<PAGE>   1


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

                                    FORM 10-K

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

                   For the fiscal year ended December 31, 1999

                                       OR

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

               For the transition period from          to
                                              _________   _________

                        Commission File Number: 0-26580

                        AMERICAN COIN MERCHANDISING, INC.
             (Exact name of registrant as specified in its charter)

            DELAWARE                                    84-1093721
   (State or other jurisdiction of          (IRS Employer Identification Number)
   incorporation or organization)

                  5660 CENTRAL AVENUE, BOULDER, COLORADO 80301
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (303) 444-2559
                         (Registrant's telephone number)

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

        ASCENDING RATE CUMULATIVE TRUST PREFERRED SECURITIES, LIQUIDATION
                            AMOUNT $10 PER SECURITY

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

                     Common Stock, par value $0.01 per share
                                (Title of class)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes  X   No
                                              ---     ---
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K. (   )

     The aggregate market value of the registrant's voting common stock held as
of February 25, 2000 by non-affiliates of the registrant was $12,686,000.

     As of February 25, 2000, issuer had 6,480,194 shares of its $0.01 par value
common stock outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

     The information required by Part III (Items 10, 11, 12 and 13) is
incorporated by reference to portions of the registrant's definitive proxy
statement for the 2000 Annual Meeting of Stockholders which will be filed with
the Securities and Exchange Commission within 120 days after the close of the
1999 year.



<PAGE>   2




                        AMERICAN COIN MERCHANDISING, INC.

                           ANNUAL REPORT ON FORM 10-K

                                DECEMBER 31, 1999

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                           PART I
                                                                                                               PAGE

<S>             <C>                                                                                            <C>
     Item 1     Business.....................................................................................    3

     Item 2     Properties...................................................................................   10

                                                          PART II

     Item 5     Market for Registrant's Common Equity and Related Stockholder Matters.......................    11

     Item 6     Selected Financial Data.....................................................................    12

     Item 7     Management's Discussion and Analysis of Financial Condition and Results of Operations.......    13

     Item 8     Financial Statements and Supplementary Data.................................................    19


                                                          PART III

     Item 10    Directors and Executive Officers of the Registrant..........................................    19

     Item 11    Executive Compensation......................................................................    19

     Item 12    Security Ownership of Certain Beneficial Owners and Management..............................    19

     Item 13    Certain Relationships and Related Transactions..............................................    20

                                                          PART IV

     Item 14    Exhibits, Financial Statement Schedules, and Reports on Form 8-K............................    20
</TABLE>


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<PAGE>   3



    Statements in this report that are not purely historical are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements with respect to the financial condition
and results of operations of the Company involve risks and uncertainties related
to Shoppe performance and dependence on suppliers and foreign sourcing. These
factors are more fully discussed later in this report under the heading "Risk
Factors." In addition, the Company's results could also be affected by a number
of other risks and uncertainties which are more fully discussed under the
headings "Risk Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in this report.

                                     PART I

ITEM 1. BUSINESS

    American Coin Merchandising, Inc. (the "Company") is the leading owner,
operator and franchisor in the United States of coin-operated skill-crane
machines ("Shoppes") that dispense stuffed animals, plush toys, watches, jewelry
and other items through a national network of more than 13,000 machines operated
by the Company and its franchisees. For up to 50(cent) a play, customers
maneuver the skill-crane into position and attempt to retrieve the desired item
in the machine's enclosed display area before play is ended. The Company's
Shoppes are placed in supermarkets, mass merchandisers, bowling centers,
truckstops, bingo halls, bars, restaurants, warehouse clubs and similar
locations ("Retail Accounts") to take advantage of the regular customer traffic
at these locations. The Company utilizes appealing displays of quality
merchandise, new product introductions, including Company-designed products,
licensed products and seasonal items, and other merchandising techniques to
attract new and repeat customers. The Company also places complementary vending
machines generally at existing Shoppe locations, including kiddie rides, bulk
vending (novelty items, candy, gum, etc.) and video games.

    The Company was formed in Colorado in July 1988 and was reincorporated in
Delaware in July 1995. At the time the Company was founded, Greg Theisen, Abbe
Stutsman, Richard Jones and Randall Fagundo and their respective spouses
("Founders") owned and operated entities that operated skill-crane machines.
Shortly after the Company was formed, it began combining the buying power of the
affiliated businesses to purchase products and skill-crane machines at lower
prices. In 1990, the Company began developing its own territories by directly
owning and operating skill-crane machines. In conjunction with its initial
public offering in October 1995, the Company reorganized by acquiring
substantially all of the inventory, property and equipment and assuming certain
facilities leases and contracts of the Affiliated Entities. All of the
Affiliated Entities previously were franchisees of the Company and all except
Sugarloaf Marketing were controlled by one or more of the Founders.

BUSINESS STRATEGY

    The Company's business strategy is to differentiate itself from traditional
skill-crane operators and to strengthen its position as a leading owner and
operator of skill-crane machines in the U.S. The key elements of the Company's
business strategy are as follows:

        Quality Products. The Company's Shoppes offer a mix of products,
    including selected products of higher quality than the carnival-type
    products traditionally associated with skill-crane and other
    prize-dispensing equipment. The plush toys offered in the Company's Shoppes
    are made with 100% polyester fiberfill and high-grade outer covers and the
    watches include dependable movements. In addition, the Company's Shoppes
    offer licensed products featuring recognizable characters (such as Pokemon,
    Disney and Looney Tunes characters) and theme-based items (such as Christmas
    and Easter items). All products offered in the Shoppes must adhere to the
    Company's safety and quality standards.

        Machine Appearance, Merchandise and Merchandising Techniques. The
    Company's Shoppes are distinctively marked with the SugarLoaf logo and other
    signage that is readily identifiable with the Company in order to create
    brand recognition. In addition, the Shoppes are well lit and are cleaned and
    serviced regularly to maintain their attractive appearance. The Shoppes
    contain an appealing mix of products arranged by size, color, shape and
    type. Products with higher perceived value are prominently displayed, and
    the Company frequently incorporates new items into the merchandise mix to
    maintain the Shoppes' fresh appearance. Management believes the Shoppes'
    appearance and the Company's merchandising techniques are important factors
    in gaining acceptance of the Company's Shoppes by retailers.

        Product Procurement and Company-Designed Product. The Company controls
    product cost by purchasing a significant portion of its products directly
    from manufacturers in large quantities and acquiring merchandise that has



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    been discontinued or is subject to substantial "close-out" discounts. The
    Company also controls product cost by pre-packing products that it
    distributes to Company-owned offices and sells to its franchisees and
    non-franchisees for use in filling and merchandising the Shoppes. These
    pre-packed units include a predetermined mix or "recipe" of different types,
    sizes, shapes and colors of product, which achieve the Company's
    merchandising objectives while also controlling average product cost. The
    Company is able to frequently introduce new product in its Toy Shoppes by
    designing a significant portion of the product and by purchasing licensed
    and other product from suppliers. Designing products at various price points
    furthers the Company's objective of controlling product cost. See "Suppliers
    -- Product."

        Vend Ratio and Revenue Management. The Company closely monitors the
    revenue per product dispensed, or the Vend Ratio, of each of its Shoppes to
    maintain customer satisfaction and to optimize Shoppe revenue and
    profitability. A lower than optimal vend frequency reduces customer
    satisfaction, resulting in less frequent plays and lower revenue at a given
    location, while a higher than optimal vend frequency reduces profitability.
    If the Vend Ratio falls outside of the Company's target range, the route
    merchandiser can influence various factors affecting the Vend Ratio,
    including the mix of products by size and weight, the placement of products
    within the Shoppe's display area, the number of products and the density of
    the products within the Shoppe. If a Shoppe's weekly revenue consistently
    falls below the Company's minimum weekly revenue goal, the Company will
    consider relocating the Shoppe. During 1999, the Company redeployed certain
    underperforming Shoppes as a result of the Company's review of the machines
    average weekly revenue.

        Location Selection. The Company concentrates its sales efforts on
    placing Shoppes in Retail Accounts such as Wal-Mart, Safeway, Flying J
    Truckstop and Furrs Family Dining, which have good reputations for quality
    and attract a high level of foot traffic. Within these accounts, the Company
    seeks to secure sites with the greatest visibility and accessibility to
    potential customers. See "Operations -- Account Acquisition, Location
    Selection and Shoppe Placement."

        Timely Installation and National Operations. The Company provides Retail
    Accounts with an integrated system of Shoppe and vending installation,
    maintenance, service and an accounting of revenue and commissions on a local
    or national basis. Such services have been deployed rapidly across the
    country to large Retail Accounts.

        Training. The Company employs a comprehensive training program,
    including seminars and field training, for its area general managers,
    general managers and franchisees. It also provides operations manuals,
    training videos and other materials relating to office management and route
    merchandising to assure the achievement of the Company's business
    objectives. See "Operations -- Supervision, Training and Support."

SHOPPES

    The Company has sought to position its Shoppes as an entertaining way to
"purchase" quality products. Management believes that the quality of the
Shoppes' products and the entertainment and amusement afforded by their
skill-crane format have broad appeal to adults and adolescents. While
skill-crane machines have been in operation for over 75 years, the Company has
incorporated into its Shoppes several improvements and refinements. The Company
increased the size of the Shoppes to enhance their visibility and to display and
vend more products and created bright, distinctive signage, which is readily
identifiable with the Company. The Company also added exterior lighting,
brightened interior lighting and selected exterior colors of the machines to
attract and focus customer attention on the products in the Shoppes. In
addition, the Company has upgraded the Shoppes' operating mechanisms to achieve
consistency of play and reliability of performance.

    The SugarLoaf Toy Shoppe has been operated by the Company since its
inception. The Company introduced the SugarLoaf Fun Shoppe in 1993, the
SugarLoaf Treasure Shoppe in 1994, the SugarLoaf Bean Bag Shoppe in 1997 and the
SugarLoaf Stop Shoppe in 1998. Management believes that the introduction of new
types of skill-crane and other machines has enabled the Company to capitalize on
its current routes and existing relationships by placing additional machines in
existing locations, thereby increasing revenue at each location with little
incremental service costs. The introductions of SugarLoaf Treasure Shoppes,
SugarLoaf Fun Shoppes, SugarLoaf Bean Bag Shoppes and SugarLoaf Stop Shoppes are
typically made in locations where a SugarLoaf Toy Shoppe is already located.
Currently the Company operates five types of Shoppes as described below.



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<PAGE>   5


    The SugarLoaf Toy Shoppe. The SugarLoaf Toy Shoppe features a play price of
50 cents and dispenses plush toys and other toys. The estimated retail values of
products offered in the SugarLoaf Toy Shoppe generally range from $4.00 to
$30.00. As of December 31, 1999, the Company and its franchisees were operating
approximately 7,775 SugarLoaf Toy Shoppes.

    The SugarLoaf Treasure Shoppe. The SugarLoaf Treasure Shoppe features a play
price of 50 cents and dispenses jewelry, watches, bolo ties and belt buckles.
The SugarLoaf Treasure Shoppe improves upon traditional skill-crane machines of
this type by dispensing products with estimated retail values ranging from $4.00
to $30.00 instead of carnival-type merchandise of low retail value. As of
December 31, 1999, the Company and its franchisees were operating approximately
1,684 SugarLoaf Treasure Shoppes, approximately 90% of which were placed within
locations in which another Shoppe was already in operation.

    The SugarLoaf Bean Bag Shoppe. During 1997 the Company converted a
substantial portion of its SugarLoaf Fun Shoppes into SugarLoaf Bean Bag Shoppes
and purchased additional SugarLoaf Bean Bag Shoppes. The SugarLoaf Bean Bag
Shoppe features a play price of 50 cents and dispenses Bean-bag type stuffed
toys with estimated retail values ranging from $3.00 to $6.00. As of December
31, 1999, the Company and its franchisees were operating 2,284 SugarLoaf Bean
Bag Shoppes.

    The SugarLoaf Stop Shoppe. The SugarLoaf Stop Shoppe features a play price
of 50 cents and dispenses key-chains featuring NASCAR, bean bags, licensed and
sports figures. The estimated retail values of products offered in the SugarLoaf
Stop Shoppe generally range from $2.00 to $10.00. As of December 31, 1999, the
Company and its franchisees were operating approximately 957 SugarLoaf Stop
Shoppes.

    The SugarLoaf Fun Shoppe. The SugarLoaf Fun Shoppe features a play price of
25 cents and dispenses small toys, novelties and candy. The SugarLoaf Fun Shoppe
is designed to appeal primarily to adolescents and children. The estimated
retail values of products offered in the SugarLoaf Fun Shoppe are generally
under $5.00. Because the retail value of the products offered in the SugarLoaf
Fun Shoppe are generally lower than the products offered in the SugarLoaf Toy
Shoppe, the SugarLoaf Treasure Shoppe, the SugarLoaf Bean Bag Shoppe and the
SugarLoaf Stop Shoppe, the SugarLoaf Fun Shoppe dispenses more frequently than
the Company's other Shoppes, including certain SugarLoaf Fun Shoppes which
operate until a player wins a prize. As of December 31, 1999, the Company and
its franchisees were operating approximately 364 SugarLoaf Fun Shoppes.

    The following table indicates the number of certain Company-owned amusement
vending equipment in operation at the indicated date:


<TABLE>
<CAPTION>
                         DECEMBER 31, 1999   DECEMBER 31, 1998  DECEMBER 31, 1997
                         -----------------   -----------------  -----------------
          TYPE            NUMBER   PERCENT   NUMBER    PERCENT  NUMBER    PERCENT
          ----            ------   -------   ------    -------  ------    -------
<S>                      <C>       <C>       <C>       <C>      <C>       <C>
Toy Shoppes ...........    6,402      47.5%   6,397      50.9%   3,831      56.1%
Treasure Shoppes ......    1,530      11.3    1,447      11.5    1,016      14.9
Bean Bag Shoppes ......    2,151      15.9    1,963      15.6    1,156      16.9
Stop Shoppes ..........      932       6.9      647       5.2     --        --
Fun Shoppes ...........      171       1.3      217       1.7      163       2.4
                          ------    ------   ------    ------   ------    ------
      Total Shoppes ...   11,186      82.9   10,671      84.9    6,166      90.3
Video Games ...........    1,298       9.6      837       6.7       73       1.1
Kiddie Rides ..........    1,011       7.5    1,057       8.4      585       8.6
                          ------    ------   ------    ------   ------    ------
                          13,495     100.0%  12,565     100.0%   6,824     100.0%
                          ======    ======   ======    ======   ======    ======
</TABLE>

OPERATIONS

    Management believes that the Company's operations program provides for
efficient and cost-effective purchasing and distribution of product. In
addition, the Company and its franchisees have a route-servicing system that
facilitates the development of a good working relationship with location
managers in regional and national chain accounts. The Company offers its
franchisees the same software management tools, training programs and product
and machine purchasing programs used by the Company, and they are required to
use substantially the same procedures, systems and methods the Company employs
in its own operations.



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    Retail Accounts. Currently, the Company's Shoppes are located, in order of
prevalence, in supermarkets, mass merchandisers, restaurants, bingo halls and
bowling centers, bars and similar locations. The Company is focusing on placing
Shoppes in national and regional Retail Accounts to take advantage of the
regular customer traffic of these locations. The following chart identifies some
of the Company's Retail Accounts:

<TABLE>
<CAPTION>
                                           RETAIL ACCOUNTS
                                           ---------------
SUPERMARKETS                MASS MERCHANDISERS        RESTAURANTS                        OTHER
------------                ------------------        -----------                        -----
<S>                         <C>                       <C>                                <C>
Kroger                      Wal-Mart                  Denny's (franchised)               AMF Bowling Centers
Safeway                     Kmart                     Ponderosa Steak House              Brunswick Bowling Centers
Fred Meyer Stores                                     Quincy's Steak House               Truckstops of America
Cub Foods                                             Golden Corral                      Flying J Truckstop
Smith's                                               Furr's Family Dining               76 Truckstops
</TABLE>

    The Company or its franchisees provide the Shoppes and pay certain
installation costs, while the retailer provides a site within the location and
electrical power. The retailers are paid commissions based upon a percentage of
gross revenue, which for the year ended December 31, 1999 generally ranged from
25% to 30%, depending on the dollar volume, number of Shoppes installed and
total number of locations the retailer controls. Management believes that
national and regional supermarket, mass merchandise and restaurant chain
accounts are increasingly aware of the economic benefits of amusement and
vending machines such as the Company's Shoppes, which can provide retailers
greater revenue per square foot than alternative uses of available floor space.

    In individual-location accounts, the Company and its franchisees generally
place Shoppes pursuant to oral agreements with location managers. While the
Company has written agreements with certain major Retail Accounts, the Company
and its franchisees also have placed Shoppes in national and regional Retail
Accounts pursuant to oral or other agreements, which may be terminated at
anytime. Management believes that the Company and its franchisees generally have
good relations with their retail accounts.

    Account Acquisition, Location Selection and Shoppe Placement. The Company
acquires new individual-location accounts for the placement of its Shoppes
through regional sales managers and field office general managers. To augment
its field office general managers' account acquisition activities, the Company's
field sales representatives began a concerted marketing effort in August 1994 to
national and regional chain accounts and has entered into new agreements with
national and regional supermarket and mass merchandise chain accounts covering
the placement of Shoppes within the locations of such accounts. The Company is
currently negotiating a new contract with Wal-Mart to replace the previous
contract. There can be no assurance that the Company will be successful in
obtaining a new Wal-Mart contract. As of December 31, 1999, the Company had
installed more than 3,175 Shoppes in approximately 1,443 Wal-Mart stores
nationwide. The Company's largest account, Wal-Mart accounted for approximately
34% of total revenue in 1999. In March 2000, the Company signed a new three-year
agreement with Safeway that designates the Company as Safeway's principal
operator of skill-cranes through April 1, 2003. As of December 31, 1999, the
Company and its franchisees had installed more than 606 Shoppes in approximately
482 Safeway stores nationwide. In September 1997, the Company signed a
three-year agreement with AMF Bowling Centers, Inc. As of December 31, 1999, the
Company and its franchisees had installed more than 697 Shoppes in approximately
214 AMF Bowling Centers nationwide.

    Once the Company enters into a national or regional chain account agreement,
it contacts each location manager to arrange for a review of the location to
confirm its suitability and to obtain the manager's agreement to the placement
of one or more Shoppes within the location. The Company and its regional sales
manager or franchisee work together to place Shoppes at national and regional
chain account locations.

    For accounts other than national chain accounts, the Company's regional
sales and general managers identify viable locations, contact the location's
owner or manager to confirm the suitability of the location and obtain the
owner's or manager's agreement to the placement of the Shoppes and related
compensation arrangements. The suitability of a location is based upon a
thorough assessment by the Company, including an analysis of the surrounding
trade area in order to determine the neighborhood demographics, local
regulations, the level of overall retail activity and the cost-effectiveness of
servicing the location through existing route merchandisers. The Company also
reviews each site within the location for its visibility and accessibility to
customers.



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    The Company and its franchisees compete for limited sites within
supermarkets with purveyors of seasonal and specialty items and with owners and
operators of other amusement and vending machines, ATM machines and coin
counting and redemption equipment. The Company's Shoppes also compete with
vending machine and coin-operated amusement device operators for sites in mass
merchandise and restaurant chains, bowling centers and other locations.
Competition for such sites is based primarily on the amount of revenue to the
location owner that can be generated by a particular use of a site. Management
believes that the revenue potential of the Company's Shoppes compares favorably
to that of competing uses for available sites within retail locations.

    Other Vending. The Company has introduced new types of complementary vending
and amusement machines at existing Shoppe locations which management believes
will expand the potential customers for the Company. In April 1997, the Company
signed a three-year agreement with Safeway that made the Company and its
franchisees Safeway's domestic coin-operated kiddie ride operator. As of
December 31, 1999, the Company and its franchisees had approximately 1,027
kiddie rides installed in Retail Accounts nationwide. In November 1997, the
Company purchased the assets of Quality Amusements Corp. and Quality
Entertainment Corp., operators of bulk vending machines and kiddie rides. In
March 1998, the Company purchased the assets of McCathren Vending Co., another
operator of bulk vending machines. Bulk vending refers to the sale of unsorted
confections, nuts, gumballs, toys and novelty items (in or out of capsules)
selected by the customer and dispensed through vending machines. As of December
31, 1999, the Company and its franchisees had approximately 7,962 pieces of bulk
vending equipment in operation. In June 1998, the Company acquired the assets of
Chilton Vending Co., an operator of simulator and traditional video games,
skill-cranes and redemption equipment. As of December 31, 1999, the Company had
approximately 1,298 simulator and traditional video games in operation. From
time to time, the Company has placed, and may continue to place in the future,
other types of coin-operated vending machines in retail accounts in order to
leverage the Company's existing national distribution and service network.

    Supervision, Training and Support. The Company's division vice presidents
are primarily responsible for hiring and training the Company's general managers
and for on-going support and supervision of the Company's field offices.

    Each Company field office is managed by an area general manager or general
manager who is responsible for the management of the office, including inventory
management, and training and monitoring route merchandisers. The Company has
developed a comprehensive training program for office area general managers,
general managers and franchisees covering office management, new account
acquisition, inventory control, route merchandising, site selection, machine
servicing and all other aspects of the operation of the business. The area
general managers and general managers attend training programs and receive
ongoing field training. The Company considers its route merchandisers to be a
key element of its merchandising efforts. The Company's area general managers
and general managers provide training of route merchandisers in all aspects of
route management, machine servicing, revenue collection, Vend Ratio monitoring
and product merchandising. See "Employees."

    Route Merchandising. Frequent, regular and reliable service and support is
an important element in the operation of the Company's Shoppes. The Company's
route merchandisers and franchisee personnel are trained to perform regularly
scheduled merchandising and service procedures. A route merchandiser has a route
consisting of 10 to 33 locations, depending upon volume, which are visited and
serviced two to ten times per week. The route merchandiser cleans and services
the Shoppe, takes inventory of the Shoppe, replaces product as needed, monitors
the Vend Ratio and arranges the product within the Shoppe in accordance with the
Company's merchandising techniques. The route merchandiser records the number of
units of product placed in the machines and the number of plays from
nonresettable meters. The meter readings are subsequently reconciled against
actual collections. All collections are delivered to and verified by another
employee at the field office for deposit.

    Inventory Management and Distribution. The Company's distribution system is
designed to allow efficient and cost-effective distribution of its product to
Company field offices and franchise offices. After the product is procured from
the Company's suppliers, it is shipped to a distribution center where it is
sorted and pre-packed. The Company maintains inventory for the products offered
through its Toy Shoppes, Treasure Shoppes, Bean Bag Shoppes, Stop Shoppes and
Fun Shoppes in a warehouse facility in Kent, Washington and in its regional
distribution warehouse centers in Atlanta, Georgia; Clearwater, Florida;
Chicago, Illinois; and Allentown, Pennsylvania. The Company communicates
appropriate product mix requirements to its warehouse employees on a weekly
basis. The warehouse employees sort the products according to the Company's
specified mix requirements and pack the product for each type of Shoppe into
pre-packed units for shipment to Company field offices and franchises on a
weekly basis.



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<PAGE>   8

    At December 31, 1999, the Company was operating in 41 states through a
national network of 38 offices. The field offices average approximately 3,609
square feet and comprise a small office area and a warehouse area where
out-of-service Shoppes are repaired and product inventory is maintained. Part of
the route merchandisers' daily route servicing responsibilities is to distribute
product to Shoppes. Pre-packing aids in controlling product cost and facilitates
new product introductions. Pre-packing also substantially reduces the warehouse
space required for inventory, allowing the Company-owned and franchise offices
to service a greater number of Shoppes without a commensurate increase in
warehouse space. In addition, pre-packing significantly reduces the time general
managers and franchise personnel spend on inventory management, which allows
more time for acquiring new accounts and monitoring the quality of Shoppe
merchandising in the field.

    Management Information Systems. The Company has a centralized data base
management information system that utilizes customized software for monitoring
field office Shoppe results. The software allows the Company to monitor
individual Shoppe placements, Shoppe revenue, Vend Ratio and tax and commission
payments through reports generated at the corporate offices. The software also
allows the Company to monitor total Shoppe revenue, average Shoppe revenue,
Shoppes on location and Vend Ratio.

MERCHANDISING

    Merchandising Mix. The Company offers merchandise for the Shoppes in
pre-pack bags along with bulk merchandise. The pre-pack bags include an
assortment of exclusive SugarLoaf designs, along with licensed and other goods.
The merchandise variety is regularly updated, and the Company offers at least
1,500 new items each year. Seasonal goods are placed in Shoppes for all major
holidays.

    New Designs. The Company works with several free-lance designers and creates
at least 300 new, exclusive designs each year that can be obtained through the
SugarLoaf Toy Shoppes. The Company also creates several theme product
collectibles and many players attempt to retrieve all of the products in the
series.

    Merchandise Sourcing and Vendor Relationships. The Company purchases product
from several overseas factories and has developed good relationships with these
suppliers over the past ten years. The Company also utilizes several domestic
sources and attempts to take advantage of licensed and closeout merchandise.

SUPPLIERS

    Product. The Company maintains a purchasing and development staff at its
corporate headquarters and contracts with foreign and domestic manufacturers and
outside vendors for its supply of products. The SugarLoaf Toy Shoppes offer a
combination of Company-designed products that are manufactured to the Company's
specifications and "off the shelf" products available from foreign manufacturers
and third-party vendors. Since 1988, all Company-designed toys have been
manufactured to its specifications by foreign manufacturers. Currently, the
Company relies on multiple manufacturers in China to produce its custom designs,
each of whom has the capability to produce a range of the toys required by the
Company. Decisions regarding the choice of manufacturer are based on price,
quality of workmanship, reliability and the ability of a manufacturer to meet
the Company's delivery requirements.

    Shoppes. The Company currently purchases Shoppes from three principal
approved crane manufacturers and may seek to add new suppliers. Management
believes that suitable skill-crane machines are available from a number of
domestic and foreign manufacturers.

FRANCHISE RELATIONS

    As of December 31, 1999, the Company had franchise agreements in effect with
12 franchisees covering 15 territories in the U.S. and one territory in British
Columbia, Canada covering, in the aggregate, 1,878 Shoppes. The Company does not
currently intend to grant any additional franchises. In the event any franchisee
proposes to transfer to any third party its SugarLoaf business or any rights or
interests granted by the franchise agreement, the Company has up to 45 days to
exercise a right of first refusal to purchase such business, rights or interests
on the same terms and conditions as the franchisee's proposed transfer of such
business rights or interests.



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<PAGE>   9

COMPETITION

    The Company competes with a number of regional and local operators of
skill-crane machines. Many of these competitors are engaged in aggressive
expansion programs, and the Company has experienced and expects to continue to
experience intense competition for new locations. There can be no assurance that
the Company will be able to compete effectively with these companies in the
future. The Company's Shoppes also compete with other vending machines,
coin-operated amusement devices, coin counting and redemption machines and
seasonal and bulk merchandise for sites in retail locations. There can be no
assurance that the Company will be able to maintain its current sites in retail
locations or that it will be able to obtain sites in the future on attractive
terms or at all. There also are few barriers to entry in the Company's business,
and it would be possible for well-financed vending machine manufacturers or
other vending machine operators with existing relationships with supermarkets,
mass merchandisers and other venues targeted by the Company to compete readily
with the Company in certain markets.

INTELLECTUAL PROPERTY

    The Company has no patents or patent applications pending and relies
primarily on a combination of trademark, trade dress and unfair competition
laws, trade secrets, confidentiality procedures and agreements to protect its
proprietary rights. The Company owns a number of trademarks that have been
registered with the United States Patent and Trademark Office, including
"Shoppe," "SugarLoaf," "Sugar Loaf," "Toy Shoppe," "Treasure Shoppe," "Fun
Shoppe," "Shoppe of Stickers" and "Kid Shoppe" and has one trademark application
pending. In addition, the Company claims common law trademark protection for the
mark "A Test of Skill." The Company considers its operations manual, training
videos, and other related materials and portions of its licensed methods to be
proprietary and confidential, and the terms of the Company's franchise
agreements require franchisees to maintain the confidentiality of such
information and procedures and to adopt reasonable precautions to prevent
unauthorized disclosure of these secrets and information. Despite the Company's
efforts to protect its proprietary rights, unauthorized parties may attempt to
copy aspects of the Company's Shoppes and products or to obtain and use
information that the Company regards as proprietary. The Company also may be
involved from time to time in litigation to determine the enforceability, scope
and validity of proprietary rights. The Company believes it has significant
intellectual property protection for its business. Management believes that its
success is likely to depend more upon merchandising skill, location selection
and consumer support than on legal protection of the Company's proprietary
rights.

GOVERNMENT REGULATION

    The Company's business is subject to federal, state, provincial and local
regulations relating to product labeling and safety, coin-operated games and
franchising. The Federal Hazardous Substances Act, as amended by the Child
Protection Act of 1966, the Child Protection and Toy Safety Act of 1969, the Toy
Safety Act of 1984 and the Child Safety Protection Act of 1994 requires the
labeling of articles that bear or contain a hazardous substance as defined in
such statutes. In addition, the Consumer Product Safety Commission may, under
these statutes, ban from the market toys or other articles intended for use by
children which contain hazardous substances or present a public health or safety
hazard, and require the repurchase and reimbursement of certain expenses by the
manufacturer of such banned toys or other articles.

    The distribution and operation of skill-crane machines may be subject to
federal, state, provincial and local regulations, including gaming regulations,
which vary from jurisdiction to jurisdiction. Certain jurisdictions may require
licenses, permits and approvals to be held by companies and their key personnel
in connection with the distribution or operation of skill-crane machines.
Currently, the Company believes that it has obtained all necessary governmental
licenses, permits and approvals necessary for the distribution or operation of
Shoppes in Company-owned operations. However, no assurance can be given that
such licenses, permits or approvals will be given or renewed in the future.
Franchisees are responsible for their own regulatory compliance.

    As a franchisor, the Company is subject to various federal and state
franchise and business opportunity laws and regulations. The Company does not
currently intend to grant any additional franchises and it believes it is in
material compliance with such laws in the states in which the Company has
offered and sold franchises.



                                       9
<PAGE>   10

INSURANCE

    The Company carries property, liability, workers' compensation and directors
and officers liability insurance policies, which it believes are customary for
businesses of its size and type. However, there can be no assurance that the
Company's insurance coverage will be adequate or that insurance will continue to
be available to the Company at reasonable rates. The Company may be subject to
claims for personal injuries resulting from the use of its Shoppes or from
products and other merchandise dispensed from the Shoppes. To date, the Company
has not experienced any material product liability claims or costs, and it
currently maintains product liability insurance that it believes to be adequate.
The Company's product liability insurance coverage is limited, however, and
there can be no assurance that such insurance would adequately cover future
product liability costs or claims.

EMPLOYEES

    As of February 25, 1999, the Company had a total of 721 employees, including
66 employees at its headquarters in Boulder, Colorado. None of the Company's
employees are represented by labor unions or covered by any collective
bargaining contract. Management believes it has a good relationship with the
Company's employees.

    Generally, each of the Company's field offices employs approximately 5 to 35
persons, including a general manager, an office assistant and an adequate number
of route merchandisers to properly service the Company's Shoppes and other
amusement vending equipment and equipment service managers. The general manager
is responsible for the daily operations of the office, monitoring route
merchandisers and acquiring new accounts. The area general managers oversee the
operations of certain Company field offices and report directly to the Company's
division vice presidents.

    The Company has an incentive bonus program pursuant to which area general
managers, general managers and field office personnel may be eligible to receive
incentive compensation based on office and route profitability. Management
believes that this program rewards excellence in management, gives field office
personnel an incentive to improve operations and results in an overall reduction
in the cost of operations. In addition, area general managers, field managers
and other corporate personnel are eligible to receive options to purchase shares
of common stock subject to ongoing service requirements.

ITEM 2. PROPERTIES

    The Company's principal executive offices are located at 5660 Central
Avenue, Boulder, Colorado and the Denver, Colorado operation occupy
approximately 28,000 square feet of office and warehouse space under a lease
that expires February 28, 2003. The Company's fulfillment warehouse in Kent,
Washington occupies approximately 106,000 square feet under a lease that expires
August 31, 2003. The Company also is a party to 57 other leases which are used
for office and warehouse space which average approximately 3,609 square feet,
provide for monthly rental payments ranging from $371 to $5,000 and expire at
various times over the period March 31, 2000 to November 14, 2003.




                                       10
<PAGE>   11

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

    Common Stock Data. The Company's Common Stock began trading publicly on the
over-the-counter market through the Nasdaq National Market under the symbol
"AMCN" on October 16, 1995. On February 7, 2000 the Company transferred to the
Nasdaq Small Cap Market. On February 25, 2000, the number of record holders was
128 and the Company estimates that on that date there were approximately an
additional 1,550 beneficial owners. On February 25, 2000, the closing price
reported on the NASDAQ Small Cap Market for the Common Stock was $2.75. The
following table sets forth for the periods indicated the high and low closing
sale quotations for the Common Stock as reported on the Nasdaq National Market.
The prices reported do not include retail mark-up, mark-down or commissions and
may not reflect actual transactions.

<TABLE>
<CAPTION>
                                                HIGH      LOW
                                               -------  ------

<S>                                            <C>      <C>
For the Fiscal Year Ended December 31, 1998:
  First Quarter ............................   $21.88   $15.25
  Second Quarter ...........................    22.63    17.25
  Third Quarter ............................    20.25    11.81
  Fourth Quarter ...........................    16.13     5.88
For the Fiscal Year Ended December 31, 1999:
  First Quarter ............................     5.94     4.00
  Second Quarter ...........................     8.31     3.69
  Third Quarter ............................     6.50     3.19
  Fourth Quarter ...........................     3.69     2.00
</TABLE>

    Common Stock Dividends. The Company has not declared or paid a cash dividend
on its Common Stock. The payment of future dividends will be within the
discretion of the Company's Board of Directors and will depend on the earnings,
capital requirements, and restrictions in current and future credit agreements
and operating and financial condition of the Company, among other factors. The
Company's current credit facility limits its payment of dividends while the
credit facility is in place.



                                       11
<PAGE>   12

ITEM 6. SELECTED FINANCIAL DATA

    The selected financial data set forth below with respect to the Company's
statements of operation for each of the years in the five-year period ended
December 31, 1999, have been derived from the financial statements of the
Company.

<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31,
                                                      -------------------------------------------------------------

                                                         1999         1998        1997         1996          1995
                                                      ---------    ---------    ---------    ---------    ---------
                                                           (IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<S>                                                   <C>          <C>          <C>          <C>          <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
  Vending .........................................   $ 115,835    $  92,854    $  52,866    $  30,439    $  17,031
  Franchise and other .............................       4,630        4,857        6,218        7,828        8,683
                                                      ---------    ---------    ---------    ---------    ---------
        Total revenue .............................     120,465       97,711       59,084       38,267       25,714
                                                      ---------    ---------    ---------    ---------    ---------
Cost of revenue:
  Vending .........................................      84,997       66,070       37,506       21,283       11,701
  Franchise and other .............................       3,104        3,108        3,967        5,659        6,054
                                                      ---------    ---------    ---------    ---------    ---------
        Total cost of revenue .....................      88,101       69,178       41,473       26,942       17,755
                                                      ---------    ---------    ---------    ---------    ---------
        Gross profit ..............................      32,364       28,533       17,611       11,325        7,959
General and administrative expenses ...............      25,668       19,413       10,314        7,053        4,565
Write off of costs in excess of assets acquired,
  severance and other costs .......................       7,536         --           --           --           --
                                                      ---------    ---------    ---------    ---------    ---------
        Operating earnings (loss) .................        (840)       9,120        7,297        4,272        3,394
Interest expense ..................................       6,866        3,368          612          375          383
Minority interest .................................        --           --           --           --             80
Share of loss of equity affiliate .................        --           --           --           --             27
                                                      ---------    ---------    ---------    ---------    ---------
        Earnings (loss) before income taxes .......      (7,706)       5,752        6,685        3,897        2,904
Income tax benefit (expense) ......................       3,200       (1,854)      (2,256)      (1,311)        (329)
                                                      ---------    ---------    ---------    ---------    ---------
        Net earnings (loss) .......................   $  (4,506)   $   3,898    $   4,429    $   2,586    $   2,575
                                                      =========    =========    =========    =========    =========
Basic earnings (loss) per share(2) ................   $   (0.70)   $    0.60    $    0.80    $    0.51         --
Diluted earnings (loss) per share(2) ..............   $   (0.70)   $    0.58    $    0.78    $    0.48         --
Basic weighted average common shares(2) ...........       6,475        6,467        5,565        5,092         --
Diluted weighted average common shares(2) .........       6,475        6,713        5,694        5,417         --
PRO FORMA INFORMATION:
  Historical net earnings before income taxes .....                                                        $   2,904
  Pro forma adjustments to earnings before taxes ..                                                            1,207
                                                                                                           ---------
  Pro forma earnings before income taxes ..........                                                            4,111
  Pro forma income tax expense ....................                                                            1,562
                                                                                                           ---------
  Pro forma net earnings(1)(2) ....................                                                        $   2,549
                                                                                                           =========
</TABLE>


<TABLE>
<CAPTION>
                                                         1999        1998          1997        1996         1995
                                                      ---------    ---------    ---------    ---------    ---------
<S>                                                   <C>          <C>          <C>          <C>          <C>
BALANCE SHEET DATA:
Working capital ...................................   $   9,367    $   9,235    $   3,626    $   2,914    $   2,896
Total assets ......................................     104,134      111,782       37,077       19,758       13,702
Total short-term debt and current portion of
  long-term debt ..................................       2,463        2,155        1,619        1,109          557
Total long-term debt, excluding current portion ...      50,230       50,310        1,292        5,059        1,632
Company obligated mandatorily redeemable preferred
  securities of subsidiary trust holding solely
  junior subordinated debentures ..................      15,542       15,492         --           --          --
Total stockholders' equity ........................      29,154       33,648       30,092       11,676        9,007

NUMBER OF SHOPPES(3):
Company operations ................................      11,186       10,671        6,166        3,967        2,057
Franchise operations ..............................       1,878        1,998        3,952        3,981        3,455
                                                      ---------    ---------    ---------    ---------    ---------
        Total .....................................      13,064       12,669       10,118        7,948        5,512
                                                      =========    =========    =========    =========    =========
</TABLE>

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

(1)  During the period through August 1995, the Company and each of the Chicago
     Toy Company, the Georgia Toy Company, Inland Merchandising, Inc., Lehigh
     Valley Toy Company, Performance Merchandising, Inc., Southwest Coin
     Company, Sugarloaf, Ltd. and Sugarloaf Marketing Inc. (the "Affiliated
     Entities"), were organized as either S corporations or a partnership and
     the taxable income of the Company and the Affiliated Entities was
     attributable directly to their respective stockholders or partners during
     such periods. Accordingly, net earnings have been adjusted to reflect
     federal and state income taxes as if such taxes had been incurred for such
     period at an estimated effective rate of 38%. See Note 1 of Notes to the
     Consolidated Financial Statements included herein.

(2)  Net earnings per share and weighted average common shares are not presented
     for 1995 because the Company and each of the Affiliated Entities were
     organized as S corporations or a partnership.

(3)  Shoppes previously owned and operated by the Affiliated Entities, other
     than Sugarloaf Marketing, are included in Company operations. Shoppes
     previously owned and operated by Sugarloaf Marketing are included in
     franchise operations on an historical basis. The number of Shoppes is as of
     the end of the indicated period.



                                       12
<PAGE>   13

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

GENERAL

    The Company and its franchisees own and operate Shoppes that dispense
stuffed animals, plush toys, watches, jewelry and other items. The Company's
Shoppes are placed in Retail Accounts and similar high traffic locations and the
Company typically pays 25-30% of gross revenue to the location owner as a
location commission. The Company has also introduced new types of complementary
vending and amusement machines at existing Shoppe locations. At December 31,
1999, the Company was operating in 41 states with a national network of 38
offices and there were 12 Company franchisees operating in 15 territories in the
United States and one territory in British Columbia. The Company sells both
machines and product vended in the machines to its franchisees and collects
continuing royalties ranging from 2% to 5% of its franchisees' gross machine
revenue.

    For the year ended December 31, 1999, over 86% of the Company's revenue and
gross profit were derived from Company-owned Shoppes. The Company's revenue and
gross profit in a particular period is directly related to the number of Shoppes
in operation during the period. Management believes that the Company's business
is somewhat seasonal, with average revenue per machine per week historically
higher during the Easter and Christmas periods. Vending revenue represents cash
receipts from customers using vending machines and is recognized when collected.
The cost of vending revenue is comprised of the cost of vended products,
location commissions, depreciation and direct service cost.

    Franchise and other revenue represents the Company's percentage of gross
vending revenue generated by Shoppes owned and operated by franchisees, as well
as product sold to the franchisees and non-franchisee customers. Product sold to
the franchisees and non-franchisee customers consists of goods to vend in
Shoppes. Equipment sales to the franchisees have been done on a pass-through
basis from the Company's main suppliers. The Company anticipates that franchise
and other revenue will decrease in the future as a result of the closure of the
Company's Plush 4 Play operation in the third quarter of 1999.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1999 VS. YEAR ENDED DECEMBER 31, 1998

Revenue

    The Company's total revenue increased 23.3% from $97.7 million in 1998 to
$120.5 million in 1999. Vending revenue increased $23.0 million or 24.7% in 1999
to $115.8 million, primarily as a result of a 26.8% increase in the average
number of Shoppes in use during 1999 over the average number of Shoppes in use
during 1998.

    Franchise and other revenue decreased $227,000 or 4.7% in 1999 as compared
to 1998, due to the closure of Plush 4 Play, the acquisition of Company
franchises and lower equipment sales to franchisees.

Cost of Revenue and Gross Profit

    The cost of vending operations increased $18.9 million in 1999 to $85.0
million. The vending operations' contribution to 1999 gross profit increased to
$30.8 million, which represents a 15.1% increase over gross profit from vending
operations realized in 1998. The vending gross profit achieved in 1999 was 26.6%
of vending revenue, which represents a 2.2 percentage point decrease from the
gross profit percentage achieved in 1998. The cash vending gross profit (vending
revenue minus cost of vended product, location commissions and direct service
cost) achieved in 1999 was 33.4% of vending revenue, which is 1.9 percentage
points lower than in 1998. The cash vending gross profit achieved during the
fourth quarter of 1999 was 34.4%, which is .7 percentage points higher that the
comparable period in 1998. In 1999, the decline in vending margin resulted
primarily from higher average cost of product and higher location commissions
compared to 1998.

    Gross profit on franchise and other revenue in 1999 decreased to $1.5
million, or 33% of franchise and other revenue, which is 3.0 percentage points
lower than the gross margin achieved in 1998. The decrease in gross margin as



                                       13
<PAGE>   14

a percentage of franchise and other revenue resulted primarily from increased
warehousing costs partially offset by lower 1999 equipment sales that are at
lower margins than product sales to franchisees and non-franchisees.

Operating Expense

    General and administrative expense as a percentage of revenue for 1999
increased to 21.3% (excluding the one-time charges recorded in the third quarter
of 1999), as compared to 19.9% of revenue in 1998. The increase in general and
administrative expenses resulted primarily from additional operating offices,
amortization of goodwill and other general and administrative expenses related
to the acquisitions made by the Company during the second and third quarters of
1998. The Company anticipates higher general and administrative expenses to
continue into 2001.

Operating Earnings (Loss)

    The operating loss in 1999 is $840,000 as compared to operating earnings of
$9.1 million, or 9.3% of total revenue for 1998. The decrease in operating
results is primarily attributable to the write off of costs in excess of assets
acquired related to Plush 4 Play, one-time severance costs and other costs
recorded by the Company in the third quarter of 1999 and higher operating
expenses as discussed above.

Non Operating Income (Expense)

    Interest expense increased $3.5 million to $6.9 million in 1999 as compared
to 1998. The Company's interest expense is directly related to its level of
borrowings and changes in the underlying interest rates. In addition, the
Company, in September 1998, issued $17 million of Ascending Rate (10.5% at
December 31, 1999) Cumulative Trust Preferred Securities.

Net Earnings (Loss) and Earnings (Loss) Per Share

      The net loss for the year ended December 31, 1999 was $4.5 million, as
compared to net earnings of $3.9 million for 1998. The diluted loss per share
for 1999 was $0.70, compared to diluted net earnings per share of $0.58 in 1998.

YEAR ENDED DECEMBER 31, 1998 VS. YEAR ENDED DECEMBER 31, 1997

Revenue

    The Company's total revenue increased 65.4% from $59.1 million in 1997 to
$97.7 million in 1998. Vending revenue increased $40 million or 75.6% in 1998 to
$92.9 million, primarily as a result of a 76.5% increase in the average number
of Shoppes in use during 1998 over the average number of Shoppes in use during
1997.

    Franchise and other revenue decreased $1.4 million or 21.9% in 1998 as
compared to 1997, due primarily to the acquisition of Company franchises.

Cost of Revenue and Gross Profit

    The cost of vending operations increased $28.6 million in 1998 to $66.1
million. The vending operations' contribution to 1998 gross profit increased to
$26.8 million, which represents a 74.4% increase over gross profit from vending
operations realized in 1997. The vending gross profit achieved in 1998 was 28.8%
of vending revenue, which represents a .3 percentage point decrease from the
gross profit percentage achieved in 1997. The cash vending gross profit (vending
revenue minus cost of vended product, location commissions and direct service
cost) achieved in 1998 was 35.3% of vending revenue, which is .8 percentage
points higher than in 1997. The cash vending gross profit achieved during the
fourth quarter of 1998 was 34.0%, which is .8 percentage points lower that the
comparable period in 1997. The Company attributes some of the shortfall to lower
per week average Shoppe revenue due to an ineffective product mix. In 1998, the
decline in vending margin also resulted from a higher average Shoppe commission
rate paid to locations.

    During the third quarter of 1998, the Company found it necessary to handle
its own plush product warehousing in the Seattle area due to increased product
requirements and insufficient space available at the public warehouse



                                       14
<PAGE>   15

previously used by the Company. Approximately 90% of the additional cost
associated with moving product from two warehouse facilities negatively affected
vending gross profit during the fourth quarter of 1998. The remaining 10% of
additional cost negatively affected gross profit on franchise and other revenue.

    Gross profit on franchise and other revenue in 1998 decreased to $1.7
million, or 36% of franchise and other revenue, which is .2 percentage points
lower than the gross margin achieved in 1997. The decrease in gross margin as a
percentage of franchise and other revenue resulted primarily from increased
warehousing costs partially offset by lower 1998 equipment sales that are at
lower margins than product sales to franchisees.

Operating Expense

    General and administrative expenses as a percentage of revenue increased to
19.9% in 1998, as compared to 17.5% of revenue in 1997. The increase in general
and administrative expenses resulted primarily from additional operating
offices, amortization of goodwill and other general and administrative expenses
related to the acquisitions made by the Company during the second and third
quarters of 1998. The Company anticipates higher general and administrative
expenses to continue into 1999. The higher general and administrative expenses
also reflect redundant accounting and management information functions
associated with the Company's recent acquisitions that the Company plans to
integrate and absorb during the first quarter of 1999.

Operating Earnings

    Operating earnings in 1998 increased 25.0% to $9.1 million or 9.3% of total
revenue, which are, as a percentage of total revenue, 3.1 percentage points
lower than the operating earnings achieved in 1997. The increase in operating
earnings results primarily from the 74.6% increase in the average number of
Shoppes in place during 1998 compared to the average number in place in 1997.
The effect of the increase in Shoppes, however, has been offset by negative
Shoppe performance during the fourth quarter of 1998, higher warehousing costs
and the increase in general and administrative expenses experienced in 1998
compared to 1997.

Non Operating Income (Expense)

    Interest expense increased $2.8 million to $3.4 million in 1998 as compared
to 1997. The Company's interest expense is directly related to its level of
borrowings and changes in the underlying interest rates.

Net Earnings and Earnings Per Share

      Net earnings for the year ended December 31, 1998 were $3.9 million, or 4%
of total revenue, as compared to net earnings of $4.4 million, or 7.5% of total
revenue, during 1997. Diluted earnings per share for 1998 decreased 25.6% to
$0.58, as compared to $0.78 per share in 1997.

LIQUIDITY AND CAPITAL RESOURCES

    The Company's primary sources of liquidity and capital resources
historically have been cash flows from operations, borrowings under the
Company's bank credit facilities and issuances of its equity securities. These
sources of cash flows have been offset by cash used for acquisitions, investment
in skill-crane machines and other amusement devices and payment of long-term
borrowings.

    Net cash provided by operating activities was $7.4 million, $8.4 million and
$8.4 million in 1999, 1998 and 1997, respectively. The Company anticipates that
cash will continue to be provided by operations as additional skill-crane
machines and other amusement devices are placed in service. Cash required in the
future is expected to be funded by existing cash and cash provided by operations
and borrowings under the Company's credit facility.

    Net cash used in investing activities was $9.3 million, $67.3 million and
$16.1 million in 1999, 1998 and 1997, respectively. Capital expenditures
amounted to $8.3 million, $23.5 million and $12.2 million in 1999, 1998 and
1997, respectively, of which $7.9 million, $19.6 million and $9.0 million were
used for the acquisition of amusement vending skill machines. The acquisition of
franchisees and others used $180,000, $43.0 million and $3.7 million in 1999,
1998 and 1997, respectively.



                                       15
<PAGE>   16

    Net cash provided by financing activities was $228,000, $59.2 million and
$8.9 million in 1999, 1998 and 1997, respectively. In 1999, activities consisted
primarily of borrowings on the Credit Facility and principal payments on
long-term debt. In 1998, activities consisted primarily borrowings on the Credit
Facility and the issuance of Trust Preferred Securities that provided $15.5
million. In 1997 the issuance of Common Stock primarily in connection with the
Company's follow-on offering, provided $14.0 million.

    Under its current Credit Facility, the Company may borrow up to $55.0
million, less an interest reserve of $955,000, at a rate based on the bank's
prime interest rate or, at the Company's option, an interest rate based on the
current LIBOR rate. The interest reserve will be reduced quarterly, as interest
payments are made on the Trust Preferred Securities. The effective rate at
December 31, 1999 was 9.69%. The Credit Facility is available through July 13,
2001 and at December 31, 1999 there was a principal amount of approximately
$49.0 million outstanding and $4.6 million available under the facility. The
Credit Facility provides that certain financial ratios be met and places
restrictions on, among other things, the occurrence of additional debt financing
and the payment of dividends. The Company was in compliance with such financial
ratios and restrictions at December 31, 1999.

    The Company may use a portion of its capital resources to effect
acquisitions of franchisees. Because the Company cannot predict the timing or
nature of acquisition opportunities, or the availability of acquisition
financing, the Company cannot determine the extent to which capital resources
may be used. Company management believes that funds generated from operations
and borrowings available under its Credit Facility and the Company's ability to
negotiate additional and enhanced credit agreements will be sufficient to meet
the Company's foreseeable operating and capital expenditure needs.



                                       16
<PAGE>   17

                                  RISK FACTORS

    This report contains forward-looking statements. Because such statements
include risks and uncertainties, actual results could differ materially from
those expressed or implied by such forward-looking statements. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed below and in the sections entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business."

    Shoppe Performance. A primary key to the financial success of the Company is
the weekly revenue generated per Shoppe, which has a history of fluctuating. The
Company has attributed some of this fluctuation to the effectiveness of its
product mix and has taken steps to address this problem; however, there can be
no assurance that such efforts will continue to have a positive impact on the
performance of the Shoppes. The average weekly revenue generated per Shoppe may
decline or fluctuate in the future, which could have a material adverse effect
on the Company's business, financial condition and results of operations.

    Growth and Management of Growth. The Company has recently experienced
substantial growth. There can be no assurance that the Company will continue to
grow at historical rates or at all. The Company's ability to generate increased
revenue and achieve higher levels of profitability will depend upon its ability
and the ability of its franchisees to place additional Shoppes in Retail
Accounts as well as to maintain or increase the average financial performance of
the Shoppes. The Company's ability to place additional Shoppes depends on a
number of factors beyond the Company's control, including general business and
economic conditions. Installation of additional Shoppes will also depend, in
part, upon the Company's ability to secure additional national and regional
Retail Accounts and to obtain approval to place additional Shoppes in individual
locations of such accounts. The Company, its franchisees and their suppliers
also may be unable to place and adequately service additional Shoppes, which
could have a material adverse effect on the Company's business, financial
condition and results of operations.

    There can be no assurance that the Company will be able to manage its
expanding operations effectively or that it will be able to maintain or
accelerate its growth. The Company's growth has placed, and is expected to
continue to place, significant demands on all aspects of the Company's business,
including Shoppe servicing, merchandising, financial and administrative
personnel and systems. The Company's future operating results are substantially
dependent upon the ability of the Company's officers and key personnel to manage
anticipated growth and increased demand effectively; to attract, train and
retain additional qualified personnel; and to implement and improve technical,
service, administrative, financial control and reporting systems. Either
deterioration in Shoppe performance or the Company's failure to manage growth
effectively could adversely and materially affect the Company's business,
financial condition and results of operations.

    Substantial Indebtedness; Effect of Financial Leverage. The Company intends
to use funds available under the Credit Facility ($4.6 million at December 31,
1999) for a number of purposes, including future acquisitions of franchisees.
Further use of funds from the Credit Facility could result in the Company
incurring additional indebtedness that is substantial in relation to its
stockholders' equity and cash flow. As a result of the issuance of the Ascending
Rate Cumulative Trust Preferred Securities and the amount the Company owes
pursuant to the Credit Facility, fixed charges could exceed earnings for the
foreseeable future. Substantial leverage poses the risk that the Company may not
be able to generate sufficient cash flow to service its indebtedness, or to
adequately fund its operations. There can be no assurance that the Company will
be able to increase its revenue and leverage the acquisitions it has made to
achieve sufficient cash flow to meet its potential debt service obligations. In
particular, there can be no assurance that the Company's operating cash flow
will be sufficient to meet its debt service obligations under the Credit
Facility. The Company's leverage also could limit its ability to effect future
financings or may otherwise restrict the Company's operations and growth.

    Trade Relations and Dependence on Major Accounts. The Company's largest
account, Wal-Mart, accounted for approximately 34% of total revenue in 1999. The
Company is currently negotiating a new contract with Wal-Mart to replace the
previous contract. There can be no assurance that the Company will be successful
in obtaining a new Wal-Mart contract. The loss of the Wal-Mart account, or the
loss of a significant number of other major accounts, or a significant reduction
in the number of Shoppes placed at such accounts, for any reason, could have a
material adverse effect on the Company's business, financial condition and
results of operations.



                                       17
<PAGE>   18

    Competition. The Company competes with a number of regional and local
operators of skill-crane machines. Many of these competitors are engaged in
aggressive expansion programs, and the Company has experienced and expects to
continue to experience intense competition for new locations and acquisition
candidates. There can be no assurance that the Company will be able to compete
effectively with these companies in the future. The Company's Shoppes also
compete with other vending machines, coin-operated amusement devices, coin
counting and redemption machines and seasonal and bulk merchandise for sites
within retail locations. There can be no assurance that the Company will be able
to maintain its current sites in the retail locations or that it will be able to
obtain sites in the future on attractive terms or at all. There also are few
barriers to entry in the Company's business, and it would be possible for
well-financed vending machine manufacturers or other vending machine operators
with existing relationships with Retail Accounts targeted by the Company to
compete readily with the Company in certain markets.

    Dependence on Suppliers and Foreign Sourcing. Substantially all of the plush
toys and other products dispensed from the Shoppes are produced by foreign
manufacturers. A majority are purchased directly by the Company from
manufacturers in China. The Company purchases its other products indirectly from
vendors who obtain a significant percentage of such products from foreign
manufacturers. As a result, the Company is subject to changes in governmental
policies, the imposition of tariffs, import and export controls, transportation
delays and interruptions, political and economic disruptions and labor strikes
that could disrupt the supply of products from such manufacturers. Among other
things, the loss of China's "most favored nation" status under U.S. tariff laws
could result in a substantial increase in the import duty of certain products
manufactured in China, which could result in substantially increased costs for
certain products purchased by the Company which could have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company also could be affected by labor strikes in the sea shipping,
trucking and railroad industries, all of which the Company utilizes to varying
degrees. Although the Company believes that alternative means of transportation
would be available for its products in the event of a labor strike affecting a
particular mode of transportation, such a disruption could increase the
Company's transportation costs and thereby reduce its profit margins in a
particular period. The Company does not have a long-term supply agreement with
any of its crane suppliers. While the Company believes that it will continue to
be able to purchase skill-crane machines from existing or alternative suppliers,
no assurance can be given that skill-cranes will be available on a
cost-efficient basis or that shortages or other disruptions in the Company's
sources of supply for skill-crane machines and components would not have a
material and adverse effect on the Company's business, financial condition and
results of operations.

    Seasonality and Variability of Results. The financial performance of the
Shoppes is substantially dependent on the level of retail traffic at such
Shoppes' particular location. Accordingly, the business, financial condition and
results of operations of the Company can be materially and adversely affected by
factors that reduce retail traffic at Shoppe locations. These include numerous
factors beyond the Company's control such as weather, labor strikes and other
disruptions of the business at Retail Accounts and local and national business
and economic conditions. The Company's results are also linked to seasonal
increases in foot-traffic at Retail Accounts, and disruptions of past trends,
including traditional increases during holiday seasons, could decrease the
Company's revenue. As a result, the Company's operating results may vary
significantly over time. Accordingly, period-to-period comparisons of its
results of operations are not necessarily meaningful and the Company's past
results should not be relied upon as an indication of future performance.

    Changing Consumer Trends; Technological Innovations. Consumer preferences
are constantly changing and difficult to predict, and consumer interest in the
Company's Shoppes or the products dispensed could decline suddenly or other
prize-dispensing equipment or amusement devices could replace the Shoppes in
consumer preference. The Company's success will depend in part on its ability to
offer new and appealing products and on the continuing appeal of its Shoppes'
skill-crane format in both existing markets and in new markets into which the
Company may expand. There can be no assurance that the use of skill-crane
machines and the Company's operating results will not be adversely affected by
changing consumer trends. The Company's business also is susceptible to advances
in the design and manufacture of skill-crane machines and other vending
technology. The Company's failure to anticipate or respond adequately to such
technological changes could adversely affect the Company's business and results
of operations.

    Dependence on Key Employees. The Company's success to date has been
dependent in part upon the efforts and abilities of Randall J. Fagundo (its
Chief Executive Officer and President), W. John Cash (its Senior Vice President,
Chief Financial Officer, Treasurer and Secretary), Robert A. Kaslon (its Senior
Vice President of Merchandising) and certain other key personnel. The Company's
continued success will depend upon its ability to retain a number of its current
key employees and to attract, train and retain new key management and
operational personnel. There can be no



                                       18
<PAGE>   19

assurance that the Company will be able to retain its existing key employees or
attract and retain qualified employees in the future. The Company does not
maintain any "key man" insurance. In addition, executives or other employees
with knowledge of the Company's operations and policies may leave the Company
and establish competitive businesses. There can be no assurance that the Company
would be able to effectively enforce non-compete provisions against these
individuals.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    The financial statements and related notes thereto required by this item are
listed and set forth herein beginning on page 22.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Directors of Registrant. Information as to the names, ages, positions and
offices with the Company, terms of office, periods of service, business
experience during the past five years and other directorships held by each
director of the Company is set forth under the caption election of directors
appearing in the Company's definitive proxy statement for the 2000 Annual
Meeting of Stockholders which will be filed with the Securities and Exchange
Commission within 120 days after the close of the 1999 year.

     Executive Officers of the Registrant. At the meeting of the Board of
Directors of the Registrant, which immediately follows the annual meeting of
stockholders, the Board of Directors elects officers of the Registrant. Such
officers hold office until death, resignation, removal from office or until
their successors are chosen and qualified. The names and ages of all executive
officers of the Registrant are set forth under the caption EXECUTIVE OFFICERS
appearing in the Company's definitive proxy statement for the 2000 Annual
Meeting of Stockholders which will be filed with the Securities and Exchange
Commission within 120 days after the close of the 1999 year.

     Compliance with Section 16(a) of the Exchange Act. Section 16(a) of the
Securities Exchange Act of 1934 requires the Company's officers and directors
and persons who own more than ten percent of the Company's outstanding common
stock to file reports of ownership and changes in ownership with the Securities
and Exchange Commission. Officers, directors and greater than ten percent
stockholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file.

     To the Company's knowledge, during the fiscal year ended December 31, 1999,
all directors, officers or more than ten percent stockholders timely filed their
Form 3's and Form 4's, except for Richard D. Jones who failed to file a timely
Form 4 related to the sale of 1,000 shares of common stock.

ITEM 11. EXECUTIVE COMPENSATION

     Information concerning remuneration received by the Company's directors and
executive officers and stock options is set forth under the caption EXECUTIVE
COMPENSATION appearing in the Company's definitive proxy statement for the 2000
Annual Meeting of Stockholders which will be filed with the Securities and
Exchange Commission within 120 days after the close of the 1999 year.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Information as to the security ownership of certain beneficial owners of
the Company and by each of its directors and officers and the amount of such
shares with respect to which certain of the directors and officers have the
right to acquire beneficial ownership, is set forth under the caption SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT appearing in the Company's
definitive proxy statement for the 2000 Annual Meeting of Stockholders which
will be filed with the Securities and Exchange Commission within 120 days after
the close of the 1999 year.



                                       19
<PAGE>   20

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Information concerning transactions with management and others and certain
business relationships is set forth under the caption CERTAIN TRANSACTIONS
appearing in the Company's definitive proxy statement for the 2000 Annual
Meeting of Stockholders which will be filed with the Securities and Exchange
Commission within 120 days after the close of the 1999 year.

                                     PART IV

ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

     (a) EXHIBITS

         3.1+     -- Certificate of Incorporation of the Registrant.
         3.2+     -- Bylaws of the Registrant.
         3.3*     -- Certificate of Designation of Series A Junior Participating
                     Preferred Stock of the Registrant.
         4.1+     -- Reference is made to Exhibits 3.1 and 3.2.
         4.2+     -- Specimen Stock Certificate.
         4.3@     -- Certificate of Trust of American Coin Merchandising Trust
                     I.
         4.4@     -- Trust Agreement of American Coin Merchandising Trust I.
         4.5@     -- Amended and Restated Trust Agreement of American Coin
                     Merchandising Trust I.
         4.6@     -- Form of Junior Subordinated Indenture between the
                     Registrant and Wilmington Trust Company, as Trustee.
         4.7@     -- Form of Guarantee Agreement with respect to Trust Preferred
                     Securities of American Coin Merchandising Trust I.
         4.8@     -- Form of Agreement as to Expenses and Liabilities between
                     the Registrant and American Coin Merchandising Trust I.
         4.9@     -- Form of Certificate Evidencing Trust Preferred Securities.
         4.10@    -- Form of Certificate Evidencing Trust Common Securities.
         4.11@    -- Form of Ascending Rate Junior Subordinated Deferrable
                     Interest Debenture.
         4.12*    -- Rights Agreement dated as of April 29, 1999 between the
                     Registrant and Norwest Bank Minnesota, N.A.
         4.13*    -- Form of Rights Certificate.
         10.1+    -- Form of Indemnity Agreement to be entered into between the
                     Registrant and its directors and executive officers.
         10.2+X   -- Amended and Restated Stock Option Plan of the Registrant
                     (the "Option Plan").
         10.3+    -- Form of Incentive Stock Option under the Option Plan.
         10.4+    -- Form of Nonstatutory Stock Option under the Option Plan.
         10.5+X   -- 1995 Non-Employee Director Stock Option Plan (the "Director
                     Plan").
         10.6+    -- Form of Nonstatutory Stock Option under the Director Plan.
         10.35#   -- Commercial Lease Amendment Agreement, between the
                     Registrant and Technical Building Company, dated as of
                     November 20, 1997.
         10.36@** -- Reducing Revolving Loan Agreement between the Registrant
                     and Wells Fargo Bank, N.A., dated as of June 10, 1998.
         10.37@** -- Amendment No. 1 to the Reducing Revolving Loan Agreement
                     between the Registrant and Wells Fargo Bank, N.A., dated
                     June 30, 1998.
         10.41o   -- Amendment No. 2 to the Reducing Revolving Loan Agreement
                     between the Registrant and Wells Fargo Bank, N.A., dated
                     September 23, 1998.
         10.42&   -- Amendment No. 3 to the Reducing Revolving Loan Agreement
                     between the Registrant and Wells Fargo Bank, N.A., dated
                     February 26, 1999.
         10.43&X  -- Management Transition Agreement between the Registrant and
                     Jerome M. Lapin, dated April 7, 1999.
         10.44&   -- Voting Agreement between the Registrant and Jerome M.
                     Lapin, dated April 7, 1999.
         10.45&   -- Stock Restriction Agreement between the Registrant and
                     Jerome M. Lapin, dated April 7, 1999.
         10.46    -- Amendment No. 4 to the Reducing Revolving Loan Agreement
                     between the Registrant and Wells Fargo Bank, N.A., dated
                     May 28, 1999
         11.1     -- Computation of Per Share Earnings.



                                       20
<PAGE>   21
         23.1     -- Consent of KPMG LLP.
         27       -- Financial Data Schedule.

+    Incorporated by reference to the Company's Registration Statement on
     Form SB-2, File No. 33-95446-D.

@    Incorporated by reference to the Company's Registration Statement on
     Form-3, File No. 333-60267.

#    Incorporated by reference to the Company's Annual Report on Form 10-K for
     the year ended December 31, 1997.

o    Incorporated by reference to the Company's Current Report on Form 8-K,
     dated October 2, 1998.

&    Incorporated by reference to the Company's Annual Report on Form 10-K/A for
     the year ended December 31, 1998.

*    Incorporated by reference to the Company's Current Report on Form 8-K,
     dated April 29, 1999.

X    Indicates management contract or compensatory plan, contract or
     arrangement.

     (b) REPORTS ON FORM 8-K.

          None.



                                       21
<PAGE>   22

                        AMERICAN COIN MERCHANDISING, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                   FOR THE THREE YEARS ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>
                                                                 PAGE
<S>                                                              <C>
Independent Auditors' Report..................................    F-1

Consolidated Financial Statements:

     Balance Sheets...........................................    F-2

     Statements of Operations.................................    F-3

     Statements of Stockholders' Equity.......................    F-4

     Statements of Cash Flows.................................    F-5

     Notes to Financial Statements............................    F-6
</TABLE>

     All schedules are omitted because of the absence of conditions under which
they are required or because the required information is provided in the
consolidated financial statements or notes thereto.


                                       22

<PAGE>   23

                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
American Coin Merchandising, Inc.:

    We have audited the accompanying consolidated balance sheets of American
Coin Merchandising, Inc. and subsidiaries as of December 31, 1999 and 1998, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the years in the three-year period ended December 31,
1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

    In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of American
Coin Merchandising, Inc. and subsidiaries as of December 31, 1999 and 1998, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1999, in conformity with generally
accepted accounting principles.




KPMG LLP




Boulder, Colorado
February 23, 2000



                                      F-1
<PAGE>   24




                        AMERICAN COIN MERCHANDISING, INC.
                           CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                                                          DECEMBER 31,
                                                                                        1999        1998
                                                                                     ---------    ---------
                                                  ASSETS
<S>                                                                                  <C>          <C>
Current assets:
   Cash and cash equivalents .....................................................   $     579    $   2,247
   Trade accounts and other receivables, net .....................................         691        1,814
   Inventories, net ..............................................................      14,806       12,579
   Prepaid expenses and other assets .............................................       2,260        1,581
                                                                                     ---------    ---------
       Total current assets ......................................................      18,336       18,221
                                                                                     ---------    ---------

Property and equipment, at cost:
   Vending machines ..............................................................      53,079       46,704
   Vehicles ......................................................................       6,866        7,082
   Office equipment, furniture and fixtures ......................................       4,003        3,074
                                                                                     ---------    ---------
                                                                                        63,948       56,860
   Less accumulated depreciation .................................................     (20,305)     (13,381)
                                                                                     ---------    ---------
       Property and equipment, net ...............................................      43,643       43,479

Placement fees, net of accumulated amortization of $1,090 in 1999 and $460 in
 1998.............................................................................         930          732
Costs in excess of assets acquired and other intangible assets, net of accumulated
   amortization of $3,904 in 1999 and $1,817 in 1998 .............................      38,247       48,333
Other assets, net of accumulated amortization of $460 in 1999 and $199 in 1998 ...       1,350        1,017
Deferred tax assets ..............................................................       1,628         --
                                                                                     ---------    ---------

       Total assets ..............................................................   $ 104,134    $ 111,782
                                                                                     =========    =========

                                   LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Current portion of long-term debt .............................................   $   2,463    $   2,155
   Accounts payable ..............................................................       4,167        3,441
   Accrued commissions ...........................................................       1,595        1,630
   Other accrued expenses ........................................................         744        1,760
                                                                                     ---------    ---------
       Total current liabilities .................................................       8,969        8,986
                                                                                     ---------    ---------

Long-term debt, net of current portion ...........................................      50,230       50,310
Other liabilities ................................................................         239        2,000
Deferred income taxes ............................................................        --          1,346
                                                                                     ---------    ---------
       Total liabilities .........................................................      59,438       62,642
                                                                                     ---------    ---------

Company obligated mandatorily redeemable preferred securities of subsidiary trust
   holding solely junior subordinated debentures .................................      15,542       15,492

Stockholders' equity:
   Preferred stock, $.10 par value (Authorized 500 shares; none issued) ..........        --           --
   Common stock, $.01 par value (Authorized 20,000 shares; issued and
     outstanding 6,480 shares in 1999 and 6,475 1998) ............................          65           65
   Additional paid-in-capital ....................................................      22,001       21,989
   Retained earnings .............................................................       7,088       11,594
                                                                                     ---------    ---------
       Total stockholders' equity ................................................      29,154       33,648
                                                                                     ---------    ---------
Commitments
       Total liabilities and stockholders' equity ................................   $ 104,134    $ 111,782
                                                                                     =========    =========
</TABLE>


          See accompanying notes to consolidated financial statements.



                                      F-2
<PAGE>   25

                        AMERICAN COIN MERCHANDISING, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                       YEAR ENDED DECEMBER 31,
                                                                    1999        1998          1997
                                                                 ---------    ---------    ---------
<S>                                                              <C>          <C>          <C>
Revenue:
   Vending ...................................................   $ 115,835    $  92,854    $  52,866
   Franchise and other .......................................       4,630        4,857        6,218
                                                                 ---------    ---------    ---------
       Total revenue .........................................     120,465       97,711       59,084
                                                                 ---------    ---------    ---------

Cost of revenue:
   Vending, excluding related depreciation and amortization ..      77,100       60,066       34,643
   Depreciation and amortization .............................       7,897        6,004        2,863
                                                                 ---------    ---------    ---------
       Total cost of vending .................................      84,997       66,070       37,506
   Franchise and other .......................................       3,104        3,108        3,967
                                                                 ---------    ---------    ---------
       Total cost of revenue .................................      88,101       69,178       41,473
                                                                 ---------    ---------    ---------

       Gross profit ..........................................      32,364       28,533       17,611

General and administrative expenses ..........................      22,141       17,526        9,885
Depreciation and amortization ................................       3,527        1,887          429
Write off of costs in excess of assets acquired, severance and
   other costs ...............................................       7,536         --           --
                                                                 ---------    ---------    ---------

       Operating (loss) earnings .............................        (840)       9,120        7,297

Interest expense, net ........................................       6,866        3,368          612
                                                                 ---------    ---------    ---------

       (Loss) earnings before taxes ..........................      (7,706)       5,752        6,685

Income tax benefit (expense) .................................       3,200       (1,854)      (2,256)
                                                                 ---------    ---------    ---------

       Net (loss) earnings ...................................   $  (4,506)   $   3,898    $   4,429
                                                                 =========    =========    =========

       Basic (loss) earnings per share of common stock .......   $   (0.70)   $    0.60         0.80
       Diluted (loss) earnings per share of common stock .....       (0.70)        0.58         0.78
       Basic weighted average common shares ..................       6,475        6,467        5,565
       Diluted weighted average common shares ................       6,475        6,713        5,694
</TABLE>


          See accompanying notes to consolidated financial statements.



                                      F-3
<PAGE>   26

                        AMERICAN COIN MERCHANDISING, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                     UNEARNED
                                                                       STOCK                  TOTAL
                                                        ADDITIONAL    OPTION                  STOCK-
                                               COMMON     PAID-IN     COMPEN-    RETAINED    HOLDERS'
                                                STOCK     CAPITAL     SATION     EARNINGS     EQUITY
                                              --------   --------    --------    --------    --------
<S>                                           <C>       <C>          <C>         <C>         <C>
DECEMBER 31, 1996 .........................   $     51   $  8,407    $    (49)   $  3,267    $ 11,676

   Issuance of 1,000,000 common
     stock in public offering, net ........         10     13,915        --          --        13,925
   Amortization of deferred compensation ..       --         --            22        --            22
   Exercise of employee stock options .....          4         39        --          --            43
   Termination of employee stock options ..       --           (9)          6        --            (3)
   Net earnings ...........................       --         --          --         4,429       4,429
                                              --------   --------    --------    --------    --------

DECEMBER 31, 1997 .........................         65     22,352         (21)      7,696      30,092

   Acquisition of 70,000 warrants to
     purchase common stock ................       --         (492)       --          --          (492)
   Amortization of deferred compensation ..       --         --            19        --            19
   Exercise of employee stock options .....       --          131        --          --           131
   Termination of employee stock options ..       --           (2)          2        --          --
   Net earnings ...........................       --         --          --         3,898       3,898
                                              --------   --------    --------    --------    --------

DECEMBER 31, 1998 .........................         65     21,989        --        11,594      33,648

   Issuance of 5,125 shares of common stock
     in employee stock purchase plan ......       --           12        --          --            12
   Net loss ...............................       --         --          --        (4,506)     (4,506)
                                              --------   --------    --------    --------    --------

DECEMBER 31, 1999 .........................   $     65   $ 22,001    $     --    $  7,088    $ 29,154
                                              ========   ========    ========    ========    ========
</TABLE>


          See accompanying notes to consolidated financial statements.



                                      F-4
<PAGE>   27

                        AMERICAN COIN MERCHANDISING, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                YEAR ENDED DECEMBER 31,
                                                                             1999        1998        1997
                                                                           --------    --------    --------
<S>                                                                        <C>         <C>         <C>
Operating activities:
   Net (loss) earnings .................................................   $ (4,506)   $  3,898    $  4,429
   Adjustments to reconcile net (loss) earnings to net cash provided
     by operating activities:
       Depreciation and amortization ...................................     11,950       8,092       3,292
       Write off of costs in excess of assets acquired, severance and
         other costs ...................................................      7,536        --          --
       Compensation expense related to stock options ...................       --            19          19
       Deferred income tax (benefit) expense ...........................     (3,200)        925         463
       Changes in operating assets and liabilities, net of acquisitions:
           Trade accounts and other receivables ........................      1,123        (878)       (332)
           Inventories .................................................     (2,227)     (4,046)     (1,026)
           Prepaid expenses and other assets ...........................     (1,223)     (2,295)       (233)
           Income taxes payable ........................................       --          (317)         38
           Accounts payable, accrued expenses and other liabilities ....     (2,086)      2,995       1,701
                                                                           --------    --------    --------
         Net cash provided by operating activities .....................      7,367       8,393       8,351
                                                                           --------    --------    --------

Investing activities:
   Acquisitions of property and equipment, net .........................     (8,267)    (23,475)    (12,168)
   Acquisitions of franchisees and others ..............................       (180)    (43,036)     (3,669)
   Placement fees ......................................................       (828)       (746)       (242)
                                                                           --------    --------    --------
         Net cash used in investing activities .........................     (9,275)    (67,257)    (16,079)
                                                                           --------    --------    --------

Financing activities:
   Issuance of company obligated mandatorily redeemable
     preferred securities, net of discount and issuance costs ..........       --        15,479        --
   Net borrowings (payments) on credit facility ........................      2,386      46,610      (3,787)
   Principal payments on long-term debt ................................     (2,158)     (1,872)       (620)
   Principal payments on notes payable to Control Group ................       --          (674)       (675)
   Acquisition of warrants .............................................       --          (492)       --
   Issuance of common stock, net of offering costs .....................         12         131      13,968
                                                                           --------    --------    --------
         Net cash provided by financing activities .....................        240      59,182       8,886
                                                                           --------    --------    --------

         Net increase (decrease) in cash and cash equivalents ..........     (1,668)        318       1,158

Cash and cash equivalents at beginning of year .........................      2,247       1,929         771
                                                                           --------    --------    --------

Cash and cash equivalents at end of year ...............................   $    579    $  2,247    $  1,929
                                                                           ========    ========    ========
</TABLE>



          See accompanying notes to consolidated financial statements.



                                      F-5
<PAGE>   28

                        AMERICAN COIN MERCHANDISING, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1999, 1998 AND 1997

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

     American Coin Merchandising, Inc., d/b/a Sugarloaf Creations, Inc. and
American Coin Merchandising Trust I (the "Company") and its franchisees own and
operate coin-operated skill-crane machines ("Shoppes") that dispense stuffed
animals, plush toys, watches, jewelry and other items. The Company's Shoppes are
placed in supermarkets, mass merchandisers, bowling centers, truck stops, bingo
halls, bars, restaurants, warehouse clubs and similar locations. The Company
also operates bulk vending equipment, kiddie rides and video equipment that are
located primarily in supermarkets and mass merchandisers. At December 31, 1999,
the Company had 38 field offices with operations in 41 states. The Company also
sells products to franchisees. At December 31, 1999 there were 12 franchisees
operating in 16 territories.

2. ACQUISITIONS

     During 1999, the Company acquired certain assets and the business
operations of one of its franchisees for approximately $180,000 in cash. The
Company has recorded approximately $159,000 of costs in excess of assets
acquired as a result of this acquisition that was accounted for using the
purchase method of accounting.

     During the third quarter of 1999, the Company renegotiated a major contract
that was originally assumed with the acquisition of Plush 4 Play. Company-owned
equipment and personnel replaced the equipment and group operators previously
utilized by Plush 4 Play to service these account locations; therefore,
substantially all of the assets and operations obtained in the Plush 4 Play
acquisition no longer have value to the Company. The remaining $6.3 million of
net costs in excess of assets acquired and other costs associated with the Plush
4 Play acquisition were written off.

     On June 12, 1998, the Company acquired certain assets and the business
operations of its franchisees Suncoast Toys, Inc., NW Toys Co. and Oregon Coin
Company ("Suncoast") for approximately $30,381,000. Of this amount, $29,581,000
was paid in cash with the balance to be paid over a three-year period in
accordance with the terms of the promissory note issued in connection with the
acquisition. The Company has recorded approximately $26,870,000 of costs in
excess of assets acquired as a result of the Suncoast acquisition that was
accounted for using the purchase method of accounting.

     The pro forma information presented above does not purport to be indicative
of the results that actually would have been obtained if the acquisition had
occurred on January 1, 1998, and is not intended to be a projection of future
results or trends.

     Also during 1998, the Company acquired certain assets and the business
operations of two franchisees, the operating assets of a video game, skill-crane
and redemption company, a bulk vending company, certain assets of a kiddie ride
company and certain assets of a skill-crane vending management and wholesale
distributor of plush products, collectively, for approximately $20,645,000. Of
this amount, $13,455,000 was paid in cash with the balance to be paid over
three-year periods in accordance with the terms of promissory notes issued in
connection with the acquisitions. The Company has recorded approximately
$16,211,000 of costs in excess of assets acquired as a result of these
acquisitions that were accounted for using the purchase method of accounting.
The Company had recognized $2,000,000 of additional consideration in 1998 for a
contingent earn-out as management believed that attaining the earn-out was
probable. Approximately $600,000 was paid to the former owners in 1999 under the
earn-out agreement. The remaining $1,400,000 was removed from costs in excess of
assets acquired and from accrued liabilities in 1999 when the final amount of
the earn-out was determined.

     During 1997, the Company acquired certain assets and the business
operations of three of its franchisees and also acquired the operating assets of
a bulk vending and kiddie ride company, collectively, for approximately
$5,494,000. Of this amount, $3,669,000 was paid in cash with the balance to be
paid over three-year periods in accordance with the terms of promissory notes
issued in connection with the acquisitions. The Company has recorded
approximately $3,685,000 of costs in excess of assets acquired as a result of
these acquisitions that were accounted for using the purchase method of
accounting.



                                      F-6
<PAGE>   29

                        AMERICAN COIN MERCHANDISING, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     VENDING
     Vending revenue represents cash receipts from customers using vending
machines and is recognized when collected. The cost of vending is comprised
primarily of the cost of products vended through the machines, the servicing of
machines and commissions paid to retail locations.

     FRANCHISE ROYALTIES
     Typically, franchisees are required to pay continuing royalties ranging
from 2% to 5% of gross machine revenue.

     INCOME TAXES
     The Company accounts for income taxes under the asset and liability method
of accounting for income taxes. Deferred income taxes reflect the net tax
effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and amounts used for income tax
purposes. Deferred tax assets and liabilities are measured using enacted tax
rates expected to be in effect for the year in which those temporary differences
are expected to be recovered or settled. The effects on deferred tax assets and
liabilities of a change in tax rates are recognized in income in the period that
includes the enactment date.

     ESTIMATES
     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect 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 revenue and expenses during the reporting
period. Actual results could differ significantly from those estimates.

     CASH EQUIVALENTS
     The Company considers as cash equivalents all highly liquid investments
with an original maturity of three months or less.

     INVENTORIES
     Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method. Inventories consist of purchased items
ready for resale or use in vending operations.

     PROPERTY AND EQUIPMENT
     Property and equipment are stated at cost. Depreciation is calculated on
the straight-line and accelerated methods over the estimated useful lives of the
assets that range from 3 to 10 years.

     COSTS IN EXCESS OF ASSETS ACQUIRED
     Costs in excess of assets acquired represent the purchase amount paid in
excess of the fair value of the tangible net assets acquired and is amortized
using the straight-line method over 20 years.

     IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
     The Company reviews its long-lived assets and intangibles for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of the asset to the future net
cash flows expected to be generated by the asset. If such assets are considered
to be impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceed the fair value of the assets.

     EARNINGS PER SHARE
     The Company discloses both basic earnings per share and diluted earnings
per share. Basic and diluted earnings per share are computed by dividing
earnings available to common stockholders by the weighted average number of
common shares outstanding during the period and by all dilutive potential common
shares outstanding during the period, respectively.

     RECLASSIFICATIONS
     Certain amounts for prior periods have been reclassified to conform to the
December 31, 1999 presentation.



                                      F-7
<PAGE>   30

                        AMERICAN COIN MERCHANDISING, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

     SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

     A schedule of supplemental cash flow information follows (in thousands):

<TABLE>
<CAPTION>
     YEAR ENDED DECEMBER 31,                                  1999       1998      1997
                                                            -------    -------   -------
<S>                                                         <C>        <C>       <C>
Cash paid during the year:
  Interest ..............................................   $ 6,902    $ 2,588   $   640
  Income taxes ..........................................        23      1,803     1,755
Significant noncash investing and financing activities:
  Notes payable issued for acquisitions of franchisees...        --      5,490     1,825
  Earn-out and hold backs related to acquisition ........    (1,442)     2,500        --
</TABLE>

4. CREDIT FACILITY

    Under its current reducing revolving loan agreement (the "Credit Facility"),
the Company may borrow up to $55.0 million, less an interest reserve of
$955,000, at a rate based on the bank's prime interest rate or, at the Company's
option, an interest rate based on the then current LIBOR rate. The effective
rate at December 31, 1999 was 9.69%. The interest reserve will be reduced
quarterly, as interest payments are made on the trust preferred securities. The
Credit Facility is available through July 13, 2001 and at December 31, 1999
there was a principal amount of approximately $49.0 million outstanding and $4.6
million available under the Facility. The Credit Facility provides that certain
financial ratios be met and places restrictions on, among other things, the
occurrence of additional debt financing and the payment of dividends on common
stock. The Company was in compliance with such financial ratios and restrictions
at December 31, 1999.

     At December 31, 1999 approximately $115,000 of the credit facility was
committed on open letters of credit for inventory on order but not yet received.

5. LONG-TERM DEBT

     Long-term debt consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                                                    DECEMBER 31,
                                                                                  1999        1998
                                                                                --------    --------
<S>                                                                             <C>         <C>
Bank reducing revolving loan (see note 4) ....................................  $ 48,996    $ 46,610
Notes payable to former franchisees and others, due in monthly and quarterly
  installments with interest ranging from 8% to 9%; final payments at various
  dates through November 1, 2001, secured by certain property and equipment...     3,697       5,855
                                                                                --------    --------
   Total long-term debt ......................................................    52,693      52,465
Less current portion .........................................................    (2,463)     (2,155)
                                                                                --------    --------
   Long-term debt, net of current portion ....................................  $ 50,230    $ 50,310
                                                                                ========    ========
</TABLE>

     The carrying amount of long-term debt approximates its fair value.

     Maturities of long-term debt as of December 31, 1999 are as follows (in
thousands):

<TABLE>
<CAPTION>
     YEAR ENDING DECEMBER 31,
<S>                                                   <C>
               2000 ...............................   $ 2,463
               2001 ...............................    50,230
                                                      -------
                                                      $52,693
                                                      =======
</TABLE>



                                      F-8
<PAGE>   31

                       AMERICAN COIN MERCHANDISING, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

6. MANDATORILY REDEEMABLE PREFERRED SECURITIES

     In September 1998, American Coin Merchandising Trust I (the "Trust"), the
Company's wholly-owned subsidiary trust created under the laws of the State of
Delaware, completed a public offering of $17 million of Ascending Rate (10.5% at
December 31, 1998 increasing to 12.0% at September 16, 2005) Cumulative Trust
Preferred Securities (the "Trust Preferred Securities"). The Company recognizes
periodic interest using the interest method over the outstanding term of the
debt. The sole assets of the Trust are American Coin Merchandising, Inc.
Ascending Rate Junior Subordinated Debentures (the "Subordinated Debentures")
due September 15, 2028. The obligations of the Trust related to the Trust
Preferred Securities are fully and unconditionally guaranteed by the Company.
Distributions on the Trust Preferred Securities are payable quarterly by the
Trust. The Trust Securities are subject to mandatory redemption upon the
repayment of the Subordinated Debentures at their stated maturity at $10 per
Trust Preferred Security.

     The Company may cause the Trust to defer the payment of distributions for
successive periods up to eight consecutive quarters. During such periods,
accrued distributions on the Trust Preferred Securities will compound quarterly
and the Company may not declare or pay distributions on its common stock or debt
securities that rank equal or junior to the Trust Preferred Securities.

     Issuance costs of approximately $1.5 million related to the Trust Preferred
Securities were deferred and are being amortized on the interest method over the
period until mandatory redemption at September 15, 2028.

7. INCOME TAXES

     Income tax (benefit) expense consists of the following (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,     1999       1998      1997
                          -------    -------   -------
<S>                       <C>        <C>       <C>
   CURRENT
     Federal ..........   $  --      $   785   $ 1,507
     State ............      --          144       286
                          -------    -------   -------
                             --          929     1,793
                          -------    -------   -------
   DEFERRED
     Federal ..........    (2,812)       779       393
     State ............      (388)       146        70
                          -------    -------   -------
                           (3,200)       925       463
                          -------    -------   -------

                          $(3,200)   $ 1,854   $ 2,256
                          =======    =======   =======
</TABLE>

     A reconciliation of the expected tax (benefit) expense, assuming income
(loss) before taxes is taxed at the statutory federal tax rate of 34%, and the
Company's actual provision for income taxes is as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,                                          1999       1998       1997
                                                               -------    -------    -------
<S>                                                            <C>        <C>        <C>
     Expected tax (benefit) expense at the federal statutory
     rate ..................................................   $(2,620)   $ 1,956    $ 2,273
     State income taxes, net of federal taxes ..............      (305)       228        265
     Change in valuation allowance .........................      (270)      (270)      (292)
     Other, net ............................................        (5)       (60)        10
                                                               -------    -------    -------

                                                               $(3,200)   $ 1,854    $ 2,256
                                                               =======    =======    =======
</TABLE>



                                      F-9
<PAGE>   32
                       AMERICAN COIN MERCHANDISING, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


     The sources and tax effects of temporary differences between financial
statement carrying amounts and the tax bases of assets and liabilities are as
follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,                                           1999       1998
                                                     -------    -------
<S>                                                  <C>        <C>
DEFERRED TAX ASSETS:
     Costs in excess of assets acquired-basis
       and amortization differences ..............   $   331    $   959
     Net operating loss carry forward ............     4,755       --
     Allowance for doubtful receivables ..........        91       --
     Inventory reserves ..........................       135       --
     Valuation allowance .........................      --          270
                                                     -------    -------
                                                       5,312        689
DEFERRED TAX LIABILITIES--
     property and equipment-basis and
       depreciation differences ..................    (3,458)    (2,035)
                                                     -------    -------

                                                     $ 1,854    $(1,346)
                                                     =======    =======
</TABLE>

8. RETIREMENT PLAN

     The Company maintains a 401(k) profit sharing plan, which covers
substantially all employees. Employees are permitted to contribute up to 15% of
their eligible compensation. The Company makes contributions to the plan
matching 50% of the employees' contribution up to 10% of compensation. The
Company's matching contributions totaled $319,000, $183,000 and $113,000 in
1999, 1998 and 1997, respectively.

     The Company has established a qualified Employee Stock Purchase Plan, the
terms of which allow for qualified employees (as defined) to participate in the
purchase of designated shares of the Company's common stock at a price equal to
the lower of 85% of the closing price at July 1 or the end of each quarterly
stock purchase period. The Company issued 5,125 shares of common stock during
1999 pursuant to this plan at an average price per share of $2.34.

9. COMMITMENTS

     The Company has noncancelable operating leases, primarily for office and
warehouse facilities, vehicles and certain types of equipment. These leases
expire at various times over the next four years. Rent expense under these
leases totaled $2,063,000, $1,087,000 and $489,000 for the years ended December
31, 1999, 1998 and 1997, respectively.

     Future minimum commitments under operating lease arrangements as of
December 31, 1999 are as follows (in thousands):

<TABLE>
<S>                                                        <C>
               2000....................................... $   2,118
               2001.......................................     1,694
               2002.......................................       980
               2003.......................................       368
                                                            --------
                 Total.................................... $   5,170
                                                            ========
</TABLE>

10. STOCK OPTIONS

     The Company has two fixed option plans. Under the terms of the amended and
restated stock option plan (the "Option Plan"), the Company may grant to
employees, consultants and advisors up to 1,400,000 shares of common stock.
Under the Option Plan, the Company may grant both incentive stock options and
non-statutory stock options, and the maximum term is ten years. Non-statutory
options may be granted at no less than 85% of the fair value of the common stock
at the date of grant. Stock options granted under the Option Plan vest over
three to five year periods.



                                      F-10
<PAGE>   33
                       AMERICAN COIN MERCHANDISING, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

     Under terms of the amended 1995 Non-Employee Directors' Stock Option Plan
(the "Directors Plan"), the Company may grant to non-employee directors options
to purchase up to 100,000 shares of common stock. Under the Directors Plan,
options granted vest over a three-year period and have a maximum term of ten
years.

     The Company applies APB Opinion No. 25 and related interpretations in
accounting for its plans. Accordingly, no compensation cost has been recognized
for options granted at fair value under the plans. The compensation cost that
has been charged against earnings for options granted at a price less than fair
value was $19,000 in 1998 and 1997, respectively. Had compensation cost for the
Company's stock-based compensation plans been determined consistent with SFAS
No. 123, the Company's net earnings (loss) and diluted earnings (loss) per share
would have been reduced to the pro forma amounts indicated below (in thousands,
except per share data):

<TABLE>
<CAPTION>
                                                      1999         1998       1997
                                                    -------      -------    -------
<S>                                                 <C>          <C>        <C>
Net (loss) earnings                As reported      $(4,506)     $ 3,898    $ 4,429
                                   Pro forma         (5,336)       3,642      4,234

Diluted (loss) earnings per share  As reported      $ (0.70)     $  0.78    $  0.48
                                   Pro forma          (0.82)        0.74       0.46
</TABLE>

     The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1999, 1998 and 1997: no dividend yield; expected
volatility of 73 percent for 1999, 66 percent for 1998 and 60 percent for 1997;
risk-free interest rates of 6.8 percent in 1999, 5.0 in 1998 and 6.0 percent in
1997; and expected lives of six years.

     A summary of the status of the Company's two fixed stock option plans as of
December 31, 1999, 1998 and 1997, and changes during the years ended on those
dates is presented below:

<TABLE>
<CAPTION>
                                     1999                   1998                  1997
                              --------------------   -------------------   --------------------
                                        WEIGHTED-              WEIGHTED-              WEIGHTED-
                                         AVERAGE                AVERAGE                AVERAGE
                                         EXERCISE               EXERCISE               EXERCISE
    FIXED OPTIONS              SHARES     PRICE       SHARES     PRICE      SHARES      PRICE
    -------------             -------    --------    -------    --------   --------    --------
<S>                           <C>       <C>          <C>       <C>         <C>        <C>
Outstanding at beginning
   of year ...............    461,417    $   8.30    316,000    $   7.75    440,797    $   1.51
Granted ..................    308,500        5.76    194,950        9.00    215,500        8.73
Exercised ................       --          --      (22,165)       5.81   (329,630)        .13
Forfeited ................    (97,900)       8.52    (27,368)       8.88    (10,667)       5.53
                              -------                -------               --------
Outstanding at end of
   year ..................    672,017        7.10    461,417        8.30    316,000        7.75
                              =======                =======               ========
Options exercisable at
   year-end ..............    280,397                108,227                 63,667
</TABLE>

     The following table summarizes information about fixed stock options
outstanding at December 31, 1999:

<TABLE>
<CAPTION>
                                            OPTIONS OUTSTANDING                          OPTIONS EXERCISABLE
                            ---------------------------------------------------    ------------------------------
               RANGE                       WEIGHTED AVERAGE
                 OF            NUMBER         REMAINING        WEIGHTED AVERAGE      NUMBER      WEIGHTED AVERAGE
          EXERCISE PRICES   OUTSTANDING    CONTRACTUAL LIFE    EXERCISE PRICE      EXERCISABLE    EXERCISE PRICE
          ---------------   -----------    ----------------    ----------------    -----------    ---------------
<S>                         <C>            <C>                 <C>                 <C>           <C>
           $4.00 to  7.00      358,667           8.9                  $5.69           184,167           $5.63
            7.50 to 10.00      313,350           8.1                   8.71            96,230            8.62
                               -------                                               --------
            4.00 to 10.00      672,017           8.5                   7.10           280,397            6.67
                               =======                                                =======
</TABLE>



                                      F-11
<PAGE>   34
                       AMERICAN COIN MERCHANDISING, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

11.  STOCKHOLDERS' EQUITY

     COMMON STOCK
     The Company was originally incorporated in Colorado in 1988 and was
reincorporated in Delaware effective July 1995. In November 1997, the Company
completed a follow-on public offering of its common stock, whereby the Company
sold 1,000,000 shares at $15 per share. Total proceeds, net of underwriting
commission and other expenses of $1,075,000, were $13,925,000.

     PREFERRED STOCK
     The Board of Directors has the authority to issue up to 500,000 shares of
$.10 par value preferred stock in one or more series and to fix the rights,
preferences, privileges and distributions thereof, including dividend rights,
conversion rights, voting rights, terms of redemption, liquidation preferences,
sinking fund terms and the number of shares constituting any series or the
designation of such series, without any further vote or action by stockholders.
No shares of preferred stock have been issued.

     WARRANTS
     In March 1998, the Company repurchased for $492,000, including acquisition
costs, warrants exercisable for 70,000 shares of its Common Stock from an
underwriter. The Company initially issued warrants to purchase 125,000 shares of
its Common Stock with an exercise price of $8.40 per share as partial
compensation for acting as the Company's underwriter in its initial public
offering in October 1995. After this purchase, the underwriter retained warrants
exercisable for 55,000 shares of the Company's Common Stock, these warrants
expired on October 18, 1999.

12. CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES

     CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS:
       SUPPLIERS
     Substantially all of the plush toys and other products dispensed from the
Shoppes are produced by foreign manufacturers. A majority are purchased directly
by the Company from manufacturers in the People's Republic of China ("China").
The Company purchases its other products indirectly from vendors who obtain a
significant percentage of such products from foreign manufacturers. As a result,
the Company is subject to changes in governmental policies, the imposition of
tariffs, import and export controls, transportation delays and interruptions,
political and economic disruptions and labor strikes, which could disrupt the
supply of products from such manufacturers. Among other things, the loss of
China's "most favored nation" status under U.S. tariff laws could result in a
substantial increase in the import duty of certain products manufactured in
China, which could result in substantially increased costs for certain products
purchased by the Company which could have a material adverse effect on the
Company's financial performance.

       CUSTOMERS
     During 1999, the Company had vending machines placed with one retail
customer that accounted for 34% of the Company's revenue.



                                      F-12
<PAGE>   35
                       AMERICAN COIN MERCHANDISING, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

13. (LOSS) EARNINGS PER SHARE

     Basic and diluted (loss) earnings per share for 1999, 1998 and 1997 were
computed as follows:

<TABLE>
<CAPTION>
                                                                                      YEAR ENDED DECEMBER 31,
                                                                                1999           1998           1997
                                                                             -----------    -----------   -----------
<S>                                                                          <C>            <C>           <C>
Net (loss) earnings.......................................................   $(4,506,000)   $ 3,898,000   $ 4,429,000
                                                                             ===========    ===========   ===========
Common shares outstanding at beginning of year ...........................     6,475,069      6,452,904     5,123,274
     Effect of shares issued during the year .............................            14         14,088       441,993
                                                                             -----------    -----------   -----------
Basic weighted average common shares .....................................     6,475,083      6,466,992     5,565,267
Incremental shares from assumed conversions:
     Stock options .......................................................          --          220,334        97,544
     Warrants ............................................................          --           25,869        31,278
                                                                             -----------    -----------   -----------
Diluted weighted average common shares ...................................     6,475,083      6,713,195     5,694,089
                                                                             ===========    ===========   ===========
     Basic (loss) earnings per share .....................................   $     (0.70)   $      0.60   $      0.80
     Diluted (loss) earnings per share ...................................         (0.70)          0.58          0.78
</TABLE>

14. UNAUDITED QUARTERLY FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                            DEC. 31   SEPT. 30   JUNE 30    MAR. 31    DEC. 31   SEPT. 30   JUNE 30    MAR. 31
                                              1999      1999       1999       1999       1998      1998       1998       1998
                                            --------  --------   --------   --------   --------  --------   --------   --------
                                                                 (in thousands, except per share data)
<S>                                         <C>       <C>        <C>        <C>        <C>       <C>        <C>        <C>
Total revenue ............................  $ 31,190  $ 29,887   $ 30,242   $ 29,147   $ 30,545  $ 27,443   $ 20,962   $ 18,761
Total cost of revenue ....................    22,356    22,317     22,302     21,124     22,067    19,190     14,627     13,294
                                            --------  --------   --------   --------   --------  --------   --------   --------
   Gross profit ..........................     8,834     7,570      7,940      8,023      8,478     8,253      6,335      5,467
General and administrative expenses ......     6,407     6,740      6,431      6,090      6,393     5,632      3,862      3,526
Write off of costs in excess of assets
     acquired, severance and other costs .      --       7,536       --         --         --        --         --         --
                                            --------  --------   --------   --------   --------  --------   --------   --------
   Operating (loss) earnings .............     2,427    (6,706)     1,509      1,933      2,085     2,621      2,473      1,941
Interest expense .........................     1,785     1,724      1,686      1,674      1,659     1,230        361        118
                                            --------  --------   --------   --------   --------  --------   --------   --------
   (Loss) earnings before income taxes ...       642    (8,430)      (177)       259        426     1,391      2,112      1,823
Benefit (provision) for income taxes .....       242     3,469         58        (86)         8      (485)      (739)      (638)
                                            --------  --------   --------   --------   --------  --------   --------   --------
   Net (loss) earnings ...................  $    400  $ (4,961)  $   (119)  $    173   $    434  $    906   $  1,373   $  1,185
                                            ========  ========   ========   ========   ========  ========   ========   ========

 Basic (loss) earnings per share .........  $   0.06  $  (0.77)  $  (0.02)  $   0.03   $   0.07  $   0.14   $   0.21   $   0.18
 Diluted (loss) earnings per share .......      0.06     (0.77)     (0.02)      0.03       0.07      0.14       0.21       0.18
 Basic weighted average common shares ....     6,475     6,475      6,475      6,475      6,472     6,470      6,469      6,457
                                            ========  ========   ========   ========   ========  ========   ========   ========
 Diluted weighted average common shares ..     6,475     6,475      6,475      6,478      6,580     6,636      6,678      6,649
                                            ========  ========   ========   ========   ========  ========   ========   ========
</TABLE>




                                      F-13

<PAGE>   36
                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereto duly authorized.

                                      AMERICAN COIN MERCHANDISING, INC.

                                      By  /s/  Randall J. Fagundo
                                          -----------------------------
                                          Randall J. Fagundo
                                          President and Chief Executive Officer

                                POWER OF ATTORNEY

    KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Randall J. Fagundo and W. John Cash, or any of
them, his or her attorney-in-fact, each with the power of substitution, for him
or her in any and all capacities, to sign any amendments to this report, and to
file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his or her substitute or
substitutes, may do or cause to be done by virtue hereof.

    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.


<TABLE>
<CAPTION>
                       SIGNATURE                             TITLE                                 DATE
                       ---------                             -----                                 ----
<S>                                                  <C>                                       <C>
    /s/  JOHN A. SULLIVAN*                           Chairman of the Board                     March 24, 2000
    --------------------------------------------
         John A. Sullivan

    /s/  RANDALL J. FAGUNDO                          President and Chief Executive             March 24, 2000
    --------------------------------------------     Officer and Director
         Randall J. Fagundo

    /s/  W. JOHN CASH*                               Senior Vice President, Chief Financial    March 24, 2000
    --------------------------------------------     Officer, Treasurer and Secretary
         W. John Cash                                (Principal Financial and Accounting
                                                     Officer)

    /s/  J. GREGORY THEISEN*                         Director                                  March 24, 2000
    --------------------------------------------
         J. Gregory Theisen

    /s/  RICHARD D. JONES*                           Director                                  March 24, 2000
    --------------------------------------------
         Richard D. Jones

    /s/  RICHARD P. BERMINGHAM*                      Director                                  March 24, 2000
    --------------------------------------------
         Richard P. Bermingham

    /s/  BRUCE W. KRYSIAK*                           Director                                  March 24, 2000
    --------------------------------------------
         Bruce W. Krysiak

    /s/  JEROME M. LAPIN*                            Director                                  March 24, 2000
    --------------------------------------------
         Jerome M. Lapin

    *  /s/ RANDALL J. FAGUNDO                                                                  March 24, 2000
       -----------------------------------------
           Randall J. Fagundo
           Attorney-in-Fact
</TABLE>



<PAGE>   37
                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                       DESCRIPTION
       -------                      -----------
<S>               <C>
         3.1+     -- Certificate of Incorporation of the Registrant.
         3.2+     -- Bylaws of the Registrant.
         3.3*     -- Certificate of Designation of Series A Junior Participating
                     Preferred Stock of the Registrant
         4.1+     -- Reference is made to Exhibits 3.1 and 3.2.
         4.2+     -- Specimen Stock Certificate.
         4.3@     -- Certificate of Trust of American Coin Merchandising Trust
                     I.
         4.4@     -- Trust Agreement of American Coin Merchandising Trust I.
         4.5@     -- Amended and Restated Trust Agreement of American Coin
                     Merchandising Trust I.
         4.6@     -- Form of Junior Subordinated Indenture between the
                     Registrant and Wilmington Trust Company, as Trustee.
         4.7@     -- Form of Guarantee Agreement with respect to Trust Preferred
                     Securities of American Coin Merchandising Trust I.
         4.8@     -- Form of Agreement as to Expenses and Liabilities between
                     the Registrant and American Coin Merchandising Trust I.
         4.9@     -- Form of Certificate Evidencing Trust Preferred Securities.
         4.10@    -- Form of Certificate Evidencing Trust Common Securities.
         4.11@    -- Form of Ascending Rate Junior Subordinated Deferrable
                     Interest Debenture.
         4.12*    -- Rights Agreement dated as of April 29, 1999 between the
                     Registrant and Norwest Bank Minnesota, N.A.
         4.13*    -- Form of Rights Certificate.
         10.1+    -- Form of Indemnity Agreement to be entered into between the
                     Registrant and its directors and executive officers.
         10.2+X   -- Amended and Restated Stock Option Plan of the Registrant
                     (the "Option Plan").
         10.3+    -- Form of Incentive Stock Option under the Option Plan.
         10.4+    -- Form of Nonstatutory Stock Option under the Option Plan.
         10.5+X   -- 1995 Non-Employee Director Stock Option Plan (the "Director
                     Plan").
         10.6+    -- Form of Nonstatutory Stock Option under the Director Plan.
         10.35#   -- Commercial Lease Amendment Agreement, between the
                     Registrant and Technical Building Company, dated as of
                     November 20, 1997.
         10.36@** -- Reducing Revolving Loan Agreement between the Registrant
                     and Wells Fargo Bank, N.A., dated as of June 10, 1998.
         10.37@** -- Amendment No. 1 to the Reducing Revolving Loan Agreement
                     between the Registrant and Wells Fargo Bank, N.A., dated
                     June 30, 1998.
         10.41o   -- Amendment No. 2 to the Reducing Revolving Loan Agreement
                     between the Registrant and Wells Fargo Bank, N.A., dated
                     September 23, 1998.
         10.42&   -- Amendment No. 3 to the Reducing Revolving Loan Agreement
                     between the Registrant and Wells Fargo Bank, N.A., dated
                     February 26, 1999.
         10.43&X  -- Management Transition Agreement between the Registrant and
                     Jerome M. Lapin, dated April 7, 1999.
         10.44&   -- Voting Agreement between the Registrant and Jerome M.
                     Lapin, dated April 7, 1999.
         10.45&   -- Stock Restriction Agreement between the Registrant and
                     Jerome M. Lapin, dated April 7, 1999.
         10.46    -- Amendment No. 4 to the Reducing Revolving Loan Agreement
                     between the Registrant and Wells Fargo Bank, N.A., dated
                     May 28, 1999
         11.1     -- Computation of Per Share Earnings.
         23.1     -- Consent of KPMG LLP.
         27       -- Financial Data Schedule.
</TABLE>

+    Incorporated by reference to the Company's Registration Statement on Form
     SB-2, File No. 33-95446-D.

@    Incorporated by reference to the Company's Registration Statement on
     Form-3, File No. 333-60267.

#    Incorporated by reference to the Company's Annual Report on Form 10-K for
     the year ended December 31, 1997.

o    Incorporated by reference to the Company's Current Report on Form 8-K,
     dated October 2, 1998.

&    Incorporated by reference to the Company's Annual Report on Form 10-K/A for
     the year ended December 31, 1998.

*    Incorporated by reference to the Company's Current Report on Form 8-K,
     dated April 29, 1999.

X    Indicates management contract or compensatory plan, contract or
     arrangement.