<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 April 30, 1999

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

           For the transition period from ___________ to _____________

                        Commission file number: 000-20685
                       -----------------------------------

                             American Wagering, Inc.
 -------------------------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)



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


                    675 Grier Drive, Las Vegas, Nevada 89119
          -------------------------------------------------------------
                     (Address of principal executive office)


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

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

     Check whether the issuer (1) filed 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
                                 -------   ------

     The number of shares of Common Stock outstanding as of June 10, 1999 was
7,824,513.








<PAGE>



                             AMERICAN WAGERING, INC.

                      UNAUDITED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>


                           ASSETS                                                 April 30,      January 31,
                                                                                    1999            1999
                                                                                ------------    ------------
<S>                                                                             <C>             <C>
CURRENT ASSETS:
  Cash                                                                          $ 1,289,061     $ 3,076,563
  Short-term investments                                                            373,101         483,671
  Accounts receivable, net of allowance for doubtful accounts
   of $78,295 and $78,295                                                           452,612         172,046
  Inventories, net of obsolescence reserve of $56,825 and $56,825                   680,416         724,386
  Prepaid expenses and other current assets                                         579,482         544,212
                                                                                -----------     -----------
TOTAL CURRENT ASSETS                                                              3,374,672       5,000,878

PROPERTY AND EQUIPMENT, net                                                       3,974,241       4,063,042

INTANGIBLE ASSETS, net                                                            1,182,235       1,238,890

DEPOSITS AND OTHER ASSETS                                                           426,249         388,765

NET LONG-TERM ASSETS OF DISCONTINUED OPERATIONS                                   1,060,978       1,074,295
                                                                                -----------     -----------
TOTAL ASSETS                                                                    $10,018,375     $11,765,870
                                                                                ===========     ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current portion of long-term debt                                             $    48,515     $    57,913
  Accounts payable                                                                  463,918         678,067
  Accrued expenses                                                                  652,827         718,932
  Unpaid winning tickets                                                            525,793       2,548,181
  Other current liabilities                                                       1,269,257         707,612
  Net current liabilities of discontinued operations                                378,195         616,644
                                                                                -----------     -----------
TOTAL CURRENT LIABILITIES                                                         3,338,505       5,327,349
                                                                                -----------     -----------
LONG-TERM DEBT:
  Long-term debt, less current portion                                            1,874,199       1,879,237
                                                                                -----------     -----------
TOTAL LONG-TERM DEBT                                                              1,874,199       1,879,237
                                                                                -----------     -----------

MINORITY INTEREST                                                                    (8,403)         (3,380)

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Series A Preferred stock - 10% cumulative;$.01 par value; authorized
   25,000,000 shares; issued and outstanding: 18,924 shares                       1,892,400       1,892,400
  Common stock -- $.01 par value; authorized
   25,000,000 shares; issued and outstanding: 7,885,613 shares                       78,857          78,857
  Additional paid-in capital                                                     14,296,848      14,296,848
  Accumulated deficit                                                           (11,126,538)    (11,377,948)
   Less: treasury stock; at cost: 61,100 shares                                    (327,493)       (327,493)
                                                                                -----------     -----------
TOTAL STOCKHOLDERS' EQUITY                                                        4,814,074       4,562,664
                                                                                -----------     -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                      $10,018,375     $11,765,870
                                                                                ===========     ===========
</TABLE>

   Note: The consolidated balance sheet at January 31, 1999 has been derived
         from the audited financial statements.

        The accompanying notes are an integral part of these consolidated
                             financial statements.
                                                                               2
<PAGE>




                             AMERICAN WAGERING, INC

                 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

               FOR THE THREE MONTHS ENDED APRIL 30, 1999 AND 1998
<TABLE>
<CAPTION>

                                                                    1999            1998
                                                                   ------          ------
<S>                                                             <C>             <C>
REVENUES                                                        $ 3,010,123     $ 2,335,368

OPERATING COSTS AND EXPENSES:
  Direct costs                                                    1,765,585       1,364,998
  Research and development                                          151,381         139,272
  Selling, general and administrative                               579,881         491,445
  Depreciation and amortization                                     188,145         164,296
                                                                -----------     -----------
TOTAL OPERATING COSTS AND EXPENSES                                2,684,992       2,160,011
                                                                -----------     -----------
OPERATING INCOME                                                    325,131         175,357

OTHER INCOME (EXPENSE):
  Interest income                                                     7,520          65,401
  Other income                                                         --            83,459
  Minority Interest                                                   5,023            --
  Equity in loss from joint venture                                    --          (110,315)
  Interest expense                                                  (70,494)       (101,125)
                                                                -----------     -----------
TOTAL OTHER EXPENSE                                                 (57,951)        (62,580)
                                                                -----------     -----------
INCOME FROM CONTINUING OPERATIONS
BEFORE PROVISION (BENEFIT) FOR INCOME TAXES                         267,180         112,777

PROVISION (BENEFIT) FOR INCOME TAXES                                   --              --
                                                                -----------     -----------

INCOME FROM CONTINUING OPERATIONS                                   267,180         112,777

DISCONTINUED OPERATIONS:

  Income (loss) from discontinued operations                           --              --
                                                                -----------     -----------
NET INCOME                                                          267,180         112,777

PREFERRED STOCK DIVIDEND REQUIREMENTS                               (15,770)           --
                                                                -----------     -----------

NET INCOME AVAILABLE TO COMMON SHAREHOLDERS                     $   251,410     $   112,777
                                                                ===========     ===========

INCOME PER SHARE OF COMMON STOCK

  Income from continuing operations
    Basic                                                       $      0.03     $      0.01
    Diluted                                                     $      0.03     $      0.01

  Income (loss)from continuing operations
    Basic                                                       $      0.00     $      0.00
    Diluted                                                     $      0.00     $      0.00

  Net income
    Basic                                                       $      0.03     $      0.01
    Diluted                                                     $      0.03     $      0.01
</TABLE>
              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                                                               3


<PAGE>




                             AMERICAN WAGERING, INC.

                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

               FOR THE THREE MONTHS ENDED APRIL 30, 1999 AND 1998
<TABLE>
<CAPTION>

                                                                    1999              1998
                                                                 ---------         ---------
<S>                                                             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                    $   251,410     $   112,777
  Adjustments to reconcile net income to cash
   used in operating activities:
  Depreciation and amortization                                     236,155         220,163
  Equity in loss from investment in
   joint venture                                                       --           110,315
  Discontinued operations                                          (145,223)           --
  Minority interest                                                  (5,023)           --
  Provision for doubtful accounts                                      --           (14,292)
  Decrease (increase) in assets:
    Accounts receivable                                            (168,122)        171,484
    Inventories                                                      42,638         135,042
    Prepaid expenses and other current assets                      (122,175)       (159,582)
  Increase (decrease) in liabilities:
    Accounts payable                                                 59,072        (871,876)
    Accrued expenses                                               (314,369)       (419,897)
    Unpaid winning tickets                                       (2,022,388)       (886,264)
    Other current liabilities                                       344,911         447,828
                                                                -----------     -----------
Total adjustments                                                (2,094,524)     (1,267,080)
                                                                -----------     -----------

  Net cash used in operating activities                          (1,843,114)     (1,154,303)
                                                                -----------     -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                                              (22,865)        (38,531)
  Deposits and other assets                                         (33,580)       (212,388)
  Proceeds from sale of assets                                       40,000            --
  Increase in investment in joint venture                              --          (137,896)
  Decrease in short-term investments                                110,570       2,605,490
                                                                -----------     -----------
  Net cash provided by investing activities                          94,125       2,216,675
                                                                -----------     -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Decrease in long-term debt                                        (38,513)       (529,557)
  Purchase of treasury stock                                           --          (197,486)
                                                                -----------     -----------
    Net cash used in financing activities                           (38,513)       (727,043)
                                                                -----------     -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS             (1,787,502)        335,329

CASH AND CASH EQUIVALENTS, beginning of period                  $ 3,076,563     $ 2,092,894
                                                                -----------     -----------
CASH AND CASH EQUIVALENTS, end of period                        $ 1,289,061     $ 2,428,223
                                                                ===========     ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest                                          $   142,112     $   172,042
                                                                ===========     ===========
</TABLE>

                                   (Continued)

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                                                               4
<PAGE>


                             AMERICAN WAGERING, INC.

                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

               FOR THE THREE MONTHS ENDED APRIL 30, 1999 AND 1998

                                   (Continued)


SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES:
Three Months Ended April 30, 1999 Transactions--

         On February 1, 1999 the Company terminated the Mega$ports joint venture
agreement with IGT. The termination agreement allows the Company to receive
IGT's 50% interest in the joint venture and the Mega$ports(R) trademark. The
Company has agreed to indemnify IGT for all presently due and future obligations
of Mega$ports. The transfer of IGT's shares in the joint venture is subject to
the approval of the Nevada Gaming Commission. The assets acquired and the
assumption of debt were as follows:

                  Cash                               $    4,262
                  Other current assets                  168,463
                  Property and equipment                 70,290
                  Current liabilities                  (243,015)
                                                     ----------
                                                     $     ----
                                                     ==========


Three Months ended April 30, 1998 Transactions--None


              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                                                               5


<PAGE>


                             AMERICAN WAGERING, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        THREE MONTHS ENDED APRIL 30, 1999


1. Summary of Business and Significant Accounting Policies

   Summary of Business

   In August 1995, American Wagering, Inc., a Nevada corporation, (the
   "Company") was formed as the holding company for Leroy's Horse and Sports
   Place ("Leroy's") and Leroy's Hotel Corporation ("LHC"). Immediately prior to
   the closing of the initial public offering by American Wagering, Inc., the
   stockholders of Leroy's and LHC exchanged their shares in those companies for
   shares of American Wagering, Inc. These transactions are referred to as the
   "Reorganization."

   Leroy's was incorporated under the laws of the State of Nevada on November
   14, 1977. The Company operates its main race and sports book located on the
   premises of LHC in Las Vegas, Nevada. Leroy's, through a central computer
   system located at its Las Vegas, Nevada headquarters, operates a statewide
   network of sports and race wagering facilities in 46 casinos. The Company
   leases the square footage necessary to conduct its operations at the
   non-Company owned gaming establishments.

   The Company also owns and operates Mega$ports (ACT) Pty Ltd. ("Mega$ports
   (ACT)") located in Canberra, Australia. Mega$ports (ACT) is the Company's
   international wagering hub licensed to accept fixed odds and pari-mutuel
   interactive wagers on the Internet from patrons around the world except the
   United States. In November 1998, the Company was issued a 15 year Sports
   Betting license from the Bookmakers Licensing Committee ("BLC") in the
   Australian Capital Territory ("ACT"). The Company began accepting wagers from
   non-Internet patrons within Australia in January 1999. The Company received
   regulatory approval for its Internet operations from the ACT and began
   accepting wagers on the Internet in March 1999. The Company believes it is
   the first Nevada licensed company to start an online gaming site.

   The Company owns AWI Keno, Inc. ("AWIK") which designs, installs, operates
   and maintains computerized keno systems and plans to offer keno players the
   first state wide progressive keno game. On April 29, 1999 the Company
   received licensing approval from the Nevada Gaming Commission to operate a
   statewide inter-casino linked system keno game. The Company estimates it will
   begin operations at selected locations in June 1999 although there can be no
   assurance in that regard.

   LHC owns and operates a 150 room Howard Johnson's hotel (the "Hotel") located
   in Las Vegas, Nevada, and, through its wholly owned subsidiary B-P Food
   Corporation, an International House of Pancakes restaurant. Leroy's operates
   its main race and sports book on the premises of the Hotel. Additionally,
   Leroy's operates a 5,600 square foot casino containing approximately 65
   electronic gaming devices including slot machines, video poker machines and
   multi-game video machines adjacent to the Hotel and restaurant (collectively
   the "Hotel/Casino").

   The Company also owns and operates Computerized Bookmaking Systems, Inc.
   ("CBS"). CBS designs, installs and maintains sports and race book equipment,
   software and computer systems for the sports betting industry. In 1994, CBS
   signed a joint venture agreement with IGT for the purpose of developing and
   marketing a pari-mutuel sports system, known as MEGA$PORTS(R). MEGA$PORTS(R)

                                                                               6
<PAGE>

   offers opportunities to wager on the outcome of individual sports contests,
   events occurring within or during the contests, and outcomes of groups of
   sports contests. In December 1998, the Company entered into an agreement with
   IGT to terminate the Mega$ports joint venture agreement. (See Note 3).

   On July 28, 1998, the Company acquired certain assets from Advanced Computer
   Services, Inc. ("ACS"). Two new subsidiaries, AWI Sports Systems, Inc. and
   AWI Hotel Systems, Inc. were formed to hold the assets acquired from ACS.

   On April 22, 1998, the Company determined it would concentrate its business
   efforts on its core competency, sports wagering, and began seeking a
   qualified buyer for the hotel, food and beverage segment of American
   Wagering, Inc. In the accompanying consolidated financial statements as of,
   and for the three months ended April 30, 1999 and 1998 the results of the
   hotel, food and beverage operations have been accounted for as discontinued
   operations (See Note 3). In conjunction with the sale of the Hotel, the
   Company intends to leaseback and continue to operate the casino for up to two
   years.

   Restricted Cash and Short Term Investments

   The Company has approximately $65,000 in restricted cash related to its
   Australian operations, which is required by local regulatory requirements.

   Short-term investments consist of liquid investments, such as treasury bills,
   with a maturity of six months or less and are carried at cost adjusted for
   discount amortization.

   Inventories

   Inventories are stated at the lower of cost (based on the first-in, first-out
   method) or market.

   Depreciation and Amortization

   Property and equipment are depreciated by use of both the straight line and
   accelerated methods. The Company recorded a charge for depreciation expense
   of $128,489 and $130,295 and amortization expense of $59,656 and $34,001 for
   the three months ended April 30, 1999 and 1998, respectively.

   Intangible Assets

   Intangible assets include the Excess of the Cost over the Fair Market Value
   of Net Assets of acquired companies. Such costs are being amortized over the
   periods expected to be benefited or approximately 25 years. Other intangible
   assets acquired including software and rights for manufacturing and
   distribution are being amortized over 7 years. Accumulated amortization was
   $431,063 and $371,407 at April 30, 1999 and January 31, 1999, respectively.

   The realizability of intangible assets is evaluated periodically as events or
   circumstances warrant. Such evaluations are based on various analyses,
   including cash flow and profitability projections that incorporate, as
   applicable, the impact on existing Company business. The analyses necessarily
   involve significant management judgment to evaluate the capacity of an
   acquired business to perform within projections.

                                                                               7

<PAGE>

   Revenue Recognition

   With respect to the Wagering segment, which includes sports book and Internet
   operations, in accordance with industry practice, the Company recognizes
   fixed odds race and sports wagering revenues as the net win from such
   wagering activities, which is the difference between gaming wins and losses.
   Wagers received on future race and sporting events are reflected as a
   liability and are not recognized as revenues until the event has taken place.
   The Company recognizes pari-mutuel race and sports wagering revenues as
   commissions earned as a percentage of the total amount wagered. Wagering
   revenues are recognized based on the results of a completed event. With
   respect to the Systems segment, the Company recognizes revenue when the
   software and hardware are installed at the customer location. Maintenance fee
   revenue is recognized as the services are provided.

   Research and Development

   The Company expenses all costs associated with the research and development
   of computerized software as incurred.

   Advertising

   The Company expenses all costs associated with advertising as incurred.

   Earnings per Share

   The Financial Accounting Standards Board issued Statement of Financial
   Accounting Standards No. 128 -"Earnings Per Share" ("SFAS No. 128") which
   became effective for periods ending after December 15, 1997 and replaces
   historically reported earnings per share with "basic", or undiluted, earnings
   per share and "diluted" earnings per share. Basic earnings per share is
   computed by dividing net income by the weighted average number of shares
   outstanding during the period, while diluted earnings per share reflects the
   additional dilution for all potentially dilutive securities, such as stock
   options.

   The weighted-average number of common and common equivalent shares used in
   the calculation of basic and diluted earnings per share consisted of the
   following:

                                                    Three months ended April 30,
                                                    ----------------------------
                                                        1999             1998
                                                       ------           ------
   Weighted-average common shares
   outstanding (used in the computation
   of basic earnings per share)..........            7,824,513        7,833,445

   Potential dilution from the assumed
   exercise of common stock options......              252,967          218,534
                                                     ---------        ---------
   Weighted-average common and common
   stock equivalent shares (used in the
   computation of diluted earnings per
   share)................................            8,077,480        8,051,979
                                                     =========        =========


                                                                               8
<PAGE>

   Use of Estimates

   Financial statements prepared in accordance with generally accepted
   accounting principles require the use of management estimates. The most
   significant estimates with regard to these financial statements relate to
   setting and adjusting lines on sporting events. The sports book operator is
   betting as a principal against its patrons. Therefore, if the "book" of
   wagers placed on an event is not balanced the sports book operator is
   significantly at risk for the outcome of a sporting event. Although sports
   book operators attempt to keep the book in balance by adjusting the betting
   line, the risk of a non-balanced book is inherent in the operation of a
   sports book. To the extent that a book on a particular event is not balanced,
   the book-making operation, like its patrons, is gambling on the outcome of an
   event.

   Principles of Consolidation

   The consolidated financial statements include the accounts of the Company and
   its wholly owned subsidiaries. All significant inter-company balances and
   transactions have been eliminated. The financial results for acquisitions are
   included in the consolidated financial statements from the date of
   acquisition. Investments in 50% or less owned joint ventures are accounted
   for under the equity method.

   Reclassifications

   Certain amounts in the 1998 consolidated financial statements have been
   reclassified to conform with the 1999 presentation. These reclassifications
   had no effect on the Company's net income (loss).

   Income Taxes

   The Company records income taxes in accordance with Statement of Financial
   Accounting Standards No. 109, "Accounting for Income Taxes." ("SFAS No. 109")
   Under SFAS No. 109, deferred income taxes are calculated using the asset and
   liability method. Under the asset and liability method, deferred income taxes
   are measured using enacted statutory tax rates expected to apply to taxable
   income in the years in which these temporary differences are expected to be
   recovered or settled.

   The provision for federal income taxes and utilization of net operating loss
   carryforwards is below. On January 31, 1999 the Company had $2,431,715 of tax
   operating loss carryforwards available to reduce future taxable income, of
   which $2,044,735 will expire in 2013 and $386,980 will expire in 2014.

                                              Three Months ended
                                                April 30, 1999
                                              ------------------
       Income from continuing operations
           before provision for income taxes      $ 267,180

       Provision for income taxes                    93,513
       Net operating loss carryforwards             (93,513)
                                                  ---------
           Net provision for income taxes                --
                                                  ---------

       Income from continuing operations          $ 267,180
                                                  =========

                                                                              9
<PAGE>

   Concentration of Risk

   The Company derives a substantial portion of its revenues from a limited
   number of licensed race and sports books in the State of Nevada. Limitations
   on the scope of operations at such licensed race and sports books due to
   statutory or regulatory changes or deterioration in the general economic
   conditions which impact the gaming industry in Nevada could adversely affect
   the Company's operating results. The Company also derives a portion of its
   revenues from its Internet operations in Australia, which is susceptible to
   regulatory or economic changes, which may impact the Internet or the gaming
   industry outside of the United States.

   The Company has expanded its sports wagering activities to Australia and is
   exploring other jurisdictions outside of the United States to expand its
   sports wagering and keno business lines. The level of customer acceptance for
   the Company's sports wagering and keno products in these new jurisdictions is
   undetermined. Establishing these operations may require initial investments
   of several hundred thousand dollars. If the required investments cannot be
   funded through current operations, the Company would have to obtain
   additional debt or equity funding. There can be no assurance that the Company
   would be able to complete such debt or equity funding or do so on terms
   satisfactory to the Company.

2. Investment in Joint Venture

   The Company, through its wholly owned subsidiary CBS, was involved in a joint
   venture with IGT. CBS and IGT each owned a fifty percent interest in the
   joint venture company named Mega$ports, Inc., a Nevada corporation
   ("Mega$ports (US)"). In December 1998, the Company entered into an agreement
   with IGT to terminate the Mega$ports joint venture agreement. The termination
   agreement allows the Company to receive IGT's 50% interest in the joint
   venture and the Mega$ports(R) trademark. The Company has agreed to indemnify
   IGT for all presently due or future obligations of Mega$ports. The transfer
   of IGT's shares in the joint venture is subject to the approval of the Nevada
   Gaming Commission. In the Company's accompanying consolidated financial
   statements for and as of the three months ended April 30, 1999, the results
   of Mega$ports, Inc. operations have been accounted for as a wholly owned
   subsidiary. Mega$ports (US), which began operations in July 1997, is engaged
   in the design, manufacture and distribution of a pari-mutuel sport wagering
   system. The Company's original investment in joint venture balance consisted
   of contributions of property and equipment, programming services and cash
   contributions for operations.

3. Discontinued Operations

   On April 22, 1998, the Company determined it would concentrate its business
   efforts on its core competency, sports wagering, and began seeking a
   qualified buyer for the hotel, food and beverage segment of American
   Wagering, Inc. In the Company's accompanying consolidated financial
   statements for and as of the three months ended April 30, 1999 and 1998, the
   results of the hotel, food and beverage operations have been accounted for as
   discontinued operations. In conjunction with the sale of the Hotel, the
   Company intends to leaseback and continue to operate the casino for up to two
   years. The casino will serve as the Company's principal gaming location.

   The Company entered into an agreement to sell the Hotel operation on May 1,
   1999, the agreement is contingent upon the buyer receiving a firm financing
   commitment by June 15, 1999. The Company has been notified the purchaser's
   lending institution loan committee will not review the loan application until
   June 21, 1999. The Company believes that the purchase agreement will be
   modified to extend the contingency date until June 22, 1999.

   The Company is a debtor under a loan, secured by a deed of trust, related to
   the hotel facility. The loan has an outstanding principal amount of
   $2,358,284 as of April 30, 1999, bears a variable annual interest rate and
   matures on April 5, 2001. The current annual interest rate on the loan is
   9.5%.

   The Company recorded a reserve during the fiscal year ended January 31, 1998
   for the estimated loss on the disposal of this segment, which totaled
   $862,000 consisting of an estimated loss on the sale of the business of
   $246,000, and a provision of $616,000 for anticipated operating losses during
   the phase out period. The Company incurred losses from this segment of
   $504,877 through from February 1, 1998 through April 30, 1999.

   These operations had revenues of $880,000 and $815,000 for the three months
   ended April 30, 1999 and 1998, respectively. Operating losses for these same
   periods were $21,000 and $77,000, respectively. Identifiable assets of the
   hotel, food and beverage operations were approximately $3.8 million and $3.7
   million as of April 30, 1999 and January 31, 1999, respectively.

   The components of assets and liabilities of discontinued operations included
   in the accompanying consolidated balance sheets are as follows:

                                                                              10
<PAGE>


                                                    April 30,      January 31,
                                                      1999            1999
                                                  -----------     -----------
   Current assets                                 $   418,370     $   274,119
   Accounts payable, accrued expenses and other      (796,565)       (890,763)
                                                  -----------     -----------
   Net current liabilities                        $  (378,195)    $  (616,644)
                                                  ===========     ===========
   Property, plant and equipment, net             $ 3,348,571     $ 3,383,376
   Non-current liabilities                         (2,287,593)     (2,309,081)
                                                  -----------     -----------
   Net long term assets                           $ 1,060,978     $ 1,074,295
                                                  ===========     ===========

   The condensed statements of operations relating to the discontinued
   operations are presented below:

                                                  Three months ended April 30,
                                                      1999            1998
                                                  -----------     -----------
    Revenues                                      $   879,941     $   814,847
    Costs and expenses                                956,285       1,040,017
                                                  -----------     -----------
    Loss before income taxes                          (76,344)       (225,170)
    Provision (benefit) for income taxes                 --             --
                                                  -----------     -----------
    Net (loss)                                    $   (76,344)    $  (225,170)
                                                  ===========     ===========


         Losses incurred during the three months ended April 30, 1999 have been
charged against previously established reserves.


4. Business Segments

   The Company's primary operations are reported in the following four segments:
   Wagering, Casino, Systems, and Keno. The Hotel, Food and Beverage business
   segment has been presented as discontinued operations in the accompanying
   consolidated financial statements.

   The Wagering segment consists of Leroy's, the licensed bookmaking operations
   with the largest number of sports books in the state of Nevada. As at April
   30, 1999, in addition to its main location, the Company operated 46 race and
   sports books located within licensed gaming establishments owned by other
   companies throughout the state of Nevada. Leroy's leases the square footage
   necessary to conduct its operations at non-Company owned establishments.
   Additionally, the Wagering segment consists of Mega$ports (ACT) Australia
   operations. Mega$ports (ACT) is the Company's international wagering hub for
   Internet sports wagering and Mega$ports, Inc., a Nevada Corporation,
   ("Mega$ports (US)") offering a pari-mutuel sports wagering system in the
   state of Nevada. The Company has terminated the joint venture agreement and
   upon regulatory approval will have 100% control over the operation.

                                                                              11
<PAGE>



   The Casino segment includes a 5,600 square foot casino within the Howard
   Johnson Hotel containing approximately 65 electronic gaming devices including
   slot machines, video poker machines and multi-game video machines.

   The Systems segment, consisting of CBS, AWISSI and AWIHSI, designs, sells,
   installs and maintains equipment, software and computer systems to the sports
   betting and hotel industries.

   The Keno segment develops, sells, operates and services stand alone linked
   progressive keno games using state-of-the-art graphical interfaces. Keno is
   currently in its startup phase and has primarily incurred labor and marketing
   expenses.

   The following summarizes the segment information for the Company:
<TABLE>
<CAPTION>


                   Three Months
                      Ended                                                                     .
                     April 30,     Wagering     Casino      Systems      Keno       Corporate         Total
                   -----------     --------     ------      -------     -------      --------        -------
<S>                    <C>       <C>          <C>         <C>           <C>        <C>            <C>
   Revenues            1999      $1,797,261   $199,080    $1,013,782    $   ---    $    ---       $ 3,010,123
                       1998       1,314,091    147,062       874,215        ---         ---         2,335,368

   Research and        1999          ---         ---         151,381        ---         ---           151,381
   Development         1998          ---         ---         139,272        ---         ---           139,272

   Operating           1999         483,866     76,986       197,045     (66,924)     (365,842)       325,131
   Income (Loss)*      1998         257,540     23,285       237,316        ---       (342,784)       175,357

   Capital             1999           4,425      ---           1,323        ---          3,103          8,951
   Expenditures        1998           6,067      ---           8,934        ---         16,634         31,635

   Depreciation and    1999          68,258      4,076        97,714        ---         18,097        188,145
   Amortization        1998          74,692      5,624        72,289        ---         11,691        164,296

   Identifiable        1999       2,718,155    168,974     5,187,981     331,067       551,220      8,957,397
   Assets  January 31, 1999       4,052,879    301,738     5,343,561     317,067       676,330     10,691,575
</TABLE>
     * Operating income (loss) does not include the allocation of corporate
   management fees. The management fees are equal to 9.5% of each operating
   Company's gross operating revenues.


   Comparative financial data for the hotel, food and beverage operations,
   reported as discontinued operations, is as follows:


                               Three Months
                                  Ended       Hotel, Food
                                 April 30,     & Beverage
                                -----------    ----------

               Revenues            1999       $  879,941
                                   1998          814,847

               Operating           1999          (20,633)
                Income (Loss)*     1998          (76,895)

               Capital             1999           13,914
               Expenditures        1998            6,896

               Depreciation and    1999           48,718
               Amortization        1998           55,867

               Identifiable        1999        3,766,942
                Assets             1998        3,657,494


                                                                              12
<PAGE>

Item 2. Management's Discussion and Analysis or Plan of Operation

Results of Operations

Three Months ended April 30, 1999 compared to the Three Months ended April 30,
1998.

         Revenues for the Three Months ended April 30, 1999, were $3,010,000, an
increase of $675,000 or 28.9% from revenues of $2,335,000 for the Three Months
ended April 30,1998. The increase was principally attributed to additional
Wagering revenues of $483,000, additional Systems revenues of $140,000 and
additional Casino revenues of $52,000. Operating income of $325,000 for the
Three Months ended April 30, 1999 increased by $150,000 or 85.8% compared to
$175,000 for the Three Months ended April 30, 1998. This improvement was
primarily due to increased Wagering revenues. In addition operating income was
impacted favorably by the increased revenues of the Casino. Offsetting the
improvement in operating income fiscal quarters was an operating loss at
Mega$ports (US) of $190,000, Mega$ports (ACT) of $69,000 and AWI Keno, Inc.
start up costs of $67,000.

Wagering Operations

         Revenues from Sports book wagering were $1,781,000 for the Three Months
ended April 30, 1999, an increase of $467,000 or 35.6% from revenues of
$1,314,000 for the Three Months ended April 30, 1998. The increase was due to a
13.1% increase in Handle (the total amount wagered at the Company's sports and
race books) and a 24.2% increase in net win percentage (revenues divided by
handle) between years. The net win percentage was 7.6% for the Three Months
ended April 30, 1999 compared to 6.2% for the Three Months ended April 30, 1998.
Handle of $22,793,000 for the Three Months ended April 30, 1999 increased by
$2,624,000 from Handle of $20,169,000 for the Three Months ended April 30, 1998.
The increase in Handle was due primarily to a net increase of five sports book
locations. An increase or decrease in handle is not necessarily indicative of an
increase or decrease in revenues or profits. Operating costs of $1,314,000 for
the Three Months ended April 30, 1999 increased by $257,000 from operating costs
of $1,057,000 for the Three Months ended April 30, 1998. The increase in costs
with no offsetting increase in revenues is principally attributed to the
operations of Mega$ports (US) which became a wholly owned subsidiary during the
Three Months ended April 30, 1999.

Casino Operations

         Revenues from Casino operations were $199,000 for the Three Months
ended April 30, 1999, an increase of $52,000 or 35.4% from revenues of $147,000
for the Three Months ended April 30, 1998. The increase was principally
attributed to increased slot play of local customers. Operating costs remained
flat between fiscal quarters.

                                                                              13
<PAGE>


Systems Operations

         Revenues from Systems operations were $1,014,000 for the Three Months
ended April 30, 1999, an increase of $140,000 or 16.0% from revenues of $874,000
for the Three Months ended April 30, 1998. Increased revenues of $54,000 from
CBS operations were atttributed to increased equipment and ticket paper sales.
Sports Systems and Hotel Systems, which began operations in July 1998 and are
partly owned, generated revenues of $86,000 primarily from recurring maintenance
billings. Operating costs combined of $719,000 for the Three Months ended April
30, 1999 increased by $155,000 or 27.5% from operating costs of $564,000 for the
Three Months ended April 30, 1998. The increase is principally attributed to
Sports and Hotel Systems which began operations during the Second Quarter of
Fiscal 1999.

Keno Operations

         Keno was formed in June 1998 and the Company estimates it will begin
operations in June 1999. During the Three Months ended April 30, 1999, Keno
incurred costs of $67,000 including labor and fringes, marketing, professional
services, travel and legal expenses.

Direct Costs

         Direct costs of $1,766,000 for the Three Months ended April 30, 1999
increased by $401,000 or 29.4% from direct costs of $1,365,000 for the Three
Months ended April 30, 1998 due principally to the new companies which were not
operating during the prior fiscal quarter.

Research and Development Costs

         Research and development costs of $151,000 for the Three Months ended
April 30, 1999 increased by $12,000 or 8.6% from research and development costs
of $139,000 for the Three Months ended April 30, 1998 due principally to
increased labor costs associated with new product development.

Selling, General and Administrative Costs

         Selling, general and administrative costs of $580,000 for the Three
Months ended April 30, 1999 increased by $89,000 or 18.2% from selling, general
and administrative costs of $491,000 for the Three Months ended April 30, 1998.
The increase is due principally to AWI Keno start up costs and Mega$ports (US)
operations.

Depreciation and Amortization

         Depreciation and amortization was $188,000 for the Fiscal Year ended
1999, an increase of $24,000 or 14.6% from depreciation and amortization of
$164,000 for the Fiscal Year ended 1998. Amortization expense increased by
$26,000 due to the acquisition of intangible assets of ACS. Depreciation expense
remained flat between fiscal quarters.

Interest and Other Income

         Interest and Other Income of $8,000 for Fiscal Year ended 1999,
decreased by $140,000 or 94.6% from interest and other income of $148,000 in the
Fiscal Year ended 1998. The reduction is principally due to a decrease in income
derived from short-term investments.

                                                                              14
<PAGE>

Interest Expense

         Interest Expense of $70,000 for Fiscal Year ended 1999 decreased by
$31,000 or 30.7% from interest expense of $101,000 in the Fiscal Year ended
1998. The decrease is principally due to the interest paid in connection with
the Racusin litigation and shareholder notes during the Three Months ended April
30, 1998.

Equity in Loss from Joint Venture

         The equity in loss from Mega$ports (US) joint venture was $110,000 for
the Three Months ended April 30, 1998. In December 1998, the Company entered
into an agreement with IGT to terminate the Mega$ports joint venture agreement.
In the Company's accompanying consolidated financial statements for and as of
the three months ended April 30, 1999, the results of Mega$ports, Inc.
operations have been accounted for as a wholly owned subsidiary.

Net Income from Continuing Operations

         The net income from continuing operations of $267,000 for Three Months
ended April 30,1999, increased by $154,000 or 136.3% from $113,000 in the Three
Months ended April 30, 1998. The increase between fiscal quarters was
principally due to the increased revenues in the Sports book Wagering
operations.

Discontinued Operations

Hotel, Food and Beverage Operations

         On April 22, 1998, the Company determined it would concentrate its
business efforts on its core competency, sports wagering, and began seeking a
qualified buyer for the hotel, food and beverage segment of American Wagering,
Inc. In conjunction with the sale of the Hotel, the Company intends to leaseback
and continue to operate the casino for up to two years. In the Company's
accompanying consolidated financial statements for and as of the Three Months
ended April 30, 1999 and 1998, the results of the hotel, food and beverage
operations have been accounted for as discontinued operations. Revenues from
hotel, food and beverage operations of $880,000 for the Three Months ended April
30, 1999 increased by $65,000 as compared to revenues of $815,000 for the Three
Months ended April 30, 1998. Operating costs associated with hotel, food and
beverage operations were $900,000 for the Three Months ended April 30, 1999, an
increase of $8,000 or 0.9% as compared to costs of $892,000 for the Three Months
ended April 30, 1998.

Liquidity and Capital Resources

         As of April 30, 1999, working capital was $36,000. Cash used in
operating activities was $1,843,000 for the Three Months ended April 30, 1999
compared to cash used in operating activities of $1,154,000 for the Three Months
ended April 30, 1998. Net cash provided by investing activities was $94,000 for
the Three Months ended April 30, 1999 compared to cash provided by investing
activities of $2,217,000 for the Three Months ended April 30, 1998. The decrease
is principally attributed to the liquidation of short-term investments during
the prior fiscal quarter. Net cash used in financing activities amounted to
$34,000 for the Three Months ended April 30, 1999 compared to net cash used in
financing activities of $727,000 for the Three Months ended April 30, 1998. This
decrease is principally due to the repayment of long-term debt during the Three
Months ended April 30, 1998. The Company paid $480,000 for the balance of a note
due to Pioneer Citizens Bank of Nevada, which was borrowed in March 1995 and
loaned to LHC to acquire the initial 50% of the Hotel/Casino.

                                                                              15
<PAGE>


         Management believes that the Company will be able to satisfy its
operating cash requirements through the end of its current fiscal year from
existing cash balances and anticipated cash flows.

         The Company has expanded its sports wagering activities to Australia
and is exploring other jurisdictions outside of the United States to expand its
sports wagering and keno business lines. The level of customer acceptance for
the Company's sports wagering and keno products in these new jurisdictions is
undetermined. Establishing these operations may require initial investments of
several hundred thousand dollars. If the required investments cannot be funded
through current operations, the Company would have to obtain additional debt or
equity funding. There can be no assurance that the Company would be able to
complete such debt or equity funding or do so on terms satisfactory to the
Company.

National Gambling Impact Study Commission

         Congress has created the National Gambling Impact Study Commission
comprised of nine individuals appointed by the President. The general duty of
the Commission is to conduct a comprehensive legal and factual study of the
gambling industry in the United States, to review existing Federal, State and
local policy and practices with respect to the legalization or prohibition of
gambling activities, to formulate and propose changes in such policies and
practices and to recommend legislation and administrative actions for such
changes. It is not possible to predict the future impact of the Commission on
the Company and its operations as the Commission could propose legislation and
actions that may materially adversely affect the Company's business.

Recently Issued Accounting Standards

         The Company has adopted the provisions of Statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS 130") and
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information." ("SFAS 131")

Year 2000

         In the past, many computer software programs were written using two
digits rather than four to define the applicable year. As a result,
date-sensitive computer software may recognize a date using "00" as the year
1900 rather than the year 2000. This is generally referred to as the Year 2000
issue. If this situation occurs, the potential exists for computer system
failures or miscalculations by computer programs, which could disrupt
operations.

         The Company utilizes computer systems in virtually all aspects of its
business. In particular, Year 2000 problems in wagering systems at the
properties in which the Company or its customers utilize computer systems could
disrupt operations at the affected properties and may have a material adverse
impact on the Company's operating results. The Company is also exposed to the
risk that one or more of its suppliers could experience Year 2000 problems that
impact the ability of such suppliers to provide goods and services. Though this
is not considered as significant a risk with respect to the suppliers of goods,
due to the availability of alternative suppliers, the disruption of certain
services, such as utilities or telephone communications, could, depending on the
extent of the disruption, have a material adverse impact on the Company's
operations. Computers on occasion fail, irrespective of the Year 2000 issue. For
this reason, where appropriate, the Company maintains paper and magnetic
back-ups daily and the Company's employees are trained in the restoration and
use of these back-ups.

         The Company has established a compliance program to assess the impact
and formulate corrective actions regarding the Year 2000 issue. Where important
to the Company's business, inquiries are continuing to be made of the third

                                                                              16
<PAGE>

parties with whom the Company does significant business, such as vendors and
suppliers, as to their Year 2000 readiness, and if a third party Year 2000
problem is detected, alternatives are being developed. The Company believes that
a substantial majority of its systems are currently Year 2000 compliant. The
Company has completed the process of assessing both the internal readiness of
its computer systems and the compliance of its currently offered computer
products and software to customers for handling the year 2000 problem. The
Company has started installations of customer upgrades to address the compliance
of its computer products and software. It is the Company's goal to have all
currently offered systems Year 2000 compliant by the end of the third quarter.
All existing installations of currently offered systems will be upgraded, if
necessary, to meet Year 2000 compliance as part of the existing maintenance
contract requirements. The Company does not intend to assess the readiness of
non-current products that are not currently offered to customers. The Company
has contacted its customers that are operating non-current systems and
communicated to them that the systems they are using are not Year 2000 compliant
and that the Company does not intend to upgrade these systems. The Company has
offered these customers solutions, which include the purchase of a new system,
which is Year 2000 compliant. The Company has not yet developed a comprehensive
contingency plan, although as previously mentioned all critical systems are
currently backed up daily and can be restored if necessary. The Company will
continue to assess the need for a comprehensive contingency plan as
implementation of its corrective action plan continues.

         The Company expects the entire process will cost no more than $100,000.
The Company does not believe that the cost of such actions will have a material
effect on the Company's results of operations or financial condition. However,
there can be no assurance that there will not be a delay in, or increased costs
associated with, the implementation of such changes, and the Company's inability
to implement such changes could have an adverse effect on future results of
operations.

Forward-Looking Statements

         Certain information included in this report and other materials filed
or to be filed by the Company with the Securities and Exchange Commission (as
well as information included in oral statements or written statements made or to
be made by the Company) contains statements that are forward-looking within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such statements include
information relating to current expansion projects, plans for future expansion
projects and other business development activities as well as other capital
spending, financing sources, Year 2000 compliance and the effects of regulation
(including gaming and tax regulation) and competition. Such forward-looking
information involves important risks and uncertainties that could significantly
affect anticipated results in the future and, accordingly, such results may
differ from those expressed in any forward-looking statements made by or on
behalf of the Company. These risks and uncertainties include, but are not
limited to, those relating to the Company taking financial risks on the outcome
of sports events as a principal betting against its patrons, domestic or global
economic conditions, changes in federal or state tax laws or the administration
of such laws, changes in gaming laws or regulations (including the legalization
of gaming in certain jurisdictions) and applications for licenses and approvals
under applicable laws and regulations (including gaming laws and regulations).


                                                                              17
<PAGE>







PART II           OTHER INFORMATION

Item 1.           LEGAL PROCEEDINGS - See the description of these legal
                  proceedings set forth in the Registrant's Form 10-KSB for the
                  year ended January 31, 1999.

Item 2.           CHANGES IN SECURITIES - NON APPLICABLE

Item.3.           DEFAULTS UPON SENIOR SECURITIES - NON APPLICABLE

Item 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -
                  NON APPLICABLE

Item 5.           OTHER INFORMATION - NON APPLICABLE

Item 6.           EXHIBITS AND REPORTS ON FORM 8-K

                  Exhibits - Financial Data Schedule

Number                 Description                           Method of Filing
------                 -----------                           ----------------

27            Financial Data Schedule                         Filed Herewith

(b)The following report on form 8-K was filed during the quarter ended April 30,
   1999:

              NONE




                                   SIGNATURES


Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.



                                                 AMERICAN WAGERING, INC.




                                                        (Registrant)

Date:    June 14, 1999                           By: /s/ Robert D. Ciunci
                                                 ----------------------------
                                                 Robert D. Ciunci
                                                 Executive Vice President and
                                                 Chief Financial Officer