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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 June 30, 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  x        No   ̈



Number of shares of common stock, par value $.01 per share, outstanding as of June 30, 2003:  24,631,058



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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|                                                                                                                                        |  | June 30, 2003 |          |   | December 31,2002 |  
|--------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | -------- | - | ---------------- | -
|                                                                                                                                        |  | (UNAUDITED)   |          |   |                  |  
|ASSETS                                                                                                                                  |  |               |          |   |                  |  
|Current assets:                                                                                                                         |  |               |          |   |                  |  
|                                                                                                                                        |  |              
|Cash                                                                                                                                    |  | $             | 20,641   |   |                  | $
|Prepaid expenses and other                                                                                                              |  |               | 2,500    |   |                  |  
|Note receivable  shareholder                                                                                                           |  |               |         |   |                  |  
|Notes receivable  current portion                                                                                                      |  |               | 268,814  |   |                  |  
|                                                                                                                                        |  |               |          |   |                  |  
|Total current                                                                                                                           |  |               | 291,955  |   |                  |  
|                                                                                                                                        |  |               |          |   |                  |  
|Notes receivable  long-term                                                                                                            |  |               | 560,530  |   |                  |  
|                                                                                                                                        |  |               |          |   |                  |  
|Total assets                                                                                                                            |  | $             | 852,485  |   |                  | $
|                                                                                                                                        |  |               |          |   |                  |  
|                                                                                                                                        |  |              
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                    |  |               |          |   |                  |  
|Current liabilities:                                                                                                                    |  |               |          |   |                  |  
|Current portion of notes payable                                                                                                        |  | $             | 73,297   |   |                  | $
|Accounts payable and accrued liabilities                                                                                                |  |               | 72,441   |   |                  |  
|Preferred stock dividends payable                                                                                                       |  |               | 15,003   |   |                  |  
|Subordinated debentures                                                                                                                 |  |               | 318,952  |   |                  |  
|                                                                                                                                        |  |               |          |   |                  |  
|                                                                                                                                        |  |              
|Total Current Liabilities                                                                                                               |  | $             | 479,693  |   |                  | $
|                                                                                                                                        |  |              
|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 (accumulated deficit)                                                                                                 |  |               | (45,050  | ) |                  |  
|                                                                                                                                        |  |               |          |   |                  |  
|Total stockholders equity                                                                                                               |  |               | 372,792  |   |                  |  
|                                                                                                                                        |  |               |          |   |                  |  
|                                                                                                                                        |  |              
|Total liabilities and stockholders equity                                                                                              |  | $             | 852,485  |   |                  | $
|                                                                                                                                        |  |               |          |   |                  |  



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



1



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NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION

STATEMENTS OF OPERATIONS (UNAUDITED)

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|                                          |  | Three Months Ended June 30, |            |   | Six Months Ended June 30, |  
|----------------------------------------- |  | --------------------------- | ---------- | - | ------------------------- | -
|                                          |  | 2003                        |            |   | 2002                      |  
|Costs and expenses:                       |  |                             |            |   |                           |  
|                                          |  |                             |            |  
|General and administrative expenses       |  | $                           | 55,626     |   |                           | $
|                                          |  |                             |            |   |                           |  
|                                          |  |                             |            |  
|Operating loss                            |  |                             | (55,626    | ) |                           |  
|                                          |  |                             |            |  
|Interest expense                          |  |                             | (11,162    | ) |                           |  
|Loss on sale of accounts receivable       |  |                             |           |   |                           |  
|Interest income                           |  |                             | 10,354     |   |                           |  
|                                          |  |                             |            |   |                           |  
|                                          |  |                             |            |  
|Loss before provision for income taxes    |  |                             | (56,434    | ) |                           |  
|                                          |  |                             |            |  
|Provision for income taxes                |  |                             |           |   |                           |  
|                                          |  |                             |            |   |                           |  
|                                          |  |                             |            |  
|Net loss                                  |  | $                           | (56,434    | ) |                           | $
|                                          |  |                             |            |   |                           |  
|                                          |  |                             |            |  
|Basic Loss Per Share                      |  |                             | *          |   |                           |  
|                                          |  |                             |            |   |                           |  
|                                          |  |                             |            |  
|Basic weighted average shares outstanding |  |                             | 24,631,058 |   |                           |  
|                                          |  |                             |            |   |                           |  



|* |  | Less than $.01 per share
|- |  | ------------------------



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



2



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NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION

STATEMENTS OF CASH FLOWS (UNAUDITED)

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|                                                                                          |  | Six Months Ended June 30, |         
|----------------------------------------------------------------------------------------- |  | ------------------------- | --------
|                                                                                          |  | 2003                      |         
|Cash Flows From Operating Activities:                                                     |  |                           |         
|Net loss                                                                                  |  | $                         | (101,245
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |  |                           |         
|Bad Debt Expense                                                                          |  |                           |        
|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                                                  |  |                           | (52,693 
|                                                                                          |  |                           |         
|                                                                                          |  |                          
|Net Cash Used In Operating Activities                                                     |  |                           | (143,430
|                                                                                          |  |                           |         
|                                                                                          |  |                          
|Cash Flows From Investing Activities:                                                     |  |                           |         
|Proceeds from sale of notes receivable                                                    |  |                           | 88,046  
|Increase in note receivable shareholder                                                   |  |                           |        
|Repayments of note receivable shareholder                                                 |  |                           | 3,464   
|Repayments of note receivable                                                             |  |                           | 139,087 
|                                                                                          |  |                           |         
|                                                                                          |  |                          
|Net Cash Provided By Investing Activities                                                 |  |                           | 230,597 
|                                                                                          |  |                           |         
|                                                                                          |  |                          
|Cash Flows From Financing Activities:                                                     |  |                           |         
|Payments on notes payable                                                                 |  |                           | (55,000 
|Payment on debentures                                                                     |  |                           | (16,890 
|                                                                                          |  |                           |         
|                                                                                          |  |                          
|Net Cash Used In Financing Activities                                                     |  |                           | (71,890 
|                                                                                          |  |                           |         
|                                                                                          |  |                          
|Net Increase In Cash                                                                      |  |                           | 15,277  
|                                                                                          |  |                          
|Cash, beginning of period                                                                 |  |                           | 5,364   
|                                                                                          |  |                           |         
|                                                                                          |  |                          
|Cash, end of period                                                                       |  | $                         | 20,641  
|                                                                                          |  |                           |         
|                                                                                          |  |                          
|Cash paid during the period for:                                                          |  |                           |         
|                                                                                          |  |                          
|Interest                                                                                  |  | $                         | 10,941  
|                                                                                          |  |                           |         
|                                                                                          |  |                          
|Non-Cash Activities:                                                                      |  |                           |         
|Sale of notes receivable in exchange for forgiveness of debentures and accrued interest   |  | $                         | 75,429  
|                                                                                          |  |                           |         
|                                                                                          |  |                          
|Transfer of accrued interest payable to subordinated debenture                            |  | $                         | 13,342  
|                                                                                          |  |                           |         



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



3



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NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

SIX MONTHS ENDED JUNE 30, 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 and six months ended June 30, 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 six months ended June 30, 2003 does not include the effect on common stock for convertible debentures for 62,500 shares of common
stock due to the conversion price of $.05 being greater than the average market price of common shares for the period June 30, 2003, nor the effect on common stock for 1,000,000 options for common stock as they are anti-dilutive.



3. RELATED PARTY



During the year ended December 31, 2002, the Company loaned an additional $59,046 to a shareholder and
officer of the Company. As of June 30, 2003, this amount has been paid in full.



The
Company has approximately $240,000 of subordinated debentures owed to a related party as of June 30, 2003. The Company paid $34,160 of interest and $16,890 of principal on these debentures to the related party during the six months ended June 30,
2003.



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NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

SIX MONTHS ENDED JUNE 30, 2003 AND 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 subordinated 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
of approximately $13,000, 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 Company had sold $385,000 of debentures as of December 31, 2002. During the six months ended June 30, 2003, the Company cancelled $62,500 of the outstanding debentures in exchange
for a note receivable (Note 4) and renewed the remaining $322,500 debentures until June 2004. The debentures require quarterly interest only payments at a 10% rate. $62,500 of the outstanding debentures at June 30, 2003 is convertible into common
stock at $0.05 per share. The debentures are subordinated to notes payable and have a principal balance of $318,952 at June 30, 2003. The Company made interest payments on debentures of $34,160 and discretionary principal payments on debentures of
$16,890 during the six months ended June 30, 2003.



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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 (the OMO Group) settling 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 convertible debentures. The Company had sold $385,000 of debentures as of December 31, 2002. During the six months ended June 30, 2003, the Company cancelled $62,500 of the outstanding
debentures in exchange for a note receivable and renewed the remaining $322,500 debentures until June 2004. The debentures require quarterly interest only payments at a 10% rate, and $62,500 of the outstanding debentures at June 30, 2003 are
convertible into common stock at $0.05 per share. The debentures are subordinated to notes payable and have a principal balance of $318,952 at June 30, 2003. The Company made interest payments on debentures of $34,160 and discretionary principal
payments on debentures of $16,890 during the six months ended June 30, 2003.



General
Condition. The Company ended the quarter with $20,641 in cash and other current assets of $271,314. Other current assets include current portion of notes receivable totaling $268,814, and prepaid expenses and other of $2,500. Total liabilities were
$479,693 at June 30, 2003. Current liabilities of $479,693 consist of accounts payable and accrued liabilities of $59,983, current portion of long-term notes payable of $73,297, preferred stock dividends payable of $15,003, and subordinated
debentures totaling $318,952.



The Company reported cash used in operating activities for
the six months ended June 30, 2003 of approximately $143,000 related primarily to the net loss and decrease in accounts payables. The Company received cash flows from investing activities of approximately $230,000 related to cash collected on notes
receivable and the sale of a note receivable. The Company made principal payments on notes payable of $55,000 and principal payments in subordinated debentures of $16,890 during the six months ended June 30, 2003.



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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 six months ended June 30, 2003 to the six months ended June 30, 2002.



Operating Income (Expense)



The Company recorded a loss from operations of $101,245 during the six months ended June 30, 2003, compared to a loss from operations of $200,023 for the six months ended June 30, 2002. The decrease in the loss from operations for the six
months ended June 30, 2003 as compared to the loss from operations for the six months ended June 30, 2002 is due to the reduction in administrative and overhead costs.



During the six months ended June 30, 2003, the Company incurred general and administrative costs of $91,163 compared to $199,646 during the six months
ended June 30, 2002.



Interest Expense



The Company incurred interest expense of $23,202 for the six months ended June 30, 2003, compared to
$28,477 for the six months ended June 30, 2002.



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Interest Income and Other Income (Expense)



The Company recorded other income of $23,628 for the quarter June 30, 2003, related to interest income on notes receivable compared to other income of
$28,100 for the quarter ended June 30, 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.



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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   | 



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9



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|      | 
|----- | 
|10.26 | 
|      | 
|10.27 | 
|      | 
|10.28 | 
|      | 
|10.29 | 
|      | 
|10.30 | 
|      | 
|10.31 | 
|      | 
|*31.1 | 
|      | 
|*32.1 | 



Reports on Form 8K



None.



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



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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



|August 14, 2003 |  | By: |  | /s/  E. H. Hawes, II, President                                                                                                    
|--------------- |  | --- |  | -----------------------------------------------------------------------------------------------------------------------------------
|                |  |     |  | E. H. Hawes, II, President and Chief Executive Officer (Principal Executive Officer and Principal Financial and Accounting Officer)



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