<PAGE>
                                
                          UNITED STATES
               SECURITIES AND EXCHANGE COMMISSION
                     WASHINGTON, D.C. 20549
                                
                           FORM 10-KSB

(MARK ONE)

 X   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
---  SECURITIES EXCHANGE ACT OF 1934
     
     For the fiscal year ended          December 31, 1998
                                ---------------------------------
     
                                  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                  333-31373
                         ----------------------------------------

                   CASINOVATIONS INCORPORATED
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         (Name of small business issuer in its charter)

         Washington                          91-1696010
-----------------------------      ------------------------------
(State or other jurisdiction              (I.R.S. Employer
     of incorporation or                Identification No.)
        organization)

6744 S. Spencer Street, Las Vegas, Nevada                   89119
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(Address of principal executive offices)                    (Zip
Code)

Registrant's telephone number            (702) 733-7195
                                ---------------------------------

Securities registered pursuant to Section 12(b) of the Act:

                                        NAME OF EACH EXCHANGE   
     TITLE OF EACH CLASS                 ON WHICH REGISTERED
                                                  
             N/A                                N/A
-----------------------------------------------------------------
                                
Securities registered pursuant to Section 12(g) of the Act:

                               N/A
-----------------------------------------------------------------
                        (Title of class)
                                
<PAGE>

     Check  whether the issuer (1) filed all reports required  to
be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934  during the preceding 12 months (or for such shorter  period
that  the registrant was required to file such reports), and  (2)
has  been  subject to such filing requirements for  the  past  90
days.    Yes           No    X
             --------     --------

     Check  if  there  is no disclosure of delinquent  filers  in
response to Item 405 of Regulation S-K is not contained  in  this
form,  and  no disclosure will be contained, to the best  of  the
registrant's  knowledge,  in  definitive  proxy  or   information
statements incorporated by reference in Part III of this Form 10-
K or any amendment to this Form 10-KSB.    [  ]

     State  issuer's  revenues for its  most  recent 
     fiscal year.                                    $   29,670
                                                     -----------

     State the  aggregate  market  value  of voting stock held by
non-affiliates  computed  by  reference to the price at which the
common equity was  sold,  or the average bid and asked  price  of
such  common  equity,  as  of  a  specified  date within the past
60  days.    $9,355,045   (as of January 31, 1999)
           --------------

     State  the  number  of shares outstanding  of  each  of  the
issuer's  classes  of common stock, as of the latest  practicable
date.

     Common Stock, $.001 par value     7,295,420 shares as of   
                                          January 31, 1999

               DOCUMENTS INCORPORATED BY REFERENCE

     None.

                               -2-

<PAGE>

                        CAUTIONARY NOTICE

     This Annual Report of Casinovations Incorporated on Form 10-
KSB  contains forward-looking statements in which the  management
of  Casinovations Incorporated shares its knowledge and judgement
about  factors that it believes may materially affect performance
of  Casinovations  Incorporated in the future.  Terms  expressing
future expectations, outlook potential and anticipated growth  in
the  gaming industry, revenues and earnings, and like expressions
typically identify such statements.

     All forward-looking statements, although made in good faith,
are  subject  to  the uncertainties inherent  in  predicting  the
future.   They are necessarily speculative, and factors  such  as
unusual   production  problems,  breakdown  of  quality  control,
competitive pressures, customer dissatisfaction, failure to  gain
new  product  acceptance by potential customers  or  approval  by
regulatory  authorities, proscription of gaming in  jurisdictions
where  it  had been lawful, the unexpected rejection of legalized
gaming  in new jurisdictions, onerous taxation and other  adverse
government  action, unusual risks attending foreign transactions,
Year   2000  problems  and  general  deterioration  in   economic
conditions may cause results to differ materially from  any  that
are projected.

     Forward-looking statements speak only as of  the  date  they
are  made, and readers are warned that Casinovations Incorporated
undertakes  no obligation to update or revise such statements  to
reflect new circumstances or unanticipated events as they occur.

     Readers   are   urged  to  carefully  review  and   consider
disclosures made by Casinovations Incorporated in this and  other
reports   that  discuss  factors  germane  to  the  business   of
Casinovations Incorporated.  See Part II.  "Item 6.  Management's
Discussion  and  Analysis of Financial Condition and  Results  of
Operations - Risk Factors and Forward Looking Statements."
     
PART I

ITEM 1.   DESCRIPTION OF BUSINESS

      Casinovations  Incorporated, a Washington corporation  (the
"Company"),  maintains  its principal offices  and  manufacturing
facilities  at  6744 S. Spencer Street, Las Vegas, Nevada  89119.
Its  telephone number and facsimile number are (702) 733-7195 and
(702)  733-7197,  respectively.  The Company was incorporated  in
the State of  Washington  on  September 20, 1995.  At  its Annual
Meeting of Stockholders scheduled for March 29, 1999, the Company
is seeking stockholder approval to reincorporate in Nevada.

       The   Company's  primary  business  is  the   development,
manufacturing  and  marketing  of  various  gaming  concepts  and
products,   including   the   Random   Ejection   Shuffler   (the
"Shuffler"), certain table game concepts, including  the  Fantasy
21 table game ("Fantasy 21"), which are currently marketed by the
Company  as  the  "Fun Pit Collection," and the  SecureDrop  Slot
Accounting System ("SecureDrop").

PRODUCTS

      As part of its business strategy, the Company has developed
various   gaming  concepts  and  products  designed  to  increase
security,   productivity  and   profits  for  the  global  gaming
industry.  The  Company's  products  are  protected under various
pending  patents,  patents,   copyrights  and   trademarks.   The
following  is a brief description  of some of  the Company's more
important products and concepts.

                               -3-
                                
<PAGE>

SHUFFLERS

      RANDOM  EJECTION SHUFFLER.  The Shuffler  is  an  automatic
playing card shuffler that utilizes a random number generator and
other  features to enhance the card shuffle.  The  Shuffler  will
shuffle one to six decks.  The Company believes that the Shuffler
is  currently  faster and jams less often than the  playing  card
shuffling  machines  of  its  competitors.   Further,  since  the
Shuffler   randomly  selects  playing  cards  once  rather   than
shuffling the playing cards repeatedly, the Shuffler reduces  the
time  required  to  shuffle  playing  cards.   Domestically,  the
Company places the Shuffler in casinos on a lease basis, charging
lease  fees  based  on  the number of decks shuffled,  which  the
Company   believes  is  desirable  to  the  Company's  customers.
Internationally,  the  Company intends to sell  the  Shuffler  to
customers.   The  Company owns the Shuffler and manufactures  the
Shuffler  in  Las  Vegas.  The Company received final  regulatory
approval  for  the Shuffler from both the Nevada (December  1998)
and  Mississippi (January 1999) gaming authorities and has  begun
to  place the Shuffler in several Nevada and Mississippi casinos.
As  of  March  1999,  the  Company  has  completed  production of
approximately 170 units of the Shuffler.

      PAIGOW  TILE  SHUFFLER.  Through an agreement with  Jinchun
International,  Inc., the Company acquired the rights  to  market
and  distribute  the  Paigow  Tile  Shuffler.   The  Paigow  Tile
Shuffler  is  intended to increase playing  efficiency  and  game
integrity  by  shuffling one set of tiles while  another  set  of
tiles is in play.  The Paigow Tile Shuffler shuffles the tiles as
follows: the dealer presses a button, which allows an area in the
table to open.  The tiles are then pushed into the opening.   The
dealer  presses  the  button again, the opening  closes  and  the
previous batch of tiles that have been shuffled are raised by  an
elevator  system  to table level, all stacked  and  ready  to  be
dealt,  while  the  other batch of tiles are being  shuffled  and
stacked  randomly.  This allows the dealer to deal out 150%  more
games  per  hour.   In the second quarter of  1999,  the  Company
intends  to  submit  an application to the  Nevada  State  Gaming
Control  Board  with respect to the approval of the  Paigow  Tile
Shuffler for placement in Nevada casinos.

FUN PIT COLLECTION

      The  Company markets various innovative casino table  games
under  the  "Fun  Pit  Collection."   Many  of  these  games  are
variations of existing popular table games, such as blackjack and
poker.  The table games that comprise the Fun Pit Collection  are
either owned by the Company or contracted for by the Company from
third party developers.

     FANTASY 21.  Fantasy 21 is a jackpot table game variation of
standard  Blackjack/21  involving a side wager of one dollar.  If
the player plays the side wager and receives a hand of 19, 20, 21
or Blackjack (a "High Hand") during five consecutive  hands,  the
player  is  eligible  for a  jackpot  round of up to $25,000 (the
"Showdown Round"). In the Showdown Round, the player is dealt six
hands simultaneously.  If the player receives six High Hands  and
the  dealer  receives a hand of Blackjack, the  player  wins  the
jackpot.   Fantasy  21  also  offers  other  jackpots  for  other
combinations   of   High   Hands.   The  Company   has   produced
approximately  50  units of Fantasy 21 and presently  intends  to
lease such units on a monthly basis.

     BONUS  BLACKJACK.  Bonus Blackjack, a variation of  standard
Blackjack/21, has two additional  side  wagers,  one  labeled  as
"Player" and the other labeled as "Dealer."  The player  has  the
option  of  placing no side wager, one side wager  or  both  side
wagers.   If  a  side wager is placed, the player is  betting  on
whether the "Player" or "Dealer" is going to receive any two-card
Blackjack, consisting of an ace and any ten-value card.   If  the
"Player"  or  "Dealer"  receives a  Blackjack,  the  player  will
receive  a  15  to 1 payoff for the proper wager.   In  addition,
Bonus  Blackjack  features a bonus meter that  tracks  only  that
table's  wagers.   In order to win the jackpot displayed  on  the
bonus  meter, the player must place both side wagers and must  be
dealt the ace of spades and jack of spades.

                               -4-
                                
<PAGE>

     WILD JACKPOT POKER. Wild Jackpot Poker, a variation of five-
card  stud,  involves the use of two jokers added  to  the  deck.
This  is  a straight-up poker game where the players play against
the  dealer  and  not against each other.  If the  player's  hand
beats the dealer's hand, the player wins without the need for the
dealer  to "qualify" as with other table games.  In addition,  if
the  player places a side wager and receives a hand of a straight
or  better,  the player will receive an additional  bonus  payout
according  to  the bonus payout schedule at the table.   Although
offered at  ten casinos located  in Canada, Wild Jackpot Poker is
expected to begin  regulatory field trials at the Las Vegas  area
in Spring 1999.

     TWIN BACCARAT.  Twin Baccarat is a variation of the standard
baccarat game.  The object of the game is to simply have a higher
total than the dealer, closest to nine.  The value of the cards 2
through  9 is face value whereas aces are worth one and tens  and
face  cards  are worth zero.  The player is initially  dealt  two
cards  and the sum of the cards, using only the single right-hand
digit, represents the player's total.  The player can never  have
a  bust  hand.   The only exception is when the  player,  or  the
dealer,  has  a "Twin Baccarat."  Twin Baccarat occurs  when  the
player's or dealer's first two cards are any two nines.   If  the
player  receives a Twin Baccarat, the player receives 3 to  2  on
his  wager and if the dealer receives a Twin Baccarat, the dealer
only takes the player's original wager.

     DANNY'S JACKPOT DICE.  Danny's Jackpot Dice, a variation  of
the standard craps game, employs an additional side wager made on
consecutive points thrown by the shooter.  The wager must be made
prior  to the shooter establishing the first "point" to be  made.
Once  the  shooter establishes the first point, no one  else  can
make  this  wager until the shooter throws a seven and goes  out.
This  side  wager will pay odds to the player based on  how  many
consecutive  points  were made during the  shooter's  turn.   The
shooter  must  make  at  least three  points  before  the  player
receives any odds on his wager.

     WILD HOLD'EM FOLD'EM.  Wild Hold'em Fold'em, a variation  of
stud  poker, offers the player the feel and decisions of a  real-
live  poker  game without the concern of playing  against  anyone
else.   In Wild Hold'em Fold'em, the player has three chances  to
wager  should the player continue to play to the end of the hand.
The  player places the first wager and receives three cards.  The
player  then  decides to either "Fold'em" and  forfeit  the  side
wager  or  "Hold'em"  and  continue.  If  the  player  elects  to
"Hold'em"  and  continue, the player must place  a  second  wager
equal to the first wager.  The player then receives a fourth card
and  must  decide again to either "Fold'em" and forfeit  the  two
wagers  or  "Hold'em"  and continue.  If  the  player  elects  to
"Hold'em"  and  continue, the player must  place  a  third  wager
double  to the first wager.  Once all third and final wagers  are
placed, the player receives the fifth and last card face-up.  All
winning hands are then resolved and paid according to the  payout
schedule.

     SECUREDROP SLOT ACCOUNTING SYSTEM AND SECURESCALE DROP CART.

     SECUREDROP.    SecureDrop  uses a "smart  bucket"  to  track
various   information   from  each  slot  machine   through   the
installation of a computer chip at the base of each smart bucket.
The  information is stored in the computer chip until  the  smart
bucket  is  transferred  to the count  room  where  the  data  is
retrieved through a serial interface.  The information  can  then
be  relayed  to  the  accounting/management  system  for  control
purposes.   Since gaming machine operators lose revenues  through
lack  of  financial accountability, SecureDrop's function  is  to
provide  the  operator with realizable information to  track  the
number  of  coins in the coin bucket at the time it  was  removed
from the machine to the time it is brought to the count room.  In
order  to address the differing needs of its clients, the Company
has  created the SecureDrop Series consisting of SecureDrop 2000,
SecureDrop 3000, SecureDrop 4000 and SecureDrop 5000.  SecureDrop
2000 offers electronic bucket identification and time stamp, uses
the  customer's current scale and interfaces with the  customer's
current data system.  SecureDrop 3000 offers the same features as
SecureDrop  2000 as well as the ability to read up to  five  hard
meters  in  the  slot machine.  SecureDrop 4000 offers  the  same
features  as  SecureDrop 3000, but also separates the  coin  drop
from the

                               -5-
                                
<PAGE>

bill  drop.  SecureDrop 5000 possess all of the features  of  the
preceding levels of the SecureDrop Series as well as the  ability
to read selected soft meters in the slot machine.

     SECURESCALE  DROP CART.  As a complement to  the  SecureDrop
Series, the Company is developing the SecureScale Drop Cart which
consists of a mobile scale and a secure drop area built into  the
cart.   By  installing a secure scale and drop  area  within  the
cart,   the  information  contained  in  the  smart  buckets   is
immediately recorded, the coins are immediately secured, and  the
lag  associated with transferring the drop bucket  to  the  count
room is eliminated.

      The  Company has received final approval of SecureDrop 2000
and  SecureDrop 3000 from the Nevada State Gaming  Control  Board
and  is  awaiting  final approval of SecureDrop 4000,  SecureDrop
5000  and  the SecureScale Drop Cart.  The Company has filed  the
appropriate  applications  for  the  SecureDrop  Series  and  the
SecureScale Drop Cart with the Mississippi Gaming Commission  and
anticipates approval of the same in the second quarter of 1999.

     OTHER PRODUCTS.

     SAFETY-PEEK  CARD.  The Safety-Peek Card is a  new  type  of
playing card designed for Blackjack/21.  The key feature  of  its
design is that it prevents the exposure of a dealer's hole  card,
I.E.  the card that is face down, when used with a modified  form
of  classic  peeking action.  The Safety-Peek  Card  permits  the
dealer  to "peek" at the opposite corner of the playing  card  in
order  to  determine the value of the hole card without revealing
the  value of the playing card.  The Safety-Peek Card is licensed
to  the George C. Matheson Company ("GEMACO") and US Playing Card
Company, under which the Company receives certain royalties.  See
Part I. "Item 1. Description of Business - Licensing."

     In  addition to the foregoing, the Company is in the process
of  developing other gaming products and table games designed  to
increase security, performance and profitability for the operator.

REGULATION

     The  gaming industry is a highly regulated industry  and  is
subject  to numerous statutes, rules and regulations administered
by  the  gaming commissions or similar regulatory authorities  of
each  jurisdiction.   Generally, the Company and  other  entities
which  seek  to introduce gaming products or concepts  into  such
jurisdictions may be required to submit applications relating  to
their  activities  or  products  (including  detailed  background
information   concerning   controlling   persons   within   their
organization)   which  are  then  reviewed  for  approval.    The
Company's  products generally fall within the  classification  of
"associated equipment".  "Associated equipment" is equipment that
is not classified as a "gaming device", but which has an integral
relationship  to  the  conduct  of licensed  gaming.   Regulatory
authorities  in  some  jurisdictions have discretion  to  require
manufacturers  and distributors to meet licensing or  suitability
requirements  prior to or concurrent with the use  of  associated
equipment.  In other jurisdictions, associated equipment must  be
approved by the regulatory authorities in advance of its  use  at
licensed  locations.  The Company has obtained, or is seeking  to
obtain, approval of its associated equipment in each jurisdiction
in which it conducts business that requires such approval.

     NEVADA.   The manufacture, sale and distribution  of  gaming
devices for use or play in Nevada or for distribution outside  of
Nevada   and  the  manufacture  and  distribution  of  associated
equipment for use in Nevada are subject to (i) the Nevada  Gaming
Control   Act   and   the   regulations  promulgated   thereunder
(collectively,   the  "Nevada  Act")  and  (ii)   various   local
ordinances and regulations.  Such activities are subject  to  the
licensing  and regulatory control of the Nevada Gaming Commission
(the  "Nevada Commission"), the Nevada State Gaming Control Board
(the   "Nevada  Board"),  and  various  local,  city  and  county
regulatory  agencies (collectively referred  to  as  the  "Nevada
Gaming Authorities").

                               -6-
                                
<PAGE>

     The  laws,  regulations  and supervisory  practices  of  the
Nevada  Gaming Authorities are based upon declarations of  public
policy having as their objectives (i) preventing any involvement,
direct  or  indirect,  of any unsavory or unsuitable  persons  in
gaming  or  the manufacture or distribution of gaming devices  at
any  time  or  in  any  capacity; (ii)  strictly  regulating  all
persons,  locations,  practices and  activities  related  to  the
operation  of licensed gaming establishments and the  manufacture
or   distribution   of  gaming  devices  and   equipment;   (iii)
establishing and maintaining responsible accounting practices and
procedures;   (iv)  maintaining  effective  controls   over   the
financial practices of licensees (including requirements covering
minimum  procedures for internal fiscal controls and safeguarding
assets  and revenues, reliable recordkeeping and periodic reports
to  be  filed  with  Nevada Gaming Authorities);  (v)  preventing
cheating   and  fraudulent  practices  and  (vi)  providing   and
monitoring  sources of state and local revenue based on  taxation
and  licensing  fees.  Changes  in  such  laws,  regulations  and
procedures,  depending upon their nature, could have  an  adverse
effect on the Company's operations.

     Although the Company is not registered with the Nevada Board
as  a   publicly  traded  corporation, the Company  is  currently
required  to  provide a copy of all periodic  reports  and  other
filings made with the Securities and Exchange Commission  to  the
Nevada Board.  Further, even though applications for the approval
of  associated equipment go through a less comprehensive approval
process, the Nevada Board may investigate any individual who  has
a  material  relationship to, or material involvement  with,  the
Company in order to determine whether such individual is suitable
or  should  be  licensed as a business associate of the  Company.
Officers, directors and certain key employees of the Company  may
be required to be licensed or found suitable by the Nevada Gaming
Authorities.   The  Nevada  Gaming  Authorities   may   deny   an
application   for  licensing  for  any  cause  that   they   deem
reasonable.  A finding of suitability is comparable to licensing.
Both  require  submission  of  detailed  personal  and  financial
information,  which is followed by a thorough investigation.  The
applicant for licensing or a finding of suitability must pay  all
the costs of the investigation.

     In the event that the Nevada Gaming Authorities were to find
an  officer, director or key employee unsuitable for licensing or
unsuitable  to continue having a relationship with  the  Company,
the  Company  would  have  to sever all relationships  with  that
individual.   In addition, the Nevada Commission may require  the
Company to terminate the employment of any person who refuses  to
file  appropriate applications. Determinations of suitability  or
of  questions pertaining to licensing are not subject to judicial
review in Nevada.

     In  the event that the Company be found to have violated the
Nevada  Act,  the  licenses and/or approvals it  holds  could  be
limited,  conditioned,  suspended or revoked.  In  addition,  the
Company  and  the  persons  involved could  be  required  to  pay
substantial  fines, at the discretion of the  Nevada  Board,  for
each  separate  violation  of the Nevada  Act.   The  limitation,
conditioning or suspension of any license or approval held by the
Company  could (and revocation of any license or approval  would)
materially adversely affect the Company's operations.

     As  for  security  holders  of the Company,  any  beneficial
holder  of  the  Company's voting securities, regardless  of  the
number  of  shares owned, may be required to file an application,
be  investigated, and have his or her suitability as a beneficial
holder  of  the  Company's voting securities  determined  if  the
Nevada  Board  finds reason to believe that such ownership  would
otherwise be inconsistent with the declared policies of the State
of  Nevada.   The  applicant must pay all costs of  investigation
incurred by the Nevada Gaming Authorities in conducting any  such
investigation.  Any person who fails or refuses to  apply  for  a
finding  of  suitability or a license within  thirty  days  after
being  ordered to do so by the Nevada Commission or the  Chairman
of   the  Nevada  Board,  may  be  found  unsuitable.   The  same
restrictions  apply to a record owner if the record owner,  after
request, fails to identify the beneficial owner.

                               -7-
                                
<PAGE>

     With  respect  to  its  current products,  the  Company  has
received  associated equipment approval from  the  Nevada  Gaming
Authorities  for  the  Shuffler,  Fantasy  21,  Bonus  Blackjack,
Danny's  Jackpot Dice, Wild Hold'em Fold'em, SecureDrop 2000  and
SecureDrop 3000.  Although the Company has not yet received final
approval  for Twin Baccarat and Wild Jackpot Poker,  the  Company
will  be  conducting field trials for these products  during  the
second quarter of 1999.

     In  order  to  receive final approval of the  Shuffler,  the
Company  repurchased from Steven L. Forte, a former employee  and
director  of the Company, and Cheryl Forte (i) 848,682 shares  of
the  Company's common stock (the "Forte Shares"); (ii) option  to
purchase  20,000  shares  of  the  Company's  common  stock;  and
(iii) royalty rights on sales of the Shuffler, Fantasy 21 and the
Safety-Peek   playing   card  (the  "Forte   Transaction").    As
conditions on the final approval of the Shuffler, the Company  is
required to, among  other  things,  submit  a semi-annual  report
summarizing  any interaction with Steven Forte  and submit copies
of  periodic  filings  made  with  the  Securities  and  Exchange
Commission to the Nevada Board.

     As  consideration, the Company executed a promissory note in
favor  of  Steven  and  Cheryl Forte in the principal  amount  of
$2,351,705 (the "Forte Note"), a security agreement in  favor  of
Steven and Cheryl Forte granting a first security interest in the
patents  for the Shuffler, Fantasy 21 and the Safety-Peek playing
card,  and a pledge agreement in favor of Steven and Cheryl Forte
whereby the Company pledged the Forte Shares as security for  the
Forte  Note.   In  December  1998,  the  Company  negotiated  the
cancellation of the Forte Note, the security agreement and pledge
agreement,  as well as an unrelated pre-existing promissory  note
in  the principal amount of $130,047.46 (the "Pre-existing  Forte
Note"),   in  exchange  for  $1,250,000  to  be  paid  in   three
installments  of  $500,000  on  December  7,  1998,  $500,000  on
December 28, 1998 and $250,000 on January 15, 1999.  Upon payment
of  the  $1,250,000, the Company cancelled the  Forte  Note,  the
security  agreement,  the pledge agreement and  the  Pre-existing
Forte  Note  and received a release from Steven and Cheryl  Forte
releasing  the  Company from any and all claims  related,  either
directly  or  indirectly, to the Forte Transaction.  Accordingly,
the  Company  has  retired the Forte Shares from  the  number  of
shares of common stock outstanding.

     MISSISSIPPI AND OTHER JURISDICTIONS.  The Company  currently
distributes products in Mississippi and South Africa  and intends
to distribute products  in other states  and countries.  Although
the regulatory schemes in  these jurisdictions are not identical,
their material attributes are substantially similar, as described
below.

     The   manufacture,  sale  and  distribution  of   associated
equipment  and the ownership in each jurisdiction are subject  to
various   provincial,  state,  county  and/or   municipal   laws,
regulations  and  ordinances,  which  are  administered  by   the
relevant regulatory agency or agencies in that jurisdiction  (the
"Gaming  Regulators").   These laws, regulations  and  ordinances
primarily  concern  the responsibility, financial  stability  and
character  of  gaming equipment manufacturers,  distributors  and
operators, as well as persons financially interested or  involved
in gaming or liquor operations.

     In  many  jurisdictions, manufacturing  or  distributing  of
gaming  supplies may not be conducted unless proper licenses  are
obtained.   An  application for a license may be denied  for  any
cause  which the Gaming Regulators deem reasonable.  In order  to
ensure  the  integrity of manufacturers and suppliers  of  gaming
supplies,  most  jurisdictions  have  the  authority  to  conduct
background  investigations of the Company, its key personnel  and
significant stockholders.  The Gaming Regulators may at any  time
revoke,  suspend, condition, limit or restrict a license for  any
cause  deemed  reasonable by the Gaming  Regulators.   Fines  for
violation of gaming laws or regulations may be levied against the
holder  of a license and persons involved.  The Company  and  its
key  personnel  have  obtained all  licenses  necessary  for  the
conduct  of the Company's business in the jurisdictions in  which
it manufactures and sells its casino

                               -8-
                                
<PAGE>

table game products.  Suspension or revocation  of  such licenses
could  have  a  material  adverse  effect  upon   the   Company's
operations.

      NATIVE   AMERICAN  GAMING  REGULATION.   Gaming  on   Native
American  lands  is  extensively  regulated  under  federal  law,
tribal-state   compacts  and  tribal  law.    The  Indian  Gaming
Regulatory  Act  of  1988  ("IGRA")  provides  the  framework for
federal  and  state  control  over all  gaming on Native American
land.  IGRA regulates  the  conduct  of gaming on Native American
lands and the terms  and  conditions  of   contracts  with  third
parties   for   management   of  gaming   operations.   IGRA   is
administered by the Bureau of Indian  Affairs  and  the  National
Indian Gaming Commission ("NIGC").

     IGRA  classifies  games  that may  be  conducted  on  Native
American  lands into three categories.  "Class I Gaming" includes
social  games solely for prizes of minimal value, or  traditional
forms of Native American gaming engaged in by individuals as part
of,  or  in  connection with, tribal ceremonies or  celebrations.
"Class  II Gaming" includes bingo, pulltabs, lotto, punch boards,
tip  jars,  instant bingo, and other games similar to  bingo,  if
those  games are played at the same location as bingo is  played.
"Class III Gaming" includes all other commercial forms of gaming,
such  as  table  games,  slots, video  casino  games,  and  other
commercial gaming (e.g. sports betting and pari-mutuel wagering).

     Class  I  Gaming  on  Native American lands  is  within  the
exclusive jurisdiction of the Native American tribes and  is  not
subject to the provisions of IGRA.

     Class  II  Gaming is permitted on Native American  lands  if
(i)  the  state  in which the Native American lands  are  located
permits  such  gaming for any purpose by any person, organization
or   entity;  (ii)  the  gaming  is  not  otherwise  specifically
prohibited  on  Native American lands by federal law;  (iii)  the
gaming  is  conducted  in accordance with a tribal  ordinance  or
resolution  which has been approved by the NIGC;  (iv)  a  Native
American  tribe  has sole proprietary interest and responsibility
for  the  conduct of gaming; (v) the primary management officials
and  key  employees are tribally licensed; and (vi) miscellaneous
other requirements are met.

     Class  III Gaming is permitted on Native American  lands  if
the  conditions  applicable to Class II Gaming are  met  and,  in
addition,  the gaming is conducted in conformance with the  terms
of  a  written  agreement  between a tribal  government  and  the
government of the state within whose boundaries the tribe's lands
are located (a "tribal-state compact").

     IGRA  requires states to negotiate in good faith with Native
American  tribes  that seek to enter into a tribal-state  compact
for  the  conduct of Class III gaming.  Such tribal-state compact
may  include provisions for the allocation of criminal and  civil
jurisdiction  between  the state and the  Native  American  tribe
necessary  for  the  enforcement of such  laws  and  regulations,
taxation by the Native American tribe of such activity in amounts
comparable  to those amounts assessed by the state for comparable
activities,  remedies for breach, standards for the operation  of
such  activity and maintenance of the gaming facility,  including
licensing,  and any other subjects that are directly  related  to
the  operation  of gaming activities.  The terms of  tribal-state
compacts vary from state to state.  Tribal-state compacts  within
one state tend to be substantially similar to each other. Tribal-
state  compacts  usually specify the types  of  permitted  games,
entitle   the  state  to  inspect  casinos,  require   background
investigations and licensing of casino employees, and may require
the   tribe  to  pay  a  portion  of  the  state's  expenses  for
establishing and maintaining regulatory agencies.

     Since  1996,  the Nevada Gaming Authorities have  taken  the
position  that  any  Native American tribe  operating  Class  III
gaming  within  the state of California, absent a  valid  compact
with  the  State  of  California, was doing  so  illegally.   The
legality  of  certain  California  Native  American  compacts  is
currently the subject of legal and other challenges.

                               -9-

<PAGE>

     UNITED  STATES - FEDERAL.  The Federal Gambling Devices  Act
of 1962 makes it unlawful for a person to manufacture, deliver or
receive   gaming  machines,  gaming  machine  type  devices   and
components thereof across interstate lines unless that person has
first  registered with the Department of Justice  of  the  United
States.

     APPLICATION OF FUTURE OR ADDITIONAL REGULATORY REQUIREMENTS.
In  the  future,  the  Company  intends  to  seek  the  necessary
licenses, approvals and findings of suitability for the  Company,
its  products and its personnel in other jurisdictions throughout
the  United  States  and  the world where significant  sales  are
anticipated to be made.  However, there can be no assurance  that
such  licenses,  approvals or findings  of  suitability  will  be
obtained  and  if  obtained  will not be  revoked,  suspended  or
conditioned  or  that  the Company will be  able  to  obtain  the
necessary approvals for its future products as they are developed
in a timely manner, or at all.  If a license, approval or finding
of  suitability  is  required by a regulatory authority  and  the
Company  fails to seek or does not receive the necessary license,
approval or finding of suitability, the Company may be prohibited
from  selling  it products for use in the respective jurisdiction
or  may  be required to sell its products through other  licensed
entities at a reduced profit to the Company.

MARKETING

     As   the   gaming   industry   becomes   increasingly   more
competitive,  the Company's strategy is to develop cost-effective
niche   products  and  services  that  increase   the   security,
productivity and profits for the global gaming industry.  As part
of its strategy, the Company offers to lease or sell its products
to casinos and other lawful gaming establishments.

     In  order to maintain and expand the market presence of  its
products, the Company is committed to providing a high  level  of
customer service and support.  For example, with respect  to  the
Shuffler, the Company oversees all installations of the  Shuffler
as  well  as provides training sessions on the operation  of  the
Shuffler.  In addition, the Company offers to its clients located
in  Nevada  and  Mississippi the ShuffleMaid  service  where  the
Company provides on-site preventative maintenance, on-site repair
service and delivery of replacement Shufflers.

COMPETITION

     The  gaming industry is extremely competitive.  Although the
Company has assembled an experienced marketing team that uses its
knowledge of the gaming industry to tailor the Company's products
and  services  to the needs of the gaming industry,  the  Company
competes  with many established companies that possess  resources
substantially greater than those of the Company.  Generally,  the
Company  competes  with  other companies that  are  substantially
larger,  have more substantial histories, backgrounds, experience
and   records   of  successful  operations,  greater   financial,
technical, marketing and other resources, more employees and more
extensive  facilities than the Company now has, or will  have  in
the foreseeable future.

     Even though the Company's overall strategy is to compete  on
the  basis of quality and price, the competitive pressures of the
gaming  industry will require the Company to invest in additional
research  and  development.   The constant  need  to  update  and
innovate may result in increased costs for and reduced margins on
the Company's products and services.

MANUFACTURING

     Until  March  1999, the Company maintained  a  manufacturing
facility  in Boise, Idaho for the production of the Shuffler  and
Fantasy 21.  In March 1999, the Company relocated the substantial
portion  of its manufacturing facilities to its principal offices
in Las Vegas, Nevada.  Fantasy 21 is produced in

                               -10-

<PAGE>

batches of 50 units and, from the point of ordering components to
completion, takes twelve to fourteen weeks to produce each batch.
The  Company  employs  a  combination  of employees  and contract
laborers in  the manufacturing process.  As for the Shuffler,  as
of  March   1999,  the  Company  has  completed   production   of 
170  units  and has  obtained components to produce approximately
350  additional  units.   As  for   SecureDrop,  the  Company  is
manufacturing the necessary components at  its principal  offices
in  Las  Vegas,  Nevada  through the  use of  employees, contract
laborers and  third-party  manufacturers.   The  key  third-party
manufacturers  for  SecureDrop are Tripp  Plastics Components  of
Las  Vegas, Nevada and River Electronics  of  Las Vegas,  Nevada,
both  of  which  have  over  fifteen  years and  twenty  years of
experience, respectively, in the gaming industry. The Company has
produced 200 units of SecureDrop and anticipates producing another
1,000 units by April 1999.  Since  the  Company  has licensed the
rights to the Safety-Peek Card to GEMACO and the US  Playing Card
Company,  the Company  does not have manufacturing facilities for
this product.

RESEARCH AND DEVELOPMENT

     To date, most of the time and effort of the Company has been
spent  on research and product development.   The Company or  its
predecessors incurred research and development costs  aggregating
$200,611, $464,304 and $244,117 for the years ended December  31,
1998, 1997 and 1996, respectively.  These funds were expended  on
engineering,  tooling, parts and other related expenditures.   To
develop  innovative and competitive products, the Company intends
to  emphasize research and development of new products as funding
and cash flow allow.

DISTRIBUTION

     The  Company presently intends to market and distribute  its
products   (1)  directly  through  the  Company's  sales   force;
(2)  through  distributors with a significant market presence  in
certain  specified  markets;  or (3) through  original  equipment
manufacturers ("OEM's").  An OEM is independent manufacturer  who
utilizes  and  incorporates certain component  parts  or  systems
manufactured  by  third  parties, such as  the  Company,  in  the
manufacturing and/or assembling of products.

     As  a  means  of  increasing  the  global  exposure  of  the
Company's  products, the Company entered into  various  exclusive
distribution agreements.  The Company currently has an  exclusive
five-year  distributorship  agreement  with  Sodak  Gaming,  Inc.
("Sodak")  whereby  the Company grants Sodak a certain  exclusive
territory  and  offers  Sodak a minimum discount  of  twenty-five
percent (25%) less than the promoted retail price in Nevada.  The
territory  includes  all Indian lands of the  United  States  and
First  Nation/Aboriginal Lands in Canada, Deadwood, South  Dakota
and  the  Miss  Marquette Riverboat and Casino, Marquette,  Iowa.
The  Company  also  has  an  exclusive five-year  distributorship
agreement  with RGB SDN BHD, a Malaysia corporation, whereby  the
Company offers to RGB SDN BHD a discount similar to that given to
Sodak  for the entire Asian Rim area, including, but not  limited
to,  Malaysia,  Singapore,  China,  Hong  Kong,  Korea,  Vietnam,
Indonesia, Thailand, The Philippines, Nepal, Cambodia, India, Sri
Lanka,  Macau,  Myanmar, Laos, Cruise Ships  based  in  Malaysia,
Singapore  and  Hong  Kong.  The territory specifically  excludes
Japan,  Australia and New Zealand which will be treated as common
distributor  areas.  Additionally, the Company has  an  exclusive
five-year  distributorship agreement with H. Joel  Rahn  (company
name  to  be designated).  The Company offers to H. Joel  Rahn  a
discount   similar  to  that  given  to  Sodak  for  a  territory
consisting  of  South  America, Central  America,  the  Caribbean
Islands,  the  State  of  Florida  and  Cruise  Ships  worldwide,
excluding Cruise  Ships  based in  Malaysia, Singapore, Hong Kong
and  the Bahamas.  The Company has also entered into an exclusive
five-year   distributorship   agreement   with   Belgian   Gaming
Technology, a Belgian corporation, with respect to all  countries
in the European Commonwealth, Eastern Europe and Africa with  the
exclusion of South Africa and ferry ships.

                               -11-

<PAGE>

LICENSING

     The  Company has granted joint exclusive licenses to  GEMACO
and  to  The US Playing Card Company for the Safety Peek  Playing
Card.    The terms of the GEMACO agreement provides for a royalty
of $.04 per deck of playing cards being paid to the Company on  a
quarterly basis. Additionally, GEMACO agreed that during the term
of the agreement, it will use $.02 on each deck for promotion and
advertising  of the product. The US Playing Card Company  pays  a
royalty of $.075 per deck.

     Technology Development Center, LLC, has granted an exclusive
license  to  the Company relating to its technology  known  as  a
"Coin Operating Machine Having An Electronically Identified  Coin
Collection  Box".  The geographical scope of the license  is  the
United States of America and all foreign countries.  Pursuant  to
the  terms  of the license agreement, the Company agreed  to  pay
Technology  Development Center, LLC (i) $50,000 in  five  monthly
installments beginning on November 14, 1997 and (ii) for  $50,000
payable  in  twelve monthly installments beginning on  April  15,
1998.  The Company shall pay a royalty of $7.50 per each licensed
product  sold,  rented,  leased, or otherwise  used  for  profit,
provided  that the Company receives a net compensation in  excess
of  $7.50 for each licensed product sold.  On July 31, 1998,  the
Company  and  Technology  Development  Center,  LLC  amended  the
license  agreement  such  that  the  Company  will  make  monthly
payments  of  $5,000  from August 1998 to October  1998,  make  a
payment  of  $2,500 in November 1998, and convert  the  remaining
balance  of  $51,250 in principal and interest into 20,500 Common
Shares  at a conversion rate of $2.50 per Common Share.   Through
this amendment, the Company reduced its cash payment requirements
and related expenses.

INTELLECTUAL PROPERTY RIGHTS

     The  Company  has secured and endeavors to  secure,  to  the
extent  possible,  exclusive rights in its  products  and  games,
primarily  through  federal  and  foreign  intellectual  property
rights, such as patents and trademarks.  The United States Patent
and  Trademark  Office has issued patents to the Company  or  its
predecessors  covering the Shuffler, Fantasy 21  and  SecureDrop.
The Company has applied for various other patents with respect to
other  concepts  and  products.  Further,  in  order  to  protect
potential foreign sources of income, the Company has filed patent
applications and trademark applications in strategically selected
foreign  countries. There can be no assurance  that  any  of  the
pending  U.S.  or  foreign patent or trademark applications  will
issue  as  patents  or trademark registrations, respectively,  or
that  any of these rights will not be infringed by others or that
already  issued patents or trademark registrations  will  not  be
invalidated or canceled. None of the foregoing measures  provides
assurance  that the Company's proprietary games or  the  concepts
incorporated in the games could not be successfully duplicated by
third  parties.  Third parties could infringe  on  the  Company's
rights,  or  the  Company's  proprietary  products and games, and
could  be  successfully  duplicated  without  infringing  on  the
Company's  legal  rights.   Many  elements  incorporated  in  the
Company's proprietary products and games are in the public domain
or otherwise not susceptible to  legal protection, and the  steps
taken  by  the  Company will not,  in and of themselves, preclude
competition with the Company's proprietary products and games.

EMPLOYEES

     As  of  February  28,  1999, the Company  had  32  full-time
employees.   The Company will, as operations demand, sub-contract
the   balance   of  its  employment  needs  through   independent
contractors.

ITEM 2.   DESCRIPTION OF PROPERTY

      The  Company leases its principal offices and manufacturing
facilities  at 6744 S. Spencer Street, Las Vegas, Nevada   89119.
The  lease is for approximately 19,000 square feet with a monthly
cost  of  approximately $11,600.  The Company believes  that  its
existing leased premises are sufficient for its

                               -12-

current business operations. As described in Item 1. "Description
of Business-Manufacturing," the Company relocated the substantial
portion of its manufacturing facilities from  Boise, Idaho to Las
Vegas, Nevada in March 1999.

ITEM 3.   LEGAL PROCEEDINGS

      On November 18, 1998, a complaint, JEWISH FEDERATION OF LAS
VEGAS  V.  CASINOVATIONS INCORPORATED (Eighth  Judicial  District
Court,  Case No. A396031), was filed against the Company  by  the
owner  of the premises at which the Company formerly located  its
principal  offices.   This complaint alleges breach  of  contract
with  respect to the lease agreement by and between  the  Company
and  the owner when the Company vacated the premises on or  about
June  1, 1998.  The Company vacated the premises on grounds  that
the premises were sinking and structurally unsound.  Although the
owner  has  requested damages in excess of $10,000 and applicable
attorneys'  fees,  the matter has been assigned  to  arbitration.
Management  intends to vigorously defend the Company against  all
allegations.

      On December 22, 1998, the Company received a letter from  a
stockholder  which  purchased 200,000  shares  of  the  Company's
common  stock (the "Disputed Shares") issued in conjunction  with
the  Offering  (as defined below).   Although  the  stockholder's
subscription agreement was accepted by the Company on December 4,
1998  and  although  the  Disputed  Shares  were  issued  to  the
stockholder on December 14, 1998, the stockholder asserts that it
has the right to  rescind said subscription agreement and that it
desires to rescind said subscription agreement. Since the receipt
of the letter, the Company, First  Global  Securities, Inc.,  the
placement  agent  involved  with  the sale of the Disputed Shares
("First  Global"), and  Noble Trenham, President of First Global,
have held  certain discussions  with  the  stockholder  regarding
the  matter.   On February  26,  1999,  the stockholder's counsel
sent  a  written demand  for return of the subscription amount by
March 2, 1999  or a lawsuit would  be  filed against the Company,
the  Company's  directors, First  Global  and Mr.  Trenham.  As a
result of  the  demand  made by the  stockholder, the Company has
obtained  an  indemnification  from First Global and Mr. Trenham.
First Global and Mr. Trenham have agreed to indemnify, defend and
hold harmless the Company of and from any and all claims, losses,
liens,  expenses, costs, damages, obligations and liabilities  of
any nature whatsoever incurred by the Company, including, without
limitation, reasonable attorneys' fees and costs incurred by  the
Company,  as a result of, or in connection with and all  demands,
settlements, rulings, orders, findings or judgments  against  the
Company  related  to, the Disputed Shares and any  other  related
matter, including, but not limited to, the repayment of the funds
paid by the stockholder for the Disputed Shares and the return of
the  commission paid by the Company to First Global with  respect
to the  Disputed Shares.  On March 24, 1999, the  Company  agreed
to  rescind  the  subscription on  or  before April 30, 1999,  in
exchange for the Company's  payment of $450,000.  Mr. Trenham and
First  Global have agreed to pay $50,000 to the stockholder.  The
Company has  reserved all rights  to seek indemnification against
Mr. Trenham and First Global.

     On March 18, 1999, Shuffle  Master, Inc. ("Shuffle  Master")
filed a complaint in the District Court, Clark County,  State  of
Nevada  (Case  No.  A400777)  against former employees of Shuffle
Master (who  are now  employees of the  Company) and the Company.
The  complaint  alleges,  among  other things,  fraud, breach  of
contract and conversion against certain of these former employees
of  Shuffle  Master and  violation of Nevada's  Trade Secret Act,
interference  with  contractual  relations,  breach  of contract,
violations of the Lanham Act and civil conspiracy to commit fraud
against certain of these former employees of  Shuffle Master and
the Company.  Management  believes that the complaint is without
merit and intends vigorously to defend the allegations contained
therein.

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

     Not Applicable.

                              -13-
                                
<PAGE>

PART II

ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
          MATTERS.

     MARKET INFORMATION

      The  Company's common stock is not presently  traded  on  a
public  trading  market,  although the Company  anticipates  that
trading  in the over-the-counter market will begin in the  second
quarter of 1999.

     COMMON STOCK, OPTIONS AND WARRANTS

      As  of January 31, 1999, there were 7,295,420 shares of the
Company's common stock outstanding and approximately 430  holders
of the Company's common stock.  In connection with the resolution
of  the  stockholder  dispute, the  Company may reacquire 200,000
shares  by  April  30,  1999.   See  Part  II.   "Item 3.   Legal
Proceedings."

     As  of December 31, 1998, the Company has issued options  to
purchase  an aggregate of 855,000 shares of the Company's  common
stock. In addition, the Board of Directors of the Company adopted
the  Casinovations Incorporated Stock Option Plan  (the  "Plan").
Under the Plan, which is subject to the approval of the Company's
shareholders,  the Company is authorized to issue  stock  options
for a total up to 500,000 shares of the Company's common stock to
selected  officers,  directors, employees consultants,  advisers,
independent contractors and agents of the Company.  With  respect
to  administration  of the Plan, the Board of  Directors  of  the
Company  has established a committee consisting of three  outside
directors, Bob L. Smith, David E. Sampson and Ronald O. Keil.

     In  1996  and  1997,  the  Company issued  four  classes  of
warrants,  Class A, Class B, Class C and Class D.  In July  1996,
the   Company's  Board  of  Directors  authorized  the  pro  rata
distribution  of  200,000  Class  A  Warrants,  200,000  Class  B
Warrants  and 250,000 Class C Warrants to all record shareholders
of  the  Company as of July 22, 1996.  The Class A Warrants  were
exercisable  into shares  of  the  Company's common  stock  at  a
price  of  $3.75 per share, the Class B Warrants at  a  price  of
$4.00 per share and the Class C Warrants at a price of $6.00  per
share.  The Class A, Class B and Class C Warrants are exercisable
over  a  four-year period ending July 2000 and are callable  with
thirty-day notice at a price of $.001 per under share  of  common
stock.   Subsequently,  in  June 1997,  the  Company's  Board  of
Directors authorized the distribution of 200,000 Class D Warrants
to  certain  shareholders for financing purposes.   The  Class  D
Warrants  are  exercisable  into  shares  of the Company's common
stock at the  purchase price  of  $1.50  per share.  Although the
Class D Warrants  are exercisable for two years beginning January
31, 1997, all Class D Warrants have been exercised.

     In  April  1998,  certain holders of the  Class  A  Warrants
transferred and assigned a portion of their  Class A Warrants  to
Richard S. Huson, VIP's Industries, Inc., an entity controlled by
Bob L. Smith, a director  of the Company,  David  Goldsmith,  Jay
Willoughby, and Richard Jaslow as a means of securing convertible
debt financing for the Company. On December 31, 1998, the holders
of  such  convertible debt  financing converted their holdings at
a  rate of $2.13 per  share for an aggregate of 235,012 shares of
the Company's common stock.

     On  September  11,  1998, the Company's Board  of  Directors
called  the Class B Warrants and Class C Warrants such  that  the
holders  of  the  Class  B  Warrants and  the  Class  C  Warrants
possessed the right to exercise such warrants at $4.00 and  $6.00
per  share,  respectively,  until October  11,  1998.   Since  no
holders  of  the Class B Warrants and Class C Warrants  exercised
such warrants, the Company issued to all  holders  of the Class B
Warrants and  Class C Warrants  $.001  per  underlying  share  of
common stock pursuant to the terms  of such warrants.  Currently,
only the Class A Warrants are outstanding.

                               -14-

<PAGE>

      In  addition to the Class A, Class B, Class C and  Class  D
Warrants, in connection with the "Offering" (defined below),  the
Company  agreed to grant First Global Securities, Inc. and  Grant
Bettingen,  Inc. (collectively, the "Placement Agents")  warrants
to  purchase 550,000 shares of common stock at an exercise  price
of  $3.00  per share.  Pursuant to the placement agreement  dated
September  17, 1998 by and between the Company and the  Placement
Agents,  as amended January 5, 1999, the Company agreed to  grant
the  Placement  Agents  warrants to purchase  332,500  shares  of
common  stock at an exercise price of $3.00 per share so long  as
all  of  the  shares under the Offering were sold by January  30,
1999.   Although  the  Offering has been completed  and  all  the
shares  offered  pursuant to the Offering  have  been  sold,  the
Company  has  not  issued  the  aforementioned  warrants  to  the
Placement  Agents  pending  a  resolution  of  the  matter with a
certain stockholder.  See Part I. "Item 3.  Legal Proceedings."

     DIVIDEND POLICY

     The Company has never declared or paid cash dividends on its
common stock. The Company presently intends to retain earnings to
finance the operation and expansion of its business and does  not
anticipate declaring cash dividends in the foreseeable future.

     USE OF PROCEEDS

     The  Company  filed a Registration Statement  on  Form  SB-2
(Registration No. 333-31373) (the "Registration Statement")  for,
among  other  things,  the  offer and sale  of  1,500,000  shares
of  the  Company's  common  stock  at   $2.50   per   share  (the
"Offering").  In  addition, the Registration Statement registered
2,107,973 shares on  behalf  of certain selling security holders,
consisting  of  319,825  shares  on  behalf of Company  officers,
directors and affiliates, 828,177  shares  on  behalf  of persons
who acquired  shares  in  previous private placements and 959,971
shares on behalf of  unaffiliated shareholders and 200,000 shares
underlying the Class A Warrants.

     On  January 30, 1999, the Company concluded the Offering  in
which the Company received  gross proceeds  of $3,794,360.  After
the  payment of commissions to  the Placement Agents, the Company
received  net proceeds of $ 3,567,613.  The Company allocated the
net proceeds from the Offering as follows: (i) $1,250,000 for the
purposes  of canceling, among  other  things, an indebtedness  of
$2,351,705 owed by  the  Company to Steven and Cheryl Forte; (ii)
$50,000 for the purposes of reducing certain indebtedness owed to
Bob L. Smith, a  director  and  shareholder of the Company; (iii)
$153,000  for  the  purposes  of  purchasing additional equipment
and  tooling; (iv) $566,600 for inventory; and (v) $1,541,013 for
the  purposes of funding working  capital and other expenses.  In
connection with the resolution of the  stockholder  dispute,  the
Company may  reacquire 200,000 shares by April 30, 1999. See Part
II. "Item 3. Legal Proceedings."

     For  the  year  ended December 31, 1998, the Company  issued
446,416 shares of common stock without registering said shares of
common  stock  under the Securities Act of 1933, as amended  (the
"Securities Act").  All 446,416 shares issued by the Company  are
restricted  securities.   The Company issued  the  aforementioned
shares  of common stock as follows:  (i) 30,000 shares in  August
1998 as part consideration for the purchase of certain assets  of
Gaming 2000, LLC; (ii) 65,250 shares in November 1998 as a result
of  the  conversion of certain indebtedness owed by the  Company;
(iii)  50,000 shares in December 1998 as payment for  advertising
services;  (iv)  2,000  shares in December  1998  as  a  gift  to
employees of the Company; and (v) 299,166 shares in December 1998
as a result of the conversion of certain indebtedness owed by the
Company.   As a result of the issuance of these shares of  common
stock, the Company did not receive any cash proceeds.

     With  respect to the 2,000 shares of common stock issued  to
the  Company's employees, the Company issued the shares as a gift
such  that  the issuance did not constitute a "sale",  "offer  to
sell", "offer

                               -15-

<PAGE>

for sale", or "offer" as  contemplated under Section 2(3)  of the
Securities Act.  Accordingly,  the  issuance  is  exempt from the
registration requirements of Section 5 of the Securities Act.  As
for the balance of the 446,416 shares issued by the Company,  the
Company relied upon Section 4(2) of the  Securities Act  in  that
the recipients of the shares of common stock were all  accredited
investors  with  pre-existing  relationships  with  the  Company.
Accordingly,  the  issuance of  these  shares of  common stock is
exempt  from  the  registration requirements of Section  5 of the
Securities Act.

                              -16-
                                
<PAGE>

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS
       
STATEMENT ON FORWARD-LOOKING INFORMATION

     Certain information included herein contains statements that
may  be  considered forward-looking statements within the meaning
of  Section  27A  of  the Securities  Act and Section 21E  of the
Securities  Exchange Act of 1934, as amended (the "Exchange Act")
such  as  statements  relating  to  plans  for  future expansion,
capital spending and  financing  sources.   Such  forward-looking
information involves important risks and uncertainties that could
significantly   affect  anticipated  results  in  the future and,
accordingly, such  results may differ from those expressed in any
forward-looking   statements   made   herein.   These  risks  and
uncertainties include, but are not limited to, those  relating to
liquidity requirements  for  the Company, the continued growth of
the gaming industry,  the  success of   the   Company's  product-
development  activities,   vigorous  competition  in  the  gaming
industry,  dependence  on  existing  management,   relocation  of
manufacturing  facilities,  gaming regulations (including actions
affecting   licensing),  leverage  and  debt  service  (including
sensitivity to fluctuations in  interest rates),  issues  related
to the Year 2000,  domestic  or  global  economic  conditions and
changes in federal or state tax  laws  or  the  administration of
such laws.

OVERVIEW

     The   Company's   primary  business  is   the   development,
manufacturing  and  marketing  of  various  gaming  concepts  and
products that increase the security, productivity and profits for
the global gaming industry.

     From  inception through December 31, 1998, the  Company  has
been  a  "Development  Stage  Company"  performing  research  and
development,  product  prototyping, field  testing  of  products,
development  of manufacturing capabilities, acquiring  inventory,
development  of  distribution channels, staffing  (including  the
four  top sales executives from a major shuffler competitor)  and
obtaining  a  building with sufficient capacity to  house  future
growth.   Beginning  January 1999, the Company anticipates  sales
development and revenue growth to be an operating company.

     In  December 1998, the Nevada Board issued its approval  for
the  Company to sell the Shuffler.  As of February 22, 1999,  the
Company  had placed 54 Shufflers under rental contracts  and  had
commitments  for  an additional 158 units.  The Company  has  the
majority  of  the  parts  required to  build  an  additional  350
Shufflers.   Additionally,  the  Company  has  received  purchase
commitments  for an aggregate of 1,200 units of its  "SecureDrop"
products.   The Company is currently negotiating for tooling  and
product  sufficient  to build 60,000 SecureDrop  units  in  1999.
The Company believes that customer interest  in both the Shuffler
and SecureDrop products continues to be very high.

     From  April 1998 through January 1999, the Company conducted
a  public  offering  for  1,500,000 shares of its common stock at
$2.50  per  share  (the "Offering").  In  addition,  the  Company
registered  2,107,973 shares of common stock on behalf of certain
selling   shareholders  and  200,000  shares   of   common  stock
underlying  the  Class A Warrants.  The Company used the proceeds
from the Offering for the  payment of operating expenses, funding
of working capital and the reduction of debt.  See Part II. "Item
5. Market for Common Equity and Related Stockholder Matters - Use
of Proceeds."

      The  following  discussion summarizes the Company's results
of  operations  for the years  ended December 31, 1998, 1997  and
1996 and the Company's liquidity and capital resources.

                              -17-

<PAGE>

RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 1998 AND 1997

     REVENUES.   For the twelve months ended December  31,  1998,
the  Company  generated  total revenues of  $29,670  compared  to
$13,516  for  the  twelve months ended December  31,  1997.   The
revenues  for the twelve months ended December 31, 1998 consisted
of  Shuffler  rentals  of  $20,894,  Shuffler  sales  of  $3,860,
interest income of $1,215 and distributor's commissions  and  Fun
Pit Collection rentals of $1,230.

     SELLING,  GENERAL  AND ADMINISTRATIVE  EXPENSES.    For  the
twelve  months  ended  December 31, 1998,  selling,  general  and
administrative expenses increased approximately $838,565, or 46%,
to  $2,664,815 compared to $1,826,250 for the twelve months ended
December  31, 1997.  This increase was primarily attributable  to
costs  associated  with  the development  and  marketing  of  the
Company's products and the expansion of the Company's operations.
For  the  twelve months ended December 31, 1998, selling, general
and administrative expenses included:  salaries and related costs
of  $947,318;  consulting services of $268,345;  cost  of  gaming
industry  shows  $140,892;  travel  and  entertainment  costs  of
$194,952;  printing  and  office  expense,  including   rent   of
$332,544;  and  legal  expenses of $135,431.   In  addition,  the
Company  had  depreciation  and  amortization  of  $123,128   and
amortized  deferred  interest  of  $0  compared  to  $40,262  and
$186,000, respectively, for the twelve months ended December  31,
1998 and 1997, respectively.

     INTEREST EXPENSE.  For the twelve months ended December  31,
1998,   the  Company   incurred  interest  expenses  of  $383,189
compared  to  $329,033 for the twelve months ended  December  31,
1997.   This increase was primarily attributable to the increased
borrowings of the Company.

     OTHER  INCOME.   For  the twelve months ended  December  31,
1998,  the Company received net proceeds of $2,088,630  from  the
sale  of common stock and received proceeds of $985,796 from  the
issuance  of long-term debt.  In addition, for the twelve  months
ended  December  31,  1998,  the  Company  received  loans   from
shareholders  in the amount of $1,368,000 and repaid  loans  from
shareholders in the amount of $3,006.  As a result,  the  Company
received $4,439,420 in net cash from financing activities.

     NET INCOME (LOSS).  For the twelve months ended December 31,
1998,  the  Company had a net loss of $3,373,144, an increase  of
$767,073,  compared to a net loss of $2,606,071  for  the  twelve
months  ended  December 31, 1997.  The increase in net  loss  was
primarily due to continued development of the Company's  products
and  the  expansion of the Company's operations.  Basic loss  per
share  was  $.53  for the twelve months ended December  31,  1998
compared to $.47 the twelve months ended December 31, 1997.

YEARS ENDED DECEMBER 31, 1997 AND 1996

     REVENUES.   For the twelve months ended December  31,  1997,
the  Company  generated  total revenues of  $13,516  compared  to
$4,253  for  the  twelve months ended December 31,  1996.   These
revenues  consisted of card royalties of $2,226, interest  income
of $8,290 and the sale of patent rights of $3,000.

     SELLING,  GENERAL  AND ADMINISTRATIVE  EXPENSES.    For  the
twelve  months  ended  December 31, 1997,  selling,  general  and
administrative expenses increased approximately $848,423, or 87%,
to  $1,826,250 compared to $977,827 for the twelve  months  ended
December  31, 1996.  This increase was primarily attributable  to
costs  associated  with  the development  and  marketing  of  the
Company's products and the expansion of the Company's operations.
For the twelve months ended December 31, 1997,

                              -18-
                                
<PAGE>

selling,  general and administrative expenses included:  salaries
and  related costs of $419,101; consulting services of  $627,913;
cost  of gaming industry shows $151,425; travel and entertainment
costs of $313,475; printing and office expense, including rent of
$166,922;  and  legal  expenses of  $72,785.   In  addition,  the
Company   had  depreciation  and  amortization  of  $40,262   and
amortized  deferred interest of $186,000 compared to  $2,553  and
$46,500,  respectively, for the twelve months ended December  31,
1996, respectively.

     INTEREST EXPENSE.  For the twelve months ended December  31,
1997,   the  Company   incurred  interest  expenses  of  $329,033
compared  to  $414,723 for the twelve months ended  December  31,
1996.

     OTHER  INCOME.   For  the twelve months ended  December  31,
1997,  the Company received net proceeds of $1,015,510  from  the
sale  of common stock and received proceeds of $744,600 from  the
sale of long-term debt.  In addition, for the twelve months ended
December  31,  1997, the Company received loans from shareholders
in  the amount of $120,000 and repaid loans from shareholders  in
the  amount  of  $38,866.   As  a result,  the  Company  received
$1,841,244 in net cash from financing activities.

     NET INCOME (LOSS).  For the twelve months ended December 31,
1997,  the  Company had a net loss of $2,606,071, an increase  of
$921,344,  compared to a net loss of $1,684,727  for  the  twelve
months  ended  December 31, 1996.  The increase in net  loss  was
primarily due to continued development of the Company's  products
and  the  expansion of the Company's operations.  Basic loss  per
share  was  $.47  for the twelve months ended December  31,  1997
compared to $.41 the twelve months ended December 31, 1996.

LIQUIDITY AND CAPITAL RESOURCES

     OVERVIEW.  Management is currently developing business plans
and  operations  such  that  the Company  is  expected  to  cover
operating  expenses  through cash flow from  operations  assuming
immediate commencement of normal sales activities.  Although  the
Company  is  currently relying upon the proceeds of the  Offering
and   advances  from  its  principal  shareholder  for  liquidity
requirements, the Company is constantly exploring and  evaluating
additional sources of financing.

     OFFERING.   The  Company completed its  Offering  of  common
stock on January 30, 1999.  As  a result  of  the  sale of shares
pursuant to the Offering, the Company received  gross proceeds of
$3,794,360.  The  Company  received  net  proceeds  of $2,088,630
during  the  twelve months ended December 31, 1998.  See Part II.
"Item 5.   Market  for  Common  Equity  and  Related  Stockholder
Matters." The Company  has agreed to rescind the  sale of 200,000
shares  issued  in  the  Offering.  See  Part I.  "Item 3.  Legal
Proceedings."

     CONVERTIBLE  DEBT.   The Company  has  received  proceeds of
$1,800,000 from the placement  of convertible debt in  the  first
quarter of 1999. The debt accrues interest at 9.5% per annum  and
is  convertible into restricted  shares of common stock after six
months at $2.60 per share.  Each  purchaser of a $50,000  unit of
convertible debt also received warrants for the purchase of 9,100
shares of  common stock at $3.00 per share.  The convertible debt
issue  was  completed in March 1999.

     WORKING  CAPITAL.   At December 31, 1998,  the  Company  had
cash,  cash  equivalents and investments of $200,749 compared  to
$119,389  at  December  31,  1997.  At  December  31,  1998,  the
Company's  working  capital deficit was $632,024  compared  to  a
deficit  of  $1,031,024 at December 31, 1997.   At  December  31,
1998,  the  Company's current ratio, I.E. the  ratio  of  current
assets  to current liabilities, was 0.62:1 compared to 0.26:1  at
December  31, 1997.  During the twelve months ended December  31,
1998,   the   Company  relied  upon  loans  from  its   principal
shareholder   and   other  directors,  and  other   private   and
institutional  sources of debt and equity capital of  $4,442,426.
Until the Company's

                               -19-

<PAGE>

normalized sales levels are achieved, the Company will be relying
upon cash generated from the Offering,loans  from  the  Company's
principal  shareholder and other directors, and other private and
institutional  sources  of  debt  and  equity capital for working
capital purposes.

     LEASE  FINANCING.    As of December 31,  1998,  the  Company
received  proceeds of $947,100 from certain lease financing  with
an  unrelated leasing company whereby the Company sold and leased
back all of its furniture, equipment and tooling, and 70 units of
the Shuffler.

     CASH  FLOW.  For the year ended December 31, 1998, net  cash
used  in  operating  activities  was  $(3,069,479)  compared   to
$(1,949,467) for the year ended December 31, 1997.  The cash used
in operating activities reflects depreciation and amortization of
$123,128  compared  to $40,262 for the year  ended  December  31,
1997; stock and options used for services of $541,108 compared to
$136,000 for the year ended December 31, 1997; compensation value
of cash stock sales of $0 compared to $177,000 for the year ended
December  31,  1997;  stock  and  option  issued  for  additional
interest  of  $133,124 compared to $117,332 for  the  year  ended
December  31,  1997;  amortization of  deferred  interest  of  $0
compared  to  $186,000  for  the year ended  December  31,  1997;
increases/decreases in accounts receivable of  $(4,003)  compared
to    $15,327   for   the   year   ended   December   31,   1997;
increases/decreases in inventory of $574,369 compared to $181,437
for  the  year  ended  December 31, 1997; increases/decreases  in
prepaid  expenses of $(1,104) compared to $39,276  for  the  year
ended  December 31, 1997; increases/decreases in other assets  of
$95,102 compared to $41,600 for the year ended December 31, 1997;
increases/decreases in accounts payable of $368,038  compared  to
$335,459   for   the   year   ended  December   31,   1997;   and
increases/decreases  in accrued expenses of $37,479  compared  to
$(57,809) for the year ended December 31, 1997.

     For  the  year  ended  December  31,  1998,  net  cash  from
financing  activities was $4,439,420 compared to  $1,841,244  for
the  year  ended  December 31, 1997.  The increase  is  primarily
attributable   to  the  proceeds  received  from  the   Company's
Offering.   The  cash  from  financing  activities  consisted  of
$2,088,630  from the sale of common stock, proceeds  of  $985,796
from  long-term  debt,  proceeds of $1,368,000  from  shareholder
loans and repayment of notes payable of $3,006.

     CAPITAL  EXPENDITURES.  In  June  1998,  the  Company opened
its  manufacturing  facilities  to  Boise,  Idaho.   The  Company
entered  into  a  one-year lease for its new  4,000  square  foot
manufacturing facility.  The Company relocated its  manufacturing
operations  to its  principal offices  in  Las  Vegas, Nevada  in
March 1999, at a cost of approximately  $5,000.  In addition, the
Company  has  planned  expenditures  of  $300,000  for additional
tooling.  For  the twelve months  ended  December  31, 1998,  the
Company  used  net  cash in  investing  activities  of $1,288,582
consisting of:  acquired  plant and equipment valued at $153,473;
increased patents and trademarks by  $19,023;  and purchased  and
retired  treasury stock for $1,116,086.   For  the twelve  months
ended December 31, 1997, the Company used net  cash in  investing
activities  of  $325,266  consisting   of:   acquired  plant  and
equipment  valued  at  $296,156;  and   increased   patents   and
trademarks by $29,110.

     RETIREMENT  OF  DEBT.   As part of a transaction  where  the
Company  repurchased  the  shares of common  stock,  among  other
things,  from  Steven L. Forte,  a  former employee, director and
shareholder  of  the  Company,  the Company executed a promissory
note  in  the  original  principal  amount  of  $2,351,705.   The
promissory  note  dated December  3, 1998 had an interest rate of
6.5% during  the  first  year and 8% thereafter and was amortized
over  a  ten-year schedule  with payments of interest only during
the  first  year,  payable  on  the  six-month  and  twelve-month
anniversary of the promissory note and  payments of principal and
interest thereafter on a monthly basis.   Through a December 1998
letter agreement, the  Company negotiated the cancellation of the
promissory note, as  well  as  the  cancellation  of the security
for the promissory  note  and the  cancellation  of  an unrelated
promissory note in the original principal  amount of $130,047.46,
in  exchange  for  three  payments  in  the  aggregate  amount of
$1,250,000: $500,000 on

                               -20-

<PAGE>

December  7, 1998,  $500,000 on December 28, 1998 and $250,000 on
January 15, 1999.  On January 15, 1999, the Company made the last
payment and cancelled the promissory note, the security  for  the
promissory note and the unrelated promissory note.

     In   addition,  the  certain  individuals,  including  three
directors  of the Company, entered into a transaction with  Randy
D.  Sines, a former officer and director of the company,  whereby
Mr.  Sines would (i) sell to these individuals all of his  shares
of  the Company's common stock and (ii) transfer to and/or cancel
in  favor  of the Company certain debts, options and warrants, in
exchange  for payment of $1,250,000 from these individuals.   The
transaction involved the following items:  (i) 885,560 shares  of
the   Company's  common  stock  (including  470,851  shares  with
restrictions  imposed  by the State of California  Department  of
Corporations,  326,153 shares restricted under Rule  144  and  by
agreement,   and  88,556  shares  registered  pursuant   to   the
Offering); (ii) options to purchase 20,000 shares of common stock
at  $1.50 per share; (iii) options to purchase 175,000 shares  of
common  stock  from the Company's principal shareholder;  (iv)  a
certain  promissory  note  in the original  principal  amount  of
$150,000;  (v) certain warrants; and (vi) certain royalty  rights
from  the  sale  of  the Shuffler, Fantasy  21  and  Safety-Peek.
Although  the  Company did not pay any portion of the  $1,250,000
paid to Mr. Sines, the Company did receive a benefit through  the
cancellation of the aforementioned promissory note,  options  and
royalty rights.

OUTLOOK

     Based  on presently known commitments and plans, the Company
believes  that  it  will  be  able to fund  1999  operations  and
required  expenditures  through cash  on  hand,  cash  flow  from
operations,  cash  from  private  placement  of  debt  and  lease
financing   sources.   In  the  event  that  such   sources   are
insufficient, the Company will need to seek cash from private  or
public  placements  of  debt or equity,  institutional  or  other
lending  sources  or change operating plans to  accommodate  such
liquidity  issues.  No assurances can be given that  the  Company
will successfully obtain necessary liquidity sources.

YEAR 2000

     During  1998,  the  Company undertook an assessment  of  the
information  systems  and  software used  in  its  operations  to
determine  whether or not those systems were Year 2000 compliant,
and  assessed plans to upgrade systems and/or software  that  was
determined to not be Year 2000 compliant.  The Company has  begun
and  is  continuing  to assess potential issues  related  to  the
approach  of  the  Year  2000 other than those  relating  to  the
Company's internal information systems, such as critical supplier
readiness   and  potential  problems  associated  with   embedded
technologies, and will develop and implement plans to correct any
deficiencies found.

     Based  upon  the  Company's efforts  to  date,  the  Company
believes  that  the costs of addressing the Company's  Year  2000
issues  have  not  been  and  are not currently  expected  to  be
material  to  the  Company's results of operations  or  financial
position;  however,  should  the  Company  and/or  its   critical
suppliers  fail  to  identify and/or correct material  Year  2000
issues,  such  failure  could impact  the  Company's  ability  to
operate as it did before the Year 2000, and subsequently  have  a
material  impact  on  the  Company's  results  of  operations  or
financial  position.  In such an event, the Company will  address
issues  as  they arise and strive to minimize any impact  on  the
Company's  operations.   The impact on  the  Company's  operating
results  of  such  failures and of any contingency  plans  to  be
designed  to  address such events cannot be  determined  at  this
time.

                               -21-

<PAGE>

RECENTLY ISSUED AND ADOPTED ACCOUNTING STANDARDS

     SFAS  No. 130, "Reporting Comprehensive Income", establishes
guidelines  for  all  items  that  are  to  be  recognized  under
accounting standards as components of comprehensive income to  be
reported in the financial statements.  The statement is effective
for  all   periods   beginning   after   December  15,  1997  and
reclassification financial statements for earlier periods will be
required for comparative  purposes.  To date, the Company has not
engaged  in transactions  which  would result in any  significant
difference between  its  reported  net loss and comprehensive net
loss as defined in the statement.

     In  March  1998, the American Institute of Certified  Public
Accountants issued Statement of Position 98-1, Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use
("SOP  98-1"). SOP 98-1 provides authoritative guidance  on  when
internal-use software costs should be capitalized and when  these
costs should be expensed as incurred.  Effective January 1, 1998,
the Company adopted  SOP  98-1.  Costs capitalized by the Company
during the year ended December 31, 1998 in accordance with  these
guidelines were not significant.

     In  June  1998,  the  Financial Accounting  Standards  Board
issued  SFAS  No. 133, Accounting for Derivative Instruments  and
Hedging  Activities ("SFAS 133"), which is required to be adopted
in years beginning after June 15, 1999. SFAS 133 will require the
Company to recognize all derivatives on the balance sheet at fair
value.  Derivatives that are not hedges must be adjusted to  fair
value through income. If the derivative is a hedge, depending  on
the nature of the hedge, changes in the fair value of derivatives
will  either be offset against the change in fair value of hedged
assets,  liabilities,  or firm commitments  through  earnings  or
recognized in other comprehensive income until the hedged item is
recognized in earnings. The ineffective portion of a derivative's
change  in fair value will be immediately recognized in earnings.
The  Company has not yet determined what the effect of  SFAS  133
will  be  on earnings and the financial position of the  Company,
however  it  believes  that  it  has  not  to  date  engaged   in
significant transactions encompassed by the statement.

     Effective  December 31, 1998, the Company adopted  SFAS  No.
131,  Disclosures  about  Segments of an Enterprise  and  Related
Information  ("SFAS  131").  SFAS 131  superseded  SFAS  No.  14,
Financial  Reporting for Segments of a Business Enterprise.  SFAS
131  establishes  standards  for the  way  that  public  business
enterprises report information about operating segments in annual
financial  statements and requires that those enterprises  report
selected   information  about  operating  segments   in   interim
financial  reports.  SFAS  131  also  establishes  standards  for
related  disclosures  about  products  and  services,  geographic
areas,  and  major customers. The adoption of SFAS  131  did  not
affect results of operations or financial position.  To date, the
Company has operated in one business segment only.

     Effective  December  31,  1998,  the  Company  adopted   the
provisions of SFAS No. 132, Employers' Disclosures about Pensions
and   Other  Post-retirement  Benefits  ("SFAS  132").  SFAS  132
supersedes the disclosure requirements in SFAS No. 87, Employers'
Accounting  for Pensions, and SFAS No. 106, Employers' Accounting
for  Post-retirement  Benefits Other Than Pensions.  The  overall
objective  of SFAS 132 is to improve and standardize  disclosures
about pensions and other post-retirement benefits and to make the
required  information more understandable. The adoption  of  SFAS
132  did  not affect results of operations or financial position.
The  Company  is in its development stage and has  not  initiated
benefit  plans to date, which would require disclosure under  the
statement.

                              -22-
                                
<PAGE>
 
RISK FACTORS AND FORWARD LOOKING INFORMATION

     THIS  REPORT  CONTAINS  CERTAIN  FORWARD-LOOKING  STATEMENTS
WITHIN  THE  MEANING  OF  SECTION  27A OF THE SECURITIES ACT  AND
SECTION 21E OF THE EXCHANGE ACT.  SUCH STATEMENTS REFER TO EVENTS
THAT  COULD  OCCUR IN THE  FUTURE OR MAY BE IDENTIFIED BY THE USE
OF WORDS SUCH AS "INTEND,"  "PLAN," "BELIEVE," CORRELATIVE WORDS,
AND   OTHER   EXPRESSIONS  INDICATING  THAT   FUTURE  EVENTS  ARE
CONTEMPLATED.  SUCH STATEMENTS  ARE SUBJECT TO INHERENT RISKS AND
UNCERTAINTIES,  AND  ACTUAL  RESULTS COULD DIFFER MATERIALLY FROM
THOSE  PROJECTED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF
CERTAIN OF THE RISK FACTORS SET FORTH BELOW AND ELSEWHERE IN THIS
PROSPECTUS.   IN ADDITION  TO  THE  OTHER  INFORMATION  CONTAINED 
HEREIN,  INVESTORS  SHOULD CAREFULLY  CONSIDER THE FOLLOWING RISK
FACTORS.

NO   ESTABLISHED   BUSINESS;  LACK  OF  OPERATING   RESULTS;   NO
INDEPENDENT  MARKET  RESEARCH  OF POTENTIAL  DEMAND  FOR  CURRENT
OPERATIONS.   The Company has been in the development  stage  and
has only recently commenced sales of its products.  The Company's
activities  have  been limited to analyzing the gaming  industry,
consulting  with  persons  in  the gaming  industry,  negotiating
interim financing arrangements, developing products, establishing
a  distribution network for its products, marketing its  products
to   the   gaming  industry,  manufacturing  its   products   and
commencing   product  sales.  Although  the  Company  anticipates
sales  development and revenue growth beginning  with  the  first
quarter  of  1999,  there is no guarantee that the  Company  will
generate  sufficient  revenue  to  sustain  its  operations.   No
independent organization has conducted market research  providing
management  with  independent assurance from  which  to  estimate
potential demand for the Company's business operations.

REGULATION.   The gaming industry is a highly regulated  industry
and  is  subject  to  numerous statutes,  rules  and  regulations
administered  by  the  gaming commissions or  similar  regulatory
authorities  of  each jurisdiction.  Generally, the  Company  and
other  entities  which  seek  to  introduce  gaming  products  or
concepts  into  such  jurisdictions may  be  required  to  submit
applications relating to their activities or products  (including
detailed  background  information concerning controlling  persons
within  their organization) which are then reviewed for approval.
The  Company may incur significant expenses in seeking to  obtain
licenses  for its gaming products and concepts, and no  assurance
can be given that its products will be approved in any particular
jurisdiction.   The  failure  to  obtain  such  approval  in  any
jurisdiction  in  which  the Company may seek  to  introduce  its
products or concepts, could have a material adverse effect on the
Company's business.  See Part I. "Item 1. Description of Business
- Regulation."

ADDITIONAL  FINANCING MAY BE REQUIRED.  Based on presently  known
commitments and plans, the Company believes that it will be  able
to  fund  its  1999 operations and required expenditures  through
cash  on hand, cash flow from operations, proceeds from the  sale
of  common  stock, cash from private placement of debt and  lease
financing   sources.   In  the  event  that  such   sources   are
insufficient, the Company will need to seek cash from private  or
public  placements  of  debt or equity,  institutional  or  other
lending  sources  or change operating plans to  accommodate  such
liquidity  issues.  No assurances can be given that  the  Company
will successfully locate necessary liquidity sources.

INFLUENCE  ON  ELECTION OF DIRECTORS AND  ALL  OTHER  MATTERS  BY
CURRENT  OFFICERS AND DIRECTORS.  The officers and  directors  of
the  Company  own approximately 52.4%  of the outstanding  common
shares.   As a result, the officers and directors of the Company,
through  their aggregate ownership of the Common Shares, will  be
able to influence the election of directors and all other matters
submitted to a vote of the Company's shareholders.

UNCERTAINTY  OF MARKET FOR COMPANY'S PRODUCTS.  The  Company  has
various gaming products, such as the Shuffler and SecureDrop, and
variations of traditional games of Blackjack and Poker, that  are
ready  for  distribution.  Despite the additions to the Company's
product  line,  the  Company  has  only  recently  completed  the
development  process for some of its gaming  products.   Although
the market appears to be

                              -23-
                                
<PAGE>

receptive  to the Company's products, there is no guarantee  that
the  market  will remain receptive and that the Company's  future
products will be received by the market in the same manner.

BENEFIT   TO  MANAGEMENT.   The  Company  may,  in  the   future,
compensate the Company's management with substantial salaries and
other   benefits.    The  payment  of  future  larger   salaries,
commissions  and the costs of these benefits may be a  burden  on
the  Company  and may be a factor in limiting or  preventing  the
Company  from  achieving  profitable operations  in  the  future.
However,  the Company would not continue to compensate management
with   such   substantial  salaries  and  other  benefits   under
circumstances  where  to  do so would have  a  material  negative
effect  on  the  Company's financial condition.

NO  DIVERSIFICATION.   The  Company intends  to  manufacture  and
market  certain  gaming  products and concepts.   Therefore,  the
Company's  financial viability will depend almost exclusively  on
its  ability  to  generate revenues from its operations  and  the
Company will not have the benefit of reducing its financial risks
by relying on revenues derived from other operations.

STOCKHOLDERS  MAY BEAR RISK OF LOSS.  The capital  stock  of  the
Company  is  at risk of complete loss if the Company's operations
are unsuccessful.

FINANCIAL CONDITION.  There can be no assurance that the  Company
will have adequate funds to pay all of its operating expenses  or
that  the  Company  can  be  operated  in  a  profitable  manner.
Profitability depends upon many factors, including the success of
the Company's operations.

COMPETITION.   There  is significant competition  in  the  gaming
industry.   The  Company competes with established companies  and
other  entities  (many  of  which possess  substantially  greater
resources  than  the Company).  Almost all of the companies  with
which  the  Company competes are substantially larger, have  more
substantial  histories, backgrounds, experience  and  records  of
successful  operations, greater financial,  technical,  marketing
and other resources, more employees and more extensive facilities
than the Company now has, or will have in the foreseeable future.
It  is also likely that other competitors will emerge in the near
future.  There is no assurance that the Company will continue  to
compete   successfully  with  other  established  gaming  product
manufacturers.  The Company shall compete on the basis of quality
and  price.   Inability to compete successfully might  result  in
increased  costs,  reduced yields and  additional  risks  to  the
investors herein.  See Part I. "Item 1. Description of Business -
Competition."

RISKS OF PROPRIETARY PRODUCTS AND GAMES.  The Company places  its
proprietary  products  and games, except SecureDrop,  in  casinos
under   short-term   lease  arrangements,  making   these   games
susceptible  to  replacement  due to pressure  from  competitors,
changes  in  economic  conditions,  obsolescence,  and  declining
popularity.   The  Company  intends to maintain  and  expand  the
number  of  installed  proprietary  products  and  games  through
enhancement of existing products and games, introduction  of  new
products  and games, and customer service, but there  can  be  no
assurance that these efforts will be successful. Introduction  of
new  proprietary  products and games involves significant  risks,
including whether the Company will be able to place its  products
and  games with casinos, the economic terms on which casinos will
accept the products and games, the popularity of the products and
games  with  gaming  patrons, and whether a successful  game  can
maintain its popularity over the long term. If the Company is not
successful  in introducing new games, the effects on the  Company
could  be  adverse.  The Company has filed trademark  and  patent
applications  to  protect  its intellectual  property  rights  in
certain  of  its  trademarks and innovations on  certain  of  its
proprietary  games,  respectively. At  this  time,  however,  the
United States Patent and Trademark Office has not acted upon  all
of these applications. There can be no assurance that the pending
patent  or trademark applications will actually issue as  patents
or  trademark registrations or that any of these rights will  not
be  infringed  by others.  Certain of the Company's products  and
games do may have independent protection of the game itself,  and
it is possible that competitors could  produce  a similar product
or game without violating any legal rights of the Company.  The

                               -24-

<PAGE>

Company intends to promote aggressively its trademarks  to  build
goodwill and customer loyalty.  In  addition, the Company intends
to improve and add innovations to certain of its games, which may
be  subject  to  legal  protection.  There  can  be no assurance,
however,  that  the Company  will be successful in these efforts,
that innovations will be subject to legal protection, or that the
innovations  will  give  a  competitive advantage to the Company.
See  Part I.  "Item  1.  Description  of  Business - Intellectual
Property."

FORWARD-LOOKING  STATEMENTS  AND ASSOCIATED  RISK.   This  Report
contains    forward-looking   statements   including   statements
regarding, among other items, the Company's growth strategies and
anticipated  trends in the Company's business  and  demographics.
These  forward-looking  statements  are  based  largely  on   the
Company's  expectations and are subject to a number of risks  and
uncertainties, certain of which are beyond the Company's control.
Actual results could differ materially from these forward-looking
statements  as a result of the factors described in this  section
"Risk  Factors  and Forward Looking Statements," including  among
others,  regulatory or economic influences.  In  light  of  these
risks  and  uncertainties, there can be  no  assurance  that  the
forward-looking  information contained in  this  Report  will  be
accurate.

LACK OF DIVIDENDS.  There can be no assurance that the operations
of  the Company will become profitable.  At the present time, the
Company  intends  to use any earnings which may be  generated  to
finance  the  growth of the Company's business.   See   Part  II.
"Item 5. Market for Common Equity and Related Stockholder Matters
- Dividend Policy."

DEPENDENCE ON KEY INDIVIDUALS.  The future success of the Company
is  highly  dependent  upon  the management  skills  of  its  key
employees  and  the  Company's  ability  to  attract  and  retain
qualified  key  employees.  The inability to  obtain  and  employ
these  individuals would have a serious effect upon the  business
of   the   Company.  The  Company  has  entered  into  employment
agreements with Steven J. Blad, and Jay L. King and is  currently
negotiating employment agreements with several of its  employees.
There can be no assurance that the Company will be successful  in
retaining its key employees or that it can attract or retain  the
additional skilled personnel required.

DEPENDENCE ON CHAIRMAN OF THE BOARD AND OTHER DIRECTORS.   During
1998  and  1997, the Company's Chairman of the Board of Directors
and  certain other directors have made significant loans  to  the
Company  to  provide necessary liquidity to the Company.   As  of
December 31, 1998, such outstanding loans were $1,385,000.  There
is  no obligation of any kind by such persons to continue lending
funds  to the Company, and there is no assurance whatsoever  that
such  persons  would  be  willing or  able  to  make  such  loans
available in the future if the Company is in need of funds.

VULNERABILITY  TO FLUCTUATIONS IN THE ECONOMY.   Demand  for  the
Company's  products is dependent on, among other things,  general
economic conditions and international currency fluctuations which
are  cyclical in nature.  Prolonged recessionary periods  may  be
damaging to the Company.

"PENNY"  STOCK  REGULATION  OF  BROKER-DEALER  SALES  OF  COMPANY
SECURITIES.   The Company intends to list  its Common  Stock,  at
least initially, on the OTC Bulletin Board and, then, upon meeting
the requirements for a NASDAQ listing, on NASDAQ Small Cap Market,
if ever.  The Company does not meet the requirements for a NASDAQ
Small  Cap  Market  listing.  The  OTC  Bulletin  Board  has   no
quantitative  written  standards and is not  connected  with  the
NASD.   Until  the Company obtains a listing on the NASDAQ  Small
Cap Market, if ever, the Company's securities may be covered by a
Rule  15g-9 under the Exchange Act that imposes additional  sales
practice requirements on broker-dealers who sell such  securities
to persons other than  established  customers  and  institutional
accredited  investors  (generally  institutions  with  assets  in
excess of $5,000,000 or  individuals with net  worth in excess of
$1,000,000  or  annual  income  exceeding  $200,000  or  $300,000
jointly with their spouse).  For transactions

                               -25-

<PAGE>

covered  by  the rule,  the  broker-dealer  must furnish  to  all
investors in penny stocks, a risk disclosure document required by
Rule  15g-9  of  the Exchange  Act,  make  a special  suitability
determination of the purchaser and have received the  purchaser's
written agreement to the transaction prior to the sale.  In order
to  approve  a person's account  for transactions in penny stock,
the broker or dealer must (i) obtain information  concerning  the
person's   financial   situation,   investment   experience   and
investment objectives; (ii) reasonably  determine,  based  on the
information required by  paragraph (i) that transactions in penny
stock  are  suitable  for  the person  and that  the  person  has
sufficient knowledge and experience in financial matters that the
person reasonably may be expected to be capable of evaluating the
rights of transactions in penny stock; and (iii)  deliver  to the
person  a written statement setting  forth the basis on which the
broker or dealer  made  the determination  required by  paragraph
(ii) in this section, stating in a  highlighted format that it is
unlawful for the  broker  or dealer  to effect a transaction in a
designated security  subject to the  provisions of paragraph (ii)
of this section unless the broker or dealer  has  received, prior
to  the  transaction, a written agreement to the transaction from
the  person;  and stating in  a  highlighted  format  immediately
preceding  the  customer signature line that the broker or dealer
is required to  provide the person with the written statement and
the person should  not sign  and return the  written statement to
the  broker  or  dealer  if it  does  not  accurately reflect the
person's   financial   situation,   investment   experience   and
investment  objectives  and obtain  from the  person  a  manually
signed and dated  copy of  the  written statement.  A penny stock
means any equity security other than  a  security (i) registered,
or  approved  for  registration  upon notice of   issuance  on  a
national  securities  exchange  that  makes  transaction  reports
available pursuant to 17 CFR  11Aa3-1 (ii) authorized or approved
for authorization upon notice of issuance,  for  quotation in the
NASDAQ system; (iii) that has a price of five dollars or more; or
(iv) whose issuer has net tangible assets in excess of $2,000,000
demonstrated  by  financial  statements  dated  less than fifteen
months previously  that the broker or dealer has reviewed and has
a reasonable basis to believe are  true and complete in  relation
to the  date  of  the transaction with the person.  Consequently,
the rule  may  affect the  ability of broker-dealers to sell  the
Company's  securities.

                              -26-
                                
<PAGE>

ITEM 7.   FINANCIAL STATEMENTS

     Independent Auditors' Report
     
     Balance Sheets at December 31, 1998
     
     Statements  of Operations for the Years Ended  December  31,
     1998 and 1997 and Period from Inception (April 29, 1994)  to
     December 31, 1998
     
     Statements of Changes in Stockholders' Equity for the Period
     from Inception (April 29, 1994) to December 31, 1998
     
     Statements  of Cash Flows for the Years Ended  December  31,
     1998 and 1997 and the Period from Inception (April 29, 1994)
     to December 31, 1997
     
     Notes to Consolidated Financial Statements
     
                              -27-
                                
<PAGE>

            REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
                                
                                
                                
Board of Directors and Stockholders
Casinovations Incorporated
(A Development Stage Company)

We  have  audited the balance sheet of Casinovations Incorporated
as  of  December 31, 1998, and the related statements of  income,
changes in stockholders' equity, and cash flows for each  of  the
two  years  in  the  period then ended and for  the  period  from
inception (April 29, 1994) to December 31, 1998.  These financial
statements  are  the responsibility of the Company's  management.
Our  responsibility is to express an opinion on  these  financial
statements based on our audits.

We  conducted  our  audits in accordance with generally  accepted
auditing  standards.  Those standards require that  we  plan  and
perform  the  audit to obtain reasonable assurance about  whether
the  financial statements are free of material misstatement.   An
audit includes examining on a test basis, evidence supporting the
amounts  and disclosures in the financial statements.   An  audit
also  includes  assessing  the  accounting  principles  used  and
significant  estimates made by management, as well as  evaluating
the  overall  financial statement presentation.  We believe  that
our audits provide a reasonable basis for our opinion.

In  our  opinion,  the financial statements  referred  to  above,
present  fairly, in all material respects, the financial position
of  Casinovations Incorporated as of December 31, 1998,  and  the
results  of  its operations and cash flows for each  of  the  two
years  in the period then ended and for the period from inception
(April  29,  1994)  to  December 31,  1998,  in  conformity  with
generally accepted accounting principles.


                           James E. Scheifley & Associates, P.C.
                           Certified Public Accountants

Englewood, Colorado
February 5, 1999

                              -28-
                                
<PAGE>

<TABLE>
<CAPTION>
                   CASINOVATIONS INCORPORATED
                  (A DEVELOPMENT STAGE COMPANY)
                          BALANCE SHEET
                        DECEMBER 31, 1998

                         ASSETS
<S>                                                     <C>
Current assets:
  Cash                                                  $     200,749
  Accounts receivable, trade                                    2,810
  Accounts receivable - employees                              11,347
  Inventories                                                 756,662
  Prepaid expenses                                             38,896
                                                        --------------
      Total current assets                                  1,010,464

Property and equipment, at cost, net of
  accumulated depreciation of $125,380                        350,772

Intangible assets, at cost, net of
  accumulated amortization of $37,369                         157,916
Deferred interest                                             238,590
Deposits                                                      142,821
                                                        --------------
                                                        $   1,900,563
                                                        ==============

      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Note payable - bank                                   $     197,383
  Current portion of leases payable                           219,758
  Current portion of long term debt                             3,232
  Accounts payable                                            810,349
  Accrued expenses                                             40,576
  Accrued interest - shareholder loans                         59,561
  Shareholder loans - due currently                           295,755
  Customer deposits                                            15,874
                                                        --------------
      Total current liabilities                             1,642,488


Other long term debt                                           13,948
Leases payable - non-current                                  813,138
Shareholder loans                                           1,089,245

Stockholders' equity:
 Common stock, $.001 par value,
  20,000,000 shares authorized,
  6,767,106 shares issued and outstanding                       6,767
 Additional paid-in capital                                 6,676,430
 Unpaid subscriptions to common stock                        (125,000)
 Deficit accumulated during development stage              (8,216,453)
                                                        --------------
                                                           (1,658,256)
                                                        --------------
                                                        $   1,900,563
                                                        ==============

                                
   See Accompanying Notes to Consolidated Financial Statements

</TABLE>

                              -29-
                                
<PAGE>

<TABLE>
<CAPTION>

                   CASINOVATIONS INCORPORATED
                  (A DEVELOPMENT STAGE COMPANY)
                    STATEMENTS OF OPERATIONS
             YEARS ENDED DECEMBER 31, 1998 AND 1997
 AND PERIOD FROM INCEPTION (APRIL 29, 1994) TO DECEMBER 31, 1998
                                
                                                                                                  Period from
                                                                                                   Inception
                                                                                               (April 29, 1994)
                                                                                                       to
                                                    December 31,          December 31,            December 31,
                                                        1998                  1997                    1998
                                                  ----------------      ----------------        ----------------
<S>                                               <C>                   <C>                     <C>
Sales                                             $       27,779        $        2,226          $       32,740
Interest income                                            1,216                 8,290                  11,299
Other income                                                 675                 3,000                   3,685
                                                  ----------------      ----------------        ----------------
                                                          29,670                13,516                  47,724

Other costs and expenses:
  Cost of sales                                          134,199                     -                 134,199
  General and administrative                           2,664,815             1,826,250               5,657,599
  General and administrative - related parties                 -                     -                  76,768
  Research and development                               220,611               464,304               1,391,871
                                                  ----------------      ----------------        ----------------  
                                                       3,019,625             2,290,554               7,260,437
                                                  ----------------      ----------------        ----------------

(Loss) from operations                                (2,989,955)           (2,277,038)             (7,212,713)

  Interest expense                                       133,574                34,515                 182,869
  Interest expense - related parties                     249,615               294,518                 973,257
                                                  ----------------      ----------------        ----------------  
                                                         383,189               329,033               1,156,126

(Loss) before income taxes                            (3,373,144)           (2,606,071)             (8,368,839)
Provision for income taxes                                     -                     -                       -

                                                  ----------------      ----------------        ----------------
Net (loss)                                        $   (3,373,144)       $   (2,606,071)         $   (8,368,839)
                                                  ================      ================        ================


 Basic and diluted (loss) per share               $        (0.53)       $        (0.47)         $        (1.72)
                                                  ================      ================        ================
 Weighted average shares outstanding                   6,397,204             5,603,588               4,873,299
                                                  ================      ================        ================


   See Accompanying Notes to Consolidated Financial Statements

</TABLE>

                              -30-
                                
<PAGE>

<TABLE>
<CAPTION>
                     CASINOVATIONS INCORPORATED
                    (A DEVELOPMENT STAGE COMPANY)
             STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (APRIL 29, 1994) TO DECEMBER 31, 1998


                                                                                                           Deficit
                                                                               Additional     Unpaid     Accumulated
                                                          Common        Stock    Paid-in       Stock    During Develop-
       ACTIVITY                                           Shares        Amount   Capital   Subscriptions  ment Stage      Total
                                                         ----------  --------- ----------- ------------- ------------    -------
<S>                                                      <C>         <C>        <C>           <C>         <C>          <C>
Capital contributed by partners                                  -   $       -  $  101,845    $       -   $        -   $  101,845

Net (loss) for the period                                        -           -           -            -      (96,141)     (96,141)
                                                         ----------  ---------- -----------   ----------  -----------  -----------
 Balance, December 31, 1994                                      -           -     101,845            -      (96,141)       5,704

Issue shares to founders (September 1995)                3,775,000       3,775     297,330                                301,105

Issuance of stock in private sales:
 October 1995 at $1.00                                     130,000         130     129,870                                130,000
  (less cost of offering)                                                           (7,206)                                (7,206)

Net (loss) for the year                                          -           -           -                  (608,756)    (608,756)
Reclassification of partnership losses                                            (152,386)           -      152,386            -
                                                         ----------  ---------- -----------   ----------  -----------  -----------
 Balance, December 31, 1995                              3,905,000       3,905     369,453            -     (552,511)    (179,153)

Issuance of stock for cash in private sales:
 March 1996 at $1.50                                        20,000          20      29,980                                 30,000
 April 1996 at $1.50                                        10,000          10      14,990                                 15,000
 July 1996 at $1.50                                         10,000          10      14,990                                 15,000
 October 1996 at $1.50                                      86,000          86     128,914                                129,000
 November 1996 at $1.50                                    302,400         302     453,298                                453,600
 December 1996 at $1.50                                     63,110          63      94,602                                 94,665

Issuance of stock for services:
 June 1996 at $1.50                                         30,000          30      44,970                                 45,000
 October 1996 at $1.50                                      35,000          35      52,465                                 52,500
 December 1996 at $1.50                                    175,000         175     262,325                                262,500

Issuance of stock to related party
 for debt conversion                                       327,000         327     490,173                                490,500

Option granted to related party for
debt conversion                                                                    232,500                                232,500

Net (loss) for the year                                          -           -           -            -   (1,684,727)  (1,684,727)
                                                         ----------  ---------- -----------   ----------  -----------  -----------
 Balance, December 31, 1996                              4,963,510       4,964   2,188,659            -   (2,237,238)     (43,615)

Issuance of stock for cash in private sales:
 January 1997 at $1.50                                     236,667         237     354,764                                355,001
 May 1997 at $1.50                                         120,339         120     180,388                                180,509
 June 1997 at $1.50                                         43,000          43      64,457                                 64,500
 July 1997 at $1.50                                         77,000          77     115,423                                115,500
  (plus compensation effect of shares
   issued at a discount)                                                            77,000                                 77,000

Exercise of common stock warrants for cash:
 September 1997 at $1.50                                   100,000         100     149,900                                150,000
 October 1997 at $1.50                                     100,000         100     149,900                                150,000
  (plus compensation effect of shares
   issued at a discount)                                                           100,000                                100,000

Issuance of stock for future services:
 February 1997 at $1.50                                    135,000         135     202,365     (187,500)                   15,000
 June 1997 at $1.50                                         20,000          20      29,980      (30,000)                        -
 Amortization of unpaid stock subscriptions                                                     136,000                   136,000

                                
         See Accompanying Notes to Financial Statements

</TABLE>

                              -31-
                                
<PAGE>

<TABLE>
<CAPTION>
                     CASINOVATIONS INCORPORATED
                    (A DEVELOPMENT STAGE COMPANY)
      STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)
FOR THE PERIOD FROM INCEPTION (APRIL 29, 1994) TO DECEMBER 31, 1998


                                                                                                           Deficit
                                                                               Additional     Unpaid     Accumulated
                                                          Common        Stock    Paid-in       Stock    During Develop-
       ACTIVITY                                           Shares        Amount   Capital   Subscriptions  ment Stage      Total
                                                         ----------  --------- ----------- ------------- ------------    -------
<S>                                                      <C>         <C>        <C>           <C>         <C>          <C>

Issuance of stock to related party
 for debt conversion
 March 1997 at $1.50                                        45,122          45      67,638                                 67,683
 December 31, 1997 at $.82                                 339,000         339     277,891                                278,230
  (plus additional interest effect of
   shares issued at a discount)                                                     11,705                                 11,705

Common stock subscribed for services
 in May 1997 at $1.50                                                                            15,000                    15,000

Net (loss) for the year                                          -           -           -            -   (2,606,071)  (2,606,071)
                                                         ----------  ---------- -----------   ----------  -----------  -----------
 Balance, December 31, 1997                              6,179,638       6,180   3,970,070      (66,500)  (4,843,309)    (933,559)
                                                        
Issuance of stock for cash in public offering:                                   
 April 1998 at $2.50                                        20,000          20      49,980                                 50,000
 May 1998 at $2.50                                          96,000          96     239,904                                240,000
 June 1998 at $2.50                                         40,000          40      99,960                                100,000
 Julyl 1998 at $2.50                                        54,000          54     134,946                                135,000
 August 1998 at $2.50                                       14,000          14      34,986                                 35,000
 September 1998 at $2.50                                    23,400          23      58,477                                 58,500
 October 1998 at $2.50                                      17,000          17      42,483                                 42,500
 November 1998 at $2.50                                     93,374          93     233,342                                233,435
 December 1998 at $2.50                                    571,460         571   1,428,079                              1,428,650
Less expenses of offering                                                         (234,455)                              (234,455)
                                                             
Issuance of stock for services and other consideration:
 June 1998 at $2.50                                         20,000          20      49,980                                 50,000
 Julyl 1998 at $2.50                                        20,500          21      51,230                                 51,250
 August 1998 at $2.50                                       30,000          30      74,970                                 75,000
 November 1998 at $2.50                                     20,000          20      49,980                                 50,000
 December 1998 at $2.50                                     52,000          52     129,948     (125,000)                    5,000

Issuance of stock for conversion of indebtedness:
 November 1998 at $2.50                                     65,250          65     163,060                                163,125
 December 1998 at $2.50                                    299,166         299     747,616                                747,915

Amortization of unpaid stock subscriptions                                                       66,500                    66,500
Compensation value of options issued                                               310,000                                310,000
Forgiveness of shareholder indebtedness                                            157,063                                157,063
Purchase and retirement of treasury stock                 (848,682)       (849) (1,114,737)                            (1,115,586)
Redemption of common stock warrants                                                   (450)                                  (450)

Net (loss) for the year                                          -           -           -            -   (3,373,144)  (3,373,144)
                                                         ----------  ---------- -----------   ---------- ------------ ------------
                                                         6,767,106   $   6,767  $6,676,430    $(125,000) $(8,216,453) $(1,658,256)
                                                         ==========  ========== ===========   ========== ============ ============
                                
         See Accompanying Notes to Financial Statements

</TABLE>
                              -32-
                                
<PAGE>

<TABLE>
<CAPTION>
                   CASINOVATIONS INCORPORATED
                  (A DEVELOPMENT STAGE COMPANY)
                    STATEMENTS OF CASH FLOWS
             YEARS ENDED DECEMBER 31, 1998 AND 1997
 AND PERIOD FROM INCEPTION (APRIL 29, 1994) TO DECEMBER 31, 1997

                                                                                                             Inception
                                                                                                          (April 29, 1994)
                                                                                                                 to
                                                             December 31, 1998     December 31, 1997     December 31, 1998
                                                             -----------------     -----------------     -----------------
<S>                                                          <C>                   <C>                   <C>
Net (loss)                                                   $    (3,373,144)      $    (2,606,071)      $    (8,368,840)
  Adjustments to reconcile net income (loss) to net
   cash provided by operating activities:
   Depreciation and amortization                                     123,128                40,262               167,617
   Stock and options issued for services                             541,108               136,000             1,452,608
   Compensation value of cash stock sales                                  -               177,000               177,000
   Stock and options issued for additional interest                  133,124               117,332               250,456
   Equipment exchanged for services                                        -                     -                 2,903
   Amortization of deferred interest                                       -               186,000               232,500
   Loss on abandonment of leasehold improvements                       3,743                     -                 3,743
Changes in assets and liabilities:
   (Increase) decrease in accounts receivable                          4,003               (15,327)              (14,157)
   (Increase) decrease in inventory                                 (574,369)             (181,437)             (756,662)
   (Increase) decrease in prepaid expenses                             1,104               (39,276)              (38,896)
   (Increase) decrease in deferred interest                         (238,590)                    -              (238,590)
   (Increase) decrease in other assets                               (95,102)              (41,600)             (142,821)
   Increase (decrease) in accounts payable                           368,038               335,459               810,349
   Increase (decrease) in accrued expenses                            37,479               (57,809)              121,666
                                                             -----------------     -----------------     -----------------
       Total adjustments                                             303,666               656,604             2,027,716
  Net cash (used in)                                         -----------------     -----------------     -----------------
   operating activities                                           (3,069,479)           (1,949,467)           (6,341,125)
                                                             -----------------     -----------------     -----------------
Cash flows from investing activities:
   Acquisition of plant and equipment                               (153,473)             (296,156)             (468,876)
   Purchase and retirement of treasury stock                      (1,116,086)                                 (1,116,086)
   Increase in patents and trademarks                                (19,023)              (29,110)             (194,006)
                                                             -----------------     -----------------     -----------------
Net cash (used in) investing activities                           (1,288,582)             (325,266)           (1,778,968)
                                                             -----------------     -----------------     -----------------
Cash flows from financing activities:
   Common stock sold for cash                                      2,088,630             1,015,510             4,039,199
   Capital contributions by partners                                       -                     -               402,950
   Proceeds from long-term debt                                      985,796               547,100             1,604,896
   Proceeds of shareholder loans                                   1,368,000               120,000             2,138,168
   Repayment of shareholder loans                                          -               (38,866)              (58,866)
   Proceeds from notes payable                                             -               197,500               197,500
   Repayment of notes payable                                         (3,006)                    -                (3,006)
  Net cash provided by                                       -----------------     -----------------     -----------------
   financing activities                                            4,439,420             1,841,244             8,320,841
                                                             -----------------     -----------------     -----------------
Increase (decrease) in cash                                           81,360              (433,489)              200,749
Cash and cash equivalents,
 beginning of period                                                 119,389               552,878                     -
Cash and cash equivalents,                                   -----------------     -----------------     -----------------
 end of period                                               $       200,749       $       119,389       $       200,749
                                                             =================     =================     =================

         See Accompanying Notes to Financial Statements

</TABLE>

                              -33-
                                
<PAGE>

                   CASINOVATIONS INCORPORATED
                                
                  NOTES TO FINANCIAL STATEMENTS
                   DECEMBER 31, 1998 AND 1997
                                
NOTE 1.   ORGANIZATION

The  Company was incorporated on September 20, 1995, in the State
of  Washington.  The Company is in the business of developing and
distributing  products  related  to  the  gaming  industry.   The
Company  has  not recorded significant revenues to  date  and  is
considered  to  be  in  its  development  stage.   The  Company's
principal  products  are an electronic card shuffling  device,  a
table   game   similar   to  the  card   game   "blackjack",   an
electronically  identified coin collection bucket  for  use  with
coin operated gaming devices and playing cards designed to assist
the  dealer  in  the  game  of "blackjack".   The  Company  is  a
continuation  of  a  partnership known as  Sharps  International,
(Sharps)  which  was  formed in April 1994  and  whose  principal
business  activity  was  the development of  an  electronic  card
shuffler.   Pursuant  to a funding agreement  dated  January  15,
1996,  the  partners of Sharps received shares of  the  Company's
common  stock  on  a  pro  rata  basis  in  exchange  for   their
partnership interests.  The assets and liabilities of Sharps have
been  carried  forward  at their historical  basis.    Additional
shares  were  issued  to  partners  of  the  Sines-Forte  general
partnership  (Sines) in exchange for the assets of  Sines.   Such
assets  consisted  of  certain intellectual property  rights  for
products,  which  the Company plans to exploit.  The  transaction
was  accounted  for  as  a reorganization  of  partnerships  into
corporate  form.  The foregoing financial statements present  the
operations  of  the  Company  and  the  partnerships  from  their
inception,  since the partnership interests of Sharps  and  Sines
are  vested  in  the same individuals.  Values  assigned  to  the
acquired   intellectual   property   rights   were   limited   to
professional fees paid for patents and trademarks.  During  1998,
Sines & Forte, in separate transactions, sold to the Company  and
others all Company stock, stock options and license rights and as
of  January 15, 1999 have no ongoing financial relationship  with
the Company (see Note 9).

SIGNIFICANT ACCOUNTING POLICIES

ESTIMATES

The  preparation  of the Company's financial statements  requires
management  to  make estimates and assumptions  that  effect  the
amounts  reported  in the financial statements  and  accompanying
notes.  Actual results could differ from these estimates.

INVENTORY

Inventory  is  stated at the lower of cost or  market  using  the
first   in,  first  out  method.   Finished  goods  include   raw
materials,  direct  labor  and overhead.  Raw  materials  include
purchase  and delivery costs. Inventory consists of the following
at December 31, 1998

<TABLE>
<CAPTION>

     <S>                          <C>
     Raw material                 $399,239
     Work in progress              221,308
     Finished goods                136,115
                                 ---------
                                  $756,662

</TABLE>

A portion of the Company's inventory is pledged as collateral for
leases as described in Note 5.

                              -34-
                                
<PAGE>
   
                   CASINOVATIONS INCORPORATED
                                
            NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                   DECEMBER 31, 1998 AND 1997
                                
PROPERTY AND EQUIPMENT

Property  and  equipment  are carried at  cost.  Depreciation  is
computed using the straight-line method over the estimated useful
lives  of  the  assets.  When assets  are  retired  or  otherwise
disposed  of,  the cost and the related accumulated  depreciation
are removed from the accounts, and any resulting gain or loss  is
recognized in operations for the period. The cost of repairs  and
maintenance  is charged to operations as incurred and significant
renewals or betterments are capitalized.

<TABLE>
<CAPTION>

     Useful lives for property and equipment are as follows:

     <S>                         <C>
     Office equipment            5 years
     Computer software           3 years
     Tooling                     7 years
     Leasehold improvements      2 years

</TABLE>

INTANGIBLE ASSETS

The  Company has applied for patents for certain of its products.
Patent  and  trademark costs aggregating $188,890  are  amortized
using  the  straight-line  method over  a  period  of  ten  years
beginning in 1997.  Amortization for the years ended December 31,
1998 and 1997 amounted to $17,995 and $15,537, respectively.

Organization  costs  aggregating $6,395 are amortized  using  the
straight  line method over a period of five years and are  stated
net  of accumulated amortization of $3,837 at December 31,  1998,
and  amortization  expense in each of the two  years  then  ended
amounted to $1,279.

The Company makes reviews for the impairment of long-lived assets
and  certain identifiable intangibles whenever events or  changes
in  circumstances indicate that the carrying amount of  an  asset
may  not be recoverable.  Under SFAS No. 121, an impairment  loss
would be recognized when estimated future cash flows expected  to
result from the use of the asset and its eventual disposition  is
less  than  its carrying amount.  No such impairment losses  have
been  identified  by  the Company for the 1998  and  1997  fiscal
years.

LOSS PER SHARE

EARNINGS PER SHARE (BASIC AND DILUTED)

Basic  Earnings  per Share ("EPS") is computed  by  dividing  net
income  available to common stockholders by the weighted  average
number  of  common  stock  shares outstanding  during  the  year.
Diluted  EPS  is  computed by dividing net  income  available  to
common  stockholders  by the weighted-average  number  of  common
stock  shares outstanding during the year plus potential dilutive
instruments  such as stock options and warrants.  The  effect  of
stock   options  on  diluted  EPS  is  determined   through   the
application  of  the  treasury  stock  method,  whereby  proceeds
received   by   the  Company  based  on  assumed  exercises   are
hypothetically used to repurchase the Company's common  stock  at
the average market price during the period.

The basic loss per share is computed by dividing the net loss for
the  period  by  the  weighted average number  of  common  shares
outstanding  for the period.  Loss per share is  unchanged  on  a
diluted basis

                              -35-
                                
<PAGE>

                   CASINOVATIONS INCORPORATED
                                
            NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                   DECEMBER 31, 1998 AND 1997
                                
since the assumed exercise of common stock equivalents would have
an anti-dilutive effect due to the existence of operating losses.

REVENUE RECOGNITION

The Company recognizes revenue from the sale of its products upon
shipment  to  the  customer.  Revenue from  rentals  of  shuffler
machines  is  recorded as revenue at the first of each  month  in
accordance  with lease terms.  Sales returns and  allowances  are
recorded  after  returned goods are received and inspected.   The
Company  began limited sales of its products in 1998 and  expects
to  begin  full  operations during 1999.  The  Company  plans  to
provide   currently   for  estimated  product   returns   arising
therefrom.

STATEMENT OF CASH FLOW INFORMATION

Cash and cash equivalents consist of cash and other highly liquid
debt instruments with a maturity of less than three months.  Cash
paid  for  interest expense amounted to $181,491 and $64,260  for
the  years  ended  December 31, 1998 and 1997, respectively.   No
cash was paid for income taxes during any period presented.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The  Company's short-term financial instruments consist  of  cash
and cash equivalents, accounts and loans receivable, and accounts
payable  and  accruals.  The carrying amounts of these  financial
instruments  approximates fair value because of their  short-term
maturities.   Financial instruments that potentially subject  the
Company to a concentration of credit risk consist principally  of
cash and accounts receivable, trade.  During the year the Company
maintained cash deposits at financial institutions in  excess  of
the  $100,000  limit  covered by the  Federal  Deposit  Insurance
Corporation.

ADVERTISING

Advertising  expenses are charged to expense upon first  showing.
Amounts charged to expense were $75,680 and $17,393 for the years
ended December 31, 1998 and 1997, respectively.

STOCK-BASED COMPENSATION

The  Company  adopted Statement of Financial Accounting  Standard
No.  123  (FAS  123),  Accounting  for  Stock-Based  Compensation
beginning  with  the  Company's  first  quarter  of  1996.   Upon
adoption   of   FAS  123,  the  Company  continued   to   measure
compensation  expense  for its stock-based employee  compensation
plans using the intrinsic value method prescribed by APB No.  25,
Accounting  for  Stock Issued to Employees, and has  provided  in
Note  7  pro  forma disclosures of the effect on net  income  and
earnings  per share as if the fair value-based method  prescribed
by FAS 123 had been applied in measuring compensation expense.

NEW ACCOUNTING PRONOUNCEMENTS

SFAS  No.  130,  "Reporting  Comprehensive  Income",  establishes
guidelines  for  all  items  that  are  to  be  recognized  under
accounting standards as components of comprehensive income to  be
reported in the financial statements.  The statement is effective
for   all   periods  beginning  after  December  15,   1997   and
reclassification financial statements for earlier periods will be
required for comparative purposes.  To

                              -36-
                                
<PAGE>

                   CASINOVATIONS INCORPORATED
                                
            NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                   DECEMBER 31, 1998 AND 1997
                                
date,  the  Company has not engaged in transactions  which  would
result  in  any significant difference between its  reported  net
loss and comprehensive net loss as defined in the statement.

In  March  1998,  the  American  Institute  of  Certified  Public
Accountants issued Statement of Position 98-1, Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use
("SOP  98-1"). SOP 98-1 provides authoritative guidance  on  when
internal-use software costs should be capitalized and when  these
costs should be expensed as incurred.

Effective  January 1, 1998, the Company adopted SOP 98-1.   Costs
capitalized  by  the Company during the year ended  December  31,
1998 in accordance with these guidelines were not significant.

Effective  December 31, 1998, the Company adopted SFAS  No.  131,
Disclosures   about  Segments  of  an  Enterprise   and   Related
Information  ("SFAS  131").  SFAS 131  superseded  SFAS  No.  14,
Financial  Reporting for Segments of a Business Enterprise.  SFAS
131  establishes  standards  for the  way  that  public  business
enterprises report information about operating segments in annual
financial  statements and requires that those enterprises  report
selected   information  about  operating  segments   in   interim
financial  reports.  SFAS  131  also  establishes  standards  for
related  disclosures  about  products  and  services,  geographic
areas,  and  major customers. The adoption of SFAS  131  did  not
affect results of operations or financial position.  To date, the
Company has operated in one business segment only.

Effective  December 31, 1998, the Company adopted the  provisions
of  SFAS No. 132, Employers' Disclosures about Pensions and Other
Post-retirement  Benefits ("SFAS 132"). SFAS 132  supersedes  the
disclosure requirements in SFAS No. 87, Employers' Accounting for
Pensions,  and  SFAS  No. 106, Employers'  Accounting  for  Post-
retirement Benefits Other Than Pensions. The overall objective of
SFAS 132 is to improve and standardize disclosures about pensions
and  other  post-retirement benefits and  to  make  the  required
information more understandable. The adoption of SFAS 132 did not
affect  results of operations or financial position.  The Company
is  in  its development stage and has not initiated benefit plans
to date, which would require disclosure under the  statement.

In  June  1998, the Financial Accounting Standards  Board  issued
SFAS  No. 133, Accounting for Derivative Instruments and  Hedging
Activities ("SFAS 133"), which is required to be adopted in years
beginning after June 15, 1999. SFAS 133 will require the  Company
to  recognize all derivatives on the balance sheet at fair value.
Derivatives  that are not hedges must be adjusted to  fair  value
through  income. If the derivative is a hedge, depending  on  the
nature  of  the  hedge, changes in the fair value of  derivatives
will  either be offset against the change in fair value of hedged
assets,  liabilities,  or firm commitments  through  earnings  or
recognized in other comprehensive income until the hedged item is
recognized in earnings. The ineffective portion of a derivative's
change  in fair value will be immediately recognized in earnings.
The  Company has not yet determined what the effect of  SFAS  133
will  be  on earnings and the financial position of the  Company,
however  it  believes  that  it  has  not  to  date  engaged   in
significant transactions encompassed by the statement.

                              -37-
                                
<PAGE>

                   CASINOVATIONS INCORPORATED
                                
            NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                   DECEMBER 31, 1998 AND 1997
                                
NOTE 2.   PROPERTY AND EQUIPMENT

<TABLE>
<CAPTION>

Property  and equipment consist of the following at December  31,
1998:

     <S>                             <C>
     Furniture and fixtures          $114,171
     Manufacturing equipment           12,653
     Tooling                          291,732
     Leasehold improvements            57,596
                                    ---------
                                     $476,152
     Accumulated depreciation and            
       amortization                   125,380
                                    ---------
                                     $350,772
                                    =========

</TABLE>

Depreciation expense charged to operations amounted  to  $103,856
and  $23,446  for  the years ended December 31,  1998  and  1997,
respectively

The  Company  owns  tooling used in the  manufacture  of  certain
plastic  components  of  its shuffler product.   The  tooling  is
maintained  by  an  independent  manufacturer  of  such   plastic
components.

Substantially  all  of  the Company's fixed  assets  secure  debt
described in Note 5.

NOTE 3.   NOTES PAYABLE AND LONG-TERM DEBT

Note payable - bank consists of a $197,383 short term loan from a
bank  secured during July 1997.  The loan bears interest at  7.2%
per  annum and is due on May 15, 1999.  The loan is secured by  a
certificate  of  deposit  in the amount of  $200,000  pledged  as
collateral by the Company's principal shareholder.

Long-term debt consists of a vehicle purchase contract  having  a
balance at December 31, 1998 of $17,180.  The loan bears interest
at  7.2%  per  year  and is due in monthly installments  of  $367
through  August  2003.  The loan is secured by a truck  used  for
company purposes.

NOTE 4.   CONVERTIBLE DEBENTURES

During  December  1997  and January 1998,  the  Company  received
proceeds   from  unsecured  convertible  debentures   aggregating
$100,000  during December 1997 and $400,000 during January  1998.
The  debentures bear interest at 6% per annum and were due on  or
before  January 31, 1999.  The principal amount of the debentures
was  convertible  at  the  holder's option  into  shares  of  the
Company's common stock at a conversion price of $2.98 per  share.
During May 1998, the Company reduced the conversion price of  the
debentures to $2.13 per share and completed the conversion of all
of  the  outstanding debentures into 234,742 shares of restricted
common  stock  during  December 1998.  Interest  accrued  on  the
convertible notes was waived by the note holders.  The difference
between the conversion rate of $2.13 per share and the fair value
of the common stock at the conversion date of $2.50 per share was
charged to interest expense for the aggregate of shares issued in
the conversion.

                              -38-
                                
<PAGE>

                   CASINOVATIONS INCORPORATED
                                
            NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                   DECEMBER 31, 1998 AND 1997
                                
NOTE 5.   LEASES PAYABLE

During  December 1998 and 1997 the Company entered into financing
type  lease  transactions  with a  leasing  company  whereby  the
Company sold and leased back from the lessor all of its furniture
and  equipment,  tooling and substantially all  of  its  finished
goods inventory.

<TABLE>
<CAPTION>

Scheduled maturities of the obligations as of December  31,  1998
are as follows:

                       YEAR                         AMOUNT
                       ----                         ------

      <S>                                          <C>               
      1999                                         $   479,230
      2000                                             533,321
      2001                                             172,258
      2002                                              67,142
                                                   ------------
      Minimum future lease payments                  1,251,951
      Less interest component                         (219,055)
                                                   ------------
      Present value of future net                              
        minimum lease payments                       1,032,896
                                                   ------------
      Less current portion                            (219,758)
      Due after one year                           $   813,138

</TABLE>

<TABLE>
<CAPTION>

Property recorded under capital leases includes the following  as
of December 31, 1998:

      <S>                                          <C>
      Office furniture and equipment               $    31,100
      Tooling                                          271,500
                                                   ------------
                                                       302,610
      Less accumulated amortization                   (119,471)
                                                   ------------
                                                       183,139
      Net capitalized leased equipment                 
      Shuffler and "Fantasy 21" machines,
      at cost                                          258,100
                                                   ------------
      Total assets subject to capital leases       $   813,138

</TABLE>

The  leases  contain provisions for mandatory  buy  back  of  the
inventory  and equipment at the end of the initial terms  of  the
leases.   The  future  minimum  lease  payments  scheduled  above
include the buy out provisions due at the end of each lease term.
The  net present value of the buy out provisions, $238,589 as  of
December  31,  1998,  has  been  included  in  other  assets  and
represents  additional  interest on  the  leases  which  will  be
amortized to interest expense during the remaining lease terms.

NOTE 6.   SHAREHOLDER LOANS

During  the  years ended December 31, 1998 and 1997, shareholders
who  are  also  directors of the Company  made  advances  to  the
Company  for working capital purposes.  The balances  payable  by
the Company aggregated $1,444,561 at December 31, 1998, including
accrued  interest  of $59,561.  The advances  include  short-term
demand  notes  made in 1998 due to two shareholders,  which  bear
interest at 9.5% per annum and aggregate $150,000 at December 31,
1998.    The  Company's  principal  shareholder  has  outstanding
advances   to  the  Company  aggregating  $1,235,000   of   which
$1,150,000  was  received by the Company during  the  year  ended
December  31, 1998.  This aggregate amount plus accrued  interest
of

                              -39-
                                
<PAGE>

                   CASINOVATIONS INCORPORATED
                                
            NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                   DECEMBER 31, 1998 AND 1997
                                
$53,976  at  December  31,  1998  is  to  be  repaid  in  monthly
installments  of  $42,814 beginning July  1,  1999  and  includes
interest at 9.5%.

The  Company's major shareholder made additional advances  during
1996  in  the  amount  of  $250,000.  The advances  provided  for
repayment by December 31, 1997, or upon default, at the option of
the stockholder, by the issuance of the Company's common stock at
a conversion rate of $.82 per share.  The difference between this
amount  and the fair value of the stock at the date of  the  loan
($1.50)  was  recorded as deferred interest during  1996  with  a
corresponding  credit to paid-in capital.  The deferred  interest
($186,000) was amortized as interest expense through December 31,
1997.   At  December  31,  1997  the  shareholder  exercised  his
conversion  rights and the Company has recorded the  issuance  of
339,304  shares of its restricted common stock for the conversion
of the loan plus accrued interest.  The conversion of the accrued
interest of $28,230 at $.82 per share has resulted in a provision
of  additional interest of $11,705 to increase the value  of  the
stock issued to fair market value of $2.50 per share.

At  December 31, 1997 the Company had outstanding advances to two
officer/shareholders aggregating $312,972.  One of  the  advances
amounting  to  $152,964  due  to  Sines  was  cancelled  with  no
continuing repayment obligation by the Company as a result  of  a
private transaction between Sines and a group which included  the
Company's   principal  shareholder.  The  cancellation   of   the
indebtedness  was accounted for by the Company as a  contribution
to capital.

The  second  advance ($135,047 unpaid at August 31,  1998)  which
was  due  to Forte was discharged in connection with the purchase
by  the  Company  of all Forte shares, options  and  intellectual
property rights as described in Note 9.

Another shareholder made a loan of $60,000 at 9 1/2% interest  to
the  Company  in  May  1996.  The Note terms included  conversion
rights at $1.00 per share.  The shareholder elected to convert  a
portion of the loan to 45,122 shares of stock in March 1997.  The
conversion  was recorded by the Company at $1.50 per  share,  the
market value at the date of conversion.  The remaining portion of
the loan was paid off during March 1997.

During   the   year  ended  December  31,  1997,  the   principal
shareholder  made additional advances to the Company  aggregating
$120,000  which are due on demand and bear interest at  9.5%  per
annum.  The Company made cash payments of principal ($18,866) and
interest  ($37,563) against advances from two other  shareholders
during  the  year  ended  December  31,  1997.   Additionally,  a
director of the Company made $100,000 of advances to the  Company
during  the  year  ended December 31, 1998.   The  advances  plus
$2,395  of accrued interest were converted into 40,958 shares  of
the  Company's common stock at a conversion price  of  $2.50  per
share during December 1998.

NOTE 7.   STOCKHOLDERS' EQUITY

During  the  periods  covered by these financial  statements  the
Company  issued  certain of its securities in  reliance  upon  an
exemption  from  registration with the  Securities  and  Exchange
Commission.  Although the Company believes that the sales did not
involve  a  public  offering and that  it  did  comply  with  the
exemptions  from registration, it could be liable for  rescission
of  said sales if such exemption was found not to apply.   During
1998, the Company began a public offering of its common stock.

The  Company has not received a request for rescission of  shares
nor  does  it  believe that it is probable that its  shareholders
would   pursue  rescission  nor  prevail  if  such  action   were
undertaken.

                              -40-
                                
<PAGE>

                   CASINOVATIONS INCORPORATED
                                
            NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                   DECEMBER 31, 1998 AND 1997
                                
Upon  formation  of  the corporation, (September  29,  1995)  the
Company  issued  2,513,000 shares of its $.001 par  value  common
stock  to  the partners of Sharps on a pro rata basis in exchange
for  their respective partnership interests and 1,262,000  shares
to  the  partners  of Sines for intellectual property  rights  as
described in Note 1.

During October 1995 the Company sold 130,000 shares of its common
stock  to  a  limited group of investors for cash  at  $1.00  per
share.

During  July 1996 the Company entered into a one year  consulting
agreement with an entity whereby the entity would provide to  the
Company  financial consulting services. Pursuant to the agreement
the  entity agreed to assist the Company in preparing  a  private
placement  memorandum  to obtain equity financing  of  a  minimum
amount  of  $450,000 and to assist the Company in completing  the
offering.

In  exchange for these services the Company agreed to pay $45,000
in cash and to issue 100,000 shares of its $.001 par value common
stock   valued  at  $150,000.   The  Company  also  granted   the
consultant an option to purchase 50,000 shares of common stock at
$1.50  for a two year period.  During February 1997, the  Company
issued  an  additional  100,000 shares  and  granted  options  to
purchase an additional 50,000 shares of common stock at $1.50  to
the  consultant  for a one year extension of the  contract.   The
shares  were valued at $150,000.  The 100,000 options to purchase
common  stock  were  converted to common stock purchase  warrants
during  June,  1997.   The Company has not recorded  compensation
expense with respect to the replacement warrants as the terms and
conditions  of the warrants, including the expiration  date,  are
identical  to  those  of the original options.   The  replacement
warrants  were  exercised during October 1997.  Additionally,  in
1996,  the  Company issued 75,000 shares of its $.001  par  value
common  stock  valued at $112,500 to other unrelated  individuals
for consulting services provided to the Company.

These  amounts  have been included in general and  administrative
expenses in 1996 in the accompanying Statement of Operations.

During  July 1996, the Company authorized the issuance of 200,000
each   of  A,  B,  and  250,000  of  C  stock  purchase  warrants
exercisable as follows:

     $ 4.00 plus one A warrant for each share of common stock
     $ 6.00 plus one B warrant for each share of common stock
     $ 8.00 plus one C warrant for each share of common stock
     
The  warrants are exercisable for a period of 48 months from  the
date of issue, and are callable with 30 days notice at a price of
$.001 per warrant.  During September 1998, the Company's Board of
Directors approved calls on the B and C warrants and the  Company
completed   the  warrant  calls  prior  to  December  31,   1998.
Additionally the exercise price of the A warrants was reduced  to
$3.75 per share.

During March 1996 the Company began offering shares of its common
stock at $1.50 per share pursuant to a private placement. Through
December  31, 1996, the Company issued 491,510 shares  of  common
stock  to  private  investors for net cash  proceeds  aggregating
$737,265.

Additionally  during  1996 the Company  issued  an  aggregate  of
240,000 shares (including the consulting shares described  above)
to  consultants and others.  The shares were valued at fair value
of $1.50 per share.

                              -41-
                                
<PAGE>

                   CASINOVATIONS INCORPORATED
                                
            NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                   DECEMBER 31, 1998 AND 1997
                                
During September, 1996 the Company agreed to issue 327,000 shares
of  its common stock to its principal shareholder in exchange for
conversion  of  $150,000 of cash advanced to the  Company  during
1996.   The  excess of the fair value of the stock at  $1.50  per
share  over  the  loan amount was charged to interest  expense  -
related parties.

During  the  period  ended December 31, 1997 the  Company  issued
677,006   shares  of  its  common  stock  for  cash   aggregating
$1,015,510  ($1.50 per share) in connection with the continuation
of  its  private sale of common stock and the exercise of  common
stock warrants.  One hundred seventy seven thousand of the shares
were issued in June and October 1997 and were valued at $2.50 per
share  as  the  timing  of their issuance was  considered  to  be
contemporaneous with the Company's decision to offer  its  common
stock  to  the  public  at  that  price.   The  Company  recorded
compensation  expense  of  $1.00  per  share  for  these  shares.
Additionally, the Company issued 155,000 shares of  common  stock
to  consultants and others for services valued at $232,500 ($1.50
per share) and issued 45,122 shares for the conversion of debt of
$45,122  to  related  parties pursuant to  conversion  provisions
included  in  the debt instruments.  The difference  between  the
conversion  price  for the debt ($1.00 per share)  and  the  fair
value  of the shares issued at the conversion date in April  1997
($1.50  per  share)  has been charged to interest  expense.   The
shares  issued  for services were for consulting and  advertising
services to be provided to the Company during 1997 and 1998.  The
unamortized  amount  of  the  services  amounted  to  $81,500  at
December  31,  1997 and is included in the caption "Unpaid  stock
subscriptions".   This amount is offset by the  value  of  common
stock  subscribed for in exchange for services during April  1997
($15,000) for engineering services fully provided to the  Company
at December 31, 1997.

During  the  period  ended December 31, 1998 the  Company  issued
929,234   shares  of  its  common  stock  for  cash   aggregating
$2,202,270  ($2.50 per share) after direct offering  expenses  of
$120,815  in  connection  with a public  sale  of  common  stock.
Additionally, the Company issued 142,500 shares of  common  stock
to  consultants  and others for services and other  consideration
valued  at  $356,250 ($2.50 per share). A portion of  the  shares
issued  for services were for consulting and advertising services
to  be  provided  to  the Company during 1999.   The  unamortized
amount of the services amounted to $125,000 at December 31,  1998
and  is  included in  the caption "Unpaid  stock  subscriptions."
During the year ended December 31, 1998 the Company issued 88,716
shares for the conversion of debt of $88,716 to unrelated parties
pursuant   to   conversion  provisions  included  in   the   debt
instruments.  The difference between the conversion price for the
debt ($1.00 per share) and the fair value of the shares issued at
the  conversion  dates  ($2.50 per share)  has  been  charged  to
interest  expense.   Additionally,  the  Company  issued  234,742
shares  of  its common stock for the conversion of debentures  as
described in Note 4. and converted $102,395 of shareholder  loans
and accrued interest into 40,958 shares of common stock.

Additionally during the year ended December 31, 1998 the  Company
issued options to purchase 300,000 shares of the Company's common
stock  to  two key employees in recognition of services performed
at  an exercise price of $1.50 per share.  The difference between
the exercise price and the fair value of the stock at the vesting
date  signifying the completion of the services approved  by  the
Company's  Board of Directors ($2.50 per share)  was  charged  to
compensation expense.

During the year ended December 31, 1998 the Company completed the
purchase  of the Forte assets as described in Note 9.  Among  the
assets were 848,682 shares of the Company's common stock with  an
ascribed  value of $1,115,586.  This amount has been  charged  to
paid  in  capital  as it is the Company's intent  to  retire  the
shares.

                              -42-
                                
<PAGE>

                   CASINOVATIONS INCORPORATED
                                
            NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                   DECEMBER 31, 1998 AND 1997
                                
The  Company  has  an  aggregate of 320,000 options  to  purchase
common  stock at $1.00 per share and 505,000 options to  purchase
common  stock at $1.50 per share and 30,000 options  to  purchase
common stock at $2.50 per share outstanding at December 31, 1998.

The  weighted average fair value at the date of grant for options
granted  during  1998 and 1997 as described above  was  $.30  per
option  in  1998  (after  recording the  additional  compensation
attributed  to  options issued at $1.50 as described  above)  and
$.35  per option in 1997.  The fair value of the options  at  the
date  of  grant was estimated using the Black-Scholes model  with
assumptions as follows:

<TABLE>
<CAPTION>

                                         1998                1997
                                   ----------------    ----------------
        <S>                          <C>                 <C>
        Market value                    $2.50               $1.50
        Expected life in years          2 - 5               2 - 5
        Interest rate                6.5% - 6.2%         6.6% - 6.2%
        Volatility                       10%                 10%
        Dividend yield                  0.00%               0.00%

</TABLE>

Stock based compensation costs would have increased pretax losses
by  $99,796 ($.02 per share) and $89,184 ($.02 per share) in 1998
and  1997, respectively if the fair value of the options  granted
during those years had been recognized as compensation expense.

NOTE 8.   INCOME TAXES

Deferred  income  taxes  may  arise  from  temporary  differences
resulting  from income and expense items reported  for  financial
accounting and tax purposes in different periods.  Deferred taxes
are  classified  as  current  or non-current,  depending  on  the
classification  of assets and liabilities to which  they  relate.
Deferred  taxes arising from temporary differences that  are  not
related to an asset or liability are classified as current or non-
current   depending  on  the  periods  in  which  the   temporary
differences  are  expected to reverse.  The  deferred  tax  asset
resulting  from  the operating loss carryforward described  below
has been fully reserved.

The  Company  currently  has  net  operating  loss  carryforwards
aggregating  approximately $5,830,000 which expire  beginning  in
2010.  The  principal  difference  between  the  Company's   book
operating losses and income tax operating losses results from the
issuance  of common stock during 1996, 1997 and 1988 for services
and  interest and options to purchase common stock at  less  than
fair  market  value  in exchange for debt conversion  rights  and
other services.

NOTE 9.   RELATED PARTY TRANSACTIONS

Certain  previous  directors/officers of the Company  (Sines  and
Forte) who were partners of Sines Forte partnership retained a 3%
royalty  interest  in the gross margin earned form  the  sale  of
products covered by the intellectual property described  in  Note
1.   During the year ended December 31, 1998 the Company  severed
its   relationship  with  the  directors/officers   in   separate
transactions.   The  Company entered  into  this  transaction  to
disassociate  itself  from Forte, whose  prior  acts  had  caused
unreasonable delay in the Company's ability to obtain approval of
its business activities by the Nevada State Gaming Control Board.
As part of this transaction the Company repurchased the shares of
common  stock,  among  other  things,  from  a  former  employee,
director  and  shareholder (Forte) of the  Company,  the  Company
executed  a promissory note in the original principal  amount  of
$2,351,705.   The promissory note dated December 3, 1998  had  an
interest rate of 6.5% during the first year and 8% thereafter and
was amortized over a ten-

                              -43-
                                
<PAGE>

                   CASINOVATIONS INCORPORATED
                                
            NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                   DECEMBER 31, 1998 AND 1997
                                
year  schedule  with payments of interest only during  the  first
year,  payable  on the six-month and twelve-month anniversary  of
the  promissory  note  and  payments of  principal  and  interest
thereafter  on a monthly basis.  Through a letter agreement,  the
Company  negotiated the cancellation of the promissory  note,  as
well as the cancellation of the security for the promissory note,
and  the cancellation of a separate note for $135,047 in exchange
for  three  payments  in  the  aggregate  amount  of  $1,250,000,
$500,000  on December 7, 1998, $500,000 on December 28, 1998  and
$250,000  on January 15, 1999.  On January 15, 1999, the  Company
made  the  last payment and cancelled the promissory note.   Also
during 1998, Sines entered into a similar transaction to sell all
of  his  Casinovations  assets, 885,560 shares  of  common  stock
(including 470,851 shares with restrictions imposed by the  State
of   California   Department  of  Corporations,  326,153   shares
restricted  by agreement and under Rule 144 and 88,556 registered
shares), options to buy 20,000 shares of stock at $1.50,  options
to  buy 175,000 shares from Huson for $150,000, Note Payable from
the  Company for $150,000 plus interest, warrants and  Royalties.
Certain   members  of  the  Board  of  Directors  and  associates
purchased the Sines shares and agreed to the canceling  in  favor
of the Company all debt, options and warrants.

The  Company paid an aggregate of $71,210 in 1997 and $20,479  in
1996  to  a  company  controlled  by  one  of  its  officers  for
administrative services provided to the Company.  At December 31,
1998, the Company had an aggregate balance due to this now former
officer and the company of $13,234.

During  June  1998  the Company entered into a  personal  service
agreement  with  an officer which provides for aggregate  monthly
compensation of $12,500 per month through December 31,  1998  and
$18,500  per  month  thereafter.  The agreement  has  a  term  of
eighteen months and includes stock option bonus provisions  based
upon the Company's attainment of certain corporate goals for 1998
and  a  stock  option  grant that vested to the  officer  at  the
contract  date.   The Company's Board of Directors  approved  the
bonus  stock  option  effective  in  November  1998.   Option  to
purchase up to 200,000 shares of common stock at $1.50 per  share
were  granted  pursuant to the contract.   The  Company  recorded
compensation  expense  related to the  options  granted  for  the
excess  of the fair value of the underlying common stock  at  the
grant date ($2.50 per share) over the exercise price of $1.50 per
share during the year ended December 31, 1998.

NOTE 10.  COMMITMENTS AND CONTINGENCIES

During 1997, the Company contracted for the production of tooling
for  certain  plastic parts utilized in the manufacture  of  it's
shuffler by an independent design and manufacturing company.  The
Company  has  made payments of $271,500 for the tooling  and  has
prepaid $40,000 as an advance against an open purchase order with
the  manufacturer.  The purchase order requires  the  Company  to
purchase  an  aggregate of $486,000 of the plastic parts  through
May  1999.   As  of December 31, 1998, the manufacturer  has  not
indicated  that  it will demand delivery to the  Company  of  the
unfilled  purchase commitment and has continued to deliver  parts
to  meet the Company's manufacturing requirements.  To date,  the
Company   has  purchased  an  aggregate  of  $116,344  from   the
manufacturer.

During October 1997, the Company entered into a license agreement
whereby  the  Company will develop and market  an  electronically
identified coin collection box for use with coin operated  gaming
devices.  The agreement provides for payments to the licensor for
use  of certain intellectual property associated with the project
as follows:

                              -44-
                                
<PAGE>

                   CASINOVATIONS INCORPORATED
                                
            NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                   DECEMBER 31, 1998 AND 1997

<TABLE>
<CAPTION>

     <S>                         <C>
     1999 Minimum royalties      $126,000
     Thereafter                  $150,000

</TABLE>

Minimum  royalties that would have been due for  the  year  ended
December  31,  1998 have been waived by the licensor.   Royalties
are to be based on a rate of $7.50 per unit sold that incorporate
the  licensed  technology.   The Company  made  $20,000  of  note
payments to the licensor in 1997 which amount has been charged to
research and development expense.  During 1998, the Company  made
additional note payments of $30,000 and discharged the  remaining
$50,000  of  the note balance and accrued interest of  $1,250  by
issuing  20,500 shares of common stock to the note  holder.   The
Company  has  charged the aggregate amount of the  note  payments
($80,000)  to research and development expense during 1998.   The
Company has the right to terminate the agreement upon sixty  days
written  notice  to  the licensor should it  determine  that  the
technology may be unpatentable or it is determined by the Company
that   the  licensed  products  are  uneconomical.   The   patent
application was filed for this product during 1996 and notice  of
patent issuance was dated February 8, 1999.

During  October,  1996  (amended March  26,  1997),  the  Company
entered  into a lease for office space for a thirty month  period
ending  March  31, 1999 at a monthly rental of $2,694,  including
maintenance  costs.   During June 1997, the Company  vacated  the
premises  as  a result of actions by the landlord, which  in  the
opinion  of  the Company, rendered the space uninhabitable.   The
aggregate  amount of unpaid rent which could be  claimed  by  the
landlord  as  a  result the Company's vacation  is  approximately
$25,000.  During October 1998, the Company entered into  a  sixty
month lease for office, manufacturing and warehouse space in  Las
Vegas,  Nevada.  The lease provides for an initial monthly rental
of  $11,364  including  estimated lease  operating  costs.   Rent
expense was $57,320 and $32,328 for the years ended December  31,
1998  and  1997,  respectively.  The Company also leases  certain
office  equipment  under non-cancelable operating  leases  having
monthly rentals of $561.

Future  minimum  rentals, including escalation provisions,  under
the leases are as follows:

<TABLE>
<CAPTION>

     <S>          <C>
     1999         $131,731
     2000         $201,461
     2001         $206,207
     2002         $200,040
     2003         $200,040
     2004          $16,670

</TABLE>

The  Company has granted joint exclusive licenses to two entities
for  marketing  rights to one of its products which  provide  for
royalty payments to the Company of $.04 and $.075 per unit  sold.
Amounts paid pursuant to the licenses have not been material.

The  Company's primary business activity since its inception  has
been   the  completion  of  research  and  development  for   its
electronic  shuffling machine.  Substantially all  of  the  costs
associated  with  this research and development through  December
31, 1996 had been paid to an engineering and design company whose
principal  shareholder  is a member of  the  Company's  board  of
directors.   A prototype shuffling machine was delivered  to  the
Company during 1996.

The  Company  believes  that  it has fulfilled  it's  contractual
obligations  to the design company and had retained the  services
of   another  company  for  refinements  to  the  prototype   and
commencement  of manufacture of the device.  Manufacture  of  the
device began during September of 1997.  During the

                              -45-
                                
<PAGE>

                   CASINOVATIONS INCORPORATED
                                
            NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                   DECEMBER 31, 1998 AND 1997
                                
March  1998,  the  Company  took  over  control  of  all  product
development  and  the manufacture of all of  its  products.   The
Company acquired manufacturing facilities and necessary equipment
and personnel. As of December 31, 1998, the Company has completed
the  manufacture  of 170 shuffler units and has inventory  levels
sufficient to produce 350 additional units.

The Company's ability to complete its development stage and begin
product  sales  is dependent upon the successful  manufacture  of
commercial quantities of its products .

NOTE 11   SUBSEQUENT EVENTS

Subsequent to December 31, 1998, the Company completed the public
offering  of  its common stock and has received additional  gross
proceeds of $1,320,025.

Additionally,  the Company has placed $1,250,000  of  convertible
debt  with interest at 9.5% per annum and a five year term.   The
notes  are convertible into shares of the Company's common  stock
at  a conversion rate of $2.60 per share.  Additionally, the note
purchasers  received  warrants to purchase 9,100  shares  of  the
Company's  common  stock  for  each  $50,000  increment  of  debt
purchased.   The  warrants  expire  after  five  years  and   are
exercisable at a price of $3.00 per share.

Subsequent  to  December  31, 1998, the  Company  has  placed  an
additional   54   shufflers  under  rental  contracts   and   has
commitments  for  an  additional 158  units.   Additionally,  the
Company  has  received purchase commitments for an  aggregate  of
1,200 units of its "SecureDrop" products.

                              -46-
                                
<PAGE>

ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

     None.

PART III

ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS

     INFORMATION CONCERNING THE BOARD OF DIRECTORS AND  EXECUTIVE
     OFFICERS

     The  Board  of Directors presently consists of six  persons.
The  Company's Bylaws provide for a Board of Directors consisting
of  one  to nine persons who are elected for a term of one  year.
At  the  Company's Annual Meeting of Stockholders  scheduled  for
March 29, 1999, the Company's stockholders will vote upon several
matters,  including, but not limited to, that  certain  Agreement
and  Plan  of  Merger, dated March 6, 1999, by  and  between  the
Company  and  the  Company's wholly-owned  subsidiary,  a  Nevada
corporation (the "Subsidiary") where the Company would merge with
and  into  the  Subsidiary with the Subsidiary as  the  surviving
corporation  (the  "Merger").   The  Merger  would   change   the
Company's  state of incorporation from Washington to  Nevada  and
would   effect   certain  changes  to  the  Company's   corporate
governance, such as the classification of the Company's Board  of
Directors.    Accordingly,  upon  approval  of  the   Merger   by
stockholders,  the  Company  will  have  a  classified  Board  of
Directors consisting of three categories, A, B and C.  Category A
directors, Richard S. Huson and Bob L. Smith, will have a  three-
year term expiring 2002, Category B directors, Steven J. Blad and
Ronald  O.  Keil,  will have a two-year term expiring  2001,  and
Category C directors, David E. Sampson and Jamie McKee, will have
a  one-year  term expiring 2000.  After their initial terms,  the
directors  will thereafter be elected for three-year  terms  such
that  only  one category of directors will stand for election  at
each  subsequent annual meeting of stockholders.   In  the  event
that the Merger is not approved, each director's term will expire
in 2000.

     The  following information is furnished with respect to each
member  of  the  Board  of Directors and the Company's  executive
officers   who   are  not  directors.   There   are   no   family
relationships  between  or  among  any  directors  or   executive
officers of the Company.

     DIRECTORS
     
<TABLE>                                                  
<CAPTION>

    NAME            AGE   DIRECTOR     POSITION                  DIRECTOR CATEGORY
                           SINCE                                  AFTER THE MERGER
    ----            ---   --------     --------                   ----------------
<S>                 <C>     <C>        <C>                              <C>
Steven J. Blad      47      1998       Chief Executive Officer,         B<F2>
                                       President and Director

Richard S. Huson    59      1998       Chairman of the Board            A<F1>

Ronald O. Keil      66      1998       Director                         B<F2>

Jamie McKee         40      1998       Director                         C<F3>

David E. Sampson    58      1996       Director                         C<F3>

Bob L. Smith        61      1998       Director                         A<F1>

----------------
<FN>
<F1> Should  the  Merger be  approved, Category A directors  will
     initially  be elected for a three year term expiring in 2002
     and for three year terms thereafter.
<F2> Should  the  Merger be  approved, Category B directors  will
     initially  be elected for a two  year  term expiring in 2001
     and for three year terms thereafter.
<F3> Should  the  Merger be  approved, Category C directors  will
     initially  be elected for a one year  term expiring  in 2000
     and for three year terms thereafter.

</FN>
</TABLE>

                             - 47 -

<PAGE>

     STEVEN  J. BLAD.  Mr. Blad was President and Chief Executive
Officer  of Flagship Games International from 1987 to July  1991.
From  July 1991 to September 1994, Mr. Blad was a consultant  for
Marketing and Gaming in Atlanta, Georgia.  From October  1994  to
September  1996,  Mr. Blad was a consultant  for  Spintek  Gaming
Technologies.   Mr. Blad joined the Company in  October  1996  as
Vice  President of Sales and Marketing until April 30, 1997  when
he  was named President of the Company.  Mr. Blad served in  that
position  until  May  27,  1998 when he  became  Chief  Executive
Officer,  President  and  Director  of  the  Company.   Mr.  Blad
received  a  Bachelor of Arts degree in 1973 from Carson  Newman.
He  obtained  a  Masters  of Arts degree in  1975  from  Southern
Baptist  Graduate School.  From 1975 to 1976, Mr.  Blad  attended
additional graduate studies at the University of Alabama.

     RICHARD S. HUSON.  Mr. Huson has been Chairman of the  Board
of  Directors since May 1998.  Until February 1998, Mr. Huson was
a  Principal  of  the  Crabbe Huson Group,  Inc.,  an  investment
advisory   firm,  which  he  co-founded  in  1980.    Previously,
Mr.  Huson  worked for three years as a registered representative
at  Foster  &  Marshall, Inc.  From 1974 to 1977, Mr.  Huson  was
Senior  Vice  President, and Investment Director for  the  Boston
Company  Institutional  Investors,  Inc.   Mr.  Huson  previously
managed  mutual  funds  with  Wellington  Management  Company  in
Boston,  Massachusetts and Financial Programs,  Inc.  in  Denver,
Colorado.   He  began  his career in investments  in  1966  as  a
securities  analyst after earning a Bachelor  of  Science  degree
with  emphasis  on  finance  and economics  from  Portland  State
University.

     RONALD O. KEIL.  Mr. Keil has been a member of the Board  of
Directors since October 1998.  Since July 1990, Mr. Keil and  his
son, Rick, own and operate two supermarkets located in San Diego,
California.  From March 1995 to June 1998, Mr. Keil was  Managing
Partner  of  RJL  Properties, Inc. that owned and  operated  four
hotels and a mini-storage facility.  In addition, Mr. Keil  owned
a 142-room Holiday Inn located at Idaho Falls, Idaho from October
1993  to  January 1998.  From August 1987 to May 1997,  Mr.  Keil
served   as  Chairman  of  the  Board  of  Directors  of  Drypers
Corporation,  a diaper manufacturing company.  From January  1960
to March 1985, Mr. Keil owned and operated Keil's Food Stores,  a
regional chain of supermarkets located in Washington and  Oregon.
Mr.  Keil is a founder and director of the Bank of Clark  County,
Oregon.   Mr.  Keil  earned a Bachelor  of  Science  in  Business
Administration  from Lewis and Clark College  and  has  completed
graduate work towards an MBA from the University of Oregon.

     JAMIE  MCKEE.  Ms. McKee has been a member of the  Board  of
Directors  since  May 1998.  Ms. McKee has  been  the  editor  of
CASINO  JOURNAL,  a  national trade publication  for  the  gaming
industry, since February 1996.  From April 1995 to February 1996,
Ms.  McKee  was  a Public Relations Account Executive  with  DRGM
Advertising and Public Relations in Las Vegas, Nevada.  From 1988
to  April  1995,  Ms. McKee was editor of the LAS VEGAS  BUSINESS
PRESS,  a weekly business publication in Las Vegas, Nevada.   Ms.
McKee earned a Bachelor of Arts in English from the University of
Nevada, Las Vegas in 1983.

     DAVID  E.  SAMPSON.  From August, 1985 to 1991, Mr.  Sampson
was  the  owner  and  manager of University  Bistro  in  Seattle,
Washington.   From  March 1994 to April  1996,  Mr.  Sampson  has
served  as  President  and Chairman of MITT  USA  Corporation,  a
sporting goods manufacturer.  Mr. Sampson was General Manager and
Director  of  Rendova Boats, LLC from October  1996  to  December
1997.   Rendova Boats is a boat manufacturer located in  Olympia,
Washington.  Mr. Sampson received a Bachelor of Science at Oregon
State  University  in  Social Science in  1965.   He  received  a
Masters degree in Political Science from the State University  of
New  York at Buffalo in 1968 and a post-graduate degree from  the
Pacific  Coast Banking School at the University of Washington  in
1982.

     BOB  L. SMITH.  Mr. Smith has been a member of the Board  of
Directors  since May 1998.  Mr. Smith also serves as Chairman  of
the Board of Directors and Chief Executive Officer of VIP's

                              - 48 -

<PAGE>

Industries,  a  company  co-founded by Mr.  Smith  in  1968  that
oversees  restaurant, hotel and real estate development  in  five
Western states.  In 1966, he started the Bob L. Smith Real Estate
Company, concentrating on real estate and development in  Oregon,
Washington  and  Northern California.  From  1962  through  1965,
Mr.  Smith was Real Estate Analyst and Marketing Supervisor  with
the  American  Oil Company.  Mr. Smith currently  serves  on  the
Board   of  Directors  of  Centennial  Bank,  Regency  of  Oregon
(formerly Blue Cross and Blue Shield of Oregon), The Crabbe-Huson
Funds, Inc., an investment management company, and Flying J. Inc,
an  integrated  oil company.  Mr. Smith received  a  Bachelor  of
Science in Business Administration from the University of  Oregon
in 1962.

     ADDITIONAL OFFICERS AND EMPLOYEES

     JAY  L.  KING.   Mr.  King has extensive experience  in  all
phases  of  financial management for a variety of  companies  and
circumstances.   He  was  Controller  for  Sigma  Game,  Inc.,  a
manufacturer  and  developer  of electronic  based  and  software
driven  gaming  machines, from December  1994  to  October  1995.
Mr. King was consultant to the Company from November 1995 through
February  1996  and  served  as Vice  President  of  Finance  and
Controller  and Director from March 1996 to May 27, 1998.   Since
May  27,  1998,  Mr. King has served as Chief Financial  Officer,
Treasurer  and  Secretary.   From July  1993  to  November  1994,
Mr.  King  was  an  independent financial  consultant  and  Chief
Financial  Officer  for I.C. Refreshment Corporation,  a  startup
beverage  company.  From 1986 to 1993, Mr. King was  director  of
financial   management  for  PG&E,  a  public  utility   company.
Mr. King managed full financial responsibilities for engineering,
construction and manufacturing business unit.  Mr. King  holds  a
Bachelor  of Science in Accounting (1971) and an MBA (1973)  from
the University of Utah and is a Certified Public Accountant.

     On  March  22,  1999,  Mr.  King  submitted  his  letter  of
resignation to the Company effective  April 2, 1999.  The Company
has accepted  Mr. King's  letter  of resignation  and the parties
have  mutually  agreed   to   terminate  Mr.  King's   employment
agreement as of the effective date of the resignation.

     WILLIAM  E.  O'HARA, JR.  Mr. O'Hara has  been  Senior  Vice
President  of  the Company since August 1998.  With almost  forty
years of sales experience, Mr. O'Hara formerly held the positions
of  Senior  Vice  President, Vice President of Field  Operations,
Executive  Director  of  Customer  Relations  and  Director  with
Shuffle  Master Gaming, Inc.  During his employment with  Shuffle
Master Gaming, Inc., Mr. O'Hara created the sales, marketing  and
service  divisions.  Mr. O'Hara currently sits on  the  board  of
directors of the Casino Management Association.

     DEAN  BARNETT.  Mr. Barnett, Vice President of  Sales  since
August  1998,  has  over five years of sales  experience  in  the
gaming  industry.   Mr.  Barnett formerly held  the  position  of
National Sales Manager for Shuffle Master Gaming, Inc.  Prior  to
his  employment  with Shuffle Master Gaming,  Inc.,  Mr.  Barnett
worked for Bally's Las Vegas as part of a special management team
focused on fraudulent player practices, such as card counting and
shuffle tracking.

     COMPENSATION OF NON-EMPLOYEE DIRECTORS

     Directors' fees were $500 per quarter/meeting for  1998  and
are  $500 per quarter/meeting for 1999, and are paid to directors
who  are  not employees of the Company.  All expenses for meeting
attendance  or  out-of-pocket expenses  connected  directly  with
their representation on the Board of Directors will be reimbursed
by  the  Company.  Directors who are employees of the Company  or
its  subsidiaries do not receive compensation for their  services
as directors.

     BOARD OF DIRECTORS MEETINGS

     The Board of Directors generally meets quarterly, and in the
twelve  months  ended December 31, 1998, the Board  of  Directors
held three regular meetings.  All directors attended at least 75%
of the meetings held.

                              - 49 -

<PAGE>

     COMMITTEES OF THE BOARD OF DIRECTORS

     The  Board  of  Directors  has one standing  committee,  the
Compensation  Committee.   The Board  of  Directors  created  the
Compensation  Committee  in January 1999  and  appointed  Bob  L.
Smith,  Ronald  O. Keil and David E. Sampson as members  of  said
committee.   The  function of the Compensation  Committee  is  to
review  and  make recommendations to the Board of Directors  with
respect to the compensation of the Company's executive officers.

ITEM 10.  EXECUTIVE COMPENSATION

     COMPENSATION OF EXECUTIVE OFFICERS

     The  following  tables  set forth compensation  received  by
Steven J. Blad, the Company's Chief Executive Officer, and  other
executive  officers of the Company whose total  compensation  for
the year ended December 31, 1998, exceeded $100,000.

                   SUMMARY COMPENSATION TABLE
                                
     The  following table sets forth the compensation awarded to,
earned  by or paid to, the Company's chief executive officer  and
its  four  other most highly-compensated executive  officers  for
services rendered in all capacities during its fiscal years ended
December 31, 1998, 1997, 1996.

<TABLE>
<CAPTION>

                                Annual Compensation            Long Term Compensation
                                --------------------           ----------------------
                                                                 Awards            Payouts
                                                                 ------            -------

                                                 Other                Securities                 All
                                                 Annual   Restricted    Under-      LTIP        Other
Name and Principal       Year   Salary   Bonus   Compen-     Stock      Lying      Payouts     Compen-
Position                         ($)      ($)    sation     Award(s)   Options/      ($)       sation
                                                   ($)        ($)      SARs (#)                  ($)<F1>
------------------       ----   ------   -----   -------  ----------  ----------   -------     ---------
<S>                      <C>   <C>      <C>       <C>       <C>         <C>          <C>       <C>

Steven J. Blad,          1998  102,520    -0-      -0-      10,000      200,000      -0-        91,500<F2>

Chief Executive          1997   19,500    -0-      -0-      15,000      100,000      -0-       152,780<F2>
Officer,President
and Director             1996    -0-      -0-      -0-       -0-          -0-        -0-        27,750<F2>


Glen Pickell,            1998    -0-      -0-      -0-       -0-          -0-        -0-        27,239<F2>

Chief Executive Officer  1997    -0-      -0-      -0-       -0-          -0-        -0-        71,120<F2>
(Sept. 1996-May 1998)
                         1996    -0-      -0-      -0-       -0-          -0-        -0-        20,479<F2>


Jay L. King,             1998   90,000  15,000     -0-       -0-        100,000      -0-          -0-

Chief Financial          1997   90,000  14,850     -0-       -0-          -0-        -0-          -0-
Officer, Secretary
and Director             1996   73,750  12,500    10,200     -0-         75,000      -0-          -0-

--------------------

<FN>
<F1>  The Company provides certain perquisites and other personal
benefits  to  some  or all of the executives.   The  unreimbursed
incremental  cost  to  the Company of providing  perquisites  and
other  personal  benefits  did not  exceed,  as  to  any  of  the
executives  for any year, the lesser of $50,000  or  10%  of  the
total salary and bonus paid to such executive for such year.

<F2>  Affiliated  entities of current  and  former  officers  and
directors  received  compensation  in  the  fiscal  years   ended
December 31, 1998, 1997 and 1996:  (i) the Arcus Group, an entity
controlled  by Glen (Tom) Pickell, a former officer and  director
of  the  Company that provided management consulting services  to
the  Company,  received  $27,239 in 1998,  $71,210  in  1997  and
$20,479 in 1996; and (ii) Gametek, Inc., an entity controlled  by
Steven  J.  Blad  that provided sales, marketing  and  management
consulting  services to the Company, received  $91,500  in  1998,
$152,780 in 1997 and $27,750 in 1996.

</FN>
</TABLE>

                             - 50 -

<PAGE>
                                
             OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
                                
     The  following table sets forth information regarding grants
of  stock options during the fiscal year ended December 31,  1998
made  to  the  named  executive officers.   There  are  no  stock
appreciation rights.

<TABLE>
<CAPTION>

                                        
                                                          Individual Grants
                       ------------------------------------------------------------------------------------------
                                        
                       Number of Securities           Percent of Total           Exercise or
Name                   Underlying Options/         Options/SARs Granted to        Base Price 
                         SARs Granted (#)         Employees in Fiscal Year<F1>    ($/Share)       Expiration Date
-------------------    --------------------       ----------------------------   -----------      ---------------
<S>                          <C>                            <C>                     <C>          <C>
Steven J. Blad               100,000                        30.30%                  $1.50           June 1, 2003
Steven J. Blad               100,000                        30.30%                  $1.50        November 15, 2003
Jay L. King                  100,000                        30.30%                  $1.50        November 15, 2003

---------------

<FN>
<F1> The  total  number  of  options granted to employees by  the
Company for the year ended December 31, 1998 was 330,000 options.

</FN>
</TABLE>
                                
       AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
              AND FISCAL YEAR-END OPTION/SAR VALUES
                                
     As  none of the Company's named executive officers exercised
any stock options during the fiscal year ended December 31, 1998,
a table reflecting the same has been intentionally omitted.

     LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
                                
     As  none  of the Company's named executive officers received
any  stock  options under a long-term incentive plan  during  the
fiscal year ended December 31, 1998, a table reflecting the  same
has been intentionally omitted.

     EMPLOYMENT AGREEMENTS

     The  Company  has  entered into employment  agreements  with
Steven  J.  Blad and Jay L. King.  Effective June  1,  1998,  the
Company and Mr. Blad entered into an employment agreement  for  a
term expiring December 31, 1999.  Mr. Blad will receive base  pay
of  $12,500  per month through December 31, 1998 and $18,500  per
month  for  the  remainder of the term.   Mr.  Blad  was  granted
options  to  purchase 100,000 shares at $1.50 per  share  and  is
eligible to receive an additional stock option for 100,000 shares
at $1.50 per share upon attaining the Company's goals for 1998 as
determined  by the Board of Directors.  An affiliated  entity  of
Mr. Blad also agreed to the termination of a consulting agreement
in exchange for $42,000, payable over 7 months, and 10,000 shares
of the Company's common stock.

     Effective  January  1,  1997, the Company  entered  into  an
employment agreement with Jay L. King,  for a term of two  years.
Upon  expiration, the employment agreement shall be  renewed  for
regular  successive one-year terms unless either party submits  a
notice  of  termination  thirty days prior  to  the  end  of  the
preceding  period.  Mr. King receives a monthly  base  salary  of
$7,500  and shall be entitled to a quarterly bonus in  an  amount
not  to  exceed  $2,500 per month upon the Company achieving  its
goals  as  set  by  the  Company's Board of Directors,  upon  the
fulfillment  of  Mr. King's duties and the Company achieving  its
goals.   Additionally, Mr. King shall receive  stock  options  to
purchase up to 150,000 shares of common stock at $1.50 per  share
upon  the following events:  (i) stock options for 50,000  shares
of  common  stock upon successful completion of the  Registration
Statement on Form SB-2; (ii) stock options

                             - 51 -

<PAGE>

for  50,000  shares of common stock upon Mr. King fulfilling  his
obligations  and  the Company reaching its goals  for  1997;  and
(iii)  stock  options  for 50,000 shares  of  common  stock  upon
Mr.  King fulfilling his obligations and the Company reaching its
goals  for  1998.  On November 15, 1998, in accordance  with  the
terms of the employment agreement, the Company issued to Mr. King
options  to purchase 100,000 shares of common stock at $1.50  per
share.  In light of  the letter  of  resignation submitted by Mr.
King, the Company and Mr. King have mutually  agreed to terminate
Mr. King's employment agreement.

     The  Company  is  currently in the  process  of  negotiating
employment agreements with its other officers and employees.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

     The following is a list of the beneficial stock ownership as
of  on January 31, 1999 of (1) all persons who beneficially owned
more  than  5% of the outstanding shares of the Company's  common
stock, (2) all directors, (3) all executive officers named in the
Summary Compensation Table (see page 50) and (4) all officers and
directors  as  a  group at the close of business on  January  31,
1999, according to record-ownership listings as of that date, and
according  to  verifications as of January 31,  1999,  which  the
Company solicited and received from each officer and director:

                             - 52 -

<PAGE>

<TABLE>
<CAPTION>
         
 TITLE OF                                          AMOUNT AND NATURE OF            PERCENT OF
  CLASS                BENEFICIAL OWNER            BENEFICIAL OWNERSHIP<F1><F2>     CLASS<F2>
---------              ----------------            ----------------------------    ----------
<S>                    <C>                                 <C>                        <C>

Common                 Richard S. Huson                    2,884,223<F3>              39.3%
                       15 SW Colorado Avenue,
                       Suite 280
                       Bend, Oregon  97702
                                                               
Common                 Steven J. Blad                        541,316<F4>               7.1%
                       6744 S. Spencer Street
                       Las Vegas, Nevada  89119
                                                               
Common                 Bob L. Smith                          399,997<F5>               5.5%
                       280 Liberty Street,
                       S.E., Suite 300
                       Salem, Oregon  97301
                                                          
Common                 Jay L. King                           200,165<F6>               2.7%
                       6744 S. Spencer Street
                       Las Vegas, Nevada  89119
                                                          
Common                 Ronald O. Keil                        181,689                   2.5%
                       2904 N.E. Burton,
                       Suite A
                       Vancouver, Washington  98661
                                                          
Common                 David E. Sampson                      137,512<F7>               1.9%
                       14009 - 205th Avenue N.E.
                       Woodinville, Washington  98072
                                                          
Common                 Jamie McKee                               0                     <F*>
                       5240 S. Eastern Avenue
                       Las Vegas, Nevada  89119
                                                               
Common                 All executive officers              4,114,902<F8>              51.7%
                       and directors as a
                       group (7 persons)
-----------------
<FN>
<F*> Less than one percent.
<F1> Unless otherwise noted, the persons identified in this table
have  sole  voting and sole investment power with regard  to  the
shares beneficially owned by them.
<F2>  Includes shares issuable upon the exercise of  options  and
warrants exercisable within 60 days of the stated date.
<F3> Includes 52,721 shares issuable upon the exercise of Class A
Warrants.
<F4>  Includes 10,000 shares issued to Gametek, Inc.,  an  entity
controlled  by  Mr.  Blad,  options to  purchase  300,000  shares
granted  by  the  Company,  options to  purchase  230,000  shares
granted by Richard S. Huson, 1,216 shares issued to the spouse of
Mr. Blad and 100 shares issued to Mr. Blad directly.
<F5> Includes 33,557 shares issuable upon the exercise of Class A
Warrants held by VIP's Industries, Inc., an entity controlled  by
Mr. Smith, 147,906 shares issued to VIP's Industries, Inc., 1,000
shares issued jointly to Mr. Smith and his daughter, and  217,534
shares issued to Mr. Smith directly.
<F6>  Includes options to purchase 175,000 shares issued  by  the
Company and 25,165 shares issued to Mr. King directly.
<F7>  Includes 1,557 shares issuable upon the exercise of Class A
Warrants,  options  to purchase 95,000 shares and  40,955  shares
issued to Mr. Sampson directly.
<F8> Includes 87,835 shares issuable upon the exercise of Class A
Warrants  and 570,000 shares issuable upon the exercise of  stock
options.

</FN>
</TABLE>

                             - 53 -

<PAGE>

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     On  February 1, 1997, the Company entered into a  consulting
agreement with Gametek, Inc. and Steven Blad, an officer  of  the
Company.  This agreement was terminated effective as of  June  1,
1998  upon  effectiveness of the employment  agreement  with  Mr.
Blad.   See  Part  III.   "Item  10.   Executive  Compensation  -
Employment Agreements."

     Through  a  purchase  agreement dated  September  1998,  the
Company  agreed  to  purchase from  Steven  L.  Forte,  a  former
employee  and  director  of the Company,  and  Cheryl  L.  Forte:
(i) certain royalties from the sales of the Shuffler, Fantasy  21
and the Safety-Peek Playing Card; (ii) options to purchase 20,000
shares of common stock; and (iii) 848,682 shares of common  stock
(the  "Forte Transaction").  The Forte Transaction also  involves
the termination of the employment agreement with Steven Forte and
the gifting of 82,000 shares of common stock by Steven and Cheryl
Forte  to  certain  individuals. As  consideration,  the  Company
executed a promissory note in favor of Steven and Cheryl Forte in
the principal amount of $2,351,705 (the "Forte Note"), a security
agreement  in favor of Steven and Cheryl Forte granting  a  first
security interest in the patents for the Shuffler, Fantasy 21 and
the Safety-Peek playing card, and a pledge agreement in favor  of
Steven  and  Cheryl Forte whereby the Company pledged  the  Forte
Shares  as  security for the Forte Note.  In December  1998,  the
Company  negotiated  the  cancellation of  the  Forte  Note,  the
security  agreement and pledge agreement, as well as an unrelated
pre-existing   promissory  note  in  the  principal   amount   of
$130,047.46  (the  "Pre-existing Forte Note"),  in  exchange  for
$1,250,000 to be paid in three installments: $500,000 on December
7,  1998,  $500,000 on December 28, 1998 and $250,000 on  January
15,  1999.  Upon payment of the $1,250,000, the Company cancelled
the  Forte Note, the security agreement, the pledge agreement and
the  Pre-existing Forte Note and received a release  from  Steven
and  Cheryl  Forte releasing the Company from any and all  claims
related, either directly or indirectly, to the Forte Transaction.
Accordingly,  the Company has retired the Forte Shares  from  the
number of shares of common stock outstanding.

     During  the years ended December 31, 1998 and 1997,  Richard
S.  Huson, Chairman and principal stockholder of the Company, and
Bob  L.  Smith and Ronald O. Keil, directors and stockholders  of
the  Company,  made  loans  to the Company  for  working  capital
purposes.    The  balances  payable  by  the  Company  aggregated
$1,444,561  at December 31, 1998, including accrued  interest  of
$59,561.   The advances include short term demand notes  made  in
1998  due to Messrs. Smith and Keil which bear interest  at  9.5%
per annum and aggregate $150,000 at December 31, 1998.  Mr. Huson
has outstanding advances to the Company aggregating $1,235,000 of
which  $1,150,000  was received by the Company  during  the  year
ended  December  31,  1998.  The Company executed  a  replacement
promissory representing the aggregate amount of advances made  by
Mr.  Huson where the outstanding principal and interest is to  be
repaid  at  an  interest  rate  of  9.5%  per  annum  in  monthly
installments of $42,814 beginning July 1, 1999.

     At  December 31, 1997, the Company had outstanding  advances
to  Randy  Sines, a former officer and director of  the  Company,
aggregating  $152,964 (the "Sines Advance").  In  December  1998,
the  Sines  Advance  was cancelled with no  continuing  repayment
obligation  by  the Company as a result of a private  transaction
between  Mr. Sines and four individuals which included  directors
Richard  S.  Huson,  Bob  L.  Smith  and  Ronald  O.  Keil.   The
cancellation of the indebtedness was accounted for by the Company
as a contribution to capital.

     INDEMNIFICATION OF DIRECTORS AND OFFICERS

     The  Company shall indemnify to the fullest extent permitted
by, and in the manner permissible under the laws of the State  of
Washington, any person made, or threatened to be made, a party to
an  action or proceeding, whether criminal, civil, administrative
or investigative, by reason of the fact that he

                             - 54 -

<PAGE>

is  or  was  a director or officer of the Company, or served  any
other  enterprise as director, officer or employee at the request
of the Company.  The Board of Directors, in its discretion, shall
have  the power on behalf of the Company to indemnify any person,
other  than  a director or officer, made a party to  any  action,
suit or proceeding by reason of the fact that he/she is or was an
employee of the Company.

     Insofar as indemnification for liabilities arising under the
Securities  Act  may  be  permitted to  directors,  officers  and
controlling persons of the Company, the Company has been  advised
that  in  the  opinion of the Securities and Exchange  Commission
such indemnification is against public policy as expressed in the
Act  and is, therefore, unenforceable.  In the event that a claim
for  indemnification  against such liabilities  (other  than  the
payment  by  the  Company  of expenses  incurred  or  paid  by  a
director,  officer or controlling person of the  Company  in  the
successful  defense  of  any  action,  suit  or  proceedings)  is
asserted  by  such  director, officer, or controlling  person  in
connection  with  any  securities being registered,  the  Company
will,  unless in the opinion of its counsel the matter  has  been
settled   by  controlling  precedent,  submit  to  a   court   of
appropriate    jurisdiction    the    question    whether    such
indemnification  by it is against public policy as  expressed  in
the Securities Act and will be governed by the final adjudication
of such issues.

     Further,  the  Company has obtained Directors  and  Officers
Insurance.   Pursuant  to  the policy with  National  Union  Fire
Insurance  Company,  the coverage includes Company  reimbursement
and  sections action claims entity coverage.  The coverage has  a
$1,000,000  aggregate  limit of liability  in  each  policy  year
(inclusive of defense costs) and there is a retention of  $25,000
for each claim.

     TRANSACTION REVIEW

     The  Company has adopted a policy that any transactions with
directors,  officers or entities of which they are also  officers
or  directors  or in which they have a financial  interest,  will
only  be on terms consistent with industry standards and approved
by  a  majority  of the disinterested directors of the  Company's
Board  of Directors.  The Bylaws of the Company provide  that  no
such transactions by the Company shall be either void or voidable
solely  because of such relationship or interest of directors  or
officers  or  solely because such directors are  present  at  the
meeting  of the Board of Directors of the Company or a  committee
thereof which approves such transactions, or solely because their
votes  are  counted for such purpose if: (i)  the  fact  of  such
common  directorship or financial interest is disclosed or  known
by  the Board of Directors or committee and noted in the minutes,
and  the Board or committee authorizes, approves or ratifies  the
contract or transaction in good faith by a vote for that  purpose
without  counting the vote or votes of such interested directors;
or  (ii)  the  fact  of  such  common directorship  or  financial
interest is disclosed to or known by the stockholders entitled to
vote  and  they approve or ratify the contract or transaction  in
good  faith by a majority vote or written consent of stockholders
holding a majority of the shares of common stock entitled to vote
(the  votes  of  the common or interested directors  or  officers
shall be counted in any such vote of stockholders); or (iii)  the
contract or transaction is fair and reasonable to the Company  at
the  time  it is authorized or approved.  In addition, interested
directors may be counted in determining the presence of a  quorum
at  a  meeting  of  the Board of Directors of the  Company  or  a
committee thereof which approves such transactions.  If there are
no  disinterested directors, the Company shall obtain a  majority
vote of the stockholders approving the transaction.

                             - 55 -

<PAGE>

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

     (a)  EXHIBITS.

NUMBER   EXHIBIT DESCRIPTION
------   -------------------

 2.01    Agreement and Plan of Merger dated as of March  6,  1999
         by  and  between  the  Company and Casinovations  Nevada
         Incorporated.
       
 3.01    Articles of Incorporation incorporated by reference from
         the Company's Registration Statement on Form SB-2 ("Form
         SB-2") filed on July 16, 1997, File Number 333-31373.
       
 3.02    Amendment to Articles of Incorporation dated October 12,
         1996  incorporated by reference from Form SB-2 filed  on
         July 16, 1997, File Number 333-31373.
       
 3.03    Amendment  to  Articles of Incorporation  dated  January
         1997  incorporated by reference from Form SB-2 filed  on
         July 16, 1997, File Number 333-31373.
       
 3.04    Bylaws  dated  September 1995 incorporated by  reference
         from  Form SB-2 filed on July 16, 1997, File Number 333-
         31373.
       
 3.05    Amended  and Restated Bylaws, incorporated by  reference
         from  Post-Effective Amendment No.1 on Form SB-2/A filed
         on June 5, 1998.
       
 4.01    Specimen  certificate for Common Stock  incorporated  by
         reference  from Form SB-2 filed on July 16,  1997,  File
         Number 333-31373.
       
 4.02    Specimen  Warrant certificate incorporated by  reference
         from  Form SB-2 filed on July 16, 1997, File Number 333-
         31373.
       
 4.03    Casinovations Incorporated 1999 Stock Option Plan.
       
10.01    Consulting Agreement of GameTek and Steven J. Blad dated
         February 1, 1997 incorporated by reference from Form SB-
         2 filed on July 16, 1997, File Number 333-31373.
       
10.02    Consulting  Agreement with Gaming Venture Corp.,  U.S.A.
         dated  July 8, 1996 incorporated by reference from  Form
         SB-2 filed on July 16, 1997, File Number 333-31373.
       
10.03    Exclusive  Distributorship Agreement with Sodak  Gaming,
         Inc. dated April 23, 1997 incorporated by reference from
         Form SB-2 filed on July 16, 1997, File Number 333-31373.
       
10.04    Exclusive  Distributorship Agreement with  RGB  SDN  BHD
         dated  February 19, 1997 incorporated by reference  from
         Form SB-2 filed on July 16, 1997, File Number 333-31373.
       
10.05    Exclusive  Distributorship Agreement with H.  Joel  Rahn
         dated  June 1, 1997 incorporated by reference from  Form
         SB-2 filed on July 16, 1997, File Number 333-31373.
       
10.06    Exclusive License Agreement with George C. Matteson Co.,
         Inc.  dated  May 5, 1994 incorporated by reference  from
         Form SB-2 filed on July 16, 1997, File Number 333-31373.
       
                            - 56 -

<PAGE>

NUMBER   EXHIBIT DESCRIPTION
------   -------------------      

10.07    License  Agreement with The United States  Playing  Card
         Company  dated March 16, 1995 incorporated by  reference
         from  Form SB-2 filed on July 16, 1997, File Number 333-
         31373.
       
10.08    Collateral  Loan  Agreement with Gaming  Venture  Corp.,
         U.S.A. incorporated by reference from Amendment No. 1 to
         Form  SB-2 filed on September 17, 1997, File Number 333-
         31373.
       
10.09    Exclusive  License Agreement with Technology Development
         Center, LLC incorporated by reference from Amendment No.
         2  to  Form SB-2 filed on November 12, 1997, File Number
         333-31373.
       
10.10    Form  of  Convertible  Unsecured Note,  incorporated  by
         reference from Post-Effective Amendment No.1 on Form SB-
         2/A filed on June 5, 1998.
       
10.11    Forte  Letter Agreement dated May 28, 1998, incorporated
         by  reference from Post-Effective Amendment No.1 on Form
         SB-2/A filed on June 5, 1998.
       
10.12    Exclusive  Distributorship Agreement  with  Gaming  2000
         L.L.C.  dated  May 28, 1998, incorporated  by  reference
         from  Post-Effective Amendment No.1 on Form SB-2/A filed
         on June 5, 1998.
       
10.13    Exclusive Distributorship Agreement with Belgian  Gaming
         Technology  dated  December 18,  1997,  incorporated  by
         reference from Post-Effective Amendment No.1 on Form SB-
         2/A filed on June 5, 1998.
       
10.14    Asset  Purchase Agreement dated August 14, 1998, by  and
         between  Casinovations  Incorporated  and  Gaming  2000,
         L.L.C.,  incorporated by reference  from  Post-Effective
         Amendment  No.2  on Form SB-2/A filed on  September  18,
         1998.
       
10.15    Purchase  Agreement dated September 1998 with Steven  L.
         Forte and Cheryl Forte.
       
10.16    Assignment  Agreement dated December  16,  1998  by  and
         between  Casinovations Incorporated and Randy  D.  Sines
         and  Irene C. Sines, incorporated by reference from Form
         8-K filed on December 23, 1998, File Number 333-31373.
       
10.17    Form of Lock Up Agreement incorporated by reference from
         Amendment No. 3 to Form SB-2 filed on January 12,  1998,
         File Number 333-31373.
       
10.18    Form  of  Warrant  Lock  Up  Agreement  incorporated  by
         reference  from Amendment No. 6 to Form  SB-2  filed  on
         April 2, 1998, File Number 333-31373.
       
10.19    Form  of  Warrant  Lock  Up  Agreement  incorporated  by
         reference from Amendment No. 7 from Form SB-2  filed  on
         April 9, 1998, File Number 333-31373.
       
10.20    Lock   Up  Agreement  incorporated  by  reference   from
         Amendment  No.  7 to Form SB-2 filed on April  9,  1998,
         File Number 333-31373.
       
10.21    Form of Lock-Up Agreement, incorporated by reference  to
         Post-Effective  Amendment No.2 on Form SB-2/A  filed  on
         September 18, 1998, File Number 333-31373.
       
                            - 57 -

<PAGE>

NUMBER   EXHIBIT DESCRIPTION
------   -------------------      

10.22    Shareholder  Agreement dated August  27,  1998,  by  and
         between Casinovations Incorporated and Richard Huson and
         Randy Sines, incorporated by reference to Post-Effective
         Amendment  No.2  on Form SB-2/A filed on  September  18,
         1998, File Number 333-31373.
       
10.23    Lease Agreement dated October 7, 1998 by and between the
         Company and Spencer Airport Center, LLC.
       
10.24    Promissory Note dated December 3, 1998 executed  by  the
         Company in favor of Steven L. Forte and Cheryl Forte.
       
10.25    Shareholder  Agreement dated December 14,  1998  by  and
         between  Casinovations Incorporated and  Richard  Huson,
         Bob Smith and Ron Keil.
       
10.26    Release and Assignment Agreement dated January 15,  1999
         by  and between Casinovations Incorporated and Steven L.
         Forte and Cheryl Forte.
       
10.27    Agreement   dated  March  24,  1999   by   and   between
         Casinovations    Incorporated   and   Dominion    Income
         Management.
       
21.01    Subsidiaries of Registrant.
       
23.01    Consent of James E. Scheifley & Associates, P.C.
       
27.01    Financial Data Schedule.
       
99.01    Employment  Agreement of Jay L. King  dated  January  1,
         1997  incorporated by reference from Form SB-2 filed  on
         July 16, 1997, File Number 333-31373.
       
99.02    Employment  Agreement with Steven  Blad  dated  June  1,
         1998,   incorporated  by  reference  to   Post-Effective
         Amendment  No.1 on Form SB-2/A filed on  June  5,  1998,
         File Number 333-31373.
       
     (b)  REPORTS ON FORM 8-K.

      During the three month period ended December 31, 1998,  the
Company  filed  a  Form  8-K  dated December  3,  1998  with  the
Securities   and  Exchange  Commission  on  December   23,   1998
reporting,  among  other  things,  the  approval  of  the  Random
Ejection Shuffler by the Nevada State Gaming Control Board.   The
Company  subsequently filed a Form 8-K dated  December  31,  1998
with  the Securities and Exchange Commission on January  7,  1999
reporting  the extension of the Company's offering  of  1,500,000
shares (subsequently amended to 1,517,744 shares) of common stock
for thirty days from December 31, 1998 to January 30, 1999.

                             - 58 -

<PAGE>
                           SIGNATURES
                                
     In  accordance with Section 13 or 15(d) of the Exchange Act,
the  registrant has duly caused this report to be signed  on  its
behalf by the undersigned, thereunto duly authorized.

                                 CASINOVATIONS INCORPORATED
                                 
                                 
March 25, 1999                   By: /s/ Jay L. King
                                    -----------------------------
                                     Jay L. King, Secretary,
                                      Treasurer and Chief
                                      Financial Officer
     
     In  accordance with the Exchange Act, this report  has  been
signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.

     SIGNATURE                    TITLE                   DATE
                                                           
                                                      
/s/ Steven J. Blad    Chief Executive Officer,        March 25, 1999
--------------------  President and Director
Steven J. Blad        (Principal Executive Officer)         
                                                           
                                                           
/s/ Jay L. King       Chief Financial Officer,        March 25, 1999
--------------------  Treasurer and Secretary 
Jay L. King           (Principal Financial and              
                      Accounting Officer)
                                                           
                                                           
/s/ Richard S. Huson  Chairman of the Board of        March 25, 1999
--------------------  Directors
Richard S. Huson                                                        


/s/ Bob L. Smith      Director                        March 25, 1999
--------------------                                       
Bob L. Smith                                           


/s/ Ronald O. Keil    Director                        March 25, 1999
--------------------                                       
Ronald O. Keil                                             


/s/ David E. Sampson  Director                        March 25, 1999
--------------------                                       
David E. Sampson                                           


/s/ Jamie McKee       Director                        March 25, 1999
--------------------
Jamie McKee
                                                           
                                                           
<PAGE>
                          EXHIBIT INDEX
                                
                                
                                
NUMBER   EXHIBIT DESCRIPTION                                    PAGE
------   -------------------                                    ----
                                                               
 2.01    Agreement  and Plan of Merger dated as of  March  6,     63
         1999  by  and  between the Company and Casinovations    
         Nevada Incorporated.
       
 3.01    Articles  of Incorporation incorporated by reference    
         from the Company's Registration Statement on Form SB-   
         2  ("Form SB-2") filed on July 16, 1997, File Number
         333-31373.
       
 3.02    Amendment to Articles of Incorporation dated October    
         12,  1996  incorporated by reference from Form  SB-2    
         filed on July 16, 1997, File Number 333-31373.
       
 3.03    Amendment to Articles of Incorporation dated January    
         1997  incorporated by reference from Form SB-2 filed    
         on July 16, 1997, File Number 333-31373.
       
 3.04    Bylaws   dated   September  1995   incorporated   by    
         reference  from  Form SB-2 filed on July  16,  1997,    
         File Number 333-31373.
       
 3.05    Amended   and   Restated  Bylaws,  incorporated   by    
         reference from Post-Effective Amendment No.1 on Form    
         SB-2/A filed on June 5, 1998.
       
 4.01    Specimen  certificate for Common Stock  incorporated    
         by  reference from Form SB-2 filed on July 16, 1997,    
         File Number 333-31373.
       
 4.02    Specimen   Warrant   certificate   incorporated   by    
         reference  from  Form SB-2 filed on July  16,  1997,    
         File Number 333-31373.
       
 4.03    Casinovations Incorporated 1999 Stock Option Plan.       68
                                                               
10.01    Consulting Agreement of GameTek and Steven  J.  Blad    
         dated  February  1, 1997 incorporated  by  reference    
         from  Form SB-2 filed on July 16, 1997, File  Number
         333-31373.
       
10.02    Consulting  Agreement  with  Gaming  Venture  Corp.,    
         U.S.A.  dated July 8, 1996 incorporated by reference    
         from  Form SB-2 filed on July 16, 1997, File  Number
         333-31373.
       
10.03    Exclusive   Distributorship  Agreement  with   Sodak    
         Gaming,  Inc.  dated April 23, 1997 incorporated  by    
         reference  from  Form SB-2 filed on July  16,  1997,
         File Number 333-31373.
       
10.04    Exclusive Distributorship Agreement with RGB SDN BHD    
         dated  February 19, 1997 incorporated  by  reference    
         from  Form SB-2 filed on July 16, 1997, File  Number
         333-31373.
       
10.05    Exclusive  Distributorship Agreement  with  H.  Joel    
         Rahn  dated  June 1, 1997 incorporated by  reference    
         from  Form SB-2 filed on July 16, 1997, File  Number
         333-31373.
       
                              - 60 -

<PAGE>

NUMBER   EXHIBIT DESCRIPTION                                    PAGE
------   -------------------                                    ----
                                                               
10.06    Exclusive License Agreement with George C.  Matteson    
         Co.,   Inc.  dated  May  5,  1994  incorporated   by    
         reference  from  Form SB-2 filed on July  16,  1997,
         File Number 333-31373.
       
10.07    License  Agreement  with The United  States  Playing    
         Card  Company  dated March 16, 1995 incorporated  by    
         reference  from  Form SB-2 filed on July  16,  1997,
         File Number 333-31373.
       
10.08    Collateral Loan Agreement with Gaming Venture Corp.,    
         U.S.A. incorporated by reference from Amendment  No.    
         1  to  Form  SB-2 filed on September 17, 1997,  File
         Number 333-31373.
       
10.09    Exclusive    License   Agreement   with   Technology    
         Development  Center, LLC incorporated  by  reference    
         from  Amendment No. 2 to Form SB-2 filed on November
         12, 1997, File Number 333-31373.
       
10.10    Form of Convertible Unsecured Note, incorporated  by    
         reference from Post-Effective Amendment No.1 on Form    
         SB-2/A filed on June 5, 1998.
       
10.11    Forte   Letter   Agreement  dated  May   28,   1998,    
         incorporated   by   reference  from   Post-Effective    
         Amendment No.1 on Form SB-2/A filed on June 5, 1998.
       
10.12    Exclusive Distributorship Agreement with Gaming 2000    
         L.L.C. dated May 28, 1998, incorporated by reference    
         from  Post-Effective Amendment No.1 on  Form  SB-2/A
         filed on June 5, 1998.
       
10.13    Exclusive  Distributorship  Agreement  with  Belgium    
         Gaming   Technology   dated   December   18,   1997,    
         incorporated   by   reference  from   Post-Effective
         Amendment No.1 on Form SB-2/A filed on June 5, 1998.
       
10.14    Asset  Purchase Agreement dated August 14, 1998,  by    
         and  between Casinovations Incorporated  and  Gaming    
         2000,  L.L.C., incorporated by reference from  Post-
         Effective  Amendment No.2 on Form  SB-2/A  filed  on
         September 18, 1998.
       
10.15    Purchase Agreement dated September 1998 with  Steven     77
         L. Forte and Cheryl Forte.                              
       
10.16    Assignment Agreement dated December 16, 1998 by  and    
         between  Casinovations  Incorporated  and  Randy  D.    
         Sines  and Irene C. Sines, incorporated by reference
         from  Form  8-K  filed on December  23,  1998,  File
         Number 333-31373.
       
10.17    Form  of Lock Up Agreement incorporated by reference    
         from  Amendment No. 3 to Form SB-2 filed on  January    
         12, 1998, File Number 333-31373.
       
10.18    Form  of  Warrant Lock Up Agreement incorporated  by    
         reference from Amendment No. 6 to Form SB-2 filed on    
         April 2, 1998, File Number 333-31373.
       
10.19    Form  of  Warrant Lock Up Agreement incorporated  by    
         reference from Amendment No. 7 from Form SB-2  filed    
         on April 9, 1998, File Number 333-31373.
       
                              - 61 -

<PAGE>

NUMBER   EXHIBIT DESCRIPTION                                    PAGE
------   -------------------                                    ----
                                                               
10.20    Lock  Up  Agreement incorporated by  reference  from    
         Amendment No. 7 to Form SB-2 filed on April 9, 1998,    
         File Number 333-31373.
       
10.21    Form of Lock-Up Agreement, incorporated by reference    
         to  Post-Effective  Amendment No.2  on  Form  SB-2/A    
         filed on September 18, 1998, File Number 333-31373.
       
10.22    Shareholder Agreement dated August 27, 1998, by  and    
         between Casinovations Incorporated and Richard Huson    
         and  Randy Sines, incorporated by reference to Post-
         Effective  Amendment No.2 on Form  SB-2/A  filed  on
         September 18, 1998, File Number 333-31373.
       
10.23    Lease Agreement dated October 7, 1998 by and between     79
         Casinovations   Incorporated  and  Spencer   Airport    
         Center, LLC.
       
10.24    Promissory  Note dated December 3, 1998 executed  by     97
         the  Company in favor of Steven L. Forte and  Cheryl    
         Forte.
       
10.25    Shareholder Agreement dated December 14, 1998 by and    103
         between   Casinovations  Incorporated  and   Richard    
         Huson, Bob Smith and Ron Keil.
       
10.26    Release  and Assignment Agreement dated January  15,    111
         1999  by and between Casinovations Incorporated  and    
         Steven L. Forte and Cheryl Forte.
       
10.27    Agreement  dated  March  24,  1999  by  and  between    116
         Casinovations   Incorporated  and  Dominion   Income    
         Management.
       
21.01    Subsidiaries of Registrant.                             124
                                                               
23.01    Consent of James E. Scheifley & Associates, P.C.        126
                                                               
27.01    Financial Data Schedule.                                128
                                                               
99.01    Employment Agreement of Jay L. King dated January 1,    
         1997  incorporated by reference from Form SB-2 filed    
         on July 16, 1997, File Number 333-31373.
       
99.02    Employment Agreement with Steven Blad dated June  1,    
         1998,  incorporated by reference  to  Post-Effective
         Amendment No.1 on Form SB-2/A filed on June 5, 1998,
         File Number 333-31373.

                             - 62 -