<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 October 31, 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 December 10, 1999
was 7,824,513.



<PAGE>



                             AMERICAN WAGERING, INC.
                      UNAUDITED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                         October 31,      January 31,
                                                                             1999            1999
                                                                         ------------    ------------
<S>                                                                      <C>              <C>
ASSETS

CURRENT ASSETS:
  Cash                                                                  $  3,247,151     $ 3,076,563
  Short-term investments                                                     252,066         483,671
  Accounts receivable, net of allowance for doubtful accounts
   of $227,876 and $78,295                                                   670,011         172,046
  Inventories, net of obsolescence reserve of $81,825 and $188,225           544,348         724,386
  Prepaid expenses and other current assets                                  506,260         544,212
                                                                        ------------     -----------
TOTAL CURRENT ASSETS                                                       5,219,836       5,000,878

PROPERTY AND EQUIPMENT, net                                                4,027,792       4,063,042

INTANGIBLE ASSETS, net                                                     1,086,970       1,238,890

DEPOSITS AND OTHER ASSETS                                                    293,695         388,765

NET LONG-TERM ASSETS OF DISCONTINUED OPERATIONS                                    -       1,074,295
                                                                         -----------     -----------
TOTAL ASSETS                                                            $ 10,628,293     $11,765,870
                                                                        ============     ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current portion of long-term debt                                     $     14,914     $    57,913
  Accounts payable                                                         1,897,469         678,067
  Accrued expenses                                                           890,524         718,932
  Unpaid winning tickets                                                   1,074,379       2,548,181
  Other current liabilities                                                1,153,208         707,612
  Net current liabilities of discontinued operations                               -         616,644
                                                                        ------------     -----------
TOTAL CURRENT LIABILITIES                                                  5,030,494       5,327,349
                                                                        ------------     -----------
LONG-TERM DEBT:
  Long-term debt, less current portion                                     1,879,237       1,879,237

MINORITY INTEREST                                                            (29,986)         (3,380)

STOCKHOLDERS' EQUITY:
  Series A Preferred stock - 10% cumulative;$.01 par value; authorized;
   25,000,000 shares; issued and outstanding: 16,424 and 18,924 shares     1,642,400       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                                                    (11,942,064)    (11,377,948)
   Less: treasury stock; at cost: 61,100 shares                             (327,493)       (327,493)
                                                                        ------------     -----------
TOTAL STOCKHOLDERS' EQUITY                                                 3,748,548       4,562,664
                                                                        ------------     -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                              $ 10,628,293     $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.



<PAGE>


                             AMERICAN WAGERING, INC
                 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE THREE MONTHS ENDED OCTOBER 31, 1999 AND 1998
<TABLE>
<CAPTION>


                                                                             1999            1998
                                                                          ----------     -----------
         <S>                                                              <C>             <C>
         REVENUES                                                         $3,883,988     $ 2,633,333

         OPERATING COSTS AND EXPENSES:
           Direct costs                                                    2,701,221       1,880,120
           Research and development                                          277,776         148,072
           Selling, general and administrative                               907,072         872,731
           Depreciation and amortization                                     218,124         219,523
                                                                          ----------     -----------
         TOTAL OPERATING COSTS AND EXPENSES                                4,104,193       3,120,446
                                                                          ----------     -----------
         OPERATING LOSS                                                     (220,205)       (487,113)

         OTHER INCOME (EXPENSE):
           Interest income                                                    13,947          12,822
           Other income (expense)                                            (38,722)         77,395
           Minority interest                                                  22,937          (4,018)
           Equity in loss from investment in joint venture                        --        (196,638)
           Interest expense                                                  (39,296)        (79,413)
                                                                          ----------     -----------
         TOTAL OTHER EXPENSE                                                 (41,134)       (189,852)
                                                                          ----------     -----------
         LOSS FROM CONTINUING OPERATIONS
         BEFORE PROVISION (BENEFIT) FOR INCOME TAXES                        (261,339)       (676,965)

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

         NET LOSS                                                           (261,339)       (676,965)

         PREFERRED STOCK DIVIDEND REQUIREMENTS                               (42,417)            --
                                                                          ----------     -----------

         NET LOSS AVAILABLE TO COMMON SHAREHOLDERS                        $ (303,756)    $  (676,965)
                                                                         ===========     ===========

         LOSS PER SHARE OF COMMON STOCK


           Net loss
             Basic                                                        $    (0.04)    $     (0.09)
             Diluted                                                      $    (0.04)    $     (0.09)


</TABLE>

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





<PAGE>

                             AMERICAN WAGERING, INC
                 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
               FOR THE NINE MONTHS ENDED OCTOBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                  1999                    1998
                                                               ----------              -----------
<S>                                                            <C>                     <C>
REVENUES                                                       $9,150,595              $ 6,602,114

OPERATING COSTS AND EXPENSES:
         Direct costs                                           6,504,623                4,514,542
         Research and development                                 621,018                  426,732
         Selling, general and administrative                    2,302,678                2,500,430
         Depreciation and amortization                            613,575                  551,080
                                                               ----------              -----------
       TOTAL OPERATING COSTS AND EXPENSES                      10,041,894                7,992,784
                                                               ----------              -----------
OPERATING LOSS                                                   (891,299)              (1,390,670)

OTHER INCOME (EXPENSE):
         Interest income                                           24,490                  119,642
         Other income (expense)                                   (37,404)                 232,720
         Minority interest                                         26,606                   (4,018)
         Equity in loss from investment in joint venture               --                 (393,819)
         Interest expense                                        (118,749)                (262,677)
                                                               ----------              -----------
TOTAL OTHER EXPENSE                                              (105,057)                (308,152)
                                                               ----------              -----------
LOSS FROM CONTINUING OPERATIONS
       BEFORE PROVISION (BENEFIT) FOR INCOME TAXES               (996,356)              (1,698,822)

PROVISION (BENEFIT) FOR INCOME TAXES                                   --                       --
                                                               ----------              -----------
LOSS FROM CONTINUING OPERATIONS                                  (996,356)              (1,698,822)

DISCONTINUED OPERATIONS:

       GAIN ON SALE OF HOTEL, FOOD AND BEVERAGE
        OPERATIONS, NET OF INCOME TAX                             341,403                       --

       EXCESS RESERVE - LOSS ON DISPOSAL                          213,465                       --
                                                               ----------              -----------
INCOME FROM DISCONTINUED OPERATIONS                               554,868                       --
                                                               ----------              -----------

NET LOSS                                                         (441,488)              (1,698,822)

PREFERRED STOCK DIVIDEND REQUIREMENTS                            (136,771)                     ---
                                                               ----------              -----------

NET LOSS AVAILABLE TO COMMON SHAREHOLDERS                      $ (578,259)             $(1,698,822)
                                                               ==========              ===========

INCOME (LOSS) PER SHARE OF COMMON STOCK

    Loss from continuing operations
         Basic                                                 $    (0.14)             $     (0.22)
         Diluted                                               $    (0.14)             $     (0.22)

    Income from discontinued operations
         Basic                                                 $     0.07              $      0.00
         Diluted                                               $     0.07              $      0.00

    Net loss
         Basic                                                 $    (0.07)             $     (0.22)
         Diluted                                               $    (0.07)             $     (0.22)

</TABLE>

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




<PAGE>

                            AMERICAN WAGERING, INC.
                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE NINE MONTHS ENDED OCTOBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                  1999            1998
                                                              -----------     -----------
<S>                                                            <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                    $  (441,488)   $ (1,698,822)
Adjustments to reconcile net loss to cash
   used in operating activities:
  Depreciation and amortization                                   613,575         645,758
  Equity in loss from investment in
   joint venture                                                       --         393,819
  Gain on sale of discontinued operations                        (341,403)             --
  Discontinued operations                                        (626,309)             --
  Minority interest                                               (26,606)          4,018
  Provision for doubtful accounts                                 149,581         330,708
  Decrease (increase) in assets:
    Accounts receivable                                          (647,546)        (45,076)
    Inventories, net                                              180,038          71,808
    Prepaid expenses and other current assets                      37,952        (137,185)
  Increase (decrease) in liabilities:
    Accounts payable                                            1,219,401        (923,624)
    Accrued expenses                                              171,592        (746,817)
    Unpaid winning tickets                                     (1,473,802)       (314,726)
    Other current liabilities                                     445,596         862,169
                                                              -----------     -----------
Total adjustments                                                (297,931)        140,852
                                                              -----------     -----------
  Net cash used in operating activities                          (739,419)     (1,557,970)
                                                              -----------     -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Net proceeds from sale of assets                              3,809,392              --
  Capital expenditures                                           (409,649)       (541,526)
  Purchase of assets of affiliate                                      --        (524,404)
  Expenditures capitalized as intangible assets                   (16,756)        (12,650)
  Increase in investment in joint venture                              --        (637,308)
  Decrease in short-term investments                              231,605       4,862,084
  Deposits and other assets                                        95,070        (161,112)
                                                               -----------     -----------
  Net cash provided by investing activities                     3,709,662       2,985,084
                                                              -----------     -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Principal payments of long-term debt                         (2,427,027)     (1,131,900)
  Purchase of treasury stock                                           --        (327,493)
  Redemption of preferred stock                                  (250,000)             --
  Preferred stock dividends paid                                 (122,628)             --
                                                              -----------     -----------
    Net cash used in financing activities                      (2,799,655)     (1,459,393)
                                                              -----------     -----------
NET INCREASE (DECREASE) IN CASH                                   170,588         (32,279)

CASH, beginning of period                                     $ 3,076,563     $ 2,092,894
                                                              -----------     -----------
CASH, end of period                                           $ 3,247,151     $ 2,060,615
                                                              ===========     ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest                                        $   240,122     $   451,803
                                                              ===========     ===========

Cash paid (recovered) for income taxes                                 --        (136,000)
                                                              ===========     ===========

</TABLE>

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



<PAGE>


                             AMERICAN WAGERING, INC
                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE NINE MONTHS ENDED OCTOBER 31, 1999 AND 1998

                                   (Continued)

SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES:
Nine Months Ended October 31, 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)
                                               ---------
                                               $   ----
                                               =========




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





<PAGE>


                             AMERICAN WAGERING, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE NINE MONTHS ENDED OCTOBER 31, 1999


1. Summary of Business and Significant Accounting Policies

The accompanying unaudited consolidated financial statements do not include all
information and disclosures required under generally accepted accounting
principles. However, in the opinion of management, the accompanying financial
statements contain all adjustments (consisting only of normal recurring
adjustments) considered necessary to present fairly the financial position,
results of operations and cash flows, of American Wagering, Inc., a Nevada
corporation, (the "Company") for the periods presented. The financial statements
as of and for the years ended January 31, 1999 and 1998 and the notes thereto
included in the Company's Annual Report on Form 10-KSB should be read in
conjunction with these interim financial statements.

Summary of Business

In August 1995, 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. Through a central computer system located at its Las Vegas, Nevada
headquarters, Leroy's operates a statewide network of 48 race and sports
wagering facilities by leasing the square footage necessary to conduct its
operations from gaming establishments. Leroy's operates its main race and sports
book and a 5,600 square foot casino with approximately 65 electronic gaming
devices including slot machines, video poker machines and multi-game video
machines at the Howard Johnson Hotel on 3111 West Tropicana Boulevard in Las
Vegas, Nevada.

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 telephone and sports
wagers on the Internet from patrons around the world except the United States.
In November 1998, the Company was issued a fifteen year Sports Betting license
from the Bookmakers Licensing Committee in the Australian Capital Territory
("ACT"). The Company began accepting wagers from 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
preliminary licensing approval from the Nevada Gaming Commission to operate a
statewide inter-casino linked system keno game. The Company began operations at
two locations in August 1999. The Nevada Gaming Commission required the Company
to successfully complete a 30-day trial period before receiving final approval
from the Nevada Gaming Commission. The Company received final approval from the
Nevada Gaming Commission on November 11, 1999.


<PAGE>


The Company also owns and operates Computerized Bookmaking Systems, Inc.
("CBS"). CBS designs, installs and maintains race and sports book equipment,
software and computer systems for the sports betting industry. In 1994, CBS
signed a joint venture agreement with International Game Technology ("IGT") for
the purpose of developing and marketing a pari-mutuel sports system, known as
MEGA$PORTS(R). MEGA$PORTS(R) 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. On February 1, 1999, the Mega$ports joint
venture agreement terminated. (See Note 2).

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. On
June 30, 1999, the Company finalized the sale of these operations and has
entered into a lease with the new owner to continue to operate the casino for up
to two years. The casino serves as the Company's principal gaming location. In
the Company's accompanying consolidated financial statements for and as of the
Three and Nine Months ended October 31, 1999 and 1998, the results of the hotel,
food and beverage operations have been accounted for as discontinued operations.
The Company recognized a gain on sale of these operations of $341,000 and an
excess reserve - loss on disposal of $213,000 during the Second Quarter of
Fiscal 2000. (See Note 3).

Cash and Short-Term Investments

As of October 31, 1999 the Company has segregated approximately $572,000 in cash
to meet certain regulatory requirements. Short-term investments consist of
liquid investments carried at cost and accrued interest.

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
$445,000 and $410,000 and amortization expense of $169,000 and $141,000 for the
nine months ended October 31, 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 $639,000 and
$371,000 at October 31, 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



<PAGE>


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.

Period Results Not Indicative of the Full Year

The results of operations for the Three and Nine months ended October 31, 1999
and 1998 are not  necessarily  indicative of the results to be expected for the
full fiscal year.

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. Wagering
revenues are recognized based on the results of a completed event. 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. The Systems segment of the Company
recognizes revenue when the software and hardware is installed at the customer
location. Maintenance fee revenue is recognized over the term of the contract.

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 replaced 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 available to common shareholders 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.

In accordance with SFAS No. 128, if potential shares outstanding would have an
anti-dilutive effect on the diluted earnings per share calculation, then the
shares are not included in the diluted earnings per share calculation. Options
outstanding during the Three and Nine months ended October 31, 1999 and 1998
under the Company's Employee stock option plan and its Directors stock option
plan were not included in the computation of diluted earnings per share because
they were anti-dilutive with regard to the loss incurred by the Company during
the Three and Nine months ended October 31, 1999 and 1998.


<PAGE>


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:
<TABLE>
<CAPTION>

                                                 Three Months                    Nine Months
                                               Ended October 31,               Ended October 31,
                                               1999            1998          1999             1998
                                             ---------      ---------      ---------       ---------
      <S>                                    <C>           <C>             <C>             <C>
   Weighted-average common shares
   outstanding (used in the computation
   of basic earnings per share)........      7,824,513      7,781,690      7,824,513       7,802,148
                                             =========      =========      =========       =========
</TABLE>

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 to the 1999 presentation. These reclassifications had no
effect on the Company's net 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.


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


<PAGE>


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
Australia, which is susceptible to statutory, 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)"). On February 1, 1999, the Mega$ports joint venture agreement terminated.
The termination agreement allows the Company to receive IGT's 50% interest in
the joint venture and the Mega$ports(R) trademark. The Company has agreed under
the terms of the agreement to indemnify IGT for all presently due or future
obligations of Mega$ports(US). The transfer of IGT's shares in the joint venture
is subject to the approval of the Nevada Gaming Commission. In the Company's
accompanying consolidated financial statements for and as of the nine months
ended October 31, 1999, the results of Mega$ports(US) 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. On
June 30, 1999, the Company finalized the sale of these operations and entered
into a lease with the new owner to continue to operate the casino for up to two
years. The casino serves as the Company's principal gaming location. In the
Company's accompanying consolidated financial statements for and as of the Three
and Nine Months ended October 31, 1999 and 1998, the results of the hotel, food
and beverage operations have been accounted for as discontinued operations.

The Company recorded a reserve during fiscal year ended January 31, 1998 for the
estimated losses on the disposal of this segment, which was comprised of an
estimated loss on the sale of the hotel of $246,000 and a provision for
anticipated losses during the phase out period of $616,000.


<PAGE>


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

<TABLE>
<CAPTION>

                                                              January 31,
                                                                1999
                                                             ----------
         <S>                                                 <C>
         Current assets                                      $  274,119
         Accounts payable, accrued expenses and other          (890,763)
                                                             ----------
         Net current liabilities                             $ (616,644)
                                                             ==========
         Property, plant and equipment, net                  $3,383,376
         Non-current liabilities                             (2,309,081)
                                                             ----------
         Net long term assets                                $1,074,295
                                                             ==========
</TABLE>

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


<TABLE>
<CAPTION>

                                          Three Months        Nine Months
                                             Ended              Ended
                                          October 31,         October 31,
                                             1998                1998
                                           ---------           ---------
<S>                                        <C>                 <C>
Revenues                                   $ 849,746           2,501,650
Costs and expenses                           979,218           3,022,216
                                           ---------          ----------
Loss before income taxes                    (129,472)           (520,566)
Provision (benefit)for income taxes
                                                  ---               ---
                                           ---------          ----------
Net loss                                   $(129,472)         $ (520,566)
                                           =========          ==========
</TABLE>

On June 30, 1999, the Company realized a gain of $341,000 from the sale of this
segment. Additionally, the Company no longer required the initial estimated loss
from discontinued operations of $246,000. The Company incurred losses from
operations in excess of its initial reserve for losses of $33,000. This excess
amount was charged against the estimated loss on the sale reserve, which reduced
that reserve to $213,000.

The sale of the segment did not result in an income tax liability. Accordingly,
the Company did not make a provision for income tax.

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 of October 31, 1999, in addition to its main location, the
Company operated 47 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 the non-Company
owned establishments. Additionally, the Wagering segment consists of Mega$ports
(ACT) Australia operations, the Company's international wagering hub for
Internet sports wagering and Mega$ports, Inc., a Nevada Corporation,
("Mega$ports (US)") which offers a pari-mutuel sports wagering system in the
state of Nevada.


<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 designs,  sells, installs and maintains equipment,  software
and computer  systems to the sports  betting and hotel  industries.  The Systems
segment includes CBS, Hotel Systems, Inc. and Sports Systems, Inc.

The Keno segment develops, sells, operates and services stand alone linked
progressive keno games using state-of-the-art graphical interfaces. Keno began
operations in August 1999 and is currently operating in two casinos.

The Corporate segment includes the Company's internal management services.

The following summarizes the segment information for the Company:

<TABLE>
<CAPTION>
                 Three Months
                    Ended
                October 31,     Wagering     Casino      Systems       Keno       Corporate       Total
                 -----------   ----------   --------    ----------   ---------    ----------   -----------
<S>                  <C>       <C>          <C>         <C>          <C>          <C>          <C>
  Revenues           1999      $2,253,445   $199,230    $1,424,668   $   6,645    $      ---  $ 3,883,988
                     1998       1,481,791    157,535       994,007         ---           ---    2,633,333

  Research and       1999             ---        ---       277,776         ---           ---      277,776
  Development        1998             ---        ---       148,072         ---           ---      148,072

  Operating          1999         355,878      9,722       232,320    (291,560)     (526,525)    (220,205)
  Income (Loss)*     1998         112,437     28,723       (69,255)   (137,127)     (421,891)    (487,113)

  Capital            1999         141,213        ---        23,805          30        20,682      185,730
  Expenditures       1998          24,625        ---        93,443     230,879        30,679      379,626

  Depreciation and   1999          84,060      5,214        97,636      14,113        17,101      218,124
  Amortization       1998          85,063      5,624       111,439         ---        17,397      219,523

  Identifiable       1999       3,942,672     35,720     4,288,246    (497,660)    2,859,315   10,628,293
  Assets January 31, 1999       4,052,879    301,738     5,343,561     317,067       676,330   10,691,575

                  Nine Months
                     Ended
                 October 31,     Wagering     Casino      Systems       Keno       Corporate       Total
                  -----------   ----------   --------    ----------   ---------    ----------   -----------
  Revenues            1999      $4,777,523   $566,964    $3,800,240   $   6,645    $      ---  $ 9,150,595
                      1998       3,606,610    458,170     2,537,334         ---           ---    6,602,114

  Research and        1999             591        ---       620,427         ---           ---      621,018
  Development         1998             ---        ---       426,732         ---           ---      426,732

  Operating           1999         177,125    134,815       631,374    (454,062)   (1,380,551)    (891,299)
  Income (Loss)*      1998         170,663     78,561      (178,552)   (137,127)   (1,324,215)  (1,390,670)

  Capital             1999         340,627      8,655         7,740      42,449        10,178      409,649
  Expenditures        1998         120,653       ---        106,895     230,879        83,099      541,526

  Depreciation and    1999         247,615      8,856       299,875      14,113        43,113      613,575
  Amortization        1998         237,190     16,873       255,332         ---        41,685      551,080

  Identifiable        1999       3,942,672     35,720     4,288,246    (497,660)    2,859.315   10,628,293
  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.


<PAGE>

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

Results of Operations

Fiscal Quarter ended October 31, 1999 compared to the Fiscal Quarter ended
October 31, 1998

         Revenues for the Fiscal Quarter ended October 31, 1999 ("Third Quarter
of Fiscal 2000") were $3,884,000, an increase of $1,251,000 or 47.5% from
revenues of $2,639,000 for the Fiscal Quarter ended October 31, 1998 ("Third
Quarter of Fiscal 1999"). The increase was attributed to an increase in Wagering
revenues of $771,000, Systems revenues of $431,000, Casino revenues of $41,000
and Keno revenue of $7,000. Operating loss of $261,000 for the Third Quarter of
Fiscal 2000, varied favorably by $416,000 or 61.4% from an operating loss of
$677,000 for the Third Quarter of Fiscal 1999. The favorable variance was
principally attributed to additional Wagering, Systems and Casino revenues in
addition to a decrease in corporate expenses. Offsetting the improvement in
operating loss between fiscal quarters were operating losses at our new Wagering
entities of $209,000 for Mega$ports (US), which became a wholly owned subsidiary
during the First Quarter of Fiscal 2000 and $173,000 for Mega$ports(ACT), which
began operations in January 1999 and $292,000 for AWI Keno, Inc. which began
operations in August 1999.

Wagering Operations

         Revenues from Wagering operations were $2,253,000 for the Third Quarter
of Fiscal 2000, an increase of $771,000 or 52.0% from revenues of $1,482,000 for
the Third Quarter of Fiscal 1999. The increase was principally due to an
increase in net win percentage (revenues divided by handle). Wagering revenues
derived from U.S. operations increased by $871,000 between such fiscal quarters.
The increase is attributed to an increase in U.S. net win percentage of 80.0%
between such fiscal quarters. Handle from U.S. operations of $28,970,000 for the
Third Quarter of Fiscal 2000 decreased by $3,338,000 from Handle of $32,308,000
for the Third Quarter of Fiscal 1999. The decrease in Handle was due to a
decreased level of wagering at our current sports book locations compared to the
prior fiscal quarter's sports book locations. An increase or decrease in handle
is not necessarily indicative of an increase or decrease in revenues or profits.
The net win percentage from U.S. operations was 8.1% for the Third Quarter of
Fiscal 2000 compared to 4.5% for the Third Quarter of Fiscal 1999. The increase
in U.S. wagering revenue was offset by Mega$ports (ACT) revenues which
experienced paid outs greater than the Handle for the Third Quarter of Fiscal
2000. Operating costs from all Wagering operations of $1,898,000 for the Third
Quarter of Fiscal 2000 increased by $529,000 or 38.6% from operating costs of
$1,369,000 for the Third Quarter of Fiscal 1999. The increase in operating costs
is principally attributed to the addition of Mega$ports(ACT) which began
operations in January, 1999 and Mega$ports (US), which became a wholly owned
subsidiary during the First Quarter of Fiscal 2000. These operations experienced
operating losses during the Third Quarter of Fiscal 2000.


Casino Operations

         Revenues from Casino operations were $199,000 for the Third Quarter of
Fiscal 2000, an increase of $41,000 or 25.9% from revenues of $158,000 for the
Third Quarter of Fiscal 1999. The increase was principally attributed to
increased slot play. Operating costs were $190,000, an increase of $61,000 or
47.2% increase from costs of $129,000 for the Third Quarter of Fiscal 1999
mainly due to certain previously shared costs with the Hotel operations which
are now partially incurred by the Casino. (See Note 3).


<PAGE>


Systems Operations

         Revenues from Systems operations were $1,425,000 for the Third Quarter
of Fiscal 2000, an increase of $431,000 or 43.4% from revenues of $994,000 for
the Third Quarter of Fiscal 1999. CBS operations revenues of $1,367,000 for the
Third Quarter of Fiscal 2000 increased by $542,000 or 65.6% from revenues of
$825,000 for the Third Quarter of Fiscal 1999. The increase was attributed to
increased equipment and ticket paper sales. Sports Systems and Hotel Systems,
which began operations in October 1998 and are partly owned, generated revenues
of $58,000 for the Third Quarter of Fiscal 2000 primarily from monthly
maintenance billings. Operating costs for all Systems operations of $1,192,000
for the Third Quarter of Fiscal 2000 increased by $129,000 or 12.1% from
operating costs of $1,063,000 for the Third Quarter of Fiscal 1999. The increase
in operating costs is principally due to cost of sales associated with the
increase in CBS system sales.

Keno Operations

         Keno was formed in June 1998 and began operations in August 1999.
During the Third Quarter of Fiscal 2000, Keno generated revenue from commissions
of $6,600 and incurred costs of $298,000 including labor and fringes, marketing,
professional services, travel and legal expenses.

Direct Costs

         Direct costs of $2,701,000 for the Third Quarter of Fiscal 2000
increased by $821,000 or 43.7% from direct costs of $1,880,000 for the Third
Quarter of Fiscal 1999. The increase is due principally to equipment costs
associated with the increase in CBS system sales and the start up of operations
which commenced during the year.

Research and Development Costs

         Research and development costs of $278,000 for the Third Quarter of
Fiscal 2000 increased by $130,000 or 87.8% from research and development costs
of $148,000 for the Third Quarter of Fiscal 1999 due principally to increased
labor costs associated with new product development.

Selling, General and Administrative Costs

         Selling, general and administrative costs of $907,000 for the Third
Quarter of Fiscal 2000 increased by $34,000 or 3.9% from selling, general and
administrative costs of $873,000 for the Third Quarter of Fiscal 1999.

Depreciation and Amortization

         Depreciation and amortization was $218,000 for the Third Quarter of
Fiscal 2000, a decrease of $2,000 or 0.9% from depreciation and amortization of
$220,000 for the Third Quarter of Fiscal 1999.


<PAGE>


Other Income and Expense

         Other expense of $38,700 for Third Quarter of Fiscal 2000, decreased by
$116,000 principally due to losses due to the exchange rate fluctuation of the
Australian dollar.

Interest Expense

         Interest Expense of $39,000 for Third Quarter of Fiscal 2000 decreased
by $40,000 or 50.6% from interest expense of $79,000 in the Third Quarter of
Fiscal 1999. The decrease is principally due to the interest paid in connection
with the shareholder notes during the Third Quarter of Fiscal 1999. These
shareholder notes were converted to preferred stock in the Fourth Quarter of
Fiscal 1998.

Equity in Loss from Joint Venture

         On February 1, 1999, the Mega$ports joint venture agreement terminated
(See Note 2). In the Company's accompanying consolidated financial statements
for and as of the Three and Nine Months ended October 31, 1999, the results of
Mega$ports, Inc. operations have been accounted for as a wholly owned
subsidiary.

Net Loss from Continuing Operations

         The net loss from continuing operations of $261,000 for Third Quarter
of Fiscal 2000, varied favorably by $416,000 or 61.4% from $677,000 in the Third
Quarter of Fiscal 1999. The favorable variance between fiscal quarters was
principally due to the increased net win percentage on wagering operations and
an increase in wagering equipment sales by the Systems operations.

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. On June 30, 1999, the Company finalized the sale of these operations and
has entered into a lease with the new owner to continue to operate the casino
for up to two years. The casino serves as the Company's principal gaming
location. In the Company's accompanying consolidated financial statements for
and as of the Three and Nine Months ended October 31, 1999 and 1998, the results
of the hotel, food and beverage have been accounted for as discontinued
operations and the sale was recognized in Second Quarter of Fiscal 1999.

        The Company recorded a reserve during fiscal year ended January 31, 1998
for the estimated losses on the disposal of this segment, which was comprised of
an estimated loss on the sale of the hotel of $246,000 and a provision for
anticipated losses during the phase out period of $616,000.

         During the three months ended July 31, 1999, the Company realized a
gain of $341,000 from the sale of this segment. Additionally, the Company no
longer required the initial estimated loss from discontinued operations of
$246,000. The Company incurred losses from operations in excess of its initial
reserve for losses of $33,000. This excess amount was charged against the
estimated loss on the sale reserve, which reduced that reserve to $213,000.

         The sale of the segment did not result in an income tax liability.
Accordingly, the Company did not make a provision for income tax.


<PAGE>


Nine Months ended October 31, 1999 compared to the Nine Months ended October 31,
1998



Wagering Operations

         Revenues from Wagering operations were $4,778,000 for the Nine Months
ended October 31, 1999, an increase of $1,171,000 or 32.5% from revenues of
$3,607,000 for the Nine Months ended October 31, 1998. Revenues from U.S.
operations were $5,126,000 for the Nine Months ended October 31, 1999, an
increase of $1,519,000 or 42.1% from revenues of $3,607,000 for the Nine Months
ended October 31, 1998. The increase is attributed to an increase U.S. net win
percentage (revenues divided by handle) of 37.5% between fiscal years. Handle
from U.S. operations of $72,899,000 for the Nine Months ended October 31, 1999
decreased by $285,000 from Handle of $73,184,000 for the Nine Months ended
October 31, 1998. An increase or decrease in Handle is not necessarily
indicative of an increase or decrease in revenues or profits. The net win
percentage from U.S. operations was 6.6% for the Nine Months ended October 31,
1999 compared to 4.8% for the Nine Months ended October 31, 1998. Increased
revenues were offset by Mega$ports (ACT) which incurred wagering losses of
$348,000 for the Nine Months ended October 31, 1999. Operating costs from all
Wagering operations of $4,600,000 for the Nine Months ended October 31, 1999
increased by $1,164,000 or 33.9% from operating costs of $3,436,000 for the Nine
Months ended October 31, 1998. The increase in operating costs is principally
attributed to the addition of Mega$ports (ACT) which began operations in January
1999 and Mega$ports (US), which became a wholly owned subsidiary during the
First Quarter of Fiscal 2000. Offsetting the improvement in operating loss
between fiscal years were operating losses at our new Wagering entities of
$519,000 for Mega$ports (US), which became a wholly owned subsidiary during the
First Quarter of Fiscal 2000 and $613,000 for Mega$ports(ACT), which began
operations in January 1999 and $454,000 for AWI Keno, Inc. which began
operations in August 1999.


Casino Operations

         Revenues from Casino operations were $567,000 for the Nine Months ended
October 31, 1999, an increase of $109,000 or 23.8% from revenues of $458,000 for
the Nine Months ended October 31, 1998. The increase was principally attributed
to increased slot play. Operating costs were 431,000, an increase of $51,000 or
13.4% from costs of $380,000 for the Third Quarter of Fiscal 1999 mainly due to
certain previously shared costs with the Hotel operations which are now
partially incurred by the casino. (See Note 3).


Systems Operations

         Revenues from Systems operations were $3,800,000 for the Nine Months
ended October 31, 1999, an increase of $1,263,000 or 49.8% from revenues of
$2,537,000 for the Nine Months ended October 31, 1998. CBS operations revenues
of $3,600,000 for the Nine Months ended October 31, 1999 increased by $1,232,000
or 52.0% from revenues of 2,368,000 for the Nine Months ended October 31, 1998.
The increase was attributed to increased equipment sales due to new casino
openings. Sports Systems and Hotel Systems, which began operations in October
1998 and are partly owned, generated revenues of $201,000 for the Nine Months
ended October 31, 1999 primarily from recurring maintenance billings. Operating
costs for all Systems operations of $3,169,000 for the Nine Months ended October
31, 1999 increased by $453,000 or 16.7% from operating costs of $2,716,000 for
the Nine Months ended October 31, 1998. The increase in operating costs is
principally due to equipment costs associated with the increase in CBS system
sales.


<PAGE>

Keno Operations

         Keno was formed in June 1998 and began operations in August 1999.
During the Nine Months ended October 31, 1999, Keno incurred costs of $447,000
including labor and fringes, marketing, professional services, travel and legal
expenses.

Direct Costs

         Direct costs of $6,505,000 for the Nine Months ended October 31, 1999
increased by $1,990,000 or 44.1% from direct costs of $4,515,000 for the Nine
Months ended October 31, 1998. The increase is due principally to equipment
costs associated with the increase in CBS system sales and the expenses
associated with the new companies, which were not operating during the prior
fiscal quarter.

Research and Development Costs

         Research and development costs of $621,000 for the Nine Months ended
October 31, 1999 increased by $194,000 or 45.4% from research and development
costs of $427,000 for the Nine Months ended October 31, 1998 due principally to
increased labor costs associated with new product development.

Selling, General and Administrative Costs

         Selling, general and administrative costs of $2,303,000 for the Nine
Months ended October 31, 1999 decreased by $197,000 or 7.9% from selling,
general and administrative costs of $2,500,000 for the Nine Months ended October
31, 1998. The decrease is due principally to a reduction in legal expenses
associated with the Company's litigation and licensing offset by an increase in
expenses associated with new companies.

Depreciation and Amortization

         Depreciation and amortization was $614,000 for the Nine Months ended
October 31, 1999, an increase of $63,000 or 11.4% from depreciation and
amortization of $551,000 for the Nine Months ended October 31, 1998.
Amortization expense increased by $28,000 due to the acquisition of intangible
assets of ACS. An increase in depreciation expense of $35,000 is associated with
the assets of our new companies.

Interest Income

         Interest income of $24,000 for Nine Months ended October 31, 1999,
decreased by $96,000 or 80.0% from interest income of $120,000 for the Nine
Months ended October 31, 1998. The reduction is principally due to a decrease in
income derived from short-term investments.


<PAGE>


Interest Expense

         Interest Expense of $119,000 for Nine Months ended October 31, 1999
decreased by $144,000 or 54.8% from interest expense of $263,000 in the Nine
Months ended October 31, 1998. The decrease is principally due to the interest
paid in connection with the shareholder notes during the Nine Months ended
October 31, 1998.

Equity in Loss from Investment in Joint Venture

         The equity in loss from Mega$ports (US) joint venture was $394,000 for
the Nine Months ended October 31, 1998. On February 1, 1999 Mega$ports joint
venture terminated. In the Company's accompanying consolidated financial
statements for and as of the Three and Nine Months ended October 31, 1999, the
results of Mega$ports, Inc. operations have been accounted for as a wholly owned
subsidiary.

Net Loss from Continuing Operations

         The net loss from continuing operations of $996,000 for Nine Months
ended October 31, 1999, varied favorably by $703,000 or 41.4% from $1,699,000 in
the Nine Months ended October 31, 1998.

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. On June 30, 1999, the Company finalized the sale of these operations and
has entered into a lease with the new owner to continue to operate the casino
for up to two years. The casino serves as the Company's principal gaming
location. In the Company's accompanying consolidated financial statements for
and as of the Three and Nine Months ended October 31, 1999 and 1998, the results
of the hotel, food and beverage operations have been accounted for as
discontinued operations.

         The Company recorded a reserve during fiscal year ended January 31,
1998 for the estimated losses on the disposal of this segment, which was
comprised of an estimated loss on the sale of the hotel of $246,000 and a
provision for anticipated losses during the phase out period of $616,000.

         During the three months ended July 31, 1999, the Company realized a
gain of $341,000 from the sale of this segment. Additionally, the Company no
longer required the initial estimated loss from discontinued operations of
$246,000. The Company incurred losses from operations in excess of its initial
reserve for losses of $33,000. This excess amount was charged against the
estimated loss on the sale reserve, which reduced that reserve to $213,000.

         The sale of the segment did not result in an income tax liability.
Accordingly, the Company did not make a provision for income tax.

Liquidity and Capital Resources

         As of October 31, 1999, working capital was $189,000. Cash used in
operating activities was $739,000 for the Nine Months ended October 31, 1999
compared to cash used in operating activities of $1,558,000 for the Nine Months
ended October 31, 1998. Net cash provided by investing activities was $3,710,000


<PAGE>


for the Nine Months ended October 31, 1999 compared to cash provided by
investing activities of $2,985,000 for the Nine Months ended October 31, 1998.
This increase is principally due to the proceeds generated from the sale of
assets of the Hotel, Food and Beverage operations offset by a decrease in income
derived from short-term investments. Net cash used in financing activities was
$2,800,000 for the Nine Months ended October 31, 1999 compared to net cash used
in financing activities of $1,459,000 for the Nine Months ended October 31,
1998. This increase is principally due to the repayment of long-term debt during
the Nine Months ended October 31, 1999 associated with the sale of the Hotel,
Food and Beverage operations.

         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. Management believes that the
future profitability is based on the ability to continue to improve the
profitability of Megasport (US), Megasports (ACT) and Keno. The Company is
currently evaluating its alternatives in seeking additional equity or debt
funding. There is no assurance that the Company can complete such equity or debt
funding or do so on terms satisfactory to the Company.

         The Company has expanded its sports wagering activities to the
international Internet market. The Company 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. On October 18, 1999 the Commission issued its report. It contained a
number of recommendations including the prohibition of Internet wagering. It is
not possible to predict the future impact of the Commission on the Company and
its operations as there could be 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


<PAGE>


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
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. All systems maintained by
the Systems segment are 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 completed installations of
customer upgrades to address the compliance of its computer products and
software. 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 developed a comprehensive contingency plan
for its internal administration systems because 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


<PAGE>


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).


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.

             On June 30, 1999, pursuant to the sale of the hotel, food and
             beverage segment, the Company entered into a settlement agreement
             with James A. Rissler and Patricia R. Rissler ("Landlord"). As
             consideration, AWI agreed to dismiss its' Appeal of the Civil
             Action entered into as of March 17, 1998 filed in the Nevada
             Supreme Court. AWI also agreed to pay the Landlord $135,680, which
             included certain rents due under the lease which were in dispute
             and license fees, interest and attorneys fees incurred by the
             Landlord. The payment of the sums pursuant to the Agreement was not
             considered an admission of liability by AWI for the Lease Claims
             asserted against them in the Civil Action. The Landlord agreed to
             fully release and discharge AWI of any litigation or action or
             claim against them. In addition, the Landlord waived its rights of
             first refusal contained in the lease and fully released AWI from
             any and all obligations as tenant under the lease. Of the amount
             paid by AWI, $52,000 had been accrued as of April 30, 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 -

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


<PAGE>


                  (b)The following report on form 8-K was filed during the
quarter ended October 31, 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:      December 14, 1999       By: /s/ Robert D. Ciunci
                                                 ------------------------------
                                                   Robert D. Ciunci
                                                   Executive Vice President and
                                                   Chief Financial Officer