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 31,2001

 [ ] 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 May 31, 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>

                                                               May 31            November 30
                                                          ----------------    ----------------
ASSETS                                                          2001                 2000
                                                          ----------------    ----------------
                                                             (Unaudited)
<S>                                                       <C>                 <C>
Current assets:
  Cash                                                    $         42,392    $         32,576
  Accounts receivable, net of allowances
    Of $61,284 / $38,838                                           898,925             740,344
  Related parties                                                   38,223              19,597
  Inventory                                                        583,342             646,469
  Other current assets                                              24,074              27,468
  Deferred income taxes                                             51,000              51,000
                                                          ----------------    ----------------
       Total current assets                                      1,637,956           1,517,454
                                                          ----------------    ----------------
Property and equipment:
  Land                                                              40,700              40,700
  Buildings and improvements                                       607,658             607,658
  Equipment and vehicles                                         2,379,793           2,366,387
  Equipment construction in process                                    842
                                                          ----------------    ----------------
       Total property and equipment                              3,028,993           3,014,745

  Accumulated depreciation                                      (2,084,297)         (1,986,203)
                                                          ----------------    ----------------
       Net property and equipment                                  944,696           1,028,542
                                                          ----------------    ----------------
Other assets:
  Accounts receivable from related parties                         326,637             346,665
  Intangible and other assets                                      134,151             143,773
  Deferred income taxes, net of allowance of $80,000               123,900             300,000
                                                          ----------------    ----------------
       Total other assets                                          584,688             790,438
                                                          ----------------    ----------------
       Total assets                                       $      3,167,340    $      3,336,434
                                                          ================    ================
</TABLE>


                       See Notes to Financial Statements

                                       2
<PAGE>

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

                                                                                     May 31           November 30
                                                                                -----------------  -----------------
LIABILITIES:                                                                          2001               2000
                                                                                -----------------  -----------------
                                                                                   (Unaudited)
<S>                                                                             <C>                <C>
Current liabilities:
  Accounts payable                                                              $         365,794  $         440,372
  Accrued expenses                                                                        283,889            312,291
  Due to related parties                                                                        0             10,028
  Current portion of long-term obligations                                                 49,843             49,691
                                                                                -----------------  -----------------
       Total current liabilities                                                          699,526            812,382
                                                                                -----------------  -----------------
Long-term liabilities:
  Long-term obligations, less current portion                                             958,705            985,635
  Note Payable                                                                            365,089            685,428
                                                                                -----------------  -----------------
       Total long-term liabilities                                                      1,323,794          1,671,063
                                                                                -----------------  -----------------
       Total liabilities                                                                2,033,320          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                                                                    (389,523)          (680,554)
                                                                                -----------------  -----------------
       Total stockholders' equity                                                       1,144,020            852,989
                                                                                -----------------  -----------------
       Total liabilities and
         stockholders' equity                                                   $       3,167,340  $       3,336,434
                                                                                =================  =================
</TABLE>

                       See Notes to Financial Statements


                                       3
<PAGE>

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

                                                              Three Months Ended                Six Months Ended
                                                       -------------------------------  -------------------------------
                                                          May 31            May 31          May 31           May 31
                                                           2001              2000            2001             2000
                                                       --------------   --------------  --------------   --------------
<S>                                                    <C>              <C>             <C>              <C>
Sales, net                                             $    2,466,591        2,360,625       4,055,914        4,557,662

Cost of good sold                                           1,200,024        1,359,778       2,179,042        2,640,504
                                                       --------------   --------------  --------------   --------------
Gross Profit                                                1,266,567        1,000,847       1,876,872        1,917,158

Operating expenses:
Selling expenses                                              448,369          442,719         789,799          804,250
General and administrative expenses                           239,527          298,119         495,530          555,186
                                                       --------------   --------------  --------------   --------------
    Total operating expenses                                  687,896          740,838       1,285,329        1,359,436
                                                       --------------   --------------  --------------   --------------
    Income from operations                                    578,671          260,009         591,543          557,722

Other income (expenses):
Interest income                                                 1,194              142           1,593              842
Other income                                                      800           10,569             800           24,457
Interest expense                                              (63,494)         (92,662)       (126,805)        (173,255)
                                                       --------------   --------------  --------------   --------------
    Total other income (expense)                              (61,500)         (81,951)       (124,412)        (147,956)

Income before income taxes                                    517,171          178,058         467,131          409,766

Income tax (expense) benefit                                 (189,400)         (76,700)       (176,100)        (154,700)
                                                       --------------   --------------  --------------   --------------
    Net income (loss)                                  $      327,771          101,358         291,031          255,066
                                                       ==============   ==============  ==============   ==============
Adjustment for preferred dividends in arrears                                                   34,451           34,451
Adjusted net income (loss) to Common Stockholders      $      327,771          101,358         256,580          220,615
                                                       ==============   ==============  ==============   ==============
Earnings (loss) per common share:
  Basic
    Net Earnings (loss)                                $          .17              .05             .13              .12
                                                       ==============   ==============  ==============   ==============
  Diluted:
    Earnings (loss) from net income                    $          .15              .05             .11              .10
                                                       ==============   ==============  ==============   ==============
Weighted average number of common shares
outstanding:
  Basic                                                     1,926,330        1,902,268       1,926,330        1,902,268
                                                       ==============   ==============  ==============   ==============
  Diluted                                                   2,257,154        2,233,092       2,257,154        2,233,092
                                                       ==============   ==============  ==============   ==============
</TABLE>


                        See Notes to Financial Statements

                                       4
<PAGE>

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

                                                                                Six months ended
                                                                        ------------------------------
                                                                            May 31         May 31
                                                                        --------------  --------------
                                                                             2001           2000
<S>                                                                     <C>             <C>
Cash flows from operating activities
  Net income                                                            $      291,031  $      255,066
  Adjustments to reconcile net income to
   net cash provided by (used in) operating activities:
     Depreciation                                                              113,467         163,661
     Amortization                                                                9,622           9,622
     Deferred income taxes                                                     176,100         153,900
   (Increase) decrease in:
     Accounts receivable, net                                                 (158,581)       (100,153)
     Inventory                                                                  63,127          (9,339)
     Other                                                                       3,394         (62,764)
   Increase (decrease) in:
     Accounts payable                                                          (74,578)       (446,368)
     Accrued expenses                                                          (28,402)         12,552
                                                                        --------------  --------------
 Net cash provided by (used in) operating activities                           395,180         (23,823)
                                                                        --------------  --------------
Cash flows from investing activities
  Purchase of  property and equipment                                          (29,621)        (16,827)
  Change in related party accounts                                              (8,626)        (20,948)
                                                                        --------------  --------------
        Net cash provided by (used in) investing activities                    (38,247)        (37,775)
                                                                        --------------  --------------
Cash flows from financing activities
  Net change in line of credit                                                (320,339)        213,469
  Payments on long-term debt                                                   (26,778)        (70,631)
                                                                        --------------  --------------
        Net cash provided by (used in) financing activities                   (347,117)        142,838
                                                                        --------------  --------------
Increase (decrease) in cash                                                      9,816          81,240
        Cash, beginning of period                                               32,576          58,073
                                                                        --------------  --------------
        Cash, end of period                                             $       42,392  $      139,313
                                                                        ==============  ==============
See Notes to Financial Statements
Supplemental disclosures:
    Income taxes paid                                                   $          900  $          900
    Interest Paid                                                       $       98,917  $      123,220
</TABLE>


                                       5
<PAGE>

                              NACO INDUSTRIES, INC.
                    Notes to Financial Statements (Unaudited)
                                  May 31, 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 six-month period ended May 31, 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 May 31, 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. The lease amounts were negotiated at the
fair-market rental value and approved by Company's Board of Directors.

NOTE D - RELATED PARTY NOTE

In March  2000,  Mr.  Verne  Bray,  Chairman  of the  Board  and CEO,  signed an
indemnification  agreement to hold the Company harmless for funds paid on behalf
of  Rimshot,  a  limited  liability  company  owned  by a son of Mr.  Bray.  The
agreement  covers $259,144 of costs advanced to Rimshot for startup  operations,
and $52,087 for principal and interest payments made on leased machinery used by
Rimshot through  November 30, 1999. The agreement calls for monthly  payments of
$2,500  beginning  October 1, 2000.  After  October 1, 2001, if Mr. Bray can not
increase the monthly  payments to at least $5,000 the note bears interest at the
applicable federal rate.  Pursuant to the  indemnification  agreement,  Mr. Bray
conveyed to the Company a security  interest in all PVC. Inc. lease  receivables
from the Company. The board of directors approved the Company's execution of the
indemnification  agreement.  The Company also signed a security  agreement  with
PVC,  Inc.  which allows the Company to offset  payments due to PVC, Inc. in the
event of default on the indemnification  agreement. At May 31, 2001 Rimshot owed
the Company $326,637.


                                       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" through 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, 2001 and May 31, 2000 respectively. For comparison purposes, percentages
of sales will be used rather than  dollars.  In the  following  discussion,  the
three  months  ended May 31, 2001 and May 31,  2000 are  referred to as 2Q01 and
2Q00,  respectively.  The six  months  ended May 31,  2001 and May 31,  2000 are
referred to as 2Y01 and 2Y00,  respectively.  Readers are cautioned that results
of  operations  for the  three  and  six  months  ended  May  31,  2001  are not
necessarily  indicative  of the results that may be expected for the fiscal year
ending November 30, 2001.

     Overview. The Company achieved net income before taxes of $517,171 for 2Q01
compared  to an net  income  before  taxes of  $178,058  for 2Q00.  The  Company
achieved net income  before taxes of $467,131 for 2Y01 compared to an net income
before  taxes of $409,766 for 2Y00.  Gross  margin as a percentage  of sales for
2Q01 and 2Q00 was 51.3% and 42.4%, respectively. Gross margin as a percentage of
sales for 2Y01 and 2Y00 was 46.3% and 42.1%,  respectively.  The increase in the
Company's  net income and gross margins was mainly due to a 9.2% decrease in raw
material  expense,  and a 14.4% decrease in labor related  expenses from 2Q00 to
2Q01 as discussed below.

     Net Sales: Net sales for 2Q01 increased by 4.5% to $2,466,591,  compared to
net sales of  $2,360,625  for 2Q00.  Net  sales for 2Y01  decreased  by 11.0% to
$4,055,914, compared to net sales of $4,557,662 for 2Y00. Management feels there
are several  factors  that  contributed  to  decreased  sales from 2Y00 to 2Y01.
First, the agricultural market has weakened during the past year mainly due to a
general  decline  in the U.S.  farm  economy.  Second,  many parts of the United
States  experienced  a  cold  and  wet  winter,   which  resulted  in  decreased
construction  and fewer  water  projects  during  the winter  months.  This cold
weather during the winter months compresses the spring  construction season into
a shorter  period of time.  Management  feels  that  this  compression  may also
partially explain why sales increased 4.5% during 2Q01 compared to 2Q00.

     Gross  Margin.  Gross margin as a percentage of net sales for 2Q01 and 2Q00
was 51.3% and 42.4%, respectively. Gross margin as a percentage of net sales for
2Y01 and 2Y00 was 46.3% and 42.1%,  respectively.  Gross margins have  increased
due,  in part,  to  several  factors:  1) Raw  materials  and 2)  Labor  related
expenses.  Raw material expenses as a percentage of sales for 2Q01 and 2Q00 were
26.5%  and  30.4%  respectively,  and for 2Y01 and 2Y00  were  26.9%  and  29.5%
respectively.  The  decrease in raw  material  costs was  partially  due to 1) a
slight  decrease in raw material  prices  generally and 2)  improvements  in the
Company's  raw material  purchasing  practices  during  2Y01.  Labor and related
expenses  as a  percentage  of net sales for 2Q01 and 2Q00 were 17.5% and 14.4%,
respectively. Labor and related expenses decreased $59,482 or 14.4% from 2Q00 to
2Q01  mainly  due to a  reduction  in force  in  production  and  non-production
personnel during the past year. 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.

     Selling:  Selling  expenses  were 18.2% of net sales for 2Q01,  compared to
18.8% for 2Q00.  Selling expenses were 19.5% of net sales for 2Y01,  compared to
17.6% for 2Y00.  The increase in selling  expenses as a percentage of sales from
2Y00 to 2Y01 was  mainly  due to  decreased  sales  volume.  In actual  dollars,
selling  expenses  decreased  $14,451,  or 1.8%, from 2Y00 to 2Y01. From 2Q00 to
2Q01  selling  expense  increased  $5,650  mainly due to increases in salary and
commission  expense.  Salary and commission expenses increased $10,121, or 6.6%,
from 2Q00 to 2Q01 mainly due to increased commissions  attributable to increased
sales for the quarter. Shipping supplies decreased as a percentage of sales from
3.4% in 2Q00 to 2.4% in 2Q01 mainly due to higher sales volume and timing on the
purchases of supplies.  Freight out  decreased as a percentage of net sales from
6.9% in 2Q00 to 6.6% in 2Q01 mainly due to higher sales volume.

     General and administrative: General and administrative expenses represented
9.7% of net sales for 2Q01,  compared to 12.6% for 2Q00. The decrease was mainly
due  to  decreased  legal,   accounting  and  outside  service  expense.  Legal,
accounting  and outside  service  expense  decreased  $61,015 from 2Q00 to 2Q01.
During  2Q00  the  Company's  management  hired a  consulting  firm to  identify
opportunities to reduce operating  expenses,  increase  efficiencies and improve
management training.  These costs were one-time costs incurred in 2Q00 that were
not necessary to repeat in 2Q01. Excluding such legal, accounting and consulting
expenses,  general and administrative  expenses remained relatively unchanged in
dollars at $217,227 and $214,804 for 2Q01 and 2Q00, respectively.

                                       7
<PAGE>

     Other: Other expenses/revenues were 2.5% of net sales for 2Q01, compared to
3.5% for  2Q00  mainly  due to  decreased  interest  expense.  Interest  expense
declined  from  3.9% of net  sales  in 2Q00 to 2.6% in  2Q01.  Interest  expense
decreased $29,168 from 2Q00 to 2Q01 mainly due to better cash flow that resulted
in decreased  finance  charges  from  vendors and less  borrowing on the line of
credit.  The average  decrease in the operating line of credit was $318,000 from
2Q00 to 2Q01. The effective  interest  rates  (interest  expense  divided by the
average  debt  balance for the period) for 2Q01 and 2Q00 were 11.46% and 11.94%,
respectively.

Liquidity and Capital Resources

         The  Company's  principal  sources  of  liquidity  have  been cash from
operations,  credit facilities and equity financing.  Cash provided by operating
activities was $395,054 in 2Y01. Cash as of May 31, 2001 was $42,392,  up $9,817
from November 30, 2000.  The Company's  working  capital has increased  $233,358
from November 30, 2000 to May 31, 2001, due primarily to an increase in accounts
receivables and a decrease in accounts payables and accruals.

         At May 31, 2001,  the  outstanding  balance of the Company's  revolving
line of credit was $365,089  compared to $1,001,267 at May 31, 2000 and $685,428
at November 30, 2000. The amount of unused credit available for borrowing at May
31, 2001 was  $792,085.  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 May 31, 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 $998,107 as of May 31, 2001  compared to $1,019,401 at November
30, 2000. As of May 31, 2001 the Company was in compliance  with all to the loan
covenants with WebBank.

         Management  believes that with its capital resources on hand at May 31,
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.


                                       8
<PAGE>

                           PART II - OTHER INFORMATION

Item 2 - Changes in Securities and Use of Proceeds   none

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

         On  May  16,  2001,  the  Company  held  its  2001  Annual  Meeting  of
Shareholders. At the 2001 Annual Meeting, the shareholders elected the following
five individuals to serve as directors:

     Director          Votes For        Votes Against    Abstentions
 Verne E. Bray         1,287,141             0               0
 W. Michael Hopkins    1,287,141             0               0
 Jeffrey J. Kirby      1,287,141             0               0
 James C. Czirr        1,287,141             0               0
 Jack Prust            1,287,141             0               0
--------------------------------------------------------------------------------
         At the 2001 Annual Meeting,  the shareholders  also approved a proposal
to ratify  the  appointment  of Jones,  Wright,  Simpkins  &  Associates  as the
independent auditor of the Company.  There were 1,287,055 votes cast in favor of
ratification,  2000  votes  cast in  opposition,  20  abstentions  and 0  broker
non-votes.

Item 6 - Exhibits and Reports on Form 8-K


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

            Exhibit No.                     Description

            (a)   None



    (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                                        July 10, 2001
---------------------                                        -------------
        Verne E. Bray                                        Date
        CEO, Secretary, Chairman
        (Principal Executive Officer)

By: /s/ W. MICHAEL HOPKINS                                   July 10, 2001
--------------------------                                   -------------
        W. Michael Hopkins                                   Date
        President


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


                                       10
<PAGE>