<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                  FORM 10-QSB

(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934
For the quarterly period ended    June 30, 2001
                               -------------------

[_] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________

Commission file number 0-5474

              NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION
       ---------------------------------------------------------------
       (Exact name of small business issuer as specified in its charter)

             Delaware                                     75-2571032
      ------------------------                     ----------------------
  (State or other jurisdiction of            (IRS Employer Identification No.)
   incorporation or organization)

                13150 Coit Road, Suite 125, Dallas, Texas 75240
           --------------------------------------------------------
                   (Address of principal executive offices)

                                (972) 671-1133
                          ---------------------------
                          (Issuer's telephone number)


Check whether the issuer (1) has filed all reports required to be filed by
Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months, and (2) has been subject to such filing requirements for the past 90
days.

                                                       Yes   xxx     No_____
                                                           -------

Number of shares of common stock, par value $.01 per share, outstanding as of
June 30, 2001: 25,105,458

Transitional Small Business Disclosure Format (Check One):  Yes ____  No  xx
                                                                         ----
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
 CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
================================================================================

<TABLE>
<CAPTION>
                                                                                     June 30,     December 31,
                                                                                       2001           2000
                                                                                   (Unaudited)
--------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>            <C>
ASSETS
Current assets:

Cash                                                                               $     9,370    $     17,225
Advances to related parties                                                              6,900         156,900
Investment in available-for-sale securities                                                  -          47,002
Advances to interest service entity                                                     67,000               -
Prepaid expenses                                                                         7,859          68,800
Deferred tax asset                                                                     227,834         258,000
                                                                                   -----------    -----------

Total current assets                                                                   318,963         547,927
                                                                                   -----------    -----------

Furniture and equipment, net of accumulated depreciation                                 3,979           9,739
                                                                                   -----------    -----------

Other assets:

Deposits                                                                                 3,246          3,246
Investments - restricted                                                                     -         35,250
Investments - other                                                                  1,072,060        769,073
                                                                                   -----------    -----------

Total other assets                                                                   1,075,306        807,569
                                                                                   -----------    -----------

Total assets                                                                       $ 1,398,248    $ 1,365,235
                                                                                   ===========    ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of notes payable                                                   $   273,297    $   245,797
Accounts payable and accrued liabilities                                               132,702         83,500
Due to former stockholders                                                                   -        150,000
Due to related entity                                                                  130,000        130,000
Preferred stock dividends payable                                                       15,003         15,003
                                                                                   -----------    -----------

Total current liabilities                                                              551,002        624,300

Subordinated convertible debentures                                                    317,000              -
Notes payable - long-term                                                              412,500        467,500
                                                                                   -----------    -----------

Total liabilities                                                                    1,280,502      1,091,800
                                                                                   -----------    -----------

Commitments and contingencies

Stockholders' Equity:

Class A preferred stock, $3.00 par value, 10% annual cumulative dividend,
    1,600,000 shares authorized, no shares issued and outstanding                            -              -
Preferred stock, $.01 par value, 10,000,000 shares authorized,
    8,000,000 shares designated Series B, no shares issued and outstanding                   -              -
Common stock, $.01 par value, 100,000,000 shares authorized, 41,788,552
    shares issued                                                                      417,886        417,886
Additional paid-in capital                                                             489,214        489,214
Treasury stock, 16,683,094 shares, at cost                                            (489,258)      (489,258)
Accumulated other comprehensive loss - unrealized
    loss on available for sale securities, net of income taxes                               -        (51,506)
Accumulated deficit                                                                   (300,096)       (92,901)
                                                                                   -----------    -----------
Total stockholders equity                                                              117,746        273,435
                                                                                   -----------    -----------

Total liabilities and stockholders' equity                                         $ 1,398,248    $ 1,365,235
                                                                                   ===========    ===========
</TABLE>

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

                                       1
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
 CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
================================================================================

<TABLE>
<CAPTION>
                                        Three Months Ended June 30,            Six Months Ended June 30,
                                        ---------------------------            -------------------------
                                             2001           2000                   2001            2000
<S>                                     <C>             <C>                   <C>             <C>
Revenue                                 $         -     $         -           $         -     $         -

General and administrative
  expenses                                  242,425         186,033               365,863         411,199
Depreciation and amortization                 2,880           2,930                 5,760           5,810
                                        -----------     -----------           -----------     -----------

Operating loss                             (245,305)       (188,963)             (371,623)       (417,009)

Interest expense                            (15,841)           (444)              (31,479)        (18,857)
Income from equity investments              202,059          96,399               302,986         210,250
Gain (loss) on sale of investments          (37,222)         63,269              (122,980)        420,797
Management fees                             115,358               -               115,358               -
Other income (expense)                     (149,457)         34,435               (99,457)         59,990
                                        -----------     -----------           -----------     -----------

Income (loss) before provision
  for income taxes                         (130,408)          4,696              (207,195)        255,171

Provision for income taxes                        -         (71,044)                    -         (71,044)
                                        -----------     -----------           -----------     -----------

Income (loss) before extra-
  ordinary item                            (130,408)        (66,348)             (207,195)        184,127

Extraordinary gain, net of
  deferred tax expense of
  $94,605                                         -         182,597                     -         182,597
                                        -----------     -----------           -----------     -----------

Net income (loss)                       $  (130,408)    $   116,249           $  (207,195)    $   366,724
                                        ===========     ===========           ===========     ===========

Basic Income (Loss) Per Share:
  Before extraordinary gain             $         *     $         *           $         *     $         *
  Extraordinary gain per share                    *               *                     *               *
                                        -----------     -----------           -----------     -----------
  Basic net income (loss) per
    share                               $         *     $         *           $         *     $       .01
                                        ===========     ===========           ===========     ===========

Basic weighted average shares
  outstanding                            25,105,458      33,120,920            25,105,458      33,120,920
                                        ===========     ===========           ===========     ===========
</TABLE>

*Less than $.01 per share

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

                                       2
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
 CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
================================================================================

<TABLE>
<CAPTION>
                                            Three Months Ended June 30,       Six Months Ended June 30,
                                            ---------------------------       -------------------------
                                               2001              2000            2001            2000
<S>                                         <C>               <C>             <C>             <C>
Net Income (Loss)                           $(130,408)        $ 116,249       $(207,195)      $ 366,724
                                            ---------         ---------       ---------       ---------

Other Comprehensive Income
  (Loss):
  Unrealized losses on available-
    for-sale securities net of
    deferred income tax benefit of
    $8,249 (6/30/01), $113,216
    (6/30/00), $0 (6/30/01) and
    $137,585 (6/30/00)                              -          (259,291)        (14,046)       (219,773)

Reclassifications                              11,524            79,801          65,552        (277,727)
                                            ---------         ---------       ---------       ---------

                                               11,524          (179,490)         51,506        (497,500)
                                            ---------         ---------       ---------       ---------

Total Comprehensive Loss                    $(118,884)        $ (63,241)      $(155,689)      $(130,776)
                                            =========         =========       =========       =========
</TABLE>

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

                                       3
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
  CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
================================================================================

<TABLE>
<CAPTION>
                                                                                 Six Months Ended June 30,
                                                                                 -------------------------
                                                                                 2001                 2000
-------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                   <C>
Cash Flows From Operating Activities:
Net income (loss)                                                            $ (207,195)           $ 366,724
Adjustments to reconcile net cash:
   Depreciation and amortization                                                  5,760                5,810
   Deferred tax benefit                                                               -              165,109
   Income from equity investments                                              (302,986)            (210,250)
   (Gain) loss on sale of securities                                            122,980             (420,797)
   Extraordinary gain                                                                 -             (276,662)
Changes in operating assets and liabilities:
   (Increase) decrease in:
       Accounts receivable                                                            -               43,177
       Advances to related parties                                              150,000                    -
       Prepaid expenses                                                          60,941                1,874
   Increase (decrease) in:
       Accounts payable and accrued liabilities                                  49,202             (109,555)
                                                                             ----------            ---------

Net Cash Provided By (Used In) Operating Activities                            (121,298)            (434,570)
                                                                             ----------            ---------

Cash Flows From Investing Activities:
   Note receivable                                                              (67,000)                   -
   Proceeds from sale of securities                                              40,943              752,942
   Due to former stockholder                                                   (150,000)                   -
                                                                             ----------            ---------

Net Cash Provided By (Used In) Investing Activities                            (176,057)             752,942
                                                                             ----------            ---------

Cash Flows From Financing Activities:
   Repurchase of stock                                                                -              (19,588)
   Proceeds from subordinated convertible debentures                            317,000                    -
   Payments on borrowings and dividends                                         (27,500)            (268,254)
                                                                             ----------            ---------
Net Cash Provided by (Used In) Financing Activities                             289,500             (287,842)
                                                                             ----------            ---------

Net Increase (Decrease) In Cash                                                  (7,855)              30,530

Cash, beginning of year                                                          17,225              248,491
                                                                             ----------            ---------

Cash, end of year                                                            $    9,370            $ 279,021
                                                                             ==========            =========

Cash paid during the period for:

   Interest                                                                  $        -            $       -
                                                                             ==========            =========

Non-Cash Investing and Financing Activities:

Payment of commission payable with securities                                $        -            $ 194,101
                                                                             ==========            =========

Change in unrealized gain (loss) on available for sale
   securities, net of deferred income taxes of $(30,166)
   (2001) and $299,246 (2000)                                                $  (51,506)           $ 497,500
                                                                             ==========            =========

Repurchase of treasury stock and settlement of debentures,
   dividends payable and accrued interest for a note payable                 $        -            $ 175,000
                                                                             ==========            =========
</TABLE>

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


                                       4
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
 CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2001 AND 2000
================================================================================

1.  OPINION OF MANAGEMENT

The preceding financial information has been prepared by the Company pursuant to
the rules and regulations of the Securities and Exchange Commission ("SEC") and,
in the opinion of the Company, includes all normal and recurring adjustments
necessary for a fair statement of the results of each period shown. Certain
information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to SEC rules and regulations. The
Company believes that the disclosures made are adequate to make the information
presented not misleading. It is suggested that these financial statements be
read in conjunction with the Company's Annual Report on Form 10-KSB for the year
ended December 31, 2000.


2.  RESTRUCTURE OF OM OPERATING, L.L.C. AND RIVER PORT TRUCK STOP, LLC

Effective April 15, 1998, the Company and Donald I. Williams ("Williams")
entered into Amendment No. One (the "Amendment") to the Operating Agreement (the
"Operating Agreement") of Operator to effect a restructuring of Operator which
the Company believed effectively addressed certain preliminary questions and
concerns raised by the Louisiana Gaming Control Board ("Gaming Control Board")
and the Video Gaming Division of the Gaming Enforcement Section of the Office of
State Police within the Department of Public Safety and Corrections (the
"Division") in their review of Operator's application for renewal of its license
to operate video poker casinos. The Company elected to voluntarily effect the
restructure of Operator even though the Gaming Control Board had not made a
final determination whether Operator's existing structure satisfied the
Louisiana residency requirements of the Louisiana Video Draw Poker Devices
Control Law and the Rules and Regulations promulgated thereunder (the "Louisiana
Act"). However, after the Company presented the Amendment and related documents
to the Division, the Company had a meeting on November 13, 1998 with the
Division, wherein the Division expressed serious concerns and doubts that the
Amendment would satisfy the Louisiana Act and indicated the Division would
recommend that Operator's license to operate video poker casinos in Louisiana
not be renewed, unless various changes were implemented to comply with the
Louisiana Act. Among the concerns expressed by the Division were the 20% gross
income allocation to the Company under the Operating Agreement and its
contribution, pursuant to the Amendment, by the Company to Operator for
additional interests in Operator which were then assigned to Williams in
exchange for a $4 million nonrecourse note (the "Note"), in addition to certain
other aspects of Amendment No. One and the related documents. Rather than risk
loss of the Operator's license, the Company entered into further amendments to
the Operating Agreement and various documents put into place in conjunction with
the Amendment, and agreed to transfer 50% of its remaining Louisiana gaming
interest (including 50% of its interest in Operator, RPLLC and the Gold Rush
Truck Stop) to certain former holders of Class A Preferred Stock of the Company
and certain related persons and entities in exchange for mutual releases and
settlements, dismissal of pending litigation and cancellation of debentures,
accrued dividends and Common Stock of the Company ("Common Stock"). The Company
believed the further restructuring of Operator effectively addressed the
concerns raised by the Division.


================================================================================


                                       5
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
 CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2001 AND 2000
================================================================================

2.  RESTRUCTURE OF OM OPERATING, L.L.C. AND RIVER PORT TRUCK STOP, LLC
(CONTINUED)

On September 28, 2000, Operator's license was renewed by the Division and Gaming
Control Board.

As part of the further restructure of Operator, the Company entered into a
Release and Settlement Agreement (the "Settlement Agreement") with, among
others, Williams and ten former holders of Class A Preferred Stock of the
Company (the "North Louisiana Group") on February 2, 1999, but to become
automatically effective as of March 31, 1999. At February 2, 1999, the North
Louisiana Group owned 5,614,632 shares of Common Stock (representing
approximately 13.4% of the issued and outstanding shares of Common Stock) and
were owed $306,959.61 in original principal amount of subordinated debentures,
and were owed accrued dividends of $255,072 accrued on the Class A Preferred
Stock prior to its conversion to Common Stock. As part of the Settlement
Agreement and pursuant to related documents executed in connection therewith,
the North Louisiana Group agreed, among other things, to (i) dismiss with
prejudice its pending lawsuit against the Company for the payment of accrued
dividends and agreed to cancel all accrued dividends payable to the North
Louisiana Group; (ii) mark their subordinated debentures "canceled" and return
them to the Company and cancel all principal and accrued interest thereunder;
(iii) return to the Company for cancellation of 5,614,632 shares of Common Stock
owned by the North Louisiana Group; (iv) be responsible on a 50/50 basis with
the Company for any funds expended in settlement with any other former holders
of Class A Preferred Stock which the Company may desire to pursue; (v) assume
50% of the debt owed by the Company, to Regions Bank, Springhill Branch,
formerly known as Springhill Bank & Trust Company, relating to the Company's
Gold Rush Truck Stop; and (vi) release all claims, known or unknown, which the
North Louisiana Group might have against, among others, the Company,
International Tours, Inc. ("International") and the officers and directors of
the Company as of the date of the Settlement Agreement. In return, the Company
(a) released all claims it might have, known or unknown, against, among others,
the North Louisiana Group as of the date of the Settlement Agreement; (b) agreed
to assign to 146LLC, on behalf of the North Louisiana Group, a 24.5% interest in
Operator and a 25% interest in RPLLC; and (c) agreed to assign to 146LLC, on
behalf of the North Louisiana Group, 50% of the Company's ownership of the Gold
Rush Truck Stop.

Under the Settlement Agreement, Williams agreed to release all claims he might
have, known or unknown, against, among others, the Company, International, the
officers and directors of the Company and the North Louisiana Group as of the
date of the Settlement Agreement, and the Company agreed to release all claims
the Company might have, known or unknown, against, among others, Williams as of
the date of the Settlement Agreement. Williams also agreed, among other things,
to (i) mark his subordinated debenture in the original principal amount of
$93,900 "canceled" and return it to the Company and cancel all principal and
accrued interest thereunder; (ii) return to the Company for cancellation 824,000
shares of Common Stock owned by Williams, 1,279,000 shares of Common Stock owned
by P.& J.


================================================================================


                                       6
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
 CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2001 AND 2000
================================================================================

2.  RESTRUCTURE OF OM OPERATING, L.L.C. AND RIVER PORT TRUCK STOP, LLC
(CONTINUED)

Williams, L.L.C. (an affiliated entity) and 450,000 shares of Common Stock owned
by New Orleans Video Poker Company, Inc. (an affiliated entity), an aggregate of
2,553,000 shares (representing approximately 6.1% of the issued and outstanding
shares of Common Stock) (iii) cancel the $78,000 of accrued dividends payable to
Williams accrued on the Class A Preferred Stock prior to its conversion to
Common Stock; and (iv) pay to the Company certain amounts which could aggregate
between $150,000 and $300,000 over six years in conjunction with the possible
additional settlements by the Company with other former holders of Class A
Preferred Stock which the Company may desire to pursue. The Company and Williams
also entered into amendments to several other existing agreements in connection
with the Settlement Agreement as described in the following paragraphs.

The Company and Williams entered into a Second Amendment (the "Second
Amendment") to Operator's Operating Agreement, effective March 31, 1999. The
Second Amendment operates to amend the Operating Agreement, as amended by the
Amendment, to delete all references to the Note and to the contribution of the
20% special gross income allocation so that neither provision shall ever have
been deemed to have existed and neither provision shall have ever been of any
force or effect. As a result, the Note is deemed to never have existed and the
20% special gross income allocation was not deemed to have been contributed by
the Company for additional ownership interest in Operator. Under the Second
Amendment, the Operating Agreement was amended to terminate, and to delete all
references to, the 20% gross income allocation after March 31, 1999 and no
further allocation or distributions will be made to the Company pursuant to such
20% special gross income allocation. Thereafter, distributions will be made in
accordance with capital accounts and the Sharing Ratios of the Members, which
will be 51% to Williams, 24.5% to the Company and 24.5% to one or more members
of the North Louisiana Group; provided, however, Williams is entitled under the
Second Amendment to distribution of the initial $4,166 to be distributed per
month up to a maximum of $50,000 per year, which distributions are to be
credited against any other distributions to Williams during such year. Pursuant
to the Second amendment, Operator will no longer be managed by a manager and,
instead, will be managed by the members, who shall take actions by the vote of
members owning at least 65% of the Sharing Ratios, except for certain enumerated
major decisions which require unanimous vote. Related agreements were also
entered into effective as of March 31, 1999 canceling the Note and the Company's
security interest in the ownership interests of Williams securing the Note.

The Company and Operator also entered into a Termination of Consulting and
Administrative Agreement (the "Termination") effective March 31, 1999. The
Termination has the effect of terminating the Consulting and Administrative
Agreement entered into between the Company and Operator on April 15, 1998 (the
"Consulting Agreement') pursuant to which the Company agreed to provide
consulting and administrative services relating to the daily management of each
of Operator's video poker casino, and pursuant to which the Company received a
fee of $400,000 per year for rendering such services, reduced by $50,000 for
each existing video poker casino Operator loses the right to operate, and
increased by $50,000 for each new video poker casino operated by Operator during
the term of the Consulting Agreement.


================================================================================


                                       7
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
 CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2001 AND 2000
================================================================================

2.  RESTRUCTURE OF OM OPERATING, L.L.C. AND RIVER PORT TRUCK STOP, LLC
(CONTINUED)

Williams and Operator also entered into a Second Amendment to Employment
Agreement (the "Employment Amendment") effective March 31, 1999 which amends the
Employment Agreement dated April 15, 1998 pursuant to which Williams received an
annual salary of $250,000, was eligible to participate in any employee benefit
plans of Operator, was furnished the use of a company automobile and was
reimbursed for expenses incurred on behalf of Operator during the course of his
employment. Under the Employment Amendment, Williams will receive an annual
salary of $100,000 and will continue to be eligible to participate in any
employee benefit plans of Operator, but will no longer be furnished the use of a
company automobile or be reimbursed for expenses. Under the Employment
Agreement, as amended by the Employment Amendment, the Employment Agreement
terminates on March 31, 2004.

As part of the Settlement Agreement, the Company and Operator have modified the
terms of the lease of the Gold Rush Truck Stop by Ozdon Investments, Inc.
("Ozdon") to Operator. Ozdon and Operator have entered into a Lease Agreement
(the "Lease") effective March 31, 1999 for an initial term of nine months and
thereafter to be a month-to-month lease until terminated by either party, with
or without cause, on 60 days' prior written notice. Ozdon will be responsible
for major repairs and Operator will be responsible for nonmajor repairs and
maintenance, and Operator will pay a rental of $33,333 per month for the term
of the Lease. The Company, Ozdon and Williams also mutually agreed to terminate
the right of first refusal previously granted to Williams to purchase the land
and buildings constituting the Gold Rush Truck Stop, or any portion thereof, if
Ozdon proposed to sell them to a third party. In conjunction with the Lease, the
Company has agreed to be solely responsible for the indebtedness to Regents
Bank, Springhill Branch, formerly known as Springhill Bank & Trust Company,
which is secured by a mortgage on the Gold Rush Truck Stop. As of March 31,
2001, the outstanding principal balance of such indebtedness was approximately
$71,545.

Pursuant to the Second Amendment, the parties agreed to delete the requirement
that all video poker gaming opportunities within Louisiana that either party
desires to pursue must first be presented to Operator for its review and
determination whether it desires to pursue such opportunity. Effective March 31,
1999, all parties will be free to pursue any video poker gaming opportunities
they may desire without first offering the opportunity to Operator or any other
member. Likewise, Williams is no longer entitled to receive a finder's fee of
$50,000 for each opportunity brought by him to Operator which is consummated by
Operator.

As part of the Settlement Agreement, Williams and the Company also agreed that
to the extent any of the truck stop, convenience store, restaurant or gaming
interest that are a part of King's Lucky Lady, Pelican Palace, Lucky Longhorn,
The Diamond Jubilee or the Video Poker Tavern Route are held or operated in the
name of the Company, effective March 31, 1999 they were deemed to be in the name
of and operated by Operator.


================================================================================


                                       8
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
 CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2001 AND 2000
================================================================================

2.  RESTRUCTURE OF OM OPERATING, L.L.C. AND RIVER PORT TRUCK STOP, LLC
(CONTINUED)

Pursuant to the Settlement Agreement, the Operating Agreement of RPLLC (the
"River Port Operating Agreement") was also amended to provide that it shall be
managed by the members in the same manner as described above for Operator under
its amended Operating Agreement, and to provide that Williams will own 50% of
the membership interest and Sharing Ratios, and the Company will own 25% and one
or more members of the North Louisiana Group will own the remaining 25%. Other
conforming changes were made to make the River Port Operating Agreement
consistent with the Operating Agreement of Operator, as amended by the Second
Amendment. The amendments to the River Port Operating Agreement also become
effective March 31, 1999.

The Second Amendment and amendment to the River Port Operating Agreement, which
were effective midnight March 31, 1999, constitute a transfer of ownership
interest and control in all of the Company's gaming operations. As of April 1,
1999, ownership of OM, RPLLC and the Gold Rush Truck Stop are as follows:

                                  North Louisiana
                    Company           Group             Williams       Total
                    -------       ---------------       --------       -----
    OM                24.5%                 24.5%        51.0%         100.0%
    RPLLC             25.0%                 25.0%        50.0%         100.0%
    Ozdon             50.0%                 50.0%            -         100.0%

Therefore, the Company has recorded its investment in OM, RPLLC and Ozdon under
the equity method from April 1, 1999.

Prior to the effective date of the Second Amendment and amendment to the River
Port Operating Agreement, the application of the existing agreements resulted in
the Company controlling the gaming operations and 100% of the net gaming income
being allocated to the Company and 0% to Williams. Therefore, the financial
statements of OM, RPLLC and Ozdon were consolidated with the Company through
March 31, 1999.

On March 27, 2000, the other two members of Operator and RPLLC purportedly voted
to merge seperate limited liability companies into each of Operator and RPLLC
and buyout the Company's interest in each for $375,000 and $50,000,
respectively. The Articles of Organziation of each of Operator and RPLLC require
that a member's interest may not be changed and the Articles of Organization may
not be amended without unanimous consent of all members. The Company voted
against the purported mergers and buyout and subsequently filed a lawsuit to
nullify the mergers and buyout. The Company has vigorously pursued its rights,
sought a judicial declaration nullifying the purported mergers of both Operator
and River Port LLC, and sought damages for these and other breaches of fiduciary
duty. The Company has also entertained discussions and negotiations concerning a
possible settlement of the litigation. Effective as of January 5, 2001, the
Company entered into a 60 day term sheet (the "Term Sheet") with the other
parties to the lawsuits, together with certain related parties thereof
(collectively, the "OMO Group"). The Company received a $50,000 non-refundable
payment in connection with the Term Sheet. On April 23, 2001, the Term Sheet was
amended to extend the negotiation date another 60 days for an additional
$100,000 non-refundable payment.


================================================================================


                                       9
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
 CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2001 AND 2000
================================================================================

2.  RESTRUCTURE OF OM OPERATING, L.L.C. AND RIVER PORT TRUCK STOP, LLC
(CONTINUED)

Under the terms of the amended Term Sheet, the Company and the OMO Group have
agreed to settle the foregoing litigation and enter into mutual releases of
claims, subject to certain conditions that must be satisfied prior to such
settlement becoming effective. The amended Term Sheet provides that the
settlement would not become effective unless definitive, binding agreements
mutually acceptable to all parties (the "Definitive Agreements") were entered
into on or before May 5, 2001, and the closing to occur on or before June 5,
2001. Definitive Agreements were not executed prior to such date, but are
continuing to be negotiated as of the date of this Form 10-QSB and the Company
anticipates that Definitive Agreements will ultimately be agreed upon and
executed, although there can be no assurance. If the Definitive Agreements are
entered into, the closing and final effectiveness of the settlement will be
subject to the Company filing an Information Statement with the Securities and
Exchange Commission and distributing the Information Statement to its
stockholders describing the settlement and related sales of assets, described
below, by the Company pursuant to the Definitive Agreements. International
Tours, Inc. ("International") has agreed to vote its common stock in favor of
the approval of the Definitive Agreements and the sale of the assets described
below, and, therefore, the approval and sale are assured. In addition to mutual
releases of all parties, the Definitive Agreements will provide for the sale by
the Company of (i) all of the Company's interest in Operator, (ii) all of the
Company's interest in River Port Truck Stop, LLC ("River Port LLC"), and (iii)
the Company's 50% ownership interest in Ozdon Investments, Inc. ("Ozdon"). The
purchase price for the sale of the foregoing assets by the Company shall be
equal to $2.3 million, payable $800,000 in cash and $1.5 million in the form of
a promissory note payable in 60 monthly installments of principal and interest;
provided, the cash potion of the purchase price will be reduced by an amount
equal to the sum of all liabilities of Ozdon in excess of $125,000. The non-
refundable payments of $150,000, already received by the Company, will be
applied against the cash portion of the purchase price. The promissory note will
be personally guaranteed by Weaver, 146 LLC, Williams, Operator, River Port LLC,
Ozdon and 167 Truck Stop, L.L.C. and will be secured by a security interest in
49% of the membership interests of Operator. The Definitive Agreements will also
include a noncompetition agreement pursuant to which the Company will agree not
to compete for a period of two years after the closing of the Definitive
Agreements in the ownership, operation or management of truck stops in any of
the Parishes in the State of Louisiana in which Operator or River Port LLC
currently own or operate truck stops.

The Company and the other parties to these lawsuits have agreed to postpone the
lawsuits pending negotiation and execution of the Definitive Agreements. If the
parties are unable to ultimately agree upon and execute the Definitive
Agreements, the settlement will not be effective and the three lawsuits will
most likely proceed.


================================================================================



                                      10
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
 CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2001 AND 2000
================================================================================

2.  RESTRUCTURE OF OM OPERATING, L.L.C. AND RIVER PORT TRUCK STOP, LLC
(CONTINUED)

The purported mergers, the pending lawsuits and the possible settlement and sale
of the Company's assets pursuant to such settlement should be considered in the
review of the remainder of this Form 10-QSB. The discussion of Operator, River
Port LLC and Ozdon, and the Company's ownership interests in them, contained in
the remainder of this Form 10-QSB assumes that the Definitive Agreements will
not be executed, the litigation will continue, the purported mergers will be set
aside and that the Company's ownership interests will be reinstated. The final
decision in this regard will not be known until it is known that the Definitive
Agreements are not going to be executed and then not until the courts render
final judgments in the lawsuits.

If, on the other hand, the Definitive Agreements are executed and the closing
occurs, the Company will sell all of its gaming assets in Louisiana for the $2.3
million purchase price discussed above. In such event, the Company plans to
pursue additional opportunities and developments in other industries and other
businesses and to continue as an ongoing business concern.


================================================================================


                                      11
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
  CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2001 AND 2000
================================================================================

2.  RESTRUCTURE OF OM OPERATING, L.L.C. AND RIVER PORT TRUCK STOP, LLC
(CONTINUED)

The following is a combined condensed unaudited balance sheet for the Operator,
RPLLC and Ozdon as of June 30, 2001 and the combined condensed unaudited
statement of income for the six months then ended.

<TABLE>
<CAPTION>
                            CONDENSED BALANCE SHEET
                                  (UNAUDITED)
                                 June 30, 2001
<S>                                                              <C>
           Assets

           Current assets                                        $  1,452,101
           Fixed assets, net                                        3,232,452
           Other assets                                               254,156
                                                                 ------------
                                                                 $  4,938,709
                                                                 ============
           Liabilities and Equity

           Current liabilities                                   $  1,371,178
           Long-term liabilities                                    1,934,611
                                                                 ------------
                                                                    3,305,789

           Equity                                                   1,632,920
                                                                 ------------
                                                                 $  4,938,709
                                                                 ============
</TABLE>

<TABLE>
<CAPTION>
                         CONDENSED STATEMENT OF INCOME
                                  (UNAUDITED)
                        Six Months Ended June 30, 2001

<S>                                                              <C>
           Revenues                                              $  9,630,465
           Cost of revenues                                         6,433,051
                                                                 ------------
           Gross profit                                             3,197,414

           General and administrative                               2,485,240
                                                                 ------------
           Operating profit                                           712,174

           Other                                                     (186,737)
           Taxes                                                      (18,571)
                                                                 ------------

           Net Income                                            $    506,866
                                                                 ============
</TABLE>

In connection with the negotiation of the settlement and sale of Operator, RPLLC
and Ozdon, the Company was released from its guaranty of the obligation of
RPLLC. Because of the guaranty, the Company had continued to record 25% of the
losses in RPLLC resulting in a negative investment balance of $149,748. As a
result of the release, the Company's negative investment of $149,748 was
increased to $0 with the resulting income recorded in income from equity
investments in the accompanying statement of operations.


================================================================================


                                      12

<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
  CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2001 AND 2000
================================================================================

3.  INVESTMENT SECURITIES

During the second quarter of 2001, the Company obtained a release of the pledged
securities from the debt holder and sold the remaining shares for a loss of
$37,222. The Company sold shares in the first quarter resulting in a loss of
$85,758.

4.  SUBORDINATED CONVERTIBLE DEBENTURES

During 2001, the Board of Directors approved the sale of up to $1,000,000 of
subordinated convertible debentures. The debentures require quarterly interest
only payments at a 10% rate, are due in full on June 1, 2003 and are convertible
into common stock at $.05 per share. The debentures are subordinated to notes
payable with a principal balance of $667,500 at June 30, 2001. As of June 30,
2001, the Company sold $317,000 of debentures. Subsequent to June 30, 2001, the
Company sold an additional $68,000.

5.  SUBSEQUENT EVENT

On April 26, 2001, the Company entered into an option agreement with Energy
Transfer Group, LLC ("ETG"). The Company paid ETG $250,000 as the option price
for the option to acquire ETG Communications, Inc. ("Communications") from ETG.
If the Company exercises the option, it will acquire Communications in exchange
for Common Stock of the Company equal to 51% of the outstanding shares following
the issuance of shares to ETG. The Company has also agreed to loan funds to
Communications for working capital. As of June 30, 2001, the Company has loaned
$67,000. The loan is due on demand and bears interest at 8%. Communications is
in the business of marketing and providing Internet service to residential and
commercial customers in rural markets through ETG's relationships with rural
electric cooperatives across the United States. The option expired August 1,
2001, however, the Company and Communications continue to negotiate an
agreement.


================================================================================


                                      13

<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
  CORPORATION AND SUBSIDIARIES

================================================================================

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

LIQUIDITY AND CAPITAL RESOURCES

General: As noted in Note 2 of the Notes to Consolidated Financial Statements,
the Company has entered into a Term Sheet to settle three lawsuits, subject to
negotiation and execution of Definitive Agreements. If the Definitive Agreements
are executed, the Company will sell all of its gaming assets in Louisiana for
$2.3 million, of which $800,000 will be paid in cash (less $150,000 already paid
to the Company) and $1.5 million will be paid by a promissory note payable in 20
quarterly installments of principal and interest. The Company is reviewing other
businesses and acquisition opportunities and plans to use the proceeds from such
sale to fund other business opportunities. See footnote 5 to the financial
statements for a discussion of ongoing negotiations to acquire an Internet
service company. The Company expects that the Definitive Agreements will be
ultimately negotiated and executed and that the settlement and sale of assets
pursuant to the Term Sheet will be effected. However, there can be no assurance.

In April and May of 2001, the Company sold $317,000 of subordinated convertible
debentures. The proceeds were used to fund the $250,000 option payment on the
potential purchase of the internet service company and as an advance of $67,000
to the same entity. In July, the Company sold an additional $68,000 of
subordinated convertible debentures.

The Company will seek to meet its long-term liquidity needs primarily through
cash flow from equity investments, operations, sale of subordinated convertible
debentures and additional borrowings from the Company's traditional lending
sources. While the Company believes it will be able to generate and obtain the
necessary capital to meet such needs, there can be no assurance that all of such
capital will be available on terms acceptable to the Company, which could delay
or cause the Company to postpone certain planned activities.

General Condition: The Company ended the quarter with $9,370 in cash and other
current assets of $309,593. Other current assets consists of a receivable from a
related entity of $6,900, advances of $67,000, prepaid expenses of $7,859 and a
deferred tax asset of $227,834. Total liabilities were $1,280,502 at June 30,
2001. Current liabilities of $551,002 consist of accounts payable and accrued
liabilities of $132,702, current portion of long-term notes payable of $273,297,
payables to related parties of $130,000 and preferred stock dividends payable of
$15,003. The Company's current liabilities decreased $73,298 from $624,300 at
December 31, 2000. This decrease was comprised primarily of the payoff of
$150,000 to a former stockholder, offset by an increase in current portion of
long-term debt and accounts payable.

Competition is intense for the business of gaming patrons in Louisiana and
Mississippi. It is expected that profit margins may continue to be adversely
affected as a result of such competition and that various gaming establishments
may be forced to close because they cannot compete effectively at such reduced
margins. The Company believes Ozdon, Operator and River Port LLC will be able to
maintain a competitive position if they are able to carefully manage expenses
and cash flow. However, there can be no assurance in this regard and the Company
has no control over such management by Operator or River Port LLC. Ozdon and
Operator were parties to a month-to-month lease pursuant to which Ozdon leased
the Gold Rush truck stop and casino to Operator. Ozdon terminated the lease, but
pursuant to the Term Sheet, Ozdon is allowing Operator to continue to operate
the truck stop and casino at the Company's discretion.



================================================================================



                                      14

<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
  CORPORATION AND SUBSIDIARIES

================================================================================


RESULTS OF OPERATIONS
Comparison of Six Months Ended June 30, 2001 to Six Months Ended June 30, 2000
------------------------------------------------------------------------------

Operating Income (Loss)
-----------------------

The Company recorded a loss from operations of $371,623 during the six months
ended June 30, 2001 compared to a loss from operations of $417,009 for the six
months ended June 30, 2000. The decline in operating loss is due to the
Company's reduction in overhead expenses.

Income from Equity Investments
------------------------------

As discussed in Note 2, the gaming and truck stop operations recorded gross
profit for the six months ended June 30, 2001 of approximately $3,197,000. In
addition, the gaming and truck stops incurred approximately $2,485,000 of
general and administrative expenses and $187,000 of other expenses during the
same six months. The result was net income from gaming and truck stop operations
of $507,000 of which the Company's share was $302,986 (including Ozdon). The
Company's share of income for the six months ended June 30, 2000 was $210,250 on
income from gaming and truck stop operations of approximately $742,000. The
decrease in income from gaming and truck stop operations was attributable to an
increase in overhead costs as RPLLC's casino opened in the second half of 2000
and the reverse of the $149,748 negative investment in RPLLC when the Company
was released from its guarantee.

As noted in Note 2 of the Notes to Consolidated Financial Statements
(Unaudited), the other two members of Operator and RPLLC have purportedly voted
in favor of a merger resulting in the termination of the Company's interests in
Operator and RPLLC for a buyout of $375,000 and $50,000, respectively, and the
Company has filed a lawsuit seeking to nullify the purported mergers and
buyouts, among other relief. Effective as of January 5, 2001, the Company
entered into a Term Sheet with the other parties to the lawsuits, together with
certain related parties of the OMO Group. Under the terms of the Term Sheet, the
Company and the OMO Group have agreed to settle the foregoing litigation and
enter into mutual releases of claims, subject to certain conditions that must be
satisfied prior to such settlement becoming effective. The Term Sheet provides
that the settlement would not become effective unless definitive, binding
agreements mutually acceptable to all parties were entered into.

Gain on Sale of Investments
---------------------------

During the six months ended June 30, 2001, the Company sold Travelbyus.com
common stock resulting in a loss of $122,980. During the six months ended June
30, 2000, the Company sold Travelbyus.com common stock resulting in a gain of
$420,797. The Company no longer holds any Travelbyus.com stock.


================================================================================


                                      15

<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
  CORPORATION AND SUBSIDIARIES

================================================================================

Other Income
------------

During the six months ended June 30, 2001, the Company recognized $150,000
related to the initial non-refundable fee received in connection with the Term
Sheet and expensed a $250,000 non-refundable deposit on the potential
acquisition of an internet service company. During the six month ended June 30,
2000 the Company had other income of $25,555 primarily related to interest
income.

Forward Looking Statements
--------------------------

Statements that are not historical facts included in this Form 10-QSB are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 that involve risks and uncertainties that could
cause actual results to differ from projected results. Such statements address
activities, events or developments that the Company expects, believes, projects,
intends or anticipates will or may occur, including such matters as future
capital, debt restructuring, the possible effects of anti-gaming sentiment, the
restructuring of Operator and RPLLC maintaining or increasing fuel sales,
compliance with other gaming law requirements, maintaining a competitive
position in the Company's market, pending legal proceedings, new lease and other
contractual arrangements, business strategies, expansion results to differ
materially ("Cautionary Disclosures") are described throughout this Form 10-QSB.
Cautionary disclosures include, among others: general economic conditions, the
Company's ability to find, acquire, market, develop, and produce new properties,
the strength and financial resources of the Company's competitors, anti-gaming
sentiment, labor relations, availability and cost of material and equipment, the
results of debt restructuring efforts, regulatory developments and compliance,
pending legal proceedings and possible new lease and other contractual
arrangements. All written and oral forward-looking statements attributable to
the Company are expressly qualified in their entirety by the Cautionary
Disclosures. The Company disclaims any obligation to update or revise any
forward-looking statement to reflect events or circumstances occurring hereafter
or to reflect the occurrence of anticipated or unanticipated events.


================================================================================


                                      16

<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
  CORPORATION AND SUBSIDIARIES

================================================================================

PART II  OTHER INFORMATION

ITEM 1  LEGAL PROCEEDINGS

Arlington Farms, Inc., et al v. North American Gaming and Entertainment
Corporation, et al, Civil Action No. 00-106-C-M2, United States District Court,
Middle District of Louisiana. This suit represents a suit by certain of the
plaintiffs in the Harry Woodall, et al v. North American Gaming and
Entertainment Corporation lawsuit, which was dismissed as part of the Settlement
Agreement with the North Louisiana Group. These plaintiffs have sued the Company
seeking specific performance under the Settlement Agreement to require the
Company, among other things, to deliver various instruments of ownership
reflecting the ownership interests of the North Louisiana Group in Operator,
River Port LLC and Ozdon and to declare that the effective date of the transfer
was December 17, 1998 rather than March 31, 1999, and for unspecified violations
of Rule 10b-5 promulgated under the Securities Act of 1933. The suit also
involves a claim against E.H. Hawes, II, the President and Chief Executive
Officer of the Company, and a nonaffiliated third party to set aside a second
lien on the Gold Rush granted by the Company to secure the personal guaranty of
Mr. Hawes and such thirty party guaranteeing the indebtedness of River Port LLC
incurred in connection with the construction of River Port. The Company and the
other parties to this litigation have agreed to postpone it pending negotiation
and execution of the Definitive Agreements pursuant to the Term Sheet.

ITEMS 2, 3, 4 AND 5 ARE OMMITED FROM THIS REPORT AS INAPPLICABLE

ITEM 6  EXHIBITS AND REPORTS ON FORM 8-K

(a)  The following documents are filed as part of this Quarterly Report on Form
     10-QSB:

Exhibit
Number        Description of Exhibits
------        -----------------------

(a)           The following exhibits are filed as part of this Form 10-QSB
              pursuant to Item 601 of Regulation S-B:

3.1.1         Certificate of Incorporation of the Company, as amended, filed as
              Exhibit 3.1 to the Company's Annual Report on Form 10-K for the
              fiscal year ended December 31, 1986 (the "1986 Form 10-K"), and
              incorporated herein by reference.

3.1.2         Certificate of Amendment of Certificate of Incorporation of the
              Company dated April 18, 1994, filed as Exhibit 3.1.8 to the
              Company's Annual Report on Form 10-K for the fiscal year ended
              December 31, 1993 (the "1993 Form 10-K"), and incorporated herein
              by reference.

3.1.3         Certificate of Amendment of Certificate of Incorporation of the
              Company effecting one-for-three reverse stock split filed as
              Exhibit 3.1 to the Company's Current Report on Form 8-K dated
              October 17, 1994, and incorporated herein by reference.


================================================================================


                                      17

<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
  CORPORATION AND SUBSIDIARIES

================================================================================

3.1.4     Certificate of Amendment of Certificate of Incorporation of the
          Company effecting name change, increase of authorized shares,
          authorization of Class A preferred stock and stock ownership
          limitations filed as Exhibit 3.2 to the Company's Current Report on
          Form 8-K dated October 17, 1994, and incorporated herein by reference.

3.1.5     Form of "Certificate of Designation, Preferences and Rights of Series
          B Convertible Preferred Stock" creating the Series B Preferred Stock
          filed as Exhibit 10.1.4 to the Company's Current Report on Form 8-K
          dated June 10, 1996, and incorporated herein by reference.

3.1.6     Certificate of Amendment of Certificate of Incorporation of the
          Company increasing the number of authorized shares of Common Stock to
          100,000,000 shares filed as Exhibit 2.1.6 to the Company's Quarterly
          Report on Form 10-QSB for the second quarter of 1998, and incorporated
          herein by reference.

3.2       Amended and Restated Bylaws of the Company filed as Exhibit 3.2 to the
          Company's Quarterly Report on Form 10-QSB for the third quarter of
          1998, and incorporated herein by reference.


(b)  Reports on Form 8-K.

       None.


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


                                             NORTH AMERICAN GAMING AND
                                             ENTERTAINMENT CORPORATION
                                             (Registrant)




                                             By: /s/ Ed Hawes
                                                 Chairman of the Board and
                                                 Chief Executive Officer


Date:  August 16, 2001


================================================================================


                                     18