<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, 1998
                                     ---------------------------- 
                               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:                       
                       ------------------------------------------

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

        Washington                               91-1696010
----------------------------              -----------------------
(State or other jurisdiction                  (I.R.S. Employer
    of incorporation or                      Identification No.)
       organization)
                                
 5240 S. Eastern Avenue, First Floor, 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       NO   X
         -----    -----                               

        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:

6,355,942 shares of Common Stock, $.001 par value, as of June 30,
                              1998
-----------------------------------------------------------------
     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           8

PART II. OTHER INFORMATION

  Item 1.  Legal Proceedings                                       10

  Item 2.  Changes in Securities                                   10

  Item 3.  Defaults Upon Senior Securities                         10

  Item 4.  Submission of Matters to a Vote of Security Holders     10

  Item 5.  Other Information                                       10

  Item 6.  Exhibits and Reports on Form 8-K                        11

SIGNATURE                                                          12

EXHIBIT INDEX                                                      13

                                2

<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.
     
<TABLE>
<CAPTION>

                   CASINOVATIONS INCORPORATED
                  (A Development Stage Company)
                          Balance Sheet
                          June 30, 1998
                                
ASSETS                                                June 30, 1998
                                                     ---------------
<S>                                                  <C>
Current assets:
  Cash                                               $       28,294
  Accounts receivable, trade                                  9,927
  Accounts receivable - employees                            12,285
  Inventories                                               308,411
  Prepaid expenses                                           48,490
                                                     ---------------
      Total current assets                                  407,407

Property and equipment, at cost, net of
  accumulated depreciation of $25,132                       266,349

Intangible assets, at cost, net of
  accumulated amortization of $18,095                       165,080
Deposits                                                     53,361
                                                     ---------------
                                                     $      892,197
                                                     ===============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Note payable - bank                                $      197,500
  Notes payable - other                                     605,000
  Current portion of leases payable                         149,616
  Accounts payable                                          498,095
  Accrued wages                                              34,563
  Accrued interest                                           65,449
  Customer deposits                                          13,374
  Shareholder loans                                         692,357
                                                     ---------------
      Total current liabilities                           2,255,954

Leases payable - non-current                                223,363

Stockholders' equity:
 Common stock, $.001 par value,
  20,000,000 shares authorized,
  6,355,942 shares issued and outstanding                     6,356
 Additional paid-in capital                               4,399,894
 Unpaid subscriptions to common stock                           -
 Deficit accumulated during development stage           (5,993,370)
                                                     ---------------
                                                        (1,587,120)
                                                     ---------------
                                                     $      892,197
                                                     ===============

</TABLE>

     See accompanying notes to unaudited financial statements.
                                
                                3
                                
<PAGE>

<TABLE>
<CAPTION>

                   CASINOVATIONS INCORPORATED
                  (A Development Stage Company)
                     Statement of Operations
            Three Months Ended June 30, 1998 and 1997
                                

                                                                                                               Period from
                                                       Three Months Ended            Six Months Ended           Inception
                                                                                                             (April 29, 1994)  
                                                 June 30, 1998  June 30, 1997  June 30, 1998  June 30, 1997  to June 30, 1998
                                                 -------------  -------------  -------------  -------------  ----------------
<S>                                              <C>            <C>            <C>            <C>            <C>
Sales                                            $       3,943  $         -    $       4,288  $         632  $          9,249
Interest income                                            -              900            -            7,074            10,083
Other income                                               -           13,000            -           13,000             3,010
                                                 -------------  -------------  -------------  -------------  ----------------
                                                         3,943         13,900          4,288         20,706            22,342

Other costs and expenses:
  General and administrative                           580,080        396,708        935,864        717,735         3,977,944
  General and administrative - related parties             -          203,092            -          203,092            76,768
  Research and development                              24,487        125,208        126,820        171,814         1,298,080
                                                 -------------  -------------  -------------  -------------  ----------------
                                                       604,567        725,008      1,062,684      1,092,641         5,352,792
                                                 -------------  -------------  -------------  -------------  ----------------

(Loss) from operations                               (600,624)      (711,108)    (1,058,396)    (1,071,935)       (5,330,450)

  Interest expense                                         -              -           37,528            -              86,823
  Interest expense - related parties                    29,256        145,152         54,136        167,143           728,483
                                                 -------------  -------------  -------------  -------------  ----------------
                                                        29,256        145,152         91,664        167,143           815,306

(Loss) before income taxes                           (629,880)      (856,260)    (1,150,060)    (1,239,078)       (6,145,756)
Provision for income taxes                                 -              -              -              -                -
                                                 -------------  -------------  -------------  -------------  ----------------

Net (loss)                                       $   (629,880)  $   (856,260)  $ (1,150,060)  $ (1,239,078)  $    (6,145,756)
                                                 =============  =============  =============  =============  ================



 Basic (loss) per share                          $      (0.10)  $      (0.16)  $      (0.18)  $      (0.23)  $         (1.37)
                                                 =============  =============  =============  =============  ================

 Weighted average shares outstanding                 6,283,638      5,481,525      6,231,638      5,393,371         4,471,098
                                                 =============  =============  =============  =============  ================

</TABLE>

     See accompanying notes to unaudited financial statements.
                                
                                4
                                
<PAGE>
     
<TABLE>
<CAPTION>

                   CASINOVATIONS INCORPORATED
                  (A Development Stage Company)
                     Statement of Cash Flows
            Three Months Ended June 30, 1998 and 1997
                                
                                                                                                 Inception
                                                                                              (April 29, 1994)
                                                                                                    to
                                                         June 30, 1998      June 30, 1997      June 30, 1998
                                                        --------------     --------------     ----------------
<S>                                                     <C>                <C>                <C>
Net (loss)                                              $  (1,150,060)     $  (1,239,078)     $  (6,145,756)
  Adjustments to reconcile net income (loss) to net
   cash provided by operating activities:
   Depreciation and amortization                                44,175             11,396             88,664
   Stock and options issued for services                        66,500            309,999            978,000
   Compensation value of cash stock sales                          -                  -              177,000
   Stock and options issued for additional interest                -               59,053            117,332
   Equipment exchanged for services                                -                  -                2,903
   Amortization of deferred interest                               -               93,000            232,500
Changes in assets and liabilities:
    (Increase) decrease in accounts receivable                 (4,052)            (5,591)           (22,212)
    (Increase) decrease in inventory                         (126,118)                -            (308,411)
    (Increase) decrease in prepaid expenses                    (8,490)            (4,526)           (48,490)
    (Increase) decrease in other assets                        (5,642)            (5,201)           (53,361)
    Increase (decrease) in accounts payable                     55,783           (70,672)            498,094
    Increase (decrease) in accrued expenses                     32,200           (80,170)            116,387
                                                        --------------     --------------     ----------------
       Total adjustments                                        54,356            307,288          1,778,406
                                                        --------------     --------------     ----------------
  Net cash (used in)
    operating activities                                   (1,095,704)          (931,790)        (4,367,350)
                                                        --------------     --------------     ----------------

Cash flows from investing activities:
   Acquisition of plant and equipment                         (16,204)           (18,996)          (331,607)
   Increase in patents and trademarks                         (16,406)           (10,949)          (191,389)
                                                        --------------     --------------     ----------------
Net cash (used in) investing activities                       (32,610)           (29,945)          (522,996)
                                                        --------------     --------------     ----------------

Cash flows from financing activities:
   Common stock sold for cash                                  430,000            600,010          2,380,569
   Capital contributions by partners                               -                  -              402,950
   Proceeds from long-term debt                                430,000                -            1,049,100
   Proceeds of shareholder loans                               290,000                -            1,060,168
   Repayment of shareholder loans                             (38,660)           (20,000)           (97,526)
   Repayment of leases payable                                (74,121)            (9,155)            123,379
   Proceeds from notes payable                                     -                  -                  -
                                                        --------------     --------------     ----------------
  Net cash provided by
   financing activities                                      1,037,219            570,855          4,918,640
                                                        --------------     --------------     ----------------

Increase (decrease) in cash                                   (91,095)          (390,880)             28,294
Cash and cash equivalents,
 beginning of period                                           119,389            552,878                -
                                                        --------------     --------------     ----------------
Cash and cash equivalents,
 end of period                                          $       28,294     $      161,998     $       28,294
                                                        ==============     ==============     ================

</TABLE>
                                
    See accompanying notes to unaudited financial statements.
                                
                                5
                                
<PAGE>

                   CASINOVATIONS INCORPORATED
                  (A Development Stage Company)
                  Notes to Financial Statements
                                
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, 1997 as included  in  the  Company's
Registration  Statement  on  Form  SB-2/A   as  last  filed  with
the  Securities  and   Exchange   Commission   on    June 5, 1998
(Commission File No. 333-31373).

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

     Certain  of  the shares issued to a consultant  during  1997
were  for  future  services to be provided to the  Company.   The
amounts attributable to unearned services have been accounted for
as  unpaid  subscriptions  to common stock  in  the  accompanying
balance sheet.  The Company has amortized $66,500 of the unearned
services  to general and administrative expenses during  the  six
months ended June 30, 1998.

     During  January  1998,  the Company received  proceeds  from
convertible debentures aggregating $400,000.  The debentures bear
interest  at  6% per annum and are due on or before  January  31,
1999.   The principal amount of the debentures is convertible  at
the holder's option into shares of the Company's common stock  at
a  conversion  price of $2.13 per share.  Of the  gross  proceeds
received  from the convertible debentures, $150,000 was  received
from the Company's principal stockholder and has been included in
shareholder   loans   in   the   accompanying   balance    sheet.
Additionally,  the  principal stockholder  made  working  capital
advances to the Company during the quarters ended March 31,  1998
and June 30, 1998 aggregating $140,000 and $350,000 respectively.
The advances bear interest at 9.5% per annum.

     During the quarter ended June 30, 1998, the Company sold  an
aggregate  of 166,000 shares of its $.001 par value common  stock
for cash proceeds of $390,000 and $25,000 in services pursuant to
a  public offering of the stock.  Additionally, 10,000 shares  of
the  common stock were sold for services amounting to $15,000  in
connection with the completion of an outstanding contract.

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.

     On May 28, 1998, the Company entered into a letter agreement
(the Letter Agreement) with Steven L. Forte and Cheryl Forte with
respect  to,  among other things, the proposed severance  of  the
business relationship between the Company and Mr. Forte  and  the
purchase  by  the Company of all of the share of  Company  common
stock  held by either Steven L. Forte and Cheryl Forte (the Forte
Shares).

                                6
                                
<PAGE>

The effectiveness  of  the Letter  Agreement was subject  to  the
approval of the Nevada State Gaming Control  Board.   On  July 2,
1998, the Nevada State Gaming Control Board approved the terms of
the  Letter  Agreement  and   authorized  field  trials  for  the
Company's  Random  Ejection  Shuffler.   Although  the definitive
agreement  between the  Company  and  Steven L. Forte  and Cheryl
Forte is currently  being  negotiated,  the Company has agreed in
principle to, among  other things,  (a)  terminate the employment
and non-compete agreement between  the Company and Mr. Forte; and
(b) purchase (i)  certain  royalties  granted  to  Mr. Forte from
the  sale  of  the  Random  Ejection  Shuffler;   (ii) options to
purchase  20,000  shares  of  Company  common  stock,  and  (iii)
848,682  shares  of  Company   common  stock.    As  part  of the
transaction, the Company has  agreed  to issue a  promissory note
in favor of Steven L. Forte and  Cheryl  Forte  in  the amount of
$2,351,705.   The  promissory  note shall bear an  interest  rate
of 6.5% during the  first  year  and  8% thereafter, be amortized
over a ten-year schedule with  payments  of  interest only during
the  first  year,  payable  on  the  six-month  and  twelve-month
anniversary of the promissory note, and payments of principal and
interest thereafter on a monthly basis.  On the fifth anniversary
of the promissory note, the  unpaid  principal and interest  will
become due and payable.  The  promissory  note  will  be  secured
by a security interest in the patents  for  the  Company's Random
Ejection Shuffler and Fantasy 21 table game.

     On  August  13, 1998, the Company entered into an  agreement
with Gaming 2000, L.L.C. (Gaming 2000) for the purchase of all of
the  assets  of Gaming 2000 in  exchange for $75,000, payable  by
delivery  of  30,000 shares of the Company's  common  stock.   In
addition,  the Company has hired the following members of  Gaming
2000's  management team:  William O'Hara - Senior Vice President,
Dean  Barnett  - Vice President of Sales, John Kenny  -  Customer
Service  Manager,  and  Tom  Gayton - Account  Executive.   These
individuals   were  all former employees of Shuffle Master,  Inc.
with Mr. O'Hara  as  a  founding  member of Shuffle Master, Inc.,
and  Mr. Barnett  as  national sales director for Shuffle Master,
Inc.

                                7
                                
<PAGE>

ITEM  2.   MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OR  PLAN   OF
           OPERATION.

     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 and Section 21E of  the
Securities  Exchange Act of 1934, such as statements relating  to
plans  for  future  operations, capital  spending  and  financing
sources.   Such  forward-looking information  involves  important
risks   and   uncertainties  that  could   significantly   affect
anticipated results in the future and, accordingly, such  results
may differ from those expressed in any forward-looking statements
made herein.  These risks and uncertainties include, but are  not
limited   to,  those  relating  to  adequate  sources  of   cash,
manufacturing  and supply issues, marketing of and acceptance  of
the Company's products, dependence on existing management, gaming
regulations (including actions affecting licensing), leverage and
debt  service (including sensitivity to fluctuations in  interest
rates),  issues  related  to the Year 2000,  domestic  or  global
economic conditions and changes in federal or state tax  laws  or
the administration of such laws.

     PLAN OF OPERATIONS.  The Company has substantially completed
its  research  and  development  stage  of  the  Random  Ejection
Shuffler(TM) (the Shuffler),  the  Fantasy 21 table game and  the
SecureDrop Coin Bucket System (SecureDrop).  In July  1998,   the
Company established a manufacturing facility in Boise, Idaho  for
the  purposes  of  producing  the  Random  Ejection  Shuffler and
Fantasy 21  and  has  hired  a production manager to oversee  the
production process. The Company has 50 completed Fantasy 21 units
in  the quality  assurance process which, upon assurance, will be
shipped to the Company's offices in Las Vegas, Nevada, by the end
of  August  1998.  The  Company  will  employ  a  combination  of
employees and contract laborers in the manufacturing process. The
Company  expects  to  produce 85 units  of  the  Random  Ejection
Shuffler  by the end  of  August  1998 and has ordered components
that  will  enable  its  manufacturing  facility  to  produce  an
additional 250 units by  the end of October 1998.  The demand for
the Company's products  will  be  dependent  on  general economic
conditions,  economic  conditions  in  the  gaming  industry  and
acceptance of new products in the marketplace.
     
     The   Company   is  developing  business  plans   that   are
anticipated to allow the Company to be self-supportive within the
first five to six months from the beginning of sales.  Should the
Company  be able to complete the successful offering of 1,500,000
shares of Common Stock presently pending pursuant to that certain
Registration Statement on Form SB-2/A (Commission File  No.  333-
31373) (the Offering), the Company expects that the Shuffler  and
the Fantasy 21(TM) table game  will be brought to market and that
the SecureDrop(TM) coin box system development will be  completed
and brought to market as well.  The Company expects that the  net
proceeds from the Offering and cash flow from operations will  be
sufficient   to   meet   the  Company's  liquidity   requirements
throughout  the remainder of the year.  In the event that  either
the  Offering  is not completed or that sales are  inadequate  to
generate  sufficient  cash  flow  from  operations,  the  Company
will have to locate alternative sources of funds.

     At June 30, 1998, the Company's working  capital deficit was
$1,848,947  compared  to  $1,031,024  at  December 31, 1997.  The
current  ratio  (the   ratio  of  current   assets   to   current
liabilities)  as  of  June 30, 1998   was  0.18:1,  compared   to
0.26:1 at December 31, 1998.  The  Company is presently dependent
on  the  success of  the  Offering to  fund its current liquidity
needs  or it  will  need to locate alternative sources of funding
for which there may  not be  sources  available.  The Company has
also relied  on  working  capital  advances  from  its  principal
shareholder  of  $490,000  in  the  first six  months of 1998 (in
addition  to a $150,000  convertible  debenture   purchase)   for
liquidity  requirements, without which the Company would not have
been able to  operate.  Since  June 30, 1998,  the  Company   has
received proceeds of $165,000  from  the  sale of shares pursuant
to the  Offering  and  has  received and additional $250,000 loan
from   the  principal  shareholder.   Although  the  Company   is
currently  negotiating  with  certain  lenders   for   additional
sources of

                                8

<PAGE>

funds and anticipates receiving such additional sources of funds,
the Company may not  be  able  to  locate  alternative  liquidity
sources  in  the event  that  the  principal  shareholder  ceases
to  make  advances  to  the  Company   and   the  Offering is not
successful.

     The  ability  of the Company to obtain any necessary  gaming
licenses,   authorizations   and   approvals   in   certain   key
jurisdictions,  such  as Nevada and New  Jersey,  may  materially
impact   the   Company's   ability   to   market   its  products.
Additional  new products  are  in  conceptual design stages  and,
with  adequate  funding, are  expected  to be  brought  to market
within the next  12 months.  With  respect  to  the Nevada gaming
authorities,   the   Company  has  received  approval   for   the
distribution of Fantasy  21 and  approval  to  begin field trials
for  the  Shuffler.   Final approval of the Shuffler is dependent
upon,  INTER  ALIA,   the  completion  of  the Forte  transaction
described  in  Part II, Item 5. Other Information.
     
     For the three months ended March 31, 1998 and the six months
ended  June  30,  1998, the Company did not make any  significant
acquisitions  of  plant and equipment.  Inventory  for  parts  to
assemble  product  increased  $79,162 at  the  end  of the second
quarter.  There are  no   expectations   for   the  purchase   of
significant equipment or  plant.  Management of the manufacturing
process  for  the  Shuffler  has been re-located to the Company's 
manufacturing facility in Boise, Idaho.
     
     For  the three months ended June 30, 1998 and the six months
ended  June 30, 1998, the Company has a net loss of $629,880  and
$1,150,060,  respectively.  For the three months ended  June  30,
1998  and  the  six months ended June 30, 1998, the  Company  had
depreciation   and   amortization   of   $37,210   and   $44,175,
respectively.  
     
     For  the three months ended June 30, 1998 and the six months
ended  June  30, 1998, the Company had general and administrative
expenses of $580,080 and $935,867.  For these time periods, these
expenses consisted  of salaries  and related costs of $96,110 and
$203,383  respectively,  consulting   services  of  $98,741   and 
$177,243 respectively, cost  of  gaming industry shows  of $7,754
and $17,117 respectively,  travel   and  entertainment  costs  of
$47,455 and $109,118 respectively, printing and  office  expense,
including rent of  $36,532  and  $70,642  respectively, and legal 
expenses of $92,350 and $106,930 respectively.

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

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

                                 9

<PAGE>

     RISK  FACTORS THAT MAY AFFECT FUTURE RESULTS.   The  Company
operates  in the highly competitive gaming industry that involves
a  number  of  risks,  some  of which are  beyond  the  Company's
control.   For  a  complete discussion of these  risks,  see  the
section  entitled,  Risk   Factors,  included   in  the Company's
Registration  Statement on Form SB-2/A, as last  filed  with  the
Commission  on June 5, 1998 (Commission File No. 333-31373).

PART II - OTHER INFORMATION
     
ITEM 1.  LEGAL PROCEEDINGS.
     
     On  April 24, 1998, a complaint was filed in District Court,
Clark  County,  Nevada on behalf of the Company  against  Western
Electronics, Inc. (Western) and its Chief Executive Officer, John
Wasden.   The  Complaint alleges causes of action for  breach  of
contract,  declaratory  relief, unjust  enrichment,  interference
with  contractual  relations, conversion  and  fraud--intentional
misrepresentation, all stemming from purchase orders between  the
Company  and Western for the Shuffler.  The Complaint was  served
upon  Western on April 27, 1998, and service upon Mr.  Wasden  is
pending.  Through this litigation, the Company seeks  to  recover
component  parts  purchased  for  the  assembly  of  the Shuffler
or in the alternative to recover the monies  expended  for  their
purchase  as  well  as  other  money damages.   Subsequent to the
filing of  its  answer,  Western  filed  an  amended  answer  and
counterclaim  in  which Western alleged  breach  of  contract and
payment  of amount.

     On  July 28, 1998, the  Company  and  Western  entered  into
an agreement  to  settle all  claims  between  the  two  parties.
Pursuant to the terms of the settlement,  the parties  agreed  to
dismiss the aforementioned matters  with prejudice  and agreed to
mutually release and  indemnify  each other  with respect to  the
issues that  were the subject matter of this litigation. Further,
in exchange for  certain  component  parts and equipment used for
the assembly of the Company's products,  the Company  executed  a
demand  note  in the amount of $325,000 in favor of Western which
note the Company  (i) has already paid $50,000, and  (ii) will be
able to  satisfy in  full at a discount if the  Company  pays  an
additional $150,000 to Western  by  October 1, 1998. In the event
that the  Company is  unable to pay the  $150,000  by  October 1,
1998, the Company will be obligated to pay an additional $125,000
thus reflecting the full amount of the demand note.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.
     
     None.
     
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.
     
     None.
     
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
     
     On  May  27,  1998, the Company held its annual  meeting  of
shareholders  (the Annual Meeting).  The purpose  of  the  Annual
Meeting was for the election of Steven J. Blad, Richard S. Huson,
Jamie McKee, David E. Sampson, and Bob L. Smith (the Nominees) as
directors   of  the  Company  for  a  term  of  one  year.    The
shareholders of the Company voted in favor of the Nominees.

ITEM 5.  OTHER INFORMATION.
     
        On  May  28,  1998,  the Company entered  into  a  letter
agreement (the Letter Agreement) with Steven L. Forte and  Cheryl
Forte with respect to, among other things, the proposed severance
of  the  business relationship between the Company and Mr.  Forte
and  the  purchase by the Company of all of the share of  Company
common stock held by either Steven L. Forte and Cheryl Forte (the
Forte  Shares).   

                                 10

<PAGE>

The effectiveness of the Letter  Agreement  was  subject  to  the
approval of the Nevada State Gaming Control Board.  On   July  2,
1998, the Nevada State Gaming Control Board approved the terms of
the  Letter Agreement  and  authorized  field  trials   for   the
Company's  Random Ejection Shuffler. 

        Although    the    definitive   agreement   between   the
Company and Steven  L. Forte  and Cheryl Forte is currently being
negotiated,  the  Company has agreed in principle to, among other
things, (a) terminate the employment  and  non-compete  agreement
between the Company and Mr. Forte; and  (b)  purchase (i) certain
royalties granted to  Mr.  Forte  from  the  sale  of  the Random
Ejection Shuffler;  (ii) options to  purchase  20,000  shares  of
Company common stock, and (iii) 848,682  shares of Company common
stock.  As part of the  transaction, the Company  has  agreed  to
issue a promissory note in favor of  Steven L. Forte  and  Cheryl
Forte in the amount of $2,351,705.00.  The promissory note  shall
bear an interest rate of  6.5%  during  the  first  year  and  8%
thereafter, be amortized over a ten-year  schedule  with payments
of interest only during the first year, payable  on the six-month
and   twelve-month   anniversary  of  the  promissory  note,  and
payments  of  principal  and  interest  thereafter on  a  monthly
basis.   On  the  fifth anniversary of the promissory  note,  the
unpaid principal  and  interest  will  become  due  and  payable.
The  promissory  note  will be secured by a security interest  in
the  patents  for  the  Company's  Random  Ejection  Shuffler and
Fantasy 21 table game.

     On  August  13, 1998, the Company entered into an  agreement
with Gaming 2000, L.L.C. (Gaming 2000) for the purchase of all of
the  assets  of Gaming 2000 in  exchange for $75,000, payable  by
delivery  of  30,000 shares of the Company's  common  stock.   In
addition,  the Company has hired the following members of  Gaming
2000's  management team:  William O'Hara - Senior Vice President,
Dean  Barnett  - Vice President of Sales, John Kenny  -  Customer
Service  Manager,  and  Tom  Gayton - Account  Executive.   These
individuals   were  all former employees of Shuffle Master,  Inc.
with Mr. O'Hara  as  a  founding  member of Shuffle Master, Inc.,
and  Mr. Barnett  as  national sales director for Shuffle Master,
Inc.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.
     
     (A)  EXHIBITS.
          --------
       
     EXHIBIT NUMBER    DESCRIPTION
     --------------    -----------
     
       27.01           Financial Data Schedule
                 
     (B)  REPORT ON FORM 8-K.
          ------------------
       
     None.
     
                               11
                                
<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 14, 1998      By:   /s/ Jay L. King
                                 --------------------------------
                                  Jay L. King
                            Its:  Chief Financial Officer and Secretary

                               12
                                
<PAGE>
                                
                          EXHIBIT INDEX

EXHIBIT NUMBER              DESCRIPTION                 PAGE NUMBER
--------------              -----------                 -----------
    27.01              Financial Data Schedule               14
                                                        

                               13