<PAGE>


______________________________________________________________________________

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                     _______

                                   FORM 10-KSB

            ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JANUARY 31, 2002
______________________________________________________________________________

                          Commission File No. 000-20685

                             AMERICAN WAGERING, INC.
                             -----------------------
                 (Name of Small Business Issuer in its Charter)

     Nevada                              88-0344658
  ---------------------------------   ----------------------
(State  or  other  jurisdiction  of      (I.R.S.  Employer
incorporation  or  organization)          Identification  No.)


                    675 Grier Drive, Las Vegas, Nevada 89119
                    ----------------------------------------
           (Address  of principal  executive  offices)  (Zip  Code)

                        (702)  735-0101
                   ---------------------------
                   (Issuer's telephone number)


Securities  registered  under  Section  12(b)  of  the  Exchange  Act:   None

Securities  registered  under  Section  12(g)  of  the  Exchange  Act:

                          Common Stock, $.01 par value
                          ----------------------------
                              Title  of  Class


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 past 12 months (or
for  such shorter period that the registrant was required to file such reports),
and  (2)  has been subject to such filing requirements for the past 90 days.
Yes X  No



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

The  issuer's  revenues  for  the  fiscal  year  ended  January  31,  2002  were
$12,000,615.

The  aggregate  market  value of the voting and non-voting stock (which consists
solely  of  shares  of Common Stock) held by non-affiliates as of April 26, 2002
computed  by  reference  to the average bid and asked price for the registrant's
Common Stock as quoted on the NASD Over-The-Counter Bulletin Board on such date,
was  approximately  $1,030,209.

The  number  of  shares of the issuer's Common Stock outstanding as of April 26,
2002  was  7,836,846.



<PAGE>
                                     PART I


Item  1.     Description  of  Business

Primary  business  formation and operating activities.  In August 1995, American
Wagering,  Inc., a Nevada Corporation (the "Company"), was formed as the holding
Company  for  Leroy's  Horse  and  Sports  Place  ("Leroy's")  and Leroy's Hotel
Corporation  ("LHC").  Leroy's  was  incorporated under the laws of the State of
Nevada on November 14, 1977.  Leroy's, through a central computer system located
at  the Company's Las Vegas headquarters, operates a statewide network of sports
and  race wagering facilities in 41 casinos.  Leroy's offers a "turn-key" sports
and  race wagering operation that allows casinos to satisfy their patrons desire
for  sports  and  race wagering without bearing the risk and overhead associated
with running the operation.  By combining volume from a number of locations, the
Company believes that Leroy's more effectively hedges risks and more efficiently
covers fixed overhead.  In addition, since its sports and race book operation is
its primary business, the Company believes that Leroy's is capable of responding
more  quickly  to  customer  needs,  such as providing faster pay-off on winning
tickets  presented  other  than in person. In October 1996, the Company acquired
from  Autotote  Corporation, all of the shares of capital stock of Autotote CBS,
Inc.  (which  was  subsequently  renamed  Computerized  Bookmaking Systems, Inc.
("CBS")),  along  with certain software and licensing rights pursuant to a stock
transfer  agreement  between the Company and Autotote Corporation.  CBS designs,
sells,  rents,  installs  and maintains sports and race book equipment, software
and  computer  systems  for  the  sports  betting industry.  The Company paid $3
million in cash to Autotote Corporation and guaranteed CBS' obligation under its
mortgage  (in the principal amount of approximately $2 million as of such date).
The  mortgage is on the real estate and building located at 675 Grier Drive, Las
Vegas, Nevada, where the Company currently maintains its corporate offices.  The
use  of  the CBS software was subject to certain litigation which was settled in
the  fiscal  year  of  2001,  see  "Legal  Proceedings".

Other  business activities and historical background.  The Company also owns and
operates  Mega$ports  (ACT)  Pty. Ltd. ("Mega$ports (ACT)") located in Canberra,
Australia,  an international wagering hub licensed to accept both fixed odds and
pari-mutuel  interactive wagers on the telephone and Internet.  Mega$ports (ACT)
accepts  wagers  from  all  jurisdictions that do not prohibit sports betting or
Internet wagering; the United States is one jurisdiction that does prohibit this
form  of  wagering  and,  as  such, Mega$ports (ACT) does not accept wagers from
persons  in  the  United  States.  On December 16, 1999, the Nevada State Gaming
Control  Board  ("Board")  filed a complaint for disciplinary action against the
Company,  referred  to as State Gaming Control Board v. American Wagering, Inc.,
dba  Mega$ports  (ACT) (the "complaint"), related to the operation of Mega$ports
Pty,  Ltd.,  ("Mega$ports  (ACT)").

On  July  27,  2000,  the  Nevada Gaming Commission approved a settlement of the
complaint.  Without  admitting or denying the allegations, the Company agreed to
pay  a  fine of $10,000 and to divest itself of any and all interests and rights
pertaining  to  Mega$ports (ACT). In the event the Company does not complete the
divestiture  prior  to  the  current July 25, 2002 deadline and fails to receive
additional  time  extensions from the Nevada Gaming Commission, there could be a
material  adverse  effect  on  the  Company's  operations  as  well  as  on  the
marketability  and  negotiated  sale price of the Mega$ports (ACT) business, see
"Legal  Proceedings".

The  Company also owns AWI Keno, Inc. ("AWIK") which designs, installs, operates
and  maintains  computerized  keno  systems  and  plans  to offer keno players a
statewide  keno  game  with  a  progressive  jackpot.  On  February 26, 2002 the
Company  temporarily  closed its keno operations.  It is the Company's intent to
restructure  AWIK  in  the  next  six months, to reopen the game and to keep its
gaming  license  active.  In  the  event  that  live  keno  operations  do  not
recommence,  the Company intends to keep AWIK's manufacturers license active for
other  new  products  developed  by  AWI.

On  July  28,  1998,  the Company through two newly formed subsidiaries acquired
certain  assets  from  Advanced  Computer  Services,  Inc.  ("ACS"),  a  systems
competitor  of  CBS, pursuant to an asset purchase agreement between the Company
and  ACS  and  settled  certain  litigations between them.  The Company paid ACS
$500,000  in  cash  and  $250,000  in the Company's Common Stock for the assets,
including software and restrictions on ACS and its shareholder not to compete or
solicit  the Company's customers. The Company's two new subsidiaries, AWI Sports
Systems,  Inc.  ("AWISSI")  and  AWI  Hotel  Systems,  Inc.  ("AWIHSI") were the
designated  acquirer  of  the  Nevada Sports wagering software and hotel systems
software,  respectively  and  assumed  certain  contractual  obligations of ACS,
including all customer contracts.  The Company initially owned 80% of AWISSI and
51% of AWIHSI and the

                                       1
<PAGE>

sole  shareholder  of  ACS  owned  the remaining interests. On June 8, 2000, the
Company  terminated a systems consulting agreement and sold the assets of AWIHSI
to  the  sole owner of ACS in exchange for ACS's 49% and 20% interests in AWISSI
and  AWIHSI.

In  November 1999, the Company formed Secured Telephone Operating Platform, Inc.
("STOP"),  which designs, installs, and operates a telephone call identification
system  for its customers.  The system determines the origin of a telephone call
and accepts or rejects the call based on its origination.  The system is used in
conjunction  with  telephone  account  wagering  within  the  State  of  Nevada.
Currently  the  STOP  system  is  being  used  by  three  casinos.

Las  Vegas  Area  Market

The  Company's  primary  market for sports and race books and keno operations is
the  Las Vegas Valley and surrounding areas (hereinafter, "Las Vegas Area").  At
December  31, 2001, the Las Vegas Area included 161 sports books, 112 race books
and  111  keno parlors.  Leroy's currently operates 27 of its 41 sports books in
the  Las  Vegas  and  surrounding areas.  The Las Vegas Area attracts both local
residents  and  Las  Vegas visitors.  The Las Vegas population was approximately
1.5  million  in  2001,  an  increase of 3.6% from the prior year.  Las Vegas is
Nevada's  principal tourist destination.  Gaming and entertainment are the major
attractions,  complemented  by  warm  weather  and  the  availability  of  many
year-round  recreational  activities.  The  number  of visitors traveling to Las
Vegas  has increased on average by 6.4% annually from approximately 18.1 million
in  1989  to  approximately  35.8  million in 2000.  Las Vegas principal tourist
market  is  the western region of the United States, most significantly Southern
California,  Arizona  and  Texas.  Las  Vegas  is  also  among the nation's most
popular  convention  sites, having hosted conventions in 2001 that were attended
by  more  than  4.0  million  people  who,  it is estimated, spent $4.8 billion,
excluding  gaming  activity.

From  1989 to 2001, gaming revenues for Clark County (which consists principally
of  the Las Vegas Area) have increased 126.5% from approximately $3.4 billion to
approximately  $7.7  billion.  The  Clark  County gaming market has historically
achieved significant growth despite adverse economic, regulatory and competitive
events  during  the  past  decade,  including  the  expansion of gaming in other
jurisdictions  across  the  United  States.

Reno  Area  Market

The market for 14 of the Leroy's sports books is the Reno Area gaming market and
surrounding  areas.  Reno  is  the  second  largest  city in Nevada with an area
population  of  approximately  249,000  in  2000  and  projected  population  of
approximately  346,000  for  2002.  Reno  is  located  at the base of the Sierra
Nevada  Mountains  along  Interstate  80,  approximately  135  miles  east  of
Sacramento,  California.  The Reno Area is a popular resort spot, which attracts
tourists  by  offering gaming as well as numerous summer and winter recreational
activities.  The  greater Reno Area attracted a total of 5.1 million visitors in
1999.

Sports  Wagering

Sports  wagering  is  legal  in  the  State  of  Nevada  and in numerous foreign
countries,  including Canada, Mexico and Australia.  Sports wagering at Nevada's
race  and sports books increased from approximately $290 million in 1980 to $2.9
billion  in 2000.  During that same period, the number of sports books increased
from  24  to  161 in Nevada.  With the advent of cable and satellite television,
both commercially and privately, viewing access to sporting events has increased
significantly.  When  sporting  events are televised, there is wider recognition
of the sports and the teams involved and increased excitement, which the Company
believes,  leads  to  more  interest  in  sports  betting.

A  sports  wagering facility, or "sports book", is a gambling establishment that
sets  odds  and point spreads and accepts bets on the outcome of sporting events
such as football, basketball, baseball, and hockey games.  Sports books set odds
and  point  spreads  aiming  not  to reflect the final result, but to maintain a
"balanced  book"  by  offering  odds  or  point  spreads that will attract equal
amounts  of  bets  on  each  side of a particular event.  As a general matter, a
customer's  odds  or  point  spread (the "line") are fixed at the time he or she
makes  his or her bet, regardless of any subsequent movement in the line.  Under
this  system,  a  sports book operator attracts bets by changing or "moving" the
line  up or down to encourage wagering on a specific team.  To the extent that a
book  on  a  particular event is not balanced, the book-making operation takes a
risk on the outcome of the event.  This is the fundamental difference from other
forms  of  organized  gambling where profits result from customer play against a
statistical  advantage that

                                       2
<PAGE>

the  gambling operator (the "House") possesses, or in pari-mutuel wagering, used
by  major North American Horse Racing Tracks, and jai alai establishments, where
the  House  receives  a guaranteed percentage for operating expenses, profit and
taxes  and  the  remainder  is  distributed  to  the  winners.

The  fundamental difference is part of the appeal for many sports customers, but
it also creates risk for the sports book.  A bookmaker operates in a system that
is  interrelated with oddsmakers and customers.  Bookmakers collect bets, adjust
odds to account for the preferences of their patrons and pay the winners and, if
the  book  is balanced, for each type of sports bet the House has a "theoretical
advantage".  For  example,  for a straight football bet involving the outcome of
one  game,  it  is  common  practice  that  the  customer wagers $11 to win $10.
Accordingly, if the book were evenly balanced, the sports book would earn $1 for
each  $22  wagered,  or  4.55%  (the  winner  would  receive  $21).

Oddsmakers  (whose services are purchased by the bookmakers) initially set lines
to  hopefully split the bets evenly between the betting participants.  Customers
have  opinions  concerning  the odds and bet accordingly, which requires initial
lines  to  be  adjusted.  As  a  result,  in  practice,  a sports book is rarely
perfectly balanced.  The sports books profit depends upon the reliability of the
oddsmaker  and  its  own  acumen  at  adjusting the odds when required.  Because
customers  are  betting  on  propositions  of uncertain probability and are paid
according to the line at which they make their bets rather than the closing odds
(as  in  a  pari-mutuel  system),  the  sports  book  is not assured of either a
constant  profit  over  time  or  for  a  single  event.

A  sports  book also attempts to limit the potential risk by setting game limits
and  line  movement.  For  example, the opening line for a football game ideally
would  split  the bets from the time it was posted until kick-off.  However, the
opening  line  generally  is unbalanced.  Because a sports book does not want to
take  the  risk  of accepting unlimited bets on one side of a game, it creates a
game  limit,  the  maximum  amount  of money that will be accepted at the posted
line.  When  the  game  limit  is  reached,  the line is changed, or "moved", to
attract  action  on  the  "other"  side.

The  game  limit  is  established  by the sports book based upon the "earn" in a
sport,  which is a function of the amount the sports book would earn if the odds
guaranteed  it a constant commission regardless of the outcome (the "theoretical
hold  percentage"),  and  the  quality  of  the line, and the customer mix.  For
example,  when  the  sports  book anticipates that the majority of the bets will
come  from  sophisticated  customers  who  know  as  much  as, or more than, the
oddsmaker,  the  limit will be relatively low.  The Company believes that events
with  the  highest  fan  popularity  and  media  coverage,  such as professional
football,  have  a  relatively  small  proportion  of  sophisticated  customers.
Accordingly, the sports books expected earn on such an event would be higher and
would  justify  a  higher  game  limit.

In  order  to  effectively balance its books, a bookmaking operation must take a
sufficient  volume  of  wagers to offset large wagers on any given event.  While
many  of  the  large  casinos  in  Las Vegas have sufficient customer traffic to
underwrite  the  risks inherent in a sports book, some large and smaller casinos
typically do not.  Some larger casinos are not interested in operating their own
sports  book  because  of  the  associated  overhead.  As  a result, the Company
believes that many casinos cannot profitably operate a sports gambling operation
and, if they do, they are exposed to significant financial risks associated with
an  "unbalanced  book".  Nevertheless,  many  of these casinos believe that they
need  to  offer  their  customers a sports book to remain competitive with other
casinos.  The  Company  has  attempted  to fill this need and operates 41 sports
books  in major metropolitan areas in Nevada (20 are in the Las Vegas Area, 5 in
the  Reno  Area,  16  throughout  the State of Nevada, including Laughlin, Jean,
Crystal  Bay,  Mesquite,  Elko,  Sun Valley, Spring Creek, Wendover, Winnemucca,
Minden  and  Pahrump).  The  locations include the Riviera Hotel and Casino, the
Tropicana  Resort  and  Casino,  and the Four Queens Hotel and Casino in the Las
Vegas  Area  and the Fitzgerald's Casino, the Carson Nugget Casino, and the Rail
City  Casino in the Reno Area.  Under Nevada gaming law, Leroy's is permitted to
own  and  operate  sports  books located on the premises of other non-restricted
gaming  licensees.  The  remaining  120  sports  books in the state are operated
primarily  by  the  casinos  in  which  they  reside.

When  Leroy's  began  operations  in  1978, it was one of only 7 sports and race
books in Las Vegas. Currently, virtually every major casino in Nevada offers its
patrons  a  sports  and  race  book.  The typical sports book location leased by
Leroy's  encompasses  approximately 300 square feet, contains a board displaying
the  odds, television monitors showing sporting events, betting stations, ticket
sellers  and  cashiers.  Most leases are at fixed rates, are cancelled by either
party  on  30  to  90  days  notice,  and some have incentive (or participation)
clauses.  As  a  bet  is  placed,  the  wagering data is entered into a computer
terminal  which  is  connected via a dedicated phone line to

                                       3
<PAGE>

Leroy's centralized computer system which confirms the line, determines that the
bet  is  within the limits set for the particular event, records the information
on  a  central  data  base and issues a ticket evidencing the bet. The ticket is
then  distributed  to  the  customer  with  Leroy's simultaneously recording the
wager.  Personnel at Leroy's main office monitor all bets and adjust the odds as
necessary  to  reflect  the  various  bets  throughout all of Leroy's locations.

The  Company  believes  that  Leroy's has lower maximum betting limits than many
sports  books  operated  by  the larger casinos.  It has established these lower
limits  in  an  effort  to  limit bets from the more sophisticated customers who
often  place larger bets.  In addition, in order to limit the more sophisticated
bettors  from  utilizing strategies that would provide an advantage, the Company
sets  even  lower limits for bets placed over the telephone, which are currently
accepted  only from within the State of Nevada and limited to $2,200 per day per
customer  unless a higher limit for a specific customer is approved by the State
Gaming  Control Board.  The Company believes that geographical dispersion across
the State of Nevada is more likely to attract bets from customers more evenly on
both  sides  of  a  line,  thereby  further  limiting  its  risk.

Professional  and  college  football  games  currently comprise about 36% of the
amount bet or $31,263,000 at the Leroy's locations with professional and college
basketball  games comprising about 29% or $25,463,000.  Professional baseball is
next  at about 28% or approximately $23,963,000.  Historically, Leroy's business
has  been  seasonal  in  nature  with  approximately  59%  of  its  handle,  or
$51,444,000,  arising  during  the months of September through January.  Leroy's
wagering  handle  for  the  September  2001  to  January  2002  season consisted
primarily  of  football  with  approximately  $32,329,000 (63%), basketball with
approximately $10,187,000 (20%) and baseball with approximately $4,370,000 (8%).
Hockey  and  boxing  comprise  the  majority of the balance.  Leroy's race books
utilize  the same personnel and facilities as its sports books, but Leroy's does
not  set  its  own  odds for race wagering.  Leroy's accepts wagers for races by
offering  race patrons the same odds as the racetracks at which the races occur.
Leroy's  only  offers  race  wagering for a few major events, such as the Triple
Crown  and  the  Breeders  Cup.  Leroy's  Vacation Village location in Las Vegas
offered  pari-mutuel  race  wagering  and operated a daily race book with wagers
merged  into  the  on-track  pari-mutuel pools, however this location was closed
January  8,  2002.  The  Company  is  currently seeking another pari-mutuel race
location.

With  the  popularity and accessibility of computers, bettors in locations where
such  betting  is permitted now have an additional medium from which to wager on
sporting  events.  Online  sport betting has existed for approximately 20 years,
but  until  more  recently, few people had access to a computer or the Internet.
The Company believes that the dynamic growth in home computing combined with the
convenience  of  betting  online will enhance the continued growth of the sports
betting  industry.

In  anticipation  of  this trend, in 1998, Mega$ports (ACT) was formed and later
issued  a  15  year sports betting license from the Australian Capital Territory
Bookmakers  Licensing  Committee  and in March 1999 received regulatory approval
for  its Internet operations from the Australian Capital Territory.  The Company
believes that it was the first Nevada licensed Company to start an online gaming
site.  Its  online  system  permits  high-speed  access  with  secure, encrypted
technology  and  allows  instantaneously  updated  betting  lines  and  account
information  seven  days  a  week,  24  hours a day.  The system was designed to
ensure  various  patron  safeguards  that  are  required  by  Australian Capital
Territory  regulations.  The  system  was also designed not to accept any wagers
from  jurisdictions  that  prohibit sports betting or Internet wagering, such as
the United States.  Patron users, however, allegedly circumvented these controls
and  a  bet from a patron in the United States was allegedly accepted causing an
action  by  the Nevada Gaming Commission against the Company and an agreement to
divest  of  the  Company's  interest  in this operation, which is required to be
completed  by  July  25,  2002,  see  "Legal  Proceedings".

Pari-mutuel  Wagering

Race  -  In  December 1997, Leroy's joined the Nevada pari-mutuel Association to
allow  pari-mutuel  race  wagering  at  one  of  its'  locations.  Leroy's,  in
association  with  a  disseminator,  offered  pari-mutuel  wagering on events at
racetracks  throughout  the  country  including  Santa  Anita  in California and
Aqueduct  in  New  York.  On  January  8,  2002,  due to the closure of Vacation
Village  in  Las  Vegas, Nevada, the Company lost its pari-mutuel race location.
The  Company  is  currently seeking a new location for pari-mutuel race wagering
which  meets  Nevada's  gaming  licensing  and  regulations.

Sports  -  From  December  1998  through  March  2000, the Company test marketed
pari-mutuel  sports  wagering  at its Nevada books and at approximately 18 other
books  throughout  the  State.  The  Company's  subsidiary,  Mega$ports,

                                       5
<PAGE>

Inc.,  acquired,  developed, and marketed the technology under the Mega$ports(R)
trademark.  Lack  of  patron  acceptance  resulted  in the Company's decision to
discontinue  the betting alternative and let its Nevada gaming license expire in
July  2000. The Company, however, has plans to market the pari-mutuel sport game
in  foreign  markets

Systems  Operations

CBS  designs,  installs and maintains computerized sports and race wagering. CBS
is  the leading race and sports wagering systems supplier in the State of Nevada
and  provides either wagering systems and/or services to the majority all of the
sports  and  race books in Nevada that are not operated by the Company's Leroy's
subsidiary.  Casinos and other sports wagering facilities generally purchase the
computerized  wagering  system  and  enter  into  an  agreement  for  repair and
maintenance  of  the  system  and  software  support.  Operating revenues mainly
consist  of race and sports wagering equipment sales and the related maintenance
contract  revenues.  CBS  sells  its race and sports wagering systems to casinos
under  purchase  agreements  and  provides training for the system operators and
terminal  clerks.  CBS does not provide the operations and supervisory personnel
necessary  to  operate  the  system.  The  Company  also  owns  and  supports an
alternative  product,  AWISSI's  Nevada  Sports  Wagering  software.

In  October 1996, when the Company acquired all of the outstanding shares of CBS
from  Autotote  Corporation  and  the  right  to  use  certain software owned by
Autotote  Corporation  and  Autotote  Systems,  Inc.,  certain  agreements  were
executed.  These  agreements  were the subject of certain litigation between the
Company and Autotote Corporation and Autotote Systems Inc,  which was settled in
fiscal  year  ended  January  2001,  see  "Legal  Proceedings"

STOP  designs, installs, and operates a telephone call identification system for
its customers.  The system determines the origin of a telephone call and accepts
or  rejects  a  call based on its origination. The system is used in conjunction
with  telephone  account  wagering  within  the State of Nevada and is currently
operating  for  three  casinos.

Keno  Operations

AWIK  was  formed  during  the  second  quarter  of  fiscal  1999. AWIK designs,
installs,  operates and maintains computerized keno systems.  On April 29, 1999,
AWIK  received  preliminary licensing approval from the Nevada Gaming Commission
to operate a statewide inter-casino linked system keno game.  THE GAME(TM) is an
interactive  system  with  high-tech  video  graphics  and  animation that links
casinos  throughout  the  State  of  Nevada.  THE GAME(TM) is a state-of-the-art
UNIX-based  computer  system  that  is  already  being  used  to  link over 1000
terminals  in  Australia.  AWIK  anticipates  that  THE GAME(TM) eventually will
offer  a  progressive  jackpot  starting  at  $1 million.  AWIK offers casinos a
risk-free  keno  operation as AWIK operates the keno game for the casino and the
casino  receives  a  percentage  of  the  play  from  AWIK.  AWIK received final
licensing  approval  from the Nevada Gaming Commission on November 11, 1999.  On
February 26, 2002 the Company temporarily closed its keno operations.  It is the
Company's  intent to restructure AWIK in the next six months, to reopen the game
and  to  keep  its  keno  gaming license active.  Even if the keno game does not
reopen,  the  Company  intends to use AWIK's manufacturers license for other new
product  development.

Discontinued  Operations

Until  June  30,  1999,  LHC  and  its subsidiary owned and operated a hotel and
restaurant  located  at  3111  West  Tropicana  Avenue,  Las Vegas, Nevada.  The
Company  continued  to lease facilities and operate 65 electronic gaming devices
on  the  premises  through  December 22, 2000, when these casino operations were
also  discontinued.

Operating  Strategy

The  Company's  primary  operating  strategies  for the foreseeable future is to
focus  on  its  core  businesses,  operating race and sports books in Nevada and
developing, selling and maintaining related systems, becoming more efficient and
cutting  costs.  In Nevada, the Company's strategy is to expand upon its current
base  of  41  books.  The  Company  is also developing a new self-service sports
wagering  terminal  which it expects to complete in the fourth quarter of fiscal
2003.  This  new  terminal  would  allow  patrons  to  place wagers on their own
without  the  assistance of employees.  Patrons will be able to wager 24 hours a
day  on  all  available events.  The self-service sports wagering terminal would
allow  the  Company  to  operate profitably in smaller casinos where labor costs
have been prohibitive

                                       5
<PAGE>

and  to  achieve  improved  efficiency  at  larger  casinos.  The  Company  has
implemented  and  is  also  initiating  other  cost  cutting  measures.

The  Company  is  redesigning  the  financial  model for its Keno operations and
intends  to  expand  its  installation  base  and  marketing  efforts  including
inter-casino  linked  progressive  jackpots,  when  financial  resources  become
available.  The  Company  is  exploring their options to re-open the pari-mutuel
sports  game  in  foreign countries.  The Company is also divesting its Internet
wagering  operation  and  has  no plans to redevelop this business source in the
foreseeable  future.

Proposed  Government  Regulation

The Company intends to continue to present casinos with a "turn key" sports book
operation that allows the casinos to satisfy their patron's desires for race and
sports  gaming  without  bearing the risk and overhead associated with operating
the  books  themselves.  Leroy's  anticipates continuing to utilize its computer
and  communication expertise and equipment, by operating its satellite locations
from  one  central  hub,  thereby  reducing  the  overhead  that each individual
location  would  have  in personnel and equipment.  The Company believes that as
televised  sporting events continue to proliferate, sports betting will continue
to grow and the Company expects that it can capitalize on such growth.  On March
22,  2000,  legislation  entitled Amateur Sports Integrity Act was introduced in
Congress.  The  general  purpose  of  the  proposed  legislation  is to prohibit
wagering on games and performances at the Summer and Winter Olympics and on high
school  and  college  games.  Leroy's currently accepts wagers on college games.
Leroy's  estimates  that wagering on college sports represents approximately 29%
of  its revenues.  As of April 2002, the bill has not been passed but would have
a  significant  negative  impact  on  the  Company's  operation if passed in its
present  proposed  form.

Regulation  and  Licensing

The  ownership  and  operation of race and sports books in Nevada are subject to
extensive  state  and  local  regulation.  The  Company's  gaming operations are
subject  to  the  Nevada  Gaming  Control  Act  and its regulations (hereinafter
collectively  referred  to  as  the "Nevada Act") and various local regulations.
The Company's gaming operations also are subject to the licensing and regulatory
control  of  the  Nevada  Gaming Commission (the "Commission"), the Nevada State
Gaming  Control  Board  (the  "Board"), the Clark County Liquor Gaming Licensing
Board, the City of Las Vegas and other local jurisdictions.  The Commission, the
Board, the Clark County Liquor Gaming Licensing Board, the City of Las Vegas and
such  other  local jurisdictions are hereinafter collectively referred to as the
"Nevada  Gaming  Authorities".

The  laws,  regulations  and  supervisory  procedures  of  the  Nevada  Gaming
Authorities  have  their  genesis in various declarations of public policy which
are  concerned  with,  among  other  things:  (i)  the prevention of unsavory or
unsuitable  persons  from having a direct or indirect involvement with gaming at
any  time  or  in  any  capacity;  (ii)  the  establishment  and  maintenance of
responsible  accounting  practices  and  procedures;  (iii)  the  maintenance of
effective  controls  over  the  financial  practices of licensees, including the
establishment  of  minimum  procedures  for  internal  fiscal  affairs  and  the
safeguarding  of  assets  and  revenues,  providing  reliable record keeping and
requiring  the  filing  of  periodic reports with the Nevada Gaming Authorities;
(iv)  the  prevention of cheating and fraudulent practices; and (v) the creation
of  a  source  of  state  and local revenues though taxation and licensing fees.
Changes in such laws, regulations and procedures could have an adverse effect on
the  Company's  gaming  operations.

Leroy's  is  currently licensed by the Nevada Gaming Authorities.  Leroy's holds
41  non-restricted  sports  book  gaming  licenses.  Gaming licenses require the
periodic  payment  of  fees  and  taxes.  Furthermore,  gaming  licenses are not
transferable.

The  Company  is  registered  in Nevada as a publicly traded corporation and, as
such,  is  required  to  submit,  on  a  periodic  basis, detailed financial and
operating  reports to the Commission.  Additionally, the Company may be required
to  furnish  any  other  information requested by the Commission.  No person may
become a stockholder of, or receive any percentage of profits from Leroy's (as a
non-public  entity)  without  first  obtaining  licenses  and approvals from the
appropriate  Nevada  Gaming  Authorities.  The  Company, Leroy's, Casino (closed
December,  2000) and AWIK have received, from the Nevada Gaming Authorities, the
various  registrations,  approvals,  permits  and licenses required to engage in
gaming  activities  in  Nevada.

                                       6
<PAGE>

The  Nevada Gaming Authorities may investigate any individual who has a material
relationship, or involvement with the Company in order to determine whether such
individual is suitable or should be licensed as a business associate of a gaming
licensee.  Officers,  directors  and  certain key employees of Leroy's must file
applications  with  the  Nevada  Gaming  Authorities  and  may be required to be
licensed  or  found  suitable  by  the  Nevada  Gaming  Authorities.  Officers,
directors  and  key  employees  of  the  Company  who  are actively and directly
involved  in  the gaming activities of Leroy's may be required to be licensed or
found  suitable by the Nevada Gaming Authorities.  The Nevada Gaming Authorities
may deny an application of licensing for any cause deemed reasonable.  A finding
of  suitability  is  comparable to licensing, and both require the submission of
detailed  personal  and  financial  information  followed  by  a  thorough
investigation.  An  applicant for licensing or a finding of suitability must pay
all  of  the costs of the investigation.  Changes in licensed positions with the
Company  or  Leroy's  must  be  reported  to  the Nevada Gaming Authorities.  In
addition  to their authority to deny an application for a finding of suitability
or licensure, the Nevada Gaming Authorities also have jurisdiction to disapprove
a change in a corporate position.  The officers and directors of the Company and
its  subsidiaries  have  been  found  suitable by the Nevada Gaming Authorities.

If  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  or  Leroy's,  the  Companies involved would be
required  to  sever  all  relationships  with  such a person.  Additionally, the
Commission may require the Company or Leroy's to terminate the employment of any
person  who  refuses  to  file  appropriate  applications.  Determinations  of
suitability  or  questions  pertaining  to licensing are not subject to judicial
review  in  Nevada.

If  it  were  determined  that the Nevada Act was violated by the Company or its
subsidiaries  the  gaming  licenses  or  registration held by the Company and it
subsidiaries  could  be  limited,  conditioned,  suspended or revoked subject to
compliance  with  certain  statutory and regulatory procedures.  However, at the
discretion  of  the  Commission, the Company and Leroy's and any person involved
could  be subject to substantial fines for each separate violation of the Nevada
Act.  Furthermore,  a supervisor could be appointed by the Commission to operate
the  Company's  gaming  properties  and,  under  certain circumstances, earnings
generated  during  the supervisors appointment (except for the reasonable rental
value  of  the  Company's  gaming properties) could be forfeited to the State of
Nevada.  Limitation,  conditioning  or  suspension  of any gaming license or the
appointment  of  a  supervisor could, and certainly the revocation of any gaming
license  would,  materially  adversely  affect  the Company's gaming operations.

A 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  be  determined  if  the  Commission  has 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 the investigation incurred
by  the  Nevada  Gaming  Authorities  in  conducting  such an investigation.  In
addition,  the Clark County Liquor Gaming Licensing Board has taken the position
that it has the authority to approve all persons owning or controlling the stock
of  any  corporation  controlling  a  gaming  license.

The  Nevada  Act  requires any person who acquires more than 5% of the Company's
voting  securities  to report the acquisition to the Commission.  The Nevada Act
requires  that  beneficial owners of more 10% of the Company's voting securities
apply  to  the  Commission for a finding of suitability within 30 days after the
Chairman  of  the  Board  mails  written  notice requiring such a filing.  Under
certain  circumstances,  an  "institutional  investor", as defined in the Nevada
Act,  which  acquires  more  than  10%,  but not more than 15%, of the Company's
voting  securities may apply to the Commission for a waiver of such a finding of
suitability  if  such  institutional  investor  holds  the voting securities for
investment purposes only.  An institutional investor shall not be deemed to hold
the  voting securities for investment purposes only unless the voting securities
were  acquired  and  are  held  in  the  ordinary  course  of  business  as  an
institutional  investor  and  not  for  the  purpose  of  causing,  directly  or
indirectly,  the election of a majority of the members of the Board of Directors
of  the  Company,  any  change  in  the  Company's  corporate  charter,  bylaws,
management,  policies  or  operations  of  the  Company,  or  any  of its gaming
affiliates,  or  any  other action which the Commission finds to be inconsistent
with  holding  the  Company's  voting  securities  for investment purposes only.
Activities  which  are  not  deemed  to  be  inconsistent  with  holding  voting
securities for investment purposes only include: (i) voting on all matters voted
on  by  stockholders; (ii) making financial and other inquiries of management of
the type normally made by securities analysts for informational purposes and not
to  cause  a  change  in  its management, policies or operations; and (iii) such
other  activities  as  the  Commission  may determine to be consistent with such
investment  intent.  If  the  Commission  grants  a  waiver to an "institutional
investor" the waiver does not include a waiver or exemption from the requirement
for  prior  approval  to  "acquire control" of a registered

                                       7
<PAGE>

corporation.  If  the  beneficial  holder of voting securities who must be found
suitable  is  a  corporation,  partnership  or  trust,  it  must submit detailed
business  and  financial information, including a list of the beneficial owners.
The  applicant  is  required  to  pay  all  costs  of  investigation.

Any  person  who  fails  or  refuses  to apply for a finding of suitability or a
license  within  30  days after being ordered to do so by the Commission, or the
Chairman of the Board may be found unsuitable.  The same restrictions apply to a
record  owner  if  the  record  owner,  after  request,  fails  to  identify the
beneficial  owners.  Any stockholder found unsuitable and who holds, directly or
indirectly,  any  beneficial  ownership  of  the  Common  Stock  of a registered
corporation  beyond  such  period of time as may be prescribed by the Commission
may  be  guilty  of  a criminal offense.  The Company is subject to disciplinary
action  if,  after  it  receives  notice  that  a  person  is unsuitable to be a
stockholder  or  to  have  any  other  relationship  with  the  Company  or  its
Subsidiaries,  the  Company:  (i) pays that person any dividend or interest upon
voting  securities of the Company; (ii) allows that person to exercise, directly
or  indirectly,  any  voting  right  conferred  through  securities held by that
person; (iii) pays remuneration in any form to that person for services rendered
or  otherwise;  or  (iv)  fails  to  pursue  all  lawful efforts to require such
unsuitable  person  to  relinquish his voting securities for cash at fair market
value.  Any  person required by the Commission to be found suitable who is found
unsuitable by the Commission, shall be guilty of a criminal offense if he holds,
directly  or  indirectly,  the  beneficial  ownership  of  the  voting  or  debt
securities  beyond  the  time  prescribed  by  the  Commission.

The  Company is required to maintain a current stock ledger in Nevada, which may
be examined by the Nevada Gaming Authorities at any time.  If any securities are
held  in trust by an agent or by a nominee, the record holder may be required to
disclose  the identity of the beneficial owner to the Nevada Gaming Authorities.
A failure to make such a disclosure may be grounds for finding the record holder
unsuitable.  The  Company  is  also  required  to  render  maximum assistance in
determining  the identity of the beneficial owner.  The Commission has the power
to require the Company's stock certificates to bear a legend indicating that the
securities  are  subject to the Nevada Act. However, to date, the Commission has
not  imposed  such  a  requirement  on  the  Company.

Changes  in control of the Company through merger, consolidation, stock or asset
acquisitions,  management  or  consulting agreements, or any act or conduct by a
person  whereby  he  or  she  obtains  control,  may not occur without the prior
approval of the Commission.  Entities seeking to acquire control of a registered
corporation  must satisfy the Board and the Commission in a variety of stringent
standards  prior  to  assuming  control  of  such  registered  corporation.  The
Commission  may  also  require controlling stockholders, officers, directors and
other  persons  having  a  material  relationship or involvement with the entity
proposed  to  acquire  control,  to  be investigated and licensed as part of the
approval  process  related  to  the  transaction.

The  Nevada legislature has declared that some corporate acquisitions opposed by
management,  repurchases  of  voting  securities  and  corporate defense tactics
affecting  Nevada  gaming  licenses,  and  registered  corporations  that  are
affiliated  with  those  operations,  may  be injurious to stable and productive
corporate  gaming.  The  Commission  has  established  a  regulatory  scheme  to
ameliorate  the  potentially  adverse  effects  of these business practices upon
Nevada's  gaming  industry  and  to  further  Nevada's policy to: (i) assure the
financial  stability  of  corporate  gaming operators and their affiliates; (ii)
preserve  the  beneficial  aspects of conducting business in the corporate form;
and  (iii) promote a neutral environment for the orderly governance of corporate
affairs.  Approvals  are, in certain circumstances, required from the Commission
before  the  Company can make exceptional repurchases of voting securities above
the  current  market price thereof and before a corporate acquisition opposed by
management can be consummated.  The Nevada Act also requires prior approval of a
plan  of recapitalization proposed by a Company's board of directors in response
to a tender offer made directly to the registered Company's stockholders for the
purposes  of  acquiring  control  of  the  registered  corporation.

 License  fees  and  taxes,  computed in various ways depending upon the type of
gaming activity involved, are payable to the State of Nevada and to the counties
and  cities  in  which the Nevada licensees respective operations are conducted.
Depending upon the particular fee or tax involved, these fees indicate taxes are
payable  either  monthly, quarterly or annually and are based upon either: (i) a
percentage  of  gross  revenues  received;  (ii)  the  number  of gaming devices
operated;  or  (iii) the number of table games operated.  A casino entertainment
tax  is  also  paid  by  casino  operations  where entertainment is furnished in
connection  with the selling of food or refreshments. Nevada licensees that hold
a  license  as  an  operator of a slot route, or a manufacturers or distributors
license,  also  pay  certain  fees  and  taxes  to  the  State  of  Nevada.

                                       8
<PAGE>

Any  person who is licensed, required to be licensed, registered, or required to
be  registered,  or  is  under  common  control  with  such  person (hereinafter
collectively referred to as "licensees") and who propose to become involved in a
gaming  venture  outside  the  State  of  Nevada is required to deposit with the
Board,  and  thereafter  maintain,  a  revolving  fund  to  pay  the expenses of
investigation  by  the Board of his or her participation in such foreign gaming.
Due  to  the  Company's  establishment  of  its  Internet  wagering operation in
Australia,  the Company has filed the appropriate foreign gaming reports and has
established  the  required  revolving  fund.  The  revolving  fund is subject to
increase  or  decrease  in  the  discretion  of the Commission. Thereafter, such
licensees  are required to comply with certain reporting requirements imposed by
the  Nevada  Act.  Licensees  are  also  subject  to  disciplinary action by the
Commission  if  they  knowingly  violate  any  laws  of the foreign jurisdiction
pertaining  to  the foreign gaming operation, fail to conduct the foreign gaming
operation  in accordance with the standards of honesty and integrity required of
Nevada  gaming operations, engage in activities that are harmful to the State of
Nevada  or  its  ability to collect gaming taxes and fees, or employ a person in
the foreign operation who has been denied a license or finding of suitability in
Nevada  on  the  basis  of personal unsuitability.  Recent changes in the Nevada
Gaming  Control  Act  would  allow  the  Company  to  seek  a  determination  of
suitability  of  any  associate  or  activity associated with the foreign gaming
opportunity  prior  to  engaging  in  that  activity.

Pursuant  to  the  Professional  and  Amateur Sports Protection Act (hereinafter
referred  to  as  the  "Sports  Protection Act"), which was effective January 1,
1993, the proliferation of legalized sports books and wagering was significantly
curtailed.  Although  the  Sports  Protection  Act  generally  prohibits  sports
wagering  in  every  jurisdiction,  including those jurisdictions subject to the
Indian  Gaming  Regulatory  Act,  the  Sports  Protection Act does permit sports
wagering  in  those  jurisdictions  that authorized sports wagering prior to the
effective  date  of  the Sports Protection Act.  Thus, sports books and wagering
are  permitted to continue to operate in Nevada provided the wager originates in
Nevada  and  is  received  by  a  licensed Sports Book in Nevada.  Moreover, the
Interstate  Wire  Act (hereinafter referred to as the "Wire Act") also prohibits
those  in  the  business  of  betting  and  wagering  from  utilizing  a  wire
communication  facility  for  the transmission in interstate or foreign commerce
any bets, wagers or information assisting in the placing of such bets and wagers
on  any  sporting  event  or contest unless such betting or wagering activity is
specifically  authorized  in  each  jurisdiction  involved.

Leroy's  may  not accept bets received by use of wire communications facilities,
including telephones and computers, unless such bets originated in jurisdictions
wherein such betting or wagering is legal.  Nevada has amended the Nevada Gaming
Control  Act  to  allow  licensed  race  and  sports  books  in Nevada to accept
interstate  pari-mutuel  wagers  from  other  jurisdictions in which pari-mutuel
wagering  is  legal.  However,  the  regulations of the Nevada Gaming Commission
currently prohibit any licensed race and sports book in the State of Nevada from
accepting  any telephone wagers from interstate locations.  In order for Leroy's
to  take  advantage  of the business opportunities provided by this amendment to
the law, the Nevada Gaming Commission must amend its regulatory restrictions "ab
initio"  or  Leroy's  can  petition  the  Commission  to  remove such regulatory
restrictions in whole or in part.  There can be no assurance that any regulatory
amendment  will  be  authorized,  that  any such amendment would be favorable to
Leroy's,  or  that  any  such  amendment  would  not  be  burdensome to Leroy's.

On  March  19,  1997,  a bill entitled the "Internet Gambling Prohibition Act of
1997" was introduced in Congress.  Since its introduction, the original draft of
the  bill  has  been  amended  several  times.  The  general prohibitions of the
legislation  would  prohibit any person from engaging in the business of betting
or  wagering via electronic communication facilities, including the Internet, if
the  transmission  is  not  legal  in  the state or foreign country in which the
transmission  either  originates  or is received.  If this bill becomes law, the
Company's  ability  to  take  advantage  of  interstate  pari-mutuel  wagering
opportunities  would  be  adversely  impacted.  The  Company  and its subsidiary
policy  is  not  to  accept  wagers through the Internet from jurisdictions that
prohibit  sports  betting  or Internet wagering, such as the United States.  See
"Legal  Proceedings".

The  Company's  wholly  owned subsidiary Mega$ports (ACT) is incorporated in the
Australian  Capital  Territory  pursuant  to  the laws of Australia as a Company
limited  by  shares.  Mega$ports  (ACT)  is  subject  to the Corporations Law of
Australia  (a  federal  law)  and  is  regulated  by  the  Australian Securities
Commission.  The Bookmakers Act of the Australian Capital Territory provides the
regulatory regime for licensed bookmakers. Mega$ports (ACT) holds Sports Betting
License Number 5 issued by the Bookmakers Licensing Committee. This Committee is
established  and governed by Division 2 of Part II of the Bookmakers Act. Sports
betting  is  governed  by  Part  IIIA  of the Bookmakers Act. A determination is
subordinate  legislation,  which  is governed by the Subordinate Laws Act of the
Australian  Capital  Territory.  The  Committee  is  the authority, which issues
licenses.  It must be satisfied that the directors and shareholders holding more
than  5%  of  the  stock  of  Mega$ports  (ACT)  have satisfied the "Suitability

                                       9
<PAGE>

Requirements" specified in the Bookmakers Act. The directors of Mega$ports (ACT)
have  satisfied  the Committee of their suitability. They must, however continue
to  satisfy  these  requirements.  If  not,  the  license  may be cancelled. The
Bookmakers  Act  provides for the method of operations that a licensed bookmaker
must  adhere  to.  These  include:  (i)  the acceptance of wagers only in venues
approved  by  the  Minister for Sport; (ii) the Minister of Sport determines the
rules  for  sports  betting;  (iii) the Minister of Sport determines the maximum
number  of  licenses  to  be  issued;  (iv) a sports betting license may only be
granted  to  a  Company  if one Director holds a bookmakers license; and (v) the
period  of  the  license  may  not  exceed  15  years.

The Minister of Sport is empowered by the Bookmakers Act to make determinations,
which  have the status and force of law.  Since the commencement of the Act, the
Minister  has  made  a number of determinations.  Each determination made by the
Minister has the status of subordinate legislation.  A determination becomes law
when  it  is published in the Government Gazette.  A determination is subject to
disallowance  by  the  Assembly.

In December 1999, the Australian Government released its Productivity Commission
Report  on  Australia's  Gambling  Industries.  The  Report  made  certain
recommendations  regarding  the  regulation  of  the  emerging  online  gambling
industry.  Following  this  report,  the  Senate Select Committee on Information
Technologies  issued a report entitled "NETBETS", a review of online gambling in
Australia.  The  Committee  came  up  with  a  series of proposals to cut online
gambling.  One  of  which  was  to  limit the expansion of online casinos with a
moratorium  on  the issuance of online gaming licenses until consumer protection
policies  were  implemented.  This  moratorium  ended  on  May  19,  2001.

In  March  2001,  Australia's  conservative government announced an intention to
prohibit  betting  by  Australian  citizens  on  the  Internet,  via interactive
television  and  mobile  phones.

In  June  2001,  following  a series of amendments, the Interactive Gambling Act
2001  was  passed. This Act makes it unlawful for an Australian licensed service
provider  to  accept  gaming  transactions from any person physically present in
Australia.  Internet  sports wagering was generally exempted from the provisions
of  the  Act,  with  the  exception  of a restriction relating to wagering on an
event,  once  the  event  has  commenced.

In  the nine months since the commencement of the Interactive Gambling Act 2001,
the  restrictions  contained  in  the legislation have not had a material effect
since there has not been a material change in handle or net win relating to  the
operations  of  the  subsidiary.

All  jurisdictions  that have legalized gaming require various licenses, permits
and  approvals  for  manufacturers  and  distributors  of  gaming  devices  and
equipment.  In  general, such requirements involve restrictions similar to those
of  Nevada.

National  Gambling  Impact  Study  Commission

Congress  created  the  National Gambling Impact Study Commission comprised of 9
individuals  appointed by the President.  The general duty of the Commission was
to  conduct  a comprehensive legal and factual study of the gambling industry in
the United States, review existing federal, state and local policy and practices
with  respect  to  the  legalization  or  prohibition  of  gambling  activities,
formulate  and  propose  changes  in  such  policies and practices and recommend
legislation  and administrative actions for such changes.  Among the Commissions
many  findings, some of which relate to the type of activities engaged in by the
Company  are  as  follows:

a.     The  Commission  found that states are best equipped to regulate gambling
within  their  borders,  with  the  exception  of  tribal  and Internet gambling

b.     The  Commission  recommended  that  betting  on  collegiate  and  amateur
athletic  events,  even  where  currently  legal,  be  banned  altogether.

c.     The  Commission  recommended  that  organizations  and  governments  fund
educational and prevention programs to help the public recognize that almost all
sports  gambling  is  illegal  and  can  have  serious  consequences.

d.     The  Commission  recommended  that the federal government should prohibit
Internet  gambling  not already authorized in the United States or among parties
in  the  United  States  and  a  foreign  jurisdiction.

                                       10
<PAGE>

It is not possible to predict the future impact of the Commission on the Company
and  its operations as the Commission could propose legislation and actions that
may  materially  adversely  affect  the  Company's  business.

Competition

There  is  intense  competition  among companies in the gaming industry, most of
which  have  significantly  greater  financial,  marketing,  technical and other
resources than the Company.  Leroy's faces competition from all other sports and
race wagering operations in the Las Vegas Area and throughout Nevada.  There are
currently 161 sports books in Nevada, of which the Company owns and operates 41.
Virtually all of the major casinos in Nevada have sports and race books and keno
parlors,  some  of  which are larger and offer more amenities than the Company's
locations  and  some  casinos  operate sports books at other casinos.  CBS faces
competition  from  the  larger  casinos  as  well as keeping up with the rapidly
growing  field  of  technology.  There  also is a possibility of another systems
provider  moving  to  Nevada.  There are currently approximately 123 keno parlor
locations  throughout  the State.  The Company's inter-casino linked keno system
competes  with  other  distributors of keno systems in Nevada, other keno system
games  and other casino-linked games, including progressive slot machines.  Some
of  these  competitors  are  larger and have greater access to capital resources
than  the  Company.

Gaming has become more accepted by society in recent years.  However, the gaming
industry  is  subject  to  shifting  consumer  preferences  and  perceptions.  A
dramatic  shift  in  consumer  acceptance  or interest in gaming could adversely
affect  the  Company.  In addition, the Company's operations compete, to varying
degrees,  with  gaming  operations  in  other parts of the United States and the
world  and  with  state-sponsored  lotteries,  on  and  off-track wagering, card
parlors,  riverboat  and  Native  American  gaming  ventures  and other forms of
legalized  gaming.  While  the  Las Vegas market is continuing to offer expanded
tourist  attractions, there can be no assurance that this market will be able to
sustain  its  current  growth  or  current  levels of tourism.  Legalized casino
gaming  in  other states and on Native American reservations provide competition
to  the  Company and its primary market and could adversely affect the Company's
operations,  particularly  if  such  gaming  were to occur in areas close to the
Company's  operations.

Future  operating  results  of  the Company are subject to significant business,
economic,  regulatory  and  competitive uncertainties and contingencies, many of
which are beyond the control of the Company.  There can be no assurance that the
Company's  overall  business  strategy  will  be  successful  in  achieving  the
Company's  goal  of attracting additional customers to the Company or increasing
the  Company's  gaming  revenues  and  operating  profits.

Employees

The  Company  and  its  subsidiaries  had  approximately  200 full and part-time
domestic  employees  at  January  31,  2002. 133 are employed by Leroy's, 44 are
employed by CBS, 10 are by Keno and 13 are employed by the Company as of January
31,  2002.  No  employees  of  the  Company  and  its subsidiaries are currently
represented  by  a  labor  union.  In  February 2002, the 10 Keno employees were
terminated or transferred upon the temporary closure of the Keno operations. The
Company,  and  its subsidiaries do not currently know whether or to what extent,
if  any, its employees will, in the future, be governed by collective bargaining
agreements.

The  continuing  proliferation  of legalized gaming in the United States and the
resulting  increase  in  the  number  of  casinos  have  created  a  competitive
environment  for  qualified  casino  management  personnel and other experienced
casino  employees  on  a  national  basis.  Management  believes  that  this
industry-wide  factor will make it more difficult for the Company to attract and
retain  a  trained  labor  force, which may adversely affect the business of the
Company.  If  the  Company  is unable to attract and retain qualified management
personnel,  the  growth  and  profitability  of  the  Company  may  be adversely
affected.

Item  2.     Description  of  Property

The  Company's  corporate  offices,  central  computer  operations  and  systems
operations  are located in a 29,250 square foot building at 675 Grier Drive, Las
Vegas, Nevada, which is owned by the Company's subsidiary, CBS.  CBS is a debtor
under  a  mortgage  loan  on the building of which approximately $1.7 million is
outstanding  as  of  January  31,  2002.  The loan, which accrues interest of 8%
annually,  is  due  in full in September 2015 and is secured by a deed of

                                       11
<PAGE>

trust,  assignment  of  leases and rents in favor of the lender. The Company has
guaranteed  CBS  obligations  under  this  loan.

Leroy's  operates  41  sports  books  subject  to  lease  agreements  in  major
metropolitan  areas  in  Nevada.  The  average  book  occupies approximately 300
square feet and ranges from 80 to 1,000 square feet.  Lease terms generally vary
from  1  to  6  years and typically provide for an automatic 1year extension and
termination  by either party with 90-day notice.  Total rental expense under the
leases  was  approximately $417,000 and $503,000 for the years ended January 31,
2002  and  2001,  respectively.

Item  3.     Legal  Proceedings

Racusin

On  August  23,  1995,  Leroy's  filed a complaint for Declaratory Relief in the
District Court of Clark County, Nevada, requesting that the court declare that 2
written agreements between Leroy's and Michael Racusin, dba M. Racusin & Company
("Racusin"),  were  vague,  ambiguous  and unenforceable contracts.  Racusin had
introduced  certain  underwriters, including Equity Securities Trading Co., Inc.
(one  of  the  underwriters of the Company's initial public offering) to Leroy's
and  provided  certain  advisory  services  for  a  fee.

In  February  2000,  a  jury verdict was rendered.  The jury found that: (i) the
Company  is  the  alter  ego  of Leroy's (ii) Leroy's breached its contract with
Racusin  and  (iii)  Racusin  was  entitled  to  compensation  for  the services
provided.

On  July  12,  2000,  the  court  entered  a  judgment  as  follows:

1.     Racusin  should  receive  $170,251  to  be  set  off against the $756,340
previously  paid  to  Racusin  by  the  Company  on September 5, 1997, leaving a
remaining  credit  to  the  Company  of  $586,089.

2.     Racusin  should  receive  239,819  shares of common stock in the Company.
This  number  of shares was calculated as:  4.5% of $45,000,000 divided by $6.00
per  share,  reduced  by  97,681  shares. ($586,089 divided by $6.00 per share).
Racusin  would  receive  pre-judgment  interest  on  the  239,819  shares.

3.     Racusin  should  recover  his  costs  of  the  suit.

Racusin  filed  an  appeal  of  the  District Courts' decision to enter judgment
asserting  that  the  proper remedy is:  (1) An all cash award; and (2) The cash
award should be based on the value of the stock on the day the IPO was completed
($9.00  per share times 337,500 shares for $3,037,500) and not the IPO valuation
price  used  by  the  District  Court  ($6.00 per share times 337,500 shares for
$2,025,000).

The  Company filed a cross-appeal which challenges the jury's determination that
the Company is the alter-ego of Leroy's; asserts the District Court erred by not
including  interest on $586,089 previously paid by the Company to Racusin in the
set-off;  and  asserts the exclusion of testimony that Racusin received $756,340
in  September  of  1997  constitutes  prejudicial  error.

 The  9th  Circuit  Court of Appeals heard the matter on September 11, 2001.  On
November  1,  2001,  the  9th  Circuit  Court  of Appeals rendered a decision as
follows:  (1)  The  Company  is  the  alter-ego of Leroy's; (2) The exclusion of
testimony  regarding payment of $756,340 to Racusin in September of 1997 did not
constitute  prejudicial  error;  (3)  The District Court erred by not allowing a
set-off  for  accrued  interest  on  amounts  previously  paid  by  the  Company
($586,089);  and  (4)  The  District  Court  erred by giving a stock-based award
rather  than  a  cash-based  award as the stock-based award constitutes specific
performance.

Pursuant  to the decision of the 9th Circuit Court of Appeals, the case has been
remanded back to the District Court for a determination of Racusin's interest in
monetary terms rather than in stock terms. The District Court must calculate the
monetary  value  that  Racusin  would  have been able to recoup from his 337,500
shares.  This  finding is dependent on when Racusin could have begun selling his
shares  (considering "relevant securities" rules), as well as how many shares he
likely  would  have  been  able  to sell at what times, given his large block of
stock  in  a small-capitalization company.  In addition, when the District Court
enters  the  new  cash  damages award on remand, it may appropriately credit the
Company  for  interest  on  the  $586,089  paid to Racusin in September of 1997.

                                       12
<PAGE>

 The  District  Court  has  set  a trial date of September 16, 2002 to hear this
matter.  The  Company  is not able to fully determine the economic impact of the
9th Circuit Court of Appeals decision at this time.  It is further believed that
the  jury's  verdict  establishing damages will be appealed by either Racusin or
the  Company.  Final resolution of this matter is probably 18 to 30 months away.
The  Company has accrued approximately $329,000 in interest toward the judgment.

Imagineering  Systems,  Inc.

On  October 21, 1998, Imagineering Systems, Inc. ("ISI") filed a civil complaint
against the Company claiming, among other things, breach of contract and implied
covenant  of  good  faith  and  fair  dealing.  On November 8, 1998, the Company
brought  an  action  to  recover  on  loans  it  made  to  ISI.

On October 2, 2000, the Company's "Notice for Summary Judgment" for the claim of
relief  for  breach  of  Promissory  Note  was granted.  The Company was awarded
$76,583  plus  interest.  The  execution  of  the  judgment was stayed until the
outcome  of  the  ISI  civil  complaint  is  known.

On October 17, 2000, a trial by jury was held and, on October 30, 2000, the jury
rendered  a  verdict in favor of ISI in the amount of $397,500 plus interest for
breach  of  contract and $1,000,000 plus interest for breach of implied covenant
of  good  faith  and  fair  dealing.

The  Company  immediately  brought  a post-trial motion asking the court to: (1)
disregard  the  jury verdict; (2) order a new trial; or (3) reduce the amount of
the  judgment.  On  February  1,  2001,  the Court filed its decision which: (a)
refused  to  set  aside  the  jury's award of $397,000 on the breach of contract
claim;  and (b) granted a new trial on the issue of damages awarded on the claim
for  breach  of the covenant of good faith and fair dealing unless ISI agreed to
reduce  the judgment for $1,000,000 to $500,000, which they did.  As a result of
the Court's decision and ISI's actions, the award to ISI was effectively reduced
from  $1,397,500  plus  interest  to  $897,500  plus  interest.

The  Company  has  appealed  the Court's decision based upon a number of factors
including,  but  not  limited  to:  (1)  the award for damages on both breach of
contract  and  implied  covenant  of  good faith and fair dealing is contrary to
Nevada contract law; (2) the award of damages for the breach of implied covenant
of good faith and fair dealing constitutes specific performance; and (3) ISI did
not  provide sufficient evidence at trial for the award of damages for breach of
contract.

During  August  2001 and October 2001, the Company participated in court-ordered
settlement  discussions  with  ISI.  During the course of these discussions, the
Company  and  ISI  were  not  able  to  reach  a  mutually agreeable settlement.
Accordingly,  the  Supreme  Court  of  the  State  of  Nevada  issued  an "Order
Reinstating  Briefing" on October 19, 2001.  Pursuant to this order, the Company
must file and serve its opening brief and appendix within one hundred (100) days
from  the date of the order.  The Company believes it will fully comply with the
filing  timeline  established  by  the  court.

The  appellate  briefing  schedule  was  set on March 11, 2002.  Based upon that
schedule  it will take from sixteen to twenty four months before a decision will
be  reached.  The  Company plans to actively pursue this appeal until a decision
is  reached.

Based upon the advice of counsel, the Company has accrued $233,000 plus interest
(net  of  $76,503  plus  interest)  with  respect  to  this  litigation.

Internet  Operations  Investigation

On  December  16,  1999, the Nevada State Gaming Control Board ("Board") filed a
complaint  for  disciplinary  action  against  the Company, referred to as State
Gaming  Control  Board  v.  American  Wagering,  Inc., dba Mega$ports (ACT) (the
"complaint"),  related  to  the  operation of Mega$ports Pty, Ltd., ("Mega$ports
(ACT)").  The  complaint  contains  13 separate counts against the Company.  The
complaint  alleges  the  Company, as a company registered with the Nevada Gaming
Commission,  engaged  in  an unsuitable method of operation due to the fact that
Mega$ports  (ACT)  accepted  a series of wagers from a patron who was physically
located in Las Vegas, Nevada.

                                       13
<PAGE>

The Board further alleged that the acceptance of these wagers was a violation of
both  federal  and  Nevada  State  laws  that prohibit Internet sports wagering.

On  July  27,  2000,  the  Nevada Gaming Commission approved a settlement of the
complaint.  Without  admitting or denying the allegations, the Company agreed to
pay  a  fine of $10,000 and to divest itself of any and all interests and rights
pertaining  to  Mega$ports  (ACT).  Pursuant to the terms of the settlement, the
divestiture  was  to  be  completed by January 27, 2001 subject to the Company's
right  to  request  not more than three 60-day extension periods to complete the
divestiture.

On  January  25,  2002,  having  exhausted  all  extensions,  the  Nevada Gaming
Commission granted the Company an additional six months (until July 25, 2002) to
complete  the divestiture.  Currently, the Company is continuing to search for a
qualified  buyer  for  the  Mega$ports  (ACT)  operation.

Willow  International  Ventures  Corporation

On October 9, 2001, Willow International Ventures Corporation ("Willow") filed a
civil  complaint  against  the  Company  claiming,  among other things:  (1) the
Company's federally trademarked name "Mega$ports" (used in the United States and
Australia)  is  invalid;  (2)  Willow's  ownership  of  the  Internet  domain
"www.megasports.com";  (3)  public  confusion regarding the similarity of names;
(4) unfair competitive practices by the Company; (5) false and misleading use of
the  trademark  "Mega$ports"  by the Company; (6) violation of the Lanham Act by
the  Company;  and  (7)  damages  in  excess  of $75,000 (the exact amount to be
determined at trial).  The complaint required a response from the Company within
twenty  (20)  days after service of the summons upon the Company (which occurred
on  October  11,  2001).  On  October 26, 2001, the Company and Willow agreed to
extend  this  deadline  to  November  20,  2001.

On  November 20, 2001, the Company filed an Answer and Counterclaim to the civil
complaint  brought  by  Willowdenying  the  allegations made therein and seeking
injunctive  relief  and  the  recovery  of  actual  and treble damages, Willow's
profits,  costs,  attorneys'  fees  and  other  relief.

The  Court  has not notified the Company as to the filing timeline of additional
documents  and/or  when  the  matter  may  be heard.  The Company is not able to
determine  the  economic  impact  of this civil action at this time.  An adverse
decision  by  the  Court,  however,  could  reduce the value of the "Mega$ports"
United  States  trademark which is carried as an asset valued at $252,531 on the
Company's  balance  sheet.
..
Autotote  Systems,  Inc.

On  March  3,  1998,  the Company and CBS filed a complaint in the United States
District  Court  for  the  District  of Nevada, against Autotote Corporation and
Autotote  Systems,  Inc.  (collectively  "Autotote")  seeking  to enjoin certain
actions  of  Autotote  and asking for monetary damages for the alleged breach by
Autotote of certain provisions of a Stock Transfer Agreement, a Technology Cross
License  Agreement,  a  Distributorship  Agreement,  and  the  International
Cooperation  Agreement, all of which were executed by the parties on October 25,
1996  (collectively  the  "Agreements"), and for the infringement by Autotote of
CBS  copyright interest in, and the misappropriation and conversion of, CBS race
and  sports  book  software.

On  July  18,  2000, the parties executed a settlement agreement under which the
Company  and  CBS  received  $540,000  and was relieved of its obligation to pay
accrued  royalty  payments  of  $349,997,  in settlement of their claims against
Autotote  and  the  counterclaims  of  Autotote  were  dismissed with prejudice.

In  connection  with  the  Autotote  Corporation  and  Autotote  Systems  Inc.
settlement, the Company and CBS entered into a settlement agreement on March 31,
1999,  with  Hipodromo  De  Agua  Caliente,  S.A.  De C.V. a Mexican Corporation
("Caliente").  Caliente is a customer of Autotote Systems Inc. that uses the CBS
race  and sports book software system.  The company and CBS claimed that the use
of  the CBS race and sports book software by Caliente outside of Mexico breached
the  agreement.  The settlement with Caliente provided for a license to Caliente
to  use  the  race  and sports book software upon terms set forth in the license
agreement.  The  license  agreement  grants  Caliente  a perpetual, nonexclusive
nontransferable  worldwide  right  and license for the sole purpose of operating
the  International  Risk  Management Business.  Caliente agreed to pay a license
fee  of  the $600,000 payable in four equal installments of $150,000 starting on
October  31,  2000.  The  settlement  agreement  was  subject  to  Nevada Gaming

                                       14
<PAGE>

commission  approval of a one-time waiver of a condition on the Company's Nevada
gaming  license prohibiting the expansion of the relationship with Caliente.  On
November  20,  2000,  the  Company  received  approval  from  the  Nevada Gaming
Commission  of  the  one  time waiver of the condition permitting the Company to
receive  the  license  fee payments from Caliente. Through February 6, 2001, CBS
received  $600,000 in license fee payments from Caliente.   In fiscal year ended
January  31,  2001,  the  Company  recorded  a  gain  of  $600,000 as litigation
settlement.

Earnings  Impact

The Company's "Consolidated Statements of Operations for the Years Ended January
31,  2002 and 2001" (see attached financial statements) indicate a Net Income in
the  amount  of  $635,454 for the year ended January 31, 2002 as compared to Net
Income  in  the  amount  of  $464,029  for  the year ended January 31, 2001. The
primary  source  of  the net income for January 31, 2001, however, is litigation
judgments  and  settlements  (chiefly,  Autotote Systems, Inc. and Hippodromo De
Agua  Caliente,  De  C.V.;  refer  to  "Autotote  Systems,  Inc."  in the "Legal
Proceedings"  section)  in  the  amount  of $981,856. Without these nonrecurring
litigation  judgments  and settlements, the Company would have experienced a net
loss  in  the  amount of $517,827.  The primary source of income for January 31,
2002,  however,  was  from  profitable  operations primarily due to cost cutting
measures  and  reduced litigation costs.  Profitable operations in 2002 included
nonrecurring  system  sales  of  approximately  $2,398,000.

Other

The Company or any subsidiary is not a party to any other material pending legal
proceeding,  nor,  to  the  Company's  knowledge,  is  any  other material legal
proceeding  threatened  against  it  or  any  of  its subsidiaries.  The Company
maintains  insurance  coverage,  including  property,  workers  compensation and
general  liability  insurance,  which  it considers adequate for the size of the
Company and the nature of its business.  Management does not believe the outcome
of  the  above-described  proceedings will have a material adverse effect on the
Company's  financial  position  or  results  of  operations.

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

On  November  28, 2001 the Company held its Annual Meeting of Stockholders.  The
matters voted upon at the meeting were the election of directors and approval of
the  2001  Stock  Option  Plan.  The  total  number  of  shares  of common stock
outstanding  at  the  record  date,  October 2, 2001, was 8,137,765 shares.  The
number  of  votes  represented  at this meeting was 7,516,922.  1,447,600 shares
were  represented  in  person  and  6,069,322  shares were represented in proxy.

At  the  meeting,  the Stockholders were asked to elect five directors with each
director to serve until the next annual meeting of the Stockholders or until the
election  and  qualification of a respective successor.  All of the nominees for
director  recommended  by the Board of Directors were elected and the results of
the  voting  were  as  follows:

Name                  Votes  For        Votes  Withheld      Abstentions
----                  -------------     ------------------   -----------
Victor J. Salerno       7,298,687             218,235            None
Timothy  F.  Lockinger  7,298,687             218,235            None
W.  Larry  Swecker      7,298,687             218,235            None
Judy  Salerno           7,298,687             218,235            None
Robert  D. Ciunci       7,298,687             218,235            None

At  the meeting, the Stockholders were asked to approve the Company's 2001 Stock
Option Plan.  The Plan was approved as recommended by the Board of Directors and
the  results  of  the  voting  were  as  follows:

                        Votes  For        Votes  Against      Abstentions
                       -------------     ------------------   -----------
Stock  Option  Plan     5,682,133*           384,339             2,580

*  =  The  total  number of "Votes For" the stock option plan includes 3,201,665
shares in which a vote was not cast on this issue.  Pursuant to the terms of the
Notice of Annual Meeting and Proxy Statement, an un-voted share on this issue is
considered  a  vote  "for"  the  plan.


                                       15
<PAGE>
                                     PART II

Item  5.     Market  for  Common  Equity  and  Related  Stockholder  Matters

The  Company's  Common  Stock  had  been  reported by the NASDAQ National Market
System  under  the  symbol  "BETM" since 1996. On August 3, 2000 the Company was
notified  that  it was not in compliance with all the requirements for continued
listing  on  the  NASDAQ  National market Systems.  Effective August 4, 2000 the
Company's  securities  began  trading  on  the  OTC Bulletin Board (OTCBB).  The
following  table  sets  forth  the  range of high and low bid quotations for the
Company's  Common  Stock  for  each  of the periods indicated as reported by the
NASDAQ  National  Market System and on the NASD Over-The-Counter Bulletin Board.



Quarter Ended      High    Low
----------------  ------  -----
April 30, 2001       3/5    1/3
July 31, 2001        1/2    1/4
October 31, 2001     1/2    1/4
January 31, 2002     1/2    1/5


Quarter Ended     High    Low
----------------  ------  -----
April 30, 2000    15 3/8  3/3/4
July 31, 2000      5 1/2  2 2/5
October 31, 2000       3    3/8
January 31, 2001     3/4    1/5


The  approximate  number  of record holders of shares of the Common Stock of the
Company  outstanding  as  of April 26, 2002 was 42.  No cash dividends have been
declared  or  paid  on  the  Company's  Common  Stock.

Item  6.     Management's  Discussion  and  Analysis  or  Plan  of  Operation

Results  of  Operations  -  Fiscal  year ended January 31, 2002, compared to the
fiscal  year  ended  January  31,  2001

Revenues  for the fiscal year 2002 decreased $185,617 (1.5%) to $12,000,615 from
revenues  of  fiscal  2001.  A  decrease  of  wagering  revenues  of  $1,219,448
primarily  due  to  a  reduction  of  handle  (the  total  amount wagered at the
Company's sports and race books), was offset by a $1,069,086 increase in systems
revenue  primarily due to equipment sales.  The operating income of $744,827 for
2002  was  $1,065,333  better  than  2001  primarily as a result of cost cutting
measures  associated  with refocusing on the Company's core business, its Nevada
race  and  sports  books  and  systems  sales  and  maintenance.

Wagering  Operations

Revenues  from wagering decreased $1,219,448 (15.7%) to $6,532,111 in 2002.  The
decrease  was  primarily  due  to  a  decrease in handle, which was offset by an
increase  in  the  Company's  overall  net  win  percentage (revenues divided by
handle).  Handle  was  $100,411,688 for 2002, a decrease of $13,655,863 (12.0%).
The  Company's  net win percentage was 6.3% in fiscal year 2002 compared to 6.3%
in  fiscal  year  2001.

The  decrease  in  wagering  handle  is  attributable  to  a  number  of reasons
including,  but  not  limited  to,  the  closure of sporting events for the week
following  the September 11 tragedy, and the subsequent scheduling change of the
"Super Bowl" NFL football championship to February 2002, (fiscal year end 2003),
a  decrease  in  the  number  of  locations.  An increase or decrease in handle,
however, is not necessarily indicative of an increase or decrease in revenues or
profits.  There  is  no assurance that the Company's handle will not decrease in
the  future.  Elimination of unprofitable locations, closure of host properties,
changes  in  state  and/or  federal  regulations,  and  other factors beyond the
Company's  control  may  result  in  further  declines  in  handle.

                                       16
<PAGE>

The  number  of  sports  and  race  book locations owned and operated by Leroy's
decreased by 1 (2.4%) to 41 at January 31, 2002. The Company intends to continue
to  open  new  locations  that  management  expects to operate profitably and to
continue its review of existing locations in order to close those locations that
are  not  operating efficiently. There is no assurance that the number of sports
and  race  books  operated by the Company will not decrease in the future due to
elimination  of  unprofitable  locations,  closure of host properties, and other
factors  beyond  the  Company's  control. There is no assurance that the Company
will be able to add new locations and/or that any new locations so added will be
profitable.

Wagering  operating  costs decreased $481,339 (8.9%) to $4,923,534. The decrease
in operating costs were primarily the results of the Company's plan to implement
cost cutting measures. The significant decreases were in rent expense ($93,725),
the  operations  of  the  Mega$ports Australia ($92,534), advertising ($85,248),
gaming  taxes  ($73,180),  and  wages  ($45,321).

Systems  Operations

Equipment  and software license sales increased by $946,187 (65.2%) in 2002, the
Company's  gross  profit margin decreased 8.7% to 61.1% as a result of increased
component costs.  Maintenance revenues increased $69,321 (2.7%) to $2,654,881 in
2002 and related expenses decreased $81,454 (6.0%) to $1,271,356.  CBS equipment
sales are low volume high dollar sales based on the need of the market, which is
limited  based  on  the  number  of  casinos that operate race and sports books.
Equipment  sales  are  not  recurring,  as the impetus for a sale is outdated or
expired  equipment  at  existing  casinos  or  the opening of a new sports book.

Keno  Operations

Keno  operations  commenced  in  August  1999.  Revenues  for 2002 were $166,531
compared  to  $201,787  in  2001.  Operating  costs  also  decreased $327,572 to
$760,296  in  2002.  In  February  2002,  the  Company  temporarily  ceased keno
operations  to  revise  the  keno  system.

Direct  Costs

Total  direct costs for wagering, systems, and keno operations of $7,538,372 for
2002  decreased  $213,086  (2.7%) from 2001 as a result of the matters discussed
above.

Research  and  Development  Costs

Research and development costs of $855,980 for the fiscal year ended January 31,
2002,  increased  by  $11,550  or  (1.4%) from research and development costs of
$844,430  for  the  fiscal  year  ended  January  31,  2001.


Selling,  General  and  Administrative  Costs

Selling,  general  and  administrative costs of $2,160,389 for 2002 decreased by
$456,029  (17.4%)  from  2001  as a result of numerous Company-wide cost cutting
measures.

Depreciation  and  Amortization  and  Asset  Impairment  Provisions

Depreciation  and  amortization  was $701,047 for 2002, compared to $852,337 for
2001  due to disposition of assets.  Provision for asset impairments of $258,250
in  2001  was  a  result  of  the Company's focus on core business and products.

Interest  Expense

Interest  expense  of  $161,087  for  fiscal  year  ended 2002 decreased $17,730
(9.9%).  The  decrease  is  principally  due to the reduced interest paid on the
paid-down  principal  balance  on  the  building  mortgage.

                                       17
<PAGE>

Discontinued  Operations

Loss  from  discontinued  operations  of  $170,939  in  2001  relates  to  the
discontinued  casino  segment.

Current  Year  Earnings

The Company's "Consolidated Statements of Operations for the years ended January
31, 2002 and 2001" (see attached financial statements) indicates a Net Income in
the  amount  of  $914,654  for  the  year  ended January 31, 2002 as compared to
$464,029  for  the year ended January 31, 2001. The primary source of net income
for  2001,  however,  is litigation judgments and settlements (chiefly, Autotote
Systems, Inc. and Hippodromo De Agua Caliente, De C.V.; refer "Autotote Systems,
Inc."  in  the  "Legal  Proceedings" section) in the amount of $981,856. Without
these  nonrecurring litigation judgments and settlements, the Company would have
experienced  a  net loss in the amount of $517,827. The primary source of income
for  fiscal  year  2002  was  income  from  operations  as a result of increased
equipment sales and Company wide cost cutting measures. Additionally, net income
for  fiscal  year  2002  was increased by an income tax benefit in the amount of
$264,815  for  which  there  was  not  benefit  in  fiscal  year  2001.

Liquidity  and  Capital  Resources

Net  working  capital increased $1,471,187 in 2002 to $2,084,474.  Cash provided
by  operating  activities was $1,394,023 for the fiscal year ended 2002 compared
to cash used in operating activities of $437,627 for the fiscal year ended 2001.
Net  cash  used  in  investing activities was $300,943 for the fiscal year ended
2002  compared  to  cash used in investing activities of $114,332 for the fiscal
year ended 2001.  Net cash used in financing activities amounted to $154,248 for
the  fiscal  year  ended January 31, 2002 compared to net cash used in financing
activities  of  $204,701  for  the  fiscal  year  ended  January  31,  2001.

Management  believes that the Company will be able to satisfy its operating cash
requirements  for  at  least  the next 12 months from existing cash balances and
anticipated  cash flows.  The Company plans to accumulate cash liquidity in 2002
to fund possible effects of litigation, seasonality of sports betting, timing of
system  sales,  and  the  possible  effects  of  the proposed legislation to ban
wagering  on  amateur athletic events.  The Company, possibly, has negative cash
flow  exposures  due  to  potential  litigation  judgments  (chiefly Racusin and
Imagineering  Systems,  Inc.;  see  "Legal  Proceedings").  Final  judgments
significantly  in  excess  of  amounts accrued could have a significant negative
impact  on  the  Company's  existing  cash  balances and anticipated cash flows.
Final  judgments  in  connection  with these matters are not expected within the
next  twelve  months.

Forward-Looking  Statement

Certain  information  included in this report and other materials filed or to be
filed  by  the  Company  with the Securities and Exchange Commission (as well as
information included in oral statements or written statements made or to be made
by  the Company) contains statements that are forward looking within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities  Exchange  Act of 1934.  Such statements include information relating
to  current  expansion  projects,  plans for future expansion projects and other
business  development  activities  as  well as other capital spending, financing
sources  and  the  effects of regulations (including gaming and tax regulations)
and  competition.  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 by or on behalf of the Company.  These risks and
uncertainties  include,  but  are  not limited to, those relating to the Company
taking  financial  risks  on the outcome of sports events as a principal betting
against  its patrons, domestic or global economic conditions, changes in federal
or  state tax laws or the administration of such laws, changes in gaming laws or
regulations  (including the legalization of gaming in certain jurisdictions) and
applications  for  licenses  and approvals under applicable laws and regulations
(including  gaming  laws  and  regulations).

                                       18
<PAGE>

Item  7.     Financial  Statements


Report of Independent Auditors                                  25

Consolidated Balance Sheets as of January 31, 2002 and 2001     26

Consolidated  Statements  of Operations for the years
 ended January 31, 2002 and 2001                                27

Consolidated  Statements of Stockholders' Equity for
 the years ended January 31, 2002 and 2001                      28

Consolidated  Statements  of Cash Flows for the
 years ended January 31, 2002 and 2001                          29

Notes to Consolidated Financial Statements                      30

Item  8.     Changes  in  Registrant's  Certifying  Accountants

The  Company  had no changes in or disagreements with its auditors on accounting
or  financial  disclosures  during  the  reported  fiscal  year.

                                       19
<PAGE>

                                    PART III


Item  9.     Directors,  Executive  Officers,  Promoters  and  Control  Persons;
Compliance  with  Section  16(a)  of  the  Exchange  Act

The  directors  and  executive  officers  of  the  Company  are  as  follows:


Name                    Age    Position
----                    ---    --------
Victor J. Salerno       57     President, Chief Executive Officer,
                               Chief Operating Officer, and Director

Timothy  F.  Lockinger  41     Chief Financial Officer, Secretary, Treasurer,
                               and Director

W.  Larry  Swecker      56     Director

Judy  Salerno           50     Director

Robert  D.  Ciunci      55     Director


Victor  J. Salerno has been President, Chief Executive Officer and a Director of
the  Company  since  its  inception.  Mr.  Salerno has been the President, Chief
Executive  Officer and a Director of Leroy's since September, 1979.  Mr. Salerno
served  as an Executive Vice President and Director of Autotote CBS Corporation,
a  Company  that  designs  and  installs computer systems for the sports betting
business,  from  April,  1989  until March, 1996.  He is a past President of the
Nevada  Association  of  Race  and  Sports  Operators.

Timothy F. Lockinger was named Chief Financial Officer, Secretary, Treasurer and
Director  of the Company in January, 2001.  Mr. Lockinger has served the Company
in  various  consulting  practices  since  1989  and,  most recently, joined the
Company  on  a  full-time  basis  in August, 1997 as a manager of Mega$ports and
Leroy's.  Mr.  Lockinger  is  a  Certified  Public Accountant (Inactive) and was
Director  of  Regulatory  Compliance  for  Casino  Data Systems, Chief Financial
Officer  for Si Redd at International Technical Systems, and a Senior Agent with
the  Nevada  Gaming  Control  Board's  Audit  Division  and has operated his own
consulting/accounting  firm.

W.  Larry Swecker became a Director of the Company in April, 2000.  Mr. Swecker,
a  Certified  Public  Accountant,  has been President of Swecker & Company. Ltd.
Certified Public Accountants since January 1979.  Prior to that he was a partner
in the firm of Keltner Milam & Company Certified Public Accountants from 1975 to
1979.  Mr.  Swecker  was  employed  as a revenue agent with the Internal Revenue
Service  from  1972  to  1975.  He  has  a  Bachelor  of  Science  in  Business
Administration  from  the University of Nevada Reno.  Mr. Swecker is a member of
the  Audit, Compensation, Stock Option and Compliance Committees of the Board of
Directors.

Judy Salerno became a Director of the Company in January, 2001.   Ms. Salerno is
the  daughter of Leroy Merillat, the founder of Leroy's Horse & Sports Place and
was  formerly married to Victor Salerno.  Ms. Salerno is a private investor with
numerous  holdings  and  has  been  a  homemaker  for  the  past  five  years.

Robert  D.  Ciunci  has been a director of the Company since August 1, 1995, and
currently is at Autotote Corporation.  Until January, 2001, Mr. Ciunci served as
Chief  Operating Officer, Chief Financial Officer and Secretary and Treasurer of
the  Company,  and  from  January 2 until January 19, 2001, he served as only as
Chief  Financial  Officer.  Mr. Ciunci became the Chief Operating Officer of the
Company  on  March,  1997.  Mr.  Ciunci  had been the Chief Financial Officer of
Leroy's since August, 1995.  From 1981 to June 1995, he was employed by Autotote
Corporation,  a  Company  that  provides  computerized  wagering systems to race
tracks  and  off-track  race  wagering  establishments,  as  its  Vice President
Finance,  Secretary  and  Treasurer.  He  holds  a  Masters  Degree  in business
administration  and  is  a  Certified  Public  Accountant.

Item  10.  Executive  Compensation

The  following  table  sets  forth certain information covering the compensation
paid  or  accrued  by the Company during the Fiscal years indicated to its Chief
Executive  Officer  and  to  its most highly compensated executive officer whose
annual salary and bonus exceeded $100,000 during the year ended January 31, 2001
(these  individuals  may  be  referred  to  as  "named  executive  officers"):

                                       20
<PAGE>

                       SUMMARY  COMPENSATION  TABLE
                       ----------------------------
                                                                Long-Term
                                                                Compensation
                                                                Awards
                                Fiscal                          Underlying
                   Principal    Year     Annual Compensation    Options
Name               Position     Ended    Salary      Bonus ($)  (1)
-----------------  ----------   -------  ----------  ---------- ---------
Victor J. Salerno  Chief        2002     $200,000    $30,000    30,000
                   Executive    2001     $200,000    $23,201         0
                   Officer      2000     $200,000          0         0
Robert D. Ciunci   Chief        2002          N/A        N/A         0
                   Financial    2001     $150,000          0         0
                   Officer      2000     $150,000          0         0



(1)   Mr.  Salerno  and  Mr.  Ciunci  were not granted options during the Fiscal
years  ended  January  31,  2001and  2000.

The  following  table  sets  forth  the number of exercisable and un-exercisable
options  as  of  January  31,  2002  and the value of such options for the Chief
Executive  Officer  and  the  named  Executive  Officers.


            AGGREGATED  OPTION  EXERCISES  IN  LAST  FISCAL  YEAR
                  AND  FISCAL  YEAR-END  OPTIONS  VALUES

                   Number of      % of
                   Securities     Total Options
                   Underlying     Granted to
                   Options        Employees in     Exercise or    Expiration
Name               Granted        Fiscal Year      Base price     Date
-----------------  -------        -----------      -----------    ---------
Victor J. Salerno   30,000        8.4%             $ 0.70         8/8/2006


              AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                    AND FISCAL YEAR-END OPTIONS VALUES

                                             Number of
                                             Securities
                                             Underlying       Value of
                                             Unexercised      Unexercised
                   Number                    Options          In The Money
                   of                        At Fiscal        Options at
                   Shares                    year end         Fiscal Year End
                   Acquired or    Value      Exercisable/     ($)Exercisable/
Name               Exercised      Realized($)Un-exercisable   Un-exercisable
----               -------------  --------   --------------   --------------
Victor J. Salerno   0             $0         30,000/0         $0/$0



Compensation  of  Directors
---------------------------

Directors  who  are not employees or consultants of the Company receive a fee of
$1,000  plus  travel  expenses  for  each  Board meeting they attend.  Committee
Chairman  receives  $500  per  month  for  each  committee  chaired  plus travel
expenses.

During  the  Fiscal  year  ended  January  31,  2002,  pursuant to the Company's
Directors  Stock  Option  Plan,  options to purchase 400 shares of the Company's
Common Stock at an exercise price of $0.35 per share were granted to Mr. Swecker
a Director of the Company, These options become fully exercisable on January 31,
2003  and  expire on January 31, 2012.  On January 31, 2000, options to purchase
400  and  300  shares, respectively of the Company's Common Stock at an exercise
price  of  $8.88  per share were granted to Mr. Barengo and Mr. Hannifin, former
directors  of  the  Company.

Employment  Agreements

On  May  10,  1996,  the  Company entered into employment agreements with Victor
Salerno  and  Robert  Ciunci.  Each  agreement  has  a  5  year initial term and
automatically  renews for a 1 year period unless either party gives the other 60
days  written  notice  to terminate prior to the expiration of the current term.
On  June 11, 1998, Mr. Ciunci's

                                       21
<PAGE>

employment  agreement  was  amended  to  increase  his  base salary. However, on
January  19,  2001  Mr.  Ciunci  resigned  from  his  position with the Company.

Pursuant  to  his employment agreement, Mr. Salerno is employed as the President
and  Chief  Executive  Officer  of  the Company at a base salary of $200,000 per
year.  In  addition, Mr. Salerno is entitled to receive a performance bonus each
calendar  year  equal to 5% of the Company's pre-tax earnings (as defined in the
employment  agreement) for the prior fiscal year.  In the event the agreement is
terminated by the Company in violation thereof, the Company has agreed to pay as
termination  benefits  to  Mr.  Salerno  a  continuation  of  his  base  salary,
performance  bonus  and all other benefits under the agreement for the remainder
of  the then outstanding term. In the event Mr. Salerno dies or becomes disabled
(as  defined  in  the  agreement), the Company has agreed to pay the termination
benefits  for  up  to  one  year.  Mr. Salerno is entitled to participate in the
Company's  benefit  plans  available  to  the  Company's  officers and employees
generally.

Item  11.  Security  Ownership  of  Certain Beneficial Owners and Management and
Related  Stockholder  Matters.

The  following  table sets forth, as of April 23, 2002 the number and percentage
of  shares  of  Common  Stock,  which  according  to information supplied to the
Company, are beneficially owned by: (i) each person who is a beneficial owner of
more  than  5%  of  the  Common  Stock;  (ii)  each  of the directors, and named
executive  officers of the Company individually; (iii) all current directors and
executive  officers  of  the  Company  as  a  group.  Under rules adopted by the
Securities  and Exchange Commission, a person is deemed to be a beneficial owner
of  Common  Stock  with  respect  to  which he or she has or shares voting power
(which  includes  the power to vote or to direct the voting of the security), or
investment  power  (which  includes  the  power  to dispose of, or to direct the
disposition  of,  the  security).  A  person is also deemed to be the beneficial
owner  of  shares  with  respect  to  which  he  or  she  could obtain voting or
investment  power within 60 days of April 30, 2002, such as upon the exercise of
options  or warrants.  Except as otherwise indicated below, the persons named in
the  table  have  sole voting and investment power with respect to all shares of
Common  Stock held by them.  Unless otherwise indicated the principal address of
each  person named in the table is c/o American Wagering, Inc., 675 Grier Drive,
Las  Vegas,  Nevada  89119.

                              Number of
       Name                   Shares         Percentage

Victor J. Salerno            2,164,600            26.4%
Judy Salerno                 1,447,600            17.7%
Robert Barengo                 525,800             6.4%
Robert D. Ciunci               108,000             1.3%
W. Larry Swecker                20,400              .2%
Timothy F. Lockinger            18,000              .2%
                            ----------          -------
All directors and executive
 officers as a
 group (6 persons)           4,284,400            52.3%
                             =========            =====

                                       22
<PAGE>

Section  16(a)  Beneficial  Ownership  Reporting  Compliance

The  following  persons  have  failed to file, on a timely basis, the identified
reports  required  by  section  16(a) of the Exchange Act during the most recent
fiscal  year.

<TABLE>
<CAPTION>

                                   Number    Transactions   Known Failures
                                   Of late   Not Timely     To File a
Name and principal position        Reports   Reported       Required Form
---------------------------        -------   ------------   --------------
Victor J. Salerno,                    2         2            None
President, Chief Executive Officer,
Chief Operating Officer, and Director

Judy Salerno                          1         1            None
Director

Robert Barengo                        0         0            None


Robert D. Ciunci                      Unknown   Unknown      Unknown
Director

W. Larry Swecker                      0         0            None
Director

Timothy F. Lockinger                  0         0            None
Chief Financial Officer,
Secretary, Treasurer, and Director



Item  12.      Certain  Relationships  and  Related  Transactions


None  of  the  following persons has any direct or indirect material interest in
any  transaction  to which the Company is a party since the incorporation, or in
any  transaction  to  which  the  Company  is  proposed  to  be  a  party:

     (a)  any  director  or  officer;
     (b)  any  proposed  nominee  for  election  as  a  director;
     (c)  any  person  who  beneficially  owns,  directly  or indirectly, shares
          carrying  more than 10% of the voting rights attached to the Company's
          common  stock;  or
     (d)  any  relative  or  spouse  of  any  of  the  foregoing persons, or any
          relative  of such spouse, who has the same house as such person or who
          is  a  director  or  officer  of  any  parent  or  subsidiary

The  Company's  policy regarding related transactions requires that any director
or  officer who has an interest in any transaction disclose the presence and the
nature  of  the  interest to the board of directors prior to any approval of the
transaction  by the board of directors.  The transaction may then be approved by
a  majority of the disinterested directors, provided that an interested director
may  be  counted  in  determining the presence of a quorum at the meeting of the
board  of  directors to approve the transaction.  The Company's policy regarding
compensation  for  directors  and  officers  is that the board of directors may,
without regard to personal interest, establish the compensation of directors for
services  in  any  capacity.

On December 9, 1998, the Company redeemed shareholder notes of $1,892,424 in the
aggregate  for 18,924 shares of Series A Preferred Stock at $100 per share.  The
holders  of  the  Series  A  Preferred  Stock  are  entitled  to  receive,  upon
declaration  by  the Board of Directors, cumulative cash dividends at the annual
rate  per  share  of  10%.  Such  dividends  were  payable  in  equal  quarterly
installments on each March 31, June 30, September 30 and December 31,

                                       23
<PAGE>

commencing with December 31, 1998, and have been payable monthly on the first of
each  month  since  1999 by an amendment by the Board of Directors. The Series A
Preferred Stock is not convertible but is redeemable, in whole or (on a pro rata
basis)  in  part, at any time at the option of the Company, by resolution of the
Board  of Directors. A management shareholder has foregone his redemption rights
for  an  indefinite  period  and  the  affected shares have been reclassified to
redeemable  preferred  stocks.  The  holders of Series A Preferred Stock are not
entitled  to  vote  (on  a cumulative basis or otherwise) as a class or with the
Common  Stock  upon  any matters submitted to shareholders for a vote, except as
otherwise  mandated under Nevada law. During fiscal year ending January 31, 2002
there  were  no  shares  redeemed  and  dividends  of  $148,657  were  paid.

                                       24
<PAGE>

P B T K
-------
PIERCY BOWLER
TAYLOR & KERN
-------------
Certified Public Accountants
      Business  Advisors

      A member of
Horwath International


                         REPORT OF INDEPENDENT AUDITORS


To  The  Board  of  Directors  and  Stockholders  of  American  Wagering,  Inc.:

     We  have  audited  the accompanying consolidated balance sheets of AMERICAN
WAGERING,  INC.  (a  Nevada  Corporation) and subsidiaries (the "Company") as of
January  31,  2002  and  2001,  and  the  related  consolidated  statements  of
operations, stockholders' equity and cash flows for the years then ended.  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 auditing standards generally
accepted  in the United States. 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 American Wagering, Inc. and
subsidiaries  as  of  January  31,  2002  and  2001,  and  the  results of their
operations  and  their  cash  flows  for the years then ended in conformity with
accounting  principles  generally  accepted  in  the  United  States.



/s/ Piercy Bowler Taylor & Kern

PIERCY BOWLER TAYLOR & KERN
Certified Public Accountants and Business Advisors
A Professional Corporation




Las Vegas, Nevada
April 26, 2002


(702) 384-1120             Fax: (702) 870-2474     6100 Elton Avenue, Suite 1000
                     Las Vegas, NV  89107-0123  pbtk.com


                                       25

<PAGE>




<CAPTION>

                               AMERICAN  WAGERING,  INC.
                             CONSOLIDATED  BALANCE  SHEETS
                         AS  OF  JANUARY  31,  2002  AND  2001



ASSETS                                                    2002           2001

<S>                                                <C>            <C>
CURRENT ASSETS
   Cash                                             $  3,139,591   $  2,200,759
   Restricted deposits                                   244,480        236,416
   Accounts receivable, net of allowance for
     doubtful accounts of $14,910 and $31,983            664,622        583,193
   Inventories                                           449,137        405,340
   Deferred tax asset, net                               272,000             --
   Prepaid expenses and other current assets             227,468        279,904
                                                    -------------  -------------
                                                       4,997,298      3,705,612
PROPERTY AND EQUIPMENT, net                            3,242,381      3,613,678
GOODWILL                                                 103,725        221,651
OTHER INTANGIBLES                                        367,135        512,594
OTHER ASSETS                                             230,996        329,756
                                                    -------------  -------------
                                                    $  8,941,535   $  8,383,291
                                                    =============  =============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
   Current portion of long-term debt                $     90,586   $     67,925
   Accounts payable                                      248,798        401,729
   Accrued expenses                                    1,118,886      1,047,852
   Unpaid winning tickets                                638,841        910,207
   Customer deposits and other current
     liabilities                                         773,418        488,201
   Net liabilities of business held for sale              42,295        176,411
                                                    -------------  -------------
                                                       2,912,824      3,092,325
                                                    -------------  -------------

LONG-TERM DEBT, less current portion                   1,720,340      1,748,592
                                                    -------------  -------------

REDEEMABLE PREFERRED STOCK  - 2,738 SHARES               273,800        273,800
                                                    -------------  -------------

STOCKHOLDERS' EQUITY
Series A preferred stock - 10% cumulative;
   $.01 par value; authorized: 25,000,000 shares;
   issued and outstanding: 11,924 shares               1,192,400      1,192,400
Common stock - $.01 par value; authorized:
   25,000,000 shares; issued: 7,897,946 shares            78,979         78,979
Additional paid-in capital                            14,382,515     14,382,515
Accumulated deficit                                  (11,291,830)   (12,057,827)
Less 61,100 common shares in treasury, at cost          (327,493)      (327,493)
                                                    -------------  -------------
                                                       4,034,571      3,268,574
                                                    -------------  -------------
                                                    $  8,941,535   $  8,383,291
                                                    =============  =============
</TABLE>



See  notes  to  consolidated  financial  statements.


                                       26

<PAGE>


<TABLE>
<CAPTION>
                            AMERICAN  WAGERING,  INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  FOR THE YEARS ENDED JANUARY 31, 2002 AND 2001


                                                2002           2001
                                            ------------  ------------
<S>                                         <C>           <C>
REVENUES
  Wagering                                  $ 6,532,111   $ 7,567,716
  Systems                                     5,301,973     4,232,886
  Keno                                          166,531       201,787
                                            ------------  ------------
                                            $12,000,615   $12,002,389
                                            ------------  ------------

OPERATING COSTS AND EXPENSES
   Direct costs:
     Wagering                                 4,589,870     5,068,755
     Systems                                  2,301,917     1,850,663
     Keno                                       646,585       832,040
                                            ------------  ------------
                                              7,538,372     7,751,458
   Research and development                     855,980       844,432
   Selling, general and administrative        2,160,389     2,616,418
   Depreciation and amortization                701,047       852,337
   Asset impairment provision                        --       258,250
                                            ------------  ------------
                                             11,255,788    12,322,895
                                            ============  ============

OPERATING INCOME (LOSS)                         744,827      (320,506)

OTHER INCOME (EXPENSE)
  Interest income                                78,152        60,684
  Interest expense                             (161,087)     (178,817)
  Litigation judgment and settlements                --       981,856
  Other, net                                    (12,053)       91,751
                                            ------------  ------------

INCOME BEFORE INCOME TAX BENEFIT                649,839       634,968
INCOME TAX BENEFIT                             (264,815)           --
                                            ------------  ------------

INCOME FROM CONTINUING OPERATIONS               914,654       634,968

LOSS FROM DISCONTINUED OPERATIONS                    --      (170,939)
                                            ------------  ------------

NET INCOME                                  $   914,654   $   464,029
                                            ============  ============


BASIC AND DILUTED INCOME (LOSS) PER SHARE
  Income from continuing operations         $      0.10   $      0.06
                                            ============  ============
  Loss from discontinued operations         $       ---   $     (0.02)
                                            ============  ============
  Net income                                $      0.10   $      0.04
                                            ============  ============

</TABLE>


See  notes  to  consolidated  financial  statements.


                                       27

<PAGE>


<TABLE>
<CAPTION>

                                   AMERICAN  WAGERING,  INC.
                      CONSOLIDATED  STATEMENTS  OF  STOCKHOLDERS'  EQUITY
                      FOR  THE  YEARS  ENDED  JANUARY  31,  2002  AND  2001



                                                                                                  Additional
                                                                                                    Paid-in
                               Preferred Stock         Common Stock         Treasury Stock          Capital

                             Shares    Par Value    Shares    Par Value    Shares       Cost        Dollars
                             -------  -----------  ---------  ----------  --------  ------------  -----------
<S>                          <C>      <C>          <C>        <C>         <C>       <C>           <C>

Balances, January 31, 2000   12,924   $1,292,400   7,885,613  $   78,856  (61,100)  (  $327,493)  $14,296,848

Dividends                        --           --          --          --       --            --            --

Stock options                    --           --      12,333         123       --            --        85,667

Reclassified to redeemable
preferred stock                (238)     (23,800)         --          --       --            --            --
Redemption of preferred
stock                          (762)     (76,200)         --          --       --            --            --

Net income                       --           --          --          --       --            --            --

Balance:  January 31, 2001   11,924   $1,192,400   7,897,946  $   78,979  (61,100)  (  $327,493)  $14,382,515

Preferred stock dividends        --           --          --          --       --            --            --

Net Income                       --           --          --          --       --            --            --
                             --------------------------------------------------------------------------------

Balances, January 31,2002    11,924   $1,192,400   7,897,946  $   78,979  (61,100)  (  $327,493)  $14,382,515
                             =======  ===========  =========  ==========  ========  ============  ===========


See notes to consolidated financial statements


                                                 Accumulated
                                                   Deficit

                                                   Dollars
                                                -------------
<S>                                             <C>

Balances, January 31, 2000                       (12,369,457)

Dividends                                           (152,399)

Stock options                                             --

Reclassified to redeemable
preferred stock                                           --
Redemption of preferred
stock                                                     --

Net income                                           464,029

Balance:  January 31, 2001                      ($12,057,827)

Preferred stock dividends                           (148,657)

Net Income                                           914,654
                                                -------------

Balances,  January 31,2002                      ($11,291,830)
                                                =============


See notes to consolidated financial statements

</TABLE>


                                       28


<PAGE>

<TABLE>
<CAPTION>

                              AMERICAN  WAGERING,  INC.
                     CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
               FOR  THE  YEARS  ENDED  JANUARY  31,  2002  AND  2001


                                                            2002         2001
                                                        -----------  -----------
<S>                                                     <C>          <C>
OPERATING ACTIVITIES
  Net cash provided by (used in) operating activities   $1,394,023   $ (437,627)
                                                        -----------  -----------

INVESTING ACTIVITIES
  Investment in restricted deposits                         (8,064)    (236,416)
  Withdrawals of restricted deposits                            --      350,000
  Purchase of property and equipment                      (398,978)    (227,916)
  Proceeds from sale of assets                             106,099           --
                                                        -----------  -----------
  Net cash provided by (used in) investing activities     (300,943)    (114,332)
                                                        -----------  -----------

FINANCING ACTIVITIES
  Repayment of borrowings                                  (94,209)     (61,892)
  Proceeds from borrowings                                  88,618           --
  Redemption of preferred stock                                 --      (76,200)
  Dividends                                               (148,657)    (152,399)
  Proceeds from stock options exercised                         --       85,790
                                                        -----------  -----------
  Net cash used in financing activities                   (154,248)    (204,701)
                                                        -----------  -----------


CASH USED IN DISCONTINUED OPERATIONS                            --     (108,374)
                                                        -----------  -----------

NET INCREASE (DECREASE) IN CASH                            938,832     (865,034)
CASH AT BEGINNING OF YEAR                                2,200,759    3,065,793
                                                        -----------  -----------
CASH AT END OF YEAR                                     $3,139,591   $2,200,759
                                                        ===========  ===========

</TABLE>



See  notes  to  consolidated  financial  statements.


                                       29

<PAGE>

                             AMERICAN WAGERING, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 2002

1.     Nature  of  Operations  and  Background  Information

Business  Activities

American  Wagering, Inc. and subsidiaries, (collectively, the Company), owns and
operates  41  race and sports wagering facilities (books) in leased space within
casinos throughout the State of Nevada.  In addition, the Company design, sells,
installs,  and  maintains  computerized  race and sports book systems, including
wagering  by  telephone,  systems  in  Nevada.  The Company is in the process of
divesting  of an Internet wagering operation located in Canberra, Australia (See
Note  8).  In  February  2002,  the  Company  temporarily  discontinued its keno
operations  and  is  currently  modernizing the operations.  The operation of 65
slot  and  other  electronic  gaming devices were discontinued in December 2000.

Concentrations

Because  the  Company  operates  primarily  in  the larger metropolitan areas of
Nevada  in  the highly regulated gaming industry, realization of its receivables
and  its  future  operations could be affected by adverse economic conditions in
Nevada  and its key feeder markets in the Western United States, and by possible
future  anti-wagering  legislation  and  regulatory  limitations on the scope of
wagering.  In  addition, approximately 102.6% of the Company's wagering revenues
relate  to  the  Nevada books and are offset by Mega$ports Australia net loss in
revenues.  More  than  one-third  of  that is derived from professional football
events.  If  the professional football season were to be interrupted, by such as
the  September 11, tragedy, this could have significant adverse impact on future
operations.  Management  also  estimates that approximately 29% of the Company's
Nevada wagering relates to college sports and, therefore, the passage of certain
anti-wagering  legislation  pending  in  Congress  could have a material adverse
impact  upon  future  operations.  In  addition,  because  the Company generates
substantial  revenue  from  system  sales  to  a  relatively small population of
potential  customers,  a  decline in the size or number of these contracts could
also  adversely  affect  future  operations.

The  Company  manages its concentrations of credit risk by evaluating the credit
worthiness  of  systems  customers before extending credit and by perfecting and
using,  when  necessary,  security  interests  in the hardware and software.  In
establishing an allowance for doubtful collection, if any, the Company considers
the customer, the relative strength of the Company's legal position, the related
cost  of  any  proceedings, and general economic conditions.  The maximum losses
that the Company would incur if a customer failed to pay would be limited to the
amount  due  after  any  allowances  provided.

2.     Summary  of  Significant  Accounting  Policies

Basis  of  Presentation

The consolidated financial statements include the accounts of American Wagering,
Inc.  (the  Company)  and  its  subsidiaries,  Leroy's  Horse  and  Sports Place
(Leroy's),  Computerized  Bookmaking Systems, Inc. (CBS), AWI Keno, Inc. (AWIK),
AWI  Sports  Systems,  Inc. (AWISSI), Secured Telephone Operating Platform, Inc.
(STOP),  Mega$ports  (ACT)  Pty  Ltd.  (Mega$ports  (ACT)),  American  Wagering
Management  Company,  Inc.  (AWMCI) and three inactive subsidiaries.  Mega$ports
(ACT) principal asset is the Internet wagering operating that is being divested.
The  three  inactive  subsidiaries  include  Leroy's Hotel Corporation (LHC) and
subsidiary  which  owned  and  operated  a  150-room hotel and restaurant in Las
Vegas,  Nevada  until  sold  in June 1999, Mega$ports, Inc. which discontinued a
pari-mutuel  sports betting operation and system it developed in March 2000, and
AWI  Hotel Systems, Inc. (AWIHSI) which held the rights to certain hotel systems
until  sold in June 2000.  All subsidiaries are 100%-owned since June 2000, when
the  Company acquired the remaining minority interest in AWISSI (49%) and AWIHSI
(20%).  All  significant  inter-company  accounts  and  transactions  have  been
eliminated  in  the  consolidation.


                                       30

<PAGE>

Use  of  Estimates

Timely preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect  reported  amounts, some of which may require revision in future periods.
Setting  and  adjusting  betting lines on sporting events that had not yet taken
place  as  of  the most recent balance sheet date might change materially before
the  event  and  within  one  year.

Cash  Equivalents

Cash  equivalents  include  highly liquid investments with initial maturities of
three months or less.  Excluded from cash and cash equivalents as of January 31,
2002,  is  $306,480 in restricted deposits to meet certain Nevada ($100,000) and
foreign ($62,000) regulatory requirements and to bond certain litigation appeals
($138,000)  and  tax  liabilities  ($6,416).  The  foreign regulatory deposit is
included  in  net  liabilities of business held for sale. Excluded from cash and
cash  equivalents  as of January 31, 2001 is $301,416 restricted to meet certain
Nevada  ($100,000)  and  foreign  ($65,000)  regulatory requirements and to bond
certain  litigation  appeals  ($138,000)  and  tax  liabilities  ($6,416).

Inventories

Inventories consisting primarily of systems components and replacement parts are
stated at the lower of cost (based on the first-in, first-out method) or market.

Property  and  Equipment

Property  and  equipment  (Note  3)  is  stated  at  cost,  net  of  accumulated
depreciation  computed  using the straight-line method over the estimated useful
lives  of  the  assets.

Goodwill  and  Other  Intangible  Assets

As  of  the  most  recent balance sheet date, goodwill primarily consists of the
excess  of  the  purchase  price  over  fair  value  of  net  assets acquired in
connection  with  the  acquisition  of  CBS, the subsidiary that designs, sells,
installs,  and maintains the Company's primary computerized race and sports book
systems  product.  Goodwill is currently amortized on a straight-line basis over
the  expected  period of benefit (1 year remaining as of the most recent balance
sheet  date).

Other intangible assets consist of agreements restricting potential competitors,
trademarks,  software  and  rights  for  manufacturing and distribution that are
amortized on a straight-line basis over their estimated useful lives or contract
terms  from  two  years  to  in  perpetuity.

Goodwill  and  other intangible assets are evaluated periodically for impairment
as  events  or  circumstances  warrant.  Such  evaluations  include, among other
analysis, cash flow and profitability projections, including the impact on other
operations  of  the Company, and resulted in write-downs and charging operations
$258,250  as of January 31, 2001, including the immaterial write-down of certain
other  long-lived  assets  in  2001.

In  July  2001,  the  Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards  ("SFAS")  No.  142,  Goodwill  and  Other
Intangibles.  Under  SFAS  142,  goodwill  is no longer subject to amortization
over  its  estimated useful life.  Rather, goodwill and other indeterminate life
intangible  assets are subject to at least an annual fair-value based test which
assesses for impairment.  Additionally, an intangible asset should be separately
recognized  if  the  benefit  of  the  intangible  asset  is  obtained  through
contractual  or  other  legal  rights,  or  if the intangible asset can be sold,
transferred, licensed, rented, or exchanged, regardless of the acquirer's intent
to  do  so.  Management  expects  the  impact  of  this  pronouncement  on  its
consolidated  financial  position  and  results  of operations to be immaterial.

Revenue  Recognition

Fixed  odds  race  and  sports  wagering  revenue  is  the net win from wagering
activities,  which  is  the difference between wagering wins and losses.  Wagers
accepted  on  future  events  are reflected as liabilities (included in


                                       31

<PAGE>

customer  deposits)  until the outcome is known. Wagering revenues also includes
commissions earned on pari-mutuel race wagers. Systems sales are recognized when
the  software and hardware are installed at the customer's location. Maintenance
fee  revenue  is  recognized  evenly  over  the  term  of  the  contract.

Advertising

The Company expenses all advertising costs as incurred.  Advertising expense was
$145,121  and  $157,814  for  2002  and  2001.

Stock-based  Compensation

The  Company  accounts for stock-based employee compensation using the intrinsic
value  method in Accounting Principal Board Opinion No. 25, Accounting for Stock
Issued  to  Employees.  Intrinsic  value  represents  the excess, if any, of the
market  price  of  the  stock  at  the grant date over the exercise price of the
options.

Foreign  Currency  Translation

Assets  and  liabilities  of foreign operations are translated into U.S. dollars
using  rates  of  exchange at the end of the year.   Income and expense accounts
are  translated into U.S. dollars using average rates of exchange.  The net gain
or  loss  resulting  from  translation  is shown as a component of comprehensive
income.  Gains  and  losses  from  foreign currency transactions are included in
direct  costs as a component of operating expenses.  The Company has adopted the
provisions of the Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive  Income.  Gains  and losses from both foreign currency translation
and  foreign  currency transactions for the Fiscal years ending January 31, 2002
and  2001  were  not  material.

Net  Income  Per  Share

Basic  net  income  per share is computed by dividing net income by the weighted
average  number  of common shares outstanding during the year.  Diluted earnings
per share considers potentially dilutive securities (options) as outstanding and
net income is adjusted for preferred stock dividends.  For the operating periods
presented,  the  tables  below reconciles net income and weighted average shares
outstanding  used to calculate basic income per share to those used to calculate
diluted  net  income  per  share:



                                                2002         2001
                                             -----------  -----------
Net income                                   $  914,654   $  464,029
Preferred stock dividends                      (148,657)    (152,399)
                                             -----------  -----------
Net income, as adjusted                      $  765,997   $  311,630
                                             ===========  ===========

Basic weighted average shares outstanding     7,836,846    7,836,846
                                             ===========  ===========
Diluted weighted average shares outstanding   8,007,516    7,836,846
                                             ===========  ===========



Per  share  information from 2001 has been restated since management was advised
by  legal  counsel that shares previously set aside for settlement of litigation
were  technically  not  outstanding.

Financial  Instruments

The  Company's  financial  instruments consist of cash, certificates of deposit,
accounts  and  notes  receivable,  accounts  payable,  accrued  expenses, unpaid
winning  tickets,  advance deposits, and long-term debt.  The Company's cash and
short-term  investments  are  diversified  among security types and issuers, and
approximate fair value.  The fair values of other financial instruments that are
short-term  and/or  that  have  little  or no risk are considered to have a fair
value  equal  to  book  value.  Assets and liabilities that are included in this
category  are  accounts  receivable,  accounts payable, accrued expenses, unpaid
winning  tickets and advance deposits.  The Company believes the fair values and
the  carrying  value  of  notes receivable and long-term debt are not materially
different  from  their  carrying  values  due  to the instruments interest rates
approximating  market rates for similar borrowings at January 31, 2002 and 2001.


                                       32

<PAGE>

Reclassifications

Certain  amounts  in  the  2001  consolidated  financial  statements  have  been
reclassified  to  conform  with  the  2002  presentation.

3.     Property  and  Equipment

Property  and  equipment  consists  of  the following as of January 31, 2002 and
2001:


                                       2002          2001
                                   ------------  ------------
Land                               $   575,000   $   575,000
Building/Improvements                2,142,099     2,139,919
Equipment, furniture and fixtures    2,420,272     2,478,045
Other                                    6,200         6,200
                                   ------------  ------------
                                     5,143,571     5,199,164
Accumulated depreciation            (1,901,190)   (1,585,486)
                                   ------------  ------------
                                   $ 3,242,381   $ 3,613,678
                                   ============  ============


4.  Accrued  Expenses

Accrued  expenses  consist  of  the  following  as of January 31, 2002 and 2001:


                                    2002        2001
                                 ----------  ----------
Payroll and related              $  419,348  $  410,995
Provision for litigation losses     521,212     518,141
Other                               178,326     118,716
                                 ----------  ----------
                                 $1,118,886  $1,047,852
                                 ==========  ==========


5.     Long-term  Debt

Long-term  debt  consists  of  an  8%  mortgage  note  payable  in equal monthly
installments  of  principal  and  interest  through 2015, collateralized by real
property.  As  of  January  31,  2002, annual maturities of total long-term debt
including  interest  for  the  next 5 years range from approximately $211,000 to
$292,000  per  year.

6.     Series  A  Preferred  Stock

In December 1998, the Company repaid shareholder notes of $1,892,424 with 18,924
shares of Series A Preferred Stock at $100 per share.  The holders of the Series
A  Preferred  Stock  are  entitled  to receive, upon declaration by the Board of
Directors,  cumulative  cash  dividends  monthly at the annual rate per share of
10%.  The  Series  A  Preferred  Stock  is not convertible but is redeemable, in
whole  or  (on  a  pro  rata  basis)  in  part, at any time at the option of the
Company,  762  shares  ($76,200) were redeemed for cash in 2001.  The holders of
Series  A  Preferred  Stock  are  not entitled to vote (on a cumulative basis or
otherwise)  as  a  class  or with the Common Stock upon any matters submitted to
shareholders  for  a  vote,  except  as mandated under Nevada law.  A management
shareholder has forgone his right to have shares redeemed in accordance with the
pro-rata  provision  for  an indefinite period and the affected shares have been
reclassified  to  redeemable  preferred  stock and may be put to the Company for
redemption  at  any  time.

7.     Capital  Stock  and  Stock  Options

The  Company's  Board  of  Directors  has approved a program to repurchase up to
250,000  shares  of  the  Company's  Common  Stock from time to time in the open
market.  As of January 31, 2002, 61,100 shares had been repurchased.  The timing
and  amount of future share repurchases, if any, will depend on various factors,
including market conditions, available alternative investments and the Company's
financial  position.

At  both January 31, 2002 and 2001, the Company had in effect stock option plans
(employee  and  director  plans) under which options may be granted to employees
and  directors  of  the  Company.  Under  these plans the Company


                                       33

<PAGE>

has authorized 1,211,500 and 20,000 shares, respectively. At August 9, 2001, the
Company  adopted its "2001 Stock Option Plan" which replaced the Company's "1995
Stock  Option  Plan" for employees. Options granted have an exercise price equal
to  the  market  price  of the Company's common stock on the date of grant and a
term  of  5 to 10 years and generally become exercisable on a single date from 1
to  5  years  from  the  date  of  grant.

Management replaced all outstanding options for employees of the 1995 plans with
the  options  provided  for  in  the  2001  Stock  Option  Plan.

<TABLE>
<CAPTION>

Summarized  information  regarding  the  options  by  recipient  category  follows:

                                                     Employees - Plan               Directors Plan
                                                     ----------------               --------------
                                                 2002                  2001              2002
                                                 ----                  ----              ----
                                                     Wtd Avg               Wtd Avg          Wtd Avg
                                                     Exercise              Exercise         Exercise
                                            Number    Price      Number      Price   Number   Price
                                          --------  ---------  ---------  --------- ------- --------
<S>                                       <C>       <C>        <C>        <C>       <C>     <C>
Outstanding at the beginning of the
year - ("1995 Stock Option Plan")          80,434   $   6.63    208,967   $  6.68    4,800  $ 8.10
  Granted                                 356,769       0.59          0         0      400     .35
  Exercised                                     0          0    (12,333)     5.38        0       0
  Forfeited                                (2,823)       .50   (116,200)     5.79        0       0
  Expired                                       0          0          0         0        0       0
  Terminated, expired, forfeited
   - "1995 Plan"                          (80,434)      6.63
Outstanding at the end of the year        353,946   $   0.59     80,434      6.63    5,200  $ 7.50
                                          ========  ========   =========  ========  ======  ======
Exercisable at the end of the year        353,946   $   0.59     43,400   $  8.94    4,800  $ 8.10
                                          ========  ========   =========  ========  ======  ======
Weighted average fair value of
  options granted on grant date                     $   0.28              $  6.63           $ 7.50
                                                    ========              ========          ======

Options available for grant at the
  end of the year                         857,554               494,566             14,800
                                          ========             =========            ======

                                                            2001
                                                            ----
                                                                  Wtd Avg
                                                                  Exercise
                                                      Number       Price
                                                      ------      ------
<S>                                                   <C>         <C>
Outstanding at the beginning of the year
- ("1995 Stock Option Plan")                           4,800      $ 8.10
  Granted                                                  0           0
  Exercised                                                0           0
  Forfeited                                                0           0
  Expired                                                  0           0
  Terminated, expired, forfeited - "1995 Plan"
Outstanding at the end of the year                     4,800        8.10
                                                      ======      ======
Exercisable at the end of the year                     4,800        8.10
                                                      ======      ======
Weighted average fair value of options
  granted on grant date                                           $ 8.10
                                                                  ======

Options available for grant at the end of the year    15,200
                                                      ======

</TABLE>


                                 Employees
-------------------------------------------------------------------------------
Employees Options                              Average
 Outstanding At                            Contractual Life           Options
January 31, 2002      Exercise Price       Remaining (Years)        Exercisable

      20,751          $  0.50                    9.5                     20,751
      30,108          $  0.50                    9.5                     30,108
      42,524          $  0.50                    9.5                     42,524
      59,245          $  0.60                    9.5                     59,245
     108,318          $  0.60                    9.5                    108,318
      87,000          $  0.70                    9.5                     87,000
       6,000          $  0.40                    9.8                      6,000
     -------                                                            -------
     353,946                                                            353,946
     =======                                                            =======


                                   Directors
-------------------------------------------------------------------------------
Directors Options                              Average
Outstanding At                             Contractual Life          Options
January 1, 2002       Exercise Price       Remaining (Years)        Exercisable

         700          $ 10.75                    5.0                        700
         700          $  6.69                    6.0                        700
        2000          $  5.89                    6.5                       2000
         700          $  6.56                    7.0                        700
         700             8.88                    8.0                        700
         400          $  0.35                   10.0                          0
       5,200                                                              4,800
     =======                                                            =======


The  following  table discloses the Company's proforma net income (loss) and net
income  (loss)  per  share  using  the  alternative  "fair value-based approach"
described  in  Statement  of Financial Accounting Standards No. 123, Stock Based
Compensation.  The table also discloses the weighted-average assumptions used in
estimating  the  fair  value of each option grant on the date of grant using the
Black-Scholes  option-pricing  model.  These assumptions are not listed for 2001
since  no  options  were  granted.

The  proforma  adjustment relates to stock options granted under the "2001 Plan"
for which a fair value on the date of grant was determined using a Black-Scholes
option  pricing  model.

                                         Year Ended
                           January  31,  2002     January  31,  2001
                           ------------------     ------------------
Risk-free interest rate             4.18%


8.     Commitments  and  Contingencies


Litigation  Judgments  and  Settlements

In 1998, the Company filed a complaint against Autotote Corporation and Autotote
Systems,  Inc.  for  infringement of copyrights.  In July 2000, a settlement was
reached  where  the  Company  received  $540,000  in cash and was


                                       34

<PAGE>

relieved of an obligation to pay accrued royalties of approximately $360,000. In
a  related  settlement with a customer of Autotote Systems, the Company granted,
subject  to Nevada regulatory approval, a perpetual, nonexclusive license to the
customer  and  received  a  one-time  fee  of  $600,000.

Since  1995,  the  Company  has  been  in  litigation  with  Michael Racusin who
introduced  certain underwriters to the Company in connection with the Company's
initial  public  offering.  The  Company  disputed  Mr.  Racusin's  claim  for
compensation  under agreements that the Company believed were unenforceable.  In
February 2000, a verdict was rendered in favor of Mr. Racusin and in July 2000 a
judgment  was  entered.  In  addition  to  $756,340  paid  by the Company to the
individual  in September of 1997, the judgment required the Company to issue him
239,819  common  shares,  currently held by the Court.  At January 31, 2000, the
Company  had  reserved 337,500 shares for issuance in this matter.  The judgment
applied  a  portion of the amount previously paid to reduce the number shares to
be  issued to 239,819. The trial court valued the award at $2,025,000 based upon
an  assumed stock price of $6 per share.  Mr. Racusin has appealed claiming that
only  a  cash  remedy  at  a  higher  price  per share ($9) is appropriate.  The
appellate  court agreed that only a cash remedy was appropriate and remanded the
matter  back  to  the trial court for determination.  A trial date of  September
16,  2002, has been set.  A number of yet-to-be adjudicated factors might impact
the  determination  and, accordingly, the Company is not able to fully determine
the  economic  impact  of  these events at this time but believes based upon the
advice  of  counsel  that  an additional cash award may range from approximately
$360,000  to  $1,700,000,  plus  accrued  interest.

In  addition,  the  Company  has  been  involved in litigation with Imagineering
Systems,  Inc  since  March  1998.  In  October 2000, a verdict was rendered and
later  a  judgment  entered  in  favor  of  Imagineering  totaling  $1,397,000.
Imagineering  subsequently agreed to a Court directed alternative to reduce this
amount  to  $897,000.  The Company intends to bond an appeal and believes, based
upon  the advice of legal counsel, that the lower end of the probable loss range
is  substantially  less  than  the  reduced  judgment.

The  ultimate  disposition  of  certain  issues  involved  in  the  Racusin  and
Imagineering  matters  cannot  be  determined  at this time.  In accordance with
Statement  of  Financial  Accounting  Standard  No.  5,  "Accounting  for
Contingencies,"  the Company has recorded an allowance for probable losses equal
to  the lower end of the estimated probable loss range (Note 4) and periodically
revises  these  estimates  as  facts  and  circumstances  change.

The Company is also currently a defendant in a claim alleging that the Company's
"Mega$ports"  trademark  is invalid, among other things, and certain other legal
matters  arising  in the ordinary course of business. The economic impact of the
Mega$ports  claim  and  the Company's counter claim cannot be determined at this
time.  In the opinion of management, based on the advice of counsel, the outcome
of  the other actions will not have a material effect on the financial position,
results  of  operations  or  cash  flows  of  the  Company.

Internet  Wagering  Disciplinary  Action

In  December 1999, the Nevada Gaming Control Board filed a complaint against the
Company  alleging the Company accepted a series of wagers over the internet from
a  patron  who  was physically located in Las Vegas, Nevada and that such action
violated  of  both  federal  and Nevada law.  In July 2000, without admitting or
denying  the  allegations,  the  Company  entered  into  a settlement and paid a
$10,000  fine  and  agreed  to  divest  of  all of its interests in its internet
wagering operations by January 27, 2001, subject if necessary, to three possible
60-day  extensions.  In  January  2001, the Company entered into an agreement to
sell  its  Internet  wagering  operation  to an Australia company for $2,500,000
(AUD).  The  prospective  purchaser  has  since  been  approved  by  Australian
regulators  to  acquire  the  business  but  has been unable to meet the payment
schedule called for in the agreement.  The Company and the prospective purchaser
are attempting to negotiate mutually acceptable revised terms, although there is
no  assurance that an agreement can be reached.  In the event the parties cannot
agree,  the  prospective purchaser would forfeit approximately $125,000 (AUD) of
earnest money, and the Company may have to request additional extensions of time
to  divest.  Management  does  not  believe  the  outcome of the above-described
proceedings  will  have  a  material  adverse  effect  on  the  Company's future
financial  position  or  operations.

Operating  Leases

The  Company  has  operating  lease commitments for the majority of its race and
sports  book locations.  Rent expense for all operating leases was approximately
$417,000  and $503,000 during the operating periods presented.  The Company also
paid  pursuant  to  a  cancelable  lease  $108,000 in 2002 and $187,000 in 2001,
included in rent expense


                                       35

<PAGE>

above,  to  a company whose board of directors includes a shareholder and former
director  of  the  Company.  Future minimums lease payments under non-cancelable
operating  leases  total  $241,772  for  2003, $121,262 for 2004 and $17,006 for
2005.

The  Company  also  leases  a portion of its office building to a tenant under a
non-cancelable  operating lease.  Rental income included in other income for the
operating  periods  presented  and  minimum  future  rentals  through 2004 total
approximately  $124,000  annually.

Discontinued  Operations

In  November  2000,  the  Company  decided  to  discontinue  its  casino  gaming
operations,  consisting  of  65  electronic gaming devices and slot machines and
recorded  a  $68,811 provision for anticipated operating losses through December
22,  2000,  the  closing date of the casino.  The Company also recorded an asset
valuation  allowance of $65,518.  There were no long-term liabilities associated
with  the discontinued segment and its other assets are not material.  Condensed
operating  results  of the casino for the years ended January 31, 2001 consisted
of  revenues  of  $513,698, expenses and provisions of $684,637, and net loss of
$170,939.

9.     Income  Taxes

The  tax  effect  of significant temporary differences representing deferred tax
assets  and  liabilities  for  the  Company  is  as  follows:



Current Deferred Tax Assets               2002          2001
                                      ------------  ------------
Net operating loss carryforward       $ 1,066,593   $ 1,892,766
Depreciation and amortization             335,680         1,643
Allowances for accounts receivable          5,069        10,874
Allowances for inventory obsolesence      100,734       106,842
Accrued liabilities                       290,142        61,292
Other                                          --        13,711
                                      ------------  ------------
                                        1,798,218   $ 2,087,128
Valuation allowance                    (1,526,218)   (2,087,128)
                                      ------------  ------------
                                      $   272,000            --
                                      ============  ============



Income  tax  expense  (benefit)  is  comprised  as  follows:

                                          2002          2001
                                      ------------  ------------
Current                               $     7,185            --
Deferred                                 (272,000)           --
                                      ------------
                                      $  (264,815)           --
                                      ============


The  difference  between the normal federal statutory tax rate of 34% applied to
income  before  income  taxes  and  the  Company's  effective  tax  rate  is:


                                                   2002         2001
                                                -----------  ----------
Income taxes at federal statutory rate          $  220,945   $ 157,770
Non-deductible expenses                             10,099      11,083
Losses of foreign subsidiary                       200,900     227,323
Net operating losses used                         (431,944)   (396,176)
Adjustment to deferred tax valuation allowance    (264,815)         --
                                                             ----------

                                                 ($264,815)         --
                                                ===========  ==========

At  January  31,  2002, the Company had tax net operating loss carry forwards of
$3,137,037  of  which $921,090 will expire in 2019 and $2,215,947 will expire in
2020


                                       36

<PAGE>

10.     Business  Segments

The Company conducts its continuing operations with customers through 3 business
segments,  Wagering  Unit,  Systems  Unit,  and  Keno  Unit.  Its  Wagering Unit
(Wagering)  operates 41 race and sports books throughout Nevada, and an Internet
and  telephone  betting  operation  located  in Canberra, Australia, that it has
agreed  to  divest  of  by  July 25, 2002.  The company's Systems Unit (Systems)
designs,  markets,  installs  and maintains sports and race book systems for the
sports  betting industry.  The Keno Unit (Keno) currently inactive operates keno
games  in  Nevada.

Amounts  for  2001 presented below have been reclassified to conform to the 2002
presentation,  including  the  elimination  of  the discontinued casino segment.
Financial  performance  measurements  for  Wagering,  Systems,  Keno,  and  SG&A
(certain  unallocated  selling, general, and administrative costs) are set forth
below.


                             2002          2001
                                       ------------
Depreciation
   Wagering              $   245,330   $   216,187
   Systems                   142,930       147,355
   Keno                      100,407       185,425
   SG&A                       54,596        13,293
                         ------------  ------------
                         $   543,263   $   562,260
                         ============  ============
Operating Income (loss)
   Wagering              $ 1,608,577   $ 2,163,036
   Systems                 1,531,182       397,153
   Keno                     (593,765)     (886,082)
   SG&A                   (1,801,167)   (1,994,613)
                         ------------  ------------
                         $   744,827   $  (320,506)
                         ============  ============
Capital Expenditures
   Wagering              $   178,356   $    31,316
   Systems                   169,298        30,458
   Keno                       15,370       163,147
   SG & A                     35,953         2,995
                         ------------  ------------
                         $   398,977   $   227,916
                         ============  ============
Identifiable Assets
   Wagering              $ 1,911,352   $ 2,301,438
   Systems                 4,101,278     4,296,418
   Keno                      314,587       715,131
   SG&A                    2,614,318     1,070,304
                         ------------  ------------
                         $ 8,941,535   $ 8,383,291
                         ============  ============


                                       37

<PAGE>

11.     Supplementary  Cash  Flow  Information


                                                        2002          2001
                                                     -----------  ------------
Reconciliation of net income to net cash
    provided by operating activities
    Net income                                       $  914,654   $   464,029
    Depreciation and amortization                       674,285       857,636
    Provision for doubtful accounts                     (17,073)     (156,641)
    Loss on asset dispositions                          147,676        70,810
    Impairment of long-lived assets                          --       258,250
    Minority interest                                        --         5,624
    Cash used in discontinued operations                     --       108,374
    Decrease (increase) in operating assets:
      Accounts receivable                               (64,356)       86,738
      Inventories                                       (43,797)       31,607
      Prepaid expenses                                   52,436        31,788
      Deferred tax assets, net                         (272,000)           --
      Other                                             204,360       350,597
    Increase (decrease) in operating liabilities:
      Accounts payable                                 (152,931)   (1,033,978)
      Accrued expenses                                   71,034      (208,316)
      Unpaid winning tickets                           (271,366)     (978,217)
      Customer deposits and other                       285,217      (502,339)
      Net liabilities held for sale                    (134,116)      176,411
                                                     -----------  ------------

Net cash provided by (used in) operating activities  $1,394,023   $  (437,627)
                                                     ===========  ============

Cash paid for interest                               $  161,540   $   166,707
                                                     ===========  ============

Cash paid for income taxes                           $   14,385            --
                                                     ===========


SUPPLEMENTAL  DISCLOSURES  OF  NON-CASH  ACTIVITIES

Fiscal  Year  ended  January  31,  2002  Transactions  -
None

Fiscal  Year  ended  January  31,  2001  Transactions  -
None

12.     Fourth  Quarter  Adjustments  (Unaudited)

During  the  fourth  quarter  of fiscal year ended January 31, 2002, the Company
revised  its accounting estimate related to the valuation allowance for deferred
tax  assets  increasing  income  $264,815.

During  the  fourth  quarter  of fiscal year ended January 31, 2001, the Company
made  the  following  changes  in  accounting  estimates:

Increased provision for asset valuation impairment            $258,250
Decreased provision for litigation judgments                   (98,338)
                                                              ---------
Decrease in net income                                        $159,912
                                                              =========


                                       38

<PAGE>

Item  13.  Exhibits  and  Reports  on  Form  8-K

     (a)     Exhibits

Exhibit
Number       Description
------       -----------

10           2001  Stock  Option  Plan
21           Subsidiaries
--------

     (b)     Reports  on  Form  8-K

             On  February  14, 2001, the Company filed a Form 8-K with respect
             to Item 5 and  7.


                                       39

<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.


                                              AMERICAN  WAGERING,  INC.

                                                  /s/ Victor Salerno
                                              By: ------------------------------
                                              Victor Salerno,
                                              President and Chief Executive
                                              Officer

     In  accordance  with  the requirements of the Exchange Act, this report has
been  signed  by  the  following  persons  in  the  capacities  and on the dates
indicated.

          Signature                  Title                          Date
          ---------                  -----                          ----

/s/ Victor Salerno
------------------------    President; Chief Executive          April 29, 2002
Victor Salerno              Officer; Director


/s/ Timothy Lockinger
------------------------    Chief Financial Officer,            April 29, 2002
Timothy Lockinger           Secretary Treasurer, and
                            Director


/s/ W. Larry Swecker
------------------------    Director                            April 29, 2002
W. Larry Swecker


/s/ Judith Salerno
------------------------    Director                            April 29, 2002
Judith Salerno




                                       40