SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-QSB

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

                   For the quarterly period ended May 31, 2003

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

                  Commission file number 33-85044-d

                              NACO Industries, Inc.
--------------------------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)

        Utah                                                 48-0836971
------------------------                            ----------------------------
(State of Incorporation)                            (IRS Employer Identification

                     395 West 1400 North, Logan, Utah 84341
                     --------------------------------------
                    (Address of principal executive offices)


                     Issuer's telephone number 435-753-8020
--------------------------------------------------------------------------------


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

As of May 31, 2003, the issuer had 1,974,455  shares of Common Stock and 165,412
shares of Preferred Stock outstanding.


     Transitional Small Business Disclosure Format Yes [  ] No  [X]

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





<PAGE>







PART 1 - FINANCIAL INFORMATION

ITEM 1. CONDENSED FINANCIAL STATEMENTS

NACO INDUSTRIES, INC.
BALANCE SHEETS

                                                      May      November
                                                      31,         30,
ASSETS                                               2003        2002
------                                           (Unaudited)   (Audited)
Current assets:
  Cash                                           $  127,293   $  234,964
  Accounts receivable, net of allowances
    Of $51,525 / $37,710                          1,352,205      699,482
  Current portion of related party receivables       30,000       30,000
  Inventories                                       729,396      722,753
  Other current assets                               16,789       64,188
  Deferred income tax asset                         105,000       89,000
                                                 ----------   ----------
       Total current assets                       2,360,683    1,840,387

Property and equipment, net                         870,649      807,714
Related party receivables                           260,182      275,182
Other assets, net                                   199,337      193,306
                                                 ----------   ----------
Total assets                                     $3,690,851   $3,116,589
                                                 ==========   ==========





                                       2
<PAGE>
<TABLE>
<CAPTION>
NACO INDUSTRIES, INC.
BALANCE SHEETS

                                                                              May        November
                                                                              31,           30,
                                                                          ------------ -----------
LIABILITIES:                                                                  2003          2002
------------                                                              ------------ -----------
                                                                          (Unaudited)   (Audited)
<S>                                                                       <C>          <C>
Current liabilities:
  Accounts payable                                                        $  411,719   $  209,886
  Accrued expenses                                                           259,783      364,622
  Income Taxes Payable                                                       160,360            0
  Current portion of long-term obligations                                    84,808       58,525
                                                                          ----------   ----------
       Total current liabilities                                             916,670      633,033
                                                                          ----------   ----------

Long-term liabilities:
  Long-term obligations, less current portion                                923,509      876,007
  Deferred income tax liability                                               67,000       67,000
                                                                          ----------   ----------
       Total long-term liabilities                                           990,509      943,007
                                                                          ----------   ----------
       Total liabilities                                                   1,907,179    1,576,040
                                                                          ----------   ----------

Stockholders' equity:
   Preferred Stock, 7% Cumulative, convertible $3.00 par value, 330,000      496,236      496,236
shares authorized and 165,412 shares issued and outstanding. (Aggregate
liquidation preference $1,235,342 and $1,270,364 respectively)
  Common stock, $.01 par value, 10,000,000 shares authorized; 1,974,455       19,745       19,745
shares issued and outstanding
  Additional paid-in capital                                               1,017,562    1,017,562
  Retained Earnings                                                          250,129        7,006
                                                                          ----------   ----------
       Total stockholders' equity                                          1,783,672    1,540,549
                                                                          ----------   ----------

       Total liabilities and
         Stockholders' equity                                             $3,690,851   $3,116,589
                                                                          ==========   ==========
</TABLE>

See Notes to Financial Statements


                                       3
<PAGE>

<TABLE>
<CAPTION>

NACO INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
                                                     Three months ended              Six months ended
                                                   May 31,         May 31,       May 31,        May 31,
                                                ---------------------------------------------------------
                                                    2003            2002          2003           2002
                                                ---------------------------------------------------------
<S>                                             <C>              <C>            <C>            <C>
Sales, net                                      $ 2,767,530      2,512,046      4,621,352      4,336,991

Cost of goods sold                                1,537,332      1,203,864      2,673,067      2,317,852
                                                ---------------------------------------------------------
       Gross profit                               1,230,198      1,308,182      1,948,285      2,019,139

Operating expenses:
  Selling expenses                                  515,596        565,989        903,989        964,115
  General and administrative expenses               246,359        235,742        489,343        488,372
                                                ---------------------------------------------------------
       Total operating expenses                     761,955        801,731      1,393,332      1,452,487
                                                ---------------------------------------------------------

       Income from operations                       468,243        506,451        554,953        566,652

Other income (expense):
  Interest income                                     1,137            285          1,726          1,018
  Interest expense                                  (27,370)       (31,858)       (53,082)       (65,641)
                                                ---------------------------------------------------------
       Total other income (expense)                 (26,233)       (31,573)       (51,356)       (64,623)
                                                ---------------------------------------------------------

Income before income taxes                      $   442,010        474,878        503,597        502,029

Income tax expense                                  168,000        177,650        191,000        188,450
                                                ---------------------------------------------------------

       Net income                               $   274,010        297,228        312,597        313,579
                                                ========================================================

Adjustment for preferred dividends in arrears             0              0        (34,451)       (34,451)

                                                ---------------------------------------------------------
Adjusted net income (loss) to common            $   274,010        297,228        278,146        279,128
stockholders
                                                ========================================================

Earnings (loss) per common share:
                                                ---------------------------------------------------------
 Basic:                                         $       .14            .15            .14            .14
                                                ========================================================

                                                ---------------------------------------------------------
 Diluted:                                       $       .14            .15            .14            .14
                                                ========================================================
Weighted average number of common
  Shares outstanding:
    Basic                                         1,974,000      1,950,000      1,974,000      1,950,000
                                                ========================================================
    Diluted                                       1,974,000      1,950,000      1,974,000      1,950,000
                                                ========================================================
</TABLE>

           See Notes to Financial Statements



                                       4
<PAGE>
<TABLE>
<CAPTION>

NACO INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
                                                             Six months ended
                                                          ----------------------
                                                           May 31,      May 31
                                                          ---------    ---------
                                                            2003         2002
<S>                                                       <C>          <C>
Cash flows from operating activities
  Net income                                              $ 312,597    $ 313,579
  Adjustments to reconcile net income to
   net cash provided by (used in) operating activities:
     Depreciation                                            86,934       97,466
     Amortization                                             4,373        4,207
     Deferred income taxes                                  (16,000)     188,450
   (Increase) decrease in:
     Accounts receivable, net                              (652,723)    (320,302)
     Receivable from related parties                         15,000        3,528
     Inventory                                               (6,643)     (60,962)
     Other                                                    3,424       25,374
   Increase (decrease) in:
     Accounts payable                                       201,833       67,040
     Taxes Payable                                          160,360            0
     Accrued expenses                                      (104,839)     (81,905)
                                                          ---------    ---------

 Net cash provided by operating activities                    4,316      236,475
                                                          ---------    ---------

Cash flows from investing activities
  Purchase of  property and equipment                       (42,026)     (63,963)
  Other Assets                                              (10,404)      (1,723)

                                                          ---------    ---------
        Net cash used in investing activities               (52,430)     (65,686)
                                                          ---------    ---------

Cash flows from financing activities
  Net change in line of credit                                    0     (131,375)
  Cash received for long-term debt                           43,975            0
  Payments on long-term debt                                (34,059)     (28,648)
  Dividend Payment                                          (69,473)     (69,473)
                                                          ---------    ---------

        Net cash used in financing activities               (59,557)    (229,496)
                                                          ---------    ---------

Decrease in cash                                           (107,671)     (58,707)

        Cash, beginning of period                           234,964      137,355
                                                          ---------    ---------

        Cash, end of period                               $ 127,293    $  78,648
                                                          =========    =========

See Notes to Financial Statements
Supplemental disclosures:
    Income taxes paid                                     $  73,159    $     900
    Interest Paid                                         $  49,054    $  65,641
</TABLE>



                                       5
<PAGE>



NACO INDUSTRIES, INC.
Notes to Financial Statements (Unaudited)
May 31, 2003



NOTE A - BASIS OF PRESENTATION
         In the opinion of management of NACO Industries,  Inc. (the "Company"),
all  adjustments  (consisting  only of  normal  recurring  accruals)  considered
necessary for a fair presentation have been included.  Operating results for the
six-month  period  ended  May 31,  2003 are not  necessarily  indicative  of the
results that may be expected for the fiscal year ending November 30, 2003. These
statements  should be read in  conjunction  with the  financial  statements  and
related notes in the  Company's  Annual Report on Form 10-KSB for the year ended
November 30, 2002.


NOTE B - DIVIDENDS
         Dividends on the  Company's  preferred  stock are  cumulative  at 7%. A
dividend of $.42 per share,  or $69,473 in aggregate  amount was declared by the
Company's  board of directors  with a record date of April 1, 2003 and a payment
date of May 16, 2003. At May 31, 2003,  dividends in the amount of $242,870 were
in arrears.

NOTE C - RELATED PARTY OPERATING LEASES

The Company leases its Logan, Utah  manufacturing and sales facility and certain
equipment from P.V.C.,  Inc.  (PVC),  a corporation  owned 100% by the Company's
majority  shareholder,  Verne Bray.  The lease  agreement  requires rents in the
amount of  approximately  $24,737  per month.  The Company  has  guaranteed  the
mortgage on the  facilities it leases from PVC. At May 31, 2003 and November 30,
2002, the outstanding mortgage balance was approximately  $661,000 and $700,000,
respectively.  At May 31,  2003,  the  Company had a lease  deposit  with PVC of
$23,000, which is included in "Other Assets" on the balance sheet.


In  addition,  Mr.  Bray has  signed an  indemnification  agreement  to hold the
Company  harmless  for  funds  paid by the  Company  on behalf  of  Rimshot  LLC
("Rimshot"),  an inactive limited  liability company owned by a son of Mr. Bray.
The Board of Directors approved the Company's  execution of the  indemnification
agreement.   The  agreement  covers  costs  advanced  to  Rimshot  for  start-up
operations and principal and interest  payments made on leased machinery used by
Rimshot.  The agreement calls for monthly payments of $2,500, which commenced on
October 1, 2000 and are scheduled to continue until the balance is paid in full.
Pursuant to the  indemnification  agreement,  Mr. Bray conveyed to the Company a
security interest in all PVC lease receivables from the Company. The Company has
also  signed a security  agreement  with PVC that  allows the  Company to offset
payments due to PVC in the event of default on the indemnification agreement.



At May 31, 2003 and November 30, 2002,  Verne Bray and related entities owed the
Company $290,182 and $305,182, respectively.



NOTE D - SUPPLEMENTAL CASH FLOW INFORMATION

During the six months  ended May 31,  2003,  the Company  acquired  property and
equipment  with an  estimated  value of $107,842 in exchange  for an increase in
debt of $107,842.





                                       6
<PAGE>


Item 2 - Management's Discussion and Analysis of Financial Condition and Results
         of Operations


Introduction
NACO Industries, Inc. ("NACO" or the "Company") manufactures and sells polyvinyl
chloride ("PVC")  products.  The Company's  primary line of business consists of
manufacturing PVC pipe fittings and valves, which are sold throughout the United
States through wholesale  distributors to irrigation,  industrial,  construction
and utility industries.  The Company  manufactures and sells fabricated fittings
(4"  through  30" in  diameter),  as well as molded  fittings  (4" though 10" in
diameter).  Pipefittings produced by the Company include tees, reducers, elbows,
couplers, end caps, and bolted repair couplers. NACO also manufactures and sells
PVC valves (4" through 12" in diameter).


Results of Operations
     The following  discussion  relates to the three and six month periods ended
May  31,  2003  and  May  31,  2002,  respectively.   For  comparison  purposes,
percentages  of  sales  will be  used  rather  than  dollars.  In the  following
discussion, the three months ended May 31, 2003 and May 31, 2002 are referred to
as 2Q03 and 2Q02,  respectively.  The six months  ended May 31, 2003 and May 31,
2002 are referred to as 6M03 and 6M02, respectively.  Readers are cautioned that
results of  operations  for the three and six months  ended May 31, 2003 are not
necessarily  indicative  of the results that may be expected for the fiscal year
ending November 30, 2003.

     Overview.  The Company  obtained a net profit  before taxes of $442,010 for
2Q03,  compared to a net profit  before taxes of $474,878 for 2Q02.  The Company
obtained a net profit  before  taxes of  $503,597  for 6M03,  compared  to a net
profit before taxes of $502,029 for 6M02.  Gross margin as a percentage of sales
for  2Q03  and 2Q02  was  44.5%  and  52.0%,  respectively.  Gross  margin  as a
percentage  of sales for 6M03 and 6M02 was 42.2% and  46.6%,  respectively.  The
decrease in the Company's  net profit  before taxes and gross margin  percentage
was mainly due to several factors as explained below.

     Net Sales: Net sales for 2Q03 increased by 10.2% to $2,767,530, compared to
net sales of $2,512,046 for 2Q02.  Management  believes that the increase in net
sales from 2Q02 to 2Q03 was due primarily to an increase in sales in the utility
market.  Net sales in the  utility  market  increased  83.2%  from 2Q02 to 2Q03.
Management  believes the increase in net sales in the utility  market was mainly
due to increased sales to one large Original  Equipment  Manufacturer,  ("OEM"),
customer that was awarded  several  domestic and foreign  construction  projects
during the  quarter.  Net sales in the  agricultural  market  decreased  7.6% or
$153,632,  from 2Q02 to 2Q03.  Agricultural and utility sales as a percentage of
total  sales  were  67.7%  and  32.3%  for  2Q03,  and 80.6% and 19.4% for 2Q02,
respectively.  Net sales for 6M03 increased by 6.6% to  $4,621,352,  compared to
net sales of $4,336,991 for 6M02.  Management  believes that the increase in net
sales from 6M02 to 6M03 was also due  primarily  to the increase in sales in the
utility  market.  Net sales in the utility market  increased  48.2% from 6M02 to
6M03,  primarily as a result of the increased sales to one large OEM customer as
described above. Net sales in the agricultural market decreased 4.4% or $151,656
from 6M02 to 6M03.  Management  believes that the decrease in  agricultural  net
sales was mainly due to two different factors.  1) The continuing drought in the
western  United  States  with its  resulting  decrease in farm income and 2) The
delay in  distribution  of the farm  aid  package  approved  by  Congress  which
management feels has caused farmers to delay decisions of upgrading or repairing
irrigation  systems.  Agricultural  and utility  sales as a percentage  of total
sales were 71.1% and 28.9% for 6M03, and 79.2% and 20.8% for 6M02, respectively.

     Gross  Margin:  Gross margin as a percentage of sales for 2Q03 and 2Q02 was
44.5% and 52.0%, respectively. Gross margin for 2Q03 decreased from 2Q02, mainly
due to an increase in raw material  and labor costs.  The cost of materials as a
percentage  of net sales  was  34.0% and 25.8% for 2Q03 and 2Q02,  respectively.
Material  costs  increased  $292,431  or 45.1%  from  2Q02 to  2Q03.  Management
believes  the 45.1%  increase  in raw  material  costs from 2Q02 to 2Q03 was due
primarily to two factors.  First,  pipe prices have increased  approximately 25%
from 2Q02 to 2Q03.  The  increase in pipe  prices  accounted  for  approximately
$112,000 of the increase in raw  material  costs for 2Q02 to 2Q03.  Second,  the
increase  in net sales  from  2Q02 to 2Q03 was  accompanied  by a  corresponding
increase in raw material cost.  Management feels another  contributing factor to
the  decrease in the gross margin as a percent of sales from 2Q02 to 2Q03 is the
lower  margins  on  utility  sales,  especially  on the  sales to the  large OEM
customer  described  above  under the  heading  "Net  Sales".  Labor and related
expenses  increased  $21,961,  or  6.0%,  from  2Q02 to  2Q03,  mainly  due to a
temporary  increase in the size of the Company's  production labor force to meet
delivery on the large OEC  customer's  orders.  Gross margin as a percentage  of
sales for 6M03 and 6M02 was 42.2% and 46.6%, respectively. Gross margin for 6M03
decreased from 6M02,  mainly due to the increase in raw material costs. The cost
of materials as a percentage of net sales was 33.7% and 27.0% for 6M03 and 6M02,
respectively.  Material  costs  increased  $388,436  or 33.2% from 6M02 to 6M03.
Management  believes the 33.2%  increase in raw material costs from 6M02 to 6M03
was due  primarily to the same two factors  described  above.  Management  feels
another  contributing factor to the decrease in the gross margin as a percent of
sales from 6M02 to 6M03 is the lower margins on utility sales, especially on the
sales to the large OEM customer  described  above under the heading "Net Sales".
Labor and related expenses decreased $33,990, or 4.5%, from 6M02 to 6M03, mainly
due to a decrease in the size of the Company's production labor force.

                                       7
<PAGE>

     Selling:  Selling  expenses  were 18.6% of net sales for 2Q03,  compared to
22.5% for 2Q02.  The decrease in selling  expenses as a percentage  of sales was
due to several principal factors. In actual dollars,  selling expenses decreased
$50,394,  or 8.9%, from 2Q02 to 2Q03.  Advertising  expense  decreased 70.7%, or
$21,784,  from  2Q02 to 2Q03,  mainly  because  the  Company  published  a large
quantity of new product  catalogs  during  2Q02,  and did not incur a comparable
expense during 2Q03. Guarantees and warranties decreased 93.5%, or $45,713, from
2Q02 to 2Q03 and decreased as a percentage of net sales from 2.0% in 2Q02 to .1%
in 2Q03, mainly due to the expense  associated with a warranty claim asserted in
2Q02 that has not been repeated in 2Q03. Salaries and related expenses increased
$17,342, or 9.0% from 2Q02 to 2Q03, mainly due to the addition of a new salesman
to the sales force.  Selling expenses were 19.6% of net sales for 6M03, compared
to 22.2% for 6M02. The decrease in selling expenses as a percentage of sales was
due to several principal factors. In actual dollars,  selling expenses decreased
$60,126,  or 6.2%, from 6M02 to 6M03.  Advertising  expense  decreased 49.7%, or
$18,624,  from 6M02 to 6M03, mainly due to the 2Q02 catalog  publication expense
described  above that was not  replicated  in 2Q03.  Guarantees  and  warranties
decreased 71.4%, or $42,213,  from 6M02 to 6M03 and decreased as a percentage of
net sales  from 1.4% in 6M02 to .4% in 2Q03,  mainly due to the  warranty  claim
asserted in 6M02 that was not repeated in 6M03.  Salaries  and related  expenses
increased $20,224,  or 5.6% from 6M02 to MQ03, mainly due to the addition of the
new salesman to the sales force.

     General and administrative: General and administrative expenses represented
8.9% of net sales for 2Q03,  compared  to 9.4% for 2Q02.  Overall,  general  and
administrative  expenses  remained  relatively even at $246,359 and $235,742 for
2Q03 and 2Q02, respectively. General and administrative expenses as a percentage
of net sales were 10.6% for 6M03, compared to 11.3% for 6M02.  Overall,  general
and  administrative  expenses remained  relatively even at $489,343 and $486,832
for 6M03 and 6M02, respectively.

     Other: Other expenses/revenues were 1.0% of net sales for 2Q03, compared to
1.3% for 2Q02,  mainly  due to  decreased  interest  expense.  Interest  expense
decreased from 1.3% of net sales for 2Q02 to .9% of net sales for 2Q03. Interest
expense decreased $5,087 from 2Q02 to 2Q03, mainly due to improved cash flow and
lower borrowings during the quarter.  Other  expenses/revenues  were 1.1% of net
sales for 6M03, compared to 1.5% for 6M02, also mainly due to decreased interest
expense.  Interest expense  decreased from 1.5% of net sales for 6M02 to 1.1% of
net sales for 6M03. Interest expense decreased $11,181 from 6M02 to 6M03, mainly
due to improved cash flow and lower borrowings during the period.  The Company's
effective  interest rates (interest  expense divided by the average debt balance
for the applicable period) for 6M03 and 6M02 were 9.90% and 9.94%, respectively.


Liquidity and Capital Resources
     The Company's  principal  sources of liquidity have  historically been cash
from  operations,  credit  facilities  and equity  financing.  Cash  provided by
operating  activities was $4,316 in 6M03.  Cash as of May 31, 2003 was $127,293,
down $107,671 from November 30, 2002. The Company's  working  capital  increased
$236,659 from November 30, 2002 to May 31, 2003, due primarily to an increase in
current assets.  The increase in current assets was mainly due to an increase in
accounts  receivable.  The  increase  in accounts  receivable  was mainly due to
increased  sales  during  2Q03  which  is  the  Company's  busy  season,   which
traditionally  runs from March  through June each year.  The increase in current
assets was financed principally by cash from operations.

     At May 31, 2003 and  November  30,  2002,  the  outstanding  balance of the
Company's  revolving  line of credit was $0. On October  1,  2001,  the  Company
entered into a line of credit with Zions Bank. The amounts  available  under the
facility are based on a percentage of accounts  receivable and  inventories.  On
April 2, 2003 the  facility  was renewed for a  twenty-four  month period with a
maturity  date of March 31, 2005.  The interest rate on the facility is variable
and is equal to 1.75 percentage  points over the prime rate. Prime rate means an
index which is determined  daily by the published  commercial loan variable rate
index held by any two of the following  banks:  J.P.  Morgan Chase & Co.,  Wells
Fargo Bank N.A. and Bank of America N.A.

     On May 31, 2003, the Company was in compliance with all loan covenants with
Zions Bank.  The maximum line is $1,200,000,  of which,  based on the "Borrowing
Base  Certificate"  prepared by the Company,  there was $1,200,000  available to
borrow as of May 31, 2003.

     Also, the Company has a note with WebBank Corporation.  The note is secured
by land,  buildings and equipment owned by the Company.  The note has a variable
interest  rate equal to the prime  interest  rate as reported by The Wall Street
Journal,  plus one and one-half percent (1.5%) provided  however,  that the rate
shall never exceed  14.75% nor be less than 9.75%.  The rate on May 31, 2003 was
9.75%.  The term of the note is 15 years from the date of closing  (April  1999)
and the note requires  monthly  payments.  On May 31, 2003, the monthly  payment
required was $11,972.  On May 31, 2003, the outstanding  balance of the note was
$898,903 and the Company was in compliance with all loan covenants with WebBank.
This note is subordinated to the Zions Bank line of credit.

     Management  believes  that its capital  resources  on hand at May 31, 2003,
revenues from sales and bank resources will be sufficient to satisfy its working
capital  requirements  for the  foreseeable  future.  There can be no assurance,
however,  that additional debt or equity  financing may not be required or that,
if such  financing is required,  it will be available on terms  favorable to the


                                       8
<PAGE>

Company,  if at all. The Company's  inability to secure additional  financing or
raise  additional  capital  would likely have a material  adverse  effect on the
Company's operations,  financial condition,  and its ability to continue to grow
and expand its operations.


Critical Accounting Policies

NACO's  significant  accounting  policies  are  described  in  Note 1 to  NACO's
Consolidated  Financial  Statements for the year ended November 30, 2002.  These
financial  statements  were prepared in accordance  with  accounting  principles
generally accepted in the United States and are included in NACO's Annual Report
on Form 10-KSB which has been filed with the Securities and Exchange Commission.
Included within these policies are the Company's "critical accounting policies."
Critical  accounting  policies are those policies that are most important to the
preparation  of the  Company's  consolidated  financial  statements  and require
management's  subjective and complex  judgment due to the need to make estimates
about  the  effect of  matters  that are  inherently  uncertain.  The  Company's
critical   accounting  policies  relate  to  allowance  for  doubtful  accounts,
inventory  valuation,  product  warranties and  allowances  for deferred  income
taxes.  The application of these  accounting  policies  involves the exercise of
judgment and the use of assumptions as to future uncertainties and, as a result,
actual results could differ materially from these estimates.

     Allowance for Doubtful  Accounts:  The Company has established an allowance
for estimated bad debts by applying a historical  percentage of bad debts to net
sales each month. In addition, all accounts over 90 days are evaluated as to the
collectibility  of each  account  and a  specific  reserve  is  established  for
specific  customer  accounts  identified  as  doubtful or  non-collectible.  The
Company's customer base is such that changes in either the customer's  financial
position  or the  economy as a whole could  cause  actual  write-offs  to differ
materially from the estimated  reserve.  The allowance for doubtful  accounts at
May 31, 2003 was  $51,525,  compared to $37,710 at fiscal year end  November 30,
2002.

     Inventories:  The  Company  evaluates  inventory  on  an  annual  basis  to
determine obsolete and slow moving inventory.  All inventory that has not moved,
been used in manufacturing or sold in the past year is reserved against. Also an
additional reserve is made for slow moving inventory.  Based on usage during the
past year, a reserve is  calculated by taking the  prevailing  interest rate for
money  borrowed  multiplied  by the value of  inventory in excess of a six-month
supply.  Inventory in excess of a  three-year  supply is reserved at 100% of the
value of that  excess  inventory.  The  reserve  for  obsolete  and slow  moving
inventories  at May 31,  2003 was $50,000  compared  to $60,000 at November  30,
2002.

     The Company takes a complete physical  inventory once a year and a physical
inventory of the top 80% of the dollars in inventory every month.  This helps to
offset any  inventory  adjustments  at year-end.  Any year-end  adjustments  are
reflected  during the fourth  quarter after the year-end  physical  inventory is
completed. Since only 80% of the dollars in inventory are counted each quarter a
"quantity reserve" is made each quarter for the parts not counted.  The quantity
reserve at May 31, 2003 was $10,000 compared to $0 at November 30, 2002.

     Product Warranties:  The Company's current liabilities  included an accrued
warranty  account for anticipated  product warranty claims based on a historical
percentage of sales plus any specific claims that have been  identified.  Actual
claims could be materially  different than the historical  estimates made by the
Company. The accrual for warranty claims at May 31, 2003 was $95,749 compared to
$83,274 at November 30, 2002.

     Deferred Income Tax Valuation  Allowances:  The Company's current assets at
May 31, 2003 include an entry for deferred taxes in the amount of $105,000.  The
Company evaluates the realizability of its net deferred tax asset on a quarterly
basis and a valuation allowance is provided.  In the opinion of management,  the
total asset value at May 31, 2003 is  realizable,  therefore  no  allowance  was
provided.  However, the Company's operating results are subject to certain risks
that could adversely affect the Company's  operating  results and its ability to
operate profitably.  The Company's operating results could be adversely affected
by increased competition in the markets in which the Company's products compete,
manufacturing delays and inefficiencies  associated with expanding the Company's
manufacturing  capacity,  adverse weather conditions,  increases in labor or raw
materials expenses,  changes in economic conditions,  unanticipated  expenses or
events and other factors that could materially change the need for an allowance.

Factors Affecting Future Results
     Statements  contained in this Quarterly  Report on Form 10-QSB that are not
purely historical are "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. All forward-looking statements involve various
risks and  uncertainties.  Forward-looking  statements  contained in this Report
include  statements  regarding the Company's  plans,  market  opportunities  and
acceptance,  expectations,  goals, revenues, financial performance,  strategies,
mission and  intentions  for the future.  Such  forward-looking  statements  are
included under. "Management's Discussion and Analysis of Financial Condition and
Results of Operations"  and encompass  NACO's  beliefs,  expectations,  hopes or
intentions  regarding  future  events.  Words  such  as  "expects,"  "believes,"
"anticipates," "should," and "likely" also identify forward-looking  statements.
All  forward-looking  statements included in this Report are made as of the date
hereof,  based on information  available to the Company as of such date, and the


                                       9
<PAGE>

Company  assumes no obligation to update any  forward-looking  statement.  It is
important to note that such statements may not prove to be accurate and that the
Company's  actual results and future events could differ  materially  from those
anticipated in such statements.  All subsequent written and oral forward-looking
statements  attributable  to the  Company  or  persons  acting on its behalf are
expressly qualified in their entirety by this section and other factors included
elsewhere in this Report.


Item 3 - Controls and Procedures

         Under  the  supervision  and with the  participation  of the  Company's
management,  including the Company's  principal  executive officer and principal
financial  officer,  the  Company  conducted  an  evaluation  of its  disclosure
controls and procedures,  as defined under Rule 13a-14(c)  promulgated under the
Exchange  Act within 90 days of the filing  date of this  Report.  Based on this
evaluation,  the Company's principal executive officer and principal  accounting
officer  concluded  that the Company's  disclosure  controls and  procedures are
effective in alerting them on a timely basis to material information relating to
the Company required to be included in the Company's  reports filed or submitted
under the Exchange Act.

         There have been no significant  changes  (including  corrective actions
with regard to significant deficiencies or material weaknesses) in the Company's
internal  controls or in other  factors  that could  significantly  affect these
controls  subsequent to the date of the  evaluation  referenced in the preceding
paragraph.





                                       10
<PAGE>



PART II - OTHER INFORMATION
Item  3 - Defaults  Upon  Senior  Securities(b)  During  the  fiscal  year ended
      November 30, 2002, the Company paid $69,473 in dividends and in April 2003
      the Company paid $69,473 on its Series 1 Class A 7% Cumulative Convertible
      Preferred Stock (the "Preferred Stock").  During the prior two years ended
      November  30, 2001 and 2000 no dividends  were paid.  As of July 14, 2003,
      the total  dividend in arrears  with  respect to the  Preferred  Stock was
      $242,870.

Item 4 - Submission of Matters to a Vote of Security Holders

         None

Item 6 - Exhibits and Reports on Form 8-K


      (a)         Exhibit  99.1  Certification  by Verne E. Bray  pursuant to 18
                  U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002

                  Exhibit 99.2  Certification by Jeffrey J. Kirby pursuant to 18
                  U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002


     (b) Reports on form 8-K. None








                                       11
<PAGE>



SIGNATURES

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

Naco Industries, Inc.
Registrant


By      /s/ VERNE E. BRAY                                   July 14, 2003
   -----------------------------------------                ---------------
        Verne E. Bray                                       Date
        CEO, Secretary, Chairman
        (Principal Executive Officer)


By      /s/ W. MICHAEL HOPKINS                              July 14, 2003
   -----------------------------------------                ---------------
        W. Michael Hopkins President                        Date


By      /s/ JEFFREY J. KIRBY                                July 14, 2003
   -----------------------------------------                ---------------
        Jeffrey J. Kirby                                    Date
        Executive Vice President/
        Chief Financial Officer/Treasurer
        (Principal Financial and Accounting Officer)



                                       12
<PAGE>


CERTIFICATIONS *
--------------
I, Verne E. Bray, certify that:

         1. I have  reviewed  this  quarterly  report  on  Form  10-QSB  of NACO
Industries, Inc.;

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

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

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

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

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

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

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

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

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

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

Date: July 14, 2003

                                     /s/ Verne E. Bray
                                     -------------------------------------------
                                         Verne E. Bray
                                         Chief Executive Officer and Secretary




                                       13
<PAGE>





I, Jeffrey J. Kirby, certify that:

         1. I have  reviewed  this  quarterly  report  on  Form  10-QSB  of NACO
Industries, Inc.;

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

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

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

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

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

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

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


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

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

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

Date: July 14, 2003

                                              /s/ Jeffrey J. Kirby
                                              ----------------------------
                                              Jeffrey J. Kirby
                                              Chief Financial Officer

                                       14