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UNITED STATES

SECURITIES
AND EXCHANGE COMMISSION

Washington, D.C. 20549



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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 March 31, 2003



| ̈ |  | 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



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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 incorporation or organization) |  | (IRS Employer Identification No.)



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 xNo  ̈



Number of shares of common stock, par value $.01 per share, outstanding as of March 31, 2003: 24,631,587



|Transitional Small Business Disclosure Format (Check One): |  | Yes  ̈No x
|---------------------------------------------------------- |  | ---------
|                                                          
|Check whether registrant is an accelerated filer           |  | Yes  ̈No x



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NORTH AMERICAN GAMING AND ENTERTAINMENT

CORPORATION

BALANCE SHEETS

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|                                                                                                                                        |  | March 31, 2003 |          |   | December 31, 2002 |  
|--------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | -------- | - | ----------------- | -
|                                                                                                                                        |  | (Unaudited)    |          |   |                   |  
|                                                                                                                                       
|ASSETS                                                                                                                                  |  |                |          |   |                   |  
|Current assets:                                                                                                                         |  |                |          |   |                   |  
|                                                                                                                                       
|Cash                                                                                                                                    |  | $              | 69,067   |   |                   | $
|Prepaid expenses and other                                                                                                              |  |                | 2,500    |   |                   |  
|Note receivable  shareholder                                                                                                           |  |                |         |   |                   |  
|Notes receivable  current portion                                                                                                      |  |                | 259,719  |   |                   |  
|                                                                                                                                        |  |                |          |   |                   |  
|                                                                                                                                       
|Total current                                                                                                                           |  |                | 331,286  |   |                   |  
|                                                                                                                                        |  |                |          |   |                   |  
|                                                                                                                                       
|Other assets:                                                                                                                           |  |                |          |   |                   |  
|                                                                                                                                       
|Notes receivable  long-term                                                                                                            |  |                | 633,405  |   |                   |  
|                                                                                                                                        |  |                |          |   |                   |  
|                                                                                                                                       
|Total other assets                                                                                                                      |  |                | 633,405  |   |                   |  
|                                                                                                                                        |  |                |          |   |                   |  
|                                                                                                                                       
|Total assets                                                                                                                            |  | $              | 964,691  |   |                   | $
|                                                                                                                                        |  |                |          |   |                   |  
|                                                                                                                                       
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                    |  |                |          |   |                   |  
|Current liabilities:                                                                                                                    |  |                |          |   |                   |  
|Current portion of notes payable                                                                                                        |  | $              | 100,797  |   |                   | $
|Accounts payable and accrued liabilities                                                                                                |  |                | 97,165   |   |                   |  
|Preferred stock dividends payable                                                                                                       |  |                | 15,003   |   |                   |  
|Subordinated debentures                                                                                                                 |  |                | 322,500  |   |                   |  
|                                                                                                                                        |  |                |          |   |                   |  
|                                                                                                                                       
|Total Current Liabilities                                                                                                               |  | $              | 535,465  |   |                   | $
|                                                                                                                                       
|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  |   |                   |  
|Additional paid-in capital                                                                                                              |  |                | 489,214  |   |                   |  
|Treasury stock, 17,157,494 shares, at cost                                                                                              |  |                | (489,258 | ) |                   |  
|Retained earnings                                                                                                                       |  |                | 11,384   |   |                   |  
|                                                                                                                                        |  |                |          |   |                   |  
|Total stockholders equity                                                                                                               |  |                | 429,226  |   |                   |  
|                                                                                                                                        |  |                |          |   |                   |  
|                                                                                                                                       
|Total liabilities and stockholders equity                                                                                              |  | $              | 964,691  |   |                   | $
|                                                                                                                                        |  |                |          |   |                   |  



1

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



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NORTH AMERICAN GAMING AND ENTERTAINMENT

CORPORATION

STATEMENTS OF
OPERATIONS (UNAUDITED)

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|                                          |  | Three Months Ended March 31, |           
|----------------------------------------- |  | ---------------------------- | ----------
|                                          |  | 2003                         |           
|                                         
|Costs and expenses:                       |  |                              |           
|                                         
|General and administrative expenses       |  | $                            | 35,537    
|                                          |  |                              |           
|                                         
|Operating loss                            |  |                              | (35,537   
|                                         
|Interest expense                          |  |                              | (12,040   
|Loss on sale of accounts receivable       |  |                              | (10,508   
|Other income                              |  |                              | 13,274    
|                                          |  |                              |           
|                                         
|Loss before provision for income taxes    |  |                              | (44,811   
|                                         
|Provision for income taxes                |  |                              |          
|                                          |  |                              |           
|                                         
|Net loss                                  |  | $                            | (44,811   
|                                          |  |                              |           
|                                         
|Basic Loss Per Share                      |  |                              | *         
|                                          |  |                              |           
|                                         
|Basic weighted average shares outstanding |  |                              | 24,680,691
|                                          |  |                              |           



*Less than $.01 per share





2

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



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NORTH AMERICAN GAMING AND ENTERTAINMENT

CORPORATION

STATEMENTS OF
CASH FLOWS (UNAUDITED)

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|                                                                                          |  | Three Months Ended March 31, |        
|----------------------------------------------------------------------------------------- |  | ---------------------------- | -------
|                                                                                          |  | 2003                         |        
|                                                                                         
|                                                                                         
|Cash Flows From Operating Activities:                                                     |  |                              |        
|Net loss                                                                                  |  | $                            | (44,811
|Adjustments to reconcile net loss to net cash provided by (used in) operating
activities: |  |                              |        
|Loss on sale of notes receivable                                                          |  |                              | 10,508 
|Forgiveness of note receivable in exchange for consulting services                        |  |                              |       
|Changes in operating assets and liabilities:                                              |  |                              |        
|(Increase) decrease in:                                                                   |  |                              |        
|Prepaid expenses and other                                                                |  |                              |       
|Increase (decrease) in:                                                                   |  |                              |        
|Accounts payable and accrued liabilities                                                  |  |                              | (41,311
|                                                                                          |  |                              |        
|                                                                                         
|Net Cash Used In Operating Activities                                                     |  |                              | (75,614
|                                                                                          |  |                              |        
|                                                                                         
|Cash Flows From Investing Activities:                                                     |  |                              |        
|Proceeds from sale of notes receivable                                                    |  |                              | 88,046 
|Repayments of note receivable shareholder                                                 |  |                              | 3,464  
|Repayments of note receivable                                                             |  |                              | 75,307 
|                                                                                          |  |                              |        
|                                                                                         
|Net Cash Provided By Investing Activities                                                 |  |                              | 166,817
|                                                                                          |  |                              |        
|                                                                                         
|Cash Flows From Financing Activities:                                                     |  |                              |        
|Payments on notes payable                                                                 |  |                              | (27,500
|                                                                                          |  |                              |        
|                                                                                         
|Net Cash Used In Financing Activities                                                     |  |                              | (27,500
|                                                                                          |  |                              |        
|                                                                                         
|Net Increase (Decrease) In Cash                                                           |  |                              | 63,703 
|                                                                                         
|Cash, beginning of period                                                                 |  |                              | 5,364  
|                                                                                          |  |                              |        
|                                                                                         
|Cash, end of period                                                                       |  | $                            | 69,067 
|                                                                                          |  |                              |        
|                                                                                         
|Cash paid during the period for:                                                          |  |                              |        
|                                                                                         
|Interest                                                                                  |  | $                            | 7,880  
|                                                                                          |  |                              |        
|                                                                                         
|Non-Cash Activities:                                                                      |  |                              |        
|Sale of notes receivable in exchange for forgiveness of debentures and accrued
interest   |  | $                            | 75,429 
|                                                                                          |  |                              |        





3

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



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NORTH AMERICAN GAMING AND ENTERTAINMENT

CORPORATION

NOTES TO
FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2003 AND 2002

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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.



Results for the three months ended
March 31, 2003 are not necessarily indicative of the results to be realized during the full year. These financial statements should be read in conjunction with the Companys Annual Report on Form 10-KSB for the year ended December 31, 2002.



The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. However, the Company currently has no sources of revenue except interest on notes receivable and its cash flow needs are dependent on the collection of notes receivable resulting from the sale of its
investments in three operating companies. Management plans to continue operating the business and pursue various business, investment and financing opportunities.



2. EARNINGS PER SHARE



The computation of earnings per share for the three months ended March 31, 2003 does not include the effect on common stock for convertible debentures for 125,000
shares of common stock due to the conversion price of $.05 being greater than the average market price of common shares for the period March 31, 2003, nor the effect on common stock for 1,000,000 options for common stock as they are anti-dilutive.



3. RELATED PARTY



During 2002, the Company loaned an additional $59,046 to a shareholder and officer of
the Company. As of March 31, 2003, this amount has been paid in full.



The
Company has $230,000 of debentures owed to a related party. The Company paid $6,050 of interest on these debentures to the related party during the quarter ended March 31, 2003.



4

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NORTH AMERICAN GAMING AND ENTERTAINMENT

CORPORATION

NOTES TO
FINANCIAL STATEMENTS (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2003 AND MARCH 31,2002

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4. Note Receivable



Notes receivable at December 31, 2002 were comprised of three notes received in conjunction with the sale of equity investments. These
notes bear interest at variable rates on the New York Prime rate and are receivable over 60 months commencing October 15, 2001. During the quarter ended March 31, 2003, the Company sold one of its notes receivable to a debenture holder. The note had
an outstanding balance of approximately $174,000 at the date of sale and was sold for cash proceeds of approximately $88,000 and cancellation of the $62,500 outstanding debenture and related interest, which resulted in a loss of approximately
$10,500.



5. 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, of which $125,000 are convertible into common stock at $0.5 per share. The debentures are subordinated to
notes payable and have a principal balance of $322,500 at March 31, 2003. The Company made interest payments on debentures of $6,050 during the quarter ended March 31, 2003.



5

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



LIQUIDITY AND CAPITAL RESOURCES



General: Until August 20,
2001, the Company was engaged in the video gaming business through its partial ownership of three operating companies: O.M. Operating, LLC (Operator), River Port Truck Stop, LLC (River Port), and Ozdon Investments, Inc.
(Ozdon) that operate video poker machines located in truck stops in Louisiana. Effective August 20, 2001, the Company entered into a definitive Purchase, Release, Settlement and Indemnity Agreement (the Settlement Agreement)
with certain parties thereof (the OMO Group) settling the three pending lawsuits against the OMO Group. In addition to mutual releases of all parties, the Settlement Agreement provided for the sale by the Company of all of the
Companys interest in the three operating Companies: Operator, River Port and Ozdon. The Company does not intend to liquidate as a result of the Settlement Agreement and sale of its assets. The Company is reviewing other business and
acquisition opportunities. However, there can be no assurances that other opportunities will become available on terms and conditions acceptable to the Company.



During 2001, the Board of Directors approved the sale of up to $1,000,000 of subordinated debentures. As of December 31, 2002, the
Company had sold $385,000 of subordinated convertible debentures. The debentures require quarterly interest only payments at a 10% rate. The debentures are due in full on June 1, 2003, and include $125,000 that are convertible into common stock at
$.05 per share. The proceeds were used to fund the $250,000 option payment on the potential purchase of Energy Transfer Group, LLC and an advance of $67,000 to the same entity. During July 2002, the Company purchased an outstanding debenture from
one party at less than fair value and re-sold the debenture to another party, which resulted in an extraordinary gain of approximately $23,000. As of December 31, 2002, the Company has paid $19,000 of the approximate $61,000 of interest accrued as
of that date. As of March 31, 2003, these debentures have a principal balance of $322,500 (see Note 4).



General Condition. The Company ended the quarter with $69,067 in cash and other current assets of $262,219. Other current assets include current portion of notes receivable totaling $269,719, and prepaid
expenses and other of $2,500. Total liabilities were $535,465 at March 31, 2003. Current liabilities of $535,465 consist of accounts payable and accrued liabilities of $97,165, current portion of long-term notes payable of $97,165, and preferred
stock dividends payable of $15,003, subordinated debentures totaling $322,500.



6

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Plan of
Operations



Effective August 20, 2001, the Company sold its interests in
Operating, River Port and Ozdon, leaving the Company with no sources of revenue. The Companys cash flow needs are dependent on the collection of notes receivable resulting from the sale of its interests in Operator, River Port and Ozdon.



Our independent accountants have expressed substantial doubt about the
Companys ability to continue as a going concern. Management plans to continue operating the business and also to pursue various business, investment and financing opportunities.



The Company will seek to meet its liquidity needs primarily through cash flow from payments on the promissory notes resulting from the
sale of assets 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.



RESULTS OF OPERATIONS



Comparison of the three
months ended March 31, 2003 to the three months ended March 31, 2002.



Operating Income (Expense)



The Company recorded a loss
from operations of $35,537 during the three months ended March 31, 2003, compared to a loss from operations of $108,658 for the three months ended March 31, 2002. The decrease in the loss from operations for the three months ended March 31, 2003 as
compared to the loss from operations for the three months ended March 31, 2002 is due to the reduction in administrative costs and overhead.



During the three months ended March 31, 2003, the Company incurred general and administrative costs of $35,537 compared to $108,658 during the three months ended
March 31, 2002.



Interest Expense



The Company incurred interest expense of $12,040 for the three months ended March 31,
2003, compared to $15,413 for the three months ended March 31, 2002.



7

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Interest Income and Other Income (Expense)



The Company
recorded other income of $13,274 for the quarter March 31, 2003, related to interest income on notes receivable compared to other income of $12,283 for the quarter ended March 31, 2002.



ITEM 3. CONTROLS AND PROCEDURES



|a) |  | Within the 90-day period prior to the date of this report, we carried out an evaluation, under the supervision and with the participation of our management, including the
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-14 of the Securities Exchange Act of 1934 (the Exchange Act). Based upon
that evaluation, the Chief Executive officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in our
Exchange Act filings. The two Executive Officers responsible for the financial reporting and disclosure are in direct control of the books and records of the Company and are involved first-hand in the decision making process for material
transactions.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|b) |  | There have been no significant changes in our internal controls or in other factors, which could significantly affect internal controls subsequent to the date we carried out
our evaluation.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Forward Looking Statements



Certain statements contained in this Report on Form 10-QSB, including statements of the
Companys current expectations, intentions, plans and beliefs, and statements containing the words believes, anticipates, estimates, expects, or may, are forward-looking statements, as
defined in Section 21D of the Securities Exchange Act of 1934. Such forward-looking statements involve known and unknown risk, uncertainties and other factors which may cause the actual results, performance, timing or achievements of the Company to
be materially different from any results, performance, timing or achievements expressed or implied by such forward-looking statements.



8

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PART II  OTHER INFORMATION



Items 1 through 5 not applicable.



ITEM 6.EXHIBITS AND REPORTS ON FORM 8K



(a) Exhibits required to be filed by Item 601 of Regulation SB:



|     
|-----
|3.1.1
|     
|3.1.2
|     
|3.1.3
|     
|3.1.4
|     
|3.1.5
|     
|3.1.6
|     
|3.2  





9

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|     
|-----
|10.26
|     
|10.27
|     
|10.28
|     
|10.29
|     
|10.30
|     
|10.31
|     
|*99.1



|b) |  | Reports on Form 8K
|-- |  | -------------------



None.



|* |  | Filed herewith
|- |  | --------------





10

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SIGNATURES



In accordance with Section 13 or 15(d) 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

|             |  |  |  |    
|------------ |  |  |  | ---
|            
|May 20, 2003 |  |  |  | By:
|             |  |  |  |    





11

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CERTIFICATION



I, E. H. Hawes, II, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-QSB of North American Gaming and Entertainment Corporation;
|-- |  | ------------------------------------------------------------------------------------------------------------



|2. |  | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3. |  | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4. |  | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and we have:
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) |  | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this quarterly report is being prepared;
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report
(the Evaluation Date); and
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) |  | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



|5. |  | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of
registrants board of directors (or persons performing the equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) |  | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize and
report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) |  | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



|6. |  | The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Date: May 20, 2003



/s/ E. H. Hawes, II

E. H. Hawes, II, Chief Executive Officer and Chief Financial Officer





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