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 February 28,2001

 [ ] 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)(Zip Code)

                   Registrant'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 February 28, 2001, the Registrant had 1,926,330 shares of Common Stock and
165,412 shares of Preferred Stock outstanding.


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



                                       1
<PAGE>

PART 1 - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

                                                          February 28             November 30
                                                       -----------------      ------------------
ASSETS                                                       2001                    2000
                                                       -----------------      ------------------
                                                          (Unaudited)
<S>                                                    <C>                    <C>
Current assets:
  Cash                                                 $         139,710      $           32,576
  Accounts receivable, net of allowances
    Of $99,726 / $38,838                                         824,976                 740,344
  Related parties                                                 25,723                  19,597
  Inventory                                                      692,546                 646,469
  Other current assets                                            27,634                  27,468
  Deferred income taxes                                           51,000                  51,000
                                                       -----------------      ------------------
       Total current assets                                    1,761,589               1,517,454
                                                       -----------------      ------------------
Property and equipment:
  Land                                                            40,700                  40,700
  Buildings and improvements                                     607,658                 607,658
  Equipment and vehicles                                       2,368,570               2,366,387
  Equipment construction in process                                5,376
                                                       -----------------      ------------------
       Total property and equipment                            3,022,304               3,014,745

  Accumulated depreciation                                    (2,044,755)             (1,986,203)
                                                       -----------------      ------------------
       Net property and equipment                                977,549               1,028,542
                                                       -----------------      ------------------
Other assets:
  Accounts receivable from related parties                       341,665                 346,665
  Intangible and other assets                                    138,962                 143,773
  Deferred income taxes, net of allowance of $80,000             313,300                 300,000
                                                       -----------------      ------------------
       Total other assets                                        793,927                 790,438
                                                       -----------------      ------------------
       Total assets                                    $       3,533,065      $        3,336,434
                                                       =================      ==================
</TABLE>



                       See Notes to Financial Statements

                                       2
<PAGE>

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

                                                                             February 28           November 30
                                                                          ----------------      ----------------
LIABILITIES:                                                                    2001                  2000
                                                                          ----------------      ----------------
                                                                            (Unaudited)
<S>                                                                       <C>                  <C>

Current liabilities:
  Accounts payable                                                        $        446,960     $         440,372
  Accrued expenses                                                                 299,161               312,291
  Income taxes payable                                                                   0
  Due to related parties                                                            10,028                10,028
  Current portion of long-term obligations                                          48,136                49,691
                                                                          ----------------      ----------------
       Total current liabilities                                                   804,285               812,382
                                                                          ----------------      ----------------
                                                                          ----------------      ----------------
Long-term liabilities:
  Long-term obligations, less current portion                                      974,481               985,635
  Note Payable                                                                     938,050               685,428
                                                                          ----------------      ----------------
       Total long-term liabilities                                               1,912,531             1,671,063
                                                                          ----------------      ----------------
       Total liabilities                                                         2,716,816             2,483,445
                                                                          ----------------      ----------------
Stockholders' equity:
   Preferred Stock, 7% Cumulative, convertible $3.00par value,330,000              496,236               496,236
shares authorized, 165,412 shares issued and outstanding. (Aggregate
liquidation preference $1,235,342 and $1,200,891 respectively)
  Common stock, $.01 par value, 10,000,000 shares authorized; 1,926,330             19,263                19,263
shares issued and outstanding.
  Additional paid-in capital                                                     1,018,044             1,018,044
  Accumulated deficit                                                             (717,294)             (680,554)
                                                                          ----------------      ----------------
       Total stockholders' equity                                                  816,249               852,989
                                                                          ----------------      ----------------
       Total liabilities and
         stockholders' equity                                             $      3,533,065     $       3,336,434
                                                                          ================      ================
</TABLE>



                       See Notes to Financial Statements


                                       3
<PAGE>

NACO INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>

                                                                                   Three months ended
                                                                             February 28          February 29
                                                                          --------------------------------------
                                                                               2001                   2000
                                                                          ----------------      ----------------
<S>                                                                       <C>                   <C>
Sales, net                                                                $      1,589,323      $      2,197,038

Cost of goods sold                                                                 979,018             1,280,727
                                                                          ----------------      ----------------
       Gross profit                                                                610,305               916,311

Operating expenses:
  Selling expenses                                                                 341,430               361,532
  General and administrative expenses                                              256,003               257,066
                                                                          ----------------      ----------------
       Total operating expenses                                                    597,433               618,598
                                                                          ================      ================

       Income (loss) from operations                                                12,872               297,713

Other income (expense):
  Interest income                                                                      399                   700
  Other                                                                                  0                13,888
  Interest expense                                                                 (63,310)              (80,593)
                                                                          ----------------      ----------------
       Total other income (expense)                                                (62,911)              (66,005)
                                                                          ================      ================

Income (loss) before income taxes                                         $        (50,040)     $        231,708

Income tax expense (benefit)                                                        13,300                78,000
                                                                          ----------------      ----------------
       Net income (loss)                                                  $        (36,740)     $        153,708
                                                                          ================      ================
Adjustment for preferred dividends in arrears                                      (34,451)              (34,451)
                                                                          ----------------      ----------------
Adjusted net income (loss) to common stockholders                         $        (71,191)     $        119,257
                                                                          ================      ================
Earnings (loss) per common share:
  Basic:
    Net Earnings (loss)                                                   $          (0.04)     $           0.06
                                                                          ================      ================
 Diluted:
    Earnings (loss) from net income                                       $          (0.04)     $           0.06
                                                                          ================      ================
Weighted average number of common
  Shares outstanding:
    Basic                                                                        1,926,330             1,876,227
                                                                          ================      ================
    Diluted                                                                      1,926,330             1,876,227
                                                                          ================      ================
</TABLE>



                        See Notes to Financial Statements


                                       4
<PAGE>

NACO INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>

                                                                                    Three months ended
                                                                          --------------------------------------
                                                                             February 28           February 29
                                                                          ----------------      ----------------
                                                                               2001                   2000
<S>                                                                       <C>                   <C>
Cash flows from operating activities
  Net income (loss)                                                       $        (36,740)     $        153,708
  Adjustments to reconcile net income (loss) to
   net cash provided by (used in) operating activities:
     Depreciation                                                                   58,552                76,337
     Amortization                                                                    4,811                 4,811
     Deferred income taxes                                                         (13,300)               77,200
   (Increase) decrease in:
     Accounts receivable, net                                                      (84,632)             (288,370)
     Receivable from related parties                                                (1,126)               (4,433)
     Inventory                                                                     (46,077)                2,860
     Other                                                                            (166)               (9,108)
   Increase (decrease) in:
     Accounts payable                                                                6,588              (109,946)
     Accrued expenses                                                              (13,130)               57,571
     Income taxes payable
                                                                          ----------------      ----------------
 Net cash provided by (used in) operating activities                              (125,220)              (38,469)
                                                                          ----------------      ----------------
Cash flows from investing activities
  Purchase of  property and equipment                                               (7,559)                 (577)
                                                                          ----------------      ----------------
        Net cash provided by (used in) investing activities                         (7,559)                 (577)
                                                                          ----------------      ----------------
Cash flows from financing activities
  Net change in line of credit                                                     252,622               303,768
  Payments on long-term debt                                                       (12,709)              (48,625)
                                                                          ----------------      ----------------
        Net cash provided by (used in) financing activities                        239,913               255,143
                                                                          ----------------      ----------------
Increase (decrease) in cash                                                        107,134               216,097

        Cash, beginning of period                                                   32,576                58,073
                                                                          ----------------      ----------------
        Cash, end of period                                               $        139,710      $        274,170
                                                                          ================      ================
Supplemental disclosures:
    Income taxes paid                                                     $              0      $            900
    Interest Paid                                                         $         51,781      $         61,093
</TABLE>



                        See Notes to Financial Statements


                                       5
<PAGE>

                              NACO INDUSTRIES, INC.
                    Notes to Financial Statements (Unaudited)
                                February 28, 2001



NOTE A - BASIS OF PRESENTATION
         In the  opinion of  management,  all  adjustments  (consisting  only of
normal recurring  accruals)  considered  necessary for a fair  presentation have
been included.  Operating results for the three-month  period ended February 28,
2001 are not necessarily  indicative of the results that may be expected for the
fiscal  year  ending  November  30,  2001.  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, 2000.


NOTE B - DIVIDENDS
         Dividends on the preferred  stock are cumulative at 7%. At February 28,
2001, $242,870 dividends were in arrears.

NOTE C - RELATED PARTY OPERATING LEASES
         In  December,  1999 the Company  entered into two  related-party  lease
agreements  with PVC,  Inc., a company owned by Verne Bray,  the Chairman of the
Board and  majority  stockholder  of the Company.  Rentals  begin at $13,500 per
month for the land and  building,  and  $9,500 per month for  various  pieces of
equipment.  The  terms  of the  leases  are for a period  of ten and five  years
respectively,  commencing  December 1999. Upon each annual anniversary date, the
monthly  rentals for each lease shall be adjusted by the amount of any  increase
in the Consumer  Price Index over the  preceding  year.  The lease  amounts were
negotiated at the  fair-market  rental value and approved by Company's  Board of
Directors.

                                       6
<PAGE>

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

Introduction
NACO  Industries,  Inc.  ("NACO" or the "Company") is a  manufacturing  company,
which  produces 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  manufacturers  and sells PVC  valves  (4"  through  12" in
diameter).

Results of Operations
     The  following  discussion  relates to the three months ended  February 28,
2001 and February 29, 2000, respectively.  For comparison purposes,  percentages
of sales will be used rather than  dollars.  In the  following  discussion,  the
three  months  ended  February 28, 2001 and February 29, 2000 are referred to as
1Q01 and 1Q00,  respectively.  Readers are cautioned  that results of operations
for the three months ended February 28, 2001 are not  necessarily  indicative of
the results that may be expected for the fiscal year ending November 30, 2001.

     Overview. The Company sustained an operating loss before taxes of $(50,040)
for 1Q01 compared to an operating profit of $231,708 for 1Q00. Gross margin as a
percentage  of sales for 1Q01 and 1Q00 was 38.4% and  41.7%,  respectively.  The
decrease in the Company's operating profit and gross margins was mainly due to a
27.7% decrease in net sales as discussed below.

     Net Sales: Net sales for 1Q01 decreased by 27.7% to $1,589,323, compared to
net sales of $2,197,038 for 1Q00.  There are several factors that contributed to
decreased sales.  First,  the agricultural  market has been weak during the past
nine months mainly due to the depressed farm economy.  Second, many parts of the
United States have experienced a cold and wet winter,  which contributes to less
construction and fewer water projects during those months.  In many agricultural
areas of the country the winter of 1Q00 was very mild in comparison to 1Q01.

     Gross  Margin.  Gross margin as a percentage of sales for 1Q01 and 1Q00 was
38.4% and 41.7%,  respectively.  The margin for 1Q01 has decreased mainly due to
decreased  sales volume.  When sales are down,  the  Company's  fixed costs stay
relatively constant,  resulting in a lower gross margin for the period. Variable
cost of raw  materials  decreased  3.0% from  1Q00 to 1Q01.  Raw  material  as a
percentage of sales for 1Q01 and 1Q00 was 29.0% and 32.0%  respectively,  mainly
due  to raw  material  prices  decreasing  slightly  and  partly  due to  better
purchasing  of raw  materials  by the  Company  during  1Q01.  Labor and related
expenses  decreased $67,209 or 16.2% from 1Q00 to 1Q01 mainly due to a reduction
in force in production  and  non-production  personnel due to lower sales volume
for the quarter. The Company takes a complete physical inventory once a year and
a physical  inventory of the top 80% of the dollars in inventory  every quarter.
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.

     Selling:  Selling  expenses  were 21.5% of net sales for 1Q01,  compared to
16.5% for 1Q00.  The increase in selling  expenses as a percentage  of sales was
mainly due to  decreased  sales  volume.  In actual  dollars,  selling  expenses
decreased  $20,102,  or 5.6%, from 1Q00 to 1Q01.  Commission  expense  decreased
$7,985,  or  16.3%,  from  1Q00  to 1Q01  mainly  due to  decreased  commissions
attributable to decreased sales.  Shipping supplies increased as a percentage of
sales  from 1.8% in 1Q00 to 2.0% in 1Q01  mainly due to lower  sales  volume and
timing on the  purchases of supplies.  Freight out  increased as a percentage of
net sales from 4.8% in 1Q00 to 6.9% in 1Q01 mainly due to lower sales volume and
partially  due  to  not  receiving  quantity  discounts  on  freight  on  larger
shipments.

     General and administrative: General and administrative expenses represented
16.1% of net sales for 1Q01, compared to 11.7% for 1Q00. The increase was mainly
due to decreased  sales volume.  Overall,  general and  administrative  expenses
remained  relatively even in dollars at $256,003 and $257,066 for 1Q01 and 1Q00,
respectively.  Travel  increased  by $7,495  from 1Q00 to 1Q01 mainly due to the
President  traveling  extensively  with other Company  employees in an effort to
bolster sales during 1Q01.  Legal and Accounting  increased  $5,421 from 1Q00 to
1Q01 mainly due to timing of the year-end accounting fees.

     Other: Other expenses/revenues were 4.0% of net sales for 1Q01, compared to
3.1% for 1Q00 mainly due to decreased sales volume.  Interest  expense went from
3.7% of net sales in 1Q00 to 4.0% in 1Q01.  Interest decreased $17,283 from 1Q00
to 1Q01 mainly due to better cash flow that  resulted  in less  finance  charges
from venders.  The effective  interest rates  (interest  expense  divided by the
average  debt  balance for the period) for 1Q01 and 1Q00 were 11.26% and 10.16%,
respectively.

                                       7
<PAGE>

Liquidity and Capital Resources

     The  Company's   principal   sources  of  liquidity  have  been  cash  from
operations,  credit  facilities  and equity  financing.  Cash used in  operating
activities was $125,221 in 1Q01.  Cash as of February 28, 2001 was $139,710,  up
$107,134 from November 30, 2000.  The  Company's  working  capital has increased
$252,232  from  November  30, 2000 to February  28,  2001,  due  primarily to an
increase in current  assets.  The increase in current  assets was financed by an
increase in the Company's line of credit, which is classified as long term debt.
The  Company  increased  trade  payables  by $6,587  from  November  30, 2000 to
February 28, 2001.

     At February 28, 2001, the  outstanding  balance of the Company's  revolving
line of credit was  $938,050.  This line of credit was entered into on April 22,
1999 with Wells Fargo Business  Credit ("Wells  Fargo").  The amounts  available
under  the  facility  are  based on a  percentage  of  accounts  receivable  and
inventories.  It matures April 30, 2003. As of February 28, 2001 the Company was
in compliance will all of the loan covenants with Wells Fargo.

     Also,  on April  22,  1999,  a second  facility  was  closed  with  WebBank
Corporation  ("WebBank")  to  restructure  the Company's  long-term  debt.  This
facility was for  $1,100,000,  and the proceeds of the facility were used to pay
off long-term debt of the Company with Nations Bank and several other lenders. A
portion of the  revolving  line that was  previously  with Nations Bank was also
paid off with the proceeds provided by this facility. The outstanding balance of
the facility was $1,009,630 as of February 28, 2001.

     On November 30, 2000,  the Company was in default of one of Webbank's  loan
covenants,  which  restricts  advances to affiliates.  For the fiscal year ended
November 30, 2000,  the balances of a receivable  from  Rimshot,  LLC, a company
owned by a member of the family of Verne Bray,  the  Company's  Chief  Executive
Officer and principal  shareholder,  increased $35,434.  This increase was not a
cash  transaction,  but rather was a result of booking a loss  incurred when two
loans, which the Company signed, were transferred to Mr. Bray. In a letter dated
December 28,  2000,  WebBank and the United  States  Department  of  Agriculture
provided a waiver with respect to this default.

     Management believes that with its capital resources on hand at February 28,
2001,  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  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.

Factors Affecting Future Results

     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, changes in economic conditions in its markets, unanticipated expenses
or events and other  factors  discussed in this report and the  Company's  other
filings with the Securities and Exchange Commission.

Employment Agreements

     In December 2000, the Company  entered into an employment  contract with W.
Michael Hopkins, the Company's President.  The contract is for a term of 5 years
and provides for a base salary of $90,000. In addition, there is an annual bonus
structure  based on a percentage of net profits  before taxes on any net profits
before  taxes over  $500,000.  Mr.  Hopkins is  entitled to receive a payment of
$100,000  if his  employment  is  terminated  in  violation  of the terms of the
employment  agreement.  Also  included in the agreement is an option to purchase
100,000  shares of Common Stock at $2.00 per share.  The option vests at 20% per
each year until 100% becomes vested on December 1, 2005.

                                       8
<PAGE>

                           PART II - OTHER INFORMATION
Item 2 - Changes in Securities and Use of Proceeds   none

Item 6 - Exhibits and Reports on Form 8-K


     (a) Exhibits.  The following are filed as exhibits to this Report.

Exhibit No.                            Description
-----------                            -----------
  10.20         Employment agreement between the Company and W. Michael Hopkins.


     (b)  Reports on Form 8-K.  None



                                       9
<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                              April 10, 2001
---------------------------------                  ---------------
        VERNE E. BRAY                              Date
        CEO, Secretary, Chairman
        (Pricipal Executive Officer)

By: /s/ W. MICHAEL HOPKINS                         April 10, 2001
---------------------------------                  ---------------
         W. MICHAEL HOPKINS                        Date
         President

By: /s/ JEFFREY J. KIRBY                           April 10, 2001
-----------------------------------------          ---------------
        JEFFREY J. KIRBY                           Date
        Executive Vice President/
        Chief Financial Officer/Treasurer
        (Principal Financial and Accounting Officer)

                                       10
<PAGE>