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 September 30, 1996

                               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 November 7, 1996 according to the  records  of
the registrant's registrar and transfer agent was 31,832,539.











                           I N D E X



PART I.     FINANCIAL INFORMATION                                         Page


Item 1.   Unaudited Financial Statements

     Unaudited Condensed Consolidated Balance Sheets as of  
           June 30, 1996  and September 30, 1996                            3

     Unaudited Condensed Consolidated Statements of Operations
           for the three months ended September 30, 1995 and 1996           4

     Unaudited Condensed Consolidated Statements of Stockholder's
           Equity for the three months ended September 30, 1996             5

     Unaudited Condensed Consolidated Statements of Cash Flows
           for the three months ended September 30, 1995 and 1996           6

     Notes   to   Unaudited  Condensed  Consolidated  Financial
           Statements                                                       7

Item  2.    Management's  Discussion and  Analysis  of  Financial
            Condition and Results of Operations                            21



PART II.  OTHER INFORMATION


Item 1.   Legal Proceedings                                                30

Item 6.   Exhibits   and   reports   on    Form    8-K                     30


SIGNATURES                                                                 31








                             PART 1

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

                                                         June 30,      Sept. 30,
                                                           1996          1996
ASSETS
Current assets:
  Cash and cash equivalents                             $ 48,057       $ 38,331
 Accounts and notes receivable, net of allowance 
  for doubtful accounts of $17,727 and $18,973            93,502         89,446
 Inventories, net                                         41,656         44,426
   Other current assets                                    8,354          8,162
  Total current assets                                   191,569        180,365
Long-term notes receivable, net of allowance 
 for doubtful accounts of $1,770 and $1,829               14,184         13,661
Property, plant and equipment, net of accumulated
 depreciation of $30,144 and $32,925                      78,084         76,309
Excess of costs over net assets of acquired businesses, 
 net of accumulated amortization of $422 and $405         60,292         60,995
Intangible assets, net of accumulated amortization of 
 $5,216  and $6,672                                       20,247         19,093
Other assets, net                                         11,128         11,434
         Total assets                                   $375,504       $361,857

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                      $  16,479     $  19,887
  Accrued liabilities                                      38,304        36,610
 Current maturities of long-term debt                      25,777        13,328
   Total current liabilities                               80,560        69,825
Senior secured notes, net of unamortized discount of 
 $3,071  and $3,001                                       150,929       150,999
Other long-term debt, less current maturities              14,638        12,860
Other  liabilities                                          6,831         6,869
      Total  liabilities                                  252,958       240,553
Minority  interest                                          1,148         1,107

Series  B Special Stock, $.10 par value, $100 
 liquidation value; 684,551 shares  and  691,707 
 issued and outstanding, net of discount                   51,552        52,656

Commitments and contingencies

Stockholders' equity:
 Common Stock, $.10 par value; 175,000,000 shares 
  authorized; 31,763,000 shares and 31,835,000 issued 
  and outstanding                                           3,176         3,183
 Series E  Special Stock, $100 liquidation value; 
  113,160 shares issued and outstanding                    11,316        11,316
 Additional paid-in capital                               139,031       138,902
 Cumulative translation adjustment                           (287)         (441)
 Accumulated deficit                                      (83,390)      (85,419)
 Total stockholders' equity                                69,846        67,541
          Total liabilities and stockholders' equity     $375,504      $361,857
                                
      See notes to unaudited condensed consolidated financial
                           statements.

                   ALLIANCE GAMING CORPORATION
    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                 (In 000's, except share data)

                                                Three Months Ended September 30,
                                                         1995       1996
Revenues:
    Gaming machine operations                          $26,296   $ 28,889
    Casino operations                                   12,242     12,713
    Gaming equipment and systems sales                       3     34,883
    Wall machine and amusement game sales                  ---     26,427
                                                        38,541    102,912

Costs and expenses:
     Cost of gaming machine operations                  20,212     21,894
     Cost of casino operations                           5,915      5,366
     Cost of gaming equipment and systems sales            ---     21,808
     Cost of  wall machine and amusement game sales        ---     15,104
     Selling, general and administrative                 6,694     22,289
     Provision for doubtful receivables                     21      1,575
     Depreciation and amortization                       2,487      5,220
     Unusual items                                         ---        700
     Direct merger costs                                 4,677        ---
                                                        40,006     93,956

Operating income (loss)                                 (1,465)     8,956

Other income (expense):
    Interest income                                        426        563
    Interest expense                                    (2,208)    (6,250)
    Royalty fees                                          (980)    (1,151)
    Minority interest in income                           (144)      (141)
    Other, net                                             482         (1)
Income (loss) before income taxes                       (3,889)     1,976

Income tax provision (benefit)                            (471)     1,341

Net income (loss)                                       (3,418)       635

Special Stock dividends                                    ---     (2,896)

Net loss applicable to common shares                   $(3,418)   $(2,261)

Net   loss  per  common  share                         $  (.29)   $  (.07)

Weighted average common shares outstanding              11,654     31,772



      See notes to unaudited condensed consolidated financial
                           statements.

                   ALLIANCE GAMING CORPORATION
  UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
                             EQUITY

             Three Months Ended September 30, 1996
                          (In 000's)
<TABLE>
<CAPTION>
                                                                             Retained                Total
                                                   Series E      Additional  Earnings   Cumulative   Stock-
                                 Common Stock     Special Stock    Paid-in    (Accum.   Translation  holders'
                                Shares  Dollars  Shares  Dollars   Capital    Deficit)  Adjustment   Equity
<S>                             <C>     <C>        <C>   <C>      <C>         <C>         <C>        <C>
Balances  at June 30, 1996      31,763   $3,176    113   $11,316  $139,031    $(83,390)   $(287)     $69,846

Net  income                        -        -       -        -         -           635       -           635
Shares issued upon exercise 
 of options                         75       7      -        -         115         -         -           122
Adjustments to  merger
 consideration                      (3)     -       -        -         (12)        -         -           (12)
Special Stock dividends            -        -       -        -         -        (2,664)      -        (2,664)
Special Stock repurchase 
 premium                           -        -       -        -        (232)        -         -          (232)
Foreign currency translation
 adjustment                        -        -       -        -         -           -       (154)        (154)

Balances at September 30,1996   31,835  $3,183     113   $11,316  $138,902    $(85,419)   $(441)     $67,541
</TABLE>














     See notes to unaudited condensed consolidated financial
                           statements.
                                
                                
                                
                                
                  ALLIANCE GAMING CORPORATION
   UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                          (In 000's)


                                               Three Months Ended September 30,
                                                          1995          1996
Cash flows from operating activities:
    Net income (loss)                                   $ (3,418)   $    635
 Adjustments to reconcile net loss
      to net cash provided by operating activities:
        Depreciation and amortization                      2,487       5,220
        Amortization of debt discounts                        59         512
   Write down of other assets                                125         102
        Loss on sale of assets                               151          53
        Provision for losses on receivables                   21       1,575
        Other                                                ---         (24)
   Net change in operating assets and liabilities:
        Accounts and notes receivable                       (453)      2,933
        Inventories                                            9      (2,456)
        Other current assets                               1,013          43
        Accounts payable                                    (271)      3,408
        Accrued liabilities                                  279        (750)

            Net cash provided by operating activities          2      11,251

Cash flows from investing activities:
    Additions to property, plant and equipment            (2,226)     (2,772)
    Proceeds from disposal of property and equipment         296          41
    Net sales of securities available for sale             3,548         ---
    Other                                                 (1,110)     (1,058)
         Net cash provided by (used in) investing 
          activities                                         508      (3,789)

Cash flows from financing activities:
    Proceeds from long-term debt, net of expenses            168          41
    Reduction of long-term debt                           (1,024)     (3,683)
    Net change in lines of credit                            ---     (12,010)
    Repurchase of Series B Special Stock                     ---      (1,653)
    Issuance of common stock upon exercise of stock options  ---         122
         Net cash used in financing activities              (856)    (17,183)

Effect of exchange rate changes on cash                      ---          (5)

Cash and cash equivalents:
   Decrease for period                                      (346)     (9,726)
   Balance, beginning of period                           13,734      48,057
   Balance, end of period                               $ 13,388    $ 38,331



See notes to unaudited condensed consolidated financial statements.

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 for the year
   ended   June   30,  1996.  All  intercompany   accounts   and
   transactions have been eliminated in consolidation.

   The condensed consolidated balance sheet at June 30, 1996 was
   derived  from audited consolidated financial statements,  but
   does  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.

   On  June  18, 1996, the Company completed the acquisition  of
   all  the  outstanding  shares of Bally Gaming  International,
   Inc.   ("BGII")  (the  "Merger").   The  consideration   paid
   consisted of approximately $77,243,000 in cash, $2,957,000 in
   the  Company's  common stock and $36,571,000 in the Company's
   Series  B  Special Stock, totaling $11.84 per share  for  the
   9,855,500 shares of BGII outstanding (excluding the 1,000,000
   shares  beneficially  owned  by  the  Company  prior  to  the
   Merger). The acquisition has been accounted for as a purchase
   and  the results of operations of BGII have been included  in
   the  consolidated financial statements beginning on June  18,
   1996.  The  purchase price was allocated based  on  estimated
   fair  values at the date of the acquisition. During  the  one
   year  period  following  the Merger, the  Company  will  make
   adjustments  to  the estimated fair values  assigned  to  the
   assets  acquired  from  BGII based on  appraisals  and  other
   information  received, which will result in  changes  to  the
   excess  of purchase price over the fair value of BGII  assets
   acquired.  The excess of purchase price over the BGII  assets
   acquired is being amortized on a straight-line basis over  40
   years   and  has  been  adjusted  during  the  quarter  ended
   September 30, 1996 for changes in values assigned to  certain
   buildings,  deferred  tax liabilities  and  the  actual  BGII
   shares acquired.

2. SUPPLEMENTAL CASH FLOW INFORMATION

   The  following  supplemental information is  related  to  the
   condensed consolidated statements of cash flows. In the three
   months  ended  September  30,  1995  and  1996,  the  Company
   recorded the following significant non-cash items:

   During the three months ended September 30, 1996, the Company
   reclassified  approximately $567,000  from  other  assets  to
   equipment   and  reclassified  approximately  $1,286,000   to
   property,  plant  and equipment from excess  costs  over  net
   assets  of  acquired  business  based  on  recent  appraisals
   received  for  certain German properties.  In  addition,  the
   Company  recorded  non-cash dividends for its  Series  E  and
   Series  B  Special  Stock in the amount of $2,664,000  and  a
   premium on the repurchase of shares of Series B Special Stock
   of $232,000.

   During the three months ended September 30, 1995, the Company
   reclassified  approximately $581,000  from  other  assets  to
   equipment  as gaming machines were  manufactured  and  placed
   into service on the route. In addition, the Company recorded
   a  non-cash unrealized gain on securities available for  sale
   in the amount of $505,000 recorded in the stockholders equity
   section, net of tax.

3. LONG-TERM DEBT AND LINES OF CREDIT

   Long-term  debt  at  June  30, 1996 and  September  30,  1996
   consists of the following (in 000's) :

                                                         June 30,      Sept. 30,
                                                           1996          1996

   12 7/8%  Senior Secured Notes due 2003, net of 
    unamortized discount of $3,071,000 and $3,001,000    $150,929      $150,999
   Bally Wulff revolving lines of credit                   13,664         9,179
   Hospitality Franchise Systems note payable,
    secured by the assets of the Rainbow Casino             7,864         7,549
   Bally Gaming and Systems revolving line of credit        7,525           ---
   7.5% Convertible subordinated debentures due 2003, 
    unsecured                                               1,642         1,642
   Subordinated note payable to stockholder, net of 
    discount, secured by the assets of VSI                  2,268           ---
   Other, secured by related equipment                      7,452         7,818
                                                          191,344       177,187
   Less current maturities                                 25,777        13,328
   Long-term debt, less current maturities               $165,567      $163,859

   In  June  1996,  the Company completed a public  offering  of
   $154,000,000 aggregate principal amount of its 12 7/8% Senior
   Secured  Notes due 2003 (the "Senior Secured Notes") as  part
   of  the financing of the BGII Merger.  Interest on the Senior
   Secured Notes is payable semi-annually in arrears on June  30
   and  December 30 of each year, commencing December 30,  1996.
   The  Senior Secured Notes will mature on June 30,  2003.  The
   Senior Secured Notes will be redeemable at the option of  the
   Company,  in  whole  or  in part, at any  time  on  or  after
   June  30, 2000 at the redemption prices of 104.292%  for  the
   twelve  months  beginning June 30, 2000,  102.146%   for  the
   twelve  months  beginning June 30, 2001 and  100%  thereafter
   plus  accrued  and unpaid interest, if any, to  the  date  of
   redemption.  Upon the occurrence of a change  of  control  as
   defined in the indenture, the Company is required to make  an
   offer to repurchase the Senior Secured Notes at a price equal
   to  101%  of  the principal amount thereof, plus accrued  and
   unpaid  interest,  if  any, to the date  of  repurchase.  The
   Senior  Secured Notes are secured by an exclusive  pledge  of
   the  equity  interests  directly or indirectly  held  by  the
   Company  in its subsidiaries, except for the equity interests
   in  BGII  and  its  subsidiaries, but  including  the  equity
   interests in Alliance Holding Company ("Holding"), which  was
   formed  to  hold  the  equity  interests  of  BGII  and   its
   subsidiaries.  The  Senior  Secured  Notes  are   fully   and
   unconditionally  guaranteed on a  joint  and  several  senior
   basis  by each present and future subsidiary, as defined,  of
   the  Company,  other  than  (i) the partially-owned  entities
   through  which the Company's Mississippi casino and Louisiana
   gaming  machine  operations are conducted and (ii)  specified
   entities  through which the Company's German  operations  are
   conducted.  The  indenture for the Company's  Senior  Secured
   Notes   contains   various  limitations  on   incurrence   of
   additional  indebtedness,  on  restricted  payments  and   on
   dividend and payment restrictions on subsidiaries.
   
   In June 1996, in response to a solicitation from the Company,
   holders  of   $83,358,000 aggregate principal amount  of  its
   7.5%   Convertible   Subordinated  Debentures   ("Convertible
   Debentures")  elected to  exchange for  new  debentures  that
   converted  at  the  time of the Merger into  shares  of   the
   Company's  common  stock ($72,042,000 principal  amount)  and
   shares  of  the Company's Series E Special Stock ($11,316,000
   principal  amount).  At  September 30,  1996,  $1,642,000  of
   Convertible Debentures remained outstanding.



   During  1995,  Hospitality Franchise  Systems,  Inc.  ("HFS")
   agreed   to   loan  $7,750,000  to  the  Company's   majority
   controlled  subsidiary Rainbow Casino Vicksburg  Partnership,
   LP  ("RCVP")  in  connection with the  construction  of  the
   Rainbow  Casino.  The loan amount was subsequently  increased
   to  $10,000,000.  The note bears interest at 7.5%  per  annum
   and  requires monthly payments of principal and interest over
   a 24-month period.  In exchange for funding this loan, HFS is
   also  entitled to receive in perpetuity a monthly  royalty  fee based on
   the   casino's  gaming revenues  of 12%  on the  first  $40.0
   million,  11% on the next $10.0 million, and 10%  thereafter.
   The   accompanying   unaudited  consolidated   statement   of
   operations for the three months ended September 30, 1995  and
   1996  include approximately $980,000 and $1,151,000  of  such
   royalties, respectively.

   In  March  1992,  Alfred  H. Wilms,  director  and  principal
   stockholder (and then Chairman of the Board of Directors  and
   Chief Executive Officer) of the Company, committed to provide
   or  cause others to provide a $6,500,000 five year   loan  to
   Video   Services,  Inc.  ("VSI"),  the  Company's  controlled
   subsidiary, which loan was funded in full and was secured  by
   a  subordinated interest in all of VSI's present  and  future
   personal  property.   All  scheduled principal  and  interest
   payments were made until September 1996 when the Company paid
   off  the  remaining  principal and accrued  interest  balance
   totaling $2,826,000.

   During March 1993, the Bally Wulff entities obtained two bank
   lines  of credit for the purpose of financing the acquisition
   of  assets  acquired  from  an independent  distributor.  The
   agreements    provide   for   borrowings   of    DM16,000,000
   (approximately  $10,490,000,  at  September  30,  1996)   and
   DM1,500,000 (approximately $983,000 at September  30,  1996),
   respectively.  The DM1,500,000 line of credit was  originally
   DM5,000,000 and has been, and will continue to be,  reduced
   by  DM250,000  principal amount per quarter, and  expires  on
   March  31,  1998.  Borrowings under this line of credit  bear
   interest at 6.95%. The working capital revolving credit  line
   of   DM16,000,000  bears  interest  at  a  rate  tied  to  an
   international borrowing rate plus 1% (4.64% at September  30,
   1996) and is due on demand. These lines are collateralized by
   a pledge of the assets acquired. Approximately $1,967,000 was
   outstanding  under  these lines at  September  30,  1996.  In
   May  1993,  the Bally Wulff entities obtained a  DM16,300,000
   (approximately  $10,686,000 at September 30, 1996)  revolving
   line  of  credit  for general working capital purposes.  This
   agreement  bears interest at a rate tied to an  international
   borrowing rate plus 1% (4.67% at September 30, 1996)  and  is
   due on demand. This line is collateralized by the receivables
   of  the  Bally  Wulff entities. Approximately $7,212,000  was
   outstanding under this line at September 30, 1996.
   
   In  March  1993,  BGII's domestic subsidiary,  Bally  Gaming,
   Inc.,  obtained  a  bank revolving line of credit  which,  as
   amended,  provides  for borrowings tied to  a  percentage  of
   Bally  Gaming,  Inc.'s  eligible (as defined  in  the  credit
   agreement) inventory and accounts receivable with  a  maximum
   borrowing  capacity  of  $15,000,000. Borrowings  under  this
   agreement,  which  expires March 31, 1997, bear  interest  at
   1.5%   above  the bank's prime rate (9.75% at  September  30,
   1996).  The  Company  must  pay an  annual  facility  fee  of
   one-half of one percent of the maximum borrowing capacity and
   a  monthly  unused line fee of one-quarter of one percent  of
   the difference between the maximum borrowing capacity and the
   average daily outstanding balance during any month. This line
   of  credit is collateralized by property, plant and equipment
   and  the  eligible  inventory and  accounts  receivable.  The
   agreement  and  subsequent amendments  also  contain  certain
   financial  and  other  restrictive covenants,  including  the
   maintenance  by  Bally Gaming, Inc. of  specified  levels  of
   minimum  net working capital, working capital ratio, tangible
   net  worth,  net  worth ratio, and minimum net  income  after
   taxes,  all  as  defined  in the credit  agreement.  Eligible
   borrowing capacity under this agreement at September 30, 1996
   was   $15,000,000.  There  was  no  balance  outstanding   at
   September 30, 1996.

4.   SERIES B SPECIAL STOCK

   During  the  quarter ended September 30,  1996,  the  Company
   purchased on the open market 19,000 shares of
   its Series B Special Stock for $1,634,000 which represented a
   premium of $232,000 over the carrying value. The premium paid
   is  reflected  in the consolidated statement of stockholder's
   equity as a charge against additional paid in capital, and is
   also  deducted in computing net income applicable  to  common
   shareholders.
     
5. INCOME TAXES

   The  Company's effective tax rate for the three months  ended
   September 30, 1996 differs from the statutory rate of 35% due
   to  higher  tax rates applicable to earnings of Bally  Wulff,
   combined with the fact that earnings at the Company's domestic
   subsidiaries cannot be fully offset by the utilization of net
   operating loss carryforwards.

   The  Company's effective tax rate for the three months  ended
   September 30, 1995 differs from the statutory rate of 35% due
   to  the  book  tax  benefit  related to  the  change  in  the
   unrealized gains and losses in the investments and securities
   available  for  sale, and the fact that net operating  losses
   incurred during the period were fully reserved.


6. LEGAL PROCEEDINGS

   Litigation Relating to the Merger.

   On or about June 19, 1995, three purported class actions were
   filed  in the Chancery Court of Delaware by BGII stockholders
   against  BGII and its directors (the "Fiorella, Cignetti  and
   Neuman  Actions") in connection with the then-proposed merger
   of  BGII  with WMS ("WMS Merger"). Also on or about June  19,
   1995,  a  purported class action was filed  in  the  Delaware
   Court of Chancery by a BGII stockholder against BGII and  its
   directors   and  the  Company  (the  "Strougo   Action")   in
   connection  with  the  tender offer and consent  solicitation
   made by the Company (subsequently superseded by the execution
   of   the Agreement and Plan of Merger in October 1995 between
   the  Company  and  BGII).  On or  about  July  6,  1995,  the
   plaintiffs  in  the  Fiorella, Cignetti, Neuman  and  Strougo
   Actions  (collectively, the "Stockholder Plaintiffs")   filed
   with  the Court a motion to consolidate the  four actions. On
   or about July 27, 1995, certain of the Stockholder Plantiffs
   filed  an  amended complaint that adopted certain allegations
   concerning self-dealing by BGII directors in connection  with
   the   merger  agreement  entered  into  with  WMS  (the  "WMS
   Agreement"); added a claim relating to BGII's alleged failure
   to  hold  an  annual meeting as required; and  added  WMS  as
   defendant.  The  amended  complaint also  alleged  that  BGII
   intended,  in violation of Delaware law, to sell Bally  Wulff
   without  first seeking stockholder approval of the sale.  The
   action sought an order  enjoining  defendants from proceeding
   with,  consummating or closing the WMS merger or   rescinding
   it  if it closed; preventing the sale of  Bally Wulff without
   prior   stockholder   approval;  declaring   invalid   BGII's
   agreement to pay WMS a fee if the WMS Agreement is terminated
   by  BGII  in certain circumstances; compelling an auction  of
   BGII  and  the  provision of due diligence  to  the  Company;
   scheduling  an  immediate meeting of BGII  stockholders;  and
   awarding  compensatory  damages.  Management  believes  these
   claims  to be without merit and intends to vigorously  defend
   these actions.   
   

   On  October 23, 1995, WMS instituted a suit in New York State
   Court  against  BGII for BGII's failure to pay  $4.8  million
   upon termination of the WMS Agreement. Management intends  to
   vigorously  defend this action. On November  22,  1995,  BGII
   answered the complaint and brought counterclaims against  WMS
   alleging  that WMS repudiated and breached the WMS  Agreement
   by,  among other things, failing to act in good faith  toward
   the  consummation of the WMS Merger, advising  BGII  that  it
   would  not  perform as agreed but would impose new conditions
   on  the  WMS  Merger, acting in excess of its  authority  and
   undermining the ability of BGII to perform the WMS Agreement.
   On  February  8,  1996  WMS moved for summary  judgment.   On
   April 2, 1996, BGII opposed WMS's motion and cross-moved  for
   summary judgment.
   
   On  September 14, 1995, a stockholders' class and  derivative
   action was commenced by Richard Iannone, a stockholder of the
   Company,  against  the Company, the members  of  its  current
   Board  of  Directors and certain of its former  directors  in
   Federal  District  Court  in Nevada  asserting,  among  other
   matters, that the Company has wasted corporate assets in  its
   efforts  to acquire BGII by, among other things, agreeing  to
   onerous  and burdensome financing arrangements that  threaten
   the Company's ability to continue as a going concern and that
   the  Company  had  made false and misleading  statements  and
   omissions  in  connection  with that  effort  by  failing  to
   disclose the need to refinance an additional $53.0 million of
   existing  BGII indebtedness, by failing to disclose  how  the
   Company would recapitalize the combined indebtedness of  both
   companies  and  by failing to disclose the allegedly  leading
   role played by Richard Rainwater in the Company's efforts  to
   acquire control of BGII which, given assurances made  by  the
   Company  to  gaming regulators in Nevada that the  unlicensed
   Mr. Rainwater would not play an active role in the management
   of  the  Company, could expose the Company to  suspension  or
   revocation  of  its Nevada gaming license. In  addition,  the
   stockholder action against the Company alleges that  (i)  the
   Company  substantially inflated its results of operations  by
   selling  gaming machines at inflated prices in  exchange  for
   promissory notes (without any down payment) which the Company
   knew  could   not  be  paid in full  but  which  the  Company
   nevertheless recorded at full value, (ii) the
   Company  doctored  reports sent to its  route  customers  and
   (iii) the directors of the Company had caused the Company  to
   engage  in  self-dealing transactions with certain  directors
   which  resulted  in  the exchange of the Company  assets  for
   assets and services of vastly lesser value. On September  21,
   1995,  a  United  States  magistrate denied  the  plaintiffs'
   request for expedited discovery, stating that Mr. Iannone was
   not  an adequate representative and was not likely to succeed
   on  the  merits. On October 4, 1995, the defendants  filed  a
   motion  to  dismiss  the action. On December  18,  1995,  the
   plaintiff  filed an amended shareholder derivative complaint.
   The  plaintiff  is no longer asserting any class  claims.  On
   March  5,  1996 the defendants filed a motion to dismiss  the
   amended complaint.  On May 16, 1996, the magistrate judge, on
   motion of defendants,
   stayed  discovery in this case pending a ruling by the  court
   on the defendants' motion to dismiss the amended complaint.


   Other Litigation

   In  1994,  after an intensive Federal investigation of  Bally
   Gaming's  former Louisiana distributor, eighteen  individuals
   were  indicted  on charges of racketeering and fraud  against
   Bally Gaming, Inc. and the Louisiana regulatory system. Among
   those  indicted  were the former distributor's  stockholders,
   directors, employees and others alleged to be associated with
   organized crime. Fifteen entered pleas of guilty before trial
   and  the  remaining three were convicted in October 1995.  In
   addition,  Alan  Maiss, a former director  and  president  of
   BGII,  pled  guilty to misprision of a felony  in  connection
   with  such  investigation.  BGII, its  subsidiaries  and  its
   current employees were not subject to such investigation.
   
   Prior  to the conclusion of the Federal criminal case, BGII's
   activities  with  regard  to its former  VLT  distributor  in
   Louisiana  were the subject of inquiries by gaming regulators
   and a report by the New Jersey Division of Gaming Enforcement
   dated  August  24,  1995.   The  New  Jersey  Commission  and
   Division of Gaming have indicated that in light of the Merger
   and  consequent personnel changes that have occurred at BGII,
   there  will be no need for a hearing and the inquiry  can  be
   resolved  by stipulation.  There has been no indication  from
   the  New  Jersey Commission and Division of Gaming  that  the
   inquiry  will  have  any  effect on  BGII's  pending  license
   application. The Gaming Authorities in Ontario,  Canada,  who
   have investigated the matter, issued a gaming registration to
   Bally Gaming, Inc. on February 8, 1996.
   
   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"). The plaintiffs
   filed suit against BGII and approximately 45 other defendants
   (each a "defendant," and collectively the "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  have  engaged  in  a  course  of  fraudulent  and
   misleading  conduct  intended to induce people  into  playing
   their gaming machines based on a false belief concerning  how
   those  machines  actually operate as well as  the  extent  to
   which  there is actually an opportunity to win on  any  given
   play.  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 one billion dollars,  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.
   
   While the ultimate outcome of the matters described above are
   not  presently determinable, management does not expect  that
   the  outcome  will  have  a material adverse  effect  on  the
   Company's results of operations, financial position  or  cash
   flows.
   
   The  Company and its subsidiaries are also involved from time
   to  time in various claims and legal actions arising  in  the
   ordinary  course of business.  Management believes  that  the
   ultimate  outcome of these matters will not have  a  material
   adverse   effect  on  the  Company's  consolidated  financial
   statements taken as a whole.

7. UNAUDITED CONSOLIDATING FINANCIAL STATEMENTS

   The  following  unaudited consolidating financial  statements
   are  presented  to  provide  information  regarding  Alliance
   Gaming Corporation in columnar presentation as follows:   the
   parent    company   and   its   wholly-owned    "Guaranteeing
   Subsidiaries", its "Pledging Subsidiaries" consisting of VSI,
   Rainbow  Casino  Vicksburg L.P. and Alliance Holding  Company
   (the entity that holds the Company's investment in BGII)  and
   its  non-pledging  and non-guaranteeing subsidiary,  Alliance
   Automaten  GmbH  &  Co  KG  (the subsidiary  that  holds  the
   Company's German interests). The "Pledging Subsidiaries"  are
   shown  separately  because all of the Company's  interest  in
   these  entities  is  pledged  as collateral  for  the  Senior
   Secured Notes. The note to consolidating financial statements
   should  be  read  in  conjunction  with  these  consolidating
   financial statements.


                  CONSOLIDATING BALANCE SHEETS
                                
                          June 30, 1996
                           (In 000's)
<TABLE>
<CAPTION>
                                
                                                                                           Alliance
                                                                 Non-Pledging              Gaming
                                     Parent and                     Non-                 Corporation
                                     Guaranteeing    Pledging    Guaranteeing   Adjust-      and
                                     Subsidiaries  Subsidiaries  Subsidiaries   ments    Subsidiaries
<S>                                     <C>          <C>          <C>          <C>          <C> 
ASSETS
Current assets:
 Cash and cash equivalents              $ 37,249     $ 8,684       $ 2,124      $           $ 48,057
 Accounts and notes receivable, net       47,915          35        46,850       (1,298)      93,502
 Inventories, net                         24,996          12        16,648                    41,656
 Other current assets                      6,317         552         1,485                     8,354
       Total current assets              116,477       9,283        67,107       (1,298)     191,569
Long-term notes receivable, net           16,935                     1,773       (4,524)      14,184
Property, plant and equipment, net        39,336      26,937        11,811                    78,084
Excess of costs over net assets of 
 acquired businesses, net                 40,396                     18,332       1,564       60,292
Intangible assets, net                    19,827         420                                  20,247
Investment in subsidiaries                88,154                                (88,154)
Other assets, net                          8,576       2,835          2,744      (3,027)      11,128
                                        $329,701     $39,475       $101,767    $(95,439)    $375,504

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable                        $15,076        $213        $3,750      $(2,560)     $16,479
 Accrued liabilities                      53,474       4,110         6,140      (25,420)      38,304
 Current maturities of long-term debt      8,200       3,913        13,664                    25,777
 Total current liabilities                76,750       8,236        23,554      (27,980)      80,560
Senior Secured Notes due 2003, net       150,929                                             150,929
Other long-term debt, less current 
 maturities                                2,750      12,984         3,007       (4,103)      14,638
Other liabilities                          7,343                                   (512)       6,831
 Total liabilities                       237,772      21,220        26,561      (32,595)     252,958

Minority interest                                      1,147                          1        1,148

Series B Special Stock                    51,552                                              51,552

Commitments and contingencies

Stockholders' equity:
Common Stock                               3,547           2                       (373)       3,176
Series E Special Stock                    11,316                                              11,316
Additional paid-in capital               118,513       2,455        75,222      (57,159)     139,031
Cumulative translation adjustment              3                      (290)                     (287)
Retained earnings (Accumulated deficit)  (93,002)     14,651           274       (5,313)     (83,390)
 Total stockholders' equity               40,377      17,108        75,206      (62,845)      69,846
                                        $329,701     $39,475      $101,767     $(95,439)    $375,504
</TABLE>


                       See accompanying unaudited note.
           
                   CONSOLIDATING BALANCE SHEETS
                                
                       September 30, 1996
                           (In  000's)

<TABLE>
<CAPTION>
                                                                                        Alliance
                                                  Non-Pledging                           Gaming
                                      Parent and       Non-                             Corporation
                                     Guaranteeing    Pledging    Guaranteeing   Adjust-      and
                                     Subsidiaries  Subsidiaries  Subsidiaries   ments    Subsidiaries
<S>                                     <C>           <C>           <C>         <C>         <C>
ASSETS
Current assets:
 Cash and cash equivalents              $ 26,992      $ 8,047       $  3,292     $          $ 38,331
 Accounts and notes receivable, net       43,230          40          47,323      (1,147)     89,446
 Inventories, net                         28,250           14         16,162                  44,426
 Other current assets                      5,827          517          1,818                   8,162
 Total current assets                    104,299        8,618         68,595      (1,147)    180,365
Long-term notes receivable, net           15,856                       2,113      (4,308)     13,661
Property, plant and equipment, net        39,273       26,723         10,313                  76,309
Excess of costs over net assets of   
 acquired businesses, net                 39,953                      19,478       1,564      60,995
Intangible assets, net                    18,718          375                                 19,093
Investment in subsidiaries                88,154                                 (88,154)
Other assets, net                          9,371        2,518            (34)       (421)     11,434
                                        $315,624      $38,234       $100,465    $(92,466)   $361,857

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable                       $ 16,872      $   455        $ 2,513     $    47    $ 19,887
 Accrued liabilities                      49,565        3,965          8,349     (25,269)     36,610
 Current maturities of long term-debt        641        2,525         10,162                  13,328
 Total current liabilities                67,078        6,945         21,024     (25,222)     69,825
Senior Secured Notes due 2003, net       150,999                                             150,999
Other long-term debt, less current 
 maturities                                2,595       11,218          2,955      (3,908)     12,860
Other liabilities                          7,316            1             46        (494)      6,869
 Total liabilities                       227,988       18,164         24,025     (29,624)    240,553

Minority interest                                       1,106              1                   1,107

Series B Special Stock                    52,656                                              52,656

Commitments and contingencies 
 
Stockholders' equity: 
Common Stock                               3,554            2                       (373)      3,183
Series E Special Stock                    11,316                                              11,316
Additional paid-in capital               118,382        2,455           75,222   (57,157)    138,902
Cumulative translation adjustment             (5)                         (436)                 (441)
Retained earnings (Accumulated deficit)  (98,267)      16,507            1,654    (5,313)    (85,419)
 Total stockholders' equity               34,980       18,964           76,440   (62,843)     67,541
                                        $315,624      $38,234         $100,465  $(92,466)   $361,857
</TABLE>


                       See accompanying unaudited note.

             CONSOLIDATING STATEMENTS OF OPERATIONS

              Three Months Ended September 30, 1995
                           (In 000's)
<TABLE>
<CAPTION>
                                                                          Alliance
                                                                           Gaming
                                    Parent and                            Corporation
                                   Guaranteeing    Pledging    Adjust-       and
                                   Subsidiaries  Subsidiaries  ments    Subsidiaries
<S>                                   <C>          <C>         <C>     <C>
Revenues:
 Gaming machine operations             $22,716     $ 3,784     $(204)   $26,296
 Casino and tavern operations            4,623       8,303      (684)    12,242
 Gaming equipment sales                      3                                3
                                        27,342      12,087      (888)    38,541
Costs and expenses:
 Cost of gaming machine operations      18,032       2,384      (204)    20,212
 Cost of casino and tavern operations    2,950       3,075      (110)     5,915
 Selling, general and administrative     4,767       2,426      (499)     6,694
 Provision for doubtful receivables         10          11                   21
 Depreciation and amortization           1,959         528                2,487
 Direct merger costs                     4,677                            4,677
                                        32,395       8,424      (813)    40,006

Operating income (loss)                 (5,053)      3,663       (75)    (1,465)

Other income (expense):
 Interest income                           479          60      (113)       426
 Interest expense                       (1,759)       (562)      113     (2,208)
 Royalty fees                                         (980)                (980)
 Minority interest in income                          (144)                (144)
 Other, net                                351         312      (181)       482

Income (loss) before income taxes       (5,982)      2,349      (256)    (3,889)

Income tax provision (benefit)            (536)        321      (256)      (471)

Net income (loss)                     $ (5,446)    $ 2,028     $ ---   $ (3,418)
</TABLE>






                       See accompanying unaudited note.



             CONSOLIDATING STATEMENTS OF OPERATIONS

              Three Months Ended September 30, 1996
                           (In 000's)
<TABLE>
<CAPTION>
                                                                                        Alliance
                                                              Non-Pledging              Gaming
                                     Parent and                   Non-                Corporation
                                   Guaranteeing     Pledging   Guaranteeing   Adjust-     and
                                   Subsidiaries   Subsidiaries Subsidiaries   ments    Subsidiaries
<S>                                   <C>          <C>            <C>         <C>         <C>
Revenues:
 Gaming machine operations             $24,569      $ 4,320       $           $           $ 28,889
 Casino operations                       3,375        9,899                    (561)        12,713
 Gaming equipment and systems sales     34,883                                            34,883
 Wall machine and amusement game sales                             26,427                   26,427
                                        62,827       14,219        26,427      (561)       102,912
Costs and expenses:
 Cost of gaming machine operations      19,117        2,777                                 21,894
 Cost of casino operations               1,866        3,500                                  5,366
 Cost of gaming equipment and systems 
     sales                              21,808                                              21,808
 Cost of wall machines and amusement  
     game sales                                                    15,104                   15,104
 Selling, general and administrative    12,905        3,104         6,858      (578)        22,289
 Provision for doubtful receivables      1,180                        395                    1,575
 Depreciation and amortization           3,258          556         1,406                    5,220
 Unusual items                             700                                                 700
                                        60,834        9,937        23,763      (578)        93,956

Operating income                         1,993        4,282         2,664        17          8,956

Other income (expense):
 Interest income                           586          90                     (113)           563  
 Interest expense                       (5,294)       (866)          (203)      113         (6,250)
 Royalty fees                                       (1,151)                                 (1,151)
 Minority interest in income                          (141)                                   (141)
 Other, net                               (136)        152                      (17)            (1)
Income (loss) before income taxes       (2,851)      2,366          2,461                    1,976

Income tax provision (benefit)            (250)        510          1,081                    1,341
Net income (loss)                       (2,601)      1,856          1,380                      635
Special Stock dividends                 (2,896)                                             (2,896)

Net income (loss) applicable to
    common shares                     $ (5,497)    $ 1,856        $ 1,380     $  ---      $ (2,261)
</TABLE>



                       See accompanying unaudited note.

             CONSOLIDATING STATEMENTS OF CASH FLOWS
              Three Months Ended September 30, 1995
                           (In 000's) 
                                                               
<TABLE>
<CAPTION>

                                                                               Alliance
                                                                                Gaming
                                         Parent and                           Corporation
                                        Guaranteeing   Pledging      Adjust-     and
                                        Subsidiaries  Subsidiaries   ments    Subsidiaries
<S>                                       <C>            <C>         <C>        <C>
Cash flows from operating activities:
 Net (loss) income                        $(5,446)       $2,028      $          $ (3,418)
 Adjustments to reconcile net (loss)  
  income to net cash provided by  
  (used in) operating activities:
 Depreciation and amortization              1,959           528                    2,487
 Amortization of debt discounts                              59                       59
 Write down of other assets                   147           (22)                     125
     Loss on sale of assets                   159            (8)                     151
     Provision for losses on receivables       10            11                       21
 Net change in operating assets and 
  liabilities:
 Accounts and notes receivable               (610)           (3)      160           (453)
 Inventories                                    6             3                        9
 Other current assets                         387           626                    1,013
 Accounts payable                            (169)         (102)                    (271)
 Accrued liabilities                         (158)          601      (164)           279
 Intercompany accounts                        439          (439)      
  Net cash provided by (used in)
  operating activities                     (3,276)        3,282        (4)             2
Cash flows from investing activities:
 Additions  to property and equipment      (1,278)         (948)                  (2,226)
 Proceeds from disposal of property and 
  equipment                                   288             8                      296
 Net  sale  of securities available for 
  sale                                      3,548                                  3,548
 Other                                       (752)         (358)                  (1,110)
  Net cash provided by  (used in)
  investing activities                      1,806        (1,298)                     508
Cash flows from financing activities:
 Proceeds  from  long-term debt, 
  net of expenses                                           329      (161)           168
 Reduction of long-term debt                  (69)       (1,120)      165         (1,024)
  Net cash used in financing activities       (69)         (791)        4           (856)

Cash and cash equivalents:
 Increase (decrease) for period            (1,539)        1,193                     (346)
 Balance, beginning of period               8,235         5,499                   13,734
 Balance, end of period                    $6,696        $6,692      $---        $13,388
</TABLE>
                                
                                
                                
                                
                                
                                
                                
                       See accompanying unaudited note.
        
              CONSOLIDATED STATEMENTS OF CASH FLOWS
              Three Months Ended September 30, 1996
                           (In 000's)
<TABLE>
<CAPTION>
                                                                                             Alliance
                                                                   Non-Pledging               Gaming
                                        Parent and                    Non-                  Corporation
                                       Guaranteeing    Pledging    Guaranteeing   Adjust-       and
                                       Subsidiaries  Subsidiaries  Subsidiaries   ments     Subsidiaries
<S>                                     <C>             <C>          <C>          <C>         <C>
Cash flows from operating activities:
 Net income (loss)                      $(2,601)        $1,856       $1,380       $            $  635
 Adjustments to reconcile net income 
  (loss) to net cash provided by 
  (used in) operating activities:
 Depreciation and amortization            3,258            556        1,406                     5,220
 Amortization of debt discounts              17            495                                    512
 (Gain) loss on sale of property and 
  equipment                                  49             (4)           8                        53
 Write down of other assets                  95                           7                       102
 Provision for losses on receivables      1,180                         395                     1,575
 Other                                                                  (24)                      (24)
 Change in operating assets and 
  liabilities:
 Accounts and notes receivable            4,513             (5)      (1,208)        (367)       2,933
 Inventories                             (2,940)            (2)         486                    (2,456)
 Other current assets                       482             35         (474)                       43
 Intercompany accounts                     (518)           317        2,807       (2,606)
 Accounts payable                         1,795            242       (1,237)       2,608        3,408
 Accrued liabilities                     (3,925)          (185)       3,192          168         (750)
  Net cash provided by (used in)
    operating activities                  1,405          3,305        6,738         (197)      11,251
Cash flows from investing activities:
 Additions to property, plant and 
  equipment                              (1,447)          (297)      (1,028)                   (2,772)
 Proceeds from disposal of property 
  and equipment                              37              4                                     41
 Other                                   (1,058)                                               (1,058)
  Net cash provided by (used in)
   investing activities                  (2,468)          (293)      (1,028)                   (3,789)
Cash flows from financing activities:
 Proceeds from long-term debt                41                                                    41
 Reduction of long-term debt               (179)        (3,649)         (52)         197       (3,683)
 Net change in lines of credit           (7,525)                     (4,485)                  (12,010)
 Repurchase of Series B Special Stock    (1,653)                                               (1,653)
 Issuance of common stock upon
  exercise of stock options                 122                                                   122
  Net cash provided by (used in)
   financing activities                  (9,194)        (3,649)      (4,537)         197      (17,183)

Effect of exchange rate changes on cash                                  (5)                       (5)
Cash and cash equivalents:
 Increase (decrease) for period         (10,257)          (637)       1,168                    (9,726)
 Balance, beginning of period            37,249          8,684        2,124                    48,057
 Balance, end of period                 $26,992         $8,047       $3,292       $  ---      $38,331
</TABLE>
                                                               
                                
                                
                                
                                
                                
                              See accompanying unaudited note.

Debt and Lines of Credit

Long-term debt and lines of credit at September 30, 1996  consist
of the following (in 000's):
<TABLE>
<CAPTION>
                                                                                             Alliance
                                                                  Non-Pledging                Gaming
                                       Parent and                     Non-                 Corporation
                                      Guaranteeing    Pledging    Guaranteeing   Adjust-       and
                                      Subsidiaries  Subsidiaries  Subsidiaries   ments     Subsidiaries

<C>                                     <C>           <C>           <C>         <C>          <C>
12 7/8% Senior Secured notes due
 2003, net of unamortized discount      $150,999      $             $           $            $150,999
Hospitality Franchise Systems
 note payable                                           7,549                                   7,549
Bally Wulff revolving line of credit                                  9,179                     9,179
7.5% Convertible subordinated
 debentures due 2003                       1,642                                                1,642
Other                                      1,594        6,194         3,938      (3,908)        7,818
                                         154,235       13,743        13,117      (3,908)      177,187
Less current maturities                      641        2,525        10,162                    13,328
Long-term debt, less current
 maturities                             $153,594      $11,218       $ 2,955     $(3,908)     $163,859
</TABLE>

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

Liquidity and Capital Resources

On June 18, 1996, the Company completed the acquisition of all the
outstanding shares of BGII.  The consideration paid consisted  of
$77,243,000  in cash, $2,957,000 in the Company's   common  stock
and  $36,571,000  in  the Company's Series B  Special  Stock  and
totaled  $11.84  per  share for the 9,855,500 shares  outstanding
(excluding the 1,000,000 shares beneficially owned by the Company
prior to the Merger). The Company incurred direct merger costs of
approximately  $4,677,000 and $0 during the  three  months  ended
September  30,  1995, and 1996, respectively. Such costs  include
legal,   accounting,  transaction  financing  fees,  public   and
investor relations and printing costs and related costs.

At September 30, 1996, the Company had $38,331,000 in cash and cash
equivalents  and  $27,980,000 in availability on revolving  lines
of  credit (representing a paydown in the lines of credit  during
the quarter of $12,010,000).  In addition the Company had working
capital   of   approximately   $110,540,000,   a   decrease    of
approximately $469,000 from June 30, 1996. Consolidated cash  and
cash  equivalents  at  September 30, 1996 includes  approximately
$8,000,000  of cash which is utilized in gaming operations  which
is held in vaults, cages or change banks.

The following table presents an analysis of the consolidated working
capital  at  June  30,  1996  and  September  30,  1996  and  the
components of the changes from the prior period:

                                              June 30,      Sept. 30,     Total
                                               1996           1996       Change
                                                           (In $000's)
Cash and Cash Equivalents                     $48,057       $38,331    $ (9,726)
Accounts and Notes Receivable, net             93,502        89,446      (4,056)
Inventories, net                               41,656        44,426       2,770
Other Current Assets, net                       8,354         8,162        (192)
   Total Current Assets                       191,569       180,365     (11,204)

Accounts Payable                               16,479        19,887      (3,408)
Accrued Liabilities                            38,304        36,610       1,694
Current Maturities of Long Term Debt           25,777        13,328      12,449
   Total Current Liabilities                   80,560        69,825      10,735

Net Working Capital                          $111,009      $110,540     $  (469)

The following are the significant changes in the components of the
Company's working capital during the three months ended September
30, 1996:

Cash and Cash Equivalents

The net change in cash and cash equivalents resulted from cash used
for  principal  reductions  of  the  revolving  lines  of  credit
borrowings associated with Bally Gaming and Systems of $7,525,000
and  Bally Wulff of $4,485,000 and to fully pay a loan associated
with  VSI in the amount of $2,826,000, payments made for  accrued
direct  merger  costs,  accrued  compensation,  and  the  accrued
distribution payable to the limited partner in the Rainbow Casino
Vicksburg Partnership, L.P., and cash used to purchase shares  of
Series  B  Special Stock, partially offset by the  cash  received
from the reduction in accounts and notes receivable.

Accounts  and  Notes  Receivable, Accounts  Payable  and  Accrued
Liabilities

During the three months ended September 30, 1996, the Company received
a  net  cash  inflow  from  its accounts  and  notes  receivable.
Accounts  payable and accrued liabilities decreased  over  the  prior
year  due  to the payments made for accrued direct merger  costs,
accrued compensation, and the accrued distribution payable to the
limited partner in the Rainbow Casino Vicksburg Partnership, L.P.

Current Maturities of Long Term Debt

During the three months ended September 30, 1996, current maturities
of  long  term  debt were reduced primarily due to the  principal
reductions  of   revolving line of credit  borrowings  associated
with  Bally Gaming and Systems and Bally Wulff, and to  a  lesser
extent,  the payment of a subordinated loan associated with  VSI,
partially offset by the reclassification to current maturities of
long-term  debt  of  certain  debt  instruments  which  now  have
maturities less than one year.

Cash Flow and Other Information

Cash provided in operating activities for three months ended September
30,   1996  increased  approximately  $11,249,000  from   amounts
reported  for  the  same period in 1995. Significant  changes  in
operating assets and liabilities in the 1996 period from the 1995
period were (1) net income of $635,000 compared to a net loss  of
$3,418,000  in  the  prior year quarter, (2) a  decrease  in  net
current   and   long-term  accounts  and  notes   receivable   of
$2,933,000  as  collections  from  prior  period  sales  exceeded
customer  financing on current period sales, (3) an  increase  in
inventories   of  $2,456,000  primarily  related   to   increased
production  activity,  (4) an increase of $3,408,000 in  accounts
payable primarily related to the increase in inventory and (5)  a
decrease in accrued liabilities and other payables primarily  due
to  payments made during the quarter on accrued and unpaid direct
merger  costs, accrued compensation and the accrued  distribution
payable  to  the  limited partner in RCVP.  Significant  non-cash
items  added to net income in the computation of cash flows  from
operating  activities for three months ended September  30,  1996
include  $5,220,000 of depreciation and amortization representing
an  increase  of  $2,733,000 over the prior year  quarter  and  a
provision for doubtful receivables of $1,575,000 representing  an
increase of $1.554,000 over the prior year quarter.

Cash  flows  used in investing activities for three months  ended
September  30, 1996 decreased by $4,297,000 from the same  period
in 1995. The decrease is primarily the result of the  net sale of
securities  available for sale during the prior  period  totaling
$3,548,000 compared to $0 in  the current period.

Cash flows from financing activities for three months ended September
30, 1996 decreased $16,327,000 from the same period in 1995.  The
decrease  was  primarily the result of cash  used  for  principal
reductions  of   and revolving line of credit borrowings  in  the
amount  of  $12,010,000, payment of the remaining principal  and
accrued interest balance of the loan associated with VSI totaling
$2,826,000 and the repurchase for $1,653,000 of 19,000 shares  of
the Company's Series B Special Stock.

In the prospectus for the Senior Secured Notes and Series B Special
Stock  issued  to finance the Merger, the Company  had  presented
adjusted  operating  cash flow for the combined  companies  which
consists  of  the  Company's  earnings  before  interest,  taxes,
depreciation  and amortization ("EBITDA"), net of casino  royalty
and minority interest and adjusted to exclude direct merger costs
and unusual items and, in periods prior to the Merger, as further
adjusted to include BGII's results for the entire period  and  to
assume  cost savings synergies resulting from the Merger  and  to
adjust business development expenses to assumed annual amount  of
$3,000,000.  The  Company experienced a significant  increase  in
adjusted operating cash flow from $9,249,000 in the three  months
ended September 30, 1995 to $13,784,000 in the three months ended
September  30,  1996. Each of the Company's four  business  units
contributed to this improvement.



 The following is summary of EBITDA, as adjusted by business unit
reconciled to adjusted operating cash flows:

                                            Three Months Ending September 30,
                                                   1995(a)       1996(a)
                                                        (In $000's)
EBITDA by Business Unit:
Bally Gaming and Systems                          $ 2,410        $5,463
Bally Wulff                                         3,159         4,050
Gaming Machine Operations                           3,983(b)      4,760(b)
Casino Operations                                   2,776(b)      3,284(b)
Corporate Administrative Expenses and Other        (4,667)       (3,973)
Direct Merger Costs                                (4,951)          ---
Unusual Items                                      (1,529)         (700)
    EBITDA, as adjusted                             1,181        12,884
Adjustments:
Direct Merger Costs                                 4,951           ---
Unusual Items or Non-recurring Charges              1,929           900
Development Expense                                   (62)(c)       ---
Synergy Cost Savings                                1,250(d)        ---
     Adjusted Operating Cash Flows                 $9,249       $13,784
_________________
(a) Includes the consolidated results of the Company (including BGII)
    for the three months ended September 30, 1996 and the combined historical 
    results of the Company andBGII for the three months ended September30, 1995.
(b) Minority interest and, for Casino Operations, casino royalty have been 
    offset against business unit EBITDA.
(c) Adjusts business development expense for the quarter ended September 30, 
    1995 to an assumed annual amount  of $3,000,000 or $750,000 for each 
    quarter.  Actual business development expenses for the quarter ended 
    September 30,  1996  was $603,000 and is included  in corporate 
    administrative expenses.
(d) Adjusts for estimated synergy cost savings including elimination of certain
    duplicative costs, such as facility, legal, accounting, and compensation.

The Company believes that the above analysis of adjusted operating
cash flows 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.

During March 1993, Bally Wulff obtained two bank revolving lines of
credit  that currently provide for borrowings up to DM17,500,000
(approximately  $11,473,000  at  September  30,  1996)  of  which
approximately $1,967,000 had been borrowed at September 30, 1996.
In  May  1993,  Bally Wulff obtained a working  capital  line  of
credit   that  provides  for  borrowings  up  to  DM16,300,000
(approximately  $10,686,000  at  September  30,  1996)  of  which
approximately $7,212,000 had been borrowed at September 30, 1996.
Bally Gaming, Inc., BGII's domestic subsidiary,  obtained a  bank
revolving  line  of  credit  in March  1993  which,  as  amended,
provides  for  borrowings tied to a percentage of  Bally  Gaming,
Inc.'s  eligible  (as defined in the credit agreement)  inventory
and  accounts  receivable with a maximum  borrowing  capacity  of
$15,000,000  with  the expiration date of  March  31,  1997.   At
September  30,  1996  Bally  Gaming,  Inc.'s  eligible  borrowing
capacity  under  this agreement was approximately $15,000,000  of
which  $0  was  outstanding.  Through bank credit  agreements  at
Bally  Wulff and Bally Gaming, Inc., the Company has unused lines
of  credit  of approximately $27,980,000 at September  30,  1996.
The  Company  is currently evaluating new financing alternatives,
including a replacement of Bally Gaming, Inc.'s revolving line of
credit  facility, in order to free up certain non-working capital
based  collateral  and  to  obtain a lower  interest  rate.   The
indenture  for  the  Company's Senior Secured  Notes  limits  the
Company's  worldwide maximum borrowings under working capital  or
revolving credit facilities to $40,000,000.

The indenture for the Company's Senior Secured Notes contains various
limitations   on   incurrence  of  additional  indebtedness,   on
restricted  payments and on dividend and payment restrictions  on
subsidiaries.  The  Company does not have  any  material  capital
expenditure  commitments  at September  30,  1996.   The  Company
anticipates  that  cash  flow  from  operations  and   borrowings
available  under existing lines of credit will be  sufficient  to
fund its cash needs for at least the next twelve months.

Management believes that customer financing terms have become  an
increasingly  important competitive factor  in  certain  emerging
markets   for  the  Bally  Gaming  and  Systems  business   unit.
Competitive conditions sometimes require Bally Gaming and Systems
to  grant  extended  payment terms on gaming machines  and  other
gaming   equipment.    While   these  financings   are   normally
collateralized  by  such  equipment,  the  resale  value  of  the
collateral in the event of a default may be less than the  amount
financed.  In conjunction with sales by Bally Gaming and Systems,
with  recourse  to the Company, of certain trade  receivables  to
third  parties,  the  Company  had guaranteed  amounts  due  from
various  customers of approximately $14,000,000 at September  30,
1996.  It is possible that one or more customers whose obligation
has been guaranteed by Bally Gaming and Systems  may be unable to
make  payments as such amounts become due.  In such event,  Bally
Gaming  and Systems  may become responsible for repayment  of  at
least a portion of such amounts over the term of the receivables.
In  general, under the terms of these contracts, the Company  may
be   responsible   for  monthly  payments  of   the   outstanding
obligations. 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.  In August 1996, the Company  received
demand notices from the holder of notes related to one customer's
trade  receivables  for  which  payments  were  in  arrears  from
December  1995.  The demand notice is for $3,571,000 and although
the  Company  is negotiating a restructuring with the  holder  of
these  notes and the customer, there can be no assurance  that  a
successful  restructuring  will  take  place.  In  order  to   be
competitive  in meeting customer demand for financing  of  gaming
equipment  in emerging markets, the Company plans to continue  to
evaluate  the  need to involve third party finance  companies  or
secure additional financing, although there is no assurance  that
such  additional financing will be obtained. Bally Wulff provides
customer  financing  for approximately  20%  of  its  sales,  and
management  expects this practice temporarily to increase  during
the latter half of calendar 1996.

In March 1992, Alfred H. Wilms, director and principal stockholder
(and  then Chairman of the Board of Directors and Chief Executive
Officer) of the Company, committed to provide or cause others  to
provide  a  $6,500,000  five  year loan  to  VSI,  the  Company's
controlled  subsidiary, which loan was funded  in  full  and  was
secured  by  a subordinated interest in all of VSI's present  and
future  personal property.  All scheduled principal and  interest
payments  were  made  until September  1996  when  the  remaining
principal  and  accrued interest thereon totaling $2,826,000  was
paid.

Results of Operations:

Three Months Ended September 30, 1995 and 1996

General

The company operates through four business units: (i) Bally Gaming and
Systems,  (ii)  Bally  Wulff (consisting of the  manufacture  and
distribution of wall-mounted gaming machines and distribution  of
other  recreational and amusement machines), (iii) gaming machine
operations  and (iv) casino operations. The results of operations
of  the BGII business units have been consolidated since June 18,
1996. However, to enhance the comparability to prior periods, the
following  discussion presents the results of the  operations  of
BGII  for  the  three months ended September 30, 1995  which  was
prior  to  the Merger and therefore such results are not included
in the accompanying consolidated financial statements.

The following tables set forth the combined revenues and operating
income  (loss) for the four business units for the  three  months
ended September 30, 1995 and 1996:

                                   1995         1996
                                       (In 000's)
Revenues:
  Bally Gaming and Systems       $27,720      $34,883
  Bally Wulff                     23,754       26,427
  Gaming Machine Operations       26,296       28,889
  Casino Operations               12,242       12,713
Total Revenues                   $90,012     $102,912

                                    1995        1996
                                       (In 000's)
Operating income (loss):
  Bally Gaming and Systems         1,875        4,772
  Bally Wulff                      1,588        2,644
  Gaming Machine Operations        2,407(a)     3,049(a)
  Casino Operations                2,335(a)     2,814(a)
  Corporate and Other             (5,569)      (4,916)
  Subtotal                         2,636        8,363
  Direct merger costs             (4,971)         ---
  Unusual items                   (1,529)        (700)
Total operating income (loss):   $(3,864)      $7,663

(a) Net of minority interest and, for Casino Operations, net of casino
    royalty.

Bally Gaming and Systems

For the quarter ended September 30, 1996, Bally Gaming and Systems
reported  revenues of $34.9 million, an increase of 26%, compared
to  revenues  of $27.7 million in the prior year quarter.   Bally
Gaming  reported  unit sales of approximately  4,900  new  gaming
machines,  an  increase  of  40%,  compared  to  unit  sales   of
approximately  3,500  in  the prior  year  quarter.   The  volume
improvement  resulted primarily from sales to Casino  Niagara  in
Niagara  Falls,  Canada where Bally Gaming  placed  approximately
1,500  new gaming machines, representing 50% of the casino floor.
By  market  segment, Bally Gaming's unit sales  for  the  quarter
consisted of approximately 1,700 units to the Nevada and Atlantic
City  markets, 2,500 units to international markets and 700 units
to riverboats, Native American and other domestic markets.  Bally
Gaming reported revenues from the sale of new gaming machines  of
$24.3  million, an increase of 29%, compared to $18.8 million  in
the prior year quarter due to higher unit volume partially offset
by lower average selling prices.  Bally Systems reported revenues
of  $5.2  million, an increase of 160%, compared to  revenues  of
$2.0  million in the prior year quarter.  The revenue improvement
resulted  primarily from the Casino Rama installation in Ontario,
Canada  and recognition of approximately one-half of the hardware
revenues during the quarter for Casino Niagara.

For  the  quarter ended September 30, 1996, gross profit  margins
improved  to  37.5%  from 34.9% in the prior year  quarter.   The
gross  margin  improvement resulted primarily from the  favorable
impact   of   greater   production  volume   in   the   Company's
manufacturing facility, partially offset by the effect of  higher
international  sales  which  traditionally  have   lower   profit
margins.   Bally Gaming and Systems reported operating income  of
$4.8  million, an increase of 154%, compared to operating  income
of  $1.9 million in the prior year quarter.  The operating income
improvement  resulted  primarily from the aforementioned  revenue
and  gross margin increases, as well as relatively flat  selling,
general  and  administrative expenses,  partially  offset  by  an
increased provision for doubtful receivables.


Bally Wulff

For  the  quarter ended September 30, 1996, Bally Wulff  reported
revenues  of  $26.4  million, an increase  of  11%,  compared  to
revenues of $23.8 million in the prior year quarter.  The revenue
improvement  resulted primarily from a 44% increase in  new  wall
machine  units sold, partially offset by a decrease in  amusement
game   sales   as  operators  weighted  their  mix   of   capital
expenditures toward new wall machines.  The currency  translation
impact  of  the  fluctuation of the German mark versus  the  U.S.
dollar reduced revenues by $1.9 million during the 1996 quarter.

For the quarter ended September 30, 1996, gross profit margin improved
to  42.8% from 40.3% in the prior year quarter.  The gross margin
improvement  resulted  primarily from  the  favorable  impact  of
greater  production volume in Bally Wulff's production  facility.
Bally  Wulff  reported  operating  income  of  $2.6  million,  an
increase  of  66%,  compared to $1.6 million in  the  prior  year
quarter.   The  operating income improvement  resulted  primarily
from  the  aforementioned  revenue and  gross  margin  increases,
partially   offset  by  an  increased  provision   for   doubtful
receivables as well as higher selling, general and administrative
expenses due to costs of a trade show.

Gaming Machine Operations

For  the  quarter  ended September 30, 1996, the  gaming  machine
operations  business unit reported revenues of $28.9 million,  an
increase  of  10%, compared to revenues of $26.3 million  in  the
prior year quarter.  Louisiana revenues increased 14% as net  win
per gaming machine per day increased 21% to $72.10 from $59.78 in
the  prior  year  quarter, partially offset by a decline  in  the
average  number of gaming machines to 653 from 677 in  the  prior
year quarter.  Nevada revenues increased 9% as net win per gaming
machine  per day increased 6% to $49.36 from $46.67 in the  prior
year  quarter,  while  the  average  number  of  gaming  machines
increased  to  5,552 from 5,270 in the prior year  quarter.   The
improvement  in  net win per gaming machine  per  day  in  Nevada
resulted  primarily  from  the  continuing  favorable  impact  of
Gamblers Bonus, a cardless slot player's club and player tracking
system  launched in December 1995.  The increase in  the  average
number  of  gaming machines in Nevada reflects  the  addition  of
approximately 150 gaming machines in Northern Nevada operated  by
Bally  Gaming prior to the Merger and the continued  roll-out  of
the   Gamblers  Bonus  machines.  Gamblers  Bonus  is   currently
installed in 86 locations representing 1,091 machines in Southern
Nevada.

For the quarter ended September 30, 1996, cost of revenues increased
8%  to $21.9 million compared to $20.2 million in the prior  year
quarter.  As a percentage of revenues, cost of revenues  improved
to  75.8% from 76.8% in the prior year quarter. Louisiana cost of
revenues,  increased  16%  and,  as  a  percentage  of   revenues
increased slightly to 64.3% from 63.0% in the prior year  quarter
primarily  due to the new location which opened in October  1995.
Nevada  cost  of  revenues increased 7% but, as a  percentage  of
revenues, improved to 77.8% from 79.2% in the prior year  quarter
primarily  due to higher revenues while costs associated with new and renewed
contracts which  remained  relatively flat. The gaming  machine  operations
business   unit  reported  operating  income,  net  of   minority
interest,  of  $3.0  million,  an increase  of  27%  compared  to
operating  income of $2.4 million in the prior year quarter.  The
operating   income  improvement  resulted  primarily   from   the
aforementioned  increase  in  revenues  and  an  improvement   in
operating costs as a percentage of revenues, partially offset  by
a   slight   increase  in  selling,  general  and  administrative
expenses.

On November 5, 1996 voters in Louisiana approved a proposition to
allow  video  poker to continue in six of the seven  parishes  in
which the Company operates within off-track betting locations  in
the  greater  New Orleans area.  In the one parish in  which  the
Company  operates where video poker was voted down,  the  Company
will be allowed to continue to conduct business through June  30,
1999.   The  two  off-track  betting  locations  in  this  parish
accounted  for  only 13% of the VSI revenues and less  than  $0.4
million of EBITDA for the year ended June 30, 1996.

Casino Operations

For  the  quarter ended September 30, 1996, the casino operations
business unit reported revenues of $12.7 million, an increase  of
16%,  compared  to revenues of $11.0 million in  the  prior  year
quarter.  This increase is due to an 18% increase at the  Rainbow
Casino   and  a  9%  increase  at  the  Plantation  Casino.   The
improvement  at  the  Rainbow  Casino  was  attributable  to  the
continuing success of its direct marketing campaigns  and  a  23%
higher  average  market  share than in the  prior  year  quarter.
Revenues from the Plantation Casino improved as revenues  in  the
prior  year  quarter had been negatively impacted by an  internal
remodeling project.

For the quarter ended September 30, 1996, the cost of revenues for
casino  operations increased 7% to $5.4 million compared to  $5.0
million  in  the  prior  year quarter but,  as  a  percentage  of
revenues, improved to 42.2% from 45.5% in the prior year  quarter
due to higher revenues with relatively stable costs.

For  the  quarter ended September 30, 1996, the casino operations
business  unit  reported operating income, net of casino  royalty
and  minority  interest, of $2.8 million,  an  increase  of  21%,
compared  to operating income of $2.3 million in the  prior  year
quarter.  The  operating  income improvement  resulted  from  the
aforementioned  increase  in  revenues  and  an  improvement   in
operating costs as a percentage of revenues, partially offset  by
an  increase in selling, general and administrative due to higher
advertising   and  promotional  costs  at  the   Rainbow   Casino
operations.

Revenues and Expenses for Closed Casinos and Taverns

During the year ended June 30, 1996, the Company disposed  of  or
terminated  operations at several small casinos  and  taverns  as
these  operations  were  not deemed to  be  compatible  with  the
Company's  long-term  growth  strategy.   The  Company  does  not
believe these businesses constitute a disposal of a segment of  a
business, as defined in APB Opinion 30, and therefore the results
of   operations  from  these  businesses  are  included  in   the
applicable  revenue  and  expense captions  in  the  consolidated
statements  of operations. No revenues or expenses were  reported
for these properties in the quarter ended September 30, 1996. For
the  quarter  ended  September  30,  1995,   revenues  for  these
properties  are  included  in casino revenues  and  totaled  $1.3
million.   The related costs of revenues are included  in  casino
cost  of  revenues and totaled $0.9 million. The related selling,
general  and  administrative expenses  are  included  in  selling
general and administrative expenses and totaled $0.4 million.

Consolidated

As previously discussed, the Company acquired BGII on June 18, 1996.
Therefore  the consolidated results of  operations for the  three
months   ended  September  30,  1996  include  the   results   of
operations of BGII while the consolidated results for  the  three
months ended September 30, 1995 do not include BGII's results.  The
discussion  below does not include results for BGII in  the  1995
quarter.

Total revenues for the quarter ended September 30, 1996, were $102.9
million,  an  increase  of 167% compared  to  revenues  of  $38.5
million  in  the  prior year quarter. This  increase  is  due  to
including $61.3 million of revenues from BGII in the 1996 quarter
as  well as the aforementioned increases in revenues at both  the
gaming machine operations and casino operations business units.

Cost of revenues for the quarter ended September 30, 1996, were $64.2
million, an increase of 146% compared to $26.1 million in the prior
year  quarter due to the inclusion of $36.9 million of BGII  cost
of  revenues  in  the 1996 quarter as well as the  aforementioned
increases  in  cost  of  revenues  at  both  the  gaming  machine
operations and casino operations business units. Cost of revenues
as a percentage of total revenues improved to 62.4% from 67.8% in
the prior year quarter due to the aforementioned improvements  at
both the gaming machine operations and casino operations business
units as well as the impact of the inclusion of the BGII business
units.

Corporate administrative expenses for the quarter ended September 30,
1996,  were  $4.0  million,  an  increase  of  82%  compared  to
corporate administrative costs of $2.2 million in the prior  year
quarter.  This  increase is due to inclusion  of  BGII  corporate
administrative expenses in the 1996 quarter partially  offset  by
synergy  cost savings such as elimination of certain  duplicative
costs,  for example facility, legal, accounting, and compensation
costs.  Corporate  administrative expenses include  salaries  and
wages,  related taxes and benefits, rent, professional  fees  and
other  expenses associated with maintaining the corporate  office
and providing centralized corporate services for the Company.

Exclusive  of the corporate administrative expenses noted  above,
selling,  general  and administrative expenses  for  the  quarter
ended  September  30,  1996, were  $18.3  million an increase of 307%
compared  to  selling, general and administrative costs  of  $4.5
million  in the prior year quarter. This increase is due  to  the
inclusion   of  $13.3  million  of  BGII  selling,  general   and
administrative   expenses   in   the   1996   quarter   and   the
aforementioned increase at both the gaming machine operations and
casino operations business units partially offset by the decrease
in  expenses  as  the  result of the aforementioned  disposed  or
terminated operations at several small casinos and taverns.

Provisions for bad debt for the quarter ended September 30, 1996,
increased  $1.6 million from the prior fiscal year quarter.  The
increase was due to the impact of including BGII's operations in
the 1996 quarter.  Depreciation and amortization for the quarter
ended  September 30, 1996 was $5.2 million, an increase of  110%
compared to depreciation and amortization of $2.5 million in the
prior  year  quarter.  This increase is due to the inclusion  of
BGII  depreciation and amortization in the 1996 quarter,  higher
depreciation  and amortization in the gaming machine  operations
business  unit and the impact of amortizing goodwill  and  other
intangibles acquired in the BGII Merger.

During the quarter ended September 30, 1996, the Company incurred
unusual  charges of $0.7 million related primarily to separation
costs of Alliance personnel subsequent to the Merger. During the
quarter  ended  September 30, 1995, the Company expensed  direct
merger  costs  related  to the pursuit  of  BGII  totaling  $4.7
million.   Such  costs  included  legal,  accounting,  financial
advisory, printer, SEC filing fees and other related expenses.

Net Interest  Expense and Income Taxes

Net  interest  expense in the quarter ended September  30,  1996,
increased $5.7 million, an increase of 219% compared to  the  net
interest expense of  $1.8 million in the prior year quarter.  The
increase  is primarily due to interest on the Company's  12  7/8%
Senior  Secured Notes due 2003 which were issued  in  June  1996,
partially  offset by lower interest expense on  the  Company's  7
1/2%  Convertible Debentures due 2003, substantially all of which
were  converted  into  equity as part of  the  financing  of  the
Merger.

The Company recorded an income tax provision of $1.3 million in the
quarter  ended  September 30, 1996 compared  to  a  benefit  from
income  taxes  of $0.5 million in the prior fiscal year  quarter.
The  current  quarter provision is primarily due to income  taxes
related to Bally Wulff.

The  information contained in this Form 10-Q may contain forward-
looking   statements   that  involve  risks  and   uncertainties,
including, but not limited to, the impact of competitive products
and  pricing,  product  demand and market acceptance  risks,  the
presence of competitors with greater financial resources, product
development  and  commercialization risks, costs associated  with
the   integration  and  administration  of  acquired  operations,
capacity  and supply constraints or difficulties, the results  of
financing efforts and other risks detailed from time to  time  in
the   Company's   filings  with  the  Securities   and   Exchange
Commission.



                             PART II

Item 1. Legal Proceedings

         See "Notes to Unaudited Condensed Consolidated Financial
           Statements- 6. Legal Proceedings" for
           a description of certain legal proceedings.

Item 6. Exhibits and Reports on Form 8-K

         a.   Exhibits - None


         b.   Reports on Form 8-K

              The  registrant  submitted  items  on Form 8-K as follows :

              (i)  On July 3, 1996 to disclose the completion  of the merger
                   with BGII and the closing of the related financings.

             (ii) On September 10, 1996 to file a consent by KPMG
                  Peat Marwick, LLP related to the Company's Registration
                  Statement (No. 33-45811).



                           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/ Steve  Greathouse
        Chairman of the Board of Directors,
        President and Chief Executive Officer
        (Principal Executive Officer)




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