<PAGE>   1
================================================================================

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

                                    FORM 10-Q

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

                     FOR THE QUARTER ENDED DECEMBER 31, 1999

                                       OR

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

               FOR THE TRANSITION PERIOD FROM                 TO

                          COMMISSION FILE NUMBER 0-4281

                           ALLIANCE GAMING CORPORATION
             (Exact name of registrant as specified in its charter)

                 NEVADA                                88-0104066
     (State or other jurisdiction of                (I.R.S. Employer
     incorporation or organization)                Identification No.)

           6601 S. BERMUDA RD.
            LAS VEGAS, NEVADA                            89119
 (Address of principal executive offices)              (Zip Code)

                  REGISTRANT'S TELEPHONE NUMBER: (702) 270-7600

                                   ----------

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. [X] Yes [ ] No

The number of shares of Common Stock, $0.10 par value, outstanding as of
February 1, 2000 according to the records of the registrant's registrar and
transfer agent was 10,336,272.

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

<PAGE>   2
                           ALLIANCE GAMING CORPORATION
                                    FORM 10-Q

                     FOR THE QUARTER ENDED DECEMBER 31, 1999

                                      INDEX

<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION                                                       PAGE
<S>                                                                                 <C>
Item 1. Unaudited Financial Statements

        Unaudited Condensed Consolidated Balance Sheets as of June 30, 1999
             and December 31, 1999                                                    3

        Unaudited Condensed Consolidated Statements of Operations
             for the three months ended December 31, 1998 and 1999                    4

        Unaudited Condensed Consolidated Statements of Operations
             for the six months ended December 31, 1998 and 1999                      5

        Unaudited Condensed Consolidated Statements of Stockholders' Deficiency
             for the six months ended December 31, 1999                               6

        Unaudited Condensed Consolidated Statements of Cash Flows
             for the six months ended December 31, 1998 and 1999                      7

        Notes to Unaudited Condensed Consolidated Financial Statements                8

Item 2. Management's Discussion and Analysis of Financial Condition and Results
             of Operations                                                           25

Item 3. Quantitative and Qualitative Disclosures About Market Risk                   36


PART II.   OTHER INFORMATION

Item 1. Legal Proceedings                                                            36

Item 4. Submission of Matters to a Vote of Security Holders                          36

Item 6. Exhibits and Reports on Form 8-K                                             36


SIGNATURES                                                                           37
</TABLE>


                                       2
<PAGE>   3
                                     PART 1

                           ALLIANCE GAMING CORPORATION
                 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
                          (In 000's, except share data)

<TABLE>
<CAPTION>
                                                                               June 30,        Dec. 31,
                                                                                 1999            1999
                                                                              ---------       ---------
<S>                                                                           <C>             <C>
ASSETS
Current assets:
  Cash and cash equivalents                                                   $  16,930       $  27,952
  Accounts and notes receivable, net of allowance for doubtful
    accounts of $12,705 and $13,369                                              92,665          84,232
  Inventories, net of reserves of $7,077 and $6,192                              46,138          47,209
  Other current assets                                                           11,423          11,381
                                                                              ---------       ---------
    Total current assets                                                        167,156         170,774
                                                                              ---------       ---------
Long-term notes receivable, net of allowance for doubtful
  accounts of $991 and $945                                                       5,782           5,005
Leased equipment, net of accumulated depreciation of $5,111 and $7,256           10,981          17,822
Property, plant and equipment, net of accumulated depreciation
     of $51,686 and $56,235                                                      74,159          77,351
Excess of costs over net assets of acquired businesses, net of
  accumulated amortization of $4,604 and $5,555                                  57,593          56,494

Intangible assets, net of accumulated amortization of $18,351 and $20,946        26,854          24,888
Other assets, net reserves of $3,468 and $1,883                                  13,782          13,571
                                                                              ---------       ---------
        Total assets                                                          $ 356,307       $ 365,905
                                                                              =========       =========

LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
  Accounts payable                                                            $  17,372       $  17,853
  Accrued liabilities                                                            39,196          33,573
  Current maturities of long-term debt                                            1,927           1,055
                                                                              ---------       ---------
     Total current liabilities                                                   58,495          52,481
                                                                              ---------       ---------
Term loan facilities                                                            134,096         131,937
Senior Subordinated Notes due 2007, net                                         149,298         149,324
Other long-term debt, less current maturities                                    33,385          59,970
Other liabilities                                                                 9,458           9,321
                                                                              ---------       ---------
        Total liabilities                                                       384,732         403,033
                                                                              ---------       ---------

Minority interest                                                                 1,983           1,338
Commitments and contingencies
Stockholders' deficiency:
  Special Stock, 10,000,000 shares authorized:
      Series E, $100 liquidation value; 153,802 shares and 47,242
        shares issued and outstanding                                            15,380           4,624
  Common Stock, $.10 par value; 50,000,000 shares authorized;
      9,791,000 and 10,335,000 shares issued and outstanding                        979           1,034
  Treasury stock at cost, 85,300 shares and 83,000 shares                          (522)           (508)
  Additional paid-in capital                                                    129,991         141,130
  Accumulated other comprehensive loss                                          (15,986)        (17,765)
  Accumulated deficit                                                          (160,250)       (166,981)
                                                                              ---------       ---------
    Total stockholders' deficiency                                              (30,408)        (38,466)
                                                                              ---------       ---------
               Total liabilities and stockholders' deficiency                 $ 356,307       $ 365,905
                                                                              =========       =========
</TABLE>

       See notes to unaudited condensed consolidated financial statements.


                                       3
<PAGE>   4
                           ALLIANCE GAMING CORPORATION
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                        (In 000's, except per share data)

<TABLE>
<CAPTION>
                                                         Three Months Ended
                                                             December 31,
                                                       -------------------------
                                                         1998            1999
                                                       ---------       ---------
<S>                                                    <C>             <C>
Revenues:
    Gaming equipment and systems                       $  22,499       $  30,591
    Wall machines and amusement games                     23,769          19,542
    Route operations                                      42,750          48,240
    Casino operations                                     14,892          16,114
                                                       ---------       ---------
                                                         103,910         114,487
                                                       ---------       ---------
Costs and expenses:
    Cost of gaming equipment and systems                  13,394          17,893
    Cost of wall machines and amusement games             14,674          11,157
    Cost of route operations                              33,516          38,007
    Cost of casino operations                              6,504           6,562
    Selling, general and administrative                   27,866          27,867
    Research and development                               3,976           3,329
    Depreciation and amortization                          5,757           6,701
    Unusual items                                             --             526
                                                       ---------       ---------
                                                         105,687         112,042
                                                       ---------       ---------
Operating (loss) income                                   (1,777)          2,445

Other income (expense):
    Interest income                                          141             112
    Interest expense                                      (7,502)         (8,715)
    Minority interest                                       (509)           (459)
    Other, net                                              (355)           (381)
                                                       ---------       ---------
Loss before income taxes                                 (10,002)         (6,998)

Income tax benefit (provision)                               245            (178)
                                                       ---------       ---------
Net loss                                                  (9,757)         (7,176)

Special Stock dividends                                     (418)             --
                                                       ---------       ---------
Net loss applicable to common shares                   $ (10,175)      $  (7,176)
                                                       =========       =========
Basic and diluted loss per share:                      $   (1.04)      $   (0.70)
                                                       =========       =========
Weighted average common shares outstanding                 9,789          10,252
                                                       =========       =========
Weighted average common and common
     share equivalents outstanding                         9,789          10,252
                                                       =========       =========
</TABLE>

       See notes to unaudited condensed consolidated financial statements.

                                       4
<PAGE>   5
                           ALLIANCE GAMING CORPORATION
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                        (In 000's, except per share data)

<TABLE>
<CAPTION>
                                                          Six Months Ended
                                                             December 31,
                                                       -------------------------
                                                         1998            1999
                                                       ---------       ---------
<S>                                                    <C>             <C>
Revenues:
    Gaming equipment and systems                       $  44,441       $  70,375
    Wall machines and amusement games                     44,380          34,218
    Route operations                                      82,754          94,292
    Casino operations                                     31,106          32,804
                                                       ---------       ---------
                                                         202,681         231,689
                                                       ---------       ---------
Costs and expenses:
   Cost of gaming equipment and systems                   25,234          39,986
   Cost of wall machines and amusement games              26,742          21,111
   Cost of route operations                               64,645          74,655
   Cost of casino operations                              13,320          13,181
   Selling, general and administrative                    48,903          51,485
   Research and development                                8,145           6,878
   Depreciation and amortization                          11,159          13,025
   Unusual items                                              --             526
                                                       ---------       ---------
                                                         198,148         220,847
                                                       ---------       ---------
Operating income                                           4,533          10,842

Other income (expense):
    Interest income                                          373             226
    Interest expense                                     (15,405)        (16,492)
    Minority interest                                     (1,048)           (927)
    Other, net                                              (547)           (125)
                                                       ---------       ---------
Loss before income taxes                                 (12,094)         (6,476)
Income tax (provision) benefit                                61            (255)
                                                       ---------       ---------
Net loss                                                 (12,033)
                                                                          (6,731)

Special Stock dividends                                     (824)             --
                                                       ---------       ---------
Net loss applicable to common shares                   $ (12,857)      $  (6,731)
                                                       =========       =========
Basic and diluted loss per share:
                                                       $   (1.34)      $   (0.66)

Weighted average common shares outstanding                 9,607          10,204
                                                       =========       =========
Weighted average common and common
   share equivalents outstanding                           9,607          10,204
                                                       =========       =========
</TABLE>

       See notes to unaudited condensed consolidated financial statements.

                                       5
<PAGE>   6
                           ALLIANCE GAMING CORPORATION
     UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
                       Six Months Ended December 31, 1999
                                   (In 000's)

<TABLE>
<CAPTION>
                                                                                                                           Total
                                                                                            Accumulated                    Stock-
                                   Common Stock       Series E                Additional       Other                      holders'
                                 -----------------    Special     Treasury      Paid-in    Comprehensive   Accumulated     Equity
                                 Shares    Dollars     Stock        Stock       Capital         Loss         Deficit    (Deficiency)
                                 ------    -------    --------    --------    ----------   -------------   ----------   ------------
<S>                              <C>       <C>        <C>         <C>         <C>          <C>              <C>         <C>
Balances at June 30, 1999         9,791     $  979    $ 15,380      $(522)     $ 129,991      $(15,986)     $(160,250)    $(30,408)

Net loss                             --         --          --         --             --            --         (6,731)      (6,731)
Treasury shares issued upon
  exercise of options                --         --          --         14             (4)           --             --           10
Special Stock dividends              --         --         442         --             --            --             --          442
Shares issued upon conversion
  of Special Stock                  544         55     (11,198)        --         11,143            --             --           --
Foreign currency translation
  adjustment                         --         --          --         --             --        (1,779)            --       (1,779)
                                 ------     ------    --------      -----      ---------      --------      ---------     --------
Balances at December 31, 1999    10,335     $1,034    $  4,624      $(508)     $ 141,130      $(17,765)     $(166,981)    $(38,466)
                                 ======     ======    ========      =====      =========      ========      =========     ========
</TABLE>

       See notes to unaudited condensed consolidated financial statements.

                                       6
<PAGE>   7
                           ALLIANCE GAMING CORPORATION
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (In 000's)

<TABLE>
<CAPTION>
                                                                             Six Months Ended
                                                                                December 31,
                                                                          ------------------------
                                                                            1998           1999
                                                                          --------       ---------
<S>                                                                       <C>            <C>
Cash flows from operating activities:
   Net loss                                                               $(12,033)      $ (6,731)
   Adjustments to reconcile net loss to net
    cash provided by (used in) operating activities:
      Depreciation and amortization                                         11,159         13,025
      Amortization of debt discounts                                            26             26
      Write down of other assets                                               523            591
      Gain on sale of assets                                                   (25)        (1,056)
      Provision for losses on doubtful receivables                             922          2,433
      Other                                                                  1,293           (656)
   Net change in operating assets and liabilities:
      Accounts and notes receivable                                         13,949          5,549
      Inventories                                                           (6,551)       (11,687)
      Other current assets                                                   3,394            (32)
      Accounts payable                                                       2,603            525
      Accrued liabilities                                                   (4,422)        (5,422)
                                                                          --------       --------
        Net cash provided by (used in) operating activities                 10,838         (3,435)

Cash flows from investing activities:
   Additions to property, plant and equipment                               (5,476)        (9,769)
   Proceeds from disposal of property and equipment and other assets            83          1,082
   Proceeds from sale/leaseback transaction                                     --            971
   Additions to other long term assets                                      (3,216)        (1,928)
                                                                          --------       --------
     Net cash used in investing activities                                  (8,609)        (9,644)

Cash flows from financing activities:
   Reduction of long-term debt                                              (4,099)        (3,291)
   Net change in lines of credit                                            (6,200)        27,511
   Proceeds from exercise of stock options and warrants                      4,778             10
                                                                          --------       --------
     Net cash (used in) provided by financing activities                    (5,521)        24,230

Effect of exchange rate changes on cash                                        323           (130)

Cash and cash equivalents:
     (Decrease) increase for period                                         (2,969)        11,022
     Balance, beginning of period                                           23,487         16,930
                                                                          --------       --------
     Balance, end of period                                               $ 20,518       $ 27,952
                                                                          ========       ========
</TABLE>

       See notes to unaudited condensed consolidated financial statements.


                                       7
<PAGE>   8
                           ALLIANCE GAMING CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                   SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999


1.   BASIS OF PRESENTATION

     The accompanying unaudited interim condensed consolidated financial
     statements reflect all adjustments, consisting of normal recurring
     adjustments, which management believes are necessary to present fairly the
     financial position, results of operations and cash flows of Alliance Gaming
     Corporation ("Alliance" or the "Company") for the respective periods
     presented. The results of operations for an interim period are not
     necessarily indicative of the results which may be expected for any other
     interim period or for the year as a whole. The accompanying unaudited
     interim condensed consolidated financial statements should be read in
     conjunction with the consolidated financial statements and notes in the
     Company's annual report on Form 10-K as amended for the year ended June 30,
     1999. All intercompany accounts and transactions have been eliminated in
     consolidation.

     The accompanying condensed consolidated financial statements at June 30,
     1999 were derived from audited consolidated financial statements, but do
     not include all disclosures required under generally accepted accounting
     principles. Certain reclassifications have been made to prior period
     financial statements to conform with current period presentation.

2.   INVENTORIES

     Inventories are stated at the lower of cost, determined on a first-in,
     first-out basis, or market. Cost elements included for work-in-process and
     finished goods include raw materials, freight, direct labor and
     manufacturing overhead.

     Inventories, net of reserves, consist of the following at June 30, 1999 and
     December 31, 1999:

<TABLE>
<CAPTION>
                                                June 30,            Dec. 31,
                                                 1999                1999
                                                -------             -------
                                                        (in 000's)
<S>                                             <C>                 <C>
     Raw materials                              $16,676             $17,906
     Work-in-process                              2,057               1,060
     Finished goods                              27,405              28,243
                                                -------             -------
            Total inventories                   $46,138             $47,209
                                                =======             =======
</TABLE>


                                       8
<PAGE>   9
                           ALLIANCE GAMING CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                   SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999


3.   DEBT, LINES OF CREDIT

     Long-term debt at June 30, 1999 and December 31, 1999 consists of the
     following:

<TABLE>
<CAPTION>
                                                                           June 30,            Dec. 31,
                                                                             1999               1999
                                                                           --------            --------
                                                                                    (in 000's)
<S>                                                                        <C>                 <C>
     10% Senior Subordinated Notes due 2007, net of unamortized
          discount of $702,000 and $676,000                                $149,298            $149,324
     Term loan facilities:
         Tranche B Term Loan                                                 72,380              70,775
         Tranche C Term Loan                                                 38,744              37,869
         Delayed Draw Term Facility                                          24,372              23,833
     Revolving Credit Facility                                               32,200              59,069
     Other, secured by related equipment                                      1,712               1,416
                                                                           --------            --------
                                                                            318,706             342,286
     Less current maturities                                                  1,927               1,055
                                                                           --------            --------
     Long-term debt, less current maturities                               $316,779            $341,231
                                                                           ========            ========
</TABLE>

     In August 1997 the Company completed a refinancing transaction whereby the
     Company repaid its 12 7/8% Senior Notes, repurchased its 15% Series B
     Special Stock, and issued $150 million of Senior Subordinated Notes and
     entered into bank financing of $230 million. The bank financing provides
     for (i) term loans in the aggregate amount of up to $140 million, comprised
     of a $75 million tranche with a 7 1/2-year term (the "Tranche B Term
     Loan"), a $40 million tranche with an 8-year term (the "Tranche C Term
     Loan"), and a $25 million tranche with a 7 1/2-year term (the "Delayed Draw
     Term Facility" and together with the Tranche B Term Loan and the Tranche C
     Term Loan, the "Term Loan Facilities"); and (ii) a $90 million revolving
     credit facility (the "Revolving Credit Facility") with a 6-year term. Each
     of these credit facilities are variable rate borrowings in accordance with
     a credit grid. The interest rates which are currently at the highest level
     of the credit grid and maturity dates are as follows:

<TABLE>
<CAPTION>
                                           Interest              Maturity
                                            Rates                  Date
                                         ------------        ----------------
<S>                                      <C>                 <C>
     Tranche B Term Loan                 LIBOR + 3.25%       January 31, 2005
     Tranche C Term Loan                 LIBOR + 3.50%          July 31, 2005
     Delayed Draw Term Facility          LIBOR + 3.25%       January 31, 2005
     Revolving Credit Facility           LIBOR + 2.75%          July 31, 2003
</TABLE>

     The Revolving Credit Facility also allows for German Deutschemark
     borrowings at the euro deutschmark rate plus 2.75% (or 6.0% at December 31,
     1999). In an amendment to the bank credit agreement in October 1999, the
     Company has agreed to keep the interest rate at the highest level of the
     credit grid through December 31, 2000.

     The bank facility is collateralized by substantially all domestic property
     and is guaranteed by each domestic subsidiary of the U.S. Borrower and
     German Subsidiaries (both as defined), other than the entity which holds
     the Company's interest in its Louisiana operations and other non-material
     subsidiaries (as defined), and secured by both a U.S. and German Pledge
     Agreement (both as defined). The bank facility contains a number of
     maintenance covenants and it and the Senior Subordinated Note Indenture
     have other significant covenants that, among other things, restrict the
     ability of the Company and certain of its subsidiaries to dispose of
     assets, incur additional indebtedness and issue preferred stock, pay
     dividends or make other distributions, enter into certain acquisitions,
     repurchase equity interests (as defined) or subordinated indebtedness,
     issue or sell equity interests of the Company's subsidiaries (as defined),
     engage in mergers or acquisitions, or engage in certain transactions with
     subsidiaries and affiliates, and that otherwise restrict corporate
     activities.

                                       9
<PAGE>   10
                           ALLIANCE GAMING CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                   SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999


     To facilitate the disposition of non-core businesses, the Company has
     obtained an amendment to its bank credit agreement. The amendment provides
     the lenders' consent to sell the businesses at specified minimum prices by
     December 31, 2000 and provides other financial flexibility to the Company.
     The bank amendment also provides that if the Company should elect to sell
     any of its non-core businesses, any restructuring charges that may be
     incurred as a result of the sales may be excluded from the determination of
     EBITDA used in the calculation of the various financial covenant ratios. In
     addition, the bank amendment provides that any restructuring charges that
     may be incurred at Bally Wulff or Bally Gaming and Systems (up to $1.5
     million) may be excluded from the determination of EBITDA used in the
     calculation of the various financial covenant ratios.

     The Senior Subordinated Notes bear interest at 10%, are due in 2007, and
     are general unsecured obligations of the Company, ranking subordinate in
     right of payment to all Senior Debt (as defined) of the Company, including
     indebtedness under the bank financing. The Senior Subordinated Notes will
     be fully and unconditionally guaranteed on a joint and several senior
     subordinated basis by all existing and future domestic Restricted
     Subsidiaries (as defined) of the Company, subject to certain exceptions
     including the partially-owned entities through which its Mississippi casino
     and Louisiana route operations are conducted. The Subsidiary Guarantees (as
     defined) are general unsecured obligations of the Guarantors, ranking
     subordinate in right of payment to all Senior Debt of the Guarantors. The
     Company will be able to designate other current or future subsidiaries as
     Unrestricted Subsidiaries (as defined) under certain circumstances.
     Unrestricted Subsidiaries will not be required to issue a Subsidiary
     Guarantee and will not be subject to many of the restrictive covenants set
     forth in the Indenture pursuant to which the Senior Subordinated Notes were
     issued. The Indenture for the Company's Senior Subordinated Notes contains
     various covenants, including limitations on incurrence of additional
     indebtedness, on restricted payments and on dividend and payment
     restrictions on subsidiaries. The Senior Subordinated Notes may not be
     redeemed for the first five years. Upon an occurrence of a Change of
     Control (as defined), the holders of the Senior Subordinated Notes will
     have the right to require the Company to purchase their notes at a price
     equal to 101% of the aggregate principal amount thereof, plus accrued and
     unpaid interest to the date of such purchase.

4.   INCOME TAXES

     The Company's effective tax rate for the three and six months ended
     December 31, 1998 and 1999 differs from the statutory rate of 35% due to
     state income taxes and the impact of taxes applicable to earnings of Bally
     Wulff. In addition, earnings at the Company's domestic subsidiaries cannot
     be fully offset by the utilization of net operating loss carryforwards, and
     there has been no tax benefit recorded for the Company's domestic
     subsidiaries with net operating losses.

5.   SUPPLEMENTAL CASH FLOW INFORMATION

     The following supplemental information is related to the unaudited
     condensed consolidated statements of cash flows. For the six months ended
     December 31, 1998 and 1999, the Company recorded the following significant
     non-cash items:

<TABLE>
<CAPTION>
                                                                         Six months ended
                                                                           December 31,
                                                                        -------------------
                                                                         1998        1999
                                                                        ------      -------
                                                                            (In 000's)
<S>                                                                     <C>         <C>
     Reclassify other assets to property, plant and
      equipment                                                         $  242      $   217
     Dividends for Series E Special Stock                                  824          442
     Reclassify inventory to equipment                                   2,842       10,170
     Translation rate adjustment                                         5,911        1,649
     Capitalized obligation incurred in acquisition of route asset         652           --
     Conversion of Series E Special Stock into common shares                --       11,198
     Deferred gain on sale/leaseback transaction                            --          484
</TABLE>


                                       10
<PAGE>   11
                           ALLIANCE GAMING CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                   SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999


6.   LEGAL PROCEEDINGS

     LITIGATION

     On September 25, 1995, BGII was named as a defendant in a class action
     lawsuit filed in federal District Court in Nevada, by Larry Schreirer on
     behalf of himself and all others similarly situated. The plaintiffs filed
     suit against BGII and approximately 45 other defendants. Each defendant is
     involved in the gaming business as either a gaming machine manufacturer,
     distributor, or casino operator. The class action lawsuit arises out of
     alleged fraudulent marketing and operation of casino video poker machines
     and electronic slot machines. The plaintiffs allege that the defendants'
     actions constitute violations of the Racketeer Influenced and Corrupt
     Organizations Act (RICO) and give rise to claims of common law fraud and
     unjust enrichment. The plaintiffs are seeking monetary damages in excess of
     $1.0 billion, and are asking that any damage awards be trebled under
     applicable Federal law. Management believes the plaintiffs' lawsuit to be
     without merit. The Company intends to vigorously pursue all legal defenses
     available to it.

     On July 20, 1999, Bally Gaming, Inc., sued International Game Technology in
     the United States District Court for the District of New Jersey. The suit
     alleged that provisions in IGT's contracts with Atlantic City casinos
     barred the casinos from acquiring progressive systems from IGT's
     competitors, thereby preserving IGT's monopoly in the lucrative Atlantic
     City progressive market, violating federal and state antitrust laws and
     common law policies against unfair competition and restraints of trade, and
     frustrating Bally's efforts to launch its Thrillions wide-area progressive
     system in Atlantic City. The lawsuit sought declaratory and injunctive
     relief, compensatory damages, and other relief. The parties entered into a
     settlement pursuant to which IGT has notified its Atlantic City customers
     that it will not enforce the challenged contract provisions, and Bally
     dismissed the suit.

     On August 30, 1999, Cardivan Company, a subsidiary of Jackpot Enterprises,
     Inc., filed an action in federal court in Nevada against Raley's and
     Albertson's, Inc., in which Cardivan sought to forestall the loss of its
     slot machine operations at fifteen Albertson's grocery stores in the Las
     Vegas area after Albertson's, Cardivan's customer, sold the stores to
     Raley's, with whom Alliance subsidiary United Coin Machine Co. has an
     exclusive contract. The federal court granted a preliminary injunction
     allowing Cardivan to continue operating machines at Raley's before trial,
     effectively preventing United Coin, though not a party to the lawsuit, from
     operating its machines there pursuant to its contract with Raley's. After
     the federal court granted the preliminary injunction, Anchor Gaming moved
     to intervene and to have the preliminary injunction extended to prohibit
     Raley's from removing Anchor's slot machines at four other stores that
     Albertson's sold to Raley's. The federal court granted the motion, allowing
     Anchor to intervene. United Coin likewise moved to intervene, but the court
     denied the motion. Raley's and Albertson's motions for summary judgment
     were heard on November 10, 1999, and trial was set on an expedited basis
     for December 7, 1999. United Coin appealed the federal court's denial of
     its motion to intervene to the Ninth Circuit Court of Appeals, but the
     court of appeals did not act before the case was settled (see below). On
     September 23, 1999, United Coin sued Cardivan Company and Anchor Gaming in
     Nevada state court for interference with contractual relations and
     Albertson's and Raley's for breach of contract. In January 2000, the
     parties announced a settlement resolving all claims between the
     litigants--Albertson's, Anchor Gaming, Jackpot Enterprises, Raley's, and
     United Coin Machine Company. Under the terms of the settlement agreement,
     United Coin will begin operating 305 gaming machines in 19 Raley's stores
     on February 1, 2000. Under its contract with Raley's, United Coin will
     operate these gaming machines, the machines at Raley's stores in Northern
     Nevada and machines at any new Raley's stores throughout Nevada until June
     30, 2008. As part of the settlement, United Coin will receive cash and
     other consideration prior to February 1.

     The Company is also a party to various lawsuits relating to routine matters
     incidental to its business. Management does not believe that the outcome of
     such litigation, including the matters above, in the aggregate, will have a
     material adverse effect on the Company.

                                       11
<PAGE>   12
                           ALLIANCE GAMING CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                   SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999


7.   COMPREHENSIVE INCOME (LOSS)

     As of July 1, 1998, the Company adopted Statement of Financial Accounting
     Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130
     establishes new rules for the reporting of comprehensive income (loss) and
     its components; however, the adoption of SFAS had no impact on the
     Company's net income (loss) or stockholders' deficiency. SFAS 130 requires
     the changes in the cumulative translation adjustment account (which is a
     component of stockholders' deficiency) to be included as a component of
     other comprehensive income (loss).

     During the six months ended December 31, 1998 and 1999, total comprehensive
     loss amounted to $6.8 million and $8.5 million respectively.

8.   SHARE REPURCHASE  PLAN

     In January 1999 the Company's Board of Directors approved a share
     repurchase plan for up to 1.18 million shares of its Common Stock. Under
     the plan, subject to price and market conditions, purchases of shares will
     be made from time to time during calendar 1999 in the open market or in
     privately negotiated transactions. As of December 31, 1999, the Company had
     approximately 83,000 shares of common stock in treasury at a cost of
     $508,000. The Company intends to use the acquired common stock to satisfy
     obligations pursuant to the exercise of stock options under the Company's
     stock option plans.

9.   REVERSE STOCK SPLIT

     On January 14, 1999 the Company's Board of Directors announced a
     one-for-three-and-one-half reverse stock split of its Common Stock
     effective February 1, 1999. The effects of the reverse split were to reduce
     the authorized number of common shares from 175.0 million to 50.0 million
     and to decrease the number of shares of Common Stock outstanding from 34.3
     million to 9.8 million. In connection with the reverse split, the share
     number, exercise price and the trigger prices, as applicable, for the
     Company's stock options and warrants were proportionately adjusted. In lieu
     of fractional shares resulting from the reverse split, stockholders
     received a cash payment from the sale of the aggregate fractional shares on
     the open market. The reverse split also impacted the conversion ratio on
     the Company's Series E Special Stock. Each share of Series E Special Stock
     is now convertible into 4.859 shares of Common Stock instead of 17.007
     shares. All share and per share data included in these financial statements
     have been restated to reflect the reverse split.

10.  EARNINGS PER SHARE

     Basic earnings per share (EPS) is computed by dividing income (loss)
     applicable to common shares (the numerator) by the weighted-average number
     of common shares outstanding (the denominator) for the period. The
     computation of Diluted EPS is similar to Basic EPS, except that the
     denominator is increased to include the number of additional common shares
     that would have been outstanding if the potentially dilutive common shares
     had been issued. Stock options and warrants are reflected in Diluted EPS by
     application of the "Treasury Stock Method" which reduces the dilutive
     effect by assuming that any proceeds from the exercise of the options and
     warrants would be used to purchase common shares at the average market
     price during the period. Series E Special Stock is reflected in Diluted EPS
     by application of the "If-Converted Method" which assumes full conversion
     at the beginning of the period.


                                       12
<PAGE>   13
                           ALLIANCE GAMING CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                   SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999


     The computation of Basic and Diluted EPS is as follows:

<TABLE>
<CAPTION>
                                                        Three months ended           Six months ended
                                                           December 31,                December 31,
                                                       ---------------------       ----------------------
                                                         1998          1999          1998          1999
                                                       -------       -------       -------       --------
                                                                 (In 000's except share data)
<S>                                                    <C>           <C>           <C>           <C>
     Net income (loss) applicable to
         common shares                                 (10,175)       (7,176)      (12,857)       (6,731)
     Wt. average common shares outstanding               9,789        10,252         9,607        10,204
     Dilutive effect of stock options outstanding           --            --            --            --
     Wt. average common and potential shares
         Outstanding                                     9,789        10,252         9,607        10,204

     Basic and diluted earnings per share               $(1.04)      $ (0.70)      $ (1.34)      $ (0.66)
</TABLE>

     Options to purchase 9,000 and 56,000 at December 31, 1998 and 1999,
     respectively, were not included in the computation of diluted EPS for the
     respective quarters because those options' exercise prices were greater
     than the average market price of the common shares for those quarters.
     Options to purchase 9,000 and 58,000 at December 31, 1998 and 1999,
     respectively, were not included in the computation of the year-to-date
     diluted EPS for the respective periods because those options' exercise
     prices were greater than the average market price of the common shares.
     Additionally, stock options and warrants outstanding to purchase
     approximately 3.7 million common shares and 2.4 million shares as of
     December 31, 1998 and 1999, respectively, were not included in the
     computation of Diluted EPS because either (i) the exercise price was
     greater than the average market price of the common shares during the
     period or (ii) the contingent issue price was greater that the market price
     of the common shares at the end of the period.

11.  UNUSUAL ITEMS

     During the quarter ended December 31, 1999, the Company incurred unusual
     items of $0.5 million, which consists of $1.5 million of restructuring
     charges at its Bally Gaming and Systems and Wall Machine and Amusement
     Games business units, partially offset by a $1.0 million gain on a release
     of an option the Company had to operate gaming machines at a dormant dog
     racing track in Kansas.

12.  SEGMENT AND GEOGRAPHICAL INFORMATION

     The Company operates in four business segments: (i) Gaming Equipment and
     Systems designs, manufactures and distributes gaming machines and
     computerized monitoring systems for gaming machines, (ii) Wall Machines and
     Amusement Games designs, manufactures and distributes wall-mounted gaming
     machines and distributes third party manufactured amusement games, (iii)
     Route Operations owns and manages a significant installed base of gaming
     machines, and (iv) Casino Operations owns and operates two regional
     casinos. Operating income is the primary measure used in assessing segment
     performance. Corporate office costs are generally not allocated except
     where those costs can be specifically identified with a segment.

     The tables below presents information as to the Company's revenues and
     operating income:

<TABLE>
<CAPTION>
                                                            Six Months Ended
                                                               December 31,
                                                       ----------------------------
                                                         1998                1999
                                                       --------            --------
                                                               (In $000's)
<S>                                                    <C>                 <C>
        Revenues:
          Gaming Equipment and Systems                 $ 44,441            $ 70,375
          Wall Machines and Amusement Games              44,380              34,218
          Route Operations                               82,754              94,292
          Casino Operations                              31,106              32,804
                                                       --------            --------
</TABLE>


                                       13
<PAGE>   14
                           ALLIANCE GAMING CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                   SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999

<TABLE>
<S>                                                    <C>                 <C>
     Total revenues                                    $202,681            $231,689
                                                       ========            ========

        Intersegment revenues:
          Gaming Equipment and Systems                 $   319             $    743
          Wall Machines and Amusement Games                 46                   32
          Route Operations                                  --                   --
          Casino Operations                                 --                   --
                                                       -------             --------
     Total intersegment revenues                       $   365             $    775
                                                       =======             ========

        Operating income (loss):
          Gaming Equipment and Systems                 $(4,307)            $  2,875
          Wall Machines and Amusement Games              2,279                 (995)
          Route Operations                               6,437                6,986
          Casino Operations                              8,885               10,595
          Corporate/other                               (8,761)              (8,619)
                                                       -------             --------
     Total operating income                            $ 4,533             $ 10,842
                                                       =======             ========
</TABLE>

     The Company has operations based primarily in the United States and
     Germany. The German operation's customers are a diverse group of operators
     of wall machines and amusement games at arcades, hotels, restaurants and
     taverns, primarily in Germany. Gaming Equipment and Systems' customers are
     primarily casinos and gaming machine distributors in the United States and
     abroad. Receivables of the German operations and Gaming Equipment and
     Systems are generally collateralized by the related equipment.

     The table below presents information as to the Company's revenues and
     operating income by geographic region:

<TABLE>
<CAPTION>
                                                Six Months Ended
                                                December 31, 1999
                                         -------------------------------
                                           1998                  1999
                                         ---------             ---------
                                                   (In $000's)
<S>                                      <C>                   <C>
     Revenues:
         United States                   $ 148,985             $ 183,884
         Germany                            49,827                39,331
         Other foreign                       3,869                 8,474
                                         ---------             ---------
     Total revenues                      $ 202,681             $ 231,689
                                         =========             =========

     Operating income (loss):
         United States                   $   2,762             $  12,513
         Germany                             1,918                (1,217)
         Other foreign                        (147)                 (454)
                                         ---------             ---------
     Total operating income              $   4,533             $  10,842
                                         =========             =========
</TABLE>

13.  UNAUDITED CONSOLIDATING FINANCIAL STATEMENTS

     The following unaudited condensed consolidating financial statements are
     presented to provide certain financial information regarding guaranteeing
     and non-guaranteeing subsidiaries in relation to the Company's Senior
     Subordinated Notes which were issued in the Refinancing (see note 2). The
     financial information presented includes Alliance Gaming Corporation (the
     "Parent") and its wholly-owned guaranteeing subsidiaries (together the
     "Parent and Guaranteeing Subsidiaries"), and the non-guaranteeing
     subsidiaries Video Services, Inc., United Gaming Rainbow, BGI Australia
     Pty. Limited, Bally Gaming de Puerto Rico, Inc., and Alliance Automaten
     GmbH & Co. KG (the subsidiary that holds the Company's German interests)
     (together the "Non-Guaranteeing


                                       14
<PAGE>   15
                           ALLIANCE GAMING CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                   SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999


     Subsidiaries"). The notes to consolidating financial statements should be
     read in conjunction with these consolidating financial statements.







                                       15
<PAGE>   16
                           ALLIANCE GAMING CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                          CONSOLIDATING BALANCE SHEETS
                                  June 30, 1999
                                   (In 000's)

<TABLE>
<CAPTION>
                                                                                                          Alliance
                                                                                                           Gaming
                                                          Parent and         Non-                        Corporation
                                                         Guaranteeing    Guaranteeing       Elimina-         and
                                                         Subsidiaries    Subsidiaries        tions       Subsidiaries
                                                         ------------    ------------      ---------     ------------
<S>                                                      <C>             <C>               <C>           <C>
ASSETS
Current assets:
  Cash and cash equivalents                                $   5,240       $  11,690       $               $  16,930
  Accounts and notes receivable, net                          45,498          51,842          (4,675)         92,665
  Inventories, net                                            30,269          16,398            (529)         46,138
  Other current assets                                         8,496           2,927                          11,423
                                                           ---------       ---------       ---------       ---------
      Total current assets                                    89,503          82,857          (5,204)        167,156
                                                           ---------       ---------       ---------       ---------
Long-term notes receivable, net                               99,961           1,797         (95,976)          5,782
Leased equipment, net                                          3,923           7,058                          10,981
Property, plant and equipment, net                            41,781          32,378                          74,159
Excess of costs over net assets of acquired
  businesses, net                                             38,904          18,689                          57,593
Intangible assets, net                                        26,448             406                          26,854
Investments in subsidiaries                                   86,993                         (86,993)
Other assets, net                                             27,890          (9,915)         (4,193)         13,782
                                                           ---------       ---------       ---------       ---------
                                                           $ 415,403       $ 133,270       $(192,366)      $ 356,307
                                                           =========       =========       =========       =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
  Accounts payable                                         $  14,706       $   2,689       $               $  17,372
  Accrued liabilities                                         26,771          13,915          (1,321)         39,196
  Current maturities of long-term debt                         6,175           3,299          (7,547)          1,927
                                                           ---------       ---------       ---------       ---------
      Total current liabilities                               47,652          19,903          (8,868)         58,495
                                                           ---------       ---------       ---------       ---------
Term loan facilities                                         134,096                                         134,096
Senior Subordinated Notes due 2007, net                      149,298                                         149,298
Other long-term debt, less current maturities                104,826          24,379         (95,820)         33,385
Other liabilities                                              7,370           2,330            (242)          9,458
                                                           ---------       ---------       ---------       ---------
      Total liabilities                                      443,242          46,612        (104,930)        384,732
                                                           ---------       ---------       ---------       ---------
Minority interest                                              1,983                                           1,983
Commitments and contingencies
Stockholders' equity (deficiency):
  Series E Special Stock                                      15,380                                          15,380
  Common Stock                                                   979          17,832         (17,832)            979
  Treasury stock                                                (522)                                          (522)
  Additional paid-in capital                                 129,991          68,700         (68,700)        129,991
  Accumulated other comprehensive loss                       (15,981)        (16,007)         16,002         (15,986)
  Retained earnings (accumulated deficit)                   (159,477)         16,133         (16,906)       (160,250)
                                                           ---------       ---------       ---------       ---------
     Total stockholders' equity (deficiency)                 (29,630)         86,658         (87,436)        (30,408)
                                                           ---------       ---------       ---------       ---------
                                                           $ 415,403       $ 133,270       $(192,366)      $ 356,307
                                                           =========       =========       =========       =========
</TABLE>

                        See accompanying unaudited note.


                                       16
<PAGE>   17
                           ALLIANCE GAMING CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                          CONSOLIDATING BALANCE SHEETS

                                December 31, 1999
                                   (In 000's)

<TABLE>
<CAPTION>
                                                                                                        Alliance
                                                                                                         Gaming
                                                       Parent and         Non-                        Corporation
                                                      Guaranteeing    Guaranteeing       Adjust-         and
                                                      Subsidiaries    Subsidiaries        ments       Subsidiaries
                                                      ------------    ------------      ---------     ------------
<S>                                                   <C>             <C>               <C>           <C>
ASSETS
Current assets:
  Cash and cash equivalents                             $  13,619       $  14,333       $               $  27,952
  Accounts and notes receivable, net                       42,711          45,620          (4,099)         84,232
  Inventories, net                                         29,727          18,011            (529)         47,209
  Other current assets                                      7,940           3,441                          11,381
                                                        ---------       ---------       ---------       ---------
   Total current assets                                    93,997          81,405          (4,628)        170,774
                                                        ---------       ---------       ---------       ---------
Long-term notes receivable, net                           102,685           1,130         (98,810)          5,005
Leased equipment, net                                       9,753           8,069                          17,822
Property, plant and equipment, net                         42,124          35,227                          77,351
Excess of costs over net assets of acquired
    businesses, net                                        38,375          18,119                          56,494
Intangible assets, net                                     24,535             353                          24,888
Investment in subsidiaries                                 81,898                         (81,898)
Other assets, net                                          32,145         (14,555)         (4,022)         13,571
                                                        ---------       ---------       ---------       ---------
                                                        $ 425,515       $ 129,748       $(189,358)      $ 365,905
                                                        =========       =========       =========       =========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
  Accounts payable                                      $  15,869       $   1,984       $               $  17,853
  Accrued liabilities                                      22,615          12,851          (1,893)         33,573
  Current maturities of long-term debt                      3,814           3,395          (6,154)          1,055
                                                        ---------       ---------       ---------       ---------
   Total current liabilities                               42,298          18,230          (8,047)         52,481
                                                        ---------       ---------       ---------       ---------
Term loan facilities                                      131,937                                         131,937
Senior Subordinated Notes due 2007, net                   149,324                                         149,324
Other long-term debt, less current maturities             131,790          26,895         (98,715)         59,970
Other liabilities                                           7,179           2,330            (188)          9,321
                                                        ---------       ---------       ---------       ---------
   Total liabilities                                      462,528          47,455        (106,950)        403,033
                                                        ---------       ---------       ---------       ---------
Minority interest                                           1,338                                           1,338
Commitments and contingencies
Stockholders' equity (deficiency):
  Series E Special Stock                                    4,624                                           4,624
  Common Stock                                              1,034          17,832         (17,832)          1,034
  Treasury stock                                             (508)                                           (508)
  Additional paid-in capital                              141,130          68,715         (68,715)        141,130
  Accumulated other comprehensive income                  (17,624)        (17,786)         17,645         (17,765)
  Retained earnings (accumulated deficit)                (167,007)         13,352         (13,506)       (166,981)
                                                        ---------       ---------       ---------       ---------
   Total stockholders' equity (deficiency)                (38,351)         82,293         (82,408)        (38,466)
                                                        ---------       ---------       ---------       ---------
                                                        $ 425,515       $ 129,748       $(189,358)      $ 365,905
                                                        =========       =========       =========       =========
</TABLE>

                        See accompanying unaudited note.

                                       17
<PAGE>   18
                           ALLIANCE GAMING CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                     CONSOLIDATING STATEMENTS OF OPERATIONS

                      Three Months Ended December 31, 1998
                                   (In 000's)

<TABLE>
<CAPTION>
                                                                                                  Alliance
                                                                                                   Gaming
                                                 Parent and         Non-                        Corporation
                                                Guaranteeing    Guaranteeing       Adjust-          and
                                                Subsidiaries    Subsidiaries        ments       Subsidiaries
                                                ------------    ------------      ---------     ------------
<S>                                             <C>             <C>               <C>           <C>
Revenues:
  Gaming equipment and systems                     $ 20,295       $  3,005       $  (2,467)      $  22,499
  Wall machines and amusement games                                 23,769                          23,769
  Route operations                                   37,370          5,380                          42,750
  Casino operations                                   3,553         11,339                          14,892
                                                   --------       --------       ---------       ---------
                                                     61,544         43,493          (2,467)        103,910
Costs and expenses:
  Cost of gaming equipment and systems               11,917          2,365          (2,467)         13,394
  Cost of wall machines and amusement games                         14,674                          14,674
  Cost of route operations                           29,894          3,622                          33,516
  Cost of casino operations                           2,123          4,381                           6,504
  Selling, general and administrative                15,931         11,935                          27,866
  Research and development                            3,178            798                           3,976
  Depreciation and amortization                       3,739          2,018                           5,757
                                                   --------       --------       ---------       ---------
                                                     66,782         41,372          (2,467)        105,687

Operating income (loss)                              (5,564)         3,787                          (1,777)

Earnings in consolidated subsidiaries                 2,056                         (2,056)

Other income (expense):
  Interest income                                       228            104            (191)            141
  Interest expense                                   (7,268)          (425)            191          (7,502)
  Rainbow royalty                                     1,333         (1,333)
  Minority interest                                    (509)                                          (509)
  Other, net                                           (177)          (178)                           (355)
                                                   --------       --------       ---------       ---------
Income (loss) before income taxes                    (9,901)         1,955          (2,056)        (10,002)
Income tax benefit                                      144            101                             245
                                                   --------       --------       ---------       ---------
Net income (loss)                                    (9,757)         2,056          (2,056)         (9,757)

Special Stock dividends                                (418)                                          (418)
                                                   --------       --------       ---------       ---------
Net income (loss) applicable to common shares      $(10,175)      $  2,056       $  (2,056)      $ (10,175)
                                                   ========       ========       =========       =========
</TABLE>

                        See accompanying unaudited note.

                                       18
<PAGE>   19
                           ALLIANCE GAMING CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                     CONSOLIDATING STATEMENTS OF OPERATIONS

                      Three Months Ended December 31, 1999
                                   (In 000's)
<TABLE>
<CAPTION>
                                                                                                   Alliance
                                                                                                    Gaming
                                                Parent and           Non-                        Corporation
                                               Guaranteeing     Guaranteeing        Adjust-          and
                                               Subsidiaries     Subsidiaries        ments        Subsidiaries
                                               ------------     ------------       --------      -------------
<S>                                            <C>              <C>                <C>           <C>
Revenues:
  Gaming equipment and systems                   $ 29,695         $  6,303         $ (5,407)       $  30,591
  Wall machines and amusement games                19,542                                             19,542
  Route operations                                 43,490            4,750                            48,240
  Casino operations                                 4,365           11,749                            16,114
                                                 --------         --------         --------        ---------
                                                   77,550           42,344           (5,407)         114,487
Costs and expenses:
  Cost of gaming equipment and systems             18,174            5,126           (5,407)          17,893
  Cost of wall machines and amusement
    games                                                           11,157                            11,157
  Cost of route operations                         34,984            3,023                            38,007
  Cost of casino operations                         2,203            4,359                             6,562
  Selling, general and administrative              16,844           11,023                            27,867
  Research and development                          2,622              707                             3,329
  Depreciation and amortization                     4,496            2,205                             6,701
  Unusual items                                      (165)             691                               526
                                                 --------         --------         --------        ---------
                                                   79,158           38,291           (5,407)         112,042
                                                 --------         --------         --------        ---------
Operating income (loss)                            (1,608)           4,053                             2,445

Earnings in consolidated subsidiaries               1,465                            (1,465)

Other income (expense):
  Interest income                                     133               99             (120)             112
  Interest expense                                 (8,348)            (489)             122           (8,715)
  Rainbow royalty                                   1,372           (1,372)
  Minority interest                                  (459)                                              (459)
  Other, net                                           65             (446)                             (381)
                                                 --------         --------         --------        ---------
Income (loss) before income taxes                  (7,308)           1,845           (1,463)          (6,998)
Income tax benefit (provision)                        202             (380)                             (178)
                                                 --------         --------         --------        ---------
Net income (loss) applicable to
  common shares                                  $ (7,178)        $  1,465         $ (1,463)       $  (7,176)
                                                 ========         ========         ========        =========
</TABLE>

                        See accompanying unaudited note.


                                       19
<PAGE>   20
                           ALLIANCE GAMING CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                     CONSOLIDATING STATEMENTS OF OPERATIONS
                       Six Months Ended December 31, 1998
                                   (In 000's)
<TABLE>
<CAPTION>
                                                                                                       Alliance
                                                                                                        Gaming
                                                     Parent and          Non-                         Corporation
                                                    Guaranteeing     Guaranteeing      Adjust-            and
                                                    Subsidiaries     Subsidiaries       ments         Subsidiaries
                                                    ------------     ------------      --------       ------------
<S>                                                 <C>              <C>               <C>            <C>
Revenues:
  Gaming equipment and systems                        $  40,310        $  9,316        $ (5,185)        $  44,441
  Wall machines and amusement games                                      44,391             (11)           44,380
  Route operations                                       72,259          10,495                            82,754
  Casino operations                                       6,860          24,246                            31,106
                                                      ---------        --------        --------         ---------
                                                        119,429          88,448          (5,196)          202,681
                                                      ---------        --------        --------         ---------
Costs and expenses:
  Cost of gaming equipment and systems                   22,970           7,449          (5,185)           25,234
  Cost of wall machines and amusement games                              26,753             (11)           26,742
  Cost of route operations                               57,710           6,935                            64,645
  Cost of casino operations                               4,162           9,158                            13,320
  Selling, general and administrative                    27,648          21,255                            48,903
  Research and development                                6,589           1,446                             8,145
  Depreciation and amortization                           7,408           3,744                            11,159
                                                      ---------        --------        --------         ---------
                                                        126,487          76,857          (5,185)          198,148
                                                      ---------        --------        --------         ---------
Operating income (loss)                                  (7,058)         11,591                             4,533

Earnings in consolidated subsidiaries                     7,304                          (7,304)

Other income (expense):
  Interest income                                           543             208            (378)              373
  Interest expense                                      (14,969)           (814)            378           (15,405)
  Rainbow royalty                                         2,840          (2,840)
  Minority interest                                      (1,048)                                           (1,048)
  Other, net                                                (66)           (481)                             (547)
                                                      ---------        --------        --------         ---------
Income (loss) before income taxes                       (12,454)          7,664          (7,304)          (12,094)
Income tax benefit (provision)                              421            (360)                               61
                                                      ---------        --------        --------         ---------
Net income (loss)                                       (12,033)          7,304          (7,304)          (12,033)

Special Stock dividends                                    (824)                                             (824)
                                                      ---------        --------        --------         ---------
Net income (loss) applicable to
  common shares                                       $ (12,857)       $  7,304        $ (7,304)        $ (12,857)
                                                      =========        ========        ========         =========
</TABLE>

                        See accompanying unaudited note.


                                       20
<PAGE>   21
                           ALLIANCE GAMING CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                     CONSOLIDATING STATEMENTS OF OPERATIONS

                       Six Months Ended December 31, 1999
                                   (In 000's)

<TABLE>
<CAPTION>
                                                                                                       Alliance
                                                                                                        Gaming
                                                     Parent and          Non-                         Corporation
                                                    Guaranteeing     Guaranteeing       Adjust-           and
                                                    Subsidiaries     Subsidiaries        ments        Subsidiaries
                                                    ------------     ------------      ---------      ------------
<S>                                                 <C>              <C>                <C>           <C>
Revenues:
  Gaming equipment and systems                        $  67,219        $  13,587       $ (10,431)      $  70,375
  Wall machines and amusement games                                       34,218                          34,218
  Route operations                                       84,271            9,571                          94,292
  Casino operations                                       8,493           24,311                          32,804
                                                      ---------        ---------       ---------       ---------
                                                        160,433           81,687         (10,431)        231,689
Costs and expenses:
  Cost of gaming equipment and systems                   39,230           11,187         (10,431)         39,986
  Cost of wall machines and amusement games                               21,111                          21,111
  Cost of route operations                               68,516            6,139                          74,655
  Cost of casino operations                               4,315            8,866                          13,181
  Selling, general and administrative                    31,580           19,905                          51,485
  Research and development                                5,433            1,445                           6,878
  Depreciation and amortization                           8,913            4,112                          13,025
  Unusual items                                            (165)             691                             526
                                                      ---------        ---------       ---------       ---------
                                                        157,822           73,456         (10,431)        220,847
                                                      ---------        ---------       ---------       ---------
Operating income                                          2,611            8,231                          10,842

Earnings in consolidated subsidiaries                     3,412                           (3,412)

Other income (expense):
  Interest income                                           268              206            (248)            226
  Interest expense                                      (15,813)            (927)            248         (16,492)
  Rainbow royalty                                         2,847           (2,847)
  Minority interest                                        (927)                                            (927)
  Other, net                                                380             (505)                           (125)
                                                      ---------        ---------       ---------       ---------
Income (loss) before income taxes                        (7,222)           4,158          (3,412)         (6,476)
Income tax benefit (provision)                              491             (746)                           (255)
                                                      ---------        ---------       ---------       ---------
Net income (loss) applicable to
  common shares                                       $  (6,731)       $   3,412       $  (3,412)      $  (6,731)
                                                      =========        =========       =========       =========
</TABLE>

                        See accompanying unaudited note.


                                       21
<PAGE>   22
                           ALLIANCE GAMING CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                     CONSOLIDATING STATEMENTS OF CASH FLOWS
                       Six Months Ended December 31, 1998
                                   (In 000's)

<TABLE>
<CAPTION>
                                                                                                Alliance
                                                                                                 Gaming
                                                   Parent and          Non-                    Corporation
                                                  Guaranteeing    Guaranteeing     Adjust-         and
                                                  Subsidiaries    Subsidiaries      ments      Subsidiaries
                                                  ------------    ------------     -------     ------------
<S>                                               <C>             <C>              <C>         <C>
Net cash provided by (used in)
  operating activities                              $ (9,751)       $ 21,275       $(1,286)      $ 10,838
                                                    --------        --------       -------       --------
Cash flows from investing activities:
  Additions to property and equipment                 (4,219)         (1,257)                      (5,476)
  Proceeds from disposal of property
    and equipment                                         54              29                           83
  Additions to other long term assets                 (3,135)            (81)                      (3,216)
                                                    --------        --------       -------       --------
      Net cash used in investing activities           (7,300)         (1,309)                      (8,609)
                                                    --------        --------       -------       --------
Cash flows from financing activities:
    Repayments of long-term debt                      (3,858)         (1,527)        1,286         (4,099)
  Net change in lines of credit                       (6,200)                                      (6,200)
  Proceeds from exercise of stock
    options and warrants                               4,778                                        4,778
  Dividends received (paid)                           18,600         (18,600)                          --
                                                    --------        --------       -------       --------
      Net cash provided by (used in)
         financing activities                         13,320         (20,127)        1,286         (5,521)
                                                    --------        --------       -------       --------
Effect of exchange rate changes
  on cash                                                                323                          323
                                                    --------        --------       -------       --------
Cash and cash equivalents:
  Increase (decrease) for period                      (3,731)            762                       (2,969)
  Balance, beginning of period                         8,577          14,910                       23,487
                                                    --------        --------       -------       --------
  Balance, end of period                            $  4,846        $ 15,672       $    --       $ 20,518
                                                    ========        ========       =======       ========
</TABLE>

                        See accompanying unaudited note.


                                       22
<PAGE>   23
                           ALLIANCE GAMING CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                     CONSOLIDATING STATEMENTS OF CASH FLOWS
                       Six Months Ended December 31, 1999
                                   (In 000's)

<TABLE>
<CAPTION>
                                                                                                    Alliance
                                                                                                      Gaming
                                                  Parent and          Non-                         Corporation
                                                 Guaranteeing     Guaranteeing        Adjust-          and
                                                 Subsidiaries     Subsidiaries        ments        Subsidiaries
                                                 ------------     ------------       --------      ------------
<S>                                              <C>              <C>                <C>           <C>
Net cash provided by (used in)
  operating activities                             $(10,516)        $  8,443         $ (1,362)       $ (3,435)
                                                   --------         --------         --------        --------
Cash flows from investing activities:
  Additions to property and equipment                (5,383)          (4,386)                          (9,769)
  Proceeds from disposal of property
    and equipment and other assets                    1,056               26                            1,082
  Proceeds from sale/leaseback transaction              971                                               971
  Additions to other long term assets                (1,888)             (40)                          (1,928)
                                                   --------         --------         --------        --------
      Net cash used in investing activities          (5,244)          (4,400)                          (9,644)
                                                   --------         --------         --------        --------
Cash flows from financing activities:
  Reduction of long-term debt                        (3,020)          (1,633)           1,362          (3,291)
  Net change in lines of credit                      22,600            4,911                           27,511
  Proceeds from exercise of stock options
    and warrants                                         10                                                10
  Dividends received (paid)                           4,550           (4,550)
                                                   --------         --------         --------        --------
      Net cash provided by (used in)
         financing activities                        24,140           (1,272)           1,362          24,230
                                                   --------         --------         --------        --------
Effect of exchange rate changes on cash                                 (130)                            (130)

Cash and cash equivalents:
  Increase for period                                 8,379            2,643                           11,022
  Balance, beginning of period                        5,240           11,690                           16,930
                                                   --------         --------         --------        --------
  Balance, end of period                           $ 13,619         $ 14,333         $               $ 27,952
                                                   ========         ========         ========        ========
</TABLE>

                        See accompanying unaudited note.


                                       23
<PAGE>   24
                           ALLIANCE GAMING CORPORATION
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DEBT AND LINES OF CREDIT

Long-term debt and lines of credit at June 30, 1999 consist of the following:

<TABLE>
<CAPTION>
                                                                                            Alliance
                                                                                             Gaming
                                        Parent and         Non-                            Corporation
                                       Guaranteeing    Guaranteeing        Elimina-            and
                                       Subsidiaries    Subsidiaries          tions         Subsidiaries
                                       ------------    ------------        ---------       ------------
                                                                  (in 000's)
<S>                                    <C>             <C>                 <C>             <C>
10% Senior Subordinated Notes due
    2007, net of unamortized
    discount                             $149,298        $                 $                 $ 149,298
Term loan facilities:
  Tranche B Term Loan                      72,380                                               72,380
  Tranche C Term Loan                      38,744                                               38,744
  Delayed Draw Term Facility               24,372                                               24,372
Revolving Credit Facility                  12,900           19,300                              32,200
Intercompany notes payable                 96,701            6,666          (103,367)
Other                                                        1,712                               1,712
                                         --------        ---------         ---------         ---------
                                          394,395           27,678          (103,367)          318,706
Less current maturities                     6,175            3,299            (7,547)            1,927
                                         --------        ---------         ---------         ---------
Long-term debt, less current
  maturities                             $388,220        $  24,379         $ (95,820)        $ 316,779
                                         ========        =========         =========         =========
</TABLE>

Long-term debt and lines of credit at December 31, 1999 consist of the
following:

<TABLE>
<CAPTION>
                                                                                           Alliance
                                                                                            Gaming
                                        Parent and          Non-                          Corporation
                                       Guaranteeing    Guaranteeing        Adjust-            and
                                       Subsidiaries    Subsidiaries         ments         Subsidiaries
                                       ------------    ------------        --------       ------------
                                                                  (in 000's)
<S>                                    <C>             <C>                 <C>            <C>
10% Senior Subordinated Notes due
    2007, net of unamortized
    discount                             $149,324                                           $149,324
Term loan facilities:
  Tranche B Term Loan                      70,775                                             70,775
  Tranche C Term Loan                      37,869                                             37,869
  Delayed Draw Term Facility               23,833                                             23,833
Revolving Credit Facility                  25,500           23,569                            59,069
Intercompany notes payable                 99,564            5,304         (104,868)
Other                                                        1,416                             1,416
                                         --------        ---------         --------         --------
                                          416,865           30,289         (104,868)         342,286
Less current maturities                     3,814            3,395           (6,154)           1,055
                                         --------        ---------         --------         --------
Long-term debt, less current
  maturities                             $414,131        $  26,894         $(98,714)        $341,231
                                         ========        =========         ========         ========
</TABLE>


                                       24
<PAGE>   25
                           ALLIANCE GAMING CORPORATION
                                    FORM 10-Q

                     FOR THE QUARTER ENDED DECEMBER 31, 1999


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

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1999, based on the terms of the $90.0 million revolving credit
facility, the Company would have been able to borrow $67.5 million under the
facility, of which the Company had borrowings of approximately $59.1 million
outstanding. The borrowing base for the revolving credit facility consists of
eligible receivables and inventory, as defined in the credit agreement.

At December 31, 1999, the Company had $28.0 million in cash and cash equivalents
and $8.4 million in unborrowed availability on its revolving credit facility
pursuant to the borrowing base limitations contained in the credit agreement. In
addition, the Company had working capital of approximately $118.3 million, an
increase of approximately $9.6 million from June 30, 1999, which is explained
below. Consolidated cash and cash equivalents at December 31, 1999 includes
approximately $22.2 million of cash which is utilized in Casino and Route
Operations which is held in vaults, cages or change banks.

The Company is in compliance with the financial and maintenance covenants under
both the credit agreement for the Bank Facility as amended and the Indenture for
the Senior Subordinated Notes.

Consistent with the Company's plan to enlarge the installed base of recurring
revenues gaming machines at its Bally Gaming and Systems business unit, the
Company has increased its investment in leased gaming equipment during the six
months ended December 31, 1999. The Company will continue the roll out, and thus
increase its investment in, these proprietary games and wide area progressive
games in the future. At December 31, 1999, due in part to the lower level of
revenues from Bally Gaming and Systems and increased collections on accounts
receivable, the borrowing base for the Company's revolving line of credit
declined by $6.9 million from September 30, 1999 to December 31, 1999. The
Company is actively managing its working capital and other assets. As part of
these efforts, during the three months ended December 31, 1999 the Company
received $1.0 million for the release of an option it held to operate gaming
machines at a dormant dog racing track in Kansas and entered into a sale and
leaseback transaction for $1.0 million for gaming machines deployed in its
Nevada Route Operation. As part of this plan, similar dispositions of other
non-core assets are likely to continue. While management believes that cash flow
from operating activities, cash and cash equivalents held and the remaining
borrowing availability under the revolving credit facility will provide the
Company with sufficient capital resources and liquidity for ongoing operating
needs, it will continue to actively manage its working capital by more timely
collecting on accounts receivable, reducing levels of raw materials and finished
goods inventories and obtaining extended payment terms with certain vendors. At
December 31, 1999 the Company did not have any significant commitments for
capital expenditures.

Working Capital

During the six months ended December, 1999, working capital increased $9.6
million to $118.3 million. The primary fluctuations in working capital were: (i)
a net decrease in accounts receivable resulting from cash collections partially
offset by improved revenues at the Bally Gaming and Systems business unit, (ii)
an increase in inventory due to a larger number of product platforms to support
at Bally Gaming and Systems, (iii) a decrease in accrued liabilities due to
decreases in certain payroll related accrued expenses, (v) the impact of foreign
exchange fluctuations between the dollar and the deutschemark on all working
capital categories, (vi) increases in accounts payable based on the increase in
inventory levels and timing of payments, (vii) a decrease in current maturities
of long-term debt due to certain amounts reclassified to long-term debt and
(viii) the corresponding impact of the above listed items on cash and cash
equivalents.

Cash Flow

During the six months ended December 31, 1999 the Company used $3.4 million of
cash in operating activities resulting from the net loss, an increase in
inventory and a decrease in accrued liabilities, partially offset by a net
decreases in accounts receivable, and increases in depreciation and
amortization, provision for doubtful receivables and accounts payable.

During the six months ended December 31, 1999 the Company used $9.6 million of
cash in investing activities resulting primarily from $9.8 million in capital
expenditures and $1.9 million in additions to other long-term assets including
$0.3 million of payments made in acquiring the rights to manufacture and
distribute several gaming


                                       25
<PAGE>   26

                           ALLIANCE GAMING CORPORATION
                                    FORM 10-Q

                     FOR THE QUARTER ENDED DECEMBER 31, 1999

products, and $0.6 million of payments in acquiring gaming rights of route
locations, partially offset by the cash proceeds of $1.0 million from the
release of an option the Company had to operate gaming machines at a dormant dog
racing track in Kansas. During the six months ended December 31, 1999, $24.2
million was provided by financing activities primarily resulting from additional
borrowings from the Company's revolving credit facility of $27.5 million,
partially offset by $3.3 million used to reduce the Company's long-term debt.

The following is a summary of the Company's earnings before interest, taxes,
depreciation and amortization (EBITDA) by business unit:

<TABLE>
<CAPTION>
                                        Three Months Ending          Six Months Ending
                                            December 31,                 December 31,
                                       ---------------------       -----------------------
                                         1998          1999          1998           1999
                                       -------       -------       --------       --------
                                                           (In $000's)
<S>                                    <C>           <C>           <C>            <C>
EBITDA by Business Unit:
Bally Gaming and Systems               $(3,532)      $  (159)      $ (2,572)      $  6,626
Wall Machines and Amusement Games        1,287         2,361          4,432          1,751
Route Operations                         6,035         6,229         11,713         11,652
Casino Operations                        4,605         5,150         10,047         11,623
Corporate Administrative Expenses       (4,415)       (3,909)        (7,928)        (7,259)
Unusual Items                               --          (526)            --           (526)
                                       -------       -------       --------       --------
    EBITDA                             $ 3,980       $ 9,146       $ 15,692       $ 23,867
                                       =======       =======       ========       ========
</TABLE>

The Company believes that the analysis of EBITDA is a useful adjunct to net
income, cash flow and other GAAP measurements. However, this information should
not be construed as an alternative to net income or any other GAAP measure of
performance as an indicator of the Company's performance or to GAAP-defined cash
flows generated by operating, investing and financing activities as an indicator
of cash flows or a measure of liquidity.

The Bank Facility is collateralized by substantially all domestic property and
is guaranteed by each domestic subsidiary of the U.S. Borrower and German
Subsidiaries (both as defined), other than the entity which holds the Company's
interest in its Louisiana operations and other non-material subsidiaries (as
defined), and secured by both a U.S. and German Pledge Agreement (both as
defined). The Bank Facility contains a number of maintenance covenants and it
and the Indenture have other significant covenants that, among other things,
restrict the ability of the Company and certain of its subsidiaries to dispose
of assets, incur additional indebtedness, issue preferred stock, pay dividends
or make other distributions, enter into certain acquisitions, repurchase equity
interests (as defined) or subordinated indebtedness, issue or sell equity
interests of the Company's subsidiaries (as defined), engage in mergers or
acquisitions, or engage in certain transactions with subsidiaries and
affiliates, and that otherwise restrict corporate activities.

Sale of Route and Casino Businesses, Bally Wulff matters and bank amendments

The Company has retained investment bankers to explore the sale of its Nevada
and Louisiana Route businesses and its Mississippi and Nevada Casino businesses
which will enable management to focus on its core gaming machine and systems
businesses. The sale process for each of the businesses is proceeding and the
Board of Directors should have final offers to consider in the March 2000
quarter for the Casinos and the Nevada Route Operations. The sales depend on
receiving offers acceptable to the Company. The net proceeds from the sale of
these non-core assets will be used to repay the Company's bank debt. To
facilitate the disposition of the businesses, the Company has obtained an


                                       26
<PAGE>   27
                           ALLIANCE GAMING CORPORATION
                                    FORM 10-Q

                     FOR THE QUARTER ENDED DECEMBER 31, 1999

amendment to its bank credit agreement. The amendment provides the lenders'
consent to sell the businesses and provides other financial flexibility to the
Company. In addition, the bank amendment provides that if the Company should
elect to sell any of its non-core businesses, any restructuring charges that may
be incurred as a result of the sales may be excluded from the determination of
EBITDA used in the calculation of the various financial covenant ratios.

The Company is also exploring various alternatives to return its Bally Wulff
operations to higher levels of profitability. The amendment to the credit
agreement provides the lenders' consent to a restructuring of the Bally Wulff
legal entities. In addition, the bank amendment provides that any restructuring
charges that may be incurred at Bally Wulff or Bally Gaming and Systems (up to
$1.5 million) may be excluded from the determination of EBITDA used in the
calculation of the various financial covenant ratios.

Customer Financing

Management believes that customer financing terms and leasing have become an
increasingly important competitive factor for the Gaming Equipment and Systems
and Wall Machine and Amusement Games business units, respectively. Competitive
conditions sometimes require Gaming Equipment and Systems to grant extended
payment terms on gaming machines, systems and other gaming equipment, especially
for sales in emerging markets. While these financings are normally
collateralized by such equipment, the resale value of the collateral in the
event of default may be less than the amount financed. Accordingly, the Company
will have greater exposure to the financial condition of its customers in
emerging markets than has historically been the case in established markets like
Nevada and Atlantic City. Bally Wulff provides customer financing for
approximately 20% of its sales and also provides lease financing to its
customers. Lease terms are generally for six months, but are also available for
12 up to 43 month terms.

Year 2000

The Company has not experience any significant Year 2000 interruptions from any
information technology ("IT") systems or non-IT systems such as its
manufacturing systems and physical facilities. The Company will continue to
monitor all critical systems for the appearance of any delayed Year 2000 related
issues including both internal systems and through suppliers, customers and
third parties with whom the Company does business.

Euro Currency Conversion

The Company's Bally Wulff subsidiary uses the German deutschmark as its
functional currency. The new Euro currency will replace the deutschmark as well
as most other European currencies after a phase in period which begins January
1, 1999. As most of Bally Wulff's transactions are within Germany, the switch to
the Euro is not expected to have a material impact on revenues, expenses or
income. The new Euro coins and bills will become the official currency in
January 2002. The Company's products can be brought into Euro compliance by
moving a switch inside the wall machine, replacing the coin tubes and modifying
the front glass to indicate Euros. Management believes the cost of the
implementing the Euro conversion will be borne be the customers.

The Company currently has borrowings outstanding on its line of credit facility,
a portion of which has a floating rate of interest tied to the Euro deutschmark
rate. Upon the full implementation of the Euro, as of January 1, 2002, the
interest rate will be tied to this new index. The impact of the change in this
index, if any, is not known and can not be quantified at this time.


                                       27
<PAGE>   28
                           ALLIANCE GAMING CORPORATION
                                    FORM 10-Q

                     FOR THE QUARTER ENDED DECEMBER 31, 1999

RESULTS OF OPERATIONS:

GENERAL

The Company operates through four business units: (i) gaming equipment and
systems, (ii) wall machines and amusement games (consisting of the manufacture
and distribution of wall-mounted gaming machines and distribution of other
recreational and amusement machines), (iii) route operations and (iv) casino
operations.

The following tables set forth the combined revenues and operating income (loss)
for the four business units for the three and six months ended December 31, 1998
and 1999:

<TABLE>
<CAPTION>
                                             Three Months Ending               Six Months Ending
                                                 December 31,                    December 31,
                                        ---------------------------       ---------------------------
                                           1998             1999             1998             1999
                                        ----------       ----------       ----------       ----------
                                                                 (In $000's)
<S>                                     <C>              <C>              <C>              <C>
REVENUES:
 Bally Gaming and Systems               $   22,499       $   30,591       $   44,441       $   70,375
 Wall Machines and Amusement Games          23,769           19,542           44,380           34,218
 Route Operations                           42,750           48,240           82,754           94,292
 Casino Operations                          14,892           16,114           31,106           32,804
                                        ----------       ----------       ----------       ----------
TOTAL REVENUES                          $  103,910       $  114,487       $  202,681       $  231,689
                                        ==========       ==========       ==========       ==========

OPERATING INCOME (LOSS):
 Bally Gaming and Systems               $   (4,454)      $   (2,128)      $   (4,307)      $    2,875
 Wall Machines and Amusement Games             122              835            2,279             (995)
 Route Operations                            3,361            3,957            6,437            6,986
 Casino Operations                           4,023            4,631            8,885           10,595
 Corporate Administrative Expenses          (4,829)          (4,324)          (8,761)          (8,093)
 Unusual items(a)                               --             (526)              --             (526)
                                        ----------       ----------       ----------       ----------
TOTAL OPERATING INCOME (LOSS)           $   (1,777)      $    2,445       $    4,533       $   10,842
                                        ==========       ==========       ==========       ==========
</TABLE>

----------

(a)  The unusual items consist of approximately $1.5 million of restructuring
     charges, partially offset by a $1.0 million gain on the release of an
     option the Company had to operate gaming machines at a dormant dog racing
     track in Kansas.

THREE MONTHS ENDED DECEMBER 31, 1998 AND 1999

BALLY GAMING AND SYSTEMS

For the quarter ended December 31, 1999, Bally Gaming and Systems reported
revenues of $30.6 million, a 36% increase compared to revenues of $22.5 million
in the prior year quarter. The improvement was due primarily to a $4.9 million
increase in recurring revenue sources which is more fully described below, and
increases in units shipped and the average selling price of new gaming machines.
Bally Gaming reported unit sales of approximately 2,300 new gaming machines, an
increase of 29% compared to unit sales of approximately 1,800 in the prior year
quarter, due primarily to an overall increase in market demand and the
successful introduction of new products recently licensed in more jurisdictions.
By market segment, Bally Gaming's unit sales for the quarter consisted of
approximately 450 units to the Nevada and Atlantic City markets, 1,350 units to
international markets and 500 units


                                       28
<PAGE>   29
                           ALLIANCE GAMING CORPORATION
                                    FORM 10-Q

                     FOR THE QUARTER ENDED DECEMBER 31, 1999

to riverboats, Native American and other domestic markets. Bally Gaming reported
revenues from the sale of new gaming machines of $13.8 million, an increase of
55% compared to $8.9 million in the prior year quarter, due to higher unit
volume and a 21% increase in average selling prices over the prior year quarter.
Bally Systems reported revenues from SDS 6000 game monitoring unit sales of $5.9
million, an increase of 5% compared to revenues of $5.6 million in the prior
year quarter. In addition, revenues from recurring revenue sources were $6.4
million, an increase of 333% compared to revenues of $1.5 million in the prior
year quarter as the installed base of such gaming machines continued to
increase.

Gross margin for the quarter ended December 31, 1999 improved to 42% compared to
41% in the prior year quarter. The improvement was due primarily to a change in
product mix to higher margin gaming machines and larger revenues from higher
margin recurring revenue units, partially offset by an increase in royalty
expense and higher cost of goods sold.

For the quarter ended December 31, 1999, Bally Gaming and Systems reported an
operating loss of $2.1 million compared to an operating loss of $4.5 million in
the prior year quarter. The improvement resulted from higher revenues, improved
gross margins and lower research and development costs, partially offset by a
higher provision for doubtful accounts and higher depreciation and amortization
expense resulting from the larger installed base of recurring revenue units.
Research and development costs totaled $2.6 million, a decrease of 18 percent
over the prior year quarter.

WALL MACHINES AND AMUSEMENT GAMES

For the quarter ended December 31, 1999, the Wall Machines and Amusement Games
business unit reported revenues of $19.5 million, an 18% decrease compared to
the prior year quarter. The lower revenues resulted from a 6% decrease in
shipments of new wall machines, a 12% decrease in the average selling price of
new wall machines and a 37% decrease in amusement game distribution revenues,
partially offset by a 16% increase in leased machine revenues. The foreign
currency fluctuation between the dollar and the deutschmark decreased revenues
by $2.6 million and EBITDA by $0.3 million in the quarter ended December 31,
1999. The Company believes that the soft demand for new wall machines is due toe
potential changes in the laws regulating wall machines that are being reviewed
by the German government. The soft demand will likely remain until the outcome
of the proposed law changes is known. The ultimate outcome and timing of the
proposed changes is not determinable at this time.

Wall Machines and Amusement Games continued to expand its leasing program
whereby new wall machines are leased to customers pursuant to operating leases.
These leases provide Wall Machines and Amusement Games with a stream of revenues
and cash flow over the life of the leases, which range from six months to three
and one half years. The increase in lease revenues compared to the prior year
quarter was due primarily to a 21% increase in the average monthly lease rate
and an increase in the installed base of leased machines.

For the quarter ended December 31, 1999, gross profit margin increased to 43%
compared to 38% in the prior year quarter. This improvement was due to sales of
higher margin progressive jackpot machines and the increase in lease revenues,
partially offset by the unfavorable impact of a lower fixed cost absorption rate
from a decrease in production. Wall Machines and Amusement Games reported
operating income of $0.8 million compared to operating income of $0.1 million in
the prior year quarter, due primarily to the increase in gross margins and lower
selling, general and administrative expenses, principally a decrease in salary
and wages and marketing expenses, partially offset by a decrease in revenues and
an increase in depreciation expense.


                                       29
<PAGE>   30
                           ALLIANCE GAMING CORPORATION
                                    FORM 10-Q

                     FOR THE QUARTER ENDED DECEMBER 31, 1999

ROUTE OPERATIONS

For the quarter ended December 31, 1999, the Route Operations business unit
reported revenues of $48.2 million, an increase of 13% compared to revenues of
$42.8 million in the prior year quarter. Revenues for the Nevada operations
increased 16% as net win per gaming machine per day increased to $61.00 from
$55.50 in the prior year quarter, while the average number of gaming machines
increased to 7,670 from 7,250 in the prior year quarter resulting primarily from
machines added as a result of new locations and taking over the contracts to
operate locations previously served by competitors. Revenues continue to be
strong in Southern Nevada, particularly in Gamblers Bonus locations. Revenues
for the Louisiana operations decreased 12% due primarily to the closing of two
OTB's that, pursuant to a prior vote, effective July 1, 1999 were required to
close. This resulted in a 10% decrease in the average number of gaming units
deployed. Additionally, there was a decrease in net win per day per gaming
machine to $76.10 from $78.90 in the prior year quarter.

For the quarter ended December 31, 1999, cost of revenues increased 13% to $38.0
million compared to $33.5 million in the prior year quarter. As a percentage of
revenues, cost of revenues increased slightly to 79% from 78% in the prior year
quarter. Nevada route operations cost of revenues as a percentage of revenues
increased to 81% from 80% in the prior year quarter, due primarily to lower
margins in the Southern Nevada route operations, partially offset by improved
margins in the Northern Nevada route operations. The lower margins in Southern
Nevada resulted primarily from increased gaming machine rental costs and
participation payments. Louisiana operations cost of revenues as a percentage of
revenues improved to 64% from 67% in the prior year quarter. The Route
Operations business unit reported operating income of $4.0 million, an increase
of 18% compared to operating income of $3.4 million in the prior year quarter.
The increase in operating income resulted primarily from higher revenues and
lower depreciation expense, partially offset higher operating costs and higher
selling, general and administrative expenses, primarily increased promotion and
marketing costs at the Nevada route operation.

Effective February 1, 2000 the Company began operating an additional 305 games
in 19 Raley's stores in Nevada. This agreement with Raley's runs through June
2008, and brings the total games on the Nevada route to over 8,000.

CASINO OPERATIONS

For the quarter ended December 31, 1999, the Casino Operations business unit
reported revenues of $16.1 million, an increase of 8% compared to revenues of
$14.9 million in the prior year quarter. This increase was a result of a 23%
increase at the Rail City Casino and a 4 percent increase at the Rainbow Casino.
The revenue improvement at the Rail City Casino to $4.4 million from $3.6
million in the prior year quarter was attributable to an increase in the average
gaming machine net win per day of 18% to $77 from $65 in the prior year quarter
and an 11% increase in the average number of gaming machines. Rainbow Casino
revenues increased to $11.7 million from $11.4 in the prior year quarter as a
result of a 6% increase in the average number of gaming machines and higher
table game revenue, partially offset by a 4% decrease in net win per day per
gaming machine to $141 from $147 in the prior year quarter. The increase in
revenues at the Rainbow Casino was despite the adverse impact of temporarily
removing machines as part of the casino expansion and internal remodeling
projects. The expansion space at the Rainbow Casino opened in late November and
the casino now has over 1,000 gaming machines.

For the quarter ended December 31, 1999, the cost of revenues for Casino
Operations increased to $6.6 million compared to $6.5 million in the prior year
quarter and, as a percentage of revenues, improved to 41% from 44% in the prior
year quarter. The Casino Operations business unit reported operating income of
$4.6 million, an improvement of 15% compared to operating income of $4.0 million
in the prior year quarter. Rainbow Casino operating income increased 5% to $3.6
million due primarily to the increase in revenues and improved operating
margins, partially offset by an increase in selling, general and administrative
costs, principally marketing costs. Rail City Casino operating


                                       30
<PAGE>   31
                           ALLIANCE GAMING CORPORATION
                                    FORM 10-Q

                     FOR THE QUARTER ENDED DECEMBER 31, 1999

income increased by 81% to $1.0 million due primarily to the increase in
revenues and improved operating margins, partially offset by an increase in
selling, general and administrative costs, primarily gaming machine rent.

CONSOLIDATED

Total revenues for the quarter ended December 31, 1999 were $114.5 million, an
increase of 10% compared to revenues of $103.9 million in the prior year
quarter. The increase is due primarily to the aforementioned increases at the
Bally Gaming and Systems, Route Operations and Casino Operations business units,
partially offset by a decrease at the Wall Machines and Amusement Games business
unit.

Cost of revenues for the quarter ended December 31, 1999 was $73.6 million, an
increase of 8% compared to $68.1 million in the prior year quarter. Cost of
revenues as a percentage of total revenues improved to 64% from 65% in the prior
year quarter. The increase was due primarily to the improvements in costs as a
percentage of revenues at the Bally Gaming and Systems, the Wall Machines and
Amusement Games and the Casino Operations business units, partially offset by an
increase in costs as a percentage of revenues at Route Operations business unit.

Selling, general and administrative expenses for the quarter ended December 31,
1999 remained constant at $27.9 million between quarters. Increases in expenses
at the Route Operations and Casino Operations business units and an increase in
the provision for doubtful accounts, were offset by a decrease in Corporate
expenses, primarily professional and consulting fees, and decreases in expenses
at the Wall Machines and Amusement Games business unit.

Research and development costs for the quarter ended December 31, 1999 were
approximately $3.3 million, a decrease of 16% compared to costs of $4.0 million
in the prior year quarter. This decrease is due to decreases in costs at the
Bally Gaming and Systems and the Wall Machines and Amusement Games business
units.

Depreciation and amortization for the quarter ended December 31, 1999 was
approximately $6.7 million, an increase of 16% compared to $5.8 million in the
prior year quarter. The increase was due primarily to increases at the Bally
Gaming and Systems and the Wall Machines and Amusement Games business units,
partially offset by decreases at the Route Operations and Casino Operations
business units.

NET INTEREST EXPENSE AND INCOME TAXES

Net interest expense in the three months ended December 31, 1999 increased to
$8.6 million from $7.4 million in the prior year quarter due to a $0.5 million
fee in connection with obtaining an amendment to the Company's bank credit
facility coupled with a higher average amount of total borrowings and slightly
higher interest rates.

The Company recorded an income tax provision of $0.2 million in the 1999 quarter
compared to an income tax benefit of $0.2 million in the prior year quarter. The
current quarter provision is due to various state income tax provisions.

SIX MONTHS ENDED DECEMBER 31, 1998 AND 1999

BALLY GAMING AND SYSTEMS

For the six months ended December 31, 1999, Bally Gaming and Systems reported
revenues of $70.4 million, a 58% increase compared to revenues of $44.4 million
in the prior year period. The improvement was due primarily


                                       31
<PAGE>   32
                           ALLIANCE GAMING CORPORATION
                                    FORM 10-Q

                     FOR THE QUARTER ENDED DECEMBER 31, 1999

to a $10.4 million increase in SDS 6000 game monitoring unit sales, an $8.0
million increase in recurring revenue sources and increases in units shipped and
the average selling price of new gaming machines. Bally Gaming reported unit
sales of approximately 5,300 new gaming machines, an increase of 33% compared to
unit sales of approximately 4,000 in the prior year period, due primarily to an
overall increase in market demand and the successful introduction of new
products recently licensed in more jurisdictions. By market segment, Bally
Gaming's unit sales for the six month period consisted of approximately 700
units to the Nevada and Atlantic City markets, 3,300 units to international
markets and 1,300 units to riverboats, Native American and other domestic
markets. Bally Gaming reported revenues from the sale of new gaming machines of
$32.1 million, an increase of 54% compared to $20.9 million in the prior year
period, due to higher unit volume and a 16% increase in average selling prices
over the prior year quarter. Bally Systems reported revenues from SDS 6000 game
monitoring unit sales of $20.1 million, an increase of 108% compared to revenues
of $9.6 million in the prior year period. In addition, revenues from recurring
revenue sources were $10.6 million, an increase of 312% compared to revenues of
$2.6 million in the prior year period. At December 31, 1999 Bally Gaming and
Systems had an installed base of over 2,000 gaming machines that earn revenue on
a recurring basis compared to approximately 100 gaming machines at December 31,
1998.

Gross margin for the six months ended December 31, 1999 remained constant at 43%
between periods. A change in product mix to higher margin gaming machines
coupled with greater revenues from recurring revenue units and SDS 6000 game
monitoring unit sales, were offset by an increase in royalty expense, a greater
provision for inventory obsolescence and higher cost of goods sold.

For the six months ended December 31, 1999, Bally Gaming and Systems reported
operating income of $2.9 million compared to an operating loss of $4.3 million
in the prior year period. The improvement resulted from higher revenues and
lower research and development costs, partially offset by higher selling,
general and administrative costs including a higher provision for doubtful
accounts, higher costs to support the recurring revenue units, higher costs from
the start of commercial sales in Australia and higher depreciation and
amortization expense resulting from the larger installed base of recurring
revenue units. Research and development costs totaled $5.4 million, a decrease
of 18% over the prior year period.

WALL MACHINES AND AMUSEMENT GAMES

For the six months ended December 31, 1999, the Wall Machines and Amusement
Games business unit reported revenues of $34.2 million, a 23% decrease compared
to the prior year period. The lower revenues resulted from a 16% decrease in
shipments of new wall machines, a 14% decrease in the average selling price of
new wall machines and a 39% decrease in amusement game distribution revenues,
partially offset by a 4% increase in leased machine revenues. The foreign
currency fluctuation between the dollar and the deutschmark decreased revenues
by $3.1 million and EBITDA by $0.2 million in the six months ended December 31,
1999. The Company believes that the soft demand for new wall machines is due to
the potential changes in the laws regulating wall machines. The soft demand will
likely remain until the outcome of the proposed law changes is known. The
ultimate outcome and timing of the proposed changes is not determinable at this
time.

Wall Machines and Amusement Games continued to expand its leasing program
whereby new wall machines are leased to customers pursuant to operating leases.
These leases provide Wall Machines and Amusement Games with a stream of revenues
and cash flow over the life of the leases, which range from six months to three
and one half years. As of December 31, 1999 a total of 5,320 machines were
deployed in the leasing plan compared to 4,760 deployed at December 31, 1998, an
increase of 12%. The average monthly lease rate increased by 4% compared to the
prior year period.


                                       32
<PAGE>   33
                           ALLIANCE GAMING CORPORATION
                                    FORM 10-Q

                     FOR THE QUARTER ENDED DECEMBER 31, 1999

For the six months ended December 31, 1999, gross profit margin decreased to 38%
compared to 40% in the prior year period. This decrease was due to the
unfavorable impact of a higher volume of trade-ins of used equipment and a lower
fixed cost absorption rate, partially offset by sales of higher margin
progressive jackpot machines. Wall Machines and Amusement Games reported an
operating loss of $1.0 million compared to operating income of $2.3 million in
the prior year period, due primarily to lower revenues and margins coupled with
increases in the provision for doubtful accounts and depreciation expense,
partially offset by lower selling, general and administrative expenses,
principally a decrease in salary and wages and marketing expenses.

ROUTE OPERATIONS

For the six months ended December 31, 1999, the Route Operations business unit
reported revenues of $94.3 million, an increase of 14% compared to revenues of
$82.8 million in the prior year quarter. Revenues for the Nevada operations
increased 17% as net win per gaming machine per day increased to $59.60 from
$54.00 in the prior year period, while the average number of gaming machines
increased to 7,640 from 7,190 in the prior year period resulting primarily from
machines added as a result of new locations and taking over the contracts to
operate locations previously served by competitors. Revenues continue to be
strong in Southern Nevada, particularly in Gamblers Bonus locations. As of
December 31, 1999, the Gamblers Bonus product was installed in over 3,000 gaming
machines at approximately 300 locations statewide or 39% of the installed base
of gaming machines. Revenues for the Louisiana operations decreased 9% compared
to the prior year period due primarily to the July 1, 1999 closing of two OTB's
that, pursuant to a prior vote, effective July 1, 1999 were required to close.
This resulted in a 9% decrease in the average number of gaming units deployed
and a decrease in net win per day per gaming machine to $76.80 from $77.90 in
the prior year period.

As a percentage of revenues, cost of revenues increased slightly to 79% from 78%
in the prior year quarter. Nevada route operations cost of revenues increased as
a percentage of revenues to 81% from 80% in the prior year quarter, due
primarily to the lower margins in the Southern Nevada route operations,
partially offset by improved margins in the Northern Nevada route operations.
The lower margins resulted primarily from the impact of the start-up costs for
the Raley's stores where the Company was not able to operate until February 1,
2000 and increased gaming machine rental and participation costs. Louisiana
operations cost of revenues decreased as a percentage of revenues to 64% from
66% in the prior year quarter. The Route Operations business unit reported
operating income of $7.0 million, an increase of 9% compared to operating income
of $6.4 million in the prior year period. The increase in operating income
resulted primarily from higher revenues and lower depreciation expense,
partially offset higher operating costs and higher selling, general and
administrative expenses, principally increases in salary and wages and promotion
and marketing costs at the Nevada route operation.

CASINO OPERATIONS

For the six months ended December 31, 1999, the Casino Operations business unit
reported revenues of $32.8 million, an increase of 6% compared to revenues of
$31.1 million in the prior year period. This increase was a result of a 24%
increase at the Rail City Casino. The revenue improvement at the Rail City
Casino to $8.5 million from $6.9 million in the prior year period was
attributable to an increase in the average gaming machine net win per day of 19%
to $74 from $62 in the prior year period and an 11% increase in the average
number of gaming machines. Rainbow Casino revenues remained constant at $24.3
million between periods as a 2% increase in net win per day per gaming machine
to $155 from $152 in the prior year period was offset by a 2% decrease in the
average number of gaming machines. Revenues at the Rainbow Casino impacted from
temporarily removing machines as part of the casino expansion and internal
remodeling projects which are now complete.


                                       33
<PAGE>   34
                           ALLIANCE GAMING CORPORATION
                                    FORM 10-Q

                     FOR THE QUARTER ENDED DECEMBER 31, 1999

For the six months ended December 31, 1999, the cost of revenues for Casino
Operations decreased to $13.2 million compared to $13.3 million in the prior
year quarter and, as a percentage of revenues, improved to 40% from 43% in the
prior year quarter. The Casino Operations business unit reported operating
income of $10.6 million, an improvement of 19% compared to operating income of
$8.9 million in the prior year period. Rainbow Casino operating income increased
9% to $8.7 million due primarily to improved operating margins and a decrease in
selling, general and administrative costs. Rail City Casino operating income
increased by 113% to $1.9 million due primarily to the increase in revenues and
improved operating margins, partially offset by an increase in selling, general
and administrative costs, primarily gaming machine rent and participation
payments.

CONSOLIDATED

Total revenues for the six months ended December 31, 1999 were $231.7 million,
an increase of 14% compared to revenues of $202.7 million in the prior year
period. The increase is due primarily to the aforementioned increases at the
Bally Gaming and Systems, Route Operations and Casino Operations business units,
partially offset by a decrease at the Wall Machines and Amusement Games business
unit.

Cost of revenues for the six months ended December 31, 1999 was $148.9 million,
an increase of 15% compared to $129.9 million in the prior year period. Cost of
revenues as a percentage of total revenues remained constant at 64% between
periods. Improvements in costs as a percentage of revenues at the Casino
Operations business unit, were offset by an increase in costs as a percentage of
revenues at Wall Machines and Amusement Games and the Route Operations business
units. Bally Gaming and Systems costs as a percentage of revenues remained
constant between periods.

Selling, general and administrative expenses for the six months ended December
31, 1999 were $51.5 million an increase of 5% compared to $48.9 million in the
prior year period. The increase was due primarily to increases in expenses at
the Bally Gaming and Systems, Route Operations and Casino Operations business
units and an increase in the provision for doubtful accounts, partially offset
by a decrease in Corporate expenses, principally salary and wages and consulting
fees, and decreases in expenses at the Wall Machines and Amusement Games
business unit.

Research and development costs for the six months ended December 31, 1999 were
approximately $6.9 million, a decrease of 16% compared to costs of $8.1 million
in the prior year period. This decrease is due to decreases in costs at the
Bally Gaming and Systems and the Wall Machines and Amusement Games business
units.

Depreciation and amortization for the six months ended December 31, 1999 was
approximately $13.0 million, an increase of 17% compared to $11.1 million in the
prior year period. The increase was due primarily to increases at the Bally
Gaming and Systems and the Wall Machines and Amusement Games business units,
partially offset by decreases at the Route Operations and Casino Operations
business units.

NET INTEREST EXPENSE AND INCOME TAXES

Net interest expense in the six months ended December 31, 1999 increased to
$16.3 million from $15.0 million in the prior year period due to a $0.5 million
fee in connection with obtaining an amendment to the Company's bank credit
facility coupled with a higher average amount of total borrowings and slightly
higher interest rates.

The Company recorded an income tax provision of $0.3 million in the current year
period compared to an income tax benefit of less than $0.1 million in the prior
year period. The current year period provision is due to various


                                       34
<PAGE>   35
                           ALLIANCE GAMING CORPORATION
                                    FORM 10-Q

                     FOR THE QUARTER ENDED DECEMBER 31, 1999

state income tax provisions.

                                    * * * * *

The information contained in this Form 10-Q may contain "forward-looking"
statements within the meaning of section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Act of 1933, as amended, and is
subject to the safe harbor created thereby. Such information involves important
risks and uncertainties that could significantly affect results in the future
and, accordingly, such results may differ from those expressed in any forward
looking statements herein. Future operating results may be adversely affected as
a result of a number of factors such as the Company's high leverage, its holding
company structure, its operating history and recent losses, competition, risks
of product development, customer financing, sales to non-traditional gaming
markets, foreign operations, dependence on key personnel, strict regulation by
gaming authorities, gaming taxes and value added taxes, uncertain effect of
National Gambling Commission, and other risks, as detailed from time to time in
the Company's filings with the Securities and Exchange Commission.


                                       35
<PAGE>   36
                           ALLIANCE GAMING CORPORATION
                                    FORM 10-Q

                     FOR THE QUARTER ENDED DECEMBER 31, 1999

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Refer to Part 1, Item 7A of the Company's annual report on Form 10-K, as
amended, for the fiscal year ended June 30, 1999. There have been no material
changes in market risks since the prior fiscal year end.

                                     PART II

ITEM 1.     LEGAL PROCEEDINGS

            See "Notes to Unaudited Condensed Consolidated Financial Statements-
            5. Legal Proceedings" for a description of certain legal
            proceedings.

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

            On January 3, 2000, the Company held its annual shareholders meeting
            at which the shareholders were asked to vote on the election of two
            directors. Of the 10,252,380 shares of common stock outstanding,
            5,676,327 shares were voted for, and 3,423,624 withheld from Mr.
            Anthony DiCesare; and 5,676,327 shares were voted for, and 3,423,624
            withheld from Mr. Joel Kirschbaum.

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

            a.     Exhibits

            4.6    Fourth Amendment and Consent among Alliance Gaming
                   Corporation, Bally Wulff Vertriebs GmbH, Bally Wulff
                   Automaten GmbH and various lenders, and Credit Suisse First
                   Boston as administrative agent dated December 16, 1999.

            27.1    Financial Data Schedule

            b.     Reports on Form 8-K

                   No reports on Form 8-K were filed during the quarter ended
                   December 31, 1999.


                                       36
<PAGE>   37
                           ALLIANCE GAMING CORPORATION
                                    FORM 10-Q

                     FOR THE QUARTER ENDED DECEMBER 31, 1999



                                   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 authorized.



     ALLIANCE GAMING CORPORATION
     (Registrant)



     By  /s/ Robert Miodunski
         -----------------------------------
         Chief Operating Officer
         (Principal Executive Officer)



     By  /s/ Scott D. Schweinfurth
         -----------------------------------
         Sr. Vice President, Chief Financial
         Officer and Treasurer (Principal
         Financial and Accounting Officer)







                                       37