant  to  purchase  50,000  shares of the
Company's Common Stock at $3.50 per share.  This warrant will be exercisable for
five  (5)  years  from  the  date  of  issuance,   and  will  carry  "piggyback"
registration rights.

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<PAGE>

NOTE E - DEBT

Subsequent to quarter end the Company has restructured it's debt with Bank IV to
better meet the cash flow needs of the Company.  Two hundred and twenty thousand
dollars  ($220,000)  was moved from the short term  revolver  to a four (4) year
long term note. Some of the growth over the past two years was financed from the
short term line. This restructure will free up that line for operating capital.

NOTE F - PREFERRED STOCK

On  March 7,  1996 the  Company  initiated  an  offering  of Units  exempt  from
registration  under the Securities Act of 1933. The offering consists of 175,000
Units at an offering price of $6.00. Each Unit consists of one share of Series 1
Class A 7% Cumulative  Convertible Preferred Stock and a Warrant to purchase one
share of Common  Stock at an  exercise  price of $3.75  per  common  share.  The
offering is being made on a "best  efforts"  basis and will  continue  until the
earlier of sales of a maximum of 175,000  Units,  or December 31, 1996.  Selling
commissions  equal to 10% of the  offering  price of the  Units  will be paid to
Placement Agents participating in the offering.

During the third  quarter,  the  Company  sold  13,000  units and  received  net
proceeds of $70,200.






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<PAGE>




ITEM 2.           MANAGEMENTS'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) products. The Company's primary line
of business consists of 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 27" in diameter), as well as molded fittings (4"
though 10" in  diameter).  Pipe fittings  produced by the Company  include tees,
reducers,  elbows,  couplers,  end caps, and bolted repair  couplers.  NACO also
manufacturers and sells PVC valves (4" through 12" in diameter).

RESULTS OF OPERATIONS

For the three and nine months ended August 31, 1996 and 1995.

The Company's  fiscal year ends on November 30. In 1995 the company  changed its
fiscal year end to November 30. Previously the fiscal year ended February 28. In
the following discussion, the quarters ended August 31, 1996 and August 31, 1995
are the third quarter of the Company's  fiscal year ending November 30, 1996 and
the second quarter of the fiscal year ended November 30, 1995 respectively.  The
year ended  November  30, 1995 was a short year due to the change in fiscal year
end. The two  quarters are referred to herein as 3Q 96 and 3Q 95,  respectively.
The nine months ended August 31, 1996 and August 31, 1995 are referred to herein
as 9M 96 and 9M 95 respectively.

NEW OPERATION

Early  in  1995  the  Company  completed  remodeling  it's  Logan  facility  and
installing  the  equipment for  fiberglass  reinforced  fittings.  This gave the
Company the capability to produce other related composite products. The addition
of composite  products in March 1995  represented  an expansion of the Company's
product line. The composite lines  contribution to the results of operations has
improved  over last year and is  anticipated  by  management  to have a positive
impact on future operating results.

GENERAL DISCUSSION OF QUARTERS OPERATING RESULTS

During the three months ended August 31, 1996,(3Q 96), the Company  sustained an
operating loss before tax of $(99,782)  compared to an operating loss before tax
of $(158,569) for 3Q 95.
The quarter of June to August is typically a slow quarter due to the seasonality
of the agricultural  market.  For the nine months ended August 31, 1996,(9M 96),
the Company had a pre tax income of $97,929 compared to a pre tax operating loss
of $(108,263) for the nine months ended August 31, 1995,(9M 95),  primarily as a
result of increased sales volume during 9M 96.


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<PAGE>



SALES

Net sales of  $1,488,340  for 3Q 96  increased  by 16%  compared to net sales of
$1,278,521  in 3Q 95 due  mainly  to  increased  volume.  For 9M 96 net sales of
$4,943,961  increased 14% over 9M 95. This is mainly due to increased volume. In
2Q 96 the  Company  had a  large  sale to a  foreign  exporter  that  had a very
positive impact on the results of operations.  The Company expects other similar
large sales in the future,  but not on a regular or predictable basis. There can
be no assurance,  however, that the Company will have similar large sales in the
future.

GROSS MARGIN

Gross margin as a percent of sales for 3Q 96 was 41.8%  compared to 37.2% 3Q 95.
The  increase in gross margin is mainly due to the higher  volume of  production
during 3Q 96 which absorbed more overhead and spread fixed costs over the larger
volume.  The larger volume was due to increased sales over the previous year and
the fact that the Company had reduced  inventories  during 3Q 95 by $151,618 and
increased inventory during 3Q 96 by $36,553. The result was increased production
during 3Q 96 of an  estimated  $188,000  over the  production  for 3Q 95.  Gross
margin for 9M 96 was 42.4%  compared to 40.9% for 9M 95. This is also mainly due
to increased  production due to increased sales and lower inventories  during 9M
96. The  Company  takes a physical  inventory  of the top 80% of the  dollars in
inventory every quarter and adjusts perpetual inventory to actual. This helps to
offset any  inventory  adjustments  at year end. At year end the Company takes a
complete physical  inventory.  Any year end adjustments are reflected during the
fourth quarter after the year end physical inventory is completed.

SELLING

Selling  expenses were  $1,016,130 or 20.6% of net sales for 9M 96 compared to $
$943,715 or 21.8% for 9M 95. The main reason for the decrease as a percentage of
net sales is increased sales. Salaries costs increased $283,777 or 11.9% from 9M
95 to 9M 96  primarily  as a result of the  addition  of a salesman to cover the
midwest and south.  Management  believes  this area has a greater  potential and
needs more coverage. Taxes and benefits increased along with salaries from 9M 95
to 9M 96 due to the additional salesman. Sales supplies increased $33,252 or 34%
from 9M 95 to 9M 96 mainly  due to costs for  publishing  and  distributing  new
product catalogs and due to increased sales.

GENERAL AND ADMINISTRATIVE

General and  administrative  expenses were $827,018 or 16.7% of net sales for 9M
96 compared to $787,646 or 18.2% of net sales for 9M 95. The main reason for the
decrease as a percentage of net sales is increased sales.


                                       11

<PAGE>

Interest  expense  for 9M 96 was  $157,592  or 3.2%  of net  sales  compared  to
$161,847  or 3.7% of net sales  for 9M 95.  Interest  expense  is down for 3Q 96
primarily  because the operating line was $415,000 less during 3Q 96 compared to
3Q 95. This is primarily due to the improved cash flow from increased  sales and
to the public  offering  explained  under the paragraph  "Liquidity  and Capital
Resources" that follows.

LIQUIDITY AND CAPITAL RESOURCES

Cash  as of 9M 96 was  $248,402,  up  $114,921  from  the  end of the  Company's
previous  fiscal year,  November 30, 1995.  During the quarter 1Q 96 the Company
closed its initial public  offering of preferred  stock after receiving funds in
the equity market of $680,472.  After payment of commissions and offering costs,
the Company netted $394,073 from the offering.  These net offering proceeds have
been  applied to  marketing  expenses  (approximately  $40,000),  new  equipment
(approximately $250,000), and working capital (approximately $104,000). The cost
of the  offering was stated on the year ended  November  30, 1995 balance  sheet
under  intangible  assets.  Following the offering the costs were netted against
the offering  proceeds  resulting in the  decrease in  intangible  assets on the
balance  sheet for 9M 96. Cash also was  increased  during the  current  year by
$120,226  for  refunds  of  taxes  paid in the  prior  year  because  of the net
operating  loss for the short year  ended  November  30,  1995.  The  Company is
current in all of its financial obligations to vendors and lending institutions.
The company  continues to address cash flows by  controlling  inventory  levels,
increasing the sales effort,  and reducing  expenses.  Subsequent to quarter end
the Company has restructured it's debt with Bank IV to better meet the cash flow
needs of the Company.  Two hundred and twenty  thousand  dollars  ($220,000) was
moved from the short term  revolver  to a four (4) year long term note.  Some of
the growth over the past two years was financed  from the short term line.  This
restructure frees up that line of credit for operating capital.

The Company  believes  that its capital  resources  on hand at August 31,  1996,
together with on going revenues from sales, and it's lending  arrangements  will
be sufficient to satisfy its working  capital  requirements  for the foreseeable
future.




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<PAGE>







                           PART II - OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

         a)       Exhibits
                  27.1   Financial Data Schedule

         b)       Reports for Form 8-K
                  No reports on Form 8-K were  filed  during  the quarter  ended
                  August 31, 1996.





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                                   SIGNATURES

The unaudited interim financial  statements  furnished by management reflect all
adjustments  which are, in the  position  of  management,  necessary  for a fair
presentation of financial position and results of operation.

In  accordance  with to the  requirements  of the  Securities  Exchange Act, 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                         10/14/96
    Verne E. Bray                             Date
    President



By  /s/ Jeffrey J. Kirby                      10/14/96
    Jeffrey J. Kirby                          Date
    Principal Financial Officer


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