<PAGE>

             U.S. SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C. 20549
                           FORM 10-QSB
(Mark One)
[X]  QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15  (D)  OF  THE
     SECURITIES EXCHANGE ACT OF 1934
     For the quarterly period ended:        June 30, 1999
                                      ---------------------------
                               OR
[ ]  TRANSITION  REPORT  PURSUANT SECTION  13  OR  15(D)  OF  THE
     SECURITIES EXCHANGE ACT OF 1934
     For the transition period from:              to
                                      ----------       ----------

Commission file number:                 000-25855
                         ----------------------------------------

                   CASINOVATIONS INCORPORATED
-----------------------------------------------------------------
             (Exact name of small business issuer as
                    specified in its charter)

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

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

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

-----------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
                       since last report)

      Check whether the issuer (1) filed all reports required  to
be  filed  by Section 13 or 15(d) of the Exchange Act during  the
past  12  months (or for such shorter period that the  registrant
was  required to file such reports), and (2) has been subject  to
such filing requirements for the past 90 days.

     YES   X   NO
          ---     ---

        APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
           PROCEEDINGS DURING THE PRECEDING FIVE YEARS

     Check whether the registrant filed all documents and reports
required  to be filed by Section 12, 13 or 15(d) of the  Exchange
Act  after  the distribution of securities under a plan confirmed
by court.

     YES      NO
         ---     ---

              APPLICABLE ONLY TO CORPORATE ISSUERS

      State  the  number of shares outstanding  of  each  of  the
issuer's  classes of common equity, as of the latest  practicable
date:
       9,707,148 shares of common stock, $.001 par value,
                      as of June 30, 1999
-----------------------------------------------------------------
     Transitional Small Business Disclosure Format (check one);

     YES      NO  X
         ---     ---

                                1

<PAGE>

                           FORM 10-QSB

                        TABLE OF CONTENTS

                                                             PAGE
                                                            NUMBER

PART I.   FINANCIAL INFORMATION

     Item 1.   Financial Statements                            3

               Balance Sheet                                   3

               Statement of Operations                         4

               Statement of Cash Flows                         5

               Notes to Financial Statements                   6

     Item 2.   Management's Discussion and Analysis of
                Financial Condition and Results of Operations  7

PART II.  OTHER INFORMATION

     Item 1.   Legal Proceedings                               16

     Item 2.   Changes in Securities and Use of Proceeds       16

     Item 3.   Defaults Upon Senior Securities                 17

     Item 4.   Submission of Matters to a Vote of Security
                Holders                                        17

     Item 5.   Other Information                               17

     Item 6.   Exhibits and Reports on Form 8-K                18

SIGNATURE                                                      20

EXHIBIT INDEX                                                  21

                                2

<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

<TABLE>
<CAPTION>

                   CASINOVATIONS INCORPORATED
                  (A Development Stage Company)
                          BALANCE SHEET
                           (UNAUDITED)
                                                                                   June 30, 1999    December 31, 1998
                                                                                  ---------------  -------------------
                                     ASSETS
<S>                                                                                <C>                  <C>
Current assets:
      Cash and cash equivalents                                                    $   1,773,363        $     200,749
      Accounts receivable, trade                                                         148,077                2,810
      Other receivables                                                                2,666,652               11,347
      Inventories                                                                      1,350,299              756,662
      Prepaid expenses                                                                    32,095               38,896
                                                                                  ---------------  -------------------
       Total current assets                                                            5,970,486            1,010,464

Property and equipment, including revenue producing equipment, at cost, net of
      accumulated depreciation of $231,459 and $125,380                                1,185,769              350,772

Intangible assets, at cost, net of
      accumulated amortization of $47,657 and $37,369                                    154,326              157,916
Deferred interest                                                                        173,071              238,590
Deposits                                                                                 263,049              142,821
                                                                                  ---------------  -------------------
                                                                                   $   7,746,701        $   1,900,563
                                                                                  ===============  ===================

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
      Note payable - bank                                                          $           -        $     197,383
      Current portion of leases payable                                                  790,608              219,758
      Current portion of long term debt                                                        -                3,232
      Accounts payable                                                                   659,711              810,349
      Accrued expenses                                                                   146,572               40,576
      Accrued interest - stockholder loans                                                     -               59,561
      Current portion of stockholder loans                                               104,532              295,755
      Customer deposits                                                                   75,458               15,874
                                                                                  ---------------  -------------------
       Total current liabilities                                                   $   1,776,881        $   1,642,488

Other long term debt                                                                           -               13,948
Leases payable                                                                         1,252,876                    -
Convertible debt                                                                       1,500,000              813,138
Stockholder loans                                                                        235,887            1,089,245
                                                                                  ---------------  -------------------
       Total liabilities                                                           $   4,765,644        $   3,558,819

Stockholders' equity:
      Common stock, $.001 par value,
       40,000,000 shares authorized, 9,706,148 shares and
       6,767,106 shares issued and outstanding, respectively                               9,706                6,767
      Additional paid-in capital                                                      13,907,544            6,676,430
      Unpaid subscriptions to common stock                                             (125,000)            (125,000)
      Deficit accumulated during development stage                                  (10,811,193)          (8,216,453)
                                                                                  ---------------  -------------------
       Total stockholders' equity                                                      2,981,057          (1,658,256)
                                                                                  ---------------  -------------------
                                                                                   $   7,746,701        $   1,900,563
                                                                                  ===============  ===================

</TABLE>

    See accompanying notes to unaudited financial statements.

                                3

<PAGE>

<TABLE>
<CAPTION>

                   CASINOVATIONS INCORPORATED
                  (A Development Stage Company)
                     STATEMENT OF OPERATIONS
    THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                           (UNAUDITED)

                                                  Three Months Ended                   Six Months Ended
                                            June 30, 1999    June 30, 1998      June 30, 1999    June 30, 1998
                                          ----------------  ---------------    ---------------  ---------------
<S>                                       <C>               <C>                <C>              <C>
Sales                                     $        80,945   $        3,943     $       98,650   $        4,288
Rental income                                     103,845                             150,365                -
                                          ----------------  ---------------    ---------------  ---------------
                                                                                                             -
                                                  184,790            3,943            249,015            4,288

Cost of sales                                     359,422                -            437,912                -
                                          ----------------  ---------------    ---------------  ---------------
                                                                                                             -
Gross margin                                     (174,632)               -           (188,897)               -

General and administrative                      1,218,138          690,080          2,143,036        1,045,864
Research and development                          185,457           24,487            344,313          126,820
                                          ----------------  ---------------    ---------------  ---------------
                                                                                                             -
(Loss) from operations                         (1,578,227)        (710,624)        (2,676,246)      (1,168,396)

Interest expense, net                             115,574                -            212,992           37,528
Interest expense - related parties                 28,929           29,256             50,372           54,136
                                          ----------------  ---------------    ---------------  ---------------
                                                                                                             -
                                                  144,503           29,256            263,364           91,664
                                          ----------------  ---------------    ---------------  ---------------
                                                                                                             -
(Loss) before income taxes                     (1,722,730)        (739,880)        (2,939,610)      (1,260,060)
Provision for income taxes                              -                -                  -                -
                                          ----------------  ---------------    ---------------  ---------------

Net income (loss)                         $    (1,722,730)  $     (739,880)    $   (2,939,610)  $   (1,260,060)
                                          ================  ===============    ===============  ===============

Basic earnings (loss) per share           $         (0.21)  $        (0.12)    $        (0.38)  $        (0.20)
                                          ================  ===============    ===============  ===============

Weighted average shares outstanding             8,400,418        6,283,638          7,661,566        6,231,638
                                          ================  ===============    ===============  ===============

</TABLE>

    See accompanying notes to unaudited financial statements.

                                4
<PAGE>

<TABLE>
<CAPTION>

                   CASINOVATIONS INCORPORATED
                  (A Development Stage Company)
                    STATEMENTS OF CASH FLOWS
             SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                           (UNAUDITED)


                                                              Six Months Ended
                                                    -------------------------------------
                                                     June 30, 1999         June 30, 1998
                                                    ---------------       ---------------
<S>                                                 <C>                   <C>
Net (loss)                                          $  (2,939,610)        $  (1,260,060)
 Adjustments to reconcile net income (loss) to net
  cash provided by operating activities:
  Depreciation and amortization                            116,366                44,175
  Stock and options issued for services                          -               176,500
  Amortization of deferred interest                         78,433                     -
 Changes in assets and liabilities:
  (Increase) decrease in trade accounts receivable       (145,267)               (4,052)
  (Increase) decrease in other receivables                (55,305)               (5,642)
  (Increase) decrease in inventory                       (593,637)             (126,118)
  (Increase) decrease in prepaid expenses                    6,801               (8,490)
  Increase (decrease) in accounts payable                (135,564)                55,783
  Increase (decrease) in accrued expenses                   46,435                32,200
  Increase (decrease) in customer deposits                  59,584                     -
                                                    ---------------       ---------------
   Total adjustments                                     (622,154)               164,356
                                                    ---------------       ---------------
Net cash (used in) operating activities                (3,561,764)           (1,095,704)
                                                    ---------------       ---------------
Cash flows from investing activities:
 Acquisition of plant and equipment                      (381,922)              (16,204)
 Equipment produced and held for rental                  (554,400)                     -
 Increase in patents and trademarks                        (6,698)              (16,406)
                                                    ---------------       ---------------
Net cash (used in) investing activities                  (943,020)              (32,610)
                                                    ---------------       ---------------
Cash flows from financing activities:
 Common stock sold for cash                              4,028,923               430,000
 Payment for rescinded stock subscription agreement      (450,000)                     -
 Repayment of long-term debt                              (16,408)                     -
 Proceeds of shareholder loans                                   -               290,000
 Repayment of shareholder loans                          (150,000)              (38,660)
 Proceeds from leases payable                            1,226,513               430,000
 Repayment of leases payable                             (264,247)              (74,121)
 Proceeds from convertible debentures                    1,900,000                     -
 Repayment of notes payable                              (197,383)                     -
                                                    ---------------       ---------------
Net cash provided by financing activities                6,077,398             1,037,219
                                                    ---------------       ---------------
Increase (decrease) in cash                              1,572,614              (91,095)
Cash and cash equivalents,
 beginning of period                                       200,749               119,389
                                                    ---------------       ---------------
Cash and cash equivalents,
 end of period                                        $  1,773,363        $       28,294
                                                    ===============       ===============

</TABLE>

    See accompanying notes to unaudited financial statements.

                                5

<PAGE>

                   CASINOVATIONS INCORPORATED
                  (A Development Stage Company)
                  Notes to Financial Statements
                           (Unaudited)

NOTE 1 - BASIS OF PRESENTATION.

The   accompanying  unaudited  financial  statements  have   been
prepared   in  accordance  with  generally  accepted   accounting
principles  for  interim  financial  information  and  with   the
instructions  incorporated in Regulation 10-SB of the  Securities
and Exchange Commission.  Accordingly, they do not include all of
the  information  and  footnotes required by  generally  accepted
accounting principles for complete financial statements.  In  the
opinion  of  management, all adjustments  (consisting  of  normal
recurring  adjustments and accruals) considered necessary  for  a
fair presentation have been included.

The  results  of  operations for the periods  presented  are  not
necessarily indicative of the results to be expected for the full
year.  The  accompanying financial statements should be  read  in
conjunction  with the Company's audited financial statements  for
the  year  ended December 31, 1998 as included in  the  Company's
Annual  Report  on Form 10-KSB as filed with the  Securities  and
Exchange Commission on March 26, 1999.

Certain reclassifications have been made to amounts presented  in
prior   periods   for   comparability  to  the   current   period
presentation.

Basic  loss  per  share was computed using the  weighted  average
number of common shares outstanding.

NOTE 2 - STATEMENT REGARDING COMPUTATION OF LOSS PER SHARE.

Fully  diluted  loss per share excludes any dilutive  effects  of
options, warrants and convertible securities.  Fully diluted loss
per  share  is  not presented because the effect would  be  anti-
dilutive.

NOTE 3 - SUBSEQUENT EVENTS.

      BUILDING  LEASE.  In  July  1999,  the  Company  agreed  in
principle  to  lease  from the  Company's  current landlord a new
building  containing approximately  58,000 square feet  beginning
October 1999,  subject  to  the  approval of  the  final building
plans  by  both parties.  Under the  terms of the proposed  lease
agreement,  the  Company  will  be  relieved from all obligations
under  its current  lease  agreement  with the landlord 15 months
after  the  execution  of the proposed lease agreement.  The term
under the proposed lease agreement will be for 86 months with one
option to  extend  for  a  five-year period.  The  effective rent
under  the proposed lease agreement is expected to be $17,903 per
month for the first year  and  $42,968 per month  for  subsequent
years,  subject  to  annual  increases  after  the  second  year.
Increases  to  rent  shall  be  based on the Consumer Price Index
and  shall  not  exceed  3%  per annum.  The other material terms
of the  proposed lease agreement are believed to be substantially
similar to those of  the  Company's current lease agreement.  The
Company  expects the new facility to be adequate for its facility
requirements for the foreseeable future.

      VEHICLE  FINANCING.    In July 1999, a  commercial  leasing
company  agreed to provide the Company with a $100,000  revolving
lease  facility  for  the  purchase of  vehicles.   The  facility
requires  the  Company to pay 10% of the purchase price  for  the
vehicle  and variable monthly payments for up to 48 months.   The
interest rate is indexed to the 5 year U.S. Treasury Index and is
fixed  for  the  term of the financing at the funding  date.  The
Company expects to treat vehicle acquisitions under this facility
as a capital lease.

                                6

<PAGE>

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

STATEMENT ON FORWARD-LOOKING INFORMATION

     Certain information included herein contains statements that
may  be  considered forward-looking statements within the meaning
of  Section  27A of the Securities Act of 1933, as  amended  (the
"Securities Act"), and Section 21E of the Securities Exchange Act
of  1934,  as  amended (the "Exchange Act"), such  as  statements
relating to plans for future expansion, capital spending,  future
operations,  sources  of liquidity and financing  sources.   Such
forward-looking   information  involves   important   risks   and
uncertainties that could significantly affect anticipated results
in  the  future  and, accordingly, such results may  differ  from
those  expressed in any forward-looking statements  made  herein.
These  risks  and uncertainties include, but are not limited  to,
those  relating  to liquidity requirements for the  Company,  the
continued  growth  of the gaming industry,  the  success  of  the
Company's product-development and marketing and sales activities,
vigorous  competition  in  the  gaming  industry,  dependence  on
existing  management,  relocation  of  manufacturing  facilities,
gaming  regulations  (including actions affecting  licensing  and
product   approvals),  leverage  and  debt   service   (including
sensitivity to fluctuations in interest rates), issues related to
the Year 2000, domestic or global economic conditions and changes
in federal or state tax laws or the administration of such laws.

OVERVIEW

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

      From  its  inception  in  1995,  the  Company  has  been  a
"Development  Stage Company" performing research and development,
product  prototyping, field testing of products,  development  of
manufacturing  capabilities, acquiring inventory, development  of
distribution  channels, staffing and obtaining a  facility   with
sufficient  capacity to house future growth.   Beginning  January
1999,  the  Company has experienced modest sales development  and
revenue growth.

     The following discussion summarizes the Company's results of
operations for the three months ended June 30, 1999 and 1998, the
six  months  ended  June  30, 1999  and  1998  and  the Company's
liquidity and capital resources.

RESULTS OF OPERATIONS

  THREE MONTHS ENDED JUNE 30, 1999 AND 1998

     REVENUES.   For  the three months ended June 30,  1999,  the
Company  generated total revenues of $184,790 compared to  $3,943
for  the three months ended June 30, 1998.  The revenues for  the
three  months  ended June 30, 1999 consisted of  Random  Ejection
Shuffler  (the "Shuffler") rentals of $69,414, Shuffler sales  of
$66,500,  table  game  rentals of $34,431,  and  other  sales  of
$14,445.

     COST OF SALES. For the three months ended June 30, 1999, the
cost  of sales was estimated by the Company to be $359,422.   For
the  three  months  ended  June 30, 1998,  the  Company  did  not
separately report cost of sales because the Company generated  an
immaterial  amount  of  revenue during the  twelve  months  ended
December  31,  1998.  The estimated cost of sales for  the  three
months  ended June 30, 1999 consists of approximately  $4,200  of
depreciation  expense  associated with  the  Shufflers  held  for
rental, $209,200 of costs related to servicing the Shufflers held
for rental, $26,300 of costs related to sales of the Shuffler and
$119,722 of labor and other manufacturing costs in excess of  the
Company's  estimated total

                                7

<PAGE>

manufacturing costs during the three months ended  June 30, 1999.
The Company expects its per unit costs of sales to decline in the
future as the manufacturing rate for the Shufflers increases and,
in turn, allows the Company to allocate costs over more units and
achieve greater production and servicing efficiencies.

     SELLING,  GENERAL  AND ADMINISTRATIVE  EXPENSES.    For  the
three   months  ended  June  30,  1999,  selling,   general   and
administrative  expenses  increased  approximately  $528,058,  or
approximately  77%, to $1,218,138 compared to  $690,080  for  the
three  months  ended June 30, 1998.  This increase was  primarily
attributable  to  expenses associated with  the  development  and
marketing  of  the  Company's products and the expansion  of  the
Company's operations.  For the three months ended June 30,  1999,
selling,  general and administrative expenses included:  salaries
and related costs of $669,943; advertising and marketing services
of  $39,680;  gaming industry show costs of $38,140;  travel  and
entertainment  costs  of $140,519; printing and  office  expense,
including rent, of $116,956; and legal expenses of $138,361.   In
addition,  the  Company  had  depreciation  and  amortization  of
$55,327  for  the  three months ended June 10, 1999  compared  to
$27,210 for the three months ended June 30, 1998.

     INTEREST EXPENSE.  For the three months ended June 30, 1999,
the  Company incurred interest expenses, net of interest  income,
of  144,503  compared to $29,256 for the three months ended  June
30,  1998.   This  increase  was primarily  attributable  to  the
increased borrowings by the Company.

     NET  INCOME  (LOSS).  For the three months  ended  June  30,
1999, the Company had a net loss of $1,722,730, compared to a net
loss  of $739,880 for the three months ended June 30, 1998.   The
increase  in  net loss was primarily due to continued development
of  the  Company's  products and the expansion of  the  Company's
operations.   Basic loss per share was $0.21, based on  8,400,418
weighted  average shares outstanding, for the three months  ended
June  30,  1999  compared to $0.12, based on  6,283,638  weighted
shares outstanding, for the three months ended June 30, 1998.

  SIX MONTHS ENDED JUNE 30, 1999 AND 1998

     REVENUES.   For  the  six months ended June  30,  1999,  the
Company  generated total revenues of $249,015 compared to  $4,288
for the six months ended June 30, 1998.  The revenues for the six
months  ended  June  30, 1999 consisted of  Shuffler  rentals  of
$87,937,  Shuffler  sales  of  $82,000,  table  game  rentals  of
$62,428, and other sales of $16,650.

     COST  OF SALES. For the six months ended June 30, 1999,  the
cost  of sales was estimated by the Company to be $437,912.   For
the  six  months  ended  June  30,  1998,  the  Company  did  not
separately report cost of sales because the Company generated  an
immaterial  amount  of  revenue during the  twelve  months  ended
December 31, 1998.  The estimated cost of sales for the six month
period  ended June 30, 1999 consists of approximately $17,000  of
depreciation  expense  associated with  the  Shufflers  held  for
rental, $281,955 of costs related to servicing the Shufflers held
for rental, $32,000 of costs related to sales of the Shuffler and
$106,000 of labor and other manufacturing costs in excess of  the
Company's  estimated  total manufacturing costs  during  the  six
months  ended  June 30, 1999.  The Company expects its  per  unit
costs of sales to decline in the future as the manufacturing rate
for  the Shufflers increases and, in turn, allows the Company  to
allocate costs over more units and achieve greater production and
servicing efficiencies.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.   For the  six
months  ended  June 30, 1999, selling, general and administrative
expenses   increased  approximately  $1,097,172,  or   105%,   to
$2,143,036  compared to $1,045,864 for the six months ended  June
30,  1998.  This increase was primarily attributable to  expenses
associated  with the development and marketing of  the  Company's
products and  the expansion of the Company's operations.  For the
six   months   ended   June  30,  1999,   selling,  general   and
administrative expenses included:  salaries and related costs  of
$1,134,127; advertising and marketing services of

                                8

<PAGE>

$83,162;  gaming  industry  show  costs  of  $115,417; travel and
entertainment  costs of  $212,418;  printing and office  expense,
including  rent,  of  $216,823;  and  legal expenses of $206,198.
In addition, the Company had  depreciation  and  amortization  of
$99,854  for  the  six  months  ended  June 10, 1999  compared to
$44,175 for the six months ended June 30, 1998.

     INTEREST  EXPENSE.  For the six months ended June 30,  1999,
the  Company incurred interest expenses, net of interest  income,
of $263,364 compared to $91,664 for the six months ended June 30,
1998.   This increase was primarily attributable to the increased
borrowings by the Company.

     NET  INCOME (LOSS).  For the six months ended June 30, 1999,
the  Company had a net loss of $2,939,610, compared to a net loss
of  $1,260,060  for  the six months ended  June  30,  1998.   The
increase  in  net loss was primarily due to continued development
of  the  Company's  products and the expansion of  the  Company's
operations.   Basic loss per share was $0.38, based on  7,661,556
weighted  average  shares outstanding, for the six  months  ended
June  30,  1999  compared to $0.20, based on  6,231,635  weighted
shares outstanding, for the six months ended June 30, 1998.

LIQUIDITY AND CAPITAL RESOURCES

      OVERVIEW.  The Company has continued to focus on sales  and
marketing  efforts  for  the  Shuffler  and  has  begun  to  make
significant  placements of the Shuffler in a  variety  of  gaming
facilities.  As a result, rentals and sales of the  Shuffler  are
beginning  to  generate  cash  receipts  which  are  expected  to
continue  to build through the rest of the year. The  Company  is
continuing  to expend cash to develop its SecureDrop system,  and
these  costs, together with product improvement expenses, related
marketing   and  regulatory  costs,  and  litigation  and   legal
expenses, are consuming cash resources.  The Company has begun to
pursue  sales orders from a variety of gaming customers  for  the
SecureDrop system.  The Company expects to substantially discount
the price of initial orders to gain market acceptance. To ramp up
increased  product production for both the Shuffler and  the  new
production  line  for  the SecureDrop system,  the  Company  will
continue to expend cash for which there will not be cash  revenue
generated  until  later in the year. Because the Company's  sales
strategy  for  Shufflers relies on monthly  rental  revenue,  the
Company  incurs  cash  expenditures well before  generating  cash
receipts sufficient to recoup its production costs.  The  Company
expects to sell its SecureDrop products for cash and normal trade
credit terms.

      In May 1999, pursuant to notices distributed by the Company
to  holders of the Company's 9.5% Convertible Notes Due 2004 (the
"Convertible Notes"), the Company offered to provide  a  one-time
two  week  window  that  expired  on  May 31,  1999 for the early
conversion  of the  Convertible Notes into shares of Common Stock
at the  stated  conversion  rate of $2.60 per share.  Pursuant to
their terms,  the Convertible Notes may be converted beginning on
the  later  of  six  (6)  months  from  the  date  of issuance or
September  1, 1999. Concurrently, pursuant to notices distributed
by the Company to holders  of the Company's Class E Warrants, the
Company issued a voluntary call of the Class E Warrants to expire
on May 31,  1999 at the stated exercise price of $3.00 per share.
In exchange for  the  conversion of the Convertible Notes and the
exercise of the Class E Warrants, the Company offered to issue an
additional set of warrants equal to the number of and on  similar
terms  and conditions as the Class E Warrants exercised.

      At the expiration of the conversion window and call period,
holders   of   the  Convertible  Notes  converted   $400,000   of
Convertible  Notes  into  153,843  shares  of  common  stock  and
exercised  72,800 Class E Warrants into 72,800 shares  of  common
stock  for  an  aggregate  of 226,643 shares of common stock.  In
exchange for  the  conversion  and  exercise, the  Company issued
72,800   warrants   to   the   persons   who   converted    their
Convertible Notes  and  exercised  their Class  E  Warrants.   As
a result, $1,500,000  of the Convertible Notes and 273,000 of the
Class E Warrants  issued  to  holders  of the  Convertible  Notes
remain  outstanding.   Through  the conversion of the Convertible
Notes and  the  exercise  of  the  Class E Warrants,

                                9

<PAGE>

the  Company converted $400,000 of indebtedness into common stock
and received  proceeds  of $218,400.  The Company intends to  use
such  proceeds for general working capital purposes.

      In  May  1999,  the  Company entered  into  a  subscription
agreement   with  a  stockholder  of  the  Company  whereby   the
stockholder agreed to purchase 2,000,000 shares of the  Company's
common  stock  for $2.60 per share for an aggregate  subscription
amount  of $5,200,000.  Pursuant to the terms of the subscription
agreement, the stockholder delivered $1,300,000 upon execution of
the  subscription  agreement and agreed to  pay  the  balance  of
$3,900,000, in no more than three equal installments of not  less
than  $1,300,000,  by  July 10, 1999.  The Company  received  the
payment of the balance of $3,900,000 prior to July 10, 1999.

      In May 1999, the Company and the Richard S. Huson Revocable
Trust  (the  "Trust"), of which Richard S. Huson, a director  and
principal stockholder of the Company, is co-trustee, entered into
a  subscription agreement whereby the Trust agreed to  convert  a
certain portion of indebtedness owed by the Company to the  Trust
in  exchange for shares of common stock at a conversion  rate  of
$2.60  per  share.   Pursuant to the terms  of  the  subscription
agreement,   the   Trust   converted  $999,999   of   outstanding
indebtedness into 384,615 shares of common stock and  received  a
replacement  promissory note for the balance of the  indebtedness
outstanding.

      As  a  result of the partial conversion of the  Convertible
Notes, the proceeds received from the exercise of certain Class A
Warrants, the proceeds received from the sale of 2,000,000 shares
of  common stock, the reduction of certain indebtedness for which
the  Company  issued shares of common stock, and other  financing
activities,   the  Company  believes  it  will  have   sufficient
liquidity  to  fund operating and development activities  through
the  end of the current fiscal year.  In the event that cash from
operations  are  not  sufficient to  fund  future  operating  and
development  activities by the beginning of the  year  2000,  the
Company  will need to seek cash from private or public placements
of  debt  or  equity, institutional or other lending  sources  or
change operating plans to accommodate its liquidity requirements.

      WORKING  CAPITAL.  At June 30, 1999, the Company had  cash,
cash  equivalents  and  investments  of  $1,773,363  compared  to
$200,749  at  June  30, 1998.  At June 30,  1999,  the  Company's
working  capital  was $4,193,605 compared to  a  working  capital
deficit  of  $632,024 at June 30, 1998.  At June  30,  1999,  the
Company's  current  ratio, I.E. the ratio of  current  assets  to
current  liabilities, was 3.36:1 compared to 0.62:1  at  December
31,  1998.   Until  the  Company's  normalized  cash  flows  from
operations  are  achieved,  the  Company  will  be  relying  upon
existing cash balances and proceeds from the placement of private
and  institutional sources of debt and equity capital for working
capital purposes.

     CASH FLOW.  For the six months ended June 30, 1999, net cash
used   in   operating  activities  was  $3,561,764  compared   to
$1,095,704 for the six months ended June 30, 1998.  Cash used  in
operating activities during the six month period ended  June  30,
1999  is  net  of  depreciation  and  amortization  of  $116,366,
compared  to  $44,175  for the six months ended  June  30,  1998;
increases  in accounts receivable of $145,267 compared to  $4,052
for the six months ended June 30, 1998; increases in inventory of
$593,637  compared to $126,118 for the six months ended June  30,
1998; a decrease in prepaid  expenses of $6,801  compared  to  an
increase  of  $8,490  for  the  six  months  ended June 30, 1998;
increases in other receivables of $55,305 compared to $5,642  for
the six months ended June 30, 1998; decreases in accounts payable
of $135,564 compared to an increase of $55,783 for the six months
ended June 30, 1998; increases  in  accrued  expenses  of $46,435
compared to $32,200 for the six months  ended June  30, 1998; and
an increase in customer deposits of $59,584 compared to  none for
the six months ended June 30, 1998.

     For the six months ended June 30, 1999, net cash provided by
financing  activities was $6,077,398 compared to  $1,037,219  for
the  six  months ended June 30, 1998.  The increase is  primarily
attributable  to

                                10

<PAGE>

the  proceeds  received  from  the public  offering for 1,500,000
shares of the Company's common stock  conducted  from April  1998
through January 1999, the  proceeds from the  sale  of  2,000,000
shares of common stock in May 1999 and the conversion of $400,000
of  the  Convertible  Notes in May 1999.  The cash from financing
activities  consisted  of  $4,028,923 from the issuance of common
stock,  proceeds  of  $1,900,000  from  the  placement   of   the
Convertible Notes and proceeds of $1,226,513 from leases payable,
reduced  by the repayment of notes and leases payable of $363,791
and  the payment for a rescinded stock subscription agreement  of
$450,000.

       CONVERTIBLE  DEBT.   The  Company  received  proceeds   of
$1,900,000  from the placement of the Convertible  Notes  in  the
first  quarter  of  1999.  The debt accrues  interest  until  its
maturity  in  February 2004 at 9.5% per annum and is  convertible
into  restricted shares of common stock after six months at $2.60
per  share.   Each purchaser of a $50,000 unit of the convertible
debt  also received warrants for the purchase of 9,100 shares  of
common stock at $3.00 per share.  The convertible debt issue  was
completed in March 1999.  As previously discussed, the holders of
$400,000  of  the  Convertible  Notes  agreed  to  convert  their
Convertible  Notes  into  153,843  shares  of  common  stock  and
exercise warrants for 72,800 shares of common stock.  As part  of
the  conversion  and exercise, the Company received  proceeds  of
$218,400 from the exercise of the warrants and issued replacement
warrants for 72,800 shares of common stock.

      EQUIPMENT  FINANCING.   As of June 30,  1999,  the  Company
received  proceeds  of $1,098,500 from loans  with  an  unrelated
leasing  company  whereby the Company has financed  substantially
all of its furniture, equipment and tooling, and 278 units of the
Shuffler.

      CAPITAL  EXPENDITURES.  For the six months ended  June  30,
1999,  the  Company  used  net cash in  investing  activities  of
$943,020 consisting primarily of the acquisition of equipment and
tooling  of  $381,922 and the manufacture of Shufflers  held  for
rent of $554,400.

     For the six months ended June 30, 1998, the Company used net
cash  in  investing activities of $32,610 consisting of  acquired
plant and equipment valued at $16,204, and increased patents  and
trademarks by $16,406.

OUTLOOK

      Based on presently known commitments and plans, the Company
believes  that  it  will  be  able to fund  1999  operations  and
required  expenditures  through cash on  hand,  existing  working
capital,  cash flow from operations and lease financing services.
In  the event that such sources are insufficient in 1999,  or  in
the event that the Company's cash flow from operations after 1999
are  not  sufficient to fund its future operating and development
activities,  the Company will need to seek cash from  private  or
public  placements  of  debt or equity,  institutional  or  other
lending  sources  or change operating plans to  accommodate  such
liquidity  issues.  No assurances can be given that  the  Company
will successfully obtain necessary liquidity sources.

YEAR 2000

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

                               11

<PAGE>

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

RISK FACTORS AND FORWARD LOOKING INFORMATION

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

       DEVELOPING   BUSINESS;  LIMITED  OPERATING  RESULTS;   NO
INDEPENDENT  MARKET  RESEARCH  OF POTENTIAL  DEMAND  FOR  CURRENT
OPERATIONS.   The Company has been in the development  stage  and
has  only  recently commenced sales and leases of  its  products.
Until late 1998,  the Company's activities have been  limited  to
analyzing  the  gaming industry, consulting with persons  in  the
gaming  industry,  negotiating  interim  financing  arrangements,
developing products, establishing a distribution network for  its
products,   marketing  its  products  to  the  gaming   industry,
manufacturing   its  products  and  commencing   product   sales.
Although  the  Company  has  generated   modest  sales and rental
revenues  in   the   first two quarters  of  1999,  there  is  no
guarantee  that the Company will generate sufficient  revenue  to
sustain   its   operations.   No  independent  organization   has
conducted  market research providing management with  independent
assurance  from  which  to  estimate  potential  demand  for  the
Company's business operations.

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

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

                               12

<PAGE>

      INFLUENCE ON ELECTION OF DIRECTORS AND ALL OTHER MATTERS BY
CURRENT  OFFICERS AND DIRECTORS.  At June 30, 1999, the  officers
and  directors  of  the Company beneficially owned  approximately
48.2%  of  the  outstanding  common shares.   As  a  result,  the
officers  and  directors of the Company, through their  aggregate
ownership  of  the  Company's  common  stock,  will  be  able  to
influence  the  election  of  directors  and  all  other  matters
submitted to a vote of the Company's stockholders.

      INFLUENCE ON ELECTION OF DIRECTORS AND ALL OTHER MATTERS BY
SIGNIFICANT  STOCKHOLDERS.   James E. Crabbe  owns  approximately
23.5% of the Company's outstanding common shares, and holds power-
of-attorney from Richard S. Huson, as an individual  and  as  co-
trustee  of  the  Richard S. Huson Revocable Trust,  to  vote  an
additional 31.7% of the outstanding common shares.  As a  result,
Mr.  Crabbe will be able to control the election of directors and
all   other   matters  submitted  to  a  vote  of  the  Company's
stockholders.

      UNCERTAINTY OF MARKET FOR COMPANY'S PRODUCTS.  The  Company
has various gaming products, such as the Shuffler and SecureDrop,
and  variations of traditional games of Blackjack and Poker, that
are  ready  for  distribution.   Despite  the  additions  to  the
Company's  product line, the Company has only recently  completed
the   development  process  for  some  of  its  gaming  products.
Although  the  market appears to be receptive  to  the  Company's
products,  there  is  no guarantee that the  market  will  remain
receptive and that the Company's future products will be received
by the market in the same manner.

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

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

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

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

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

                               13

<PAGE>

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

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

      LACK  OF  DIVIDENDS.  There can be no  assurance  that  the
operations of the Company will become profitable.  At the present
time,  the  Company  intends to use any  earnings  which  may  be
generated to finance the growth of the Company's business, and it
does  not intend to make cash distributions, or distributions  of
any nature for the foreseeable future.

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

      DEPENDENCE  ON  CHAIRMAN OF THE BOARD AND OTHER  DIRECTORS.
During  1998 and 1997, certain members of the Company's Board  of
Directors  made  significant loans  to  the  Company  to  provide
necessary  liquidity to the Company.  As of June 30,  1999,  such
outstanding loans were $339,350.  There is no obligation  of  any
kind  by  such persons to continue lending funds to the  Company,
and  there is no assurance

                               14

<PAGE>

whatsoever  that  such  persons  would be willing or able to make
such loans available in the future if the  Company is in  need of
funds.

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

      ABSENCE OF TRADING MARKET.   The  Company's common stock is
not  presently  traded  in  the over-the-counter  market  or  any
exchange.  As a result,  the Company's stockholders may encounter
difficulty in selling shares of the Company's common stock.

      "PENNY" STOCK REGULATION OF BROKER-DEALER SALES OF  COMPANY
SECURITIES.   The  Nasdaq Stock Market has  minimum  quantitative
requirements,  and the OTC Bulletin Board does  not.   Until  the
Company obtains a listing on the Nasdaq Stock Market, if at  all,
the Company's securities may be covered by a Rule 15g-9 under the
Exchange  Act that imposes additional sales practice requirements
on  broker-dealers who sell such securities to persons other than
established  customers  and  institutional  accredited  investors
(generally  institutions with assets in excess of  $5,000,000  or
individuals  with  net  worth in excess of $1,000,000  or  annual
income exceeding $200,000 or $300,000 jointly with their spouse).
For  transactions  covered by the rule,  the  broker-dealer  must
furnish  to  all  investors  in penny stocks  a  risk  disclosure
document  required  by  Rule 15g-9 of the Exchange  Act,  make  a
special  suitability  determination of  the  purchaser  and  have
received  the  purchaser's written agreement to  the  transaction
prior  to  the sale.  In order to approve a person's account  for
transactions in penny stock, the broker or dealer must (i) obtain
information   concerning   the  person's   financial   situation,
investment  experience and investment objectives; (ii) reasonably
determine,  based  on the information required by  paragraph  (i)
that transactions in penny stock are suitable for the person  and
that  the  person  has  sufficient knowledge  and  experience  in
financial  matters that the person reasonably may be expected  to
be  capable  of  evaluating the rights of transactions  in  penny
stock;  and  (iii)  deliver  to the person  a  written  statement
setting  forth the basis on which the broker or dealer  made  the
determination required by paragraph (ii) in this section, stating
in  a  highlighted format that it is unlawful for the  broker  or
dealer  to effect a transaction in a designated security  subject
to  the  provisions of paragraph (ii) of this section unless  the
broker  or  dealer  has  received, prior to  the  transaction,  a
written agreement to the transaction from the person; and stating
in  a  highlighted  format  immediately  preceding  the  customer
signature  line that the broker or dealer is required to  provide
the  person with the written statement and the person should  not
sign and return the written statement to the broker or dealer  if
it  does not accurately reflect the person's financial situation,
investment  experience and investment objectives and obtain  from
the  person  a  manually signed and dated  copy  of  the  written
statement.  A penny stock means any equity security other than  a
security (i) registered, or approved for registration upon notice
of   issuance  on  a  national  securities  exchange  that  makes
transaction  reports available pursuant to 17 CFR  11Aa3-1;  (ii)
authorized or approved for authorization upon notice of issuance,
for  quotation in the Nasdaq system; (iii) that has a  price  per
share equal to or greater than five dollars; or (iv) whose issuer
has  net tangible assets in excess of $2,000,000 demonstrated  by
financial  statements dated less than fifteen  months  previously
that the broker or dealer has reviewed and has a reasonable basis
to  believe are true and  complete  in  relation  to  the date of
the  transaction  with  the  person.   Consequently, the rule may
affect  the  ability  of  broker-dealers  to  sell  the Company's
securities.

                               15

<PAGE>

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

      In  July  1999, the Company settled a complaint  originally
filed  on  March  18,  1999  by Shuffle  Master,  Inc.  ("Shuffle
Master").  The complaint (Case No. A400777) filed in the District
Court,  Clark  County,  State of Nevada  (the  "District  Court")
against former employees of Shuffle Master (who are now employees
of  the  Company)  and the Company alleged, among  other  things,
fraud, breach of contract and conversion against certain of these
former  employees  of  Shuffle Master and violation  of  Nevada's
Trade Secret Act, interference with contractual relations, breach
of contract, violations of the Lanham Act and civil conspiracy to
commit fraud against certain of these former employees of Shuffle
Master and the Company.  The terms of the settlement relieve  the
Company  from all prior and future liability associated with  the
allegations  provided  that the Company  reimburse  approximately
$20,000  related to certain relocation costs previously  incurred
by  Shuffle Master for one of its former employees.  The  Company
reimbursed Shuffle Master for those costs in July 1999.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

      CONVERSION OF CONVERTIBLE NOTES; VOLUNTARY CALL OF CLASS  E
WARRANTS.   In May 1999, pursuant to notices distributed  by  the
Company  to holders of the Company's 9.5% Convertible  Notes  Due
2004 (the "Convertible Notes"), the Company offered to provide  a
one-time two week window that expired  on  May 31, 1999  for  the
early  the  conversion  of  the  Convertible Notes into shares of
Common  Stock  at  the stated conversion rate of $2.60 per share.
Pursuant  to their terms,  the Convertible Notes may be converted
beginning on  the  later  of  six  (6)  months from the  date  of
issuance or   September  1,  1999.    Concurrently,  pursuant  to
notices distributed  by  the Company to  holders of the Company's
Class E Warrants,  the  Company issued a  voluntary  call  of the
Class E Warrants to expire on May 31, 1999 at the stated exercise
price of $3.00 per  share.   In  exchange  for the  conversion of
the Convertible Notes and  the  exercise of the Class E Warrants,
the Company offered to issue an  additional set of warrants equal
to the number of and on similar terms and conditions as the Class
E Warrants exercised.

      At the expiration of the conversion window and call period,
holders   of   the  Convertible  Notes  converted   $400,000   of
Convertible  Notes  into  153,843  shares  of  common  stock  and
exercised  72,800 Class E Warrants into 72,800 shares  of  common
stock  for  an aggregate of 226,643 shares of common  stock.   In
exchange  for  the  conversion and exercise, the  Company  issued
72,800  warrants  to the persons who converted their  Convertible
Notes  and  exercised  their Class  E  Warrants.   As  a  result,
$1,500,000  of the Convertible Notes and 273,000 of the  Class  E
Warrants  issued  to  holders  of the  Convertible  Notes  remain
outstanding.  Through the conversion of the Convertible Notes and
the  exercise  of  the  Class E Warrants, the  Company  converted
$400,000  of indebtedness into common stock and received proceeds
of  $218,400.   The  Company intends to  use  such  proceeds  for
general working capital purposes.

      PRIVATE PLACEMENT.  In May 1999, the Company entered into a
subscription agreement with a stockholder of the Company  whereby
the  stockholder  agreed  to purchase  2,000,000  shares  of  the
Company's  common  stock  for $2.60 per share  for  an  aggregate
subscription amount of $5,200,000.  Pursuant to the terms of  the
subscription agreement, the stockholder delivered $1,300,000 upon
execution  of the subscription agreement and agreed  to  pay  the
balance  of  $3,900,000, in no more than three equal installments
of  not  less  than  $1,300,000, by July 10, 1999.   The  Company
received the payment of the balance of $3,900,000 prior  to  July
10, 1999.

      CONVERSION OF OUTSTANDING INDEBTEDNESS.  In May  1999,  the
Company  and the Richard S. Huson Revocable Trust (the  "Trust"),
of  which  Richard S. Huson, a director and principal stockholder
of the

                               16

<PAGE>

Company,  is  co-trustee,  entered  into a subscription agreement
whereby  the  Trust  agreed  to  convert  a  certain  portion  of
indebtedness  owed by the Company to the Trust  in  exchange  for
shares  of common stock at a conversion rate of $2.60 per  share.
Pursuant  to the terms of the subscription agreement,  the  Trust
converted  $999,999  of  outstanding  indebtedness  into  384,615
shares of common stock and received a replacement promissory note
for the balance of the indebtedness outstanding.

     With respect to the private placement of 2,000,000 shares of
common  stock  and  the  conversion of  $999,999  of  outstanding
indebtedness  into  384,615 shares of common stock,  the  Company
relied  upon  Section  4(2) of the Securities  Act  in  that  the
relevant  parties  to  the aforementioned transactions  were  all
accredited  investors  with pre-existing relationships  with  the
Company.   Accordingly, the issuances of shares of  common  stock
were  exempt from the registration requirements of Section  5  of
the Securities Act.

      The  Company intends to use the proceeds from  the  private
placement of 2,000,000 shares of common stock and the exercise of
72,800  Class  E Warrants to fund operating losses,  for  general
corporate    purposes,   including   product   development    and
manufacturing  expansion and improvements, and  working  capital.
As  the Company has not determined the amount of proceeds  to  be
used specifically for each of the foregoing purposes, the Company
will have significant flexibility in applying the proceeds.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

     None.

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

     None

ITEM 5.  OTHER INFORMATION.

      IRREVOCABLE POWER-OF-ATTORNEY GRANTING VOTING RIGHTS OF THE
COMPANY'S  COMMON  STOCK.  In August 1999, Richard  S.  Huson,  a
director  and principal stockholder of the Company,  executed  an
irrevocable  power  of  attorney granting voting  rights  of  the
Company's  common  stock owned by the Trust to James  E.  Crabbe.
Mr.  Crabbe  currently owns approximately 23%  of  the  Company's
outstanding  common  stock directly, and, as  a  result  of  this
agreement,  will hold additional voting power of a  approximately
31% of the Company's outstanding common stock.

      GRANT  OF  STOCK APPRECIATION RIGHTS.  In  July  1999,  the
Company  announced that it would grant to each employee  who  was
employed  by  the  Company as of July 31, 1999, approximately  80
individuals, a stock appreciation right to receive an  amount  of
cash  based upon the appreciation in value of 500 shares  of  the
Company's common stock with an exercise price of $2.50. This non-
transferable  stock appreciation right must be exercised  in  its
entirety  and  terminates upon the earlier of the termination  of
the  employee's  employment, 180 days after the employee's  death
and  three years after the employee's retirement.  As of the date
of  this  report, the Company has not formally issued  the  stock
appreciation rights to the eligible employees.

      MARKET  MAKER  UPDATE.  Although the Company  has  met  and
continues  to  meet  with various market makers  for  its  common
stock, the Company has been unable to secure a first market maker
that,  in  the  opinion  of  the  management of the Company, will
reflect   positively  on  the  Company   and  its  common  stock.
The Company's Board of Directors believes that the Company should
affiliate  only with credible market makers and is  reluctant  to
deal with  those  who  do  not meet its scrutiny.  As  a means of
enhancing the  Company's ability to secure a first market  maker,
the Company has  entered into several transactions

                               17

<PAGE>

during  the  second quarter of 1999 to improve its balance  sheet
and  to  secure  sufficient working capital for the remainder  of
the year. Although transactions such as the conversion of certain
indebtedness into common stock  and the  sale of 2,000,000 shares
of  common  stock  have  increased  the  Company's  liquidity and
enhanced  its  balance  sheet, there  is  no  guarantee that  the
Company  will be able to secure a first market maker as a  result
of these transactions.  Although the Company had hoped to provide
its stockholders with an update with respect to the engagement of
a  market  maker, the Company has no news to report at this  time
and will continue to interview and contact market makers who will
reflect positively on the Company and its common stock.

      NEVADA  GAMING APPROVAL OF THE SECUREDROP 2000 SYSTEM.   On
August  4,  1999, the Company received approval from  the  Nevada
Gaming  Control Board to sell its SecureDrop 2000 system  in  the
State  of  Nevada.   Additionally, the Company received  approval
from  the  Nevada  Gaming Control Board,  subject  to  successful
completion  of  field  trials, to sell its  SecureDrop  3000  and
mobile  cart  system  in the State of Nevada.   The  Company  has
identified  several  casino-gaming  properties  for   the   first
installment of the SecureDrop 2000 system and believes  that  one
or more installations of the SecureDrop 2000 system will occur in
the  Company's  third fiscal quarter.  The Company is  continuing
its  development of the SecureDrop 4000 system and the SecureDrop
5000 system.

      EMPLOYMENT  AGREEMENT WITH STEVEN J. BLAD.  On  August  10,
1999,  the  Company  entered  into an employment  agreement  with
Steven  J.  Blad,  the  Company's President and  Chief  Executive
Officer.  The new employment agreement is effective as of January
1,  2000,  and continues for a term of three years.  Pursuant  to
the  new  employment agreement, Mr. Blad shall receive a  monthly
base salary of $23,500.00 and 400,000 stock option rights with an
exercise  price  of $2.50.  With respect to the  vesting  of  the
options, 100,000 stock options will vest as of the effective date
of  the new employment agreement with the balance to vest over  a
three-year period thereafter as long as Mr. Blad remains employed
as  the  Company's  President  and Chief  Executive  Officer  and
satisfies  certain  performance goals to be  established  by  the
Company's  Board  of  Directors.  As with the current  employment
agreement  with  Mr. Blad, the new employment agreement  contains
provisions with respect to confidentiality and non-competion.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

       (a) EXHIBITS.

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

         10.01       First   Security  Bank  of   Nevada   Master
                     Equipment Lease Agreement.

         10.02       Employment Agreement with Steven J. Blad
                     dated August 10, 1999.

         27.01       Financial Data Schedule.

                               18

<PAGE>

       (b) REPORTS ON FORM 8-K.

      During  the  three month period ended June  30,  1999,  the
Company  filed three current reports on Form 8-K on May 11,  1999
(dated  April  30, 1999), July 9, 1999 (dated May 28,  1999)  and
July  12,  1999 (dated June 24, 1999).  These current reports  on
Form 8-K reported, among other things, the appointment of Bob  L.
Smith  as  the  Company's Chairman of the  Board;  the  Company's
agreement to rescind a subscription agreement for 200,000  shares
of  the  Company's  common  stock  and  return  $450,000  to  the
stockholder;  the purchase of 2,000,000 shares of  the  Company's
common  stock  by  James E. Crabbe for an aggregate  subscription
amount of $5,200,000; the conversion of $999,999 of the Company's
outstanding indebtedness by the Trust into 384,615 shares of  the
Company's common stock; the appointment of Timothy P. Leybold  as
the Company's Chief Financial Officer; the conversion of $400,000
of  the  outstanding  principal on  the  Convertible  Notes  into
153,843  shares  of  the Company's common  stock;  the  Company's
receipt of $218,400 upon the exercise of 72,800 Class E Warrants;
and the distribution by the Company to all of its stockholders of
a  letter  dated June 24, 1999 from the Company's  President  and
Chief Executive Officer entitled "Stockholder Update".

                               19

<PAGE>

                            SIGNATURE

     In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf  by  the
undersigned, thereunto duly authorized.

                                    CASINOVATIONS INCORPORATED
                               ----------------------------------
                                          (Registrant)


Date: August 12, 1999    By:   /s/ Timothy P. Leybold
                               ----------------------------------
                               Timothy P. Leybold
                         Its:  Chief Financial Officer

                               20

<PAGE>

                           EXHIBIT INDEX

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

    10.01       First   Security  Bank  of   Nevada       22
                Master Equipment Lease Agreement.

    10.02       Employment Agreement with Steven J.       28
                Blad dated August 10, 1999.

    27.01       Financial Data Schedule.                  36

                               21