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

                                    Form 10-Q


(Mark One)


  X       QUARTERLY  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE  SECURITIES
-----
          EXCHANGE ACT OF 1934 FOR THE QUARTERLY  PERIOD ENDED MARCH 31, 1999 OR


          TRANSITION  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES
-----
          EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______


Commission file number 0-19322


                          POWERHOUSE TECHNOLOGIES, INC.
              (Formerly known as Video Lottery Technologies, Inc.)
             (Exact name of registrant as specified in its charter)


         Delaware                                                     81-0470853
(State or other jurisdiction of                                 (I.R.S. Employer
incorporation or organization)                               Identification No.)


115 Perimeter Center Place, Suite 911
Atlanta, Georgia                                                           30346
(Address of principal executive offices)                              (Zip code)


                                 (770) 481-1800
              (Registrant's telephone number, including area code)


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

Applicable  only to  issuers  involved  in  bankruptcy  proceedings  during  the
preceding five years:

Indicate  by check mark  whether  the  registrant  has filed all  documents  and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.  Yes         No
                            -----      -----

Applicable only to corporate issuers:

The number of shares  outstanding  of the issuer's $ .01 par value Common Stock,
as of the latest practicable date of April 15, 1999, was 10,667,190 shares.

                                     - 1 -

<PAGE>


                          POWERHOUSE TECHNOLOGIES, INC.
                                AND SUBSIDIARIES

                                      INDEX


                                                                            Page
                                                                            ----

PART I.       FINANCIAL INFORMATION

ITEM 1.  Consolidated Financial Statements

              Statements of Earnings
              Three Months Ended March 31, 1999 and 1998                       3

              Balance Sheets
              March 31, 1999 and December 31, 1998                             4

              Statement of Stockholders' Equity
              Three Months Ended March 31, 1999                                5

              Statements of Cash Flows
              Three Months Ended March 31, 1999 and 1998                       6

              Notes to Consolidated Financial Statements                       7

ITEM 2.  Management's Discussion and Analysis of Financial Condition
              and Results of Operations                                       12

ITEM 3.  Quantitative and Qualitative Disclosures About Market Risk           15


PART II. OTHER INFORMATION

ITEM 1.  Legal Proceedings                                                    16

ITEM 2.  Changes in Securities                                                16

ITEM 3.  Defaults Upon Senior Securities                                      16

ITEM 4.  Submission of Matters to a Vote of Security Holders                  16

ITEM 5.  Other Information                                                    16

ITEM 6.  Exhibits and Reports on Form 8-K                                     16

Signatures                                                                    17

                                     - 2 -

<PAGE>



                          PART I. FINANCIAL INFORMATION

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS

                 POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES
                             STATEMENTS OF EARNINGS
                    (in thousands except for per share data)

                                                    Three Months Ended March 31,
                                                    ----------------------------
                                                         1999             1998
                                                         ----             ----

REVENUES:
     Lottery systems                                   $26,038           29,264
     Gaming machines and systems                        15,785            9,924
     Gaming operations                                   9,031            6,848
     Pari-mutuel systems                                 4,486            4,194
                                                       -------           ------
          Total revenues                                55,340           50,230
                                                       -------           ------

COSTS OF REVENUES:
     Lottery systems                                    16,123           19,107
     Gaming machines and systems                         8,237            4,798
     Gaming operations                                   7,087            5,853
     Pari-mutuel systems                                 2,997            2,894
                                                       -------           ------
          Total costs of revenues                       34,444           32,652
                                                       -------           ------

Gross profit                                            20,896           17,578

OTHER OPERATING EXPENSES:
     Selling, general and administrative                 9,835            8,526
     Research and development                            2,396            2,565
     Depreciation and amortization                       5,242            4,820
     Other charges                                       1,328              ---
                                                       -------           ------

Earnings from operations                                 2,095            1,667
                                                       -------           ------

OTHER INCOME (EXPENSE):
     Interest and other income                             527              368
     Interest expense                                   (1,017)            (790)
                                                       -------           ------
          Other expense, net                              (490)            (422)
                                                       -------           ------

Earnings before income taxes and accounting change       1,605            1,245

Income tax expense                                        (994)            (632)
                                                       -------           ------

Earnings before cumulative effect of accounting change     611              613

Cumulative effect of change in accounting principle,
          net                                             (235)             ---
                                                       -------           ------

Net earnings                                             $ 376              613
                                                       =======           ======

SHARE INFORMATION, BASIC AND DILUTED:
     Earnings before accounting change                  $ 0.06             0.06
     Effect of accounting change                         (0.02)             ---
                                                        ------             ----
     Net earnings                                       $ 0.04             0.06
                                                        ======             ====

Weighted average shares:
     Basic                                              10,550           10,467
     Potential common stock (excluded if antidilutive)     544              405
                                                        ------           ------
     Diluted                                            11,094           10,872
                                                        ======           ======

          See accompanying notes to consolidated financial statements.

                                     - 3 -

<PAGE>



                 POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES
                                 BALANCE SHEETS
                      (in thousands except for share data)

                                                         March 31,  December 31,
                                                           1999         1998
                                                           ----         ----
ASSETS
  Current assets:
    Cash and cash equivalents                            $  7,434       16,371
    Restricted short-term deposits                            169        1,992
    Accounts receivable, net                               25,215       21,786
    Current installments of notes receivable, net           6,836        6,179
    Inventories                                            19,602       18,630
    Prepaid expenses                                        3,455        1,574
    Deferred income taxes                                   9,597        9,549
                                                         --------      -------
  Total current assets                                     72,308       76,081

  Property and equipment, net                              87,923       76,355
  Restricted cash deposits                                    285          376
  Notes receivable, excluding current installments          9,482       10,049
  Goodwill, net                                             8,291        8,495
  Intangible and other assets, net                         19,636       17,119
                                                         --------      -------
                                                         $197,925      188,475
                                                         ========      =======
LIABILITIES
  Current liabilities:
    Current installments of long-term debt               $  5,530        4,445
    Accounts payable                                       10,321       12,611
    Accrued expenses                                       19,466       17,848
                                                         --------      -------
  Total current liabilities                                35,317       34,904

  Long-term debt, excluding current installments           59,500       51,765
  Deferred income taxes                                    14,618       13,828
                                                         --------      -------
         Total liabilities                                109,435      100,497
                                                         --------      -------

Commitments and contingencies (see note 7)

STOCKHOLDERS' EQUITY
  Preferred stock, $.01 par value.  Authorized 10,000,000
    shares; no shares issued                                  ---          ---
  Common stock, $.01 par value.  Authorized 25,000,000
    shares                                                    107          106
  Paid-in capital                                          91,357       91,304
  Deferred restricted stock compensation                     (733)        (815)
  Accumulated deficit                                      (2,241)      (2,617)
                                                         --------      -------
         Total stockholders' equity                        88,490       87,978
                                                         --------      -------
                                                         $197,925      188,475
                                                         ========      =======

          See accompanying notes to consolidated financial statements.

                                     - 4 -

<PAGE>


                 POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES
                        STATEMENT OF STOCKHOLDERS' EQUITY
                      (in thousands except for share data)
<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------
                                                                  Restricted                    Total
                         Common         Common                       Stock        Accumu-    Stock-holders'
                         Stock           Stock       Paid-in        Compen-        lated        Equity
                         Issued        par value     Capital        sation        Deficit
-----------------------------------------------------------------------------------------------------------
<S>                     <C>               <C>         <C>            <C>          <C>           <C>

December 31, 1998       10,648,317        $106        91,304         (815)        (2,617)       87,978

Net earnings                   ---         ---           ---          ---            376           376

Shares
  issued to directors        4,461         ---            62          ---            ---            62

Amortization of
  deferred
  restricted stock
  compensation                 ---         ---           ---           82            ---            82

Stock options
  exercised and shares
  issued under
  employee stock
  purchase plan             59,412           1           574          ---            ---           575

Stock redemptions          (45,000)        ---          (583)         ---            ---          (583)
                        ----------        ----        ------         ----         ------        ------

March 31, 1999          10,667,190        $107        91,357         (733)        (2,241)       88,490
                        ==========        ====        ======         ====         ======        ======
-----------------------------------------------------------------------------------------------------------
</TABLE>

          See accompanying notes to consolidated financial statements.

                                     - 5 -

<PAGE>


                 POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES
                            STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                                    Three months ended March 31,
                                                       1999               1998
                                                       ----               ----

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net earnings                                        $   376               613
  Adjustments to reconcile net earnings to net cash
   provided by operating activities:
     Depreciation and amortization                      5,242             4,820
     Cumulative effect of accounting change, net          235               ---
     Other, net                                           228               135
     Changes in operating assets and liabilities:
      Receivables, net                                 (3,519)            4,672
      Inventories                                        (793)           (3,276)
      Prepaid expenses                                 (1,864)             (219)
      Accounts payable                                 (2,290)           (2,434)
      Accrued expenses                                  1,700            (2,065)
      Income taxes                                        899               624
                                                      -------            ------
Net cash provided by operating activities                 214             2,870
                                                      -------            ------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Expenditures on property and equipment           (16,143)           (2,493)
     Expenditures on intangible and other
          noncurrent assets                            (3,720)             (115)
     Proceeds from sales of equipment                      78                97
     Change in restricted cash deposits                 1,914               241
                                                      -------            ------
Net cash used in investing activities                 (17,871)           (2,270)
                                                      -------            ------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from line of credit                      10,000               ---
     Repayments of long-term debt                      (1,180)           (2,489)
     Payments of loan fees                                (92)              ---
     Proceeds from issuance of common stock               575             2,080
     Redemption of common stock                          (583)              ---
                                                      -------            ------
Net cash provided by (used in) financing activities     8,720              (409)
                                                      -------            ------

Net increase (decrease) in cash and cash equivalents   (8,937)              191

Cash and cash equivalents, beginning of period         16,371            13,772
                                                      -------            ------

Cash and cash equivalents, end of period              $ 7,434            13,963
                                                      =======            ======

          See accompanying notes to consolidated financial statements.

                                     - 6 -

<PAGE>


                 POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     a.   Presentation

          The  consolidated   financial   statements  include  the  accounts  of
     Powerhouse  Technologies,  Inc.  and  its  subsidiaries  (collectively  the
     "Company").  All significant  intercompany  balances and transactions  have
     been eliminated.

          The Company has four business segments:
          o    Lottery   systems   includes  the  design,   manufacture,   sale,
               installation and operation of on-line lottery  systems.  Revenues
               are derived from the Company's AWI subsidiary.
          o    Gaming  machines and systems  includes  the design,  manufacture,
               sale and leasing of video  gaming  machines  and central  control
               systems and provision of related services. Revenues are generated
               by the  Company's  VLC and VLC of Nevada  subsidiaries.
          o    Gaming  operations  includes  operating a casino,  gaming machine
               routes and  racetrack.  Revenues are  generated at the  Company's
               Sunland  Park  Racetrack & Casino and  through its Montana  route
               operations.
          o    Pari-mutuel  systems includes the design,  manufacture,  sale and
               operation of computerized  pari-mutuel  wagering  systems used at
               racetracks.  Revenues are provided by the  Company's  United Tote
               subsidiary.

          The  consolidated   balance  sheet  as  of  March  31,  1999  and  the
     consolidated  statements  of  earnings  and cash flows for the  three-month
     periods  ended March 31, 1999 and 1998 and the  consolidated  statement  of
     stockholders'  equity for the three-month  period ended March 31, 1999 have
     been prepared by the Company,  without audit.  These  financial  statements
     should be read in conjunction  with the consolidated  financial  statements
     and notes  contained in the  Company's  1998 Annual Report on Form 10-K. In
     the opinion of management,  all adjustments (consisting of normal recurring
     adjustments) necessary to present fairly the financial position, results of
     operations  and cash flows as of and for the  periods  indicated  have been
     made.

     b.   Management estimates

          The  preparation of financial  statements in conformity with generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that affect the reported amounts of assets and liabilities and
     disclosure  of  contingent  assets  and  liabilities  at  the  date  of the
     financial  statements  and the  reported  amounts of revenues  and expenses
     during  the  reporting  period.  Actual  results  could  differ  from those
     estimates.

     c.   Accounting pronouncements not yet adopted

          Statement of Financial Accounting Standards No. 133 ("Statement 133"),
     issued  June 1998,  establishes  accounting  and  reporting  standards  for
     derivative  instruments,  including certain derivative instruments embedded
     in other  contracts  (collectively  referred  to as  derivatives),  and for
     hedging  activities.  Statement  133  requires an entity to  recognize  all
     derivatives  as either assets or  liabilities in the statement of financial
     position and measure those  instruments  at fair value.  This  statement is
     effective  for  fiscal  years  beginning  after  June  15,  1999.   Initial
     application  of it  must  be as of  the  beginning  of an  entity's  fiscal
     quarter.  The Company expects to adopt this statement  January 1, 2000; the
     adoption is not  expected  to have a  significant  effect on the  Company's
     financial position, results of operation or cash flows.


2.   OTHER CHARGES

     The  statement  of earnings for the quarter  ended March 31, 1999  includes
$1.3  million  ($1.1  million or $0.10 per  diluted  share after tax) of charges
relating to the Company's  proposed merger with Anchor

                                     - 7 -

<PAGE>

                 POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Gaming and the startup of the  Company's  casino at its Sunland  Park  facility.
Costs related to the proposed  merger consist  primarily of  professional  fees,
while those  associated with the casino startup include  pre-opening  costs from
January 1, 1999 through  February 21,  1999.  Approximately  $0.9 million of the
other charges relate to the Company's proposed merger with Anchor Gaming,  while
$0.2 million represent Sunland Park casino startup costs.

3.   CUMULATIVE EFFECT OF ACCOUNTING CHANGE

     Pursuant to the required adoption of Statement of Position 98-5 (SOP 98-5),
the Company  changed its method of  accounting  for  startup  costs.  The change
required that startup costs be expensed as incurred rather than  capitalized and
amortized  to  expense.   This  change  resulted  in  the  write-off  of  casino
pre-opening costs  capitalized  through December 31, 1998. The cumulative effect
of the write-off  totals $235,000 or $0.02 per diluted share (after tax), and is
reflected in the  accompanying  statement  of earnings.  As discussed in Note 2,
costs incurred  during 1999 were expensed as incurred.  The adoption of SOP 98-5
would not have had a  significant  effect on net  earnings or earnings per share
for the three months ended March 31, 1998;  as such,  pro forma  results are not
presented.

4.   INVENTORIES

     A summary of inventory follows:

                                                     March 31,      December 31,
                                                       1999             1998
                                                       ----             ----
                                                      (000s)           (000s)
     Manufacturing:
        Raw materials                                 $ 6,802           6,497
        Work-in-process                                 1,551           1,166
        Finished goods                                  9,589           9,604
     Customer service and other                         1,660           1,363
                                                      -------          ------
                                                      $19,602          18,630
                                                      =======          ======

5.   STOCKHOLDERS' EQUITY

     During the quarter,  the Company purchased 45,000 shares of its outstanding
stock pursuant to a stock buyback authorized by the Company's Board of Directors
in 1998; such shares were cancelled.

6.   SEGMENT DATA

                                                    Three Months Ended March 31,
                                                       1999             1998
                                                       ----             ----
                                                      (000s)           (000s)

     Segment revenues:
        Lottery systems                               $26,038          29,264
        Gaming machines and systems                    15,855          10,041
        Gaming operations                               9,031           6,848
        Pari-mutuel systems                             4,591           4,316
                                                      -------          ------
          Total revenues                               55,515          50,469
       Less intercompany                                 (175)           (239)
                                                      -------          ------
          Consolidated revenues                       $55,340          50,230
                                                      =======          ======

                                     - 8 -

<PAGE>

                 POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                                    Three Months Ended March 31,
                                                       1999             1998
                                                       ----             ----
                                                      (000s)           (000s)

     Earnings from operations before other charges:
        Lottery systems                              $ 3,579            3,211
        Gaming machines and systems                    2,320              914
        Gaming operations                                392              (90)
        Pari-mutuel systems                             (394)            (372)
                                                     -------           ------
           Reportable segments' earnings from
             operations before other charges           5,897            3,663
        Corporate expenses                            (2,474)          (1,996)
                                                     -------           ------
           Consolidated earnings from operations
             before other charges                    $ 3,423            1,667
                                                     =======           ======

     Earnings from operations including other
       charges:
        Lottery systems                                3,579            3,211
        Gaming machines and systems                    2,320              914
        Gaming operations                                (42)             (90)
        Pari-mutuel systems                             (394)            (372)
                                                     -------           ------
           Reportable segments' earnings from
             operations including other charges        5,463            3,663
        Corporate expenses                            (3,368)          (1,996)
                                                     -------           ------
           Consolidated earnings from operations
             including other charges                 $ 2,095            1,667
                                                     =======           ======

                                                    March 31,       December 31,
                                                       1999             1998
                                                       ----             ----
                                                      (000s)           (000s)

     Segment assets:
       Lottery systems                              $ 72,158           57,880
       Gaming machines and systems                    53,872           52,107
       Gaming operations                              30,779           28,194
       Pari-mutuel systems                            22,430           22,357
                                                    --------          -------
          Reportable segments' assets                179,239          160,538
       Corporate assets                               18,686           27,937
                                                    --------          -------
          Consolidated assets                       $197,925          188,475
                                                    ========          =======

7.   COMMITMENTS AND CONTINGENCIES

     The  Company  has  employment  agreements  with  certain  of its  executive
officers that provide for lump sum severance payments and accelerated vesting of
options and  restricted  stock upon  termination  of  employment  under  certain
circumstances or a change in control, as defined.  The Company's proposed merger
constitutes  a change  in  control  as  defined  in  certain  of the  employment
agreements  as well as in certain stock  incentive  and  incentive  compensation
arrangements.

     The Company is obligated to provide services and/or equipment under certain
of its  contracts.  In addition,  the various  state  on-line  lottery and video
gaming  contracts  contain  provisions under which the Company may be subject to
monetary penalties for central computer downtime,  terminal failures,  delays in
servicing  inoperable  terminals  within specified time periods and ticket stock
shortages  among other things.  The Company accrues any net losses in fulfilling
the terms of these  contracts  when the loss is probable  and can be  reasonably
estimated.

                                     - 9 -

<PAGE>

                 POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     The Company  typically posts bid,  litigation,  and  performance  bonds for
on-line  lottery  contracts.  At March 31, 1999,  the Company had  collateral in
support  of  the  various  bonds  outstanding  consisting  of  $7.5  million  of
irrevocable  standby  letters  of  credit.  Should  the  Company  fail  to  meet
contractually  specified  obligations  during the  contract  term,  the  lottery
authority may assess damages and exercise its right to collect on the applicable
bond. An additional $1.0 million in letters of credit is outstanding  related to
supplier and rental contracts entered into in the ordinary course of business.

     The Company has had disputes with customers over implementation  schedules,
deliverables and other issues. The Company works with these customers to resolve
these differences; however, should the Company be unable to resolve any disputes
in a mutually  satisfactory manner, the Company may suffer negative consequences
in its  relationships  with these and other  customers and its pursuit of future
business. The ultimate cost to the Company of such damages (if any) would be net
of its claims under risk management policies in effect as appropriate.

     A significant percentage of the Company's consolidated revenues are derived
from  sales  to  customers  in  jurisdictions  that  have  enacted   legislation
permitting various types of gaming.  Such enacted  legislation may change due to
political and economic  conditions  within the  jurisdiction  which could have a
material  adverse  effect upon the Company's  financial  position and results of
future operations.

     International  sales  denominated  in  foreign  currencies   accounted  for
approximately  $9.2 million or 4.3% of the  Company's  consolidated  revenues in
1998.  Management  can give no assurances  that changes in currency and exchange
rates will not materially affect the Company's  revenues,  costs, cash flows and
business  practices  and  plans.  Additional  risks  inherent  in the  Company's
international  business  activities  generally  include  unexpected  changes  in
regulatory requirements,  tariffs and other trade barriers,  delays in receiving
payments  on  accounts  receivable  balances,   reimbursement   approvals  (both
governmental and private),  difficulties in managing  international  operations,
potentially  adverse tax consequences,  restrictions on repatriation of earnings
and  the  burdens  of  complying  with  a  wide  variety  of  foreign  laws  and
regulations.  In addition, the Company's foreign operations would be affected by
general economic  conditions in the  international  markets in which the Company
does  business,  such  as  a  prolonged  economic  downturn  in  Europe  or  the
Asian-Pacific region. There can be no assurances that such factors will not have
a material  adverse effect on the Company's future  international  revenues and,
consequently,  on  the  Company's  business,  financial  condition,  results  of
operations and cash flows. The Company has not  historically  attempted to hedge
the risks of fluctuating  exchange  rates given the currencies  involved and the
terms of payment granted to its customers.

     The Year 2000 issue is pervasive and complex.  Virtually every  information
technology  ("IT") system,  including the Company's  internal  systems,  systems
delivered to customers,  and suppliers'  systems, as well as non-IT systems will
be affected in some way by the  rollover  of the  two-digit  year value to "00".
Non-IT systems include  manufacturing systems and physical facilities including,
but not limited to,  security  systems and  utilities.  The result  could create
errors  in  information  or  system  failures.   Recognizing  this  uncertainty,
management  has and is  continuing  to  actively  analyze,  assess  and plan for
various Year 2000  issues.  Management  has  appointed a task force that reports
periodically  to the Company's CEO and Board of Directors,  and has also engaged
outside consultants to assist and advise management in this assessment process.

     The  Company's  Year 2000 team has  completed  an  inventory  of all of its
computer  systems and technology  that may be impacted by Year 2000 issues.  The
programming  and testing of mission  critical  systems,  including those systems
delivered  to customers or used in the  provision of services to  customers,  is
complete and contingency  plans have been developed.  In calendar year 1999, the
Company plans to replace or upgrade the remaining systems that are identified as
non-Year-2000  compliant at an incremental cost of  approximately  $0.5 million.
Non-IT system issues are more difficult to identify and resolve.  The Company is
actively  identifying  non-IT  Year 2000  issues  concerning  its  products  and
services,  as well as its  physical  facility  locations.  As  non-IT  areas are
identified,  management  formulates  the  necessary  actions  to ensure  minimal
disruption  to its business  processes.  Although  management  believes that its
efforts will be successful and the costs will be immaterial to its  consolidated
financial  position  and  results of  operations,  it

                                     - 10 -

<PAGE>

                 POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

also  recognizes  that any  failure or delay  could  cause a  disruption  in its
business and may have a significant financial impact.

     The  Company has  evaluated  its  strategy  and legal  obligations  for any
communication to its customers. The Year 2000 readiness of its customers varies,
and the Company is  encouraging  its customers to evaluate and prepare their own
systems.  In many cases the Company is assisting  customers by providing  new or
modified systems to resolve Year 2000 issues.

     The Company is also assessing the Year 2000 readiness of its key suppliers.
The  Company's  direction  in this effort is to ensure the adequacy of resources
and  supplies to  minimize  any  potential  business  interruptions.  Management
expects  to  complete  this part of its Year 2000  readiness  plan in the second
quarter of 1999. As part of the Company's contingency plans, management will, as
considered  necessary,  begin  to  identify  and  communicate  with  alternative
suppliers to ensure the continuation of its critical business operations.

     The Company believes that because of modifications already made and current
plans for additional  modifications  of existing  computer  systems,  updates by
vendors  and  conversion  to new  software,  the Year 2000  issue  will not pose
significant operations problems for the Company.  However, if such modifications
and conversions are not completed properly or in a timely manner, or third party
software and systems  relied on by the Company  fail,  the Year 2000 issue could
have a material impact on the business and operations of the Company.  The costs
of  modifications  and conversions are not anticipated to be material,  and will
principally   represent  a  re-deployment  of  existing  or  otherwise   planned
resources.  No assurance can be given that the Company will  successfully  avoid
any problems associated with the Year 2000 issue.

     In March 1996, Ladbroke Holdings del Peru S.A. ("Ladbroke") filed an action
in the United  States  District  Court,  Eastern  District of Michigan,  against
United Tote Company and the Company. The complaint alleged, in part, that United
Tote had  violated an agreement  that it had entered  with  Ladbroke to "supply,
install,  commission and operate" a number of wagering terminals and that United
Tote,  without  justification,  notified  Ladbroke that it was  terminating  the
agreement.   Ladbroke  alleged  that  United  Tote  and  the  Company's  conduct
constituted a breach of contract,  wrongful termination of contract,  fraudulent
misrepresentation and tortious interference with contract/business relationship.
The  complaint  does not  specify  a damage  figure  but seeks  recovery  of all
"actual,  incidental  and  consequential  damages."  The Company and United Tote
filed a counterclaim  against Ladbroke  alleging claims for breach of certain of
Ladbroke's   obligations   under  the  contract  and  unjust   enrichment.   The
counterclaim  alleged,  in part,  that Ladbroke  failed to identify a sufficient
number of viable retailer  locations,  and failed to promote,  design and market
the game so as to create  sufficient  demand.  The case is in discovery  and the
Company intends to continue to vigorously defend the action.  The Company cannot
reasonably predict the ultimate outcome of this litigation.

     The Company is involved in various other claims and legal  actions  arising
in the  ordinary  course  of  business.  In the  opinion  of  management,  after
consultation with legal counsel, the ultimate disposition of these other matters
will not have a material adverse effect on its consolidated  financial  position
or results of operations or liquidity.

                                     - 11 -

<PAGE>

                 POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES

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

     Certain statements in this Report on Form 10-Q constitute  "forward-looking
statements"  within the meaning of Section 27A of the Securities Act of 1933 and
Section  21E of  the  Securities  Exchange  Act of  1934.  Such  forward-looking
statements  involve  known and unknown  risks,  uncertainties  and other factors
which may cause the actual results,  performance or achievements of the Company,
or  industry  results,  to be  materially  different  from any  future  results,
performance,  or  achievements  expressed  or  implied  by such  forward-looking
statements. Such factors include, among others, the following:  general economic
and  business  conditions;   competitive  factors  in  the  industry,  including
additional  competition  from  existing  competitors  or future  entrants to the
industry; social and economic conditions;  local, state and federal regulations;
changes in business strategy or development  plans; the Company's  indebtedness;
quality of management;  availability,  terms and deployment of capital; business
abilities and judgment of personnel;  availability of qualified  personnel;  and
other factors.

Recent Developments
-------------------

     On March 9, 1999,  the Company  signed a definitive  merger  agreement with
Anchor Gaming.  Subject to  shareholder  and  regulatory  approval,  Anchor will
acquire all  outstanding  shares of the  Company's  common  stock for $19.50 per
share  (approximately $220 million) plus net debt (approximately $70 million) in
an all-cash merger. A special meeting of the Company's shareholders is scheduled
for June 7,  1999,  at which  the  shareholders  will  vote on the  merger.  The
transaction is expected to close in the third quarter of 1999.

First Quarter 1999 Compared with First Quarter 1998
---------------------------------------------------

     Consolidated  revenues  increased by 10% to $55.3 million compared with the
first quarter 1998,  while  consolidated  gross profit increased by 19% to $20.9
million.  The revenue increase resulted from the casino opening at the Company's
Sunland Park Racetrack & Casino and continued  increases in casino market gaming
machine  sales.  Gross margin  increased  from 35% in 1998 to 38% in 1999 due to
higher  margin on AWI  equipment  and software  sales and the casino  startup in
February  1999.  Earnings  from  operations  were $2.1  million in 1999 and $1.7
million in 1998 and include  other  charges of $1.3 million  ($1.1  million,  or
$0.10 per share,  after tax).  Approximately  $0.9 million of the other  charges
relate to the Company's  proposed merger with Anchor Gaming,  while $0.2 million
represent Sunland Park casino startup costs.

                                 Lottery Systems
                                 ---------------

     Total revenues from the lottery systems  segment  decreased by 11% to $26.0
million.  Gross  profit  margin for the lottery  systems  segment was 38% in the
first  quarter  1999  compared  with 35% in 1998.  Profit  derived  from service
revenues  was 36% in 1999 and 35% in 1998,  while  profit  provided  by  lottery
system and terminal sales was 86% in 1999 and 41% in 1998. The current quarter's
86% margin reflects sales of inventories  which had previously been written off.
The Company  expects  gross  profit  margins from  on-line  lottery  revenues to
continue  increasing over time,  although no assurances of increased margins can
be given.

     The Company  expects the lottery  systems  segment to remain a  significant
segment of the Company and the segment's  growth is dependent upon  management's
strategy to  selectively  bid on domestic  lottery  contracts  and  aggressively
pursue international  on-line lottery  opportunities.  On-line lottery contracts
for several state lotteries are currently,  or will be, up for procurement  over
the  next  three  years.  Due to the  high  cost  of  implementing  new  lottery
contracts,  the  Company  is  targeting  those  states  which it  believes  will
establish a bidding process based exclusively on technical capability, price and
service.  This strategy allows the Company to efficiently allocate its resources
so that it may also continue to pursue international growth  opportunities.  The
Company  is  currently   pursuing   potential   opportunities  in  a  number  of
jurisdictions  worldwide that are expected to implement on-line lottery programs
within the next two years.

                                     - 12 -

<PAGE>

                 POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES

     The Company's on-line lottery system MasterLink(R)  affords the Company the
ability to develop  add-on  products  and  services.  Given the  maturity of the
on-line  lottery  industry,  operators  are in need of ways to increase  lottery
ticket sales and reduce costs.  The Company  expects to develop new products and
services  every  year for its  existing  customers  as well as reduce  operating
costs.

     In March 1999, AWI and the Florida Lottery signed an amended contract under
which AWI will  provide an on-line  lottery  system and related  services to the
Florida  Lottery.  A decision by the Lottery  not to join the  multi-state  game
Powerball(R)  necessitated  the  renegotiation  of the contract  entered into in
October 1998. Under the amended contract,  the Company will design,  install and
operate a new statewide on-line lottery system for an initial term of five years
and three months, with two, two-year renewal options. The Company estimates that
revenues   from  the  contract  over  the  initial   63-month   period  will  be
approximately  $200 million.  AWI will be  compensated at a base rate of on-line
sales and, if on-line  ticket  sales  exceed  targeted  amounts,  an  additional
incentive  rate.  An  attempt by the losing  vendor to enjoin the  contract  was
rejected by the Florida district court; the decision has been appealed.

                           Gaming Machines and Systems
                           ---------------------------

     Revenue from the gaming  machines and systems  segment  increased by 59% to
$15.8  million in the first  quarter of 1999  compared  with the same  period in
1998.  1,314 units were delivered in 1999 compared with 835 units in 1998. Gross
profit  margin on gaming  machines and systems  revenue was 48% in 1999 compared
with 52% in 1998.

     The  $5.9  million  revenue  increase  over  1998  reflects  the  Company's
significant  sales in the casino gaming market;  the success of VLC's innovative
Coin-Free(TM)  technology,  which provides cash vouchers for winnings instead of
coins; and AGS central system sales.

     The Company  expects the gaming  machines  and systems  segment to remain a
significant segment of the Company's  operations.  The growth and success of the
segment is dependent  upon the  Company's  ability to expand its position in the
worldwide video lottery gaming machine market,  to continue to penetrate  casino
markets  such as  Nevada,  Mississippi  and New  Jersey  and to  develop  casino
opportunities at pari-mutuel  racetracks  similar to the Company's  racetrack in
Sunland Park, New Mexico.  The Company believes that new  international  markets
and the  replacement of older gaming machines and systems in Australia and North
America  will  provide  for  significant  future  growth  opportunities  for the
Company.  Penetration  and  growth  of  sales to  casino  markets  is  primarily
dependent on the  production of games which  generate  greater than average play
and net win, and on  broadening  the product line while  offering a  competitive
price.  The Company  believes that its gaming  machines are capable of producing
greater than average play and net win amounts reflecting their superior graphics
technology  and  playability.  Developing  casino  opportunities  at pari-mutuel
racetracks is dependent  initially  upon the enactment of  legislation  to allow
gaming at racetrack facilities.  A small number of states, including New Mexico,
West  Virginia,   Delaware,  Iowa,  Rhode  Island  and  Louisiana  have  enacted
legislation to allow gaming at racetracks and the Company  anticipates the trend
to continue although there can be no assurance of it.

                                Gaming Operations
                                -----------------

     Gaming  operations  revenue,  which includes the new casino at Sunland Park
and route and racetrack operations,  increased by $2.2 million compared with the
same period last year. On February 22, 1999, the casino addition opened with 152
gaming machines,  increasing to 296 gaming machines by March 31, 1999, resulting
in an average of 206 machines in service during the 38-day period.  Gross margin
from gaming operations increased from 13% in 1998 to 22% in 1999.

     Revenue from route  operations  was $4.2 million in the first  quarter 1999
compared with $4.5 million in 1998. Profit margin from route operations remained
consistent  at 27% in both  1999  and  1998.  Margin  on  racetrack  and  casino
operations  increased  to a profit  of 15% in 1999  from a loss in 1998.  Casino
operations provided a 27% margin,  while racetrack and other operations provided
a 3% margin.

                                     - 13 -

<PAGE>

                 POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES

     Current  New Mexico law allows up to 300  gaming  machines  at each  racing
facility  operating  for up to twelve  hours per day.  The  Company's  casino is
located  in  Sunland  Park,  New  Mexico,  adjacent  to El Paso,  Texas,  with a
population base of two million  residents within a 100-mile radius.  Although no
assurances  can be given as to the continued  success of the casino  operations,
the  Company  expects  casino  revenues  to  become  a  significant  portion  of
consolidated revenues.

                               Pari-mutuel Systems
                               -------------------

     Revenue from the pari-mutuel  systems segment increased by 7% due primarily
to revenues  from five new  customers.  Gross profit margin was 33% in the first
quarter 1999 compared with 31% in 1998. The Company  provides  wagering  systems
and service to over 120 of the approximate  350 pari-mutuel  facilities in North
America, including Churchill Downs which has consistently set new attendance and
wagering records with the Company's wagering system and services.

         Declines in on-track  wagering at pari-mutuel  facilities  have created
increased pricing pressures for the Company and its pari-mutuel wagering systems
supplier competitors. The Company does not anticipate those pricing pressures to
decrease  in the  near  future.  Accordingly,  the  Company  plans  to  maintain
profitability  by  improving  customer  service  while  maintaining  or reducing
operating  costs.  In 1998 the Company  introduced  a new  hardware and software
platform, the Horizon NT 2000(TM) System. The new platform, using Windows NT(TM)
and the Pentium  Plus(TM)  family of  servers,  allows the Company to reduce its
capital costs and be more competitive by creating regional hub systems.  The new
platform  can be  operated  on multiple  hardware  platforms,  which the Company
believes is attractive in international markets and could increase market share.
The Company  believes  that  expansion of gaming at  racetracks  could  increase
attendance and on-track wagering at racetracks.  A number of jurisdictions  have
considered or are considering gaming at racetracks.

Selling, General and Administrative Expenses
--------------------------------------------

     Selling, general and administrative ("SG&A") expenses increased 15% to $9.8
million in the first quarter 1999,  increasing  from 17% to 18% of  consolidated
revenues.  The  increase  was in the  gaming  machines  and  systems  and gaming
operations  segments as well as at the corporate  level. The gaming machines and
systems segment increase resulted  primarily from increased sales efforts and an
increase in the provision for bad debts necessitated by the significant increase
in accounts and notes  receivable  compared  with March 31, 1998 levels.  Gaming
operations  expenses  increased due to personnel and other costs associated with
the casino,  while  corporate  expenses  increased due to  personnel,  legal and
travel costs. The Company anticipates that SG&A expenses will remain at or above
current levels given its strategic business development plans.

Research and Development
------------------------

     In the first  quarter 1999,  the Company  expended $2.4 million on research
and  development  activities  compared  with $2.6  million in 1998.  The Company
continues to develop and enhance its central  system and  terminal  software and
games as well as terminal hardware for all three systems  segments.  Significant
efforts were expended on the  implementation of new lottery systems in the first
quarter 1999, redirecting  approximately $1.0 million which would otherwise have
been  reflected  as  research  and  development  expense.  A number of  software
development projects are currently being monitored for technological feasibility
and the  Company  may  capitalize  certain  development  costs  as the  projects
continue.  Research and  development  expense was 4.3% and 5.1% of  consolidated
revenues in the first quarters of 1999 and 1998, respectively.

                                     - 14 -

<PAGE>

                 POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES

Depreciation and Amortization
-----------------------------

     Depreciation and amortization  increased by 9% to $5.2 million in the first
quarter 1999. The decrease is primarily  attributable to equipment  upgrades for
certain of the Company's lottery and pari-mutuel system customers.  Depreciation
and  amortization  are  expected to increase  primarily  in the lottery  systems
segment as new systems are placed in service.

Liquidity and Capital Resources
-------------------------------

     In the first quarter 1999 the Company  generated  $0.2 million of cash from
operations  compared  with $2.9  million  in 1998.  The  reduction  reflects  an
increase in receivable balances since year-end and as compared with 1998's first
quarter decrease.  Working capital decreased by approximately  $4.2 million from
$41.2  million  at  December  31,  1998 to  $37.0  million  at March  31,  1999.
Approximately  $19.9 million was invested in property,  equipment and intangible
and other assets in the first  quarter 1999  compared with $2.6 million in 1998.
Approximately  $15.1 million of the 1999 investment  related to the manufacture,
purchase and installation of on-line lottery  equipment and  approximately  $3.4
million was expended for the Sunland Park casino  addition,  racetrack  facility
renovation and purchase of casino gaming machines.

     Historically, the Company has met its cash flow requirements primarily with
cash provided by operations,  public  offerings of equity  securities,  and from
borrowings  from financial  institutions.  In October 1998, the Company  entered
into a $100.0  million credit  facility (with an option for an additional  $25.0
million) with Lehman Brothers, Inc. The facility provided two $25.0 million term
loans  maturing  in  five  and six  years,  respectively,  and a  $50.0  million
revolving  line of credit  expiring  September  2003. Up to $15.0 million of the
revolver  may  be  used  as  collateral  for  the  Company's   bonding  program;
contractual obligations at March 31, 1999 required approximately $8.5 million in
outstanding  letters of credit.  Proceeds  from the two $25.0 million term loans
were used to pay off existing debt of  approximately  $27.9 million,  to provide
capital for existing  commitments,  to manufacture and implement on-line lottery
systems, and to complete the development of the Sunland Park Racetrack & Casino.
At March 31,  1999,  the company had drawn $10.0  million on the line of credit,
leaving $31.5  available for draw.  The Company  repaid  long-term  debt of $1.2
million in the first quarter 1999.

     Sizable  capital  expenditures  are  anticipated  related to the  Company's
on-line lottery contracts.  Total anticipated capital requirements are estimated
at  approximately  $60.0 million for 1999. Cash provided by operations and draws
on the line of credit are expected to provide  sufficient sources of funding for
these expenditures.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     There have been no material changes in the Company's sources of market risk
since reported at December 31, 1998.

                                     - 15 -

<PAGE>
                 POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES

                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     No  significant  changes have occurred with regard to legal  proceedings as
disclosed in Part 1, Item 3, of the Company's December 31, 1998 Form 10-K.

ITEM 2. CHANGES IN SECURITIES

     None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     None

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

     None

ITEM 5. OTHER INFORMATION

     None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     a.   Listing of Exhibits

          EX-27 Financial Data Schedule (For SEC Use Only)

     b.   Reports on Form 8-K

          Form 8-K dated March 12, 1999  reporting  the Agreement to Merger with
     Anchor Gaming.

          Form 8-K dated May 13, 1999 reporting a letter  agreement  dated as of
     May 7, 1999  among  Anchor  Gaming  and the  Company  permitting  Anchor to
     acquire less than 5% of the  outstanding  common stock of the Company prior
     to closing of the Merger Agreement.

                                     - 16 -

<PAGE>

                 POWERHOUSE TECHNOLOGIES, INC. AND SUBSIDIARIES

SIGNATURES


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

                              POWERHOUSE TECHNOLOGIES, INC.



Date:    May 14, 1999         /S/ SUSAN J. CARSTENSEN
                              --------------------------------------------------
                              Susan J. Carstensen, Chief Financial Officer and
                                Treasurer (Principal Financial and Accounting
                                Officer)(authorized to sign on behalf of 
                                Registrant)











                                     - 17 -