<PAGE>

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

                                  FORM 10-KSB
(Mark One)

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
                  For the fiscal year ended December 31, 2000
                                       OR
[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
            For the transition period ____________ to _____________

                         Commission file number 0-5474

                             NORTH AMERICAN GAMING
                         AND ENTERTAINMENT CORPORATION
                 (Name of small business issuer in its charter)

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

      13150 Coit Road, Suite 1100, Dallas, Texas                75240
       (Address of principal executive offices)               (Zip Code)

        Issuer's telephone number, including area code:  (972) 671-1133

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:  Common Stock, par
value $.01 per share

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
YES   X   NO
    -----    -----

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained herein, and none will be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.  [  ]

The issuer's revenues [income] for its most recent fiscal year were: $1,368,358.

The aggregate market value of the voting common stock held by non-affiliates of
the issuer, based on the average bid and asked price of such stock, was $184,779
at March 1, 2001.

At March 1, 2001, the registrant had outstanding 25,105,458 shares of par value
$.01 common stock.

                      DOCUMENTS INCORPORATED BY REFERENCE

None.

Transitional Small Business Disclosure Format (check one):

               Yes            No     X
                    -------       -------
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                               TABLE OF CONTENTS
<TABLE>
<CAPTION>

<S>                                                                                               <C>
ITEM 1.  DESCRIPTION OF BUSINESS.................................................................  1
ITEM 2.  DESCRIPTION OF PROPERTY................................................................. 16
ITEM 3.  LEGAL PROCEEDINGS....................................................................... 16
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................................... 17

                                                PART II
ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS................................ 18
ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION............................... 18
ITEM 7.  FINANCIAL STATEMENTS.................................................................... 21
ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE..................................................... 21

                                               PART III
ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
         PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.............................. 22
ITEM 10. EXECUTIVE COMPENSATION.................................................................. 23
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.......................... 24
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................................... 25
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K........................................................ 25
</TABLE>

                                      -i-
<PAGE>

              NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION

                                    PART I



ITEM 1.  DESCRIPTION OF BUSINESS
---------------------------------

General

     North American Gaming and Entertainment Corporation (the "Company") was
incorporated under the laws of the State of Delaware in 1969.  The Company
changed its name from Western Natural Gas Company to North American Gaming and
Entertainment Corporation on October 17, 1994 in connection with its merger (the
"Merger") with OM Investors, Inc. ("OM").   Following the Merger, the Company
has concentrated its business in the gaming industry but plans to cease doing
business in this industry and pursue additional opportunities and developments
in other industries.

Forward Looking Statements

     This Form 10-KSB includes certain statements that are not historical facts
and are deemed to be "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995.  See Item 6 --"Management's
Discussion and Analysis or Plan of Operations -- Forward Looking Statements" for
a further discussion of these "forward-looking statements".

Purported Cash Out Merger of Company's Interests; Potential Settlement of
Litigation

     On March 15, 2000 meetings of the members of OM Operating, L.L.C.
("Operator") and River Port Truck Stop, LLC ("River Port LLC") were called by
Donald I. Williams ("Williams") and The 146, LLC ("146LLC"), the other two
members of Operator and River Port LLC.  The purpose of each meeting was to
merge newly-formed limited liability companies owned by Williams and 146LLC into
Operator and River Port and to cancel, or "cash out", the Company's membership
interests in exchange for a cash payment of $375,000 by Operator and $50,000 by
River Port LLC.  The Company objected to the holding of the meetings and the
cancellation of its membership interests.  The Articles of Organization or the
Operating Agreement of each of Operator and River Port LLC provide that a
member's interest may not be changed and the Articles of Organization may not be
amended without the unanimous vote of all members.  Despite the Company's
objections and the requirements of the Articles of Organization, a meeting of
members was held by each of OM and River Port on March 27, 2000 at which
Williams and 146LLC purported to approve both mergers.  The Company voted
against the merger at each meeting.  The purpose of both mergers was to
terminate the Company's interests in OM and River Port LLC without its consent.
A Certificate of Merger was filed by Operator and River Port LLC with the
Secretary of State of Louisiana on March 28, 2000 purporting to finalize both
mergers.

     The Company filed a lawsuit, styled North American Gaming and Entertainment
Corporation v. OM Operating, L.L.C., River Port Truck Stop, L.L.C., Donald I.
Williams, Loy F. Weaver and The 146, L.L.C., Civil Action No. CV00-0575S, United
States District Court, Western District of Louisiana, Shreveport Division,
against Operator, River Port LLC, Williams, 146LLC and Loy F. Weaver, an
affiliate of 146LLC ("Weaver"), for breach of fiduciary duty and breach of
contract, and to declare as a nullity the mergers purportedly approved by
Williams and 146LLC.  Related litigation was brought by the defendants and
related parties in the litigation styled (i) 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, and
(ii) The 146, L.L.C. v. Ozdon Investments, Inc., State of Louisiana, Parish of
Pointe Coupee, 18th Judicial District Court, Docket No. 34,928, Division "A".
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 term
sheet (the "Term Sheet") with the other parties to the lawsuits, together with
certain related parties thereof (collectively, the "OMO Group").

                                      -1-
<PAGE>

     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 (the "Definitive Agreements") were entered into on or
before March 9, 2001.  Definitive Agreements were not executed prior to such
date, but are continuing to be negotiated as of the date of this Form 10-KSB 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 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 Company will also be indemnified against any loss due to its guaranty of the
obligations of River Port LLC until it is released from such guaranty.  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.

       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-KSB.  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-KSB 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.

Settlement Agreements and Purchase of Shares and Debentures

     Effective as of April 1, 2000, the Company entered into a Settlement
Agreement with the holders of $173,498.51 of the Company's subordinated
debentures issued to former shareholders of OM (the "Debenture Holders").
Pursuant to the Settlement Agreement, the Debenture Holders released all claims
against the Company, International and E.H. Hawes II, the Company's President
("Hawes"), and the Company, International and Hawes released all claims against
the Debenture Holders.  Additionally, the Company agreed to pay an aggregate of
$225,000 to the Debenture Holders, payable $50,000 in cash on April 1, 2000,
with the remaining balance of $175,000 represented by a promissory note bearing
interest at 8.5% per annum and payable in 20 equal quarterly payments.  The
Debenture Holders agreed to transfer 1,958,829 shares of Common Stock of the
Company to the Company for cancellation, to forgive $151,125 of accrued
dividends on the former Class A Preferred Stock of the Company and transferred
subordinated debentures to the Company for cancellation having a balance of
principal and interest owed thereunder of $220,193.

                                      -2-
<PAGE>

     On January 1, 2001, but to be effective as of December 1, 2000, the Company
entered into a Settlement Agreement with the holders of all but $18,297 of the
Company's remaining subordinated debentures issued to former shareholders of OM
(the "Remaining Debenture Holders").  Pursuant to the Settlement Agreement, the
Remaining Debenture Holders released all claims against the Company,
International and Hawes, and the Company, International and Hawes released all
claims against the Remaining Debenture Holders.  Additionally, the Company
agreed to pay an aggregate of $700,000 to the Remaining Debenture Holders,
payable $150,000 in cash on January 1, 2001, with the remaining balance of
$550,000 represented by a promissory note dated December 1, 2000 bearing
interest at 9% per annum and payable in twenty equal quarterly payments.  The
Remaining Debenture Holders agreed to transfer 6,056,633 shares of Common Stock
of the Company to the Company for cancellation, to forgive $280,800 of accrued
dividends on the former Class A Preferred Stock of the Company and transferred
subordinated debentures to the Company for cancellation having a balance of
principal and interest owed thereunder of $428,806.97.

Sale of Travel Industry Assets

     General.  The Company entered into a Purchase of Assets Agreement (the
"Purchase Agreement") on October 13, 1999 with Travelbyus.com Ltd.
("Travelbyus"), International Tours, Inc. ("International") and two of the
Company's subsidiaries, GalaxSea Cruises and Tours, Inc. ("GalaxSea") and IT
Cruise, Inc. ("IT Cruise").  Under the Purchase Agreement, each of International
and GalaxSea sold substantially all of their respective cruise related assets to
Travelbyus and the Company sold to Travelbyus the stock of IT Cruise owned by
the Company, representing 100% of the outstanding stock of IT Cruise.

     The purchase and sale of the assets of International funded and closed on
October 15, 1999, with an effective date of October 1, 1999.  The purchase and
sale (the "Sale") of assets of GalaxSea and the stock of IT Cruise (the "Cruise
Business") closed into escrow on October 15, 1999.  The only condition to the
release of escrow and the closing becoming effective was the mailing of an
Information Statement to the stockholders of the Company.  Escrow was to be
released and the closing was to become effective 20 days after the first mailing
of such Information Statement to the Company's stockholders (the "Effective
Date"), but with a financial and accounting effective date to relate back to
October 1, 1999.  In the interim, the Company entered into a management
agreement pursuant to which Travelbyus managed the Cruise Business  pending the
Effective Date.  The Information Statement was mailed on December 23, 1999 and,
therefore, the Effective Date was January 12, 2000.

     Assets Sold.  The assets sold included machinery, equipment, fixtures,
furniture, prepaid expenses, intellectual property rights (including the name
"GalaxSea"), licenses, computer software, books and records and third-party
agreements and supply contracts existing at October 1, 1999.  The assets sold
did not include cash, accounts receivable or intra-company indebtedness existing
at October 1, 1999.

     Purchase Price.  The Company received $1,333,334 in cash and 666,667 shares
of common stock of Travelbyus, with a stated value under the Purchase Agreement
of $.75 per share (an aggregate of $500,000), as the purchase price for the
Cruise Business.  The cash was paid to the Company, less an escrow reserve of
$66,667, on October 15, 1999 and the shares were placed in escrow until the
Effective Date.  Of the shares received by the Company, 66,667 shares were
transferred to a former officer of GalaxSea and IT Cruise as a bonus and 100,000
shares were transferred to a nonaffiliated entity in satisfaction of a $100,000
advisory fee payable to such entity for assisting the Company in evaluating
Travelbyus, leaving the Company with a net of 500,000 shares of common stock of
Travelbyus.  International received $666,667 in cash, less an escrow reserve of
$33,333, and 333,333 shares of common stock of Travelbyus as the purchase price
for its cruise related assets.

     Allocation of Purchase Price.  The Company and International agreed upon
the allocation of the aggregate purchase price two-thirds to the Company and
one-third to International based on the following factors: (1) historical
financial operating statements; (2) the cruise segment versus the tour segment
of the leisure travel industry; (3) the relative values of the companies to
Travelbyus; and (4) the relative asset values of the respective companies on a
going forward basis.  No fairness opinion was obtained and no other third-party
appraisal or review was conducted to arrive at the allocation between the
Company and International.  The Board of Directors of the Company and
International decided they were capable of evaluating the factors to be taken
into account to determine the allocation of the aggregate purchase price, and
determined that the expense of engaging an investment banking firm or another
third party review of the transaction and allocation was not necessary.

                                      -3-
<PAGE>

     Shares of Travelbyus Not a Long-Term Investment.  The 666,667 shares of
common stock of Travelbyus received by the Company represented approximately
1.3% of the outstanding common stock of Travelbyus as of November 15, 1999.  The
Company did not intend to hold these shares as a long term investment or
distribute them to the stockholders of the Company.  Instead, the Company
intended to sell these shares on the Toronto Stock Exchange, where the shares of
Travelbyus are listed, as soon as it could do so in an orderly disposition, in
order to maximize the Company's return on the shares, in accordance with the
rules of the Toronto Stock Exchange.  As of March 1, 2001, the Company had
transferred 166,667 shares as an advisory fee and bonus, as discussed above, and
had sold 425,000 of such shares and continues to hold 75,000 shares, which are
pledged as collateral on a $175,000 promissory note.  On such date, the closing
sale price on the Toronto stock exchange for Travelbyus common stock was $0.16
(US) per share.

     Expenses.  The Purchase Agreement provided that each party would pay all of
the fees and expenses incurred by it (including the fees and expenses of
counsel) in connection with the negotiation, execution and delivery and
performance of the Purchase Agreement and the transactions contemplated by the
Purchase Agreement.

     Non-Competition Agreement.  The Company agreed not to compete in the Cruise
Business for a period ending on October 13, 2004  anywhere in North America.
The Company also agreed to hold confidential all confidential and proprietary
information and trade secrets of the Cruise Business sold to Travelbyus.

     Accounting Treatment.  The effective date of the Sale of the Cruise
Business related back to October 1, 1999. Consequently, the transaction was
recorded as a disposition of assets in the fourth quarter of 1999.  The sales
proceeds exceed the net book value of the assets sold and, therefore, the
Company realized a gain from the Sale effective October 1, 1999. The financial
statements included with this Form 10-KSB reflect the Sale of the Cruise
Business as being effective as of October 1, 1999, and the financial statements
for prior periods have been restated to remove the separate segment information
for the Cruise Business operations as discontinued operations.  Consequently,
separate segment information, and a separate discussion of the Cruise Business,
is not included in this Annual Report.


Restructure of OM Operating, L.L.C.

     Effective April 15, 1998, the Company and 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.  See "Assignment to OM Operating, L.L.C." and "License Renewal
Process", below.  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 interests (including 50% of its interest in
Operator, River Port LLC 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.  On
September 28, 2000, Operator's license was renewed by the Division and Gaming
Control Board.

                                      -4-
<PAGE>

     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 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 River Port LLC; 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. 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 interests 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

                                      -5-
<PAGE>

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 casinos, 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.

     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 the Company to Operator.
The Company and Operator have entered into a Lease Agreement (the "Lease")
effective March 31, 1999 for an initial term of six 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.  The Company will be responsible for major
repairs and Operator will be responsible for nonmajor repairs and maintenance,
and Operator will pay a rental of $33,333.33 per month for the term of the
Lease.  The Company 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 the Company
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 December 31,
2000, the outstanding principal balance of such indebtedness was approximately
$137,484.

     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 interests that are part of King's Luck 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 shall be
deemed to be in the name of and operated by Operator.

Restructure of River Port Truck Stop, LLC

     Pursuant to the Settlement Agreement, the Operating Agreement of River Port
LLC (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 interests 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 became effective March 31, 1999.

                                      -6-
<PAGE>

Ownership of Ozdon Investments, Inc.

     Ozdon Investments, Inc. ("Ozdon") is a Louisiana corporation owned 50% by
the Company and 50% by 146LLC, a Louisiana limited liability company owned by
members of the North Louisiana Group.  The Company has not entered into a
shareholders' agreement or similar agreement with the other 50% owner of Ozdon.
Consequently, if the two shareholders cannot agree on various actions, deadlocks
may arise which, if they cannot be satisfactorily resolved otherwise, may
require either shareholder to apply to a court to appoint a receiver or
otherwise intervene to break the deadlock.  In the past, the Company has had
difficulties with the other shareholder, or affiliates thereof, resolving
controversial matters.  See "Purported Cash Out Merger of Company's Interests;
Potential Settlement of Litigation", above, and Item 3--"Legal Proceedings".

Development of River Port Truck Stop

     In January of 1997 the Company formed a subsidiary called River Port Truck
Stop, Inc. ("RPTS") and entered into an agreement with S.W. Day and T. Joe
Calloway ("Lessor") to lease property in Port Allen, Louisiana, for a period of
50 years.  The terms of the lease call for a monthly base rent payment of $7,000
plus Additional Rent of 10% of Net Revenue as defined in the lease agreement.
Lessor further agreed that for the first 24 months after the commencement of
video poker operations the Additional Rent would be 5% (rather than 10%) and
that commencing with the 25th month of video poker operations the Additional
Rent would be 10% of Net Revenue.  RPTS assigned the lease to River Port LLC on
May 19, 1998.  River Port LLC is a Louisiana limited liability company formed on
April 13, 1998 by the Company and Williams to build and operate a video poker
casino, restaurant, truck stop and convenience store on the leased property.
See "Restructure of River Port Truck Stop, LLC", above.  A convenience store and
fuel facility was operated from June 1, 1997 until July 21, 1998 by the Company,
through its subsidiary RPTS, and effective July 21, 1998 the operations were
taken over by River Port LLC.  On January 10, 1999, River Port LLC entered into
a Convenience Store and Restaurant Sub-Lease (the "Sublease") and a Fuel Service
and Truck Stop Operating Agreement (the "Fuel Service Agreement") with RVC
Operations, L.L.C., a nonaffiliated limited liability company ("RVC"), pursuant
to which RVC would operate the restaurant, convenience store and truck stop for
an initial term of 15 years with an option to extend for an additional 15 years,
in exchange for an escalating annual base rent ($42,000 in year 1, $84,000 in
years 2 and 3, $96,000 in years 4-6, $100,800 in years 7-9, $105,840 in years
10-12 and $111,132 in years 13-15) with an adjustment every three years for
increases in the Consumer Price Index; percentage rate based on gross sales in
excess of certain benchmark amounts; and a royalty on fuel sales based on sales
in excess of certain benchmark amounts.  The Sublease and Fuel Service Agreement
was also intended to be triple-net leases under which RVC is responsible for
maintenance, taxes and insurance.  River Port LLC also assigned to RVC the
option to purchase the leased premises which River Port LLC has under the lease
agreement with Lessor.  Effective November 28, 2000, the Fuel Service Agreement
and Sublease with RVC was terminated and RVC was released from responsibility.
From such date, River Port LLC assumed the operations of the truck stop and
restaurant.  River Port LLC completed the convenience store, fuel facility and
parking lot in January 1999. Construction of the video poker casino was
completed in October 1999 and the casino opened for business in August 2000.
River Port LLC borrowed a total of $2,000,000 from Cottonport Bank (the "Bank")
in the form of two notes for purposes of funding construction of the truck stop
and video poker casino owned and operated by River Port LLC.  The outstanding
balance of these notes on December 31, 2000 totalled $1,950,000.  These notes
were combined into one promissory note on January 3, 2001, with an aggregate
principal balance of $1,957,235, bearing interest at an annual rate of 10.5% and
payable in 35 consecutive monthly payments of $26,410, with the balance due in
full on December 30, 2003.  The full amount of the loan is guaranteed by the
Company and Operator; $1,000,000 of the loan is guaranteed by Williams and his
spouse; and $750,000 is guaranteed by E.H. Hawes, II, the President and Chief
Executive Officer of the Company, and an unaffiliated individual (which guaranty
is secured by a second lien on the Company's Gold Rush property).  The lease of
the property upon which the truck stop and video poker casino were constructed
has been pledged as collateral for the loan, and the improvements constructed
thereon have also been pledged as collateral for the loan.

Gaming Industry Restrictions on Stock Ownership

     Upon the effective date of the Merger with OM, the Company's Certificate of
Incorporation was amended to adopt various restrictions on ownership of the
common and preferred stock of the Company in order to comply with applicable
gaming statutes.  Persons who are not suitable to be stockholders of the Company
under such statutes may not own common or preferred stock of the Company.
Further, any stockholder may be required, at such stockholder's expense, to make
filings with applicable gaming authorities to determine suitability, and if
found not suitable will be required to dispose of such stockholder's stock and
will not be entitled to vote or receive distributions pending such

                                      -7-
<PAGE>

disposal. These restrictions are further described, below, under the caption
entitled "Restrictions on Stockholders; Mandatory Disposition if Found
Unsuitable".

Operation of Truck Stop Facilities

     Operator presently operates the truck stop facilities (i.e. the fuel pumps,
convenience store and restaurant) at the Gold Rush truck stop located in
Opelousas, Louisiana, the Pelican Palace, located in Toomey, Louisiana, and
operated the truck stop facility at King's Lucky Lady, located in Port Barre,
Louisiana until April 1, 1999, and River Port LLC operates the River Port truck
stop facility at Port Allen, Louisiana.  Ozdon owns the facility in Opelousas;
Operator operates the facility in Toomey pursuant to a long term contract with
the owner of the truck stop; and River Port operates the facility in Port Allen
pursuant to a long term lease with the owner of the land.  These facilities and
the agreements with the owners are described below.

     The Gold Rush - Opelousas, Louisiana.  The Gold Rush truck stop is located
in Opelousas, St. Landry Parish, Louisiana, a town with a population of
approximately 19,273 located at the intersection of Interstate Highway 49 and
U.S. Highway 167, approximately 20 miles from Lafayette, Louisiana.  Operator's
right to operate the truck stop facilities was granted pursuant to a month-to-
month lease with Ozdon which was terminated by Ozdon, but pursuant to the Term
Sheet, Ozdon is allowing Operator to continue to operate the truck stop
facilities at the Company's discretion.  The Gold Rush truck stop facility
opened for business on February 17, 1993, and the video poker casino opened for
business on the same date.  The Gold Rush has 31 fuel dispensers, an
approximately 4,234 square foot convenience store and a restaurant.  At December
31, 2000, Operator employed 45 persons in the combined truck stop and video
poker casino operations.

     Pelican Palace - Toomey, Louisiana.  The Pelican Palace truck stop is in
Toomey, Louisiana, a town with a population under 1,000 located three miles east
of the Texas state line on Interstate 10, approximately three miles from Vinton,
Louisiana (population approximately 3,150).  The Company, as successor in merger
to OM, entered into an Operating and Financing Agreement on July 21, 1993 (as
amended March 17, 1995) with Curray Corporation ("Curray"), a nonaffiliate
corporation that owns the land on which the Pelican Palace now stands, pursuant
to which the Company agreed to furnish the financing for, and to build, operate
and manage, a truck stop facility and video poker casino.  The Company also
agreed to purchase 50 video poker machines to be used in the casino, at a cost
of approximately $282,000.  The Pelican Palace has 14 fuel dispensers, an
approximately 1,200 square foot convenience store and a restaurant.  Pursuant to
the Operating and Financing Agreement, which was assigned by the Company to
Operator concurrently with the Merger with OM, Operator has the right and the
obligation to operate and manage both the truck stop facility and the video
poker casino for an initial term of five years (commencing March 30, 1994) and
Operator has the option to renew it for three additional five year terms on the
same terms as the original five year period; and Operator is presently in the
first five-year renewal term.  However, on October 19, 1995, the Company,
Operator and Curray agreed to co-management of the Pelican Palace whereby
Operator serves as the operator of the video poker casino, restaurant and
beverage facilities, with Curray assuming the role of landlord, pursuant to
which Curray assumes all responsibility for property maintenance.  Under the
Operating and Financing Agreement, the net income from operations is split 50%
to Operator and 50% to Curray.  However, Operator has agreed to pay from its
share of net income an amount equal to 2% of the net revenues generated from the
video poker machines to a nonaffiliate party as a finder's fee in connection
with the Pelican Palace acquisition.  Operator has entered into a subcontract
with a nonaffiliate corporation to manage and operate the fuel pump operations
and convenience store in return for a monthly payment to Operator of $2,500,
plus a percentage of all fuel sales and a percentage of merchandise sales over
$500,000.  Consequently, Operator will not employ on site personnel to manage
these operations.  Operator will, however, remain primarily responsible for
management of such operations.  At December 31, 2000, Operator employed 35
persons at the Pelican Palace in the combined truck stop and video poker casino
operations.  Pursuant to the Settlement Agreement, Operator is responsible for
management of the truck stop facility commencing March 31, 1999, subject to the
existing subcontract.

     River Port Truck Stop - Port Allen, Louisiana.  The River Port Truck Stop
is in Port Allen, Louisiana, a town with a population of approximately 30,000
located approximately 6 miles West of Baton Rouge on Highway 415. The River Port
truck stop has nine fuel dispensers, and an approximately 4,710 square foot
restaurant/convenience store.  River Port LLC finished construction of the
convenience store, fuel facility and restaurant on January 2, 1999, and entered
into the Sublease and Fuel Service Agreement with RVC on January 10, 1999.  The
Sublease and Fuel Service Agreement are discussed in further detail under
"Development of River Port Truck Stop", above.  Effective November 28, 2000, the
Sublease and Field Service Agreement were terminated and River Port LLC assumed
the operations of the truck stop and restaurant.  River Port LLC occupies the
premises pursuant to a lease with a term of

                                      -8-
<PAGE>

50 years, commencing January 1997, and pays a monthly base rent of $7,000 plus
Additional Rent of 10% of Net Revenues as defined in the Lease Agreement,
provided that during the first twenty-four months after commencement of video
poker operations, the Additional Rent will be 5% (rather than 10%). As of
December 31, 2000, River Port LLC employed 12 persons for such operations.

     King's Lucky Lady - Port Barre, Louisiana.  King's Lucky Lady truck stop is
in Port Barre, Louisiana, a town with a population of approximately 2,150
located five miles east of Opelousas, on U.S. Highway 190.  King's Lucky Lady
has 16 fuel dispensers, an approximately 800 square foot convenience store and a
restaurant.  As of April 1, 1999, the Company and Operator no longer operate
King's Lucky Lady truck stop as a result of settlement of litigation involving
this truck stop.  See "Item 3 -- Legal Proceedings" for a discussion of this
litigation and the settlement.  Prior to such litigation, the Company, as
successor in merger to OM, had operated the King's Lucky Lady Truck Stop
pursuant to the Commercial Lease dated April 18, 1992 with T.B. Guillory, Inc.
("Guillory"), a nonaffiliated corporation that owns the facility.  The lease was
for an initial term of five years (commencing May 1, 1992), and the Company had
the option to renew it for three additional five year terms, subject to the
parties negotiating a percentage rental for the renewal period acceptable to
both parties.  The parties were unable to negotiate an acceptable renewal
percentage rental before May 1, 1997, and Guillory delivered notice to Operator
that the lease terminated effective April 30, 1997 and that Operator no longer
had any right to operate the video poker casino after such date.  Litigation was
commenced between Guillory and the Company and Operator for a determination
whether the lease was terminated or whether the Company and Operator had the
right to extend the lease.  As discussed in Item 3 -- "Legal Proceedings",
Guillory prevailed in the litigation and the Company no longer operates this
truck stop facility effective April 1, 1999.

Assignment to OM Operating, L.L.C.

     Louisiana law requires a device operator's license in order to own and
operate truck stop video poker devices, and further requires that a licensed
device owner and operator be at least majority owned by Louisiana residents.
See "Regulation and Licensing", below.  Following the Merger, there could be no
assurance that the Company would be majority owned by Louisiana residents, and
if not, then OM would not be deemed majority owned by Louisiana residents and
would lose its device operator's license to operate and manage the five truck
stop video poker casinos. Consequently, on the effective date of the Merger with
OM, OM contributed and assigned to Operator all of its rights, duties and
obligations to operate the five existing video poker casinos and the tavern
route, and Operator became the licensed device operator.  Operator is a
Louisiana limited liability company organized by OM and Williams, a former
director and Vice President of OM.  Effective March 31, 1999, Operator is owned
51% by Williams, 24.5% by the Company and 24.5% by members of the North
Louisiana Group, and will exist until the earlier of December 31, 2050 or the
date that Operator no longer owns or operates any video poker devices.  See
"Restructure of OM Operating, L.L.C.", above, for a further discussion of
Operator.

License Renewal Process

     As further discussed under "Regulation and Licensing", below, the Louisiana
Gaming Control Board ("Gaming Control Board") has undertaken a review of all
licensees operating video poker casinos, including the Operator.  The Company
had preliminary meetings with the State Police, which is conducting the initial
reviews for the Gaming Control Board, concerning the structure of Operator
described above and whether such structure satisfies the Louisiana residency
requirements necessary for a license to operate video poker casinos, and made
various modifications to its structure in an attempt to satisfy certain concerns
raised by the State Police.  On September 28, 2000, the State Police and the
Gaming Control Board renewed Operator's license to operate video poker casinos.


Operation of Video Poker Casinos

     Under Louisiana law, a licensed truck stop facility covering at least five
contiguous acres which has overnight facilities, a restaurant and service
facilities for 18 wheel tractor-trailers may segregate an area of the facility
as the video poker casino for adult patronage only and place up to 50 video
poker devices for play in the casino area; while racetracks and off track
betting ("OTB") parlors are permitted to install an unlimited number of video
poker devices, and qualifying locations with liquor licenses ("taverns") are
limited to three such devices.  As of December 31, 2000, Operator operates the
video poker casino at the Gold Rush, the Pelican Palace, the River Port and the
Lucky Longhorn truck stops in Louisiana (and until April 1, 1999 and August 17,
1999, operated the King's Lucky Lady and the Diamond Jubilee, respectively,
video poker casinos in Louisiana) and handles all sales of alcoholic beverages
at the

                                      -9-
<PAGE>

convenience store and restaurant at the Gold Rush and the Pelican Palace. See
"Operation of Truck Stop Facilities", above. At December 31, 2000, Operator
employed approximately 64 persons in connection with its casino operations.
Operator generally operates its video poker casinos pursuant to long term
contracts with the owners of the truck stop. These casinos and the agreements
with the owners are described below. See, also, "Regulation and Licensing --
Louisiana -- Recent Changes in Louisiana Act", below, for a discussion of recent
changes to Louisiana law regarding operation of truck stop video poker casinos.

     The Gold Rush - Opelousas, Louisiana.  The Gold Rush is also described
above under "Operation of Truck Stop Facilities".  The video poker casino and
lounge at the Gold Rush contains approximately 1,752 square feet and 50 video
poker devices.  Operator's right to operate the casino, truck stop and
restaurant at the Gold Rush was granted pursuant to a month-to-month lease with
Ozdon which was terminated by Ozdon, but pursuant to the Term Sheet, Ozdon is
allowing Operator to continue to operate the casino, truck stop and restaurant
at the Company's discretion. A non-affiliate of the Company is entitled to a
revenue participation interest of 10% of the gaming profits (total cash played
in the machines less winnings paid out and less all franchise, licensing and
device fees paid to the State of Louisiana or any other political subdivision)
from the operations of the video poker casino.  There are two other truck stops
operating a total of approximately 85 video poker devices within 20 miles of the
Gold Rush, and a Native American gaming casino approximately 35 miles from the
Gold Rush.  Of the two other truck stops with video poker casinos, one is the
King's Lucky Lady video poker casino. See "Marketing and Competition", below.
Operator employed 45 persons in the combined operations of the Gold Rush truck
stop and casino at December 31, 2000.

     Pelican Palace - Toomey, Louisiana.  The Pelican Palace is also described
above under "Operation of Truck Stop Facilities".  The video poker casino and
lounge at the Pelican Palace contains approximately 2,200 square feet and 50
video poker devices.  Operator's right to operate the casino and lounge is
granted pursuant to the Operating and Financing Agreement previously discussed.
There are eight other truck stops operating a total of approximately 370 video
poker devices, and a race track operating approximately 350 video poker devices,
within 20 miles of the Pelican Palace. The Lucky Longhorn, one of these truck
stops, is also operated by Operator and is located across Interstate 10.
Additionally, there is a Native American gaming casino operating approximately
40 miles from the Pelican Palace, and four riverboat casinos operating within
approximately 25 miles. See "Marketing and Competition," below.  Operator
employed 35 persons at the Pelican Palace at December 31, 2000.

     Lucky Longhorn - Vinton, Louisiana.  The Lucky Longhorn video poker casino
contains approximately 3,000 square feet and 50 video poker devices within the
Lucky Longhorn truck stop in Vinton, Louisiana, across Interstate 10 from the
Pelican Palace.  Operator operates the video poker casino pursuant to an Act of
Contract and Agreement dated June 5, 1992 with three nonaffiliated corporations
and two nonaffiliated individuals who own the truck stop (referred to
collectively as "Longhorn") which was assigned to Operator by OM.  Operator has
the exclusive right to place and operate video poker devices in the Lucky
Longhorn for a period of 10 years (commencing August 2, 1992).  Operator and
Longhorn split 50%/50% the net revenues generated from operation of the video
poker devices; net revenues being defined as all money played in the devices
less winnings paid out and the (32.5% net device revenue tax payable to the
state.  Operator is solely responsible from its share of the revenues for paying
all other costs and expenses related to the video poker casino, with the
exception of contracted security.  There are eight other truck stops operating a
total of approximately 370 video poker devices, and a race track operating
approximately 350 video poker devices, within 20 miles of the Lucky Longhorn.
Additionally, there is a Native American gaming casino operating approximately
40 miles from the Lucky Longhorn, and four riverboat casinos operating within
approximately 25 miles. See "Marketing and Competition", below.  Operator
employed 14 persons at the Lucky Longhorn at December 31, 2000.

     River Port - Port Allen, Louisiana.  River Port is also described above
under "Operation of Truck Stop Facilities."  On January 17, 1997, a wholly owned
subsidiary of the Company entered into a Lease Agreement with S.W. Day and T.
Joe Calloway, two nonaffiliated individuals, to lease undeveloped land for a
term of 50 years and to construct on it a truck stop and video poker casino.
The Company assigned the Lease Agreement to River Port LLC on May 19, 1998.
River Port LLC has built an approximately 3,500 square foot video poker casino
and bar and an approximately 4,710 square foot restaurant/convenience store on
the land at an approximate cost of $2,000,000 (including equipment) which River
Port LLC funded through long-term indebtedness borrowed from Cottonport Bank and
two notes with original principal balances of $250,000 and $1,750,000, which had
a combined outstanding balance of approximately $1,950,000 at December 31, 2000,
and which were combined into one promissory note on January 3, 2001 with an
aggregate principal balance of $1,957,235.  The Lease Agreement provides for
payment of a base rent of $7,000 per month, commencing on the earlier of
commencement of construction or June 30, 1997, and additional rent equal to 10%
of the net revenues generated from video poker operations; net revenues meaning
all money played

                                      -10-
<PAGE>

in the devices less winnings paid out and all franchise fees, device fees and
other taxes payable to the state or any other governmental agency, other than
federal or state income taxes. The River Port video poker casino opened for
business in August 2000. Operator operates the River Port Video Poker Casino
pursuant to a device placement and operating agreement between River Port LLC
and Operator. The River Port video poker casino has 40 video poker devices, and
Operator employed 8 persons in connection with the operations of the video poker
casino at December 31, 2000.

     King's Lucky Lady - Port Barre, Louisiana.  King's Lucky Lady is also
described above under "Operation of Truck Stop Facilities".  Until April 1,
1999, Operator operated the video poker casino at King's Lucky Lady, but will no
longer operate such video poker casino effective as of that date.  See the
discussion of King's Lucky Lady, above, under "Operation of Truck Stop Facility"
for a discussion of the Company's loss of the right to operate the video poker
casino at King's Lucky Lady.

     The Diamond Jubilee - New Orleans, Louisiana.  The Diamond Jubilee video
poker casino contains approximately 2,700 square feet and 35 video poker devices
(50 devices prior to February 1, 1997, 40 devices from February 1, 1997 through
August 16, 1998 and 35 devices from August 17, 1998 through August 17, 1999, the
date Operator ceased operating the casino) within The Diamond Jubilee truck stop
in east New Orleans, Louisiana. Operator operated the video poker casino
pursuant to a Sublease Agreement (the "Casino Sublease") dated July 1, 1996
between Operator and New Orleans Video Poker, Inc. ("NOVP"), a Louisiana
corporation 50.1% owned by Donald I. Williams and his spouse and 29.5% owned by
nine other stockholders of the Company.  NOVP leases the truck stop operations
and the video poker casino from Stanley Doussan ("Doussan") pursuant to a Lease
Agreement, Addendum to Lease and Sublease and Operator's Agreement dated July
10, 1992, as amended by an Amendment to Lease and Addendum to Lease dated
December 15, 1992 (collectively, the "Operator's Agreements").  Operator
attempted to renegotiate the Operator's Agreements on terms more favorable to
Operator, but Doussan was not able to reach an agreement with Operator
concerning these terms, so Operator elected to terminate the Casino Sublease
effective August 17, 1999 and no longer operates the Diamond Jubilee.

Video Poker Tavern Route

     Operator also operated nine video poker devices in three third-party
taverns as of December 31, 2000 and is entitled to between 30% and 35% of the
net revenues generated from the devices.

Marketing and Competition

     Marketing.   Ozdon, Operator and River Port LLC market their video poker
casinos through limited newspaper and radio advertising, and from word of mouth
referrals.  Customers are drawn primarily from the local population and
surrounding area, except for the properties on the Texas state line which draw
largely from residents of Texas, which does not have video poker gaming.

     Competition.   The gaming industry is highly fragmented and characterized
by a high degree of competition among a large number of participants, including
riverboat casinos, dockside casinos, land-based casinos, video lottery
terminals, video poker devices, Native American gaming ventures and other forms
of legalized gaming in the United States.  Many of the competitors and potential
competitors of Ozdon, Operator and River Port LLC have significantly greater
experience and financial resources than the Company and Ozdon, Operator and
River Port LLC.  The Company believes that competition in the gaming industry is
based on the quality and location of gaming facilities, the effectiveness of
marketing efforts and customer service and satisfaction.  The truck stop casinos
of Ozdon, Operator and River Port LLC are subject to extensive competition from
other truck stops and taverns located within the market area for each truck
stop, and from Louisiana's racetracks and OTB parlors which may install an
unlimited number of video poker devices.  As of December 31, 2000, there were
over 12,000 video poker devices in operation in Louisiana. Most are one to three
devices located in taverns.  As of such date, there were approximately 100
licensed truck stops with approximately 3,500 devices in the aggregate.  Each
truck stop is permitted to have up to 50 video poker devices and each tavern is
permitted to have up to three video poker devices.  In addition, Louisiana has
authorized riverboat gaming, and three land-based casinos located in New
Orleans.  Fourteen riverboats were in operation at December 31, 2000, four in
Lake Charles (approximately 23 miles from Operator's Lucky Longhorn and Pelican
Palace), three in New Orleans (over 100 miles from any of the truck stop casinos
in which the Company has an interest), three in Bossier City (over 100 miles
from any of the truck stop casinos in which the Company has an interest), two in
Shreveport (over 100 miles from any of the truck stop casinos in which the
Company has an interest), and two in Baton Rouge (over 40 miles from any of the
truck stop casinos in which the Company has an interest). At December 31, 2000,
there were three Native American casinos in operation in Louisiana, one in
Kinder, one in Marksville and one in

                                      -11-
<PAGE>

Charentan. The riverboats and land-based casinos are permitted to have table
games, slot machines and video poker devices. It is anticipated that the
riverboats and the casinos will focus their marketing efforts on the tourist
market. Although Ozdon, Operator and River Port LLC have focused their marketing
efforts primarily on local residents, such other gaming operations will provide
substantial competition.

     The adjacent state of Mississippi has also legalized dockside gaming.
Dockside gaming in Mississippi, riverboat casinos in Louisiana and the land-
based casino in New Orleans have or are anticipated to have a wide variety of
gaming devices and table games, while Louisiana law limits the operations of
Ozdon, Operator and River Port LLC to video poker devices.  Further, Louisiana
law limits the jackpot that may be paid by a video poker device to $500 per play
while other gaming activities have no such limit.  The Company believes the
limit to be a competitive disadvantage.

     The operation of truck stop video poker casinos is a highly competitive
business.  The principal competitive factors in the industry include the quality
and location of the facility, the nature and quality of the amenities, customer
services offered, and the implementation and success of marketing programs.  The
Company believes Ozdon, Operator and River Port LLC compete effectively with
other truck stops and taverns in their respective market in these areas.

     There has been a moderate increase during the last two years in the number
of gaming establishments opening for operation in Louisiana and Mississippi, and
competition for the business of gaming patrons has become very intense. As a
result, it is expected that the profit margins which may be expected by gaming
establishments like those in which the Company has an interest will be adversely
affected, and that various gaming establishments may be forced to close because
they cannot compete effectively at such reduced margins.  The Company believes
the video poker casinos in which the Company has an interest 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.

Employees

     As of December 31, 2000, the Company employed three persons full time and
part time.  As of December 31, 2000, Operator and River Port employed 88 and 13
persons, respectively, full and part time, including one executive and four
managerial personnel, with the remainder involved in on-site operation of the
four truck stop casinos.  None of the current employees of the Company, Operator
or River Port LLC are covered by any collective bargaining agreements.  The
Company considers its employee relations to be good and believes the employee
relations of Ozdon, Operator and River Port LLC to be good, but it has no
control over such employee relations.

Environmental Matters

     A number of jurisdictions have adopted laws and regulations relating to
environmental controls and the development and operation of various projects.
Ozdon, Operator and River Port LLC are responsible for complying with various
federal and state waste disposal and licensing laws in connection with the truck
stop facilities they operate, including the requirement of obtaining permits for
underground storage tanks for fuel products and the requirement of properly
disposing of waste motor oil and other regulated products.  The Company believes
Ozdon, Operator and River Port LLC have obtained all permits required of them,
and is not aware of any material violation of applicable environmental
regulations with respect to the truck stop operations in which it has an
interest.  There have been no changes to the Company's operations and no
reserves have been established for any environmental hazards with respect to
such truck stop operations.  Environmental contingencies are not expected to
have a material adverse effect on future results of operations or financial
condition.

Regulation and Licensing

     Louisiana

     Device Owner's License.  The manufacture, distribution, servicing and
operation of video draw poker gaming devices ("Devices") in Louisiana is subject
to the Louisiana Gaming Control Law and the Louisiana Video Draw Poker Devices
Control Law and the Rules and Regulations promulgated thereunder (the "Louisiana
Act").  Licensing and regulatory control is provided by the Louisiana Gaming
Control Board (the "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").  The laws and regulations of
the Gaming Control Board and the Division are

                                      -12-
<PAGE>

based upon a primary consideration of maintaining the health, welfare and safety
of the general public and upon a policy which is concerned with protecting the
video gaming industry from elements of organized crime, illegal gambling
activities and other harmful elements, and protection of the public from illegal
and unscrupulous gaming to ensure the fair play of video gaming Devices. The
Louisiana Act was amended in 1994 to further qualify and restrict video gaming
operations in truck stops. See "Recent Changes in Louisiana Act", below.

     Operator, which operates the Gold Rush, the River Port, the Lucky Longhorn
and the Pelican Palace Video Poker casinos, has been granted a license as a
Device owner by the Division, and River Port LLC has been granted a license as a
Device owner by the Division.  Prior to terminating the lease with Operator for
the Gold Rush video poker casino, if the lease is terminated, Ozdon will be
required to obtain a license as a Device owner or will be required to enter into
a lease or operating agreement with another person or entity who maintains a
license as a Device owner. Under the terms of the Louisiana Act, licenses expire
at midnight on June 30 of each year and must be renewed annually through payment
of certain fees and continued compliance with the suitability requirements of
the Louisiana Act.  All license fees must be paid on or before May 15 in each
year licenses are renewable.  The Company believes Operator and River Port LLC
have timely submitted their renewal applications, but there is a backlog
existing at the Division and the Division is behind in reviewing applications,
including the application of Operator and River Port LLC.

     The Gaming Control Board may deny, impose a condition or fine, suspend or
revoke any license, renewal, or application for a license for violation of any
rules and regulations of the Gaming Control Board or Division or any violations
of the Louisiana Act. Fines for violations of gaming laws or regulations may be
levied against the licensees and the persons involved.  In addition, the
licensees could be subject to separate fines for each violation of the gaming
laws.  The Louisiana Act states that a license issued by the Gaming Control
Board is a pure and absolute privilege. The issuance, condition, denial,
suspension or revocation of a license is at the discretion of the Gaming Control
Board in accordance with the provisions of the Louisiana Act.  A license is not
property or a protected interest under the constitution of either the United
States or the State of Louisiana.  Suspension or revocation of the license of
Operator or River Port LLC could have a material adverse effect upon the
business of the Company.

     The Gaming Control Board has the authority to conduct overt and covert
investigations of any person, entity, applicant or participant involved directly
or indirectly in the video gaming industry in Louisiana.  This investigation may
extend beyond the information provided in the formal application, including
information with regard to the licensee's immediate family and relatives and
their affiliations with certain groups, organizations, corporations, firms or
other business entities.  The investigation may also extend to every person who
has or controls more than a 5% ownership, income or profit interest in an entity
which applies for a license in accordance with the Louisiana Act, or who is a
key employee or who has the ability to exercise significant influence over the
licensee.  All persons or entities investigated must meet all suitability
requirements and qualifications for a licensee.  The Gaming Control Board may
deny an application for licensing or renewal of a license for any cause which it
may deem reasonable.  The applicant for licensing must pay a filing fee which
also covers the cost of investigation.

     In order for a corporation or limited liability company like the Company,
Ozdon, Operator or River Port LLC to be licensed by the Gaming Control Board, it
must be demonstrated that a majority of the corporation or limited liability
company is owned by persons who have been domiciled in Louisiana for a period of
at least two years prior to the date of the application.  See "License Renewal
Process", above, for a discussion of the renewal examination to which the
Company and Operator are presently subject and the possible results thereof if
the Operator is found not to meet the residency requirements.

     Devices must meet strict specifications established by the Gaming Control
Board.  The number of Devices is limited depending on the type of location at
which the Devices are located.  Fees payable to the Gaming Control Board include
an application fee, which is non-refundable, an annual fee, based upon a
percentage of the net revenues from the operation of each Device, a Device
owner's fee, a Device operations fee, license establishment fee and a Device
owner's franchise fee.  All fees are payable in either semi-monthly, quarterly
or annual installments depending on the fee being paid.

     Establishment License.  The Louisiana Act also provides that a truck stop
facility ("Establishment") must obtain a license as an Establishment to allow
the placement and operation of Devices within the Establishment.  The
Establishment license is typically granted to the owner of the truck stop
facility, but may also be granted to a lessee of the facility.  The owners are
the Establishment licensees for the Pelican Palace and the Lucky Longhorn.
Ozdon is the Establishment licensee for the Gold Rush and River Port LLC is the
Establishment licensee for River Port.

                                      -13-
<PAGE>

     Establishment licenses are also subject to annual renewal at the same time
Device owner licenses are renewable, and the payment of an annual fee.  The
Gaming Control Board has the same authority to deny, suspend, condition or
revoke an Establishment license, and to conduct investigations (including
investigations of all parties deriving a share of gaming revenue), as it does
for Device owner licenses.  As with the Device owner license, the Establishment
license is a pure and absolute privilege.  The loss by Ozdon or River Port LLC
of their respective Establishment licenses, or the loss of the Establishment
licenses by the Establishment licensee for the Pelican Palace and the Lucky
Longhorn, would have a material adverse effect upon the business of the Company.

     The Gaming Control Board has issued a directive to the Division to strictly
enforce the requirements of the Louisiana Act which require the Establishment
Licensee to be in control of the fuel operations at the truck stop.  The
determination whether the Establishment Licensee has satisfied such control
requirements involves various subjective criteria and the determination is not
easily predictable. It is possible that the Gaming Control Board or the Division
could interpret these subjective criteria in such a manner to conclude that the
Establishment Licensee at one or more of the truck stops in which the Company
has an interest was not in compliance, in which case their Establishment license
could be revoked, which would also result in the Operator or River Port LLC, as
applicable, losing its ability to operate the video poker truck stop casino at
such truck stop.  The Company has reviewed arrangements between the
Establishment Licensees and the fuel operators at the existing truck stops in
which the Company has an interest in an attempt to determine whether they are in
compliance or whether modifications need to be made to bring them into
compliance and believes they are in compliance. There can be no assurance that
the Gaming Control Board or the Division might not have a different
interpretation than the Company or Establishment licensee with regard to such
arrangements and their compliance with the fuel operations control requirement.

     Recent Changes in Louisiana Act.  Effective July 1, 1994, the Louisiana
legislature adopted amendments to the Louisiana Act which have a material effect
on operations of truck stop casinos.  The franchise payment payable to the State
of Louisiana was raised from 22.5% of net device revenues (money played in video
poker devices less winnings paid) to 32.5% and 26% of net device revenues for
those operated in truck stops and taverns, respectively.

     In addition to raising the franchise payment, the Louisiana legislature
also adopted additional standards to be satisfied for a truck stop facility to
be considered a qualified truck stop facility for placement of video poker
devices. These standards include strict compliance with the parking area
requirements for 18-wheel vehicles; requiring a 24-hour on-site restaurant
facility; requiring access to repair facilities; and requiring certain other
amenities be available for truck drivers.  Under the new law, operators had
until January 1, 1996 to bring their truck stops into compliance with these new
standards.  As of December 31, 2000, each of Gold Rush, Luck Longhorn, Pelican
Palace and River Port Truck Stops satisfied these additional criteria.

     The Louisiana legislature also adopted minimum fuel sales requirements for
qualified truck stops effective July 1, 1994, except that existing licensed
facilities had until January 1, 1996 to satisfy such requirements.  The fuel
sales requirements and their relationship to the number of video poker devices
that may be operated at the truck stop are based on average monthly sales, as
follows: (i) up to 50 devices if sales equal at least 100,000 gallons per month
and 40,000 of such gallons are diesel, (ii) up to 40 devices if sales equal at
least 75,000 gallons, but are less than 100,000 gallons, per month and 30,000 of
such gallons are diesel, and (iii) up to 35 devices if sales equal at least
50,000 gallons, but are less than 75,000 gallons, and 10,000 of such gallons are
diesel.  During the grandfather period for existing licensed facilities (which
expired January 1, 1996), facilities were required to average monthly sales of
at least 25,000 gallons per month, commencing October 1994, in order to continue
operating video poker devices at the facility. As of December 31, 2000, the
truck stop facilities at the Gold Rush, River Port, Lucky Longhorn and Pelican
Palace satisfied the fuel sales necessary to allow the operation of the maximum
number of 50 devices. It is anticipated that the Division will review fuel sales
at truck stops on a quarterly basis to determine whether the average monthly
fuel sales volumes are being satisfied for the number of devices operated, and,
if not, the number of operating devices will be reduced until the next quarterly
review.  The reduction in the number of devices operated at any of the truck
stop casinos in which the Company has an interest could have an adverse effect
on the cash flow of the Company if the level of fuel sales cannot be increased
to reach the former level of devices maintained, although such effect will be
mitigated by the fact that rarely are all devices in a location in operation at
the same time.

     There has been during the past several years a perceived increase in anti-
gaming sentiment in Louisiana within certain segments of the population and with
certain politicians.  In April 1996, the Louisiana Legislature approved a local-
option bill which gave the voters in each parish the right to decide during the
November 5, 1996, general election what forms of gaming they want to continue in
their parish.  At this general election, all parishes in

                                      -14-
<PAGE>

which video poker casinos were operated in which the Company had an interest
voted to continue truck stop video poker, but two parishes voted to discontinue
video poker casinos which will result in the closure of various taverns and the
loss of various video poker devices. The Company believes there is continuing
anti-gaming sentiment prevailing within certain segments of the population and
with certain politicians. From time to time bills are proposed in the
legislature to restrict or terminate truck stop video poker casinos, and the
Gaming Control Board and Division are interpreting very strictly various
regulatory requirements which sometimes involve subjective criteria, which
interpretations may result in the loss of licenses by certain licensees. The
Company cannot predict whether anti-gaming sentiment or any future proposed
legislation will result in further changes to the gaming laws of Louisiana, or
an outright ban on certain forms of gaming, including truck stop video poker
casinos. The State of Louisiana and the local parishes generate substantial
revenues from license fees and taxes on the gaming industry, so the loss of
portions of these revenues would most likely be carefully examined in connection
with any future proposed limitations on gaming. The Company continues to monitor
these proceedings and provides input as appropriate. The Company also continues
to review other gaming opportunities outside Louisiana, and other non-gaming
opportunities, for purposes of diversification.

     The Gaming Control Board has undertaken a review of all licensees operating
video poker casinos.  The Company is aware of at least two operators who have
lost their licenses on the grounds they were not in compliance with Louisiana
requirements. The Operator's Device Owner's license was renewed by the Gaming
Control Board on September 28, 2000.  River Port LLC was granted an
Establishment license on August 15, 2000 and a Device Owner's license on
September 18, 2000.

     Other States

     The ownership and operation of gaming facilities in other states where
gaming is legal are subject to extensive state and local regulation.  To the
extent the Company expands its gaming operations into other states, the Company
will, among other things, be required to register under the gaming acts of such
states and its gaming operations will be subject to the licensing and regulatory
control of the gaming commissions of such states, and various local, city and
county regulatory agencies.  The Company will be required to submit detailed
financial, operating and other reports to such gaming commissions, and
substantially all loans, leases, sales of securities and similar financing
transactions entered into by the Company will be required to be reported to or
approved by such gaming commissions.  The Company will also be required to
periodically submit detailed financial and operating reports and to furnish any
other information required thereby.

     Each of the directors, officer and key employees of the Company who are
actively and directly engaged in the administration or supervision of gaming, or
who have any other significant involvement with the activities of the Company,
will be required to be found suitable therefor, and may be required to be
licensed, by applicable gaming commissions.  The finding of suitability is
comparable to licensing, and both require submission of detailed personal
financial information followed by a thorough investigation.  In addition, any
individual who is found to have a material relationship to, or material
involvement with, the Company may be required to be investigated in order to be
found suitable or to be licensed as a business associate of the Company.  Key
employees, controlling persons or others who exercise significant influence upon
the management or affairs of the Company may also be deemed to have such a
relationship or involvement.  There can be no assurance that such persons will
be found suitable by the applicable gaming commissions in states in which the
Company may seek to expand.

     Federal Regulation

     Operator and River Port LLC are required to file annually with the United
States Department of Justice under the Gambling Devices Act of 1962.  The
Company believes all currently required filings have been made although it has
no control over such annual filing compliance.

Restrictions on Stockholders; Mandatory Disposition if Found Unsuitable

     The Louisiana Act requires all officers, directors and holders of 5% or
more of the Company's Common Stock to meet the suitability requirements
applicable for the types of licenses held or to be held by Ozdon, Operator or
River Port LLC, and, if required by the Division, to file a license application
with the Division.  Failure to meet such suitability requirements or file any
required application can result in suspension or forfeiture of the Louisiana
licenses. Other states grant their gaming commissions the discretion to require
a suitability finding with respect to anyone who acquires any security of the
Company, regardless of the percentage of ownership.  Furthermore, certain of
these states

                                      -15-
<PAGE>

provide that any owner of voting securities found unsuitable and who holds,
directly or indirectly, any beneficial ownership of equity interests in the
Company beyond such period of time as may be prescribed by the gaming commission
of such state may be guilty of a crime. Any person who fails or refuses to apply
for a finding of suitability or a license within a specified number of days
after being ordered to do so by an applicable gaming commission may be found
unsuitable. In addition, certain of these states provide that if any owner of
voting securities is found to be unsuitable, such owner must immediately
surrender all securities to the Company, and the Company must refund any money
or other thing of value that may have been invested in or made use of by the
Company.

     As a result of the foregoing restrictions on ownership, the Company's
Certificate of Incorporation was amended in conjunction with the Merger with OM
to provide that if a holder or a beneficial holder of Common Stock or any other
class of capital stock is required by the Division or the gaming commission of
any other state to be found suitable, the holder shall apply for a finding of
suitability within the time period required by applicable law or by such
regulatory authority.  Further, the applicant for a finding of suitability will
be required to pay all costs of the investigation for such finding of
suitability.  The amended Certificate also provides that if a holder or
beneficial owner who is required to be found suitable does not apply for such
finding within the required time period, or is not found suitable by the
applicable regulatory authority, (i) the holder shall, upon request of the
Company, dispose of his Common Stock or any other class of capital stock within
30 days or within the time prescribed by the applicable regulatory authority,
whichever is earlier, or (ii) the Company may, at its option, redeem the
holder's Common Stock or any other class of capital stock at the lesser of the
market price thereof on the date of the finding of unsuitability or the price at
which such Common Stock or any other class of capital stock was acquired by the
holder, and (iii) if required under applicable state law, such shares may not be
voted by such unsuitable person and no dividends or distributions of any kind
may be made on such shares to such unsuitable person.


ITEM 2.  DESCRIPTION OF PROPERTY
--------------------------------

     Ozdon owns the Gold Rush truck stop facility and the building in which the
video poker casino is operated. This property is subject to a mortgage having a
remaining principal balance of $137,484 at December 31, 2000, and which requires
monthly payments of principal and interest of approximately $22,814 through June
20, 2001, at which time the note will be paid in full.  This property is further
described under Item 1- - "Description of Business --Operation of Truck Stop
Facilities" and "-- Operation of Video Poker Casinos".  Reference is hereby made
to these sections for a description of this property and the Company's various
rights relative to this property.

     A description of the various agreements under which Operator operates and
manages the Pelican Palace truck stop facility and operates the truck stop video
poker casinos at the Gold Rush, Pelican Palace and Lucky Longhorn, and a
description of the River Port lease, is also included under Item 1--"Description
of Business -- Development of River Port Truck Stop", "--Operation of Truck Stop
Facilities" and "--Operation of Video Poker Casinos".  Reference is also hereby
made to these sections for a description of those agreements and the Company's
various rights relative to the truck stops.

     The Company's principal executive office is located in Dallas, Texas.  The
Company leases approximately 5,645 square feet pursuant to a 72 month lease
(commencing November 1996) which provides for a rental rate of approximately
$5,090 per month.  Until the Sale of the Cruise Business, the Company subleased
approximately 2,015 square feet of its office space to International for $1,595
per month pursuant to a month to month verbal agreement. On June 30, 2000, the
Company subleased approximately 4,784 square feet of space to a nonaffiliated
entity which pays a monthly rental of $3,986 until October 31, 2001, at which
time the rent will increase to $4,385 until October 31, 2002.  Currently, the
Company occupies 860 square feet of the total leased space for a monthly rental
cost of $1,500. The lease expires on October 31, 2002.

ITEM 3.  LEGAL PROCEEDINGS
--------------------------

     T.B. Guillory ("Guillory") et al versus North American Gaming and
Entertainment Corporation and O.M. Operating, LLC, 27th Judicial District Court,
St. Landry Parish, Louisiana.  The preliminary question to be decided by the
court was whether the option to renew the term of the contract of lease on
King's Lucky Lady Truck Stop was in compliance with the requirements of the
Louisiana Civil Code governing the validity of such options.  The validity of
the option was assailed on grounds that the alleged failure of the option to
stipulate a price rendered it invalid.  On March 3, 1998, the court rendered
judgment against the Company and Operator on the grounds that the failure to
stipulate a price rendered the option invalid, and the Company and Operator were
ordered to vacate the premises

                                      -16-
<PAGE>

effective April 30, 1997. The Company and Operator filed an appeal of this
judgment. The Third Circuit Court of Appeals heard the appeal on November 6,
1998 and upheld the ruling of the trial court that the renewal option was not
valid. The Company and Operator appealed to the Supreme Court of Louisiana which
refused to review the Court of Appeals' decision on March 29, 1999. The Company
and Operator have no further right to appeal the decision that the lease will
not be renewed. During the course of the litigation, Operator was ordered by the
court to escrow 50% of the monthly operating profit generated by King's Lucky
Lady, and effective from the date of the judgment on March 3, 1998 Operator was
required to escrow 100% of the operating profit. As of March 1, 1999, Operator
had placed in escrow $775,595 for the period from May 1997 through February
1999. Operator and the Company also petitioned the court to grant a management
fee for services from April 30, 1997 through the date the appeal was concluded
and also asserted a claim for damages for unjust enrichment against Guillory. On
March 31, 1999, the parties agreed to a full settlement regarding the remaining
outstanding issues including the ownership of the escrowed funds. As a result of
the settlement, the Company and Operator agreed to vacate the property effective
12:01 a.m., April 1, 1999. Under the terms of the settlement, the Company and
Operator received $325,000 from the escrow fund was entitled to 20% of the net
profits of King's Lucky Lady for the month of March 1999. All remaining claims
were dismissed.

     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 damages
allegedly caused by the delay of the Company in delivering such ownership
interests and unspecified damages allegedly caused 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 third 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.

     See Item 1 -- "Description of Business - Purported Cash Out Merger of
Company's Interests; Potential Settlement of Litigation" for a discussion of
additional pending legal litigation.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------

     None.



                     [This Space Intentionally Left Blank]

                                      -17-
<PAGE>

                                    PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
-----------------------------------------------------------------

  The Company's Common Stock is traded over-the-counter and quoted from time to
time in the OTC Bulletin Board "pink sheets" under the trading symbol "NAGM".
Consequently, there is currently no established public trading market for the
Company's Common Stock. The following table sets forth the range of high and low
bid prices as reported by the OTC Bulletin Board for the periods indicated. Such
quotations represent inter-dealer prices without retail markup, markdown, or
commission, and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
        Calendar Years     Bid Price
          by Quarter   ----------------
        --------------    High    Low
                       ----------------
<S>     <C>            <C>     <C>
2000    First            $0.10   $0.031
        Second            0.10     0.03
        Third             0.03     0.03
        Fourth            0.03     0.03

1999    First          $  0.05 $0.03125
        Second          0.0625  0.03125
        Third             0.04  0.03125
        Fourth            0.04  0.03125
</TABLE>

     At December 31, 2000, the Company had approximately 3,119 common
stockholders of record.

     The Company has not paid cash dividends on Common Stock during the last two
years and the Board of Directors of the Company does not currently intend to pay
cash dividends on Common Stock in the foreseeable future. The Company may not
declare or pay dividends on Common Stock if there are accumulated and unpaid
dividends on its former outstanding Class A Preferred Stock.  From October 17,
1994 through May 31, 1996, the former outstanding Class A Preferred Stock bore a
dividend of $.30 per annum (payable monthly), an annual dividend of $480,000
because all 1,600,000 shares were outstanding.   As of January 1, 2001, the
Company is in arrears on dividends on its former outstanding Class A Preferred
Stock in the amount of $15,003.  All other former holders of the Class A
Preferred Stock have entered into settlement agreements with the Company
pursuant to which their accrued dividends were cancelled.

     As of January 1, 2001, all but $18,297 of the subordinated debentures
issued by the Company in connection with the redemption of 313,000 shares of
Class A Preferred Stock had been redeemed by the Company pursuant to various
settlement agreements entered into with the holders of the subordinated
debentures.


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

Liquidity and Capital Resources

     Sales and Possible Sale of Assets.  As described in Item 1 -- "Description
of Business -- Purported Cash Out Merger of Company's Interests; Potential
Settlement of Litigation", 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 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.  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.

     As described in Item 1 -- "Description of Business", the structure of
Operator and River Port LLC  and the various interests (including revenue and
profits interests) of the Company in Operator and River Port LLC have been

                                      -18-
<PAGE>

restructured in an attempt to satisfy certain concerns raised by the Division.
On September 28, 2000, the Division renewed Operator's Device Owner's license
and on September 18, 2000 granted River Port LLC a Device Owner's license.
River Port LLC was granted an Establishment license on August 15, 2000.

     As described in Item 1 -- "Description of Business -- Sale of  Travel
Industry Assets", effective October 1, 1999, the Company sold its Cruise
Business for $1,333,334 in cash and 666,667 shares of Travelbyus common stock
with a stated value of $500,000 on the date of sale.  The common stock of
Travelbyus is listed on the Toronto stock exchange.

     The Company will seek to meet its long-term liquidity needs primarily
through cash flow from equity investments, operations, additional borrowings
from the Company's traditional lending sources and possible sales of equity or
debt securities.  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 2000 with $17,225 in cash and other
current assets of $530,702. Other current assets consists of receivables from
related parties of $156,900, an investment in shares of Travelbyus common stock
with a market value of $47,002, prepaid expenses of $68,800 and a deferred tax
asset of $258,000. Total liabilities were $1,091,800 at December 31, 2000.
Current liabilities of $624,300 consist of accounts payable and accrued
liabilities of $83,500, current portion of long-term notes payable of $245,797,
payables to related parties of $280,000 and preferred stock dividends payable of
$15,003.  The Company's current liabilities decreased $391,412 from $1,015,712
at December 31, 1999.  This decrease was comprised primarily of a decrease in
accounts payable and accrued liabilities due to the payment of accrued
commissions on the sale of cruise operations and the settlement of accrued
interests of $153,000, a change in the deferred tax liability related to the
unrealized gain on Travelbyus common stock, and the settlement of debt and
accrued preferred stock dividends of $928,000 for new long-term debt of
$547,500.

     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.


Results of Operations


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

     The Company recorded a loss from operations of $651,836 during the twelve
months ended December 31, 2000 compared to a gain from operations of $43,067 for
the twelve months ended December 31, 1999. The decline in operating
profitability is due to the Company's sale of a significant portion of its
gaming operations effective April 1, 1999 and the sale of its cruise operations
effective October 1, 1999.

     Upon the sale of a significant portion of the Company's interest in the
gaming operations on April 1, 1999, the Company now records income from gaming
and truck stop operations under the equity method as "Income from Equity
Investments" in "Other Income (Expense)" in its financial statements.  Prior to
April 1, 1999, the operations of the gaming entities were consolidated and
therefore, resulted in operating income.  For the twelve months ended December
31, 2000, the Company recorded income from its equity investment of $386,594 and
for the nine months from April 1, 1999 to December 31, 1999, the Company
recorded income from its equity investments of $275,769. The combined gaming and
truck stop operations of Ozdon, Operator and River Port LLC generated
approximately $5,966,000 of gross profits on revenues of approximately
$16,745,000 during the twelve months ended December 31, 2000.  For the three
months ended March 31, 1999, the Company recorded gross profit of approximately
$1,568,000 on revenues of approximately $6,039,000 (consolidated) while the
combined gaming and truck stop operations

                                      -19-
<PAGE>

generated gross profit of approximately $5,192,000 on sales of approximately
$13,082,000 during the nine months from April 1, 1999 to December 31, 1999.
Total 1999 gross profit from gaming operations was approximately $6,760,000 on
revenues of approximately $19,116,000. The decline in revenues during 2000 is
due to the fact that the Operator closed down or sold two locations on or after
March 31, 1999. Gross profit percentage in 2000 is up to 35.6% compared to 35.4%
for 1999 due to the fact that the locations closed down or sold in 1999 were the
two least profitable properties.

     During the nine months ended September 30, 1999, the Company recorded gross
profit from its cruise operations of $361,206, which is included in discontinued
operations, and $0 for the year ended December 31, 2000 as the Company sold its
cruise operations in the fourth quarter of 1999.

     During the twelve months ended December 31, 1999, the Company recorded
general and administrative costs of $2,036,040 compared to $640,016 during the
twelve months ended December 31, 2000. The primary reason for the decline is due
to the sale of a significant portion of the Company's interest in gaming
operations and its cruise operations during 1999 and the related decrease in
overhead costs.  The Company's share of overhead costs from gaming operations is
now included in its equity income.

Interest Expense
----------------

     The Company recorded interest expense of $55,763 for the twelve months
ended December 31, 2000 compared to $193,340 for the twelve months ended
December 31, 1999.  The decline in interest expense is attributable to the debt
on the construction of a new truck stop and casino for which the Company sold a
significant interest effective April 1, 1999.  In addition, the Company paid off
debt of approximately $297,000 and settled approximately $496,000 of interest
bearing debt for less than face value.

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

     The combined gaming and truck stop operations of Ozdon, Operator and River
Port LLC recorded gross profit for the twelve months ended December 31, 2000 of
approximately $5,996,000 and incurred approximately $4,496,000 of general and
administrative expenses and $79,000 of other expenses during the same twelve
months.  The result was net income from gaming and truck stop operations of
approximately $1,391,000 of which the Company's share was $386,594 (including
Ozdon).  The Company's share of income for the nine months from April 1, 1999 to
December 31, 1999 was $275,769 while, during the quarter ended March 31, 1999,
the Company recorded 100% of the gaming and truck stop operations, recording net
income of $68,347 for the quarter.

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

     During the year ended December 31, 2000, the Company sold Travelbyus.com
common stock resulting in a gain of approximately $384,500.  During the year
ended December 31, 1999, the Company sold a portion of its investments in
Operator, River Port LLC and the Gold Rush resulting in a gain of approximately
$634,000.

Depreciation and Amortization
-----------------------------

     During the year ended December 31, 2000, the Company recorded $11,520 of
depreciation expense compared to $70,965 during the year ended December 31,
1999.  The decrease is due to the sale of a portion of its interest in gaming
operations effective April 1, 1999 and the sale of its cruise operations
effective October 1, 1999 and the resulting decrease in depreciable assets on
the Company's books.

Other Income (Expense)
----------------------

     The Company recorded net, other income of $63,722 for the year ended
December 31, 2000 compared to net, other expense of $(357,733) for the year
ended December 31, 1999.  In 1999, the Company paid costs to settle a dispute
relating to the King's Lucky Lady truck stop of approximately $174,000 and other
expenses of Operator and River Port LLC were consolidated through March 31,
1999.

                                      -20-
<PAGE>

Extraordinary Gain
------------------

     During 2000, the Company recorded an extraordinary gain related to the
settlement of long-term debt, accrued interest and accrued dividends totaling
approximately $1,080,900 for new debt of approximately $547,500.  The result was
a gain on the settlement of approximately $487,000, net of a deferred tax
expense of $46,500.  The Company did not have any extraordinary gains in 1999.

Discontinued Operations
-----------------------

     As discussed above, the Company sold its cruise operations effective
October 1, 1999.  All activity of the cruise operations in 1999 through the
effective date are included in discontinued operations.  The sale of the cruise
operations resulted in a gain on the sale of approximately $1,131,000.

Forward Looking Statements

     Statements that are not historical facts included in this Form 10-KSB 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 River Port LLC maintaining or increasing fuel
sales, compliance with other gaming law requirements, maintaining a competitive
position in the Company's markets, pending legal proceedings, business
strategies, expansion and growth of the Company's operations, and cash flow.
Factors that could cause actual results to differ materially ("Cautionary
Disclosures") are described throughout this Form 10-KSB. Cautionary Disclosures
include, among others: general economic conditions, the Company's ability to
find, acquire, market, develop and produce new properties or new businesses, 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,
and pending legal proceedings.  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.

ITEM 7.  FINANCIAL STATEMENTS
-----------------------------

     The financial statements required by this item begin at Page F-1 hereof.

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

     None.



                     [THIS SPACE INTENTIONALLY LEFT BLANK]

                                      -21-
<PAGE>

                                    PART III

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

     The following table provides information as of March 1, 2001, with respect
to each of the Company's directors and each executive officer:
<TABLE>
<CAPTION>
                                                             Served as Executive
                                                                 Officer or
        Name                 Age      Position                 Director Since
        ----                ---       --------                 --------------
  <S>                       <C>  <C>                           <C>
                              Directors and Executive Officers

   E.H. Hawes, II            61  Director (Chairman),                   1998
                                 President and Chief
                                 Executive Officer
   Daryl N. Snadon           55  Director                               1994

   Richard P. Crane, Jr.     61  Director and Secretary                 1994
</TABLE>

     E. H. Hawes, II.  Mr. Hawes has been the Chairman of the Board, President
and Chief Executive Officer of the Company since January 7, 1998.  He has been
the Chairman of the Board of IT Financial Corporation ("ITFC"), which is the
holding company for International Tours, Inc. ("International"), since 1969, and
has been the Chairman of the Board of International since 1969.  ITFC and
International are privately owned corporations engaged in the business of travel
agency franchising and travel agency training and schools.  Mr. Hawes has also
been President of Glacier Petroleum, Inc., a privately owned oil and gas
exploration company, since 1971.

     Daryl N. Snadon.  Mr. Snadon has been a Director of the Company since
January 1994.  He has been sole proprietor of Beltway Development Company, a
real estate development company, in Dallas, Texas since 1973. Mr. Snadon has
also been the Chief Executive Officer of Beltway Construction Incorporated, a
general contractor, in Dallas, Texas since 1975, and President of Beltway
Management Corporation, a real estate leasing and management company, since
1988.  Mr. Snadon holds an undergraduate degree from the University of Missouri
and is a graduate of the University of Missouri School of Law.

     Richard P. Crane, Jr.  Mr. Crane has been a partner in the law firm of
Musick, Peeler and Garrett, Santa Monica, California, since February 1997, and
prior to that time was a partner in the laws firms of Crane & McCann, Santa
Monica, California, for approximately three years, Crane, Rayle & Lennemann,
Santa Monica, California, for approximately two years, and Girardi, Keese &
Crane, Los Angeles, California, for 14 years.  Mr. Crane has practiced law for
over 34 years, seven of which were with the U.S. Attorney General's Office where
for five years he was the Attorney in Charge and Chief Trial Counsel of the
Organized Crime and Racketeering Section of the Western Regional Office. He has
served as a Director and as Secretary of the Company since October 1994.  Mr.
Crane is also a director of Service Merchandise, Inc. which is a publicly traded
company.  He is a graduate of Vanderbilt University and holds a law degree from
Vanderbilt University Law School.

     During 2000, the Board of Directors held three meetings, and took three
corporate actions by unanimous written consent. The Company does not have an
audit committee, a nominating committee, or a compensation committee or any
committee performing similar functions.

     Non-officer directors of the Company were paid a fee of $500 for each
meeting of the Board attended.  In addition, the Company reimburses the
directors for their expenses (if any) incurred in connection with their duties
as directors.  Messrs. Crane and Snadon were each granted options on January 20,
2000 to purchase 1,000,000 shares of Common Stock at an exercise price of
$.03125 per share, the approximate fair market value on such date, with such
options vesting immediately and having a term of five years from the date of
grant.  Mr. Crane was paid a consulting fee of $25,000 during 2000.

                                      -22-
<PAGE>

Section 16(a) Beneficial Ownership Reporting Compliance

     Based solely upon a review of Forms 3, 4 and 5 furnished to the Company
pursuant to Rule 16a-3(e) promulgated under the Securities Exchange Act of 1934
(the "Exchange Act"), or upon written representations received by the Company,
the Company is not aware of any failure by any officer, director or beneficial
owner of more than 10% of the Company's Common Stock to timely file with the
Securities and Exchange Commission any Form 3, 4 or 5 relating to 2000, except
that (i) International Tours, Inc. ("International") was late by 12 months
filing a Form 4 reporting direct ownership of 500,000 shares of Common Stock and
Hawes Partners and E.H. Hawes, II were also late by 12 months filing a Form 4
reporting indirect beneficial ownership of these 500,000 shares, and (ii) Hawes
Partners and E.H. Hawes, II were late by 34 months filing an amendment to Form 3
reporting indirect beneficial ownership of an additional 43,334 shares of Common
Stock.

ITEM 10.     EXECUTIVE COMPENSATION
-----------------------------------

     The following table sets forth the compensation paid by the Company for
services rendered during the fiscal years ended December 31, 2000, 1999 and
1998, and the number of options granted, to the Chief Executive Officer of the
Company, and the value of the unexercised options held by such Chief Executive
Officer on December 31, 2000. No other executive officer of the Company received
remuneration in excess of $100,000 during 2000.

                           Summary Compensation Table
<TABLE>
<CAPTION>
                                                                     Long Term
                                              Annual              Compensation-
           Name and                        Compensation             Securities           All
           Principal                   --------------------         Underlying          Other
           Position              Year  Salary        Bonus      Options or Warrants  Compensation
-------------------------------  ----  ------       -------     -------------------  -------------
<S>                              <C>   <C>         <C>          <C>                  <C>
E. H. Hawes, II,                 2000    $  -       $  -                    -        $200,000/(1)/
 Chief Executive                 1999       -          -                    -         190,000/(1)/
  Officer                        1998       -          -                    -          63,125/(1)/
</TABLE>
_____________________________

(1)  Represents consulting fees paid by the Company.



                             Option/SAR Grant Table
                (Option/Warrant/SAR Grants in Last Fiscal Year)

<TABLE>
<CAPTION>
                   Number of
                   Securities    Percent of
                   Underlying      Total
                   Options or  Option/Warrant                Market Price
                    Warrants     Granted to    Exercise or      on Date
                    Granted     Employees in    Base Price     of Grant     Expiration
      Name             #        Fiscal Year       ($/Sh)        ($/Sh)         Date
-----------------  ----------  --------------  ------------  -------------  ----------
<S>                <C>          <C>             <C>          <C>            <C>
  E. H. Hawes, II      -             -            $   -         $    -          -
</TABLE>

                                      -23-
<PAGE>

             Aggregate Option/Warrant/SAR Exercises in Last Fiscal
                       Year and FY-End Option/SAR Values
<TABLE>
<CAPTION>
                                                                    Value of
                                                                  Unexercised
                    Shares               Number of Securities     In-the-Money
                   Acquired             Underlying Unexercised  Options/Warrants/
                      on       Value    Options/Warrants/SARs     SARs at 1998
                   Exercise   Realized     at 1998 FY-End            FY-End
      Name             #         $                #                     $
-----------------  ---------  --------  ----------------------  -----------------
<S>                <C>        <C>       <C>                     <C>
 E. H. Hawes, II     None       None              -                    $ -
</TABLE>

ITEM 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
---------------------------------------------------------------------------

     The following table sets forth certain information regarding the ownership
of Common Stock as of April 6, 2001, by each stockholder known to the Company to
own beneficially more than five percent of the outstanding Common Stock, each
current director, and all executive officers and directors as a group, based on
information provided to the Company by such persons.  Except as otherwise
stated, each such person has sole investment and voting power with respect to
the shares set forth in the table:
<TABLE>
<CAPTION>

Name and Address
of Beneficial Owner                     Number of Shares  Percent
--------------------------------------  ----------------  -------
<S>                                     <C>               <C>

      International Tours, Inc./(1)/          15,886,960     63.3
      13150 Coit Road
      Suite 125
      Dallas, Texas 75240

      Hawes Partners/(1)/                     16,122,620     64.2
      Shangri-La Vista Tower
      Route 3
      Afton, Oklahoma 74331

      E.H. Hawes, II/(1)/                     16,124,458     64.2
      Shangri-La Vista Tower
      Route 3
      Afton, Oklahoma 74331

      Daryl N. Snadon/(2)/                     3,535,673     13.5
      15280 Addison Rd., Ste 300
      Dallas, Texas  75248

      Richard P. Crane, Jr./(3)/               1,285,556      5.1
      530 Wilshire Blvd., Ste. 400
      Santa Monica, California 90401

      All Executive Officers and              20,946,183     77.3
      Directors as a Group
     (3 persons)/(1)(2)(3)/
</TABLE>

---------------

(1)  International Tours, Inc. ("International") owns 15,886,960 shares of
     Common Stock of record and beneficially.  E. H. Hawes, II, owns of record
     and beneficially 2,334 shares of Common Stock.  I.T. Financial Corporation
     ("ITFC") owns 235,660 shares of Common Stock of record and beneficially.
     Hawes Partners is a partnership owned 100% owned by Mr. Hawes.  Hawes
     Partners beneficially owns 100% of the outstanding capital stock of
     International.  Consequently, the 15,886,960 shares of Common Stock owned
     of record and beneficially by International may also be deemed to be
     beneficially owned by each of Hawes Partners and Mr. Hawes, and are
     reflected accordingly in the table above for their respective ownership
     positions.  Hawes Partners also beneficially owns 64.97% of ITFC and Hawes
     Partners and Mr. Hawes may also be deemed to

                                      -24-
<PAGE>

     beneficially own the shares owned by ITFC and such shares are reflected as
     being beneficially owned by each of them in the table above.

(2)  Includes a vested option to acquire 1,000,000 shares and 535,666 shares
     pledged as collateral on a note payable to Mr. Snadon's former wife.

(3)  Includes vested options to acquire 1,000,000 shares.


ITEM 12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-----------------------------------------------------------

     Overhead Sharing Agreement.  Until the Sale of the Cruise Business
effective October 11, 1999, the Company and International had agreed to an
overhead sharing arrangement pursuant to which the Company subleased
approximately 2,015 square feet of office space to International in the
Company's principal executive offices for a monthly rental of $1,595, and
reimbursed International for the portion of the salaries of International's
employees attributable to services performed by them for GalaxSea and I.T.
Cruise. During 1999, the Company paid approximately $79,000 in salary to
International, and International paid $22,095 in rent to the Company.

     Guarantees of Indebtedness of River Port LLC.  The Company has guaranteed
the approximate $2.0 million loan from Cottonport Bank to River Port LLC for
construction of the River Port Truck Stop, Williams and his spouse have
guaranteed $1,000,000 of such loan, and $750,000 is guaranteed by E.H. Hawes, II
and A. Keith Weber.  The guarantee by Hawes and Weber is secured by a second
lien on the Company's Gold Rush property.

     Consulting Fees.  E.H. Hawes, II is the Chairman of the Board, President
and Chief Executive Officer of the Company.  Mr. Hawes provides consulting
services to the Company and was paid $200,000 and $190,000 in consulting fees
during 2000 and 1999, respectively.  He does not receive a salary from the
Company.  The Company has agreed to pay Mr. Hawes $200,000 during fiscal 2001
for consulting services and expense reimbursements.

     Loan.  During 2000, Mr. Hawes borrowed $150,000 from the Company which was
repaid in full in January 2001.  The loan did not bear interest.

     International Note.  The Company paid International $725,223 in 1999 and
$274,202 in 2000 pursuant to a promissory note in the original principal amount
of $1,400,000.  The Note has been paid in full as of December 31, 2000.  At
December 31, 2000, International had an account payable to the Company of
$6,900.

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

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

          1.  Financial Statements:  The financial statements filed as part of
     this report are listed in the "Index to Financial Statements" on Page F-1
     hereof.

          2.  Exhibits required to be filed by Item 601 of Regulation S-B:

                                      -25-
<PAGE>

   2.1    Restated Plan and Agreement of Merger, dated as of January 21, 1994,
          as amended and restated, by and between the Company, OM Investors,
          Inc. ("OM") and a subsidiary of the Company (without schedules) filed
          as Exhibit 2.1 to the Company's Registration Statement on Form S-4,
          Registration No. 33-79384, and incorporated herein by reference.

   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.

   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 3.1.6 to the Quarterly Report on
          Form 10-QSB for the fiscal quarter ended June 30, 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 fiscal quarter ended
          September 30, 1998, and incorporated herein by reference.

   10.1.1 Operating and Financing Agreement dated July 21, 1993 between OM
          and Curray Corporation relating to the Pelican Palace filed as Exhibit
          10.27.1 to the Form S-4 and incorporated herein by reference.

   10.1.2 Letter Agreement dated September 21, 1993 between OM and Mary
          Merrell Fountain relating to the Pelican Palace filed as Exhibit
          10.27.2 to the Form S-4 and incorporated herein by reference.

                                      -26-
<PAGE>

  10.1.3  Commercial Lease dated February 14, 1994 between Tobacco Plus, Inc.
          and OM and Curray Corporation relating to the Pelican Palace filed as
          Exhibit 10.27.3 to the Form S-4 and incorporated herein by reference.

  10.1.4  Lease dated February 18, 1994 between Albert and Jay, Inc. and OM
          relating to the Pelican Palace filed as Exhibit 10.27.4 to the Form S-
          4 and incorporated herein by reference.

  10.1.5  Collateral Promissory Note dated July 21, 1993 in the original
          principal amount of $1,450,000 payable by Curray Corporation to OM
          filed as Exhibit 10.27.5 to the Form S-4 and incorporated herein by
          reference.

  10.1.6  Collateral Mortgage dated July 21, 1993 between Curray Corporation
          and OM relating to Exhibit 10.27.5 filed as Exhibit 10.27.6 to the
          Form S-4 and incorporated herein by reference.

  10.1.7  Notarial Endorsement and Assignment of Note dated October 29, 1993
          relating to Exhibit 10.27.5 filed as Exhibit 10.27.7 to the Form S-4
          and incorporated herein by reference.

  10.1.8  Consent dated April 20, 1994 relating to the Pelican Palace filed
          as Exhibit 10.14.1 to the Form S-4 and incorporated herein by
          reference filed as Exhibit 10.27.8 to the Form S-4 and incorporated
          herein by reference.

  10.2.1  Commercial Lease dated April 28, 1992 between OM and T.B. Guillory,
          Inc. and Bill Guillory relating to King's Lucky Lady filed as Exhibit
          10.28.1 to the Form S-4 and incorporated herein by reference.

  10.2.2  Consent dated April 21, 1994 relating to King's Lucky Lady filed as
          Exhibit 10.28.2 to the Form S-4 and incorporated herein by reference.

  10.3.1  Act of Contract and Agreement dated June 5, 1992 between The
          Longhorn Club, Inc., The Longhorn Truck & Car Plaza, Inc., D.M.L.
          Cattle Company, Inc., Dorothy M. Leach, Charles R. Cotton, Southern
          Trading Corporation and OM relating to the Lucky Longhorn filed as
          Exhibit 10.29.1 to the Form S-4 and incorporated herein by reference.

  10.3.2  Amendment to Act of Contract and Agreement dated July 15, 1992,
          amending Exhibit 10.29.1 filed as Exhibit 10.29.2 to the Form S-4 and
          incorporated herein by reference.

  10.3.3  Act of Contract between OM and Southern Trading Corporation dated
          June 5, 1992 relating to Exhibit 10.29.1 filed as Exhibit 10.29.3 to
          the Form S-4 and incorporated herein by reference.

  10.3.4  Assignment dated February 15, 1993 between OM and Southern Trading
          Corporation relating to Exhibit 10.29.1 filed as Exhibit 10.29.4 to
          the Form S-4 and incorporated herein by reference.

  10.3.5  Assignment dated June 22, 1993 between OM and John F. DeRosier
          relating to Exhibit 10.29.1 filed as Exhibit 10.29.5 to the Form S-4
          and incorporated herein by reference.

                                      -27-
<PAGE>

  10.3.6  Consent dated May 1, 1994 relating to the Lucky Longhorn filed as
          Exhibit 10.29.6 to the Form S-4 and incorporated herein by reference.

  10.4.1  Amended and Restated Articles of Organization of OM Operating,
          L.L.C. filed as Exhibit 10.32.1 to the Form S-4 and incorporated
          herein by reference.

  10.4.2  Corrected Operating Agreement of OM Operating, L.L.C. filed as
          Exhibit 10.32.2 to the Company's Annual Report on Form 10-KSB for the
          fiscal year ended December 31, 1994 and incorporated herein by
          reference.

  10.5    License Agreement dated effective December 15, 1995 between the
          Company and Operator licensing sales of alcoholic beverages at the
          Pelican Palace filed as Exhibit 10.35 to the Company's Annual Report
          on Form 10-KSB for the fiscal year ended December 31, 1995 and
          incorporated herein by reference.

  10.6    Option Agreement dated January 17, 1996 between the Company and
          Richard P. Crane, Jr. representing 500,000 shares of Common Stock
          filed as Exhibit 10.38 to the Company's Annual Report on Form 10-KSB
          for the fiscal year ended December 31, 1995 and incorporated herein by
          reference.

  10.7.1  Stock Purchase and Registration Rights Agreement dated July 1, 1996
          between the Company and New Orleans Video Poker Company, Inc.
          ("NOVP"), filed as Exhibit 10.1 to the Company's Quarterly Report on
          Form 10-QSB for the fiscal quarter ended September 30, 1996 and
          incorporated herein by reference.

  10.7.2  Sublease Agreement dated July 1, 1996 between OM Operating Company,
          LLC ("Operating") and NOVP filed as Exhibit 10.1.2 to the Company's
          Quarterly Report on Form 10-QSB for the fiscal quarter ended September
          30, 1996 and incorporated herein by reference.

  10.7.3  Consent to Sublease entered into as of October 7, 1996, by and between
          Operating, NOVP and Stanley Doussan filed as Exhibit 10.1.3 to the
          Company's Quarterly Report on Form 10-QSB for the fiscal quarter ended
          September 30, 1996 and incorporated herein by reference.

  10.8    License to Operate Video Poker Casino dated effective December 15,
          1995 between Operating and Ozdon Investments, Inc., relating to The
          Gold Rush Truck Stop filed as Exhibit 10.2 to the Company's Quarterly
          Report on Form 10-QSB for the fiscal quarter ended September 30, 1996
          and incorporated herein by reference.

  10.9.1  Agreement and Plan of Merger dated effective June 7, 1996, relating to
          the acquisition of GalaxSea and I.T. Cruise filed as Exhibit 10.1.1 to
          the Company's Current Report on Form 8-K dated June 10, 1996 and
          incorporated herein by reference.

  10.9.2  Form of Note dated June 10, 1996 in the original principal amount of
          $1,400,000 payable by the Company to International relating to the
          acquisition of I.T. Cruise filed as Exhibit 10.1.2 to the Company's
          Current Report on Form 8-K dated June 10, 1996 and incorporated herein
          by reference.

  10.9.3  Form of Security Agreement dated effective June 10, 1996 between
          International and the Company securing repayment of the Note filed as
          Exhibit

                                      -28-
<PAGE>

          10.27.2 filed as Exhibit as 10.1.3 to the Company's Current Report on
          Form 8-K dated June 10, 1996 and incorporated herein by reference.

  10.9.4  Form of GalaxSea Cruise Marketing Agreement dated May 1, 1996 between
          International and GalaxSea filed as Exhibit 10.1.5 to the Company's
          Current Report on Form 8-K dated June 10, 1996 and incorporated herein
          by reference.

  10.9.5  Form of Cruise Marketing Agreement dated May 1, 1996 between
          International and I.T. Cruise filed as Exhibit 10.1.6 to the Company's
          Current Report on Form 8-K dated June 10, 1996 and incorporated herein
          by reference.

  10.9.6  Form of Assignment between International and I.T. Cruise dated June 1,
          1996 filed as Exhibit 10.1.7 to the Company's Current Report on Form
          8-K dated June 10, 1996 and incorporated herein by reference.

  10.9.7  Form of Security Agreement dated June 10, 1996 between the Company,
          Ozdon Investments, and Lamar E. Ozley, Jr., as Trustee for the former
          shareholders of Ozdon Investments, Inc. filed as Exhibit 10.1.8 to the
          Company's Current Report on Form 8-K dated June 10, 1996 and
          incorporated herein by reference.

  10.10.1 Lease Agreement dated January 17, 1997 between S.W. Day and T. Joe
          Calloway and River Port Truck Stop, Inc. (a subsidiary of the Company)
          filed as Exhibit 10.28.1 to the Company's Annual Report on Form 10-KSB
          for the fiscal year ended December 31, 1996 and incorporated herein by
          reference.

  10.11   Operating Agreement of River Port Truck Stop, LLC between the Company
          and Donald I. Williams ("Williams") filed as Exhibit 10.1 to the
          Company's Quarterly Report on Form 10-QSB for the fiscal quarter ended
          June 30, 1998 and incorporated herein by reference.

  10.12   Amendment to Employment Agreement between River Port Truck Stop, LLC,
          O.M. Operating, L.L.C. and Williams filed as Exhibit 10.2 to the
          Company's Quarterly Report on Form 10-QSB for the fiscal quarter ended
          June 30, 1998 and incorporated herein by reference.

  10.13   Consulting and Administrative Agreement between the Company and River
          Port Truck Stop, LLC filed as Exhibit 10.3 to the Company's Quarterly
          Report on Form 10-QSB for the fiscal quarter ended June 30, 1998 and
          incorporated herein by reference.

  10.14   Letter Agreement between the Company and Williams relating to River
          Port Truck Stop, LLC filed as Exhibit 10.4 to the Company's Quarterly
          Report on Form 10-QSB for the fiscal quarter ended June 30, 1998 and
          incorporated herein by reference.

  10.15   Assignment and Assumption of Lease dated May 19, 1998, by and between
          River Port Truck Stop, Inc. and River Port Truck Stop, LLC filed as
          Exhibit 10.5 to the Company's Quarterly Report on Form 10-QSB for the
          fiscal quarter ended June 30, 1998 and incorporated herein by
          reference.

  10.16   Amendment No. One to Operating Agreement of OM Operating, L.L.C. dated
          effective April 15, 1998 filed as Exhibit 10.1 to the Company's
          Current Report on Form 8-K dated April 15, 1998 and incorporated
          herein by reference.

                                      -29-
<PAGE>

  10.17   Note dated April 15, 1998 in the original principal amount of
          $4,000,000 payable to the Company by Williams filed as Exhibit 10.2 to
          the Company's Current Report on Form 8-K dated April 15, 1998 and
          incorporated herein by reference.

  10.18   Assignment and Security Agreement dated April 15, 1998 between the
          Company and Williams filed as Exhibit 10.3 to the Company's Current
          Report on Form 8-K dated April 15, 1998 and incorporated herein by
          reference.

  10.19   Consulting and Administrative Agreement dated April 15, 1998 between
          the Company and Operator filed as Exhibit 10.4 to the Company's
          Current Report on Form 8-K dated April 15, 1998 and incorporated
          herein by reference.

  10.20   Employment Agreement dated April 15, 1998 between Operator and
          Williams filed as Exhibit 10.5 to the Company's Current Report on Form
          8-K dated April 15, 1998 and incorporated herein by reference.

  10.21   Release and Settlement Agreement dated February 2, 1999 by and among
          the parties referenced therein, together with various Exhibits thereto
          (but exclusive of various Schedules thereto) filed as Exhibit 10.1 to
          the Company's Current Report on Form 8-K dated February 1, 1999 and
          incorporated herein by reference.

  10.22   Settlement Agreement dated February 2, 1999 by and among the parties
          referenced therein filed as Exhibit 10.2 to the Company's Current
          Report on Form 8-K dated February 1, 1999 and incorporated herein by
          reference.

  10.23   Convenience Store and Restaurant Sub-Lease dated January 10, 1999
          between RVC Operations, L.L.C. and River Port Truck Stop, LLC filed as
          Exhibit 10.41 to the Company's Annual Report on Form 10-KSB for the
          fiscal year ended December 31, 1998 and incorporated herein by
          reference.

  10.24   Fuel Service and Truck Stop Operating Agreement dated January 10, 1999
          between RVC Operations, L.L.C. and River Port Truck Stop, LLC filed as
          Exhibit 10.42 to the Company's Annual Report on Form 10-KSB for the
          fiscal year ended December 31, 1998 and incorporated herein by
          reference.

  10.25   Purchase of Assets Agreement dated October 13, 1999 relating to the
          Sale of the Cruise Business filed as Exhibit 10.25 to the Company's
          Annual Report on Form 10-KSB for the fiscal year ended December 31,
          1999 and incorporated herein by reference.

  *10.26  Settlement Agreement dated April 1, 2000 between the Company and
          various holders of subordinated debentures and common stock.

  *10.27  Settlement Agreement dated January 1, 2001, but to be effective as of
          December 1, 2000, between the Company and various holders of
          subordinated debentures and common stock.

  *10.28  Promissory Note in the amount of $550,000 dated as of December 1, 2000
          and executed in connection with the Settlement Agreement filed as
          Exhibit 10.27.

  *10.29  Promissory Note in the amount of $175,000 dated April 1, 2000 and
          executed in connection with the Settlement Agreement filed as Exhibit
          10.26.

                                      -30-
<PAGE>

  *21.1   Subsidiaries of the Company.

________________________

*    Filed herewith.

b)   Reports on Form 8-K

     None.

                                      -31-
<PAGE>

                                   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


April 10, 2001                      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)



In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Company and in the
capacities and on the dates indicated.

April 10, 2001                      /s/ E. H. Hawes, II
                                    -------------------------------------------
                                    E.H. Hawes, II
                                    Director (Chairman)

April 10, 2001                      /s/ Daryl N. Snadon
                                    -------------------------------------------
                                    Daryl N. Snadon
                                    Director

April 10, 2001                      /s/ Richard P. Crane, Jr.
                                    -------------------------------------------
                                    Richard P. Crane, Jr.
                                    Director

                                      -32-
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
  CORPORATION AND SUBSIDIARY
TABLE OF CONTENTS
--------------------------------------------------------------------------------


Financial Statements of North American Gaming and
    Entertainment Corporation and Subisidiary

<TABLE>
<CAPTION>
                                                                       Page
                                                                       ----
<S>                                                                 <C>
Independent Auditors' Report                                            F-2

Financial Statements:

     Consolidated Balance Sheet - December 31, 2000                     F-3

     Consolidated Statements Of Operations - Years Ended
       December 31, 2000 And 1999                                      F-4-F-5

     Consolidated Statements Of Comprehensive Income -
       Years Ended December 31, 2000 And 1999                           F-6

     Consolidated Statements Of Stockholders' Equity (Deficit) -
       Years Ended December 31, 2000 And 1999                           F-7

     Consolidated Statements Of Cash Flows - Years Ended
       December 31, 2000 And 1999                                      F-8-F-9

     Notes To Consolidated Financial Statements                      F-10-F-26
</TABLE>

                                      F-1
<PAGE>

Independent Auditors' Report




To the Stockholders
North American Gaming and Entertainment Corporation


We have audited the accompanying consolidated balance sheet of North American
Gaming and Entertainment Corporation (a Delaware corporation) and subsidiary as
of December 31, 2000, and the related consolidated statements of operations,
comprehensive income, stockholders' equity (deficit) and cash flows for the
years ended December 31, 2000 and 1999. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of North
American Gaming and Entertainment Corporation and subsidiary as of December 31,
2000, and the results of their operations and their cash flows for the years
ended December 31, 2000 and 1999 in conformity with generally accepted
accounting principles.



March 8, 2001                                        /S/Sartain Fischbein & Co.
Tulsa, Oklahoma

                                      F-2
<PAGE>

<TABLE>
<CAPTION>
NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
======================================================================================================
December 31,                                                                                    2000
------------------------------------------------------------------------------------------------------
<S>                                                                                        <C>
ASSETS

Current assets:

Cash                                                                                       $    17,225
Advances to related parties                                                                    156,900
Investment in available-for-sale securities                                                     47,002
Prepaid expenses                                                                                68,800
Deferred tax asset                                                                             258,000
                                                                                           -----------
Total current assets                                                                           547,927
                                                                                           -----------
Furniture and equipment, net of accumulated depreciation                                         9,739
                                                                                           -----------

Other assets:

Deposits                                                                                         3,246
Investments - restricted                                                                        35,250
Investments - other                                                                            769,073
                                                                                           -----------
Total other assets                                                                             807,569
                                                                                           -----------
Total assets                                                                               $ 1,365,235
                                                                                           ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Current portion of notes payable                                                           $   245,797
Accounts payable and accrued liabilities                                                        83,500
Due to former stockholders                                                                     150,000
Due to related entity                                                                          130,000
Preferred stock dividends payable                                                               15,003
                                                                                           -----------

Total current liabilities                                                                      624,300

Notes payable - long-term                                                                      467,500
                                                                                           -----------
Total liabilities                                                                            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
Additional paid-in capital                                                                     489,214
Treasury stock, 16,683,094 shares, at cost                                                    (489,258)
Accumulated other comprehensive loss - unrealized
     loss on available for sale securities, net of income taxes                                (51,506)
Accumulated deficit                                                                            (92,901)
                                                                                           -----------
To stockholders' equity                                                                        273,435
                                                                                           -----------
Total liabilities and stockholders' equity                                                 $ 1,365,235
                                                                                           ===========

======================================================================================================
</TABLE>

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

                                      F-3
<PAGE>

<TABLE>
<CAPTION>
NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
==================================================================================================
Years Ended December 31,                                                 2000            1999
--------------------------------------------------------------------------------------------------
<S>                                                                    <C>             <C>
Revenue:
Video poker                                                            $       -       $ 4,128,171
Truck stop and convenience store                                               -         1,905,456
                                                                       ---------       -----------

                                                                               -         6,033,627

Costs and expenses                                                             -         3,883,555
General and administrative                                               640,016         2,036,040
Depreciation and amortization                                             11,520            70,965
                                                                       ---------       -----------

Operating income (loss)                                                 (651,536)           43,067

Interest expense                                                         (55,763)         (193,340)
Income from equity investments                                           386,594           275,769
Gain on sale of investments                                              384,495           633,971
Other income (expense)                                                    63,722          (357,733)
                                                                       ---------       -----------

Income from continuing operations before
   provision for income taxes and extraordinary
   gain                                                                  127,512           401,734

Provision for income taxes                                               (10,991)          (45,000)
                                                                       ---------       -----------

Income from continuing operations before
   extraordinary gain                                                    116,521           356,734

Extraordinary gain, net of
   taxes of $46,500 (2000)                                               487,047                 -
                                                                       ---------       -----------

Income from continuing operations                                        603,568           356,734

Discontinued operations:

Loss from operations of cruise operations
   disposed of net of income tax expense
   of $33,000 (1999)                                                           -          (184,531)

Gain on disposal of cruise operations, net of
   selling costs of $297,434 and income taxes
   of $109,000 (1999)                                                          -         1,130,589
                                                                       ---------       -----------

Net income                                                             $ 603,568       $ 1,302,792
                                                                       =========       ===========

==================================================================================================
</TABLE>

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

                                      F-4
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
================================================================================
Years Ended December 31,                               2000           1999
-------------------------------------------------------------------------------


Earnings Per Share:
Basic:
Income before extraordinary gain                    $          *   $       0.01

Extraordinary gain per share                                0.02              -
                                                    ------------   ------------

Income from continuing operations                           0.02           0.01

Loss from discontinued operations                              -          (0.01)

Gain on disposal of cruise operations                          -           0.03
                                                    ------------   ------------

Net income                                          $       0.02   $       0.03
                                                    ============   ============


Basic weighted average shares outstanding             31,130,691     35,508,850
                                                    ============   ============

* Less than $0.01 per share.

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


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

                                      F-5
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
 CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
================================================================================

<TABLE>
<CAPTION>
Years Ended December 31,                                          2000           1999
-----------------------------------------------------------------------------------------

<S>                                                            <C>            <C>
Net income                                                      $ 603,568      $1,302,792
                                                                ---------      ----------
Other Comprehensive Income (Loss):
Unrealized gains (loss) on available-for-sale securities
     net of deferred income tax expense (benefit)
     of $(176,843) (2000) and $329,137 (1999)                    (343,284)        548,562
Reclassification adjustment for gains included in net
     income, net of taxes of $132,282 (2000)                     (256,784)              -
                                                                ---------      ----------
                                                                 (600,068)        548,562
                                                                ---------      ----------

Comprehensive income                                            $   3,500      $1,851,354
                                                                =========      ==========
</TABLE>

                                      F-6
================================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
 CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
================================================================================
Years Ended December 31, 2000 and 1999
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                           Accumulated                   Total
                                  Class A   Preferred             Additional                  Other                   Stockholders'
                                 Preferred    Stock      Common     Paid-in    Treasury   Comprehensive  Accumulated     Equity
                                   Stock    Series "B"   Stock      Capital     Stock        Income        Deficit      (Deficit)
                                 ---------  ----------  --------  ----------  ----------  -------------  -----------  -------------
<S>                              <C>        <C>         <C>       <C>         <C>         <C>            <C>          <C>
Balance, December 31, 1998               -  $        -  $417,886  $  466,959  $        -  $           -  $(1,999,261) $  (1,114,416)

Redemption of 8,167,632 shares
of stock at $.01 per share               -           -         -           -     (81,676)             -            -        (81,676)

Purchase of 500,000 shares
of stock at $.06 per share               -           -         -           -     (30,000)             -            -        (30,000)

Other comprehensive income               -           -         -           -           -        548,562            -        548,562

Net income - 1999                        -           -         -           -           -              -    1,302,792      1,302,792
                                 ---------  ----------  --------  ----------  ----------  -------------  -----------  -------------
Balance, December 31, 1999               -           -   417,886     466,959    (111,676)       548,562     (696,469)       625,262

Redemption of 1,958,829 shares
of stock at $.10 per share               -           -         -           -    (195,883)             -            -       (195,883)

Redemption of 6,056,633 shares
of stock at $.03 per share               -           -         -           -    (181,699)             -            -       (181,699)

Stock based compensation on
non-employee options                     -           -         -      22,255           -              -            -         22,255

Other comprehensive loss                 -           -         -           -           -       (600,068)           -       (600,068)

Net income - 2000                        -           -         -           -           -              -      603,568        603,568
                                 ---------  ----------  --------  ----------  ----------  -------------  -----------  -------------
Balance, December 31, 2000       $       -  $        -  $417,886  $  489,214  $ (489,258) $     (51,506) $   (92,901) $     273,435
                                 =========  ==========  ========  ==========  ==========   =============  =========== =============
</TABLE>

                                      F-7
================================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
  CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
================================================================================

<TABLE>
<CAPTION>
Years Ended December 31,                                                     2000                1999
---------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                <C>
Cash Flows From Operating Activities:
Net income                                                                 $ 603,568          $ 1,302,792
Adjustments to reconcile net income
   to net cash used in operating activities:
     Depreciation and amortization                                            11,520              320,887
     Deferred tax expense                                                      5,000              176,000
     Stock based compensation on options                                      22,255                    -
     Income from equity investments                                         (386,594)            (275,769)
     Realized gain on sale of marketable securities                         (384,495)                   -
     Extraordinary gain on forgiveness of debt                              (533,547)                   -
     Gain on sale of an interest in gaming operations                              -             (673,579)
     Gain on sale of cruise operations                                             -           (1,537,023)
     Loss on disposal of assets                                                    -               39,608
Changes in operating assets and liabilities:
     (Increase) decrease in:
         Accounts receivable                                                 110,843              (27,026)
         Advances to related parties                                        (156,900)                   -
         Inventories                                                               -              (11,027)
         Prepaid expenses                                                    (66,926)              34,966
         Deposits                                                                  -               14,253
     Increase in:
         Accounts payable and accrued liabilities                             89,224              185,347
                                                                           ---------          -----------

Net Cash Used In Operating Activities                                       (686,052)            (450,571)
                                                                           ---------          -----------
Cash Flows From Investing Activities:
     Purchases of property, plant and equipment                                    -              (58,724)
     Cash sold in sale of assets                                                   -             (304,286)
     Proceeds from sale of assets                                                 50            1,701,759
     Repayments by borrowers                                                       -               47,666
     Net capital contribution to equity investments                                -              (14,137)
     Proceeds from the sale of available-for-sale securities                 821,593                    -
     Purchase of available-for-sale securities                               (19,555)                   -
     Construction of casino and truck stop                                         -               (8,500)
                                                                           ---------          -----------

Net Cash Provided By Investing Activities                                    802,088            1,363,778
                                                                           ---------          -----------
Cash Flows From Financing Activities:
     Purchase of treasury stock                                              (50,000)             (30,000)
     Payments on borrowings                                                 (297,302)            (915,825)
                                                                           ---------          -----------

Net Cash Used In Financing Activities                                       (347,302)            (945,825)
                                                                           ---------          -----------
Net Decrease In Cash                                                        (231,266)             (32,618)

Cash, beginning of year                                                      248,491              281,109
                                                                           ---------          -----------

Cash, end of year                                                          $  17,225          $   248,491
                                                                           =========          ===========
</TABLE>

                                      F-8
================================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
 CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
================================================================================

<TABLE>
<CAPTION>
Years Ended December 31,                                        2000              1999
-----------------------------------------------------------------------------------------
<S>                                                          <C>               <C>
Cash Paid During The Year For:
  Income taxes, net of refunds received                      $  (91,616)       $   22,000
  Interest                                                   $   25,264        $  237,436

Non-Cash Investing and Financing Activities:

  Redemption of common stock, cancellation
    of debt, dividends and accrued interest
    and receipt of marketable equity securities
    in connection with the sale of assets                    $        -        $1,642,149
                                                             ==========        ==========
  Change in unrealized gain (loss) on available for
    sale securities, net of deferred income taxes            $ (600,068)       $  548,562
                                                             ==========        ==========
  Accrued expenses satisfied by distributing
    marketable securities                                    $  194,101        $        -
                                                             ==========        ==========
  Forgiveness of debt and accrued liabilities, plus
    redemption of treasury stock in exchange for
    new debt                                                 $  725,000        $        -
                                                             ==========        ==========
  Purchase of treasury stock included in due to
    former stockholders                                      $  150,000        $        -
                                                             ==========        ==========
</TABLE>

                                      F-9
================================================================================
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
  CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000 AND 1999
================================================================================

1.  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
       POLICIES

The accompanying consolidated financial statements include the accounts of North
American Gaming and Entertainment Corporation, a Delaware corporation ("NAGEC"),
and its wholly owned subsidiary, GalaxSea Cruises and Tours, Inc. ("Galaxsea")
(collectively the "Company"). Through March 31, 1999, the consolidated financial
statements also included the accounts of OM Operating, LLC ("OM"), River Port
Truck Stock, LLC ("RPLLC") and Ozdon Investments, Inc. ("Ozdon") (see Note 2).
Through October 1, 1999, the consolidated financial statements also included the
accounts of I.T. Cruise, Inc. ("IT"). All significant intercompany balances and
transactions have been eliminated in consolidation.

The Company's operations for the three months ended March 31, 1999 consisted of
the truck stop facilities and/or video poker casinos in five truck stops, and
the video poker devices for a route of 4 bars and restaurants, all located in
the state of Louisiana. Subsequent to March 31, 1999, the Company earned income
from its equity investments in OM, RPLLC and Ozdon (which owns the facility
known as the Gold Rush Truck Stop), which operated four video poker casinos and
one bar operation. The Company also operated in the cruise travel business,
through September 30, 1999 (See Note 3).

Use of Estimates: The preparation of consolidated financial statements in
----------------
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Video Poker Revenue: Video poker revenue equals the net revenue from gaming
-------------------
activities and is defined as the difference between gaming wins and losses.

Investment Securities: Investment securities that are held for short-term resale
---------------------
are classified as trading securities and carried at fair value. Other marketable
securities are classified as available-for-sale and are carried at fair value.
Unrealized gains and losses on securities available-for-sale are reported net of
income taxes in accumulated other comprehensive income (loss). Cost of
securities sold is recognized using the specific identification method. Equity
securities, whose trade is restricted, are carried at fair value on the date
they became restricted.

                                      F-10
================================================================================
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
  CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000 AND 1999
================================================================================

1.  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
      POLICIES (CONTINUED)

Furniture and Equipment: Expenditures for furniture and equipment are recorded
-----------------------
at cost. Improvements which extend the economic life of such assets are
capitalized. Expenditures for maintenance and repairs are charged to expense.

Depreciation is provided over the estimated useful lives of assets, which range
from 5 to 7.5 years, using an accelerated method.

Long-Lived Assets: Long-lived assets to be held and used in the Company's
-----------------
business are reviewed for impairment, whenever events or changes in
circumstances indicate that the related carrying amount may not be recoverable.
When required, impairment losses on assets to be held and used are recognized
based on the fair value of the asset.

Income Taxes: The Company uses the asset and liability method of accounting for
------------
income taxes. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the consolidated financial statement carrying amounts of
existing assets and liabilities and their respective tax consolidated basis.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. The Company files a consolidated U. S.
Federal tax return. OM and RPLLC are not subject to income taxes. Income or loss
is required to be included in the income tax returns of the members.

Concentration: During the years ended December 31, 2000 and 1999, video poker
-------------
revenues represent approximately 67% and 68%, respectively of operating revenues
of its minority owned casino operations. Failure to comply with Louisiana gaming
regulations regarding Video Poker could result in license revocation (see Note
10).

Basic Earnings Per Share: Basic earnings per share of common stock was computed
------------------------
by dividing income applicable to common stockholders, by the weighted average
number of common shares outstanding for the year. Diluted earnings per share are
not presented because all potential common shares are anti-dilutive.

                                      F-11
================================================================================
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
  CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000 AND 1999
================================================================================

1.  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
      POLICIES (CONTINUED)

Fair Value of Financial Instruments: The carrying amounts of financial
-----------------------------------
instruments including cash, prepaids, accounts payable and accrued expenses
approximated fair value as of December 31, 2000 because of the relatively short
maturity of these instruments.

The carrying amounts of notes payable and debt issued approximate fair value as
of December 31, 2000 because interest rates on these instruments approximate
market interest rates.

Recently Issued Accounting Pronouncements: In June of 1998, the FASB issued
-----------------------------------------
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133). SFAS No. 133 addresses the
accounting for derivative instruments embedded in other contracts and hedging
activities. SFAS No. 133 was effective for all fiscal quarters of all fiscal
years beginning after June 15, 1999. However, in June of 1999 the FASB issued
SFAS No. 137 which deferred the effective date from June 15, 1999 to June 15,
2000. Additionally, in June of 2000 the FASB issued SFAS No. 138 which amended
the accounting for certain derivative instrument and hedging activities under
SFAS No. 133. Initial application of SFAS No. 133 and SFAS No. 138 shall be as
of the beginning of the entity's fiscal quarter starting January 1, 2001.
Hedging relationships shall be designated and documented under the provisions of
these statements. These statements currently have no impact on the financial
statements of the Company, as the Company does not hold any derivative
instruments or participate in any hedging activities.

2.  MINORITY INTERESTS

OM Operating L.L.C. (OM): In 1994 the Company contributed to OM its assets and
------------------------
liabilities related to the operation of the video draw poker gaming devices.
Donald I. Williams (Williams), an employee of the Company, contributed $100 to
OM as his capital contribution. OM was formed to facilitate compliance with
Louisiana law which requires the operator of video poker devices in truck stops
to be at least majority owned by Louisiana residents.

Through April 15, 1998, the Company received a gross income allocation equal to
20% of OM's gross gaming income generated from the operation of the video poker
gaming devices. Gross gaming income is defined as total money played in all
devices, less all payouts on winnings to players and less all gaming and device
taxes and fees payable to the State of Louisiana.

Application of the provisions of the Operating Agreement of OM resulted in 100%
of the net income being allocated to the Company and 0% being allocated to
Williams for the period from January 1, 1998 to April 15, 1998.

                                      F-12
================================================================================
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
  CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000 AND 1999
================================================================================

2.  MINORITY INTERESTS (CONTINUED)

Effective April 15, 1998, the Company and Williams entered into Amendment Number
One (the "Amendment") to the Operating Agreement of OM.

The Company contributed to OM its right to the 20% gross income allocation in
exchange for 99% of the ownership interest in OM, and simultaneously assigned
50% of the ownership interests in OM to Williams in exchange for a $4,000,000
nonrecourse note (the "Note") payable by Williams to the Company. Immediately
thereafter Williams owned 51% and the Company owned 49% of the ownership
interests in OM, the Company no longer had the 20% gross income allocation and
Williams owed the Company $4,000,000 pursuant to the Note. The Note was payable
solely from cash flow distributions made by OM to Williams from five video poker
casinos, truck stops, and route operations operated by the Company and OM (less
an amount to allow Williams to pay his federal and state income taxes on OM's
net taxable income), and was secured by his 51% ownership interest and all cash
flow distributions made to him with respect to the five existing video poker
casinos, truck stops and route operations. The principal balance of the Note was
automatically reduced pro-rata (at percentages agreed upon based on 1997 net
operating income of each of the five locations) if OM lost the right to operate
any of the five locations.

Until the Note was paid in full, the Company had the right to remove and appoint
a new manager of OM with the concurrence of Williams, and must at the request of
Williams remove and replace any such manager who fails to satisfactorily perform
his dutires. Once the Note had been paid in full, the manager would be elected
by the owners of at least 65% of the ownership interest in OM.

In conjunction with the restructuring of OM, the Company and OM entered into a
five year Consulting and Administrative Agreement pursuant to which the Company
would receive a fee of $400,000 per year.

Additionally, Williams and OM entered into a five year Employment Agreement
pursuant to which Williams would receive an annual salary of $250,000.

The Company agreed to lease to OM the land and buildings constituting The Gold
Rush Truck Stop for payments of $400,000 per year expiring April 15, 2008.

Under the Amendment, Williams and the Company were allocated 51% and 49%,
respectively, of the profits and losses of OM after deducting Williams' salary,
the consulting fee and rent on the Gold Rush Truck Stop. The allocated profits
of Williams were payable to the Company as a reduction of accrued interest on
the Note and then principal until such time as Williams allocation of profits
was sufficient to pay-off the Note.

Application of the above provisions of the Amendment resulted in 100% of the net
income being allocated to the Company and 0% to Williams for the period from
April 15, 1998 to December 31, 1998, and for the period from January 1, 1999 to
March 31, 1999. The principal balance outstanding on the Note at December 31,
1998 and March 31, 1999 remained at $4,000,000.

                                      F-13
================================================================================
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
  CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000 AND 1999
================================================================================


2.  MINORITY INTERESTS (CONTINUED)

The restructure under the Amendment included an assignment of ownership
interests by the Company which did not qualify for sale treatment under
applicable accounting rules until Williams' share of distributions of cash flow
resulted in sufficient payments on the Note to make significant reductions
thereof. Because of this, the assignment transaction and resulting $4,000,000
Note were not reflected in the consolidated financial statements. The Company
continued to consolidate the operations of OM until significant payments were
made on the Note.

River Port Truck Stop, LLC (RPLLC): During 1998, the Company and Williams agreed
----------------------------------
to form RPLLC to pursue development, construction, ownership and operation of a
truck stop and video poker facility. RPLLC was owned 49.9% by the Company and
50.1% by Williams.

In May 1998, the Company assigned RPLLC its lease on a truck stop facility and,
on July 21, 1998, the Company and Williams entered into an Operating Agreement
to govern the operations of RPLLC. Until the Note was paid in full, the Company
had the right to remove and appoint a new manager of RPLLC with the concurrence
of Williams, and must at the request of Williams remove and replace any manager
who fails to satisfactorily perform his duties. Once the Note had been paid in
full, managers would be elected by the owners of at least 65% of the ownership
interests in RPLLC.

In conjunction with the Operating Agreement of RPLLC, the Company and RPLLC
entered into a five year Consulting and Administrative Agreement pursuant to
which the Company would receive a fee of $50,000 per year.

Additionally, Williams, RPLLC and OM also entered into an Amendment to the
Employment Agreement pursuant to which Williams agreed to perform the same
services for RPLLC as he performed for OM under the Employment Agreement and
pursuant to which OM and RPLLC agreed to split his annual salary of $250,000 pro
rata based on the number of truck stop video poker casinos operated by each
entity.

Williams and the Company were allocated 50.1% and 49.9%, respectively of the
profits and losses of RPLLC. Notwithstanding the above, each members'
distributive share of income, gain, loss, deduction or credit was first
allocated to the Company and Williams' in order to cause their member accounts
to approximate the 49.9% and 50.1% ownership percentages, respectively, and then
in proportion to the members' respective ownership percentage.

Application of the above provisions of the RPLLC Operating Agreement resulted in
100% of the net losses being allocated to the Company and 0% to Williams for the
period from July 21, 1998 to December 31, 1998 and for the period from January
1, 1999 to March 31, 1999.

                                      F-14
================================================================================
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
  CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000 AND 1999
================================================================================

2.  MINORITY INTERESTS (CONTINUED)

Restructure of OM and RPLLC: In order to respond to additional concerns of the
---------------------------
Louisiana gaming regulators (see Note 10) related to the Amendment to the
Operating Agreement and the RPLLC Operating Agreement, the Company and Williams
executed Amendment Number Two to the Operating Agreement and Amendment Number
One to the RPLLC Operating Agreement in February 1999 ("the Amendments").

The Amendments were effective April 1, 1999 and effectively canceled the Note
and the Company's contribution of the 20% gross income allocation. In addition,
Williams agreed to cancel his subordinated debenture in the amount of $103,651
(including accrued interest), return an aggregate of 2,553,000 shares of common
stock of the Company owned by Williams and entities related to Williams, to
cancel $78,000 of accrued dividends on Class A Preferred Stock, contribute .1%
interest in RPLLC to the Company, and pay the Company cash ranging from $150,000
to $300,000. The Amendments terminated the Company's 20% gross income allocation
in OM and caused it to contribute operating assets and liabilities of two truck
stops and three restaurants to OM as of March 31, 1999. Thereafter, all profit
and loss of OM and RPLLC will be allocated to the members based on each members'
ownership as detailed below.

In conjunction with the restructuring, the consulting agreements with OM and
RPLLC were terminated effective April 1, 1999. Additionally, Williams salary was
reduced to $100,000 per year and a new month-to-month Gold Rush lease for
$33,333 per month were effective April 1, 1999.

Concurrent with the Amendments, the Company entered into an agreement with 10
former Class A Preferred Stockholders (former stockholders) whereby the Company
agreed to transfer 50% of its interest in all gaming operations (including OM,
RPLLC, and Ozdon) to the former stockholders. In consideration, the former
stockholders agreed to cancel their subordinated debentures in the amount of
$338,837 (including accrued interest), return an aggregate of 5,614,632 shares
of common stock, and cancel $255,072 of accrued dividends on Class A Preferred
Stock.

As of April 1, 1999, ownership of OM, RPLLC and Ozdon were as follows:

<TABLE>
<CAPTION>
                                          Former
                       Company        Stockholders      Williams      Total
                       -------        ------------      --------      -----
        <S>            <C>            <C>               <C>          <C>
        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%
</TABLE>

The Amendments constituted a transfer of ownership interest and control in all
of the Company's gaming operations. The transfer became effective April 1, 1999.
At that time, the Company began recording its investment in OM, RPLLC and Ozdon
(collectively referred to as the "Operator") using the equity method of
accounting, whereby the Company records as part of operations, its proportionate
share of their undistributed income or loss. To the extent the Company has
guaranteed debt of RPLLC, it will continue to record its share of losses beyond
$0.

                                      F-15
================================================================================
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
  CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000 AND 1999
================================================================================



2.  MINORITY INTERESTS (CONTINUED)

The Company's investment in the equity of OM, RPLLC and Ozdon, included as
Investments-other in the accompanying consolidated balance sheet are as follows
at December 31, 2000:

                   OM                         $ 629,966
                   RPLLC                        (99,279)
                   Ozdon                        238,386
                                              ---------

                                              $ 769,073
                                              =========

The Company's share of the income of OM, RPLLC and Ozdon collectively, included
in operations was approximately $389,000 and $276,000 in 2000 and 1999,
respectively.

The following is a condensed unaudited combined balance sheet for OM, RPLLC and
Ozdon as of December 31, 2000 and the condensed unaudited, combined statement of
income for the year then ended.

                      CONDENSED AND COMBINED BALANCE SHEET
                                   (UNAUDITED)
                                December 31, 2000

<TABLE>
<CAPTION>
           Assets                                               Total
                                                              --------
           <S>                                               <C>
           Current assets                                    $1,980,000
           Property and equipment, net                        3,114,000
           Intangibles and other, net                           140,000
                                                             ----------

           Total Assets                                      $5,234,000
                                                             ==========


           Liabilities and Equity

           Current liabilities                               $1,082,000

           Long-term debt                                     1,975,000
                                                             ----------

           Total Liabilities                                  3,057,000

           Equity                                             2,177,000
                                                             ----------

           Total Liabilities and Equity                      $5,234,000
                                                             ==========

</TABLE>


                                      F-16
================================================================================
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
  CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000 AND 1999
================================================================================

2.  MINORITY INTERESTS (CONTINUED)

                   CONDENSED AND COMBINED STATEMENT OF INCOME
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                           Year Ended
                                                       December 31, 2000
                                                       -----------------
         <S>                                           <C>
         Revenues                                           $16,745,000
         Costs of revenue                                   (10,779,000)
         General and administrative expenses                 (4,496,000)
                                                            -----------

         Operating income                                     1,470,000

         Interest expense, net                                 (181,000)
         Other income, net                                      209,000
         Income taxes                                          (107,000)
                                                           ------------

              Net income                                   $  1,391,000
                                                           ============
</TABLE>


On March 24, 2000, the other two members of OM and RPLLC purportedly voted to
merge separate limited liability companies into each of OM and RPLLC and buyout
the Company's interest in each for $375,000 and $50,000, respectively. The
Articles of Organization or Operating Agreement 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 merger
and buyout and subsequently filed a lawsuit to nullify the mergers and buyout.

In January 2001, the Company entered into a preliminary agreement to negotiate a
settlement of all lawsuits related to the purported buyout. Under the
preliminary agreement, the parties will mutually release all other parties and
the Company will sell its interests in OM, RPLLC and Ozdon for $2,300,000.


3.  DISCONTINUED OPERATIONS

Effective October 1, 1999, the Company sold the assets of GalaxSea, including
fixed assets, tradenames and other intangibles and cruise deposits, and the
stock of IT for $1,360,127 and 666,667 shares of the purchaser's common stock
with a fair market value of $ 776,401. The purchaser's common stock is listed on
the Toronto Exchange.

Net sales from cruise operations for the nine months ended September 30, 1999
were $685,219. This amount is not included in revenues in the accompanying
consolidated statements of operations, but is included as part of discontinued
operations.

Assets and liabilities of the cruise operations sold consisted of the following
at September 30, 1999:

                         Furniture and equipment                     $ 23,771
                         Tradenames and intangibles                   529,456
                         Cruise deposits                               26,548
                                                                     --------

                         Net assets disposed of                      $579,775
                                                                     ========

                                      F-17
================================================================================
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
  CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000 AND 1999
================================================================================


3.  DISCONTINUED OPERATIONS (CONTINUED)

In connection with the sale, the Company had agreed to pay an officer of the
Company 10% of the proceeds (excluding the amount paid for cruise deposits),
totaling $133,333 and transfer 10% of the purchaser's common stock, or 66,667
shares with a fair market value of $77,334, as a bonus and to repurchase 500,000
shares of the Company's common stock at $.06 per share. Additionally, the
Company agreed to transfer 100,000 shares of the purchaser's common stock with a
fair market value of $116,767 to a consultant as an advisory fee. In 2000, the
166,667 shares of the purchaser's stock were either transferred directly to the
appropriate party or sold and the proceeds distributed (See Note 5).


4.  RELATED PARTY TRANSACTIONS

During 2000, the Company loaned $150,000 to an officer of the Company. The loan
was repaid in January 2001. In addition, the Company overpaid its note payable
to IT by $6,900, which is recorded as a receivable at December 31, 2000.

During 2000 and 1999 the Company paid an officer of the Company consulting fees
totaling $200,000 and $190,000, respectively.

The Company subleased space in its corporate office to a shareholder during
1999, receiving rents of approximately $16,200.

The Company owes OM $130,000 at December 31, 2000 related to a prior year asset
sale.



                                      F-18
================================================================================
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
  CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000 AND 1999
================================================================================

5.  INVESTMENT SECURITIES

Investment securities, classified as available-for-sale, are were summarized as
follows at December 31, 2000:

                                                                   2000
                                                                   ----

         Marketable equity securities, at cost                   $116,007
         Unrealized losses                                        (69,005)
                                                                 --------

         Marketable equity securities, fair market value         $ 47,002
                                                                 ========

These securities were sold for a realized loss of approximately $86,000 in 2001.

The Company had marketable equity securities at December 31, 1999, with an
original cost of $194,101, which were restricted for distribution to an officer
and consultant in satisfaction of commissions on the sale of the cruise
operations. In 2000, the shares were either sold on behalf of these individuals
and the proceeds distributed or distributed to them directly.

In addition, the Company has marketable equity securities with a fair market
value of $35,250 which are pledged as collateral on a note payable (See Note 9).


6.  FURNITURE AND EQUIPMENT

Furniture and equipment include the following at December 31, 2000:

             Leasehold improvements                    $   1,071
             Furniture and equipment                      76,292
                                                       ---------

                                                          77,363

             Less accumulated depreciation               (67,624)
                                                       ---------

             Furniture and equipment - net             $   9,739
                                                       =========


7.  EXTRAORDINARY GAIN

Effective April 1, 2000 and December 1, 2000, the Company acquired a total of
8,015,462 shares of its common stock from individuals for $377,582, $200,000 in
cash and  approximately $177,500 in debt. Treasury stock was recorded at the
closing price of the Company's stock on the date of settlement. In addition, the
Company settled the following liabilities by issuing new debt of  approximately
$547,500.

Subordinated debentures                              $  495,900
Preferred stock dividends payable                       431,900
Accrued interest                                        153,100
                                                     ----------

                                                     $1,080,900
                                                     ==========

                                      F-19
===============================================================================
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
  CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000 AND 1999
================================================================================

7.  EXTRAORDINARY GAIN (CONTINUED)

The transaction resulted in an extraordinary gain on the settlement of debt of
approximately $533,400. The total treasury stock purchase and debt settlement
financed with notes was $725,000 (See Note 9).


8.  INCOME TAXES

The components of the provision for income taxes as shown on the accompanying
consolidated statements of operations are as follows:

<TABLE>
<CAPTION>
                                          Years Ended December 31,
                                          ------------------------
                                       2000                       1999
                                     ---------                 ---------
     <S>                             <C>                       <C>
     Current- Federal                $  19,491                 $       -
     Current-State                      33,000                    11,000
     Deferred                            5,000                   176,000
                                     ---------                 ---------

                                     $  57,491                 $ 187,000
                                     =========                 =========
</TABLE>

Components of the net deferred tax asset at December 31, 2000 are as follows:

       Deferred tax assets:

       Net operating loss carryforwards                       $ 903,000
       Other, net                                                83,000
       Unrealized loss on available-for-sale securities          31,000
                                                              ---------
       Total deferred tax assets                              1,017,000
       Less - valuation allowance                              (759,000)
                                                              ---------

                                                              $ 258,000
                                                              =========

At December 31, 2000, the Company had a net operating loss carryforward
available for Federal income tax purposes of approximately $3,000,000. Because
of tax rules relating to changes in corporate ownership, the utilization by the
Company of these benefit carryforwards in reducing its tax liability is
restricted to a cumulative annual utilization of approximately $330,000 plus
unexpired and unused limitations from prior years. The amounts of operating loss
carryforwards expire in varying amounts through 2014. Due to the uncertainty of
realization and the annual restriction discussed above, a deferred tax asset
valuation allowance has been provided.

                                      F-20
================================================================================
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
  CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000 AND 1999
================================================================================

8.  INCOME TAXES (CONTINUED)

The following is a reconciliation of the U. S. statutory tax rate to the
Company's effective rate for the years ended December 31, 2000 and 1999:

<TABLE>
<CAPTION>

                                                       2000       1999
                                                     --------    -------
        <S>                                          <C>         <C>
        Statutory rate                                 34.0%       34.0%
        Goodwill amortization                             -       (16.4)
        Forgiveness of accrued dividends
          payable                                     (32.7)          -
        Income from equity investment not
          taxed at Company's level                    (13.8)          -
        State income taxes                               .5          .7
        Other                                          20.7        (5.7)
                                                     ------      ------

        Company's effective rate                        8.7%       12.6%
                                                     ======      ======
</TABLE>

9.  NOTES PAYABLE

<TABLE>
<CAPTION>
                                                                                        December 31,
                                                                                            2000
                                                                                        ------------
<S>                                                                                      <C>
    Notes payable to certain stockholders, interest at 9%, payable
    in 2001. The notes are unsecured.                                                     $ 18,297

    Note payable to individuals, interest at 9%, payable in quarterly installments
    of $27,500, plus interest beginning April 1, 2001 until maturity on January 1,
    2006. The note is secured by the Company's stock in Ozdon.                             550,000

    Note payable to individuals (originally $175,000), interest at 9%, payable in
    quarterly installments of $15,000 plus interest until maturity on April 1, 2003.
    The note is secured by 75,000 shares of the Company's investment in
    available-for-sale securities. The note is in default as of March 8, 2001.             145,000
                                                                                         ---------
                                                                                           713,297
    Less: Current Portion                                                                  245,797
                                                                                         ---------
    Long-Term Portion                                                                     $467,500
                                                                                         =========
</TABLE>

The $550,000 note and the $145,000 note were issued in conjunction with the
purchase of treasury stock and debt settlement, as discussed in Note 7.


                                      F-21
================================================================================
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
  CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000 AND 1999
================================================================================


9.  NOTES PAYABLE (CONTINUED)

The amounts due in subsequent years are as follows:

<TABLE>
<CAPTION>
                   Year Ended                         Notes
                  December 31,                       Payable
                  ------------                     ----------
                  <S>                                <C>
                      2001                           $245,797
                      2002                            110,000
                      2003                            110,000
                      2004                            110,000
                      2005                            110,000
                      Thereafter                       27,500
                                                   ----------

                      Total                          $713,297
                                                   ==========
</TABLE>

10.  CONCENTRATIONS, COMMITMENTS AND CONTINGENCIES

License Renewal Process: The Louisiana gaming regulators (the "Regulators")
-----------------------
reviewed the ownership structure of the Company's video poker operations under
the Amendment (see Note 2) and expressed concerns whether such structure
satisfies the Louisiana residency requirements necessary to operate video poker
casinos. The Company was given until February, 1999 to restructure the ownership
of OM and RPLLC. The Amendments were agreed to in February 1999 and given to the
Regulators for review (also see Note 2). On September 28, 2000, the regulators
renewed the license of OM. On August 15, 2000 and on September 18, 2000,
respectively, RPLLC was granted an establishment license and a device owner's
license by the regulators.

The Regulators require the truck stop owner to maintain an "Establishment
License". The holder of the Establishment License is required to maintain
control over the truck stop's fuel operations. If any truck stop owners have
their Establishment License revoked, it would have a material adverse effect on
the Company's and the Operator's business operations and financial condition.

                                      F-22
================================================================================
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
  CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000 AND 1999
================================================================================

10.  CONCENTRATIONS, COMMITMENTS AND CONTINGENCIES (CONTINUED)

Louisiana Regulations: The franchise tax payable by the Company and/or Operator
---------------------
to the State of Louisiana in 2000 and 1999 equals 32.5% of net gaming device
revenue for truck stop casinos and 26% of net gaming device revenue for devices
placed in bars and restaurants.

The Louisiana legislature adopted minimum fuel sale requirements for qualified
truck stops effective July 1, 1994. The fuel sale requirements dictate the
number of video poker devices that may be operated at the truck stop, based on
average monthly sales. As of December 31, 2000, the Operator's remaining gaming
facilities meet the monthly fuel sales requirements to keep the maximum 50
machines allowed.

The Company and one of its stockholders have guaranteed debt of RPLLC. The
balance outstanding on the notes at December 31, 2000 was approximately
$1,950,000.

Cash: The Company maintains cash balances with financial institutions which
----
periodically exceeds FDIC insured limits.

Litigation: During 2000, the Company became involved in litigation as described
----------
in Note 2. The Company has entered into a preliminary settlement agreement
related to the lawsuits. Should the Company be unable to finalize the
preliminary settlement and the purported buyout of the Company's interest in OM
and RPLLC be upheld, it could materially affect future operating results (See
Note 2).

In the opinion of management, there are no other contingent claims or litigation
against the Company which would  materially  affect its  consolidated  financial
position.


11.  STOCKHOLDERS' EQUITY

Preferred Stock
---------------

The Company has authorized 10,000,000 shares of preferred stock with attributes
as determined by the Board of Directors.

The Board of Directors designated a series of preferred stock, Preferred Stock
Series "B". The maximum shares under the series is 8,000,000. The Preferred
Stock Series B has a par value of $.01, accrues no dividends and converts on a 1
to 1 basis into common stock.

The Company has also authorized 1,600,000 shares of Class A Preferred Stock. The
Class A Preferred Stock has a par value of $3.00, bears a 10% annual cumulative
dividend, payable monthly and is convertible into common stock on a 6.4 to 1
basis.

The Class A Preferred Stock is redeemable at the option of the Company and
carries a liquidation preference of $3.00 per share.


                                      F-23
================================================================================

<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
  CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000 AND 1999
================================================================================
11.  STOCKHOLDERS' EQUITY (CONTINUED)

During 1999, in conjunction with the restructure of the Company's gaming
operations (Note 2) the Company redeemed 8,167,632 shares of common stock at
$.01 per share.

During 1999, the Company redeemed 500,000 shares of common stock from an officer
of Galaxsea and IT Cruise for $30,000 (Note 3).

During 2000, the Company redeemed 8,015,462 shares of common stock from
individuals for approximately $377,500 (Note 7).


Restrictions on Ownership
-------------------------

The Company's Certificate of Incorporation restricts ownership of the common and
preferred stock of the Company in order to comply with applicable gaming
statutes. Persons who are not suitable to be stockholders of the Company under
such statutes may not own common or preferred stock of the Company. Further, any
stockholder may be required, at such stockholder's expense, to make filings with
applicable gaming authorities to determine suitability, and if found not
suitable will be required to dispose of such stockholder's stock and will not be
entitled to vote or receive distributions pending such disposal.

Stock Options
-------------

During 1996, the Company granted an officer and one of its directors options to
purchase 500,000 shares each of common stock for $.30 per share. The shares were
fully vested as of the date of the grant and expire five years from the date of
the grant. No options to purchase the Company's stock were issued during 1999.

In January 2000, the Company granted two non-employees options, whereby each may
acquire 1,000,000 shares of common stock, at an exercise price of $.03125 per
share. The shares are fully vested as of the date of grant and expire five years
from the date of grant. The Company recognized compensation expense at the date
of grant of $22,255 related to services provided, based on the fair value of the
options on the measurement date, which is the date a commitment for performance
is reached or performance is complete.


                                      F-24
================================================================================
<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
  CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000 AND 1999
================================================================================

11.  STOCKHOLDERS' EQUITY (CONTINUED)

The following is a table of options granted:

<TABLE>
<CAPTION>
                                                                              Weighted
                                               Shares         Exercise         Average
                                                Under         Price Per        Exercise
                                               Option           Share           Price
                                            -----------    ------------     ------------
       <S>                                  <C>            <C>              <C>
       Balance, December 31, 1998             1,000,000    $        .30     $        .30

             Granted                                  -               -                -
                                            -----------    ------------     ------------

       Balance, December 31, 1999             1,000,000    $        .30     $        .30

             Granted                          2,000,000             .03              .03
                                            -----------    ------------     ------------

       Balance, December 31, 2000             3,000,000    $   .03 -.30     $        .12
                                            ===========    ============     ============
</TABLE>


The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" for
employee stock options. There is no proforma effect in 2000 or 1999 as the
Company granted no options to employees during those years.


12.  CONTRACTS

The Operator currently has three gaming and/or truck stop establishments as well
as video poker route operations in Louisiana. Through March 31, 1999, the
Company consolidated the operations of the Operator (see Note 2). Therefore, the
Company, through its consolidated subsidiary, was the gaming operator until
March 31, 1999 when it sold a portion of its interest in the gaming operations.
The gaming contracts assign various percentages of the gaming revenues of these
establishments to various property owners, lessors or lenders. When the Operator
enters into a contract with an establishment, it acquires the right to place
gaming devices in the establishment's truck stop facilities or bars. These
agreements provide the establishments a percentage of the net gaming income,
reflected by the Company or Operator as rent under gaming leases. In addition,
the Operator has a revenue sharing agreement on a single location (Gold Rush)
which operates similar to the other gaming contracts, but Ozdon owns the truck
stop facility.


                                      F-25
================================================================================

<PAGE>

NORTH AMERICAN GAMING AND ENTERTAINMENT
  CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000 AND 1999
================================================================================

12.  CONTRACTS (CONTINUED)

Rent expense of the Company under gaming leases through March 31, 1999 was as
follows:

<TABLE>
<CAPTION>
                               January 1, 1999 to
                                 March 31, 1999
                               ------------------
<S>                            <C>
Kings Lucky Lady                    $  91,000
The Longhorn Club                     335,000
Pelican Palace                        242,000
Gold Rush Truck Stop                   53,000
Diamond Jubilee                       199,000
RPLLC                                  21,000
                                    ---------

                                    $ 941,000
                                    =========
</TABLE>

13.  EMPLOYEE BENEFIT PLAN

The Company has a 401(k) defined contribution plan. Participation is voluntary
and employees are eligible to participate upon attaining age 21 and completing
one year of employment with the Company. The Company provides no matching
contribution but may make a discretionary contribution which vests over six
years. The Company made no discretionary contributions for the years ended
December 31, 2000 and 1999.


                                      F-26
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