<PAGE>   1
                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   For the quarterly period ended May 30, 1998



Commission file number  1-11250



                           GTECH Holdings Corporation
             (Exact name of registrant as specified in its charter)

         Delaware                                           05-0450121
(State or other jurisdiction of                  (I.R.S. Employer Identification
incorporation or organization)                                Number)


55 Technology Way, West Greenwich, Rhode Island               02817
(Address of principal executive offices)                    (Zip Code)


Registrant's telephone number, including area code:  (401) 392-1000


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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


At July 4, 1998 there were 41,279,559 shares of the registrant's Common Stock
outstanding.


<PAGE>   2




INDEX

GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

                                                                           Page
PART I.  FINANCIAL INFORMATION                                            Number
                                                                          ------

Item 1.       Financial Statements

              Consolidated Balance Sheets                                    3

              Consolidated Income Statements                                 4

              Consolidated Statement of Shareholders' Equity                 5

              Consolidated Statements of Cash Flows                          6

              Notes to Consolidated Financial Statements                    7-8

Item 2.       Management's Discussion and Analysis of Financial Condition   9-14
              and Results of Operations

Item 3.       Quantitative and Qualitative Disclosures about Market Risk    15


PART II.  OTHER INFORMATION

Item 1.       Legal Proceedings                                             15

Item 2.       Changes in Securities                                         15

Item 6.       Exhibits and Reports on Form 8-K                              15

SIGNATURES                                                                  16

EXHIBITS                                                                   17-18


<PAGE>   3

PART 1. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS
GTECH HOLDINGS CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>

                                                                                                 (Unaudited)
                                                                                                   May 30,          February 28,
ASSETS                                                                                              1998                1998
                                                                                                    ----                ----
                                                                                               (In thousands, except share amounts)

<S>                                                                                             <C>                <C>
CURRENT ASSETS
     Cash and cash equivalents                                                                  $     8,059        $     8,250
     Trade accounts receivable                                                                       81,967             93,778
     Sales-type lease receivables                                                                    12,713             13,958
     Inventories                                                                                     25,694             27,853
     Deferred income taxes                                                                           40,897             40,897
     Assets held for sale                                                                            14,178             14,178
     Other current assets                                                                            18,105             14,141
                                                                                                -----------        -----------
                 TOTAL CURRENT ASSETS                                                               201,613            213,055

SYSTEMS, EQUIPMENT AND OTHER ASSETS RELATING TO CONTRACTS                                         1,241,727          1,204,552
Less: Accumulated Depreciation                                                                     (717,591)          (677,696)
                                                                                                -----------        -----------
                                                                                                    524,136            526,856


GOODWILL, net                                                                                       117,258            118,537

INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES                                             12,414             64,808

OTHER ASSETS                                                                                        101,052            100,556
                                                                                                -----------        -----------
                                                                                                $   956,473        $ 1,023,812
                                                                                                ===========        ===========
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
     Short-term borrowings                                                                      $       486        $       240
     Accounts payable                                                                                33,607             39,451
     Accrued expenses                                                                                46,299             56,915
     Special charge                                                                                  16,770             33,631
     Employee compensation                                                                           11,406             25,648
     Advance payments from customers                                                                 12,217                504
     Income taxes payable                                                                            44,854             25,392
     Current portion of long-term debt                                                                3,067              3,903
                                                                                                -----------        -----------
                 TOTAL CURRENT LIABILITIES                                                          168,706            185,684

LONG-TERM DEBT, less current portion                                                                373,637            453,587

OTHER LIABILITIES                                                                                    38,813             19,171

DEFERRED INCOME TAXES                                                                                20,160             20,160

SHAREHOLDERS' EQUITY
     Preferred Stock, par value $.01 per share--20,000,000 shares authorized, none issued              --                 --
     Common Stock, par value $.01 per share--150,000,000 shares authorized,
        44,110,440 and 43,922,627 shares issued, 41,329,559 and 41,284,146 shares
        outstanding at May 30, 1998 and February 28, 1998, respectively                                 441                439
     Additional paid-in capital                                                                     175,659            171,302
     Equity carryover basis adjustment                                                               (7,008)            (7,008)
     Accumulated other comprehensive income                                                          (8,425)               (42)
     Retained earnings                                                                              274,634            255,955
                                                                                                -----------        -----------
                                                                                                    435,301            420,646
     Less cost of 2,780,881 and 2,638,481 shares in treasury at
        May 30, 1998 and February 28, 1998, respectively                                            (80,144)           (75,436)
                                                                                                -----------        -----------
                                                                                                    355,157            345,210
                                                                                                -----------        -----------
                                                                                                $   956,473        $ 1,023,812
                                                                                                ===========        ===========
</TABLE>

See notes to consolidated financial statements


                                      -3-

<PAGE>   4


CONSOLIDATED INCOME STATEMENTS

GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                    (Unaudited)
                                                               Three Months Ended (1)
                                                             -------------------------
                                                             May 30,           May 31,
                                                              1998              1997
                                                              ----              ----
                                                              (Dollars in thousands,
                                                             except per share amounts)
<S>                                                         <C>              <C>    
Revenues:
      Services                                              $ 221,881        $ 225,930
      Sales of products                                        10,398           19,241
                                                            ---------        ---------
                                                              232,279          245,171
Costs and expenses:
      Costs of services                                       148,589          156,715
      Costs of sales                                            8,011           11,328
                                                            ---------        ---------
                                                              156,600          168,043
                                                            ---------        ---------
Gross profit                                                   75,679           77,128

Selling, general and administrative                            30,197           35,914
Research and development                                        9,595            8,175
                                                            ---------        ---------
Operating income                                               35,887           33,039

Other income (expense):
      Interest income                                             745            1,753
      Equity in earnings of unconsolidated affiliates           3,366            3,714
      Other income (expense)                                     (305)             370
      Interest expense                                         (7,488)          (6,676)
                                                            ---------        ---------
Income before income taxes                                     32,205           32,200

Income taxes                                                   13,526           12,880
                                                            ---------        ---------
Net income                                                  $  18,679        $  19,320
                                                            =========        =========

Basic earnings per share                                    $     .45        $     .46
                                                            =========        =========
Diluted earnings per share                                  $     .45        $     .46
                                                            =========        =========
</TABLE>

(1) 13 weeks in the quarter ended May 30, 1998 and 14 weeks in the quarter ended
May 31, 1997

See notes to consolidated financial statements


                                      -4-


<PAGE>   5


CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY-(Unaudited)

GTECH HOLDINGS CORPORATION AND SUBSIDIARIES



<TABLE>
<CAPTION>
                                                          Common Stock                                 Equity         Accumulated
                                                    -------------------------      Additional         Carryover          Other
                                                    Issued                           Paid-in            Basis         Comprehensive
                                                    Shares             Amount        Capital          Adjustment         Income
                                                    ------             ------        -------          ----------         ------
                                                                                          (Dollars in thousands)
<S>                                               <C>              <C>              <C>              <C>               <C>          
Balance at February 28, 1998                      43,922,627       $      439       $  171,302       $   (7,008)       $      (42)
Comprehensive income:
    Net income                                          --               --               --               --                --
    Other comprehensive income, net of tax:
        Foreign currency translation                    --               --               --               --              (8,383)
Comprehensive income
Purchase of 142,400 shares of common stock              --               --               --               --                --
Common stock issued under stock award plans          187,813                2            4,357             --                --
                                                  ----------       ----------       ----------       ----------        ----------
Balance at May 30, 1998                           44,110,440       $      441       $  175,659       $   (7,008)       $   (8,425)
                                                  ==========       ==========       ==========       ==========        ==========
</TABLE>


<TABLE>
<CAPTION>
                                                   Retained         Treasury
                                                   Earnings           Stock             Total
                                                   --------           -----             -----
                                                           (Dollars in thousands)
<S>                                               <C>              <C>               <C>
Balance at February 28, 1998                      $  255,955       $  (75,436)       $  345,210
Comprehensive income:
    Net income                                        18,679             --              18,679
    Other comprehensive income, net of tax:
        Foreign currency translation                    --               --              (8,383)
                                                                                     ----------
Comprehensive income                                                                     10,296
Purchase of 142,400 shares of common stock              --             (4,708)           (4,708)
Common stock issued under stock award plans             --               --               4,359
                                                  ----------       ----------        ----------
Balance at May 30, 1998                           $  274,634       $  (80,144)       $  355,157
                                                  ==========       ==========        ==========
</TABLE>



See notes to consolidated financial statements

                                      -5-

<PAGE>   6


CONSOLIDATED STATEMENTS OF CASH FLOWS

GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                                    (Unaudited)
                                                                                Three Months Ended (1)
                                                                               ------------------------
                                                                               May 30,          May 31,
                                                                                1998             1997
                                                                                ----             ----
                                                                               (Dollars in thousands)
<S>                                                                          <C>              <C>      
OPERATING ACTIVITIES
Net income                                                                   $  18,679        $  19,320
Adjustments to reconcile net income to net cash provided
  by operating activities:
      Depreciation and amortization                                             50,709           48,759
      Equity in earnings of unconsolidated affiliates,
         net of dividends received                                              (2,438)          (1,109)
      Other                                                                        861            1,157
      Changes in operating assets and liabilities:
         Trade accounts receivable                                              11,811           12,765
         Inventories                                                             2,556           (3,878)
         Special charge                                                        (15,384)            --
         Other assets and liabilities                                          (15,298)         (16,590)
                                                                             ---------        ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                       51,496           60,424

INVESTING ACTIVITIES
Purchases of systems, equipment and other assets relating to contracts         (47,107)        (100,043)
Cash proceeds from sale of equity investment                                    84,904             --
Other                                                                           (5,364)          (7,417)
                                                                             ---------        ---------
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES                            32,433         (107,460)

FINANCING ACTIVITIES
Proceeds from issuance of long-term debt                                        76,106          393,400
Net borrowings under short-term borrowing arrangements                             195            2,244
Principal payments on long-term debt                                          (156,933)        (329,901)
Purchases of treasury stock                                                     (4,708)         (15,521)
Other                                                                            4,309              122
                                                                             ---------        ---------
NET CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES                           (81,031)          50,344

Effect of exchange rate changes on cash                                         (3,089)            (154)
                                                                             ---------        ---------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                  (191)           3,154

Cash and cash equivalents at beginning of period                                 8,250           11,985
                                                                             ---------        ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                   $   8,059        $  15,139
                                                                             =========        =========
</TABLE>


(1) 13 weeks in the quarter ended May 30, 1998 and 14 weeks in the quarter ended
May 31, 1997

See notes to consolidated financial statements

                                      -6-

<PAGE>   7


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

GTECH HOLDINGS CORPORATION AND SUBSIDIARIES

NOTE A--BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of GTECH Holdings
Corporation (the "Company"), the parent of GTECH Corporation ("GTECH"), have
been prepared in accordance with generally accepted accounting principles
("GAAP") for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by GAAP for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ended May 30, 1998 are
not necessarily indicative of the results that may be expected for the full 1999
fiscal year ending February 27, 1999. The balance sheet at February 28, 1998 has
been derived from the audited financial statements at that date. For further
information refer to the consolidated financial statements and footnotes thereto
included in GTECH Holdings Corporation's fiscal 1998 Annual Report on Form 10-K.

The Company operates on a 52- to 53-week fiscal year ending on the last Saturday
in February. Fiscal 1998 was a 53-week year. The Company included the extra week
in the fiscal 1998 first quarter ended May 31, 1997. Accordingly, there are 13
weeks in the quarter ended May 30, 1998, versus 14 weeks in the quarter ended
May 31, 1997.

NOTE B--INVENTORIES
<TABLE>
<CAPTION>
                                                                               May 30,        February 28,
                                                                                1998              1998
                                                                                ----              ----
                                                                                (Dollars in thousands)
<S>                                                                      <C>                 <C>            
Inventories consist of:
       Purchased components                                              $        15,534     $        17,202
       Finished subassemblies                                                      1,855               1,719
       Work-in-process                                                             7,213               7,789
       Finished goods                                                              1,092               1,143
                                                                         ---------------     ---------------
                                                                         $        25,694     $        27,853
                                                                         ===============     ===============
</TABLE>


NOTE C--LONG-TERM DEBT

<TABLE>
<CAPTION>

                                                                               May 30,        February 28,
                                                                                1998              1998
                                                                                ----              ----
                                                                                (Dollars in thousands)
<S>                                                                      <C>                 <C>            
Long-term debt consists of:
       7.75% Series A Senior Notes due 2004                              $       150,000     $       150,000
       7.87% Series B Senior Notes due 2007                                      150,000             150,000
       Revolving credit facility                                                  56,600             135,000
       Other                                                                      20,104              22,490
                                                                         ---------------     ---------------
                                                                                 376,704             457,490
       Less current portion                                                        3,067               3,903
                                                                         ---------------     ---------------
                                                                         $       373,637     $       453,587
                                                                         ===============     ===============
</TABLE>


                                      -7-

<PAGE>   8



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)


NOTE C--LONG-TERM DEBT-(continued)

The Company has an unsecured revolving credit facility of $400 million expiring
in June 2002 (the "Credit Facility"). At May 30, 1998, the weighted average
interest rate for all outstanding borrowings under the Credit Facility was
5.72%.


NOTE D--INCOME TAXES

The Company's effective income tax rate is greater than the statutory rate due
primarily to state income taxes and certain expenses that are not deductible for
income tax purposes.


NOTE E--COMMITMENTS AND CONTINGENCIES

See Legal Proceedings in Part II, Item 1 and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in Part I, Item 2
herein.


NOTE F--EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per
share:


<TABLE>
<CAPTION>
                                              May 30,       May 31,
                                               1998          1997
                                               ----          ----
                                        (Dollars and shares in thousands,
                                            except per share amounts)
<S>                                          <C>           <C>    
Numerator:
       Net income                            $18,679       $19,320

Denominator:
       Weighted average shares-Basic          41,409        42,078

Effect of dilutive securities:
       Employee stock options                    367           323
                                             -------       -------
       Weighted average shares-Diluted        41,776        42,401
                                             =======       =======

Basic earnings per share                     $   .45       $   .46
                                             =======       =======

Diluted earnings per share                   $   .45       $   .46
                                             =======       =======
</TABLE>

NOTE G--SUBSEQUENT EVENT

On July 1, 1998, the Company acquired 80% of the equity of Europrint Holdings
Ltd. ("Europrint") and its wholly owned subsidiaries, including Interactive
Games International ("IGI") for a cash purchase price of approximately
$24,500,000. The Company has the option, and in certain circumstances, the
obligation to acquire the remaining 20% of the equity of Europrint and IGI 
within the next five years. Europrint is among the worlds largest providers
of media promotional games and IGI has pioneered the development of interactive,
televised lottery games.

                                      -8-

<PAGE>   9




Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS


Certain statements contained in this section and elsewhere in this report are
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Securities Exchange Act of 1934. Such statements
include, without limitation, statements relating to (i) the future prospects for
and stability of the lottery industry and other businesses that the Company is
engaged in or expects to engage in, (ii) the future operating and financial
performance of the Company, (iii) the ability of the Company to retain existing
business and to obtain and retain new business, and (iv) the results and
effects of legal proceedings and investigations. Such forward-looking
statements reflect management's assessment based on information currently
available, but are not guarantees and are subject to risks and uncertainties
which could cause actual results to differ materially from those contemplated
in the forward-looking statements. These risks and uncertainties include, but
are not limited to, those set forth elsewhere in this report and in the
Company's press releases and its fiscal 1998 Form 10-K and subsequent filings
with the Securities and Exchange Commission.          


General

The Company has derived substantially all of its revenues from the rendering of
services and the sale or supply of computerized on-line lottery systems and
components to government-authorized lotteries. Service revenues have been
derived primarily from service contracts. These contracts are typically of at
least five years' duration, and are generally based upon a percentage of a
lottery's gross on-line lottery sales. These percentages vary depending on the
size of the lottery and the scope of services provided to the lottery. Product
sale revenues have been derived primarily from the installation of new on-line
lottery systems and sales of lottery terminals and equipment in connection with
the expansion of existing lottery systems. The size and timing of these
transactions have resulted in variability in product sales revenues from period
to period. Fiscal 1998 was a significant year for product sales, including a
large product sale to the Massachusetts State Lottery in the first quarter of
fiscal 1998. The Company currently anticipates that product purchases by
lotteries during fiscal 1999 could be lower than the fiscal 1998 level of $122.0
million by as much as 50%.

The Company has taken steps to broaden its offerings of high-volume transaction
processing services outside of its core business of providing on-line lottery
services. For example, the Company's Dreamport subsidiary ("Dreamport")
provides gaming technology and a comprehensive array of management, development
and strategic services to the gaming and entertainment market. 

The Company's business is highly regulated, and the competition to secure new
government contracts is often intense. Awards of contracts to the Company are,
from time to time, challenged by competitors. Further, there have been and
continue to be investigations of various types, including grand jury
investigations, conducted by governmental authorities into possible
improprieties and wrongdoing in connection with efforts to obtain and/or the
awarding of lottery contracts and related matters. Although the Company does not
believe that it has engaged in any wrongdoing in connection with these matters,
certain investigations that are conducted largely in secret are still under way.
Accordingly, the Company lacks sufficient information to determine with
certainty their ultimate scope and whether the government authorities will
assert claims resulting from these or other investigations that could implicate
or reflect adversely upon the Company. Because the Company's reputation for
integrity is an important factor in its business dealings with lottery and other
government agencies, if government authorities were to make 


                                      -9-

<PAGE>   10

an allegation of, or if there were to be a finding of, improper conduct on the
part of or attributable to the Company in any matter, such an allegation or
finding could have a materially adverse effect on the Company's business,
including its ability to retain existing contracts and to obtain new or renewal
contracts. In addition, continuing adverse publicity resulting from these
investigations and related matters could have such a materially adverse effect.
See "Legal Proceedings" in Part II, Item 1 herein; Part I, Item 1 - "Factors
Affecting Future Performance - Maintenance of Business Relationships and Certain
Legal Matters" and Part I, Item 3 - "Legal Proceedings" in the Company's fiscal
1998 annual report on Form 10-K; and Note G to the Consolidated Financial
Statements in the Company's fiscal 1998 annual report on Form 10-K for further
information concerning these matters and other contingencies.

The Company operates on a 52- to 53-week fiscal year ending on the last Saturday
in February. Fiscal 1998 was a 53-week year. The Company included the extra week
for fiscal 1998 in the first quarter of fiscal 1998. Accordingly, there are
thirteen weeks in the quarter ended May 30, 1998, versus fourteen weeks in the
quarter ended May 31, 1997.


Results of Operations

Revenues for the first quarter of fiscal 1999 were $232.3 million, representing
a $12.9 million, or 5.3%, decrease from revenues of $245.2 million in the first
quarter of fiscal 1998.

Service revenues in the fiscal 1999 first quarter were $221.9 million,
representing a $4.0 million, or 1.8%, decrease from the $225.9 million of
service revenues in the first quarter of fiscal 1998. This decrease was
primarily a factor of the extra week of service revenues in the first quarter of
fiscal 1998, along with lower service revenues from the Company's Texas lottery
contract (resulting primarily from lower sales generated by that customer),
partially offset by higher service revenues from the on-line lottery system in
Brazil that was implemented by the Company in fiscal 1998. While the Company's
service revenues in the fiscal 1999 first quarter were impacted in a positive
way by a record breaking Powerball jackpot, the Company's fiscal 1998 first
quarter was similarly impacted by significant jackpot activity in Texas and New
York. After a number of years of growth, the Company has witnessed a slowing in
the sales generated by its U.S. lottery customers. The Company believes that the
overall growth rate for its U.S. lottery customer's sales will be in the 1-3%
range in fiscal 1999. However, there can be no assurance that this will be the
case.

Product sales in the first quarter of fiscal 1999 were $10.4 million, a decrease
of $8.9 million, or 46%, from the $19.3 million of product sales in the first
quarter of fiscal 1998. This decrease resulted primarily from lower central
lottery system, instant ticket validation system and terminal sales in the first
quarter of fiscal 1999 than in the first quarter of fiscal 1998, partially
offset by the recognition of deferred revenues on product sales to Camelot Group
plc ("Camelot") and other members of the U.K. lottery consortium. Prior to the
sale of the Company's investment in Camelot, the Company deferred 22.5% of the
revenues attributable to any product sales to Camelot and the other consortium
members and recognized such deferred revenue over the depreciable life of the
equipment. The sale of the Camelot investment triggered an acceleration in the
recognition of this deferred revenue. The Company sold one new central lottery
system and one new instant ticket validation system in the first quarter of
fiscal 1998 as compared to the absence of such sales in the first quarter of
fiscal 1999. The Company sold approximately 200 lottery terminals in the first
quarter of fiscal 1999 as compared to approximately 1,100 lottery terminals in
the first quarter of fiscal 1998.            

Gross margins on service revenues were 33% in the fiscal 1999 first quarter
compared to 30.6% in the first quarter of fiscal 1998. This increase was due
primarily to lower costs resulting from the restructuring announced in the
fourth quarter of fiscal 1998, partially offset by lower margins realized 


                                      -10-

<PAGE>   11

from certain of the Company's U.S. lottery customers, primarily as a function of
lower sales generated by those customers, along with lower margins relating to
the start-up nature of the on-line lottery in Brazil.

Gross margins on product sales fluctuate due to the mix, volume and timing of
product sales contracts. Gross margins on product sales were 23% in the first
quarter of fiscal 1999 compared to 41.1% in the first quarter of fiscal 1998.
This change reflects the acceleration into the first quarter of fiscal 1999 of
deferred revenue and related cost associated with prior years' product sales to
Camelot and other members of the U.K. lottery consortium, compared to the higher
margin central lottery and instant ticket validation system sales in the first
quarter of fiscal 1998.

Selling, general and administrative expenses in the first quarter of fiscal 1999
were $30.2 million, representing a $5.7 million, or 15.9%, decrease from the
$35.9 million incurred in the first quarter of fiscal 1998. This decrease was
due primarily to cost savings resulting from the restructuring announced in
February 1998, along with lower legal expenses associated with investigations
and legal proceedings. As a percentage of revenues, selling, general and
administrative expenses were 13% and 14.6% during the first quarters of fiscal
1999 and 1998, respectively.

Research and development expenses in the first quarter of fiscal 1999 were $9.6
million, representing a $1.4 million, or 17.4%, increase from research and
development expenses of $8.2 million in the first quarter of fiscal 1998. This
increase reflects costs associated with the continuing development of the
Company's Internet wagering platform. As a percentage of revenues, research and
development expenses were 4.1% and 3.3% during the first quarters of fiscal 1999
and 1998, respectively.

Interest income in the first quarter of fiscal 1999 was $.7 million, a decrease
of $1.1 million from the $1.8 million earned during the first quarter of fiscal
1998. This decrease was due primarily to lower dollar-denominated cash balances
that were on hand in Brazil during the first quarter of fiscal 1999 to fund the
on-line lottery system implementation that was completed in February 1998.

In April 1998, the Company sold its 22.5% equity interest in Camelot to Camelot
for approximately $84.9 million. The book value of the Camelot investment at the
time of sale was approximately $51.8 million. A portion of the cash received by
the Company would have to be returned to Camelot in the event that Camelot loses
its operating license for reasons attributable to the Company. Accordingly, the
Company has deferred the recognition of the gain from the sale of its investment
and will recognize such gain evenly over the remaining period of Camelot's
operating license. The sale of the equity interest does not affect the Company's
position as the principal supplier of goods and services to Camelot, but will
reduce the Company's equity in earnings of unconsolidated affiliates. (Reference
is made to the Company's Report on Form 8-K and 8-K/A filed with the SEC in May
1998 for further information concerning the sale of the Company's equity
interest in Camelot).

Other expense in the first quarter of fiscal 1999 was ($.3) million compared to
other income of $.4 million in the first quarter of fiscal 1998. The change of
$.7 million reflects the timing impact of foreign exchange costs incurred
relating to the marking to market of hedges utilized to protect certain fiscal
1999 European denominated anticipated profit, partially offset by the
amortization of the gain on the sale of the Camelot investment.

Interest expense in the first quarter of fiscal 1999 was $7.5 million, an
increase of $.8 million over the $6.7 million incurred during the first quarter
of fiscal 1998. This increase was due primarily to higher average interest
rates, partially offset by lower average debt balances and the impact of the
extra week in the first quarter of fiscal 1998.

The Company's effective income tax rate increased from 40% in the first quarter
of fiscal 1998 to 42% in the first quarter of fiscal 1999 due principally to the
loss of the tax benefit associated with U.K. equity 


                                      -11-

<PAGE>   12

earnings that were reported on an after-tax basis. The Company's effective
income tax rate is greater than the statutory rate due primarily to state
income taxes and certain expenses that are not deductible for income tax
purposes.

Special Charge

In the fourth quarter of fiscal 1998 the Company's Board of Directors approved a
plan of reorganization and restructuring of the Company's operations (the
"Plan"). The Company estimated and recorded a $99,382,000 special charge
($60,623,000 after-tax) in connection with the Plan. The major components of the
Plan consisted of the sale of electronic benefit transfer (EBT) contracts and
certain related assets held by the Company's Transactive subsidiary
("Transactive"), contractual obligations in connection with the departures of
the Company's former Chairman and Vice Chairman from the Company, legal costs in
connection with the Branson litigation and judgment in the U.K., asset
impairment charges relating to two of the Company's lottery contracts and a
worldwide workforce reduction to eliminate a total of approximately 800 company
positions worldwide. See Note P to the Consolidated Financial Statements in the
Company's fiscal 1998 annual report on Form 10-K for further information.

The sale of EBT contracts and certain related assets held by Transactive is
subject to the consents of the applicable state contract parties and to
regulatory approvals, including the U.S. Department of Justice which is
reviewing the transaction and may challenge it. The Company expects to receive a
decision from the Department of Justice in July 1998. The special charge assumed
that requisite customer and regulatory approvals would be received. As of June
25, 1998, the Company has received consents from two of the four state contract
parties. In the event that some or all approvals are not received, the
transaction may not be able to be consummated and/or an additional charge may be
required.


Impact of Year 2000

Many computer programs, including those used by the Company and its suppliers
and customers, use only two digits to identify a year and were not designed to
handle years beginning after 1999. These programs, including some that are
critical to the Company's operations, could fail to properly process data that
contain dates after 1999 unless they are modified or replaced. The Company has
undertaken a worldwide effort to test its various computer software programs
(both those used internally and those provided to customers) in order to
complete the necessary modifications by August 1999 (the "Year 2000 Project").
In addition, the Company has initiated formal communications with all of its
significant suppliers and customers to determine the Company's vulnerability to
those third parties' failure to upgrade their own software for Year 2000 issues.

The total cost to the Company of the Year 2000 Project is estimated at $15
million. Of this amount, it is anticipated that $10 million will be spent on
new hardware and software that will be capitalized and the remaining $5 million
will be expensed as incurred. Expenditures to date have not been significant.
The cost of the Year 2000 Project and the date that the Company believes it
will complete the Year 2000 modifications are based on management's best
estimates. These estimates were derived utilizing numerous assumptions of
future events, including the continued availability of certain resources, third
party modification plans, and other factors. The Company believes it is on
track to resolve this issue in a timely fashion without having a materially
adverse effect on its business, operations or financial condition, but there
can be no assurance that this will be the case.

Strategies

The Company currently is evaluating a number of possible alternatives to
increase shareholder value. Such alternatives include, but are not limited to,
increasing debt and expanding the share repurchase program while 
    

                                      -12-

<PAGE>   13

focusing on the Company's core gaming and entertainment business; making
strategic non-gaming acquisitions that would allow the Company to leverage its
strengths in data communications and high volume transaction processing; and
taking the company private through a leveraged buy out. Under certain
alternatives, the Company may consider a recapitalization that would involve
higher debt and a substantial reduction in equity. Every alternative would
include continued commitment to the core business. The Company expects to
complete its evaluation of these and other strategic alternatives by the end of
September 1998. However, there can be no assurance that such timetable will be
met or that any such actions or transactions will actually be consummated.


Changes in Financial Position, Liquidity and Capital Resources

During the first quarter of fiscal 1999, the Company generated $51.5 million of
cash from operations. This cash, together with $84.9 million of cash received
from the sale of the Company's investment in Camelot, was used to pay down the
Credit Facility and to fund the purchase of $47.1 million of systems, equipment
and other assets relating to contracts and the repurchase of $4.7 million of the
Company's common stock.

Trade accounts receivable decreased by $11.8 million, from $93.8 million at
February 28, 1998 to $82 million at May 30, 1998, due primarily to the lower
level of product sales in the first quarter of fiscal 1999 compared to the
fourth quarter of fiscal 1998.

The cost of systems, equipment and other assets relating to contracts increased
by $37.1 million, from $1,204.6 million at February 28, 1998 to $1,241.7 million
at May 30, 1998. This increase reflects the continuing installation of new
lottery systems for lotteries in Michigan and the Czech Republic and the
expansion of lottery systems in several domestic and international locations.

Investment in and advances to Unconsolidated Affiliates decreased by $52.4
million, from $64.8 million at February 28, 1998 to $12.4 million at May 30,
1998, due primarily to the sale of the Company's investment in Camelot.

Accounts payable decreased by $5.9 million, from $39.5 million at February 28,
1998 to $33.6 million at May 30, 1998, due primarily to lower inventory and the
current lower volume of ongoing lottery and benefits delivery system
installations.

Accrued expenses decreased by $10.6 million, from $56.9 million at February 28,
1998 to $46.3 million at May 30, 1998, due primarily to the timing of
semi-annual interest payments on the Company's Senior Notes along with lower
deferred revenue relating to certain of the Company's lottery contracts.

Special charge decreased by $16.8 million, from $33.6 million at February 28,
1998 to $16.8 million at May 30, 1998, due to approximately $14.2 million of
severance and related payments.

Accrued employee compensation decreased by $14.2 million, from $25.6 million at
February 28, 1998 to $11.4 million at May 30, 1998, due primarily to the payment
of fiscal 1998 management bonuses and employee profit sharing.

Advance payments from customers increased by $11.7 million, from $.5 million at
February 28, 1998 to $12.2 million at May 30, 1998. This increase reflects the
current portion of the deferred gain from the sale of the Company's investment
in Camelot.


                                      -13-

<PAGE>   14

Long-term debt decreased by $80 million, from $453.6 million at February 28,
1998 to $373.6 million at May 30, 1998, due primarily to the proceeds received
from the sale of the Company's investment in Camelot that were utilized to
reduce the Credit Facility.

Other liabilities increased by $19.6 million, from $19.2 million at February 28,
1998 to $38.8 million at May 30, 1998. This increase reflects the long-term
portion of the deferred gain from the sale of the Company's investment in
Camelot.

The Company's business is capital-intensive. Although it is not possible to
estimate precisely, due to the nature of the business, the Company currently
anticipates that the level of capital expenditures for systems, equipment and
other assets relating to contracts required during fiscal 1999 will be in a
range of $160.0 million to $210.0 million. The principal sources of liquidity
for the Company are expected to be cash generated from operations and borrowings
under the Company's Credit Facility. As of July 4, 1998 the Company had utilized
approximately $84.5 million of its $400 million Credit Facility. The Company
currently expects that its cash flow from operations and available borrowings
under its Credit Facility, together with other sources of capital believed to be
available, will be sufficient to permit it to meet its anticipated working
capital and ordinary capital expenditure needs, to service its debt obligations
and to permit it to fund anticipated internal growth.

On July 1, 1998, the Company acquired 80% of the equity of Europrint Holdings
Ltd. ("Europrint") and its wholly owned subsidiaries, including Interactive
Games International ("IGI") for a cash purchase price of approximately
$24,500,000. The Company has the option, and in certain circumstances, the
obligation to acquire the remaining 20% of the equity of Europrint and IGI
within the next five years. Europrint is among the worlds largest providers of
media promotional games and IGI has pioneered the development of interactive,
televised lottery games. 

Inflation, Interest Rates and Foreign Exchange Fluctuation

The impact of inflation on the Company's operations has not been significant to
date. While the Company believes that its business is not highly sensitive to
inflation, there can be no assurance that a high rate of inflation in the future
would not have an adverse effect on the Company's operations, particularly in
emerging markets such as Brazil. The Company has historically used the U.S.
dollar as the functional currency for its operations in Brazil due to the high
levels of inflation in the Brazilian economy. The Company began using the local
currency in Brazil as the functional currency on March 1, 1998 because of the
significant reduction in the rate of inflation in Brazil. The change in
functional currency is not expected to materially affect the Company's
operations. At May 30, 1998, the net book value of the Company's investments in
Brazil was approximately $179 million.

The Company uses various techniques to reduce the risk associated with future
increases in interest rates, including the issuance of seven- and ten-year fixed
rate debt on May 29, 1997, in a private placement.

The Company attempts to manage its foreign exchange risk by securing payment
from its customers in U.S. dollars, by sharing risk with its customers, by
utilizing foreign currency borrowings, by leading and lagging receipts and
payments and by entering into foreign currency exchange contracts. In addition,
a significant portion of the costs attributable to the Company's foreign
currency revenues is incurred in the local currencies.

The Company, from time to time, enters into foreign currency exchange and option
contracts to reduce the exposure associated with certain firm sales commitments,
anticipated local currency margin and certain assets and liabilities denominated
in foreign currencies. The Company does not engage in currency speculation.
Unrealized gains and losses on contracts that hedge specific foreign currency
commitments are deferred and accounted for as part of the transaction being
hedged. Contracts used to hedge local currency margin and certain assets and
liabilities are marked to market with the resulting transaction gains or losses
included in other income. As of July 4, 1998, the Company had approximately 
$99.1 million of outstanding foreign currency exchange contracts to purchase
foreign currencies (primarily pounds Sterling) and approximately $93.4 million
of outstanding foreign currency exchange and option contracts to sell foreign
currencies (primarily pounds Sterling, Spanish Pesetas, Brazilian Reals and
Australian dollars).


                                      -14-

<PAGE>   15

Item 3.       Quantitative and Qualitative Disclosures about Market Risk

              Not Applicable


PART II.  OTHER INFORMATION

Item 1.       LEGAL PROCEEDINGS

For information respecting legal proceedings, refer to Items 1 and 3 of, and
Note G of Notes to Consolidated Financial Statements included in, the Company's
fiscal 1998 Annual Report on Form 10-K and to Part I, Item 2, "Management's
Discussion and Analysis of Financial Condition and Results of Operations", of
this report.

Regarding U.S. v. J. David Smith, U.S. District Court for the District of New
Jersey, which is discussed under "Factors Affecting Future Performance--
Maintenance of Business Relationships and Certain Legal Matters" in Part I,
Item I of the Company's 1998 Form 10-K, Mr. Smith still has not been sentenced
respecting the October 1996 jury verdict against him. In May and again in June
1998, the New Jersey Federal Court heard oral arguments on Mr. Smith's motion
for a new trial and a decision by the Court on this motion is anticipated
shortly.    


Item 2.       CHANGES IN SECURITIES

(c)  During the quarter, 1,438 shares of the Company's unregistered common stock
     vested under stock award plans. Pursuant to the terms of these plans the
     shares were issued with no cash consideration to the Company. Registration
     of such shares was not required because the transaction did not constitute
     a "sale" under Section 2 (3) of the Securities Act of 1933 or,
     alternatively, the transaction was exempt pursuant to the private offering
     provisions of the Act and the rules thereunder.


Item 6.       EXHIBITS AND REPORTS ON FORM 8-K

        (a) Exhibits - The exhibits to this report are as follows:

            10   GTECH Holdings Corporation 1998 Non-Employee Directors' 
                 Stock Election Plan (incorporated by reference to Exhibit 4.2
                 to the Form S-8 of GTECH Holdings Corporation, Registration
                 Number 333-57781)*
            27   Financial Data Schedule - May 30, 1998 
            27.1 Financial Data Schedule - May 31, 1997

        (b) The Company filed Reports on Form 8-K and 8-K/A with the SEC on May
            5, 1998 concerning the sale of the Company's equity interest in
            Camelot

        *   Indicates a management contract or compensatory plan or
            arrangement.


                                      -15-

<PAGE>   16


                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                 GTECH HOLDINGS CORPORATION



Date July 13, 1998               By   /s/  Thomas J. Sauser
                                 -----------------------------------------------
                                 Thomas J. Sauser, Senior Vice President & Chief
                                 Financial Officer (Principal Financial Officer)


Date July 13, 1998               By   /s/  Robert J. Plourde
                                 -----------------------------------------------
                                 Robert J. Plourde, Vice President and Corporate
                                 Controller (Principal Accounting Officer)



                                      -16-