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

                                   FORM 10-KSB

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

     For the fiscal year ended December 31, 1996

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

     For the transition period from                   to                     .
                                    -----------------    --------------------
     Commission file number: 1-4799

                           NATIONAL ENTERPRISES, INC.
                  --------------------------------------------
                 (Name of small business issuer in its charter)

            Indiana                                     35-0540454
 ------------------------------              ----------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

 90 Adelaide Street West, Suite 300
 Toronto, Ontario, Canada                                          M5H 3V9
----------------------------------------                           --------
 (Address of principal executive offices)                         (Zip Code)

Issuer's telephone number:  416-363-8300

Securities registered under Section 12(b) of the Exchange Act:  NONE

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

     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 [ ] No
[X]

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will be
contained,  to the best of the  registrant's  knowledge,  in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

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     State issuer's revenue for its most recent fiscal year: $1,661

     As of July 1, 1997 (using the  average of the bid and asked  prices on such
day) the aggregate market value of the voting stock held by  non-affiliates  was
$1,574,412.

     State whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the  distribution  of
securities under a plan confirmed by a court. Yes [ ] No [ X ]

     As of July 1, 1997, 72,587,698 shares of common stock, no par value, of the
Issuer were outstanding.

              Documents Incorporated by Reference into this Report

                                      None

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



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                                Table of Contents


                                                                            Page
                                                                            ----
PART I

         Item 1.     Description of Business                                   4
         Item 2.     Description of Property                                  14
         Item 3.     Legal Proceedings                                        21
         Item 4.     Submission of Matters to a Vote of Security Holders      21


PART II

         Item 5.     Market for Common Equity and Related Stockholder
                     Matters                                                  22
         Item 6.     Management's Discussion and Analysis or Plan
                     of Operation                                             23
         Item 7.     Financial Statements                                     25
         Item 8.     Changes In and Disagreements With Accountants 
                     on Accounting and Financing Disclosure                   36


PART III

         Item 9.     Directors, Executive Officers, Promoters and Control
                     Persons: Compliance with Section 16(a) of the Exchange
                     Act                                                      36
         Item 10.    Executive Compensation                                   38
         Item 11.    Security Ownership of Certain Beneficial Owners
                     and Management                                           38
         Item 12.    Certain Relationships and Related Transactions           39
         Item 13.    Exhibits and Reports on Form 8-K                         41


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In this Annual Report on Form 10-KSB,  all references to "dollars" and "$"are to
United  States  dollars,  except as  otherwise  noted.  Reference  to "C$" is to
Canadian  dollars and "ATS" is to Austrian  Schillings.  Conversion  of Austrian
Schillings  to United  States  dollars  herein  assumes a  conversion  rate of 1
ATS=$.081, the rate published in the Wall Street Journal on July 9, 1997.


                                     PART I

Item 1.  DESCRIPTION OF BUSINESS

Introduction.

     National  Enterprises,  Inc.  (together  with its wholly owned  subsidiary,
Argosy  Mining  G.m.b.H.,   hereafter  referred  to  as  the  "Company"),  is  a
corporation formed under the laws of the State of Indiana in 1940.

     The Company emerged from Chapter 11 bankruptcy  proceedings under a Plan of
Reorganization,  which was confirmed by the United States  Bankruptcy  Court for
the Eastern District of Virginia (Case No.  90-33935-S) on April 10, 1992. Since
emerging from bankruptcy proceedings,  the Company has never been profitable and
has  not  generated  sufficient  working  capital  to  sustain  its  operations.
Subsequent to emerging from bankruptcy and throughout 1996 the Company continued
its efforts to reorganize its business affairs through the sale of its remaining
inventory of  development  resort  lots,  adoption of a new  strategic  business
direction,  and  the  search  for a new  controlling  shareholder.  The  Company
achieved this objective late in 1996.

     On December 17, 1996, as part of a series of transactions which resulted in
a change in control of the  Company,  the  Company  acquired  all the issued and
outstanding  stock in Argosy Mining G.m.b.H.,  an Austrian  company  ("Argosy"),
from Argosy Mining Corp, a Canadian  company ("Argosy  Mining").  As a result of
the purchase of the stock of Argosy,  the Company acquired 100% of the ownership
interests  in nine  gold  exploration  properties  located  in  Austria  and the
business of the Company changed from the sale of resort home sites and panelized
public housing to gold mining and  exploration,  in particular  the  evaluation,
exploration and development of gold mining prospects located in Austria.

     Until the change in  control  in the  Company  and the  acquisition  by the
Company of the stock of Argosy in December, 1996, the business activities of the
Company  during 1996 were limited by lack of capital,  no  operational  business
plan and the lack of paid  employees.  The  Company  had  nominal  revenue  from
operations in 1996. During 1996, the Company had become an inactive  corporation
and  was  actively  marketed  by  its  directors  as  a  company  available  for
acquisition  by  another  corporation  seeking  to  merge  its  business  into a
reporting entity.


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<PAGE>

The Change In Control and Acquisition of Argosy.

     Starting in September, 1996, a series of transactions were initiated by the
Company,  Argosy Mining and Mercury  Immobililen Und Verwatungs  A.G., a company
incorporated  under the laws of Switzerland  ("Mercury"),  which resulted in the
sale of the Company's  remaining  inventory of development resort lots, adoption
of a new  strategic  business  direction,  through the sale of its wholly  owned
subsidiaries,  purchase of all the shares of Argosy and the change in control of
the Company. These transactions are summarized below.

     (a) By agreement,  dated September 3, 1996, the Company sold 200,000 shares
of  common  stock at $.25 per share to  Florian  Riedl-Riedenstein  and  200,000
shares of common stock at $.25 to a private  investor.  The  subscriptions  were
accepted  and the shares  issued by the Company in January,  1997.  The $100,000
raised  was used by the  Company in  partial  payment of the costs and  expenses
incurred in the preparation and closing by the Company of the divestiture of the
assets of the  Company,  purchase  of all the shares of Argosy and the change in
control of the Company.  Mr.  Riedl-Riedenstein  has since become the  Chairman,
President and Chief Executive Officer of the Company.

     (b) By  agreement,  dated  November 27, 1996,  which closed on December 17,
1996,  Mercury  purchased  54,367,551 shares of common stock of the Company from
Arendscor  (Canada) Inc.  representing 77.2% of the outstanding common shares of
the  Company,  and  became  the  controlling  shareholder  of the  Company.  The
consideration for the purchase was $10,000. The completion of the stock purchase
was conditioned, among other things, on the simultaneous closing of the purchase
of Argosy by the Company.

     (c) On November  28, 1996,  the Company  transferred  to Danca  Investments
Inc., an affiliate of Arendscor (Canada) Inc., the then controlling  shareholder
of the  Company,  all of the  interest of the Company in its three  wholly owned
subsidiaries, NRC Inc., Arendswood Homes Inc. and National Building Systems Inc.
This transaction divested the Company of its three wholly-owned subsidiaries and
certain of its remaining  development  resort lots.  The  consideration  for the
transfer was the assumption by Danca Investments Inc. of $142,874 in obligations
owed by the Company to Arendscor  (Canada) Inc. No independent  valuation of the
assets  transferred  by the  Company to Danca  Investments  Inc.  was  received.
However,  the transaction was approved by the shareholders of the Company at the
1995 Annual Meeting of the Shareholders.

     (d) By  agreement,  dated  November 30, 1996,  which closed on December 17,
1996, the Company  acquired all the issued and outstanding  stock of Argosy from
Argosy  Mining,  an  unaffiliated  entity.  Argosy holds  interests in nine gold
mining prospects in Austria. The consideration for the purchase was C$250,000 in
cash paid by the Company  and  1,000,000  shares of common  stock of the Company
transferred  to  Argosy  Mining  by  Mercury.  The  agreement  provides  that an
additional  1,000,000  shares of common  stock  would be  transferred  to Argosy
Mining by Mercury if the Company did not register the original  1,000,000 shares

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of common stock with the  Securities  and Exchange  Commission for resale within
three months following the closing date.  Mercury deposited  1,000,000 shares of
common stock of the Company in escrow for this purpose.  Such  condition was not
satisfied  and,  therefore,  the shares were  transferred  to Argosy Mining Corp
pursuant to the terms of the escrow.

     (e) By agreement,  dated December 6, 1996, Erzbergbau Radhausberg G.m.b.H.,
("Erzbergbau"),  the seller of the mining properties to Argosy Mining, agreed to
the sale and transfer of the  properties  from Argosy  Mining to the Company and
the Company agreed to assume the  obligations  relating to the properties in the
agreement between Erzbergbau and Argosy Mining. By agreement,  dated December 6,
1996, Erzbergbau agreed to the full settlement of the amount due from Argosy for
the  properties of $1,000,000 by the transfer of 300,000  shares of common stock
of the Company to Erzbergbau  from Mercury and  Erzbergbau  released the Company
from any further  obligations set forth in the agreement between  Erzbergbau and
Argosy Mining and in the agreement referred to above.

     (f) On December 12, 1996, Mercury entered into Put/Escrow Agreements with a
number of  shareholders  of the  Company.  The  agreements  provide that certain
shareholders may require Mercury to purchase  additional  shares of common stock
from them at $.10 per share during a period from September 12, 1997 to September
27, 1997. The put option  expires if the shares covered have been  registered by
the Company with the Securities and Exchange Commission for resale in the United
States and have been  freely  tradeable  at a price above $.10 for more than ten
consecutive  days after  registration  and prior to receipt by the  Company of a
notice of exercise.  As part of the  agreement,  the Company  deposited  cash of
$100,000 in escrow equal to one-half  the option  price,  and Mercury  deposited
1,000,000  shares of the common  stock of the Company  held by Mercury to secure
the Put/Escrow  Agreement.  The Put/Escrow Agreements cover a total of 2,000,000
shares of the Company,  including  1,223,200  shares held by Arendscor  (Canada)
Inc.,  88,000  shares  held by Edward  Jan Smith (a  director  of the  Company),
100,000  shares held by Matthew  Gaasenbeek,  III (a  director of the  Company),
8,800 shares held by Lisa  Hoekwater,  240,000 shares held by John B. Overzet (a
former director of the Company),  100,000 shares held by Arthur Walker (a former
director  of the  Company),  and  240,000  shares  held by Jack Wrobel (a former
director of the Company).

     As a result of these  transactions,  the Company  achieved its objective of
reorganizing its business affairs through the sale of its remaining inventory of
development resort lots, adoption of a new strategic business direction, and the
search for a new controlling shareholder. Consequently, the business plan of the
Company  changed and the Company became engaged in gold mining and  exploration,
in particular the location, evaluation, acquisition, exploration and development
of precious  metal mining  prospects and to that end to own,  acquire,  improve,
develop,  sell, lease, and convey lands or mineral claims or any right, title or
interest therein, and to search, explore, prospect or drill for and exploit ores
and minerals therein or thereupon.




                                        6

<PAGE>


New Business Plan.

     The Company,  by and through Argosy,  holds 100% of the ownership interests
in nine gold prospecting properties in Austria, as listed below:

Property                         Location                      Square Kilometers
--------                         --------                      -----------------

Schellgaden North and            South Salzburg                   39.4 sq. kms.
Schellgaden South                North Carinthia                  37.4 sq. kms.

Goldeck West - Siflitz and       South Carinthia                  27.6 sq. kms.
Goldeck East - Siflitz           South Carinthia                  31.6 sq. kms.

Kreuzeck West
Rabant-Gurskerkammer -
Fundkofel and                    South West Carinthia             23.9 sq. kms.
Kreuzeck East - Lengholz         South Carinthia                  20.5 sq. kms.

Kliening and                     East Carinthia                   27.4 sq. kms.
Kliening West - Buchbauer        East Carinthia                   27.4 sq. kms.

Strassegg-Gasen                  North Styria                     12.3 sq. kms.

     All these  properties  have been centers of gold mining  activities  dating
back at least  1,000  years  with  intermittently  flourishing  gold  production
continuing into the late 19th century.  Repeated  attempts to explore and revive
the  areas'  gold  potential  during  the first  half of the 20th  century  were
curtailed by political instability and the two World Wars. Extensive underground
workings from the old mining  periods are still  accessible at the  Schellgaden,
Goldeck Siflitz and Kreuzeck gold properties.

     In 1995,  Argosy conducted  underground  channel  sampling  programs in old
mines on the  Schellgaden  and Goldeck  Siflitz  properties to test for the gold
potential of the in situ ore.  Subsequently,  four diamond core drill holes were
made  at the  Schellgaden  North  property  and  three  at the  Goldeck  Siflitz
property.  With analysis of previous  exploration  data and the new  information
generated by the channel sampling and core drilling,  a new understanding of the
Schellgaden  North gold  property's  geology and  structural  model reveals what
management  of the Company  believes to be excellent  potential for this ancient
mining area.

     In order to further examine the potential of these sites, the Company plans
a new diamond core drilling  program to be conducted over an area of 500 by 1500
meters in the Schellgaden North property,  which includes old workings.  A total
of six to eight  diamond  core  holes are  expected  to be drilled to a depth of
approximately  300 meters in the  Schellgaden  North  property in the summer and
fall of 1997.  The cost of this  project is  approximately  $600,000,  which the

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Company  will seek to fund  through  equity or debt  financing.  There can be no
assurance that the Company will be successful in such funding efforts. After the
core is drilled,  the samples will be analyzed for geologic  attributes  and the
presence of gold.  Based on the result of the core  samples,  the  Company  will
decide  whether to drill  additional  core  samples  to  confirm or support  its
findings,  develop a program to develop  and prove the  reserve in the area,  or
abandon the site.

     It is expected  that should a gold reserve be found,  confirmed and proven,
that the Company will seek either to enter into a joint venture  agreement  with
an operator to extract the gold from the area or will sell the property outright
to realize its value. There can be no assurance that a gold reserve will ever be
found, confirmed and proven or that the Company will ever be able to realize the
value of the find through a joint venture arrangement or sale of the property.

     Although the  Schellgaden  North property is the first priority for further
exploration,  an  evaluation  of the future  exploration  potential of the other
eight  properties  is ongoing  under the  direction  of Dr.  Hans R. Klob,  Vice
President, Exploration of the Company. The Company may engage in prospecting and
development of core drilling programs with respect to the other properties.

     In  addition  to the  present  sites held by the  Company,  the  Company is
evaluating other potential acquisitions as well, including sites in Switzerland,
Ghana and British  Columbia,  Canada.  There can be no assurance  that any other
sites will be acquired by Company.

     The  development  of the  Company's  new  business  plan is  intended to be
financed by future debt or equity financing.  There can be no assurance that the
business plan of the Company will be successful  and will result in  significant
revenue and profit to the Company.  The gold mining  properties  acquired by the
Company are  non-producing  prospects where  Management of the Company  believes
that precious metal, in particular  gold, may be present in commercially  viable
quantities. The development of the business plan of the Company is dependent, in
part,  on the ability of the Company to raise  additional  financing to fund the
proposed development  activities and to pay operating expenses.  There can be no
assurance that the Company will be able to procure such additional  financing on
terms  acceptable  to it or at all  and any  equity  financing  acquired  by the
Company will likely result in dilution of the interests of present shareholders.
The search for  precious  metal  deposits  that can be  profitably  produced  is
extremely  high  risk  and  development   requires  large  capital  outlays  and
operational expertise.

Austrian Mining Laws and Regulations

     The properties  presently held by the Company are located in and subject to
the  laws  of  the  Republic  of  Austria.   In  Austria,   public   duties  and
responsibilities  are  divided  between  the  Republic  of Austria  and its nine
provinces (Vienna, Lower Austria, Burgenland,  Styria, Upper Austria, Carinthia,
Salzburg,  Tyrol,  Vorarlberg).  According  to the 1975  Mining  Law,  mining in
Austria is controlled by special federal authorities ("Mining Authorities").

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     Mining  Authorities  of first stage are the  Regional  Mining  Authorities,
special and  professional  federal  authorities,  and the Federal  Minister  for
Economic  Affairs  (second  and  appealing  stage).  Mining  Authorities  report
directly to the Federal Minister.  There are six regional mining  authorities in
Austria, located in Vienna (Vienna, Lower Austria,  Burgenland); Graz (East- and
West-Styria), Leoben (Upper-Styria);  Klagenfurt (Carinthia);  Innsbruck (Tyrol,
Vorarlberg):  Salzburg  (Salzburg,  Upper  Austria).  The Federal  Ministry  for
Economic Affairs (Vienna) is divided into several departments. Mining is subject
to Department VII ("Supreme Mining Authority").

     The  Mining   Authorities   are  charged   with   significant   duties  and
responsibilities,  including issuance of mining licenses, prevention of dangers,
legislation, optimal use of deposits and education of miners and foremen.

     The legal  framework  for the Austrian  mining  industry is the 1975 Mining
Law, as amended. This law applies to the prospecting, exploration, exploitation,
storage and processing of mineral raw materials  "free for mining," "state owned
mineral raw materials" and "land owner's  mineral raw  materials."  The law also
applies to mining  carried out in the course of  exploration  and  exploitation,
processing of other mineral  commodities and exploration  and  investigation  of
geological structures suitable for storing liquid and gaseous hydrocarbons,  and
storing  hydrocarbons  etc.  These  provisions  also apply to mining  aspects of
exploration  and  supervision of activities in respect of geothermal  energy and
the utilization of geothermal heat, where tunnels, shafts and wells of more than
100 meters are used, the  exploration of the earth crust for its suitability for
storing any substances and the utilization of workings in closed down mine sites
and other purposes than the production of mineral commodities.

     Exploration  is  considered  to be divided  into two  phases:  the  initial
search, followed by investigation.  The permits required vary slightly depending
upon the classification of minerals:

     Mineral raw materials free for mining:

     1.  All  mineral  raw  materials  from  which  iron,  manganese,  chromium,
molybdenum,  tungsten,  vanadium,  titanium,  zirconium, cobalt, nickel, copper,
silver,  gold,  platinum and PG-elements,  zinc,  mercury,  lead, tin,  bismuth,
antimony, arsenic, sulfur, aluminum, beryllium lithium, rare earths or compounds
of these  elements  can be  produced,  in as far as they are not listed below or
represent state owned, land owner's or other mineral raw materials.

     2. Gypsum, anhydrite, barite, fluorite, graphite, talc, china clay (kaolin)
and leucophyllite.

     3. All types of coal and oil shale.

     Prospecting  for  "free  for  mining"  mineral  raw  materials  requires  a
prospection permit,  entitling the holder to search for such minerals within the
jurisdiction of the Regional Mining  Authority.  It does not confer an exclusive

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right.  Conversely,  an exploration license confers an exclusive right for "free
for mining" mineral raw materials within a specified area located in the area of
jurisdiction  of the  respective  Regional  Mining  Authority.  Mining  of those
mineral raw materials requires a mining-permit.

     "State  owned  mineral  raw  materials"  belong  to the  federal  state and
comprise the following types of minerals:

     1. Rock salt and all salt occurring together with rock salt.

     2. Hydrocarbons.

     3. Minerals containing uranium and thorium.

     The  rights for  exploration  of these  minerals  can be granted to persons
meeting certain  criteria through a civil right contract by the Federal Minister
of Economic Affairs in consent with the Federal Minister of Finance on behalf of
the state.  The right to explore  for salt has been ceded by law to an  Austrian
public company in the salt business.

     "Land  owner's  mineral  raw  materials"  are  comprised  of the  following
minerals:

     Magnesite,  mica,  illite clay and other expandable clays,  quartz,  quartz
rock, and quartzitic sand, in as far as suitable for the  manufacturing of glass
or fireproof  products or as starting  material for the  manufacture  of cement;
clays,  in as far as suitable for the  manufacture  of  fireproof or  acid-proof
products, cements, brick work and other ceramic products; dolomite, in as far as
suitable for the  manufacture  of fireproof  products;  limestone,  in as far as
suitable  for the  manufacture  of quick lime or as  starting  material  for the
manufacture of cement or as aggregate for metallurgical  processes;  marl, in as
far as suitable for the  manufacture  of cements;  basaltic  rock,  in as far as
suitable for the manufacture of fireproof  products or of rock wool;  bentonite,
kieselgur, asbestos, feldspar, trass, andalusite, sillimanite and disthene.

     A  prospecting  permit  to  search  followed  by an  exploration  permit to
investigate is needed for the above mentioned minerals.  Both permits are issued
by the Regional Mining Authority.

     All minerals not listed above are subject to the category of "other mineral
raw materials."

     Prospecting  on  surface  for  "other  mineral  raw  materials"  and  their
production  requires  a license  according  to the 1994  Trade  Law.  In case of
underground activities,  commencing of mining has to be reported to the Regional
Mining Authority.

     The holder of mining rights enjoys certain rights. Under certain conditions
he may - in the course of exploration and production  utilize other minerals not
listed in his mining right title as well. The Mining Law furthermore  allows use

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<PAGE>

of mine  waters.  Mine  waters may be  utilized  when ever  required  for mining
operations as long it does not merge with permanent surface waters.

     The  holder of the  mining  rights may also  engage  himself in  processing
minerals and their  benefication  (pelletizing,  bricketing,  drying,  roasting,
carbonizing, coking, gasefying, liquefying and solution) of minerals or making a
suspension during processing in accordance with operational and local conditions
and further  processing to a saleable product.  He is also entitled to use mines
for purposes other than  exploitation  of minerals to bring in or to store goods
in geological structures in as far as these operations do not interfere with the
production and the storage of minerals.

     The holder of the mining rights is faced with special  obligations as well.
Opening  and  closing of mines have to be  announced  in right time in  advance.
During  mining  operations  the holder of the mining rights has to take care for
life  and  health  of  persons,  objects  in the  property  of  others  and  not
transferred  to him for use to protect the  environment,  deposit and surface to
provide  reclamation of surface after ending mining  activities.  Concerning the
protection  of the  environment  he is obliged to do  everything  to prevent any
permanent damage to soil, vegetation and livestock.

     If a person not  belonging to the mining  company comes to death or suffers
from injury to his body or health or an object is damaged by a mining  operation
this is referred as a mining damage.

     Mining  activities  must be carried out in such a way to avoid emissions in
the best way according to the latest technology.  It's the duty of the holder of
the  mining  rights  to follow up mine  maps  under  the  supervision  of a mine
surveyor.  In the case of any accident  occurring in other mining operations the
holder of the mining  rights is obliged to send  rescue men and  equipment  upon
request in as far as this does not disturb its own operation.

     Mineral  production  and the  storage  of any  hydrocarbons  in  geological
structures has to be done in accordance  with a written plan,  which needs to be
approved by the Regional Mining Authority in respect of the operations envisaged
and the measures  planned.  This is not applicable to small  enterprises.  Small
enterprises are mining enterprises or independent  operational units of a mining
enterprise  employing  less than 40  persons on  regular  base.  In case of land
owners minerals production may be commenced or recommenced after an interruption
of more than five years on the base of exploration and production plans approved
by the Regional Mining Authority.

     Where a mining enterprise consists of several independent units, the holder
of mining  rights has to  appoint a  manager,  a deputy  manager  and  technical
supervisors for each unit. In small enterprises,  where operational  hazards can
be  expected  to remain at a low level,  multiple  appointments  of  responsible
persons  are  allowed.  The  holder of the mining  rights  also has to appoint a
responsible  mine-surveyor  for each  mine.  Multiple  appointments  by  several
holders of mining  rights are allowed as well.  Any  appointment  is subject for
approval by the Mining Authority.

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<PAGE>



     Holders of mining  rights  jointly  owning a mining  right title or jointly
entrusted with the use of a mining right title and also single holders of mining
rights residing abroad  permanently or legal persons or commercial law companies
are obliged to appoint a person living in Austria, authorized to receive legally
valid orders and written communications by the Mining Authorities.

     Mining areas must be clearly  entered in the land use plan.  Buildings  and
other  installations  not  serving  the  purpose  of  mining  operations  may be
constructed  in mining  areas  upon  obtaining  a special  permit by the  mining
authority only.

     General Considerations.

     The  value of the  Company's  properties  and  exploration  results  may be
affected by the prices of precious  metals,  especially gold, and by the cost of
extracting the precious metals.  During 1996, gold prices  fluctuated from a low
of $368 to a high of $415 per ounce. During the last ten years, gold prices have
averaged  $403 per ounce and stayed over $300 per ounce while  modern heap leach
technologies  has allowed  lower  grades of ore bodies to be mined.  For several
years, this trend created a resurgence in the United States and  internationally
in the traditional gold producing areas, of exploration activity for gold in the
minerals industry.

     The  availability  of mining  prospects  is  dependent  upon the  Company's
ability to negotiate  leases or  concessions  with property  owners or to locate
claims pursuant to laws of the particular jurisdiction.

     Other than its mining agreements,  the Company has no patents,  trademarks,
licenses or franchises  material to its operations.  The properties in which the
Company  has an  interest  in Austria are  accessible  throughout  the year.  If
mineralized  deposits are discovered under claims or leases in which the Company
owns an interest, the economic viability of the deposit may depend upon numerous
factors  not  within the  Company's  control,  including  the  selling  price of
minerals,  the extent of other  domestic  production,  proximity and capacity of
water and  mills,  and the  effect  of  state,  federal  or  foreign  government
regulations.

     Competition  in the Company's  industry  occurs almost  exclusively  in the
acquisition of mining properties because the market price for gold is determined
by market  factors and  conditions  that are beyond the Company's  control.  The
exploration for, development of and acquisition of gold and other precious metal
properties  are  subject  to  intense  competition.  The  principal  methods  of
competition include:  (i) bonus payments at the time of lease acquisition,  (ii)
delay  rentals  and  advance  royalty  payments,  (iii) the use of  differential
royalty rates,  (iv) the amount of annual rental  payments,  (v) exploration and
production  commitments  by the lessee and (vi) staking  claims.  Companies with
greater financial resources,  larger staffs and labor forces, and more equipment
for exploration and development may be in a more advantageous  position than the
Company  to  compete  for such  mineral  properties.  Management  believes  that
competition for acquiring mineral prospects will continue to be intense.

                                       12

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     The mining industry,  including the business of Company, must follow strict
local, state and federal  regulations  imposed in each country where it operates
to maintain  environmental  quality.  As a result, the Company is subject to the
environmental  regulations in Austria with regard to mining  properties.  To the
best knowledge of management,  the Company's  Austrian project complies with all
present  environmental   regulations  and  laws.  Continued  compliance  is  not
anticipated to result in any additional material capital and/or operating costs.
However,  it can not be known  at this  time  what  additional  future  laws and
regulations might be adopted in Austria or elsewhere,  nor their effect, if any,
on the Company.

     As of June 2, 1997, the Company did not have any  employees.  Its directors
and  officers  are not engaged  full time in the  prosecution  of the  Company's
business.  The Company has retained the services of a consulting geologist,  Dr.
Hans  Klob,  to  assist  it in its  operations,  on a part  time  basis  and has
appointed him Vice President,  Exploration of the Company.  Dr. Klob served in a
similar  capacity  for Argosy  Mining.  No  employees  are  expected to be hired
throughout  this fiscal year unless the activities of the Company expand and its
new business plan develops.  However, the Company intends to hire consultants to
assist it in its operations.

     When used in this Annual  Report on Form 10-KSB,  in future  filings by the
Company with the  Securities  and Exchange  Commission,  in the Company's  press
releases and in any oral  statements  made by the Company,  the words or phrases
"will likely result,"  "expects,"  "intends," "will continue," "is anticipated,"
"estimates,"  "projects,"  "plans,"  and  similar  expressions  are  intended to
identify  "forward  looking  statements"  within  the  meaning  of  the  Private
Securities  Litigation  Reform Act of 1995. A forward  looking  statement is not
historical  fact and  whether the  statement  comes true is subject to risks and
uncertainties.  The actual  results or  activities  of the  Company  will likely
differ from the projected results or activities of the Company.  Forward looking
statements  include  the  proposed  business  plan of the  Company,  the planned
development  of the Company's  mining  properties in Austria,  the  commencement
dates and the costs of diamond core  drilling and  exploration  activities,  the
future acquisition of mining properties,  the procurement of future financing to
fund the Company's  operations,  and the compliance with environmental and other
mining  laws in  Austria.  Factors  that could  cause  actual  results to differ
materially from projected results include, among others, risks and uncertainties
relating  to  general   domestic  and   international   economic  and  political
conditions,  risks associated with mining  operations in Austria,  unanticipated
ground  and  water  conditions,  unanticipated  grade and  geological  problems,
metallurgical  and other  processing  problems,  availability  of materials  and
equipment,  the  timing  of  receipt  of  necessary  governmental  permits,  the
occurrence of unusual  weather or operating  conditions,  force majeure  events,
lower than expected ore grades and higher than expected  stripping  ratios,  the
failure of equipment or processes to operate in accordance  with  specifications
and expectations,  labor relations,  accidents,  delays in anticipated  start-up

                                       13

<PAGE>


dates,  environmental  costs and  risks,  the  ability  of the  Company to raise
financing on a favorable  basis to the Company or at all, and general  financial
and stock market conditions.  Readers are cautioned not to put undue reliance on
forward-looking  statements.  In light of the significant uncertainties inherent
in forward-looking statements, the inclusion of any such statement should not be
regarded  as a  representation  by the  Company  or any  other  person  that the
objectives  or plans of the Company  will be  achieved or that the Company  will
ever obtain  significant  revenue or  profitability.  The Company  disclaims any
intent or obligation to update publicly the forward-looking statements contained
in this  report,  whether  as a result  of new  information,  future  events  or
otherwise, except as required by applicable laws.

Item 2.  DESCRIPTION OF PROPERTY

Summary.

     The Company,  by and through its wholly owned subsidiary Argosy,  owns 100%
of the ownership  interests in nine mining  properties  located in Austria.  All
nine properties have been centers of gold mining activities dating back at least
1,000 years with intermittently  flourishing gold production continuing into the
late 19th  century.  Repeated  attempts  to explore  and revive the areas'  gold
potential  during the first half of the 20th century were curtailed by political
upheaval and the two World Wars. Access to the nine properties of the Company in
Austria is favorable as the area has a well developed infrastructure and none of
the properties lie in remote mountain areas.

     The following is a description of the Company's mineral properties.

     Schellgaden  North and Schellgaden  South.  The Schellgaden  North property
extends from South Salzburg into North Carinthia Province, Austria. The property
consists of 39.4  square  kilometers.  The  property  consists of 82 leases,  36
leases in Salzburg and 46 leases in  Carinthia.  The current lease term is for a
two year period,  January 1, 1996 to December 31, 1997.  It is in this  property
that the  initial  exploration  and  evaluation  activities  of the  Company are
scheduled to take place.  The  Schellgaden  North site is part of a historically
significant gold mining district.  A series of ancient gold mines lies along the
outcrop of a  gneiss-micaschist-amphibolite  series, called the Storz and Kareck
Formations  on the  eastern  rim of the  Tauern  Window.  The gold ore is a fine
grained  stratabound  quartz-sulfide  layer,  that  occurs  in  three  different
mineralized horizons.

     The Schellgaden South Property is located in Northern  Carinthia,  Austria.
The property  consists of 37.4 square  kilometers and is located to the south of
the Schellgaden  North property.  This area is less significant than Schellgaden
North from a historical viewpoint in terms of number of mines once operating and
the extent of ore  recovered.  The property  consists of 75 leases in Carinthia.
The current lease term is for a two year period, January 1, 1996 to December 31,
1997.

     Access to the Schellgaden  North and South  properties is by  Tauemautobahn
A-10, the major freeway link between Munich-Salzburg-Klagenfurt-Italy. A federal
highway,  B-99,  runs  parallel.  Small  access roads  frequently  lead into the

                                       14

<PAGE>

concession  area over the whole  North-South  extension  of about 29  kilometers
between the town of St. Michael in Salzburg and Gmund in Northern Carinthia.

     Management  determined to commence  operations on this property as reported
gold grades were sufficiently high and underground  workings from the old mining
operations  periods are still  accessible at the site. It was on the Schellgaden
North site that the prior owner,  Argosy Mining,  conducted limited  exploration
activities.  During the first phase of this program  conducted by Argosy Mining,
the old  underground  mines were channel  sampled and assayed by Bondar-Clegg in
Vancouver,  Canada  after  sample  preparation  by The  University  of  Salzburg
Geoscience  Lab. The samples  showed  evidence of gold with grades ranging at an
average of 5-15 g Au/t.  During the second  phase four  diamond core drill holes
were dug to a maximum  depth of 100 meters in the south of the Stublbau  Mine to
learn about the tectonic structure and to test the southern  continuation of the
ore horizon of the mine. Drilling started in September 1995 and ended in October
1995. Based on the results of the study of the geologist for Argosy Mining,  Dr.
Hans R. Klob,  who now has been  appointed  Vice  President,  Exploration of the
Company,  demonstrated the possibility that an area once viewed as medieval gold
mining following along a single stratabound  quartz-sulfide-gold  layer may be a
horizon  of at  least  four  different  ore  bearing  levels  of 2 to 10  meters
thickness  with one to several  single  quartz-ore  beds of centimeter- to meter
thickness.

     The core  drilling  samples  showed two  systems  of en echelon  type block
faulting,  one striking  North-South  with varying  down-thrust to the east, the
other  striking  West-East  with down  thrust to the North,  usually  with small
vertical throw amounts. The formation usually dips gently to the east.

     During the summer and fall of 1997,  the  Company  intends to conduct a new
core  drilling  program  over  an area of 500 by  1500  meters  on the  property
overlying the main old workings.  A total of six to eight diamond core holes are
expected to be drilled to a depth of  approximately  300 meters.  The  projected
cost of this project is approximately  $600,000.  After the core is drilled, the
samples  will be analyzed for  geologic  attributes  and the presence of gold by
Bondar-Clegg, Canada or another acceptable assay laboratory. Based on the result
of the core samples,  the Company will decide whether to abandon the site, drill
additional  core samples to confirm or support its findings or develop a program
to develop  and prove the  reserve in the area.  The  program of the  Company is
intended to confirm the results of the prior study  conducted  by Argosy  Mining
and to determine the potential gold reserve in the area.

     Goldeck West - Siflitz and Goldeck East - Siflitz. The Goldeck West-Siflitz
Property is located in South  Carinthia,  Austria.  The property area is of 27.6
square kilometers and consists of 57 leases. The current lease term is for a two
year period, January 1, 1996 to December 31, 1997. This property was acquired by
Argosy  directly from the Austrian  Government in 1995.  The property is located
within the  Kreuzeck-Goldeck  Gold district in the southern part of the Austrian
Province of  Carinthia.  This  district has been the site of numerous  mines for
gold and antimony from the early middle ages on and the last of the mines closed

                                       15

<PAGE>


down in the early 1950's. The Goldeck East-Siflitz  Property is located in South
Carinthia, Austria. The property consists of 31.6 square kilometers and consists
of 64 different leases. The current lease term is for a two year period, January
1, 1997 to December 31, 1998. The property is also part of the  Kreuzeck-Goldeck
Gold district and lies to the east of the Goldeck West-Siflitz property.  Argosy
obtained  the  exploration  rights  to this  area  directly  from  the  Austrian
Government in 1995 when studies and drilling at Goldeck Siflitz area indicated a
continuation of gold bearing structures further to the east.

     Access to the Goldeck  West - Siflitz  and  Goldeck  East - Siflitz is by a
federal  highway,  B- 100,  which runs  East/West  along the Drau River. A dense
network of secondary roads accesses the two properties, which have been historic
centers of gold mining.

     The Kreuzeck-Goldeck  Mountains cover an area of over 600 square kilometers
with predominantly  retrograde mica schist,  garnet-mica schist  intercalated by
quartzites.  Bands of marble,  rare in the Kreuzeck Mountains in the west, reach
greater  abundance and thickness in the Goldeck Range in the east.  Metavolcanic
intercalations  are  frequent  throughout  the  whole  area,  with  basalts  and
rhyolites  as well as  andesitic to rhyolitic  meta-tuffs  and  tuffites.  While
amphibolite  (meta-basalt)  bands in the west are maximally 30 meters thick,  in
the  eastern  Kreuzeck  up to 500  meters  have been  observed.  Numerous  small
granodiorite  intrusions of Alpidic age (26-40  million years) have intruded the
metamorphic  series. At the Goldeck Range, a direct continuation of the Kreuzeck
Mountains in the west across the Drau Valley, a sometimes  incomplete  threefold
repetition of mixed  pelitic-psammitic-volcanic  lithologies  and  carbonates is
typical.

     A large number of ore  occurrences  of different  types have been known and
mined in the Kreuzeck-Goldeck  Range, many believed stratabound,  a number bound
to massive tectonic shear zones,  especially in the  Goldeck-Siflitz  area, with
gold-arsenopyrite-stibnite  associations.  During the height of mining,  between
1460 and 1560,  despite  primitive mining methods and poor recovery rates, it is
reported that annual  production  over the whole area may have reached a maximum
of 4,000 kilograms of gold.

     The  Company's   exploration   activities  are  currently  focused  on  the
Schellgaden  North.  Exploration  programs  will be developed for Goldeck West -
Siflitz  and Goldeck  East - Siflitz  based on the  availability  of capital and
developments on the Schellgaden North property.

     Kreuzeck West - Rabant.  The Kreuzeck West - Rabant  Property is located in
Western Carinthia Province and extends into East-Tyrol  Province,  Austria.  The
property  consists  of 23.9  square  kilometers  and is made up of 44  leases in
Carinthia  and 5 leases in East Tyrol.  The current lease term is for a two year
period,  January 1, 1996 to December 31, 1997. This property is the western most
property in the  Kreuzeck-Goldeck  Gold  district and has been an area of active
mining from the Middle Ages to the 1950s when the Rabant and Gurskerkammer Mines
were closed down by the Bleiberger  Bergwerks Union ("BBU").  BBU mined the area

                                       16

<PAGE>


for lead,  zinc and  antimony.  The BBU still owns the mining  rights around the
Gurskerkammer Mine, but Argosy was granted exploration rights covering the whole
area, and the mining rights are being  reviewed by the Carinthian  Department of
Mines.  The Company expects that the rights granted to the BBU will be annulled.
Until,  and if, the rights are lifted,  the Company cannot  conduct  exploration
operations in the area.

     Access to the Kreuzeck West property is by a federal  highway,  B-100 which
runs East/West along the Drau River. A dense network of secondary roads accesses
the property, which has been a historic center of gold mining.

     From the west of the lease block to the east, former mining activities seem
to reveal a certain  trend or zoning  from  predominantly  stibnite  ore  bodies
(Rabant) to stibnite and arsenopyrite-gold at the center (Gurskerkammer Mine) to
gold (silver) in the east (Fundkofel Mine).  While the Rabant-area  stibnite ore
bodies with a lenticular to layer-like shape,  similar to the Gurskerkammer Mine
stibnite ore and arsenopyrite-gold  mineralizations,  are said to be stratiform,
the Fundkofel Mine gold was found in vein-type, discordant structures.

     At the Knappenstube  mine,  north of Fundkofel,  only a massive sulfide ore
body is distinctly  stratabound.  Gold values vary strongly,  are generally very
low and of no commercial  interest.  Thickness of the massive sulfide ore varies
from 0.1 to 2.2 meters, with additional  impregnations up to three meters in the
host rock. Ore minerals are pyrite, pyrrhotite, sphalerite, chalcopyrite, galena
and arsenopyrite.  High gold grades seem to coincide with galena-quartz  veining
penetrating massive sulfide ore.

     The  Gurskerkammer  Mine is easily accessible and the drill target would be
arsenopyrite-gold  impregnated  light green  meta-tuffite in the hanging wall of
stibnite ore,  dipping 45o NNE with grades ranging over 10 g Au/t.  Stibnite was
mined from lenticular  stibnite-quartz  ore bodies along a major shear zone with
graphitic and argillaceous material.

     The Rabant Mine is no longer accessible,  as most entrances have collapsed.
The lenticular  stibnite ore bodies are reported to contain fine  intergrowth of
pyrite and arsenopyrite with gold contents ranging from 1 to 35 g Au/t.

     The  Fundkofel  Mine offers  very  limited  access.  Gold was mined in this
location in the late Middle Ages. In the 1920s, a major mine development  effort
took place with tunneling along three different levels,  entrances to which have
collapsed. The mine is characterized by a series of chlorite-amphibolite schist,
meta-tuffites and mica schists trending West-East and dipping 34-40o north. They
are intersected by steeper dipping to vertical  gold-bearing  veins. These veins
normally pinch out within the mica schist, but open up in the metavolcanics.

     More  exploration,  core  samples and review  needs to be done in this area
prior to  ascertaining  the potential  for gold  extraction.  However,  the work
cannot be done until the rights of the BBU are resolved.

                                       17

<PAGE>


     The  Company's   exploration   activities  are  currently  focused  on  the
Schellgaden  North.  Exploration  programs will be developed for Kreuzeck  West-
Rabant based on the  availability of capital and developments on the Schellgaden
North property.

     Kreuzeck East - Lengholz.  The Kreuzeck East - Lengholz property is located
in  SouthWestern  Carinthia,  Austria.  The  property  consists  of 20.5  square
kilometers and is made up of 42 leases. The current lease term is for a two year
period,  January 1, 1996 to December 31, 1997. The Kreuzeck East property covers
the southern slope of the Eastern Kreuzeck  Mountains  between  Steinfeld in the
west and  Lessnig  in the east.  The  property  includes  two  famous old mining
districts,  the rich gold mines north of Lengholz and the  stibnite  deposits of
Lessnig-Radlberg.  The mines in this  area have been shut down and  inaccessible
for many years. At both old mine centers,  mica schists with minor  greenschists
are host rock to the mineralization,  with a general East-West strike and 35-60o
dip to the north.  The Lengholz mine was opened in 1544 when gold was discovered
and closed down in the 17th century.

     Access to the Kreuzeck East property is by a federal  highway,  B-100 which
runs East/West along the Drau River. A dense network of secondary roads accesses
the property, which has been a historic center of gold mining.

     The  Company's   exploration   activities  are  currently  focused  on  the
Schellgaden  North.  Exploration  programs will be developed for Kreuzeck East -
Lengholz  based  on  the   availability  of  capital  and  developments  on  the
Schellgaden North property.

     Kliening and  Kliening  West -  Buchbauer.  The Kliening and Kliening  West
properties are located in Eastern Carinthia,  Austria. Each property consists of
27.4 square kilometers and are made up of 54 different leases. The current lease
term is for a two year period,  January 1, 1996 to December 31, 1997 and January
1, 1996 to December 31, 1998  respectively.  The Kliening  Gold Mining  District
lies west of Bad St. Leonhard in the Upper Lavant Valley, the NNW of the village
of Kliening in eastern Carinthia.  At Kliening,  at least nine different steeply
Northeast  dipping veins have been reported.  Mineralized  structures  have been
traced over 1000 meters along strike, average spacing between the veins at about
50 meters.

     Access to the Kliening  properties  from Vienna or  Klagenfurt  is over the
Austrian  Sudautobahn,  the federal  highway  A-2.  The  properties  are located
between  the town of Bad St.  Leonard/Lavanttal  and the  Klippitztorl  mountain
pass,  about 10 kilometers to the west,  with a secondary  road link via the old
gold mining town of Kliening.

     The  polymetallic  sulfide  association is dominated by  arsenopyrite  with
pyrite,   galena,   ag-   tetrahedrite,   and  bismuth.   Gold  also  occurs  in
milimeter-grains  as free  gold  within  quartz  and  chlorite.  Host  rocks are
metamorphic  schists.  A program of core samples in the 1980's were inconclusive
due to high losses of core material.


                                       18

<PAGE>


     At  Kliening  West,  the  property  contains  a geologic  zone with  banded
gneisses,  marble and schists intruded by pegmatitic bodies. Main faulting is NW
trending,  minor  faulting NE. The gold  mineralization  is bound to NW striking
quartz-arsenopyrite veins along sheer zones.

     In 1990,  samples  taken from Kliening West were analyzed and yielded 0.2 g
Au/t to 0.40 ounces Au/t.

     The  Company's   exploration   activities  are  currently  focused  on  the
Schellgaden  North.  Exploration  programs  will be  developed  for Kliening and
Kliening West - Buchbauer based on the  availability of capital and developments
on the Schellgaden North property.

     Strassegg-Gasen.  The  Strassegg-Gasen  Property  is  located  in  Northern
Styria,  Austria. The property consists of 12.3 square kilometers and is made up
of 25 leases.  The current  lease term is for a two year period from  January 1,
1997 to December  31, 1998.  The  Strassegg-Gasen  Property is located  about 15
kilometers east of the district center Bruck/Mur, province of Styria. Extensive,
but  shallow,  underground  mining of gold and  arsenopyrite  dates  back to the
Middle Ages. A great number of  collapsed  mine  entrances,  pits and mine dumps
have been mapped by an exploration project conducted in the 1980s.

     The Strassegg-Gasen  property lies in Northern Styria, south of the town of
Murzzuschlag   in  the  Mur  Valley  and  east  of  the  industrial   center  of
Bruck/Mar-Kapfenberg.   Access  is  by  the  main  Vienna-Klagenfurt  road  link
A-2/S-6/S-35.  The property is bounded by a provincial  road,  which connects to
main highways. A dense network of small roads and trails provides easy access to
the property, which has been a center of historic mining activities.

     At the Strassegg-Gasen  Property ancient mining activities followed along a
NNW-SSE  striking trend within a band of greenschists  for about 2.5 kilometers.
Traces of  mining  there  have been  found  also over a  vertical  extent of 200
meters.  The mining district was important for both gold as well as arsenopyrite
production. The polymetallic mineral association contains arsenopyrite,  galena,
sphalerite, minor chalcopyrite and traces of rare complex Ag-sulfides.

     Two  types  of  mineralizations   are  described,   a  series  of  parallel
quartz-sulfide  veins,  more or less parallel along strike to the schistosity of
the greenschist host rock, but more steeply dipping, with a maximal thickness of
1.5 meters,  with locally massive  sulfides,  and a horizon with massive sulfide
nodules in greenschists with thickness to 2.5 meters and mainly arsenopyrite.

     An airborne geo-MAG survey of the area discovered a strong magnetic anomaly
down-dip from the outcropping greenschist series, seat of the historic gold mine
workings. The anomaly shows a certain NNW-SSE elongation with a maximum magnetic
susceptibility  of 300 n Tesla.  Computer  calculations to model the anomaly are
presently undertaken at the Institute for Geophysics at the University of Vienna
in an  attempt  to define  the  parameters  of the  anomaly  more  closely.  The
Company's  geologist  believes that the anomaly is caused by a massive  sulfidic
ore body  located  at an  estimated  depth of about 300  meters.  Such a massive
sulfide  ore body is  believed  to be the source for the  numerous  gold-sulfide
veins mined during historic times close to the surface.

                                       19

<PAGE>


     Subject to favorable  results of the present computer  modeling attempts on
the anomaly,  an initially limited  exploratory core drill program is planned in
the future.

     The  Company's   exploration   activities  are  currently  focused  on  the
Schellgaden North.  Exploration  programs will be developed for  Strassegg-Gasen
based on the availability of capital and  developments on the Schellgaden  North
property.

     The mining  rights to all nine  Austrian  properties  are held by currently
valid and  maintained  leases which expire,  in part on December 31, 1997 and in
part on December 31, 1998.

     Under Austrian  federal law, the annual fee requirement for all exploration
claims and  concessions is ATS 120.00  (approximately  $9.72) for each claim, or
ATS 60,240.00  (approximately  $4,879.44)  for all 502 claims on the nine mining
properties.  The bill is received by the  concession  holder for the  properties
annually from the Highest  Mining  Authority  seated at the Federal  Ministry of
Economic Affairs in Vienna,  Austria. An additional annual fee may be charged by
the provincial Mine Department Offices, which administers and grants exploration
and mining permits and approves  exploration work programs.  The provincial Mine
Department Offices can charge an annual renewal  administrative fee of ATS 20.00
(approximately  $1.62)  per claim to cover  administrative  costs of  concession
maintenance, registry and renewal. This fee amounts to ATS 720.00 (approximately
$58.32) in Salzburg, ATS 100.00 (approximately $8.10) in Innsbruck (East Tyrol),
and  ATS  6,350.00  (approximately  $514.35)  in  Klagenfurt  (Carinthia).   The
Departments  of Graz and Leoben have not charged any fees in the past two years.
There are no fee requirements to local  administrations  or to local land owners
on or under  whose  properties  the  explorations  work is  conducted.  The only
payments  to land  owners  that  may  take  place  are  negotiated  payments  of
compensation  for  actual/possible   losses  from  the  exploration  and  mining
activities and the granting of access to and over the property.  These fees tend
to  be  between  ATS   3,000.00   (approximately   $243.00)  to  ATS   10,000.00
(approximately $810.00).

     To maintain  exploration  rights and concessions under applicable  Austrian
law, the Company has to submit a work program with detailed  descriptions of the
type, extent and purpose of the planned  exploration  activities and schedule of
work.  Also,  the  Company  must  provide an estimate of the cost of the program
combined  with  evidence of the  financial  means to complete  the  program.  In
addition,  the  Company  must  provide  a  description  of  equipment  required,
transportation  needed and the safety measures taken to protect workers.  Once a
program is completed, or at the end of each year, the Company must submit a work
program report indicating the results of the program.

     The  Company  is in the  process  of  procuring  permits  for  the  planned
Schellgaden  North diamond drilling program scheduled for the summer and fall of
1997.  There  can be no  assurance  that the  permits  will be  granted,  or, if
granted,  that they will be granted in a timely  manner.  The work program calls

                                       20

<PAGE>


for up to eight 300 meter diamond core drill holes. After the work is completed,
or at year's end, the Company will submit a report to the Mine Department Office
which will validate the work and results for the purpose of continuation  and/or
renewal of its respective claims.  Management believes that this work program is
sufficient for all nine Austrian properties held by the Company to be renewed at
year end for an  additional  two year  period,  but there can be no assurance of
this result.

     The  exploration  and mining rights held by the Company can be forfeited or
canceled  by the  Mining  Authorities  in the  case of  repeated  breach  of the
provisions  and  regulations  of the  mining  law  or  repeated  neglect  of the
requirements  stated by the  Mining  Authorities  by the  lease  holder or their
authorized  representative.  The  exploration  and  mining  rights  may  also be
canceled by  non-payment  of the yearly claim fees.  Under  Austrian  law,  land
rights and mineral rights are equal and coexist for each others benefit.  A land
owner may object to a work plan but cannot  stop the plan as long as the program
is  economically,   legally  and  environmentally   sound.  The  law  encourages
negotiation and cooperation between land owners and holders of mineral rights.

Item 3.  LEGAL PROCEEDINGS

     The Company is party to one legal action  related to the prior  business of
the Company. On March 2, 1995, a lawsuit was filed in the 98th District Court in
Travis County,  State of Texas,  alleging liability for the deaths of two people
and the destruction of a mobile home allegedly  manufactured by the Company in a
fire. The lawsuit seeks unspecified  damages.  The Company intends to vigorously
defend this action.  The legal  defense of the Company is being  provided by the
insurance  carrier for the Company and  management  does not  consider a loss or
judgment above the limits of insurance probable.

     While the outcome of this and any other legal  action  cannot be  predicted
with  certainty,  it is the opinion of the  Management  of the Company that this
action,  when finally  resolved,  will not have a material adverse effect on the
Company's financial condition, results of operations or cash flows.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     No matters were  submitted  during the fourth  quarter of 1996 to a vote of
security holders.







                     - THIS AREA INTENTIONALLY LEFT BLANK -


                                       21

<PAGE>

                                     PART II
 
Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     Prior to December 7, 1994,  the  Company's  common stock had been listed on
the New York Stock  Exchange,  the Chicago Stock  Exchange and the Pacific Stock
Exchange.  On December 4, 1994, these stock exchanges  suspended  trading in the
Company's  common  stock.  The  suspension  was a result of the  failure  of the
Company to  continue to meet the  listing  requirements  with the New York Stock
Exchange. The Company appealed suspension, but, on May 24, 1995, the Company was
delisted from the New York and Chicago Stock  Exchanges  and, on April 11, 1996,
the Company was delisted from the Pacific Stock Exchange.  The Company's  common
stock now trades  over-the-counter  on the National  Association  of  Securities
Dealers Inc. OTC Bulletin Board under the symbol "NEIT."

     The following is the range of high and low bid  information  for the shares
of the common  stock of the  Company  for each  quarter  in 1995 and 1996.  This
information  was obtained from the Trading and Market  Services  division of The
Nasdaq Stock Market, Inc. The information  provided is  over-the-counter  market
quotations.  The quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions.

        Quarter Ending                     High Bid                  Low Bid
        --------------                     --------                  -------

        March 31, 1995                     None                      None
        June 30, 1995                      None                      None
        September 30, 1995                 0.125                     0.03
        December 31, 1995                  0.125                     0.03125
        March 31, 1996                     0.07                      0.03125
        June 30, 1996                      0.0313                    0.001
        September 30, 1996                 0.04                      0.001
        December 31, 1996                  0.08                      0.02

     As of July 1, 1997, the Company had  approximately  6,000  shareholders  of
record.

     The Company has not paid any cash  dividends on its common stock since 1973
and does not intend to pay any cash dividends in the foreseeable future.

     During 1996, the Company sold the following unregistered shares:

          (1) On  September 3, 1996,  the Company sold 200,000  shares of common
     stock at $.25 per share to Florian  Riedl-Riedenstein and 200,000 shares of
     common  stock at $.25 per share to a private  investor.  The  subscriptions
     were  accepted and the shares issued by the Company in January,  1997.  The
     $100,000  raised  was used by the  Company  to pay the costs  and  expenses
     incurred in the  preparation  and closing by the Company of the divestiture

                                       22

<PAGE>

     of the assets of the Company,  purchase of all the shares of Argosy and the
     change in control of the Company.  Mr.  Riedl-Riedenstein  has since become
     the Chairman,  President  and Chief  Executive  Officer of the Company.  No
     underwriter or sales agent was used in this  transaction and no commissions
     were paid for this  transaction.  The shares  were  issued  pursuant to the
     exemption from registration  provided by Section 4(2) of the Securities Act
     of 1933, as amended (the "Securities  Act"), in a private  transaction to a
     sophisticated  purchaser  and are  restricted  from  transfer  unless  such
     transfer is  registered  under the  Securities  Act or made  pursuant to an
     exemption therefrom.

          (2) On December 17, 1996, the Company sold 1,800,000  shares of common
     stock at $.25  per  share  to a  private  investor.  The  subscription  was
     accepted  and the  shares  issued by the  Company  in  January,  1997.  The
     $450,000  raised  was used by the  Company  to pay the costs  and  expenses
     incurred in the  preparation  and closing by the Company of the divestiture
     of the assets of the Company,  purchase of all the shares of Argosy and the
     change in control of the  Company.  A finder's  fee of $36,000  was paid in
     connection  with this  transaction.  The shares were issued pursuant to the
     exemption from registration provided by Section 4(2) of the Securities Act,
     in a private  transaction to a  sophisticated  purchaser and are restricted
     from transfer  unless such transfer is registered  under the Securities Act
     or made pursuant to an exemption therefrom.

Item 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

General

     Prior to December 1996, the Company derived revenues from the operations of
its real estate development  operations.  The Company,  however,  as of December
1996, has discontinued such real estate development operations and has commenced
new operations in the mining industry.

Results of Operations

     Since emerging from  bankruptcy in 1992, the Company  incurred  losses from
its now discontinued real estate  development  operations.  In 1995, the Company
realized net income from such operations of $371,484.  However,  such net income
is largely as a result of a  forgiveness  of accrued  interest on the  Company's
indebtedness  to its then major  shareholder in the amount of $596,410.  Without
such extraordinary gain from debt forgiveness, the Company would have incurred a
net loss from operations of $224,926.

     In 1996,  the Company  incurred a net loss from its now  discontinued  real
estate development  operations of $32,660.  Such net loss for 1996 was due to an
excess of general and administrative costs ($67,452,  including a management fee
of $12,000) over the Company's net gains from land sales of $34,792.

                                       23

<PAGE>


     In  addition to the $67,452 in general  and  administrative  expenses  from
discontinued  operations,  the Company had only an additional $10,285 in general
and administrative expenses in 1996, for a total of $77,737. This is in contrast
to the Company's general and administrative  expenses for 1995 of $269,578. This
was due to the fact  that  during  1996  the  Company  had  become  an  inactive
corporation with no paid employees.

Liquidity and Capital Resources

     As a result  of the  series  of  transactions  through  which  the  Company
discontinued its real estate development operations,  a change of control of the
Company  was  effected  and nine gold  exploration  properties  in Austria  were
acquired,  the  Company  does not have  capital  with  which to  pursue  its new
business  plan.  Of the  Company's  $495,342 of total  assets as of December 31,
1996,  $200,192  constituted  deferred  exploration costs and $100,000 was being
held as a security  deposit,  thus leaving only  $170,150 in cash and $25,000 in
accounts receivable.

     To  remedy a lack of  capital  in  amounts  sufficient  to  pursue  its new
business  plan, the Company is currently  considering  various  capital  raising
options, including, but not limited to, a significant equity financing. However,
there can be no assurance  that the Company will be successful in its efforts to
raise capital sufficient to enable the Company to pursue its new business plan.






                        - THIS AREA INTENTIONALLY BLANK -

                                       24

<PAGE>

Item 7.  FINANCIAL STATEMENTS.


                          INDEPENDENT AUDITORS' REPORT

To the Shareholders and Board of Directors
of National Enterprises, Inc.

We have audited the  accompanying  consolidated  balance  sheets and the related
consolidated statements of operations,  cash flows, and changes in shareholders'
deficit of National Enterprises, Inc. as of and for the years ended December 31,
1996 and 1995. These consolidated financial statements are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

In our opinion,  the  consolidated  financial  statements  audited by us present
fairly,  in  all  material   respects,   the  financial   position  of  National
Enterprises,  Inc. and its  subsidiaries  at December 31, 1996 and 1995, and the
results  of their  operations  and their  cash  flows  for the two  years  ended
December 31, 1996 and 1995, in conformity  with  generally  accepted  accounting
principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the company will continue as a going concern. As discussed in Note 1 to the
consolidated   financial  statements,   on  April  10,  1992,  the  Company  was
reorganized  under Chapter 11 of the U. S.  Bankruptcy  Code.  Under the Plan of
Reorganization  most of the operating  assets have been sold or transferred to a
liquidating  trust for the benefit of creditors.  During 1996,  the Company sold
its  subsidiaries  which held all of its  remaining  operating  assets.  It then
acquired  a new  subsidiary  which  owned  certain  mineral  concessions.  These
concessions  are  unproven  and  the  Company's  ability  to  establish  ongoing
operations is dependent upon these rights being  commercially  developed and the
Company's  ability to raise adequate  capital to develop them. The  consolidated
financial  statements  do not  include  adjustments  that might  result from the
outcome of this uncertainty.

                                                           JAMES SMITH & COMPANY
                                                      A Professional Corporation
Dallas, Texas
June 30, 1997

                                       25
<PAGE>

<TABLE>
<CAPTION>
                           NATIONAL ENTERPRISES, INC.
                           CONSOLIDATED BALANCE SHEETS
                        as of December 31, 1996 and 1995

                                                                        1996            1995
                                                                        ----            ----
       <S>                                                        <C>             <C>         
ASSETS
       Current Assets
              Cash ............................................   $    170,150    $      1,937
              Accounts receivable .............................         25,000            --
              Security Deposit ................................        100,000            --
                                                                  ------------    ------------
       Total Current Assets ............................               295,150           1,937

       Mineral Properties and Deferred Exploration Costs .......       200,192            --
                                                                  ------------    ------------

Total Assets ..................................................   $    495,342    $      1,937
                                                                  ============    ============

LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities
       Accounts payable .......................................   $     37,703    $     69,054
       Other accrued expenses .................................         67,370          57,370
       Loans payable - related parties (Note 5) ...............           --           158,584
       Net liabilities of discontinued operations .............           --            13,592
                                                                  ------------    ------------

Total Current Liabilities .....................................        105,073         298,600
                                                                  ------------    ------------

Commitments and Contingencies (Note 6)

Shareholders' Equity (Deficit)
       Preferred stock, 10,000,000 shares authorized,
              none issued .....................................           --              --
       Common stock, no par value, 1,000,000,000
              shares authorized, 70,387,698 and
              69,416,698 shares issued and outstanding
              in 1996 and 1995, respectively ..................     47,258,893      47,183,763
       Common stock subscriptions .............................        514,000            --
       Common stock transferred by Affiliate (Note 1) .........        (46,000)           --
       Accumulated deficit ....................................    (47,336,624)    (47,480,426)
                                                                  ------------    ------------
Total Shareholders' Equity (Deficit) ..........................        390,269        (296,663)
                                                                  ------------    ------------

Total Liabilities and Shareholders' Equity (Deficit) ..........   $    495,342    $      1,937
                                                                  ============    ============
</TABLE>

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

                                       26

<PAGE>

<TABLE>
<CAPTION>
                           NATIONAL ENTERPRISES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                For the Periods Ended December 31, 1996 and 1995


                                                                                1996            1995
                                                                                ----            ----
<S>                                                                           <C>             <C>  
Income
       Interest income .................................................     $      1,661    $      2,445

Expenses
       General and administrative ......................................           10,285         145,032
                                                                             ------------    ------------

Loss from continuing operations ........................................           (8,624)       (142,587)

Discontinued operations
       Income (loss) from operations of subsidiaries (Note 7) ..........          (32,660)        371,484

       Gain on disposal of fully owned subsidiaries ....................          185,086            --
                                                                             ------------    ------------

       Net Income ......................................................     $    143,802    $    228,897
                                                                             ============    ============

Net loss per share of common stock from
continuing operations ..................................................     $       0.00    $       0.00
                                                                             ============    ============

Net income per share of common stock ...................................     $       0.00    $       0.01
                                                                             ============    ============

Weighted average number of shares of common
stock outstanding ......................................................       69,566,083      46,007,433
                                                                             ============    ============

</TABLE>




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

                                       27

<PAGE>

<TABLE>
<CAPTION>


                           NATIONAL ENTERPRISES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                For the Periods Ended December 31, 1996 and 1995

                                                                            1996          1995
                                                                            ----          ----
<S>                                                                       <C>          <C>      
Cash flows from operating activities
       Net income .....................................................   $ 143,802    $ 228,897
       Adjustments to reconcile net income to net
        cash provided (used) by operating activities
           Increase in accounts receivable ............................     (25,000)        --
           Increase in security deposit ...............................    (100,000)        --
           (Decrease) increase in accounts payable ....................     (31,351)      23,613
           (Decrease) increase in accrued expenses ....................      10,000     (485,292)
                                                                          ---------    ---------

Net cash used by operating activities .................................      (2,549)    (232,782)
                                                                          ---------    ---------

Cash flows from investing activities
       Mineral property acquisition costs .............................    (200,192)        --
       Increase (decrease) in assets of discontinued operations .......     (13,592)      60,763
                                                                          ---------    ---------

Net cash provided (used) by investing activities ......................    (213,784)      60,763
                                                                          ---------    ---------

Cash flows from financing activities
       Short-term borrowings - related party ..........................        --         57,425
       Payment on borrowings - related party ..........................    (158,584)     (15,000)
       Proceeds from sale of common stock subscriptions ...............     514,000         --
       Proceeds from sale of common stock .............................      29,130       95,000
                                                                          ---------    ---------

Net cash provided by financing activities .............................     384,546      137,425
                                                                          ---------    ---------

Net increase (decrease) in cash .......................................     168,213      (34,594)

Cash at beginning of year .............................................       1,937       36,531
                                                                          ---------    ---------

Cash at end of year ...................................................   $ 170,150    $   1,937
                                                                          =========    =========

Non-cash transactions
       Conversion  of debt to common  stock (Note 4) 
       Transfer of common stock by Affiliate (Note 1)
</TABLE>

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

                                                         28

<PAGE>

<TABLE>
<CAPTION>
                           NATIONAL ENTERPRISES, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT

                                    Common Stock            Common        Additional                      Common Stock
                                ---------------------        Stock          Paid-in     Accumulated      Transferred by
                                Shares         Amount     Subscriptions     Capital        Deficit          Affiliate      Total
                                ------         ------     -------------   ----------    -----------      --------------    -----

<S>                           <C>          <C>            <C>          <C>             <C>             <C>             <C>
January 1, 1995 .........     19,036,698   $  9,327,499   $     --     $ 35,432,264    $(47,709,323)   $       --      $ (2,949,560)

Sale of common stock ....      3,800,000      1,900,000         --       (1,805,000)           --              --            95,000

Change to no par value
from $.50 per share .....           --       33,627,264         --      (33,627,264)           --              --              --

Convert note payable to
major shareholder into
shares of common stock ..     46,580,000      2,329,000         --             --              --              --         2,329,000


1995 net income .........           --             --           --             --           228,897            --           228,897
                            ------------    -----------   ----------   ------------    ------------    ------------    ------------

December 31, 1995 .......     69,416,698     47,183,763         --             --       (47,480,426)           --          (296,663)

Sale of common stock
subscriptions ...........           --             --        514,000           --              --              --           514,000

Exercise of stock options        971,000         29,130         --             --              --              --            29,130

Transfer of common stock
    by Affiliate ........           --           46,000         --             --              --           (46,000)           --

1996 net income .........           --             --           --             --           143,802            --           143,802
                            ------------   ------------   ----------   ------------    ------------    ------------    ------------

December 31, 1996 .......     70,387,698   $ 47,258,893   $  514,000   $       --      $(47,336,624)   $    (46,000)   $    390,269
                            ============   ============   ==========   ============    ============    ============    ============
</TABLE>

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

                                       29

<PAGE>

                           National Enterprises, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 1996 and 1995

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

National  Enterprises,  Inc.  (National) was incorporated  under the laws of the
state of Indiana in 1940.  National  emerged from bankruptcy  proceedings  under
Chapter  11 of  Title  11 of the  United  States  Code  pursuant  to a  Plan  of
Reorganization  (the Plan) which was confirmed by the United  States  Bankruptcy
Court for the Eastern  District of Virginia on April 10,  1992.  Under the Plan,
substantially  all  of  National's   manufacturing  and  operating  assets  were
transferred to a liquidating  trust for the benefit of the Company's  creditors.
During 1996, National changed its operations to gold exploration and development
business by liquidating its remaining assets in real estate development business
and acquiring the mineral interests in nine gold exploration  properties located
in  Austria.  National  is in the  exploration  stage and has not,  as yet,  any
commercial production.

On December  17,  1996,  a change in control of  National  was  accomplished  by
Mercury  Immobililen Und Verwatungs A.G., a Switzerland  corporation  (Mercury),
purchasing  54,367,551  shares of common  stock of the  Company  from  Arendscor
(Canada) Inc., a Canadian corporation (Arendscor).

Discontinued Operations

On December 11, 1996,  National  transferred  the  ownership of its wholly owned
subsidiaries;  NRC, Inc.,  Arendswood Homes, Inc. and National Building Systems,
Inc.  (the Former  Subsidiaries);  to Danca  Investments,  Inc., an affiliate of
Arendscor  as payment in full for all debts  outstanding  to  Arendscor  and its
affiliates.  The transfer of the Former  Subsidiaries  constitutes a disposal of
substantially  all  of  National's  real  estate  development  operations.   The
operating   results  of  the  Former   Subsidiaries   have  been  segregated  as
discontinued in the accompanying  consolidated financial statements.  The income
statements for 1995 have been restated and operating results of the discontinued
operations are also shown separately.

Acquisition of Argosy Mining G.m.b.H.

On December 17, 1996,  National acquired all the issued and outstanding stock of
Argosy Mining G.m.b.H.,  an Austrian corporation (Argosy G.m.b.H.),  from Argosy
Mining Corp., a Canadian  corporation  (Argosy Mining),  and its related mineral
rights to explore for gold reserves in nine  prospects  located in Austria.  The
consideration  for the  transaction  included  the  payment  by the  Company  of
$200,192 in cash and the  transfer to Argosy  Mining from  Mercury of  2,300,000
shares of common stock in National,  valued at $.02 per share,  representing the
lowest bid price during the quarter  ending  December 31, 1996, for an aggregate
amount of $46,000.  The  transfer of shares by Mercury on behalf of National has
been  accounted  for in  the  accompanying  consolidated  balance  sheets  as an
increase in common stock in the amount of $46,000 with a corresponding deduction

                                       30

<PAGE>

                           National Enterprises, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 1996 and 1995
                                   (continued)

to  shareholders'  deficit in the amount of $46,000 and separately  disclosed as
"common stock transferred by affiliate". The acquisition was accounted for under
the purchase method of accounting. Accordingly, the purchase price was allocated
to the assets acquired and liabilities assumed based on their fair values at the
respective  date of  acquisition.  The results of operations  since December 17,
1996, are included in the accompanying consolidated financial statements.

The following  summarized  pro forma  information  assumes the  acquisition  had
occurred on January 1, 1995:

                                                1996                   1995
                                           --------------          ------------

     Income                                $        5,661          $    230,445
                                           ==============          ============

     Loss from continuing operations         $    (65,624)           $ (212,587)
                                            =============           ===========

     Net income                            $       81,802          $    157,897
                                           ==============          ============

Principles of Consolidation

The consolidated  financial  statements include the accounts of National and its
subsidiaries.   All  significant  intercompany  transactions  and  accounts  are
eliminated from the consolidated financial statements.

Revenue Recognition

National  recognized the sale of residential  construction  and resort  property
when the sale closed. National did not provide any financing on these contracts.

Mineral Properties and Deferred Exploration Costs

Costs relating to the acquisition,  exploration and development of non-producing
mining  properties  held by National are  capitalized  until such time as either
economically recoverable reserves are established, or the properties are sold or
abandoned.  Proceeds from sale of properties and earn-in  arrangements  in which
National has retained an economic  interest are credited  against property costs
and no gain is recognized until all costs have been fully recovered.

Amounts  recorded for mineral  properties  and deferred  costs  represent  costs
incurred  to-date and are not intended to reflect present or future values.  The
recoverability  of amounts  shown for mineral  properties  and related  deferred
costs is dependent  upon the  discovery of  economically  recoverable  reserves,
confirmation  of  National's  interest in the  underlying  mineral  claims,  the
ability of National to obtain  necessary  financing to complete the development,
and future profitable production or proceeds from the disposition thereof.

                                       31

<PAGE>

                           National Enterprises, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 1996 and 1995
                                   (continued)

Income Taxes

National has net  operating  loss  carryforwards  to offset the current  taxable
income. The sale of the Former Subsidiaries eliminated  substantially all of the
remaining  net  operating  loss  because it was  related to those  subsidiaries'
operations.

Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect certain  reported amounts and  disclosures.  Accordingly,  actual results
could differ from those estimates.

Cash Equivalents

For purposes of the  statements  of cash flows,  National  considers  all highly
liquid  investments with maturities of three months or less when purchased to be
cash equivalents.

Net Income (Loss) Per Share

Net income  (loss) per share is based on the weighted  average  number of common
shares of stock outstanding.  Options, when dilutive,  have been included in the
calculation of weighted average number of shares outstanding.

NOTE 2 - INCOME TAXES

The  transactions  in  1996  eliminated  virtually  all of  National's  tax  net
operating loss  carryforward.  The net income for the year will be offset by the
carryforward   utilization,   but  the  remaining   losses  were   substantially
attributable to the subsidiaries.  As a result, as of the end of 1996,  National
has no remaining loss or credit carryforwards available for use in future years.

NOTE 3 - STOCK OPTION PLAN

On June 1, 1994,  National adopted a non-qualified  stock option plan subject to
shareholder  approval,  which approval was obtained on June 15, 1995.  Under the
terms of the plan,  the  Company's  Board of  Directors is  authorized  to grant
options to purchase up to  1,500,000  of Common  Stock to key  employees  of the
Company,  including  officers and directors.  During 1994,  options on 1,475,000
shares  were  granted at an  exercise  price of $.03 per share.  The options are
fully vested after six months and must be exercised within ten years of the date
of grant. On November 29, 1996, certain officers, directors and former employees
of the Company  exercised stock options for 971,000 shares of common stock.  The
remaining stock options outstanding were canceled.

                                       32

<PAGE>

                           National Enterprises, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 1996 and 1995
                                   (continued)

NOTE 4 - COMMON STOCK

During 1996, National sold subscriptions for 2,200,000 shares of common stock at
$.25 per share net of expenses of $36,000 for  aggregate  proceeds of  $514,000.
The shares of common stock were issued January 16, 1997.

On December 12, 1996,  Mercury entered into Put/Escrow  Agreements with a number
of shareholders of National.  The agreements  provide that certain  shareholders
may require Mercury to purchase shares of common stock from the  shareholders at
$.10 per share during a period from  September  12, 1997 to September  27, 1997.
The put option  expires if the shares  covered have been  registered by National
with the Securities and Exchange  Commission for resale in the United States and
have been freely  tradeable at a price above $.10 for more than ten  consecutive
days after  registration.  As part of the agreement,  National deposited cash of
$100,000 in escrow equal to one-half  the option  price,  and Mercury  deposited
1,000,000  shares of  National's  common  stock  held by  Mercury  to secure the
Put/Escrow  Agreement.  The  Put/Escrow  Agreements  cover a total of  2,000,000
shares of National.

During  1995,  the  shareholders  approved  Arendscor's  offer to  exchange  its
$2,329,000  note  for  46,580,000  shares  of  common  stock.  An  amendment  to
National's  Articles of Incorporation and Bylaws was made to increase the number
of shares  authorized to be issued to 1,000,000,000  and to change the par value
of the stock from $.50 to no par value.  This amendment is reflected  throughout
the consolidated  financial statements by combining the common stock and capital
in excess of par value accounts.

During 1995,  National sold 3,800,000  shares of common stock at $.025 per share
for aggregate proceeds of $95,000.

NOTE 5 - RELATED PARTY TRANSACTIONS

In 1996,  National  transferred the ownership of its wholly owned  subsidiaries;
NRC, Inc.,  Arendswood Homes, Inc., and National Building Systems, Inc. to Danca
Investments,  Inc., an affiliate of Arendscor (Canada), Inc., as payment in full
of all debts outstanding to Arendscor (Canada), Inc., and its affiliates.

In 1995,  National  issued  46,580,000  shares of its common  stock to its major
shareholder, Arendscor (Canada), in return for cancellation of a note payable to
Arendscor in the amount of $2,329,000 and forgiveness of accrued interest in the
amount of $596,410.  As a result,  Arendscor and its  affiliates  own a total of
56,496,551  shares of common stock.  This represents  eighty-two  percent of the
common shares outstanding.


                                       33

<PAGE>

                           National Enterprises, Inc.
                   Notes to Consolidated Financial Statements
                           December 31, 1996 and 1995
                                   (continued)

In 1995,  National  sold 229 mobile home lots to an affiliate of Arendscor for a
total sales price in the amount of $71,563.  This price is the approximate  fair
market  value of these lots.  The lots sold were  recorded on the books at a net
book value of  $71,563.  Accrued  property  taxes in the amount of $60,113  were
assumed by the purchaser.

In 1995,  National paid North American  Property  Associates,  Ltd.,  (NAPA), an
affiliate of Arendscor,  $5,000 per month. This amount  approximated the cost of
management and administrative  salaries, rent and utilities incurred by NAPA for
the benefit of National.  This arrangement ceased on December 31, 1995, when the
management of National's  remaining business activities was moved to Toronto. In
1996, the Company paid a management fee of $1,000 per month to NAPA. Other costs
are incurred for National's  benefit by another  affiliate who is reimbursed for
these actual costs.

NOTE 6 - COMMITMENTS AND CONTINGENCIES

The  Company  is a  defendant  in a lawsuit  filed in 1995  seeking  unspecified
damages related to the deaths of two people and the destruction of a mobile home
in a fire.  The  plaintiff  alleges that the mobile home was  manufactured  by a
division of the Company in 1978. The Company is represented by counsel  retained
by its  liability  insurance  carrier.  This  lawsuit is still in the  discovery
phase.  It is impossible at this time to estimate  what  liability,  if any, the
Company may have in this matter.

The  Company was named as a Third Party  Defendant  by a defendant  in a lawsuit
filed by a former  employee of the  Company.  This  defendant  manufactured  the
equipment  involved  in the  accident.  The  Company's  liability  to the former
employee  was  satisfied  by workers  compensation  insurance.  This lawsuit was
settled in 1996 at no cost to the Company.

In 1995,  the Company  transferred  certain  resort  home sites and  undeveloped
acreage in full  settlement of a judgment in the amount of $157,000  rendered in
1992 in a lawsuit  against  one of the  Former  Subsidiaries.  The  property  so
transferred had been fully reserved in 1992, following the verdict.
Therefore, no loss was incurred in 1995.


                                       34

<PAGE>


NOTE 7 - DISCONTINUED OPERATIONS

The income (loss) from discontinued  operations for the years ended December 31,
1996 and 1995, consists of the following:

<TABLE>
<CAPTION>
                                                                    1996         1995
                                                                    ----         ----

<S>                                                              <C>          <C>      
Land sales ...................................................   $ 492,320    $ 122,738
Other income .................................................        --         10,030
Less cost of sales ...........................................    (457,528)    (119,878)
                                                                 ---------    ---------
                                                                    34,792       12,890

General and administrative (including management
fees of $12,000 in 1996 and $60,000 in 1995) (Note 5) ........      67,452      124,546
Interest expense - related parties (Note 5) ..................        --        104,118
Property taxes ...............................................        --          8,477
Depreciation .................................................        --            675
                                                                 ---------    ---------
                                                                    67,452      237,816
Net loss from discontinued operations before
extraordinary item ...........................................     (32,660)    (224,926)

Extraordinary gain from debt forgiveness -
related party (Note 5) .......................................        --        596,410
                                                                 ---------    ---------

Net income (loss) from discontinued operations ...............   $ (32,660)   $ 371,484
                                                                 =========    =========
</TABLE>


                                       35

<PAGE>


Item 8.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE

 None

                                    PART III

Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16 (a) OF THE EXCHANGE ACT.

 Directors and Executive Officers of the Company.

     Listed  below  are the  names,  ages  (as of May 31,  1997)  of each of the
directors and executive officers of the Company:
<TABLE>
<CAPTION>

                                    Positions Held              Directorship or Office
Name                        Age     With the Company            Held Since
----                        ---     ----------------            ----------------------

<S>                         <C>                                         <C> 
Florian Riedl-Riedenstein   55      Director, Chairman,                 1996
                                    President and Chief
                                    Executive Officer

D. Campbell Deacon          49      Director                            1994

Edward Jan Smith            48      Director                            1996

C.W. Leigh Cassidy, C.A.    40      Vice President, Chief               1996
                                    Financial Officer and
                                    Secretary

Matthew Gaasenbeek, III     66      Director                            1993

Dr. Hans R. Klob            50      Vice President, Exploration         1997
</TABLE>

     No  arrangement or  understanding  exists between any director or executive
officer and any other person  under which any director or executive  officer was
elected. All of the above officers and directors have been elected for a term of
one year or until a  successor  is  elected.  Directors  are subject to election
annually by the shareholders. Directors are elected by a simple plurality of the
vote of the shareholders.  There are no family relationships by blood,  marriage
or adoption among any of the officers or significant employees of the Company.

     Florian  Riedl-Riedenstein.  Mr.  Riedl-Riedenstein has been a director and
Chairman of the Company since  December,  1996 and has been  President and Chief
Executive Officer of the Company since July, 1997. Mr. Riedl-Riedenstein is Vice
Chairman and a Director of Tri Star Gold Corp.  (1996), a Director of Coral Gold


                                       36

<PAGE>


Corp. (1994), a Director of Bralorne Pioneer Gold Corp. (1994) and a Director of
Levon Resources Ltd. (1996). He is formerly Chairman and Chief Executive Officer
of Strand Resources  (1993-1996) and Managing Director of Investment  Department
of Schoeller & Co., Bank AG (1969-1990).

     D. Campbell  Deacon.  Mr. Campbell has been a director of the Company since
1994 and served as  President  and Chief  Executive  Officer of the Company from
1994 until July, 1997. He has been the President and Chief Executive  Officer of
United Tri-Star Resources  Corporation since 1994 and was the Chairman and Chief
Executive Officer of the investment banking firm of Deacon,  Barclays,  de Zoete
Wedd from 1986 to 1994.  Mercury,  the majority  shareholder of the Company,  is
also a significant shareholder in United Tri-Star Resources Corporation.

     C.W. Leigh Cassidy,  C.A. Mr.  Cassidy has been the Vice  President,  Chief
Financial Officer and Secretary of the Company since December, 1996. Since 1996,
Mr. Cassidy has been Vice  President,  CFO of United  Tri-Star  Resources  Ltd.,
International Reef Resources Ltd., Tri-Star Gold Corp.  Previously,  he was Vice
President,  CFO of Emtech Ltd. (1993-1995),  Vice President,  CFO, Taramira Inc.
(1992-1993),  Group Vice President,  CFO, Household Financial Corporation (1987-
1992).

     Edward Jan Smith.  Mr. Smith has been a director of the Company since 1996.
From 1993 to 1996,  he was the  Secretary,  Vice  President,  Finance  and Chief
Financial  Officer of the Company.  Since leaving the Company,  he has been Vice
President and Chief Financial Officer of MacLean Oddy & Associates,  a wholesale
insurance  brokerage firm. He was a principal in Smith,  Sibley & Co., from 1991
to 1993 and was with Price Waterhouse from 1980 to 1991. In 1994, the Securities
and Exchange  Commission  announced the settlement of a Rule 2(e) administrative
proceeding  brought  against Mr. Smith and one other person in  connection  with
audits  performed  in 1987 and 1988 of  another  company  when Mr.  Smith  was a
partner in Price Waterhouse.  The settlement was reached to end an investigation
that had been in progress for five years. Under the terms of the settlement, Mr.
Smith did not admit or deny the charges and was barred  from  practicing  before
the  Commission  as an  auditor  for a period of nine  months.  The terms of the
settlement  does not limit or  restrict,  in any way,  Mr.  Smith's  acting as a
director of the Company.

     Matthew  Gaasenbeek III. Mr.  Gaasenbeek has been a director of the Company
since 1993.  In 1997,  he became an  associate  with  Sharwood  and  Company,  a
corporate finance intermediary. Since 1983 he has been the President of Northern
Crown Capital Corporation and since 1992 has been a director of Royal Oak Mines.
Previously,  Mr.  Gaasenbeek  was  President  of Camico  Inc.  (1983-1991).  Mr.
Gaasenbeek  is also  currently  a director of several  non-profit  environmental
organizations.

     Dr. Hans R. Klob.  Dr.  Klob has been Vice  President,  Exploration  of the
Company since 1997. He is a  professional  geologist and economist  with over 26
years experience in exploration,  mining,  project management and planning.  Dr.
Klob has acted as a consulting geologist on many projects.  From 1978 to 1984 he
held various management  positions with Austrian OMV and SOHIO Petroleum.  Since
1984, he has conducted consulting services for clients through HRK International
of San  Francisco.  During  his  career,  he has  served  many  small  and large
organizations in the mining industry, such as Bechtel Engineering, Fluor Daniel,
Placer  Dome  US,  St.  Joe  Gold-Dallhold   Resources,   Doyon  Limited,  Amoco
Production.  He also has served as a consultant to foreign  governments  such as
Turkey, Rwanda and Nicaragua.

                                       37

<PAGE>


     Since  1995,  Dr.  Klob was  General  Manager of Argosy  Mining's  Austrian
subsidiary,  which was  purchased  by the  Company in  December,  1996.  In this
position,  as exploration  manager for Argosy Mining, he brought the Schellgaden
North  gold  property  to the  status of a geology  inferred  world  class  gold
resource.  Dr. Klob,  through HRK Consultants,  is currently a consultant to the
Company.  Based on his advice,  the Schellgaden  North property will be the main
target of the  Company's  1997  diamond  core drill  program in Austria to drill
prove the indicated resource.

Item 10.  EXECUTIVE COMPENSATION.

     For the years 1994, 1995 and 1996, no  compensation  was awarded to, earned
by, or paid to the Chief  Executive  Officer  of the  Company  and no  executive
officer of the  Company  received a total  annual  salary and bonus in excess of
$100,000.

     Directors  receive no cash  compensation  for their  services.  The Company
reimburses  Directors for  out-of-pocket  expenses  incurred to attend Directors
meetings.

Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     Security  ownership  of  all  beneficial  owners  of  more  than  5% of the
outstanding common stock of the Company as of June 2, 1997 and management.

Name and Address of                     Amount and Nature of          Percent of
Beneficial Owner                        Beneficial Ownership          Class
-------------------                     --------------------          ----------

Mercury Immobilien und                  52,067,551                    71.73%
Verwaltungs AG                          Owned Directly
Eleonorenstrasse 2, Postfach 324
8028 Zurich, Switzerland

Florian Riedl-Riedenstein               250,000                         .34%
A-3034 Maria-Anzbach                    Owned Directly
Tannhof - 1   AUSTRIA
D. Campbell Deacon                      Nil                           Nil
300, 90 Adelaide Street West
Toronto, Ontario   M5H 3V9

Matthew Gaasenbeek, III                 480,000                         .66%
Sharwood and Company                    Owned by Spouse
300-8 King Street East
Toronto, Ontario  M5C 1R5


Edward Jan Smith                        110,000                         .15%
Maclean, Oddy & Assoc. Inc.
1445 Ross Avenue, Suite 3900,
Dallas, Texas   75202-2791

Directors and
Executive Officers as a Group           840,000                        1.15%
(six persons)

                                       38

<PAGE>


Item 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     In  1996,   National   transferred   the  ownership  of  its  wholly  owned
subsidiaries,  NRC, Inc., Arendswood Homes, Inc., and National Building Systems,
Inc., to Danca Investments,  Inc., an affiliate of Arendscor (Canada),  Inc., as
payment in full of all debts  outstanding to Arendscor  (Canada),  Inc., and its
affiliates.

     On December 12, 1996,  Mercury  entered into  Put/Escrow  Agreements with a
number of  shareholders  of the  Company.  The  agreements  provide that certain
shareholders may require Mercury to purchase  additional  shares of common stock
from them at $.10 per share during a period from September 12, 1997 to September
27, 1997. The put option  expires if the shares covered have been  registered by
the Company with the Securities and Exchange commission for resale in the United
States and have been  freely  tradeable  at a price above $.10 for more than ten
consecutive  days after  registration  and prior to receipt by the  Company of a
notice of exercise.  As part of the  agreement,  the Company  deposited  cash of
$100,000 in escrow equal to one-half  the option  price,  and Mercury  deposited
1,000,000  shares of the common  stock of the Company  held by Mercury to secure
the Put/Escrow  Agreement.  The Put/Escrow Agreements cover a total of 2,000,000
shares of the Company,  including  1,223,200  shares held by Arendscor  (Canada)
Inc.,  88,000  shares  held by Edward  Jan Smith (a  director  of the  Company),
100,000  shares held by Matthew  Gaasenbeek,  III (a  director of the  Company),
8,800 shares held by Lisa  Hoekwater,  240,000 shares held by John B. Overzet (a
former director of the Company),  100,000 shares held by Arthur Walker (a former
director  of the  Company),  and  240,000  shares  held by Jack Wrobel (a former
director of the Company).

     By agreement,  dated  December 6, 1996,  Erzbergbau  Radhausberg  G.m.b.H.,
("Erzbergbau"),  the seller of the mining properties to Argosy Mining, agreed to
the sale and transfer of the  properties  from Argosy  Mining to the Company and
the Company agreed to assume the  obligations  relating to the properties in the
agreement between Erzbergbau and Argosy Mining. By agreement,  dated December 6,
1996, Erzbergbau agreed to the full settlement of the amount due from Argosy for
the  properties of $1,000,000 by the transfer of 300,000  shares of common stock
of the Company to Erzbergbau  from Mercury and  Erzbergbau  released the Company
from any further  obligations set forth in the agreement between  Erzbergbau and
Argosy Mining and in the agreement referred to above.

     By agreement,  dated November 30, 1996,  which closed on December 17, 1996,
the Company acquired all the issued and outstanding  stock of Argosy from Argosy
Mining,  an  unaffiliated  entity.  Argosy  holds  interests in nine gold mining
prospects in Austria.  The consideration for the purchase was C$ 250,000 paid by
the Company and 1,000,000 shares of common stock of the Company held by Mercury.
The agreement provided that an additional  1,000,000 shares of common stock will
be  transferred to Argosy Mining by Mercury if the Company does not register the
original 1,000,000 shares of common stock with the Securities and Exchange

                                                      39

<PAGE>


Commission  for resale within three months  following the closing date.  Mercury
deposited  1,000,000  shares of common  stock of the  Company in escrow for this
purpose and the shares were  transferred  to Argosy  Mining Corp pursuant to the
terms of the escrow.

     On November 28, 1996, the Company transferred to Danca Investments Inc., an
affiliate of Arendscor  (Canada) Inc., the then  controlling  shareholder of the
Company,  all  of the  interest  of  the  Company  in  its  three  wholly  owned
subsidiaries, NRC Inc., Arendswood Homes Inc. and National Building Systems Inc.
This transaction divested the Company of its three wholly-owned subsidiaries and
certain of its remaining  development  resort lots.  The  consideration  for the
transfer was the assumption by Danca Investments Inc. of $142,874 in obligations
owed by the Company to Arendscor  (Canada) Inc. No independent  valuation of the
assets  transferred  by the  Company to Danca  Investments  Inc.  was  received.
However,  the transaction was approved by the shareholders of the Company at the
1995 Annual Meeting of the Shareholders.

     By agreement,  dated November 27, 1996,  which closed on December 17, 1996,
Mercury  purchased  54,367,551  shares  of  common  stock  of the  Company  from
Arendscor  (Canada) Inc.  representing 77.2% of the outstanding common shares of
the  Company,  and  became  the  controlling  shareholder  of the  Company.  The
consideration for the purchase was $10,000. The completion of the stock purchase
was conditioned, among other things, on the simultaneous closing of the purchase
of Argosy by the Company.

     By agreement,  dated  September 3, 1996, the Company sold 200,000 shares of
common stock at $.25 per share to Florian  Riedl-Riedenstein  and 200,000 shares
of common stock at $.25 to a private investor.  The subscriptions  were accepted
and the shares issued by the Company in January,  1997. The $100,000  raised was
used by the Company in partial payment of the costs and expenses incurred in the
preparation  and closing by the Company of the  divestiture of the assets of the
Company,  purchase  of all the shares of Argosy and the change in control of the
Company.  Mr.  Riedl-Riedenstein  has since become the  Chairman,  President and
Chief Executive Officer of the Company.

     In 1995, National issued 46,580,000 shares of its common stock to its major
shareholder, Arendscor (Canada), in return for cancellation of a note payable to
Arendscor in the amount of $2,329,000 and forgiveness of accrued interest in the
amount of $596,410.  As a result,  Arendscor and its  affiliates  own a total of
56,496,551  shares of common  stock.  At the time  this  represented  eighty-two
percent of the common shares outstanding.

     In 1995,  National  sold 229 mobile home lots to an  affiliate of Arendscor
for a total sales price in the amount of $71,563.  This price is the approximate
fair market value of these lots.  The lots sold were  recorded on the books at a
net book value of $71,563.  Accrued property taxes in the amount of $60,113 were
assumed by the purchaser.

                                       40

<PAGE>


     In 1995, National paid North American Property Associates, Ltd., (NAPA), an
affiliate of Arendscor,  $5,000 per month. This amount  approximated the cost of
management and administrative  salaries, rent and utilities incurred by NAPA for
the benefit of National.  This arrangement ceased on December 31, 1995, when the
management of National's  remaining business activities was moved to Toronto. In
1996, the Company paid a management fee of $1,000 per month to NAPA. Other costs
are incurred for National's  benefit by another  affiliate who is reimbursed for
these actual costs.

Item 13.  EXHIBITS AND REPORTS ON FORM 8-K.

     (a) Exhibits

         Exhibit   Item 601
         No.       Category   Exhibit

         1           3(ii)    Amended  By-Laws of  National  Enterprises,  Inc.,
                              adopted  February 11, 1972 as amended to March 15,
                              1993.*

         2           10(i)    Share Purchase Agreement, dated November 28, 1996,
                              among   National   Enterprises   Inc.   and  Danca
                              Investments Inc., pertaining to the sale of all of
                              the issued  and  outstanding  shares of NRC,  Inc.
                              Filed as Exhibit  1.I to Form 8-K filed  March 27,
                              1997 and incorporated herein by reference.

         3           10(i)    Share Purchase Agreement, dated November 28, 1996,
                              among   National   Enterprises   Inc.   and  Danca
                              Investments Inc., pertaining to the sale of all of
                              the  issued  and  outstanding  shares of  National
                              Building  Systems,  Inc.  Filed as Exhibit 1.II to
                              Form 8-K  filed  March 27,  1997 and  incorporated
                              herein by reference.

         4           10(i)    Share Purchase Agreement, dated November 28, 1996,
                              among   National   Enterprises   Inc.   and  Danca
                              Investments Inc. pertaining, to the sale of all of
                              the issued and  outstanding  shares of  Arendswood
                              Homes,  Inc.  Filed as  Exhibit  1.III to Form 8-K
                              filed  March 27, 1997 and  incorporated  herein by
                              reference.

         5           10(i)    Agreement, dated November 30, 1997, among National
                              Enterprises, Inc., Argosy Mining Corp. and Mercury
                              Immobilien und Verwaltungs  AG,  pertaining to the
                              acquisition  of Argosy  Mining  G.m.B.H.  Filed as
                              Exhibit 2.IV to Form 8- K filed March 27, 1997 and
                              incorporated herein by reference.

         6           10(ii)   National  Enterprises,   Inc.  1994  Stock  Option
                              Plan.*

                                                41

<PAGE>



         7           21      List of subsidiaries of National Enterprises, Inc.*

         8           27      Financial Data Schedule.*

     *Filed herewith.

     (b) Reports on Form 8-K

     None filing the fiscal quarter ended December 31, 1996.


                                     42

<PAGE>

                                 SIGNATURES

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

NATIONAL ENTERPRISES, INC.


By:     /s/  Florian Riedl Riedenstein                    Date:    July 18, 1997
        -----------------------------------------------
        Florian Riedl Riedenstein, Chairman, President,
        Chief Executive Officer (Principal
        Executive Officer), and Director

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

By:     /s/ C. W. Leigh Cassidy                            Date:   July 18, 1997
        -------------------------------------------------
        C. W. Leigh Cassidy, Vice President,
        Chief Financial Officer (Principal
        Financial and Accounting Officer)
        and Secretary


By:     /s/ D. Campbell Deacon                             Date:   July 18, 1997
        ------------------------------------------------
        D. Campbell Deacon, Director


By:     /s/ Edward Jan Smith                               Date:   July 18, 1997
        --------------------------------------------------
       Edward Jan Smith, Director


By:     /s/ Matthew Gassenbeck, III                        Date:   July 18, 1997
        ----------------------------------------------
        Matthew Gaasenbeek, III, Director



                                     43


<PAGE>
                                 EXHIBIT INDEX

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

  1  3(ii)    Amended  By-Laws of  National  Enterprises,  Inc.,
              adopted  February 11, 1972 as amended to March 15,
              1993.

  2  10(i)    Share Purchase Agreement, dated November 28, 1996,       N/A
              among   National   Enterprises   Inc.   and  Danca
              Investments Inc., pertaining to the sale of all of
              the issued  and  outstanding  shares of NRC,  Inc.
              Filed as Exhibit  1.I to Form 8-K filed  March 27,
              1997 and incorporated herein by reference.

  3  10(i)    Share Purchase Agreement, dated November 28, 1996,       N/A
              among   National   Enterprises   Inc.   and  Danca
              Investments Inc., pertaining to the sale of all of
              the  issued  and  outstanding  shares of  National
              Building  Systems,  Inc.  Filed as Exhibit 1.II to
              Form 8-K  filed  March 27,  1997 and  incorporated
              herein by reference.

  4  10(i)    Share Purchase Agreement, dated November 28, 1996,       N/A
              among   National   Enterprises   Inc.   and  Danca
              Investments Inc. pertaining, to the sale of all of
              the issued and  outstanding  shares of  Arendswood
              Homes,  Inc.  Filed as  Exhibit  1.III to Form 8-K
              filed  March 27, 1997 and  incorporated  herein by
              reference.

  5  10(i)    Agreement, dated November 30, 1997, among National       N/A
              Enterprises, Inc., Argosy Mining Corp. and Mercury
              Immobilien und Verwaltungs  AG,  pertaining to the
              acquisition  of Argosy  Mining  G.m.B.H.  Filed as
              Exhibit 2.IV to Form 8- K filed March 27, 1997 and
              incorporated herein by reference.

  6  10(ii)   National  Enterprises,   Inc.  1994  Stock  Option
              Plan.

  7  21      List of subsidiaries of National Enterprises, Inc.

  8  27      Financial Data Schedule.