---

---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

---

FORM 10-Q

(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, 2001

or

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

FOR THE TRANSITION PERIOD FROM  TO

COMMISSION FILE NUMBER 000-23401

---

GAMETECH INTERNATIONAL, INC.(Exact name of registrant as specified in its charter)

DELAWARE(State of other jurisdiction
of incorporation or organization)

33-0612983(I.R.S. Employer Identification No.)


900 SANDHILL ROAD, RENO, NEVADA
89511(Address of principal executive offices)
(Zip code)

Registrant's
telephone number, including area code: (775) 850-6100

---

Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes /x/  No / /

On
June 4, 2001, the registrant had 12,378,723 outstanding shares of its Common Stock, par value $.001 per share.

---

---

---



GAMETECH INTERNATIONAL, INC.    INDEX

|                               |                                                                                               | Page No.                                            
|------------------------------ | --------------------------------------------------------------------------------------------- | ----------------------------------------------------
|Part I. Financial Information: |                                                                                               |                                                     
|                               | Item 1. Financial Statements (Unaudited)                                                      |                                                     
|                               |                                                                                               | Condensed Consolidated Balance Sheets               
|                               |                                                                                               |                                                     
|                               |                                                                                               | Condensed Consolidated Statements of Income         
|                               |                                                                                               |                                                     
|                               |                                                                                               |                                                     
|                               |                                                                                               | Condensed Consolidated Statements of Cash Flows     
|                               |                                                                                               |                                                     
|                               |                                                                                               | Notes to Condensed Consolidated Financial Statements
|                               | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations |                                                     
|                               | Item 3. Quantitative and Qualitative Disclosures about Market Risk                            |                                                     
|Part II. Other Information     |                                                                                               |                                                     
|                               | Item 1. Legal Proceedings                                                                     |                                                     
|                               | Item 2. Changes in Securities and Use of Proceeds                                             |                                                     
|                               | Item 6. Exhibits and Reports on Form 8-K                                                      |                                                     
|Signatures                     |                                                                                               | 13                                                  

2

---



PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GAMETECH INTERNATIONAL, INC.    CONDENSED CONSOLIDATED BALANCE SHEETS    (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

|                                           |                                                                                                                           | April 30,
2001 |        | October 31,
2000 |  
|------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------- | -------------- | ------ | ---------------- | -
|
|ASSETS:                                    |                                                                                                                           |                |        |                  |  
|Current assets:                            |                                                                                                                           |                |        |                  |  
|                                           | Cash and equivalents                                                                                                      |                | $      | 5,621            |  
|                                           | Short-term investments                                                                                                    |                |        | 2,568            |  
|                                           | Accounts receivable, net                                                                                                  |                |        | 5,165            |  
|                                           | Deferred and prepaid income taxes                                                                                         |                |        | 2,501            |  
|                                           | Other current assets                                                                                                      |                |        | 1,061            |  
|                                           |                                                                                                                           |                |        |                  |  
|Total current assets                       |                                                                                                                           |                | 16,916 |                  |  
|Bingo units, furniture and equipment, net  |                                                                                                                           |                | 22,280 |                  |  
|Intangible and other assets, net           |                                                                                                                           |                | 18,082 |                  |  
|                                           |                                                                                                                           |                |        |                  |  
|Total assets                               |                                                                                                                           | $              | 57,278 |                  | $
|                                           |                                                                                                                           |                |        |                  |  
|LIABILITIES AND STOCKHOLDERS' EQUITY:      |                                                                                                                           |                |        |                  |  
|Current liabilities:                       |                                                                                                                           |                |        |                  |  
|                                           | Accounts payable                                                                                                          |                | $      | 639              |  
|                                           | Other current liabilities                                                                                                 |                |        | 2,970            |  
|                                           | Current portion of long-term debt                                                                                         |                |        | 1,059            |  
|                                           |                                                                                                                           |                |        |                  |  
|Total current liabilities                  |                                                                                                                           |                | 4,668  |                  |  
|Long-term debt                             |                                                                                                                           |                | 1,853  |                  |  
|Deferred income taxes                      |                                                                                                                           |                | 536    |                  |  
|Commitments and contingencies              |                                                                                                                           |                |        |                  |  
|Stockholders' equity:                      |                                                                                                                           |                |        |                  |  
|                                           | Common stock, $.001 par value: 40,000,000 shares authorized; 12,371,223 shares issued and outstanding in 2001 and in 2000 |                |        | 12               |  
|                                           | Capital in excess of par value                                                                                            |                |        | 43,541           |  
|                                           | Retained earnings                                                                                                         |                |        | 14,764           |  
|                                           | Less: treasury stock, 1,855,325 shares in 2001 and 1,840,725 shares in 2000, at cost                                      |                |        | (8,096           | )
|                                           |                                                                                                                           |                |        |                  |  
|Total stockholders' equity                 |                                                                                                                           |                | 50,221 |                  |  
|                                           |                                                                                                                           |                |        |                  |  
|Total liabilities and stockholders' equity |                                                                                                                           | $              | 57,278 |                  | $
|                                           |                                                                                                                           |                |        |                  |  

See
notes to financial statements.

3

---



GAMETECH INTERNATIONAL, INC.    CONDENSED CONSOLIDATED STATEMENTS OF INCOME    THREE MONTHS AND SIX MONTHS ENDED APRIL 30, 2001 AND 2000  (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

|                                                        |                            | Three Months Ended
April 30, |        | Six Months Ended
April 30,
|------------------------------------------------------- | -------------------------- | ---------------------------- | ------ | --------------------------
|
|
|Revenues                                                |                            | $                            | 12,813 |                           
|Operating expenses:                                     |                            |                              |        |                           
|                                                        | Cost of revenue            |                              |        | 4,098                     
|                                                        | General and administrative |                              |        | 2,810                     
|                                                        | Sales and marketing        |                              |        | 3,489                     
|                                                        | Research and development   |                              |        | 456                       
|                                                        |                            |                              |        |                           
|                                                        |                            |                              | 10,853 |                           
|                                                        |                            |                              |        |                           
|Income from operations                                  |                            |                              | 1,960  |                           
|Interest income and other, net                          |                            |                              | 31     |                           
|                                                        |                            |                              |        |                           
|Income before income tax provision                      |                            |                              | 1,991  |                           
|Income tax provision                                    |                            |                              | 961    |                           
|                                                        |                            |                              |        |                           
|Net income                                              |                            | $                            | 1,030  |                           
|                                                        |                            |                              |        |                           
|Basic net income per share                              |                            | $                            | 0.10   |                           
|                                                        |                            |                              |        |                           
|Diluted net income per share                            |                            | $                            | 0.09   |                           
|                                                        |                            |                              |        |                           
|Shares used in the calculation of net income per share: |                            |                              |        |                           
|                                                        | Basic                      |                              |        | 10,515,898                
|                                                        |                            |                              |        |                           
|                                                        | Diluted                    |                              |        | 11,181,804                
|                                                        |                            |                              |        |                           

See
notes to financial statements.

4

---



GAMETECH INTERNATIONAL, INC.    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS    FOR THE SIX MONTHS ENDED APRIL 30, 2001 AND 2000  (DOLLARS IN THOUSANDS)

|                                                                                  |                                              | 2001                      |        | 2000  |     
|--------------------------------------------------------------------------------- | -------------------------------------------- | ------------------------- | ------ | ----- | ----
|
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |                                              |                           |        |       |     
|Net income                                                                        |                                              | $                         | 245    |       | $   
|Adjustments to reconcile net income to net cash provided by operating activities: |                                              |                           |        |       |     
|                                                                                  | Depreciation, amortization and obsolescence  |                           |        | 5,591 |     
|                                                                                  | Changes in operating assets and liabilities: |                           |        |       |     
|                                                                                  |                                              | Accounts receivable, net  |        |       | (326
|                                                                                  |                                              | Other current assets      |        |       | 404 
|                                                                                  |                                              | Accounts payable          |        |       | (834
|                                                                                  |                                              | Other accrued liabilities |        |       | (454
|                                                                                  |                                              |                           |        |       |     
|Net cash provided by operating activities                                         |                                              |                           | 4,626  |       |     
|CASH FLOWS FROM INVESTING ACTIVITIES:                                             |                                              |                           |        |       |     
|Decrease in short-term investments                                                |                                              |                           | 1,193  |       |     
|Capital expenditures for bingo units, furniture and equipment                     |                                              |                           | (3,324 | )     |     
|Payment on restructuring of distributor agreement                                 |                                              |                           |       |       |     
|Capitalized software development costs                                            |                                              |                           |       |       |     
|                                                                                  |                                              |                           |        |       |     
|Net cash (used in) provided by investing activities                               |                                              |                           | (2,131 | )     |     
|CASH FLOWS FROM FINANCING ACTIVITIES:                                             |                                              |                           |        |       |     
|Proceeds from short-term borrowings from bank                                     |                                              |                           | 2,327  |       |     
|Payments on short-term borrowings from bank                                       |                                              |                           | (2,327 | )     |     
|Payments on long-term debt                                                        |                                              |                           | (779   | )     |     
|Payments for buy out of distributorship agreement                                 |                                              |                           | (170   | )     |     
|Proceeds from exercise of stock options                                           |                                              |                           |       |       |     
|Payments for repurchase of common stock for treasury                              |                                              |                           | (54    | )     |     
|                                                                                  |                                              |                           |        |       |     
|Net cash used in financing activities                                             |                                              |                           | (1,003 | )     |     
|                                                                                  |                                              |                           |        |       |     
|Net increase in cash and equivalents                                              |                                              |                           | 1,492  |       |     
|Cash and equivalents at beginning of period                                       |                                              |                           | 4,129  |       |     
|                                                                                  |                                              |                           |        |       |     
|Cash and equivalents at end of period                                             |                                              | $                         | 5,621  |       | $   
|                                                                                  |                                              |                           |        |       |     

See
notes to financial statements.

5

---



GAMETECH INTERNATIONAL, INC.    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS    APRIL 30, 2001  (UNAUDITED)

1.  NOTES TO FINANCIAL STATEMENTS

NOTE A. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements as of April 30, 2001 have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. Operating results for the three- and six-month periods ended April 30, 2001 are not necessarily indicative
of the results that may be expected for the year ending October 31, 2001.

The
balance sheet at October 31, 2000 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.

For
further information, refer to the financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended
October 31, 2000.

NOTE B. NET INCOME PER SHARE OF COMMON STOCK

Net income per share of common stock is computed in accordance with Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings per Share." The
calculation of the basic and diluted earnings per share is the same except for the dilutive effect of outstanding stock options. The dilution is 665,906 shares and 1,002,037 shares for the three
months ended April 30, 2001 and 2000, respectively. The dilution is 530,907 shares and 900,463 shares for the six months ended April 30, 2001 and 2000, respectively.

NOTE C. COMMITMENTS AND CONTINGENCIES

LITIGATION

The Company is involved in various legal proceedings arising out of its operations in the ordinary course of its business. The Company does not believe that
any of these proceedings will have a material adverse effect on its business, financial condition, or results of operations. However, an unfavorable outcome could have a material adverse effect on the
Company's business financial condition and results of operations.

See
Item 1, Legal Proceedings, of Part II, Other Information.

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

The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere in this
Form 10-Q.

6

---

OVERVIEW

GameTech installs electronic bingo systems in bingo halls, typically under revenue sharing agreements or at fixed rates per bingo session. The Company
recognizes revenue as its bingo units are utilized by players and operators. Revenue growth is affected by player acceptance of electronic bingo as an alternative to paper bingo and the Company's
ability to expand operations in existing markets and into new markets. Fixed-base bingo units generate greater revenue per unit than hand-held bingo units, but also require
greater initial capital investment.

The
Company typically installs its electronic bingo systems at no charge to its customers and capitalizes the costs. During the six-month periods ended April 30,
2001 and 2000, the Company's capital expenditures were approximately $3.3 million and $3.8 million, respectively, almost all of which represented investments in bingo equipment. The
Company's cost of revenues consists primarily of the expenses of providing customer service, including labor, service-related overhead, and depreciation of the bingo systems installed in customer
locations. The Company records depreciation of bingo equipment over a five-year estimated useful life using the straight-line method of depreciation.

RESULTS OF OPERATIONS

Three Months Ended April 30, 2001 Compared to Three Months Ended April 30, 2000

Revenues.Revenues increased $230,000, or 1.8%, to $12.8 million for the three months ended April 30,
2001 compared to $12.6 million during the comparable prior year period. This increase was the result of additional unit placements and increased revenues, primarily in existing markets,
including Alaska, Arizona, California, Colorado, Florida, Illinois, Kentucky, Nebraska, Nevada, New York, Ohio, Oregon, Oklahoma, Pennsylvania, and South Carolina. However, revenues per unit generated
by these additional units were lower in some cases due to fewer bingo sessions played per week and competitive pricing pressures. The second quarter of fiscal 2001 experienced a continuing impact of
competitive pricing pressures. Approximately 1,600 bingo units were removed in the Texas market during the second quarter of fiscal 2000 as a result of canceling a distributor contract with a former
distributor. Revenues declined approximately $190,000 in the Washington market on a comparable quarter comparison due to the legislation and expansion of casino-style gaming.

Cost of Revenues.Cost of revenues increased $364,000, or 9.7%, to $4.1 million for the three months ended
April 30, 2001 from $3.7 million for the three months ended April 30, 2000.  Cost of revenue as a percent of revenue for the current year quarter was 32% compared
to 29.7% for the second quarter of
fiscal 2000. The increase in cost of revenues was primarily due to the following: (1) bingo unit depreciation and amortization expenses increased approximately $170,000 primarily due to an
increase in the number of bingo units installed, and the Company's revised estimate of useful life for uninstalled units which began in the first quarter of fiscal 2001; and (2) the inventory
valuation provision increased approximately $330,000 compared to the prior year as a result of increased bingo unit upgrades and refurbishment expenses; offset by (3) a reduction in operational
and service costs of approximately $140,000. As a percentage of revenues, depreciation increased to 11.3% from 10.2% while service and operations decreased to 16.5% from 17.9%.

General and Administrative.General and administrative expenses increased $871,000 for the three months ended
April 30, 2001 to $2.8 million compared to $1.9 million during the comparable prior year period. The increase was primarily attributable to the following: (1) an increase
of approximately $373,000 in the reserve for doubtful accounts; (2) an increase in professional fees, insurance, and compliance of approximately $170,000 principally related to the Company's
entry into foreign markets; and (3) administrative, finance, and personnel increases of approximately $125,000 during the three months ended April 30, 2001. As a percentage of revenues,
general and administrative expenses increased to 21.9% from 15.4% in the comparable prior year period.

7

---

Sales and Marketing.Sales, marketing, and commissions expenses increased $379,000, or 12%, to $3.5 million for
the three months ended April 30, 2001 from $3.1 million for the three months ended April 30, 2000. This growth was primarily due to an increase in personnel costs as a result of a
redefined incentive commission plan and additional personnel. As a percentage of revenues for the three months ended April 30, 2001, sales, marketing, and commissions expenses increased to
27.2% from 24.7% in the comparable prior year period.

Research and Development.Research and development expenses were $456,000 for the three months ended April 30,
2001 compared to $446,000 for the three months ended April 30, 2000, an increase of 2.2%. These costs related to new products and product enhancements. As a percentage of revenues, research and
development costs were 3.6% in the current period compared to 3.5% in the prior year period.

Provision for Income Taxes.The Company's effective income tax rate was approximately 48.3% and 43.9% for the quarters
ended April 30, 2001 and 2000, respectively. The increase related to the effect of nondeductible expenses on the lower level of pre-tax income.

Six Months Ended April 30, 2001 Compared to Six Months Ended April 30, 2000

Revenues.Revenues were $24.8 million for the six months ended April 30, 2001 compared to
$25.8 million for the six months ended April 30, 2000, a decrease of $1.0 million. The decrease was primarily a result of a removal of approximately 1,600 bingo units in Texas due
to cancelation of a distributor contract during the second quarter of fiscal 2000, as well as competitive pressures. This was offset by placement of additional bingo units and increased revenues,
primarily in existing markets, including Alaska, Arizona, California, Colorado, Florida, Illinois, Nebraska, Nevada, New York, Ohio, Oregon, Pennsylvania, and South Carolina. However, revenues per
unit generated by these additional units in some cases were lower due to fewer bingo sessions played per week and competitive pricing pressures. Additionally, revenues declined in the Washington
market by approximately $498,000 from the comparable six months due to legislation and expansion of casino-style gaming.

Cost of Revenues.Cost of revenues increased approximately $2.1 million to $9.4 million for the six
months ended April 30, 2001 from $7.3 million for the six months ended April 30, 2000. Cost of revenue as a percent of revenue for the current six-month period was
37.8% compared to 28.4% for the six months ended April 30, 2000. The increase in cost of revenues was primarily related to (1) an increase in bingo unit depreciation and amortization
expense of $440,000, due principally to an increase in the number of bingo units installed and the Company revising its estimate of useful life for uninstalled units beginning in the first quarter of
fiscal 2001; and (2) the inventory reserve provision increased approximately $2.0 million compared to the comparable period, primarily as a result of inventory valuation adjustments of
approximately $1.7 million incurred in the first quarter of fiscal 2001, and increased inventory refurbishment expenses during the period. As a percentage of revenues, depreciation increased to
11.9% from 9.9%, while service and operation costs decreased to 16.5% from 17.2%.

General and Administrative.General and administrative costs increased $2.4 million to $6.6 million for
the six months ended April 30, 2001, or from 16.4% to 26.7% of revenue compared to the comparable prior year period. The increase was primarily attributable to (1) an increase in
reserves for doubtful accounts of approximately $1.3 million, including adjustments of approximately $650,000 for settlement of disputed customer accounts; (2) an increase in
professional fees, including legal, consulting, and finance and accounting, of approximately $500,000 and; (3) approximately $530,000 related to personnel costs, facilities, travel, and general
corporate expenses.

Sales and Marketing.Sales, marketing, and commission costs increased approximately $890,000 to $7.5 million for
the six months ended April 30, 2001 compared to the comparable prior year period, or

8

---

from 25.6% to 30% of revenue. The increase was primarily due to (1) an increase of approximately $400,000 in distributor commissions, including the settlement of a distributor issue in the
first quarter
of fiscal 2001; and (2) an increase of approximately $480,000 in sales and marketing costs due to a redefined incentive commission plan, additional staff, and travel expenses. As a percentage
of revenues, distributor commissions increased to approximately 21.3% from 18.9%.

Research and Development.Research and development costs increased $66,000 to $916,000 for the six months ended
April 30, 2001 compared to $850,000 for the comparable prior year period, or 3.3% to 3.7% of revenue. These costs related to product enhancements and new product development.

Provision for Income Taxes.The Company's effective income tax rate was approximately 52.0% and 43.9% for the six
months ended April 30, 2001 and 2000, respectively. The increase relates to the effect of nondeductible expenses on the lower level of pre-tax income.

LIQUIDITY AND CAPITAL RESOURCES

Operating activities provided $4.6 million of cash for the six months ended April 30, 2001 compared to $6.3 million for the six months
ended April 30, 2000. In 2001, the $4.6 million consisted of $245,000 of net income, $5.6 million of depreciation, amortization, and obsolescence offset by changes to operating
assets and liabilities. In 2000, the $6.3 million provided by operating activities consisted primarily of $3.9 million in net income, depreciation, amortization, and obsolescence of
$4.1 million, offset by changes to operating assets and liabilities.

Investing
activities used $2.1 million of cash in the six months ended April 30, 2001 compared to providing cash of $222,000 for the six months ended April 30,
2000. In 2001, the $2.1 million used consisted of a $1.2 million reduction in short-term investments offset by capital expenditures of $3.3 million. In 2000, the
$222,000 consisted of a decrease in short-term investments of $5.3 million offset by capital expenditures of $3.8 million, and a $1.3 million payment toward the
restructuring of a distributor agreement.

Financing
activities used cash of $1.0 million for the six months ended April 30, 2001 compared to $2.0 million used for the six months ended April 30,
2000. In 2001, the $1.0 million consisted primarily of $779,000 in long-term debt repayment, $170,000 for payments for a distributorship buyout, and $54,000 to repurchase treasury
stock. In 2000, the $2.0 million used consisted of $429,000 in repayments on long-term notes payable, $169,000 for payments for a distributorship buyout, and $1.4 million to
repurchase treasury stock.

At
April 30, 2001, the Company had cash and equivalents and short-term investments totaling $8.2 million. The Company also has a $10.0 million line of
credit (the "Revolving Credit Facility") with Wells Fargo Bank, N.A. ("Wells Fargo"), which is tied to an interest rate based on the prime rate or LIBOR plus 2.0%, at the Company's option, on which
there was no outstanding balance at April 30, 2001. The Revolving Credit Facility expires on April 2, 2002. The Company believes that cash flow from
operations and the $8.2 million in cash and cash equivalents and short-term investments at April 30, 2001, together with funds available under the Revolving Credit Facility,
will be sufficient to support its operations, budgeted capital expenditures, and liquidity requirements through fiscal 2001. However, the Company's long-term liquidity requirements will
depend on many factors, including the rate at which the Company expands its business, whether internally or through acquisitions and strategic alliances. In addition, strategic opportunities the
Company may pursue could require it to fund its portion of operating expenses of such ventures, and could further require it to advance additional amounts should any partners in such ventures be
unable to meet unanticipated capital calls or similar funding events. To the extent that the funds generated from the sources described above are insufficient to fund the Company's activities in the
long term, the Company will be required to raise additional funds through public or private financing. No assurance can be given that additional financing will be available or, if it is available,
that it will be on terms acceptable to the Company.

9

---

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's Revolving Credit Facility with Wells Fargo is a $10.0 million line of credit with an interest rate based on the prime rate or LIBOR plus
2.0%, at the Company's option. The line of credit will expire on April 2, 2002.

Because
the interest rate on the Revolving Credit Facility is variable, the Company's cash flow may be affected by increases in interest rates, in that the Company would be required
to pay more interest in the event that both the prime and LIBOR interest rates increase. Management does not believe, however, that any risk inherent in the variable-rate nature of the
loan is likely to have a material effect on the Company's interest or available cash. Even if the Company were to draw down additional amounts on the line prior to its expiration and an increase in
both alternate rates occurred, it would not be likely to have a material effect on the Company's interest expense or available cash.

Sensitivity Analysis.Assuming the Company had a $2 million balance outstanding at April 30, 2001, the
rate of interest calculated using the prime rate option would be 7.50%. The Company's monthly interest payment, if the rate stayed constant would be $12,500. If the prime rate rose to 12%, the
Company's monthly payment would be $20,000. An increase of 1% or 2% above the prime rate at April 30, 2001 would give the Company a monthly payment of $14,167 or $15,833, respectively. The
Company does not believe the risk resulting from such fluctuations is material or that the payment required would have a material effect on cash flow.

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This
document includes various "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Sections 21E of the Securities
Exchange Act of 1934, as amended, which represent the Company's expectations or beliefs concerning future events. Statements containing expressions, such as "believes," "anticipates," or "expects,"
used in the Company's press releases and periodic reports on Forms 10-K and 10-Q filed with the Commission, are intended to identify forward-looking statements. All
forward-looking statements involve risks and uncertainties. Although the Company believes its expectations are based upon reasonable assumptions within the bounds of its knowledge of its business and
operations, there can be no assurances that actual results will not materially differ from expected results. The Company cautions that these and similar statements included in this report are further
qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements. Such factors could include, without limitation, the following:
increased competition in existing markets; a decline in the public participation in bingo; the limitation, conditioning, or suspension of any of the Company's bingo permits or licenses; increases in
or new taxes imposed on bingo revenues or bingo devices; a finding of unsuitability by regulatory officers with respect to the Company's officers, directors, or key employees; loss or retirement of
key executives; adverse economic or regulatory conditions in the Company's key markets; and adverse results of significant litigation matters. Readers are cautioned not to place undue reliance on
forward-looking statements, which speak only as of the date thereof. The Company undertakes no obligation to publicly release any revisions to such forward-looking statements to reflect events or
circumstances after the date hereof.

10

---

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On June 14, 1999, the Company filed a patent infringement action, GAMETECH INTERNATIONAL, INC. V. BETTINA CORPORATION,
CV-N-99-00317-(ECR), in the United States District Court, District of Nevada, against Bettina Corporation, alleging that Bettina Corporation's "Bingo
Magic" portable hand-held device infringes the Company's '940 Patent. Bettina Corporation, in its answer to the complaint, denies all causes of action and has asked the Court
to find the '940 Patent invalid, unenforceable, and not infringed. A stay of the case was lifted pursuant to stipulation of the parties and order dated August 31, 2000. No trial
date has yet been set. The parties are in active discussions regarding settlement of the case in which Bettina Corporation is expected to pay GameTech a confidential amount. The terms of the
settlement are not expected to have a material effect on the Company's financial position or results of operations.

On
January 6, 2000, the Company was named as a third-party defendant in Cause No. DV-99-3012H, TREND GAMING SYSTEMS, LLC V. HIGHLANDS PTA, ET AL.,
pending in the 44th District Court of Dallas County, Texas. The lawsuit involves a claim for breach of contract filed by Trend Gaming Systems, LLC ("Trend," a distributor for the
Company) against several bingo conductors, and a claim for tortious interference with contract against K&B Sales, Inc., dba Goodtime Bingo ("K&B"), and Daniel Hennessy. K&B added the Company as
a third party defendant alleging breach of contract, interference with contract, illegal restraint of trade, and conspiracy to commit tortious interference, and has requested actual and exemplary
damages. The bingo conductors also added a third-party claim against the Company, alleging that the Company conspired with Trend to defraud the conductors.

The
underlying dispute between the Company and K&B involved termination of K&B's distributor relationship with the Company. On March 22, 2001, the Company and K&B entered into
a settlement agreement and mutual release of all claims. The terms of the agreement between the parties are confidential and had no impact on the Company's 2001 financial results. On April 7,
2001, the Court dismissed with prejudice all claims between the Company and K&B. The third party claim brought by the bingo conductors against the Company is the only remaining involvement the Company
has in this case. The case is set for trial on October 2, 2001.

On
March 22, 2001, GAMETECH INTERNATIONAL, INC. V. TREND GAMING SYSTEMS, LLC, CV 01-540 PHX PGR, was filed in the United States District Court, District of
Arizona, seeking a declaratory judgment that the Company is not in material breach of its November 1, 1999 distribution agreement (the "Agreement") with Trend. The Company and Trend have had
discussions regarding their respective performances under the Agreement. To resolve any uncertainties, the Company has filed a declaratory relief action to confirm its compliance with the Agreement.
The Agreement between the parties in dispute pertains to the Texas territory. No relevant court dates have been set.

On
February 8, 1999, the Company acquired BTC by entering into a series of agreements including a Stock Purchase Agreement and Escrow Agreement (collectively the "Acquisition
Agreements") with BTC and its stockholders. In connection with the acquisition, BTC's stockholders made certain representations and warranties, and a portion of the purchase price was put into escrow
to provide for indemnification to the Company in the event of any breaches of these representations and warranties.

On
February 4, 2000, the Company delivered notice that it had certain claims for indemnification against BTC's stockholders for breaches of representations and warranties
arising from the acquisition. The Company estimates that its claims exceed the escrow fund and it has requested that no escrow funds be released pending a final determination of its claims. The escrow
fund consists of 373,387 shares of the Company's common stock and cash totaling $1,952,211. BTC's stockholders delivered their objections to the escrow on February 24, 2000, objecting to all of
the Company's indemnification

11

---

claims. The parties must make a good faith effort to reach agreements upon the rights of the parties with respect to each claim. The matter is currently scheduled for arbitration on
November 12, 2001 before the American Arbitration Association.

The
Company is involved in various other legal proceedings arising out of its operations in the ordinary course of its business. The Company does not believe that any of those
proceedings will have a material adverse effect on its business, financial condition, or result of operations.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Not Applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable.

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

Not Applicable.

ITEM 5. OTHER INFORMATION

Not Applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



12

---





SIGNATURES

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

|Signature                             |  | Title                              |  | Date         
|------------------------------------- |  | ---------------------------------- |  | -------------
|                                      |  |                                    |  |              
|/s/JON L. WHIPPLEJon L. Whipple       |  | Chief Executive Officer, President |  | June 14, 2001
|/s/RICHARD M. KELLEYRichard M. Kelley |  | Chief Financial Officer, Treasurer |  | June 14, 2001

13

---

QuickLinks