**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**





**(Mark
                One)**R
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934****FOR
                THE QUARTERLY PERIOD ENDED JULY 31, 2007****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**
            **33-0612983**(State
                or other jurisdiction
            (I.R.S.
                Employer Identification No.)of
                incorporation or organization)





**900
      SANDHILL ROAD, RENO, NEVADA**


**89521**


(Address
      of principal executive offices)


(Zip
      code)





Registrant’s
      telephone number, including area code: (775) 850-6000





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 R No £





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):


Large
                accelerated filer£
            Accelerated
                filer£
            Non-accelerated
                filerR





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes £ No R





On
      September 12, 2007, the registrant had 12,617,407  outstanding
      shares of its Common Stock, par value $0.001 per share.













**GAMETECH
      INTERNATIONAL, INC.**


**QUARTERLY
      REPORT ON FORM 10-Q**


**FOR
      THE QUARTERLY PERIOD ENDED JULY 31, 2007**


**INDEX**





**Page****No.**Part
                I. Financial Information:Item
                1. Financial Statements (Unaudited)Condensed
                Consolidated Balance Sheets as of July 31, 2007 (Unaudited) and October
                31, 2006
            3Unaudited
                Condensed Consolidated Statements of Income for the Three and Nine
                Months
                Ended July 31, 2007 and 2006
            4Unaudited
                Condensed Consolidated Statements of Cash Flows for the Nine Months
                Ended
                July 31, 2007 and 2006
            5Notes
                to Unaudited Condensed Consolidated Financial Statements
            6Item
                2. Management’s Discussion and Analysis of Financial Condition and Results
                of Operations
            15Item
                3. Quantitative and Qualitative Disclosures About Market
                Risk
            23Item
                4. Controls and Procedures
            23Part
                II. Other Information:Item
                1. Legal Proceedings
            23Item
                1A. Risk Factors
            24Item
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds
            24Item
                3. Defaults Upon Senior Securities
            24Item
                4. Submission of Matters to a Vote of Security Holders
            24Item
                5. Other Information
            24Item
                6. Exhibits
            24Signatures
            26




2
 
 **PART 1.**
                  **FINANCIAL
                    INFORMATION****ITEM  1.**
                  **FINANCIAL
                    STATEMENTS.**
  **GAMETECH
            INTERNATIONAL, INC.**
 **CONDENSED
            CONSOLIDATED BALANCE SHEETS**
 (In
            thousands, except share and per share
            amounts)
   **July
                    31,**
                    **2007**
                
                **October
                    31,**
                  **2006****(Unaudited)**
                
                **(Note
                    A)****Assets:**Current
                    assets:Cash
                    and cash equivalents
                
                $
                8,384
                
                $
                5,411Short-term
                    investments
                
                
                5,167
                
                
                7,408Accounts
                    receivable, less allowance of $2,523 in 2007 and $2,230 in
                    2006
                
                
                7,916
                
                
                3,734Deposits
                
                
                14
                
                
                17Inventory
                
                
                3,691
                
                
                -Refundable
                    income taxes
                
                
                -
                
                
                64Restricted
                    short-term investments
                
                
                4,515
                
                
                4,515Prepaid
                    expenses and other current assets
                
                
                862
                
                
                377Deferred
                    income taxes
                
                
                2,674
                
                
                2,458Total
                    current assets
                
                
                33,223
                
                
                23,984Bingo
                    equipment, furniture and other equipment, net
                
                
                22,679
                
                
                22,868Goodwill,
                    net
                
                
                37,580
                
                
                10,184Intangibles,
                    less accumulated amortization of $4,402 in 2007 and $4,071 in
                    2006
                
                
                8,255
                
                
                1,217Restricted
                    cash
                
                
                498
                
                
                483Notes
                    Receivables
                
                
                143
                
                
                -Deferred
                    income taxes, long term
                
                
                186
                
                
                176Other
                    assets
                
                
                -
                
                
                302Total
                    assets
                
                $
                102,564
                
                $
                59,214**Liabilities
                    and stockholders’ equity:**Current
                    liabilities:Accounts
                    payable
                
                $
                2,128
                
                $
                1,819Accrued
                    payroll and related obligations
                
                
                1,183
                
                
                980Accrued
                    loss contingencies
                
                
                4,046
                
                
                3,898Income
                    taxes payable
                
                
                6
                
                
                294Current
                    portion of long term debt
                
                
                3,334
                
                
                21Other
                    accrued liabilities
                
                
                1,895
                
                
                1,560Total
                    current liabilities
                
                
                12,592
                
                
                8,572Long
                    term debt, net of current portion
                
                
                35,973
                
                
                160Deferred
                    income taxes
                
                
                438
                
                
                648Total
                    liabilities
                
                
                49,003
                
                
                9,380Commitments
                    and contingencies
                
                
                -
                
                
                -Stockholders’
                    equity:Common
                    stock, $0.001 par value: 40,000,000 shares authorized; 14,447,732
                    shares
                    issued at July 31, 2007 and 14,371,547 shares issued at October
                    31,
                    2006
                
                
                14
                
                
                14Additional
                    paid in capital
                
                
                51,250
                
                
                50,881Retained
                    earnings
                
                
                10,393
                
                
                7,035Treasury
                    stock, at cost: 1,855,325 shares in 2007 and 2006
                
                
                (8,096
                )
                
                (8,096
                )Total
                    stockholders’ equity
                
                
                53,561
                
                
                49,834Total
                    liabilities and stockholders’ equity
                
                $
                102,564
                
                $
                59,214
  The
          accompanying notes are an integral part of these unaudited condensed
          consolidated financial statements.
  3
  **GAMETECH
              INTERNATIONAL, INC.**
 **CONDENSED
              CONSOLIDATED STATEMENTS OF INCOME**
 (In
              thousands, except  per share
              amounts)
 (Unaudited)
  **Three
                      Months**
                    **Ended
                      July 31,**
                  
                  
                  **Nine
                      Months**
                    **Ended
                      July 31,****2007**
                  
                  
                  **2006**
                  
                  
                  **2007**
                  
                  
                  **2006**Net
                      revenue
                  
                  $
                  16,637
                  
                  $
                  12,430
                  
                  $
                  42,065
                  
                  $
                  37,310Cost
                      of revenue
                  
                  
                  8,047
                  
                  
                  5,113
                  
                  
                  18,916
                  
                  
                  14,720Gross
                      profit
                  
                  
                  8,590
                  
                  
                  7,317
                  
                  
                  23,149
                  
                  
                  22,590Operating
                      expenses:General
                      and administrative
                  
                  
                  2,430
                  
                  
                  1,885
                  
                  
                  6,398
                  
                  
                  6,799Sales
                      and marketing
                  
                  
                  2,528
                  
                  
                  2,777
                  
                  
                  8,459
                  
                  
                  8,288Research
                      and development
                  
                  
                  1,064
                  
                  
                  550
                  
                  
                  2,451
                  
                  
                  2,227Loss
                      contingencies
                  
                  
                  31
                  
                  
                  33
                  
                  
                  124
                  
                  
                  99Total
                      operating expenses
                  
                  
                  6,053
                  
                  
                  5,245
                  
                  
                  17,432
                  
                  
                  17,413Income
                      from operations
                  
                  
                  2,537
                  
                  
                  2,072
                  
                  
                  5,717
                  
                  
                  5,177Interest
                      expense
                  
                  
                  (977
                  )
                  
                  (2
                  )
                  
                  (1,332
                  )
                  
                  (8
                  )Other
                      income (expense), net
                  
                  
                  214
                  
                  
                  131
                  
                  
                  539
                  
                  
                  336Income
                      before income taxes
                  
                  
                  1,774
                  
                  
                  2,201
                  
                  
                  4,924
                  
                  
                  5,505Provision
                      for income taxes
                  
                  
                  695
                  
                  
                  879
                  
                  
                  1,827
                  
                  
                  2,158Income
                      from operations, net of tax
                  
                  
                  1,079
                  
                  
                  1,322
                  
                  
                  3,097
                  
                  
                  3,347Cumulative
                      effect of a change in accounting estimate (net of tax)
                  
                  
                  -
                  
                  
                  -
                  
                  
                  261
                  
                  
                  -Net
                      income
                  
                  $
                  1,079
                  
                  $
                  1,322
                  
                  $
                  3,358
                  
                  $
                  3,347Net
                      income per share – Basic:Income
                      before cumulative effect of accounting estimate
                  
                  $
                  0.09
                  
                  $
                  0.11
                  
                  $
                  0.25
                  
                  $
                  0.28Cumulative
                      effect of accounting estimate
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  0.02
                  
                  $
                  -Net
                      income
                  
                  $
                  0.09
                  
                  $
                  0.11
                  
                  $
                  0.27
                  
                  $
                  0.28Net
                      income per share – DilutedIncome
                      before cumulative effect of accounting estimate
                  
                  $
                  0.08
                  
                  $
                  0.10
                  
                  $
                  0.24
                  
                  $
                  0.26Cumulative
                      effect of accounting estimate
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  0.02
                  
                  $
                  -Net
                      income
                  
                  $
                  0.08
                  
                  $
                  0.10
                  
                  $
                  0.26
                  
                  $
                  0.26Shares
                      used in calculating net income per share:Basic
                  
                  
                  12,580
                  
                  
                  12,312
                  
                  
                  12,552
                  
                  
                  12,107Diluted
                  
                  
                  12,890
                  
                  
                  12,969
                  
                  
                  13,029
                  
                  
                  12,684
  The
          accompanying notes are an integral part of these
          unaudited condensed consolidated financial statements.
  4
  **GAMETECH
              INTERNATIONAL, INC**
 **CONDENSED
              CONSOLIDATED STATEMENTS OF CASH FLOWS**
 (Unaudited,
              in
              thousands)
 **Nine
                      Months Ended July 31,****2007**
                  
                  
                  **2006****Cash
                      flows from operating activities:**Net
                      income
                  
                  $
                  3,358
                  
                  $
                  3,347Adjustments
                      to reconcile net income to net cash provided by operating
                      activities:Depreciation
                      and amortization
                  
                  
                  8,635
                  
                  
                  7,695Obsolescence
                      and loss on disposal of bingo terminals and related
                      equipment
                  
                  
                  16
                  
                  
                  522Loss
                      on disposal of furniture and other equipment
                  
                  
                  64
                  
                  
                  4Stock
                      compensation expense
                  
                  
                  (69
                  )
                  
                  197Deferred
                      income taxes
                  
                  
                  (436
                  )
                  
                  (672
                  )Interest
                      on short-term investments
                  
                  
                  (281
                  )
                  
                  (109
                  )Interest
                      on restricted cash
                  
                  
                  (15
                  )
                  
                  (29
                  )Change
                      in operating assets and liabilities net of effects from purchase
                      of
                      Summit:Accounts
                      receivable, net
                  
                  
                  (1,537
                  )
                  
                  (228
                  )Deposits
                  
                  
                  3
                  
                  
                  (98
                  )Inventory
                  
                  
                  (379
                  )
                  
                  -Refundable
                      income taxes
                  
                  
                  64
                  
                  
                  742Restricted
                      short-term investments
                  
                  
                  -
                  
                  
                  66Prepaid
                      expenses and other assets
                  
                  
                  (470
                  )
                  
                  (78
                  )Notes
                      receivable
                  
                  
                  40
                  
                  
                  -Accounts
                      payable
                  
                  
                  (1,638
                  )
                  
                  794Accrued
                      payroll and related obligations
                  
                  
                  203
                  
                  
                  100Accrued
                      loss contingencies
                  
                  
                  148
                  
                  
                  99Income
                      taxes payable
                  
                  
                  (288
                  )
                  
                  183Other
                      accrued liabilities
                  
                  
                  335
                  
                  
                  (459
                  )Non-current
                      employment obligations
                  
                  
                  (16
                  )
                  
                  (12
                  )Net
                      cash provided by operating activities
                  
                  
                  7,737
                  
                  
                  12,064**Cash
                      flows from investing activities:**Proceeds
                      from sale of short-term investments
                  
                  
                  18,037
                  
                  
                  20,004Payments
                      for purchase of short-term investments
                  
                  
                  (15,515
                  )
                  
                  (23,195
                  )Capital
                      expenditures for bingo equipment, furniture, and other
                      equipment
                  
                  
                  (5,234
                  )
                  
                  (9,730
                  )Payment
                      for the acquisition of Summit Amusement & Distributing,
                      Ltd
                  
                  
                  (2,437
                  )
                  
                  -Payments
                      for acquisitions of intangible assets
                  
                  
                  (50
                  )
                  
                  (113
                  )Net
                      cash used in investing activities
                  
                  
                  (5,199
                  )
                  
                  (13,034
                  )**Cash
                      flows from financing activities:**Tax
                      benefit from stock options exercised
                  
                  
                  167
                  
                  
                  283Payments
                      on long term debt
                  
                  
                  (3
                  )
                  
                  -Proceeds
                      from issuance of common stock
                  
                  
                  271
                  
                  
                  2,018Net
                      cash provided by financing activities
                  
                  
                  435
                  
                  
                  2,301Net
                      increase in cash and cash equivalents
                  
                  
                  2,973
                  
                  
                  1,331Cash
                      and cash equivalents at beginning of period
                  
                  
                  5,411
                  
                  
                  6,330Cash
                      and cash equivalents at end of period
                  
                  $
                  8,384
                  
                  $
                  7,661**Supplemental
                      Cash Flow Information:**Cash
                      paid during the period for:Interest
                  
                  $
                  1,286
                  
                  $
                  -Income
                      taxes
                  
                  $
                  2,148
                  
                  $
                  1,623**Non-cash
                      investing and financing activities:**Acquisition
                      of assets included in accounts payable
                  
                  $
                  762
                  
                  $
                  -Note
                      payable for the acquisition of Summit Amusement & Distributing,
                      Ltd
                  
                  $
                  38,945
                  
                  $
                  -Notes
                      Payable for purchase of patent
                  
                  $
                  200
                  
                  $
                  -The
                      Company purchased Summit for $41.7 million. In conjuction with
                      the
                      acquisition, liabilities were assumed as follows:Fair
                      value of assets acquired
                  
                  $
                  7,570Goodwill
                      and intangibles
                  
                  $
                  32,560Notes
                      payable
                  
                  $
                  (38,945
                  )Liabilities
                      assumed
                  
                  $
                  1,185
  The
        accompanying notes are an integral part of these
        unaudited condensed consolidated financial statements.


5




**GAMETECH
      INTERNATIONAL, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(UNAUDITED)**





**NOTES
      TO FINANCIAL STATEMENTS**





**NOTE
      A. BASIS OF PRESENTATION**





The
      accompanying unaudited condensed consolidated financial statements and related
      disclosures as of July 31, 2007 have been prepared in accordance with U.S.
      generally accepted accounting principles applicable to interim financial
      information and with the instructions to Form 10-Q and Rule10-01 of Regulation
      S-X. Accordingly, they do not include all of the information and footnotes
      required by U.S. generally accepted accounting principles for complete financial
      statements. In our opinion, all adjustments (consisting of normal recurring
      adjustments) considered necessary for a fair presentation of our financial
      position and interim results have been included. Operating results for the
      three
      and nine-month periods ended July 31, 2007 are not necessarily indicative of
      the
      results that may be expected for the current fiscal year or any other
      period.





The
      balance sheet at October 31, 2006 has been derived from the audited financial
      statements at that date but does not include all of the information and
      footnotes required by U.S. generally accepted accounting principles for complete
      financial statements. These condensed unaudited consolidated financial
      statements should be read in conjunction with the consolidated financial
      statements and related notes, as well as other information included in our
      Annual Report on Form 10-K for the year ended October 31, 2006 and any other
      of
      our filings with the Securities and Exchange Commission.





**USE
      OF ESTIMATES**





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States requires management to make estimates
      and assumptions that affect the amounts reported in the consolidated financial
      statements and accompanying notes. Allowance for doubtful accounts,
      obsolescence, impairment of goodwill, loss contingencies, and stock based
      compensation are significant estimates made by us. Actual results could
      ultimately differ from those estimates.





**NOTE
      B. SIGNIFICANT ACCOUNTING POLICIES**





**REVENUE
      RECOGNITION**





We
      recognize revenue when the following criteria are met:


·
            Persuasive
                evidence of an arrangement between us and our customer
                exists,


·
            Delivery
                has occurred or services have been
                rendered,


·
            The
                price is fixed or determinable, and


·
            Collectibility
                is reasonably assured.





We
      earn
      our revenue in a variety of ways. We offer our products for lease or sale.
      We
      also sell service and software updates for our sold equipment.





*Bingo
      Equipment*


Revenue
      is recognized for bingo terminals and bingo systems installed as a single
      element placed in bingo halls under contracts based on (1) a fixed fee per
      use per session; (2) a fixed weekly fee per terminal; or (3) a
      percentage of the revenue generated by each terminal. Revenue recognition is
      a
      key component of the Company's results of operations, and determines the timing
      of certain expenses, such as commissions. The Company recognizes revenue when
      all of the following factors exist: (a) evidence of an arrangement with the
      customer; (b) play or availability of the bingo terminals; (c) a fixed
      or determinable fee; and (d) collectibility is reasonably assured. We
      exercise judgment in assessing the credit worthiness of customers to determine
      whether collectibility is reasonably assured. Should changes in conditions
      cause
      us to determine the factors are not met for future transactions, revenue
      recognized for future reporting periods could be adversely
      affected.





*Video
      Lottery Terminal*


Our
      product sales revenues are generated from the sale of video lottery terminals,
      conversion kits, content fees, license fees, participation fees, equipment
      and
      services. Revenues are reported net of discounts, sales taxes and other taxes
      of
      a similar nature. Revenues related to contracted production is recognized as
      the
      related work is delivered. We recognize license fee revenues over the term
      of
      the associated agreement unless the fee is in exchange for products delivered
      or
      services performed that represent the culmination of a separate earnings
      process. Amounts received prior to completing the earnings process are deferred
      until revenue recognition criteria are met.




6




Our
      sales
      credit terms are predominately 30 days. In certain limited circumstances,
      we may extend credit terms up to 160 days.





**ACCOUNTS
      RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS**





Accounts
      receivable are recorded when revenue is recognized in accordance with our
      revenue recognition policy and represent claims against third parties that
      will
      be settled in cash. The carrying value of our receivables, net of allowances,
      represents our estimated net realizable value.





*Bingo
      Equipment*


We
      estimate the possible losses resulting from non-payment of outstanding accounts
      receivable arising from the lease of our bingo units. Our customer base consists
      primarily of entities operating in charitable, Native American, and commercial
      bingo halls located throughout the United States. In some jurisdictions, the
      billing and collection function is performed as part of a distributor
      relationship, and in those instances, we maintain allowances for possible losses
      resulting from non-payment by both the customer and distributor. We perform
      ongoing evaluations of our customers and distributors for credit worthiness,
      economic trends, changes in our customer payment terms, and historical
      collection experience when evaluating the adequacy of our allowance for doubtful
      accounts. We also reserve a percentage of our accounts receivable based on
      aging
      category. In determining these percentages, we review historical write-offs
      of
      our receivables, payment trends, and other available information. While such
      estimates have been within our expectations and the provisions established,
      a
      change in financial condition of specific customers or in overall trends
      experienced may result in future adjustments of our estimates of recoverability
      of our receivables.





*Video
      Lottery Terminals*


We
      estimate the possible losses resulting from non-payment of outstanding accounts
      receivables arising from the sale of video lottery terminals and related
      equipment. Our customer base consists of casinos located in various states
      and
      Native American casinos. We perform ongoing evaluations of our customers and
      distributors for credit worthiness, economic trends, changes in our customer
      payment terms, and historical collection experience when evaluating the adequacy
      of our allowance for doubtful accounts.





**INVENTORIES**





Inventories,
      consisting primarily of parts and components to be used for manufacturing of
      products to be sold, are valued at the lower of cost or market, as determined
      by
      the first-in, first-out basis. Also classified as inventories is equipment
      consisting of video lottery terminals to be sold in a future period. The
      following schedule details inventory between parts and equipment as of July
      31,
      2007 (in thousands):






July
                31, 2007Inventory
                - parts
            
            $
            2,454Inventory
                - equipment
            
            
            1,237Total
                Inventory
            
            $
            3,691





**BINGO
      EQUIPMENT, FURNITURE AND OTHER EQUIPMENT**





Bingo
      equipment includes portable and fixed-base player terminals as well as file
      servers, caller units, point-of-sale units, and other support equipment. Bingo
      equipment, furniture, and other equipment are stated at cost and depreciated
      using the straight-line method over the estimated useful lives of the assets.
      The estimated useful lives are as follows:





Bingo
                equipment
            
            
            3-5
                yearsOffice
                furniture and equipment
            
            
            3-7
                yearsLeasehold
                improvements
            
            
            10
                years





We
      provide reserves for excess or obsolete bingo terminals on hand not expected
      to
      be used. The reserves are based upon several factors, including estimated
      forecast of bingo terminal demand for placement into halls. The estimates of
      future bingo terminal demand may prove to be inaccurate, in which case we may
      have understated or overstated the provision required for excess or obsolete
      bingo terminals. Although we attempt to assure the accuracy of these estimated
      forecasts, any significant unanticipated changes in demand or technological
      developments could have a significant impact on the value of bingo terminals,
      results of operations, and financial condition.





**SOFTWARE
      DEVELOPMENT CAPITALIZATION**





We
      capitalize costs related to the development of certain software products that
      meet the criteria of Statement of Financial Accounting Standards (“SFAS”) No. 86
      - *Accounting
      for the Costs of Computer Software to Be Sold,*  *Leased,
      or Otherwise Marketed* .
      SFAS
      No. 86 provides for the capitalization of computer software that is to be used
      as an integral part of a product or process to be sold or leased, after
      technological feasibility has been established for the software and all research
      and development activities for the other components of the product or process
      have been completed. We are capitalizing qualified costs of software developed
      for new products or for significant enhancements to existing products. We cease
      capitalizing costs when the product is available for general release to our
      customers. We amortize the costs on a straight-line method over the estimated
      economic life of the product beginning when the product becomes available for
      general release.




7





The
      achievement of technological feasibility and the estimate of the product’s
      economic life require judgment. Any changes in key assumptions, market
      conditions, or other circumstances could result in an impairment of the
      capitalized asset and a charge to our operating results.





**GOODWILL**





We
      are
      required to perform an annual goodwill impairment review, and depending upon
      the
      results, the recorded goodwill may be written down and charged to income from
      operations when its carrying amount exceeds its estimated fair value. Goodwill
      is reviewed for possible impairment annually, or more frequently whenever events
      or changes in circumstances indicate that the carrying value may not be
      recoverable, such as a significant adverse change in legal factors or business
      climate, an adverse action or assessment by a regulator, unanticipated
      competition, or a loss of key personnel.





**LONG-LIVED
      ASSETS**





We
      have
      adopted the provisions of SFAS No. 144, *Accounting
      for the*  *Impairment
      or Disposal of Long-Lived Assets* .
      SFAS
      No. 144 requires impairment losses to be recognized for long-lived assets and
      identifiable intangibles, other than goodwill, used in operations when
      indicators of impairment are present and the estimated undiscounted cash flows
      are not sufficient to recover the assets’ carrying amount. The impairment loss
      is measured by comparing the fair value of the asset to its carrying
      amount.





**LEGAL
      CONTINGENCIES**





We
      are
      currently involved in various claims and legal proceedings (see Note E Legal
      Proceedings). Periodically, we review the status of each matter and assess
      the
      potential financial exposure. If the potential loss from any claim or legal
      proceeding is considered probable and the amount can be estimated, we accrue
      a
      liability for the estimated loss. Significant judgment is required in both
      the
      determination of probability and the determination as to whether an exposure
      can
      be reasonably estimated.





Because
      of uncertainties related to these matters, accruals are based only on the best
      information available at the time. As additional information becomes available,
      we reassess the potential liability related to our pending claims and litigation
      and may revise these estimates. Such revisions in the estimates of the potential
      liabilities could have a material impact on the results of operations and
      financial condition.





**STOCK-BASED
      COMPENSATION**





We
      generally grant stock options to our employees for a fixed number of shares
      with
      an exercise price equal to the fair value of the shares on the date of the
      grant.





We
      have
      adopted the Financial Accounting Standards Board (“FASB”) SFAS No. 123(R), *Share
      Based Payment* .
      This
      statement is a revision of SFAS No. 123, and supersedes APB Opinion No. 25,
      and
      its related implementation guidance. SFAS No. 123(R) addresses all forms of
      share-based payment awards including shares issued under employer stock purchase
      plans, stock options, restricted stock, and stock appreciation rights. Under
      SFAS No. 123(R), share-based payment awards result in a cost that will be
      measured at fair value on the award’s grant date. Stock options exercised in
      future periods will result in an adjustment within the Consolidated Statement
      of
      Cash Flows depicting a reduction to net cash provided by operating activities
      with an offsetting increase in net cash provided by financing activities related
      to incremental tax benefits. In the fourth quarter of the fiscal year 2005,
      our
      Board of Directors approved the acceleration of the vesting of all unvested
      stock options awarded under the 1997 Incentive Stock Plan. As a result, all
      options outstanding at October 31, 2005 were fully vested and no compensation
      cost for such options will be recognized in any future periods.





For
      the
      three-month period ended July 31, 2007, we recognized compensation expense
      of
      $111,003 and a related tax benefit of $37,416 for a net cost of $73,587. For
      the
      nine-month period ended July 31, 2007, we recognized a compensation credit
      of
      $69,654 and a related tax benefit reversal of $25,801 for a net credit of
      $43,853. For the three-month period ended July 31, 2007 both basic and diluted
      earnings per share were reduced by $0.01 as a result of recognizing the
      share-based compensation expense, net of tax. For the nine-month period ended
      July 31, 2007 both basic and diluted earnings per share were increased by less
      than $0.01 as a result of recognizing the share-based compensation credit,
      net
      of tax. The stock option compensation reversal due to the change in accounting
      estimate is included in these totals.




8





As
      of
      July 31, 2007, the total compensation cost related to unvested stock-based
      awards granted to employees under our stock option plans but not yet recognized
      was $910,569. The cost of each award will be amortized on a straight-line basis
      over its term, which range from two to four years, and will be adjusted for
      subsequent changes in estimated forfeitures.





On
      November 10, 2005, the FASB issued Staff Position No. SFAS 123(R)-3, *Transition
      Election Related to Accounting for Tax Effects of*  *Share-Based
      Payment Awards.* We
      have
      elected to adopt the alternative transition method provided in this FASB Staff
      Position for calculating the tax effects of share-based compensation pursuant
      to
      SFAS No. 123(R). The alternative transition method includes a simplified method
      to establish the beginning balance of the additional paid-in capital pool
      related to the tax effects of employee share-based compensation, which is
      available to absorb tax deficiencies recognized subsequent to the adoption
      of
      SFAS No. 123(R).





Under
      SFAS No. 123(R) stock-based compensation cost is measured at the grant date,
      based on the estimated fair value of the award, and is recognized over the
      stated vesting period. We continue to utilize the Black-Scholes option-pricing
      model to estimate the fair value of employee stock-based compensation at the
      date of grant, which requires the use of accounting judgment and financial
      estimates. The expected life of the options used in this calculation is the
      period of time the options are expected to be outstanding, and is determined
      by
      the simplified method outlined in Staff Accounting Bulletin 107 which states,
      “The midpoint of the average vesting period and contractual life is an
      acceptable expected life assumption.” Expected stock volatility is based on the
      historic volatility of the stock for a period equal to the length of time we
      have been public. Expected option exercises, the period of time the options
      are
      held, forfeitures, employee terminations and other criteria are based on
      previous experiences. The risk-free rates for periods within the contractual
      life of the options are based on United States Treasury Note rates in effect
      at
      the time of the grant for the period equal to the expected life. Application
      of
      alternative assumptions could produce significantly different estimates of
      the
      fair value of stock-based compensation and consequently, the related amounts
      recognized in the Condensed Consolidated Statements of Income.





These
      amounts were determined using the Black-Scholes option-pricing model, which
      values options based on the stock price at the grant date, the expected life
      of
      the option, the estimated volatility of the stock, the expected dividend
      payments, and the risk-free interest rate over the expected life of the option.
      The assumptions used in the Black-Scholes model were as follows:






**Three
                Months**
              **Ended
                July 31,****2007**Risk-free
                interest rate
            
            
            4.67
            %Dividend
                yield
            
            
            —Volatility
                factor
            
            
            61.5
            %Forfeiture
                rate
            
            
            —Expected
                life (in years)
            
            
            6.0








*CHANGE
      IN ACCOUNTING* ** *ESTIMATE*





During
      the quarter ended April 30, 2007, the Company re-evaluated its forfeiture rate
      for stock options and revised the compensation expense accordingly. For the
      nine-months ended July 31, 2007 we recognized a cumulative effect adjustment
      of
      $399,575, and a related tax benefit of $138,308 for an increase to net income
      of
      $261,267. For the nine-month period ended July 31, 2007, diluted and basic
      earnings per share increased by $0.02 as a result of change in estimate of
      the
      forfeiture rate.





**RECENT
      ACCOUNTING PRONOUNCEMENTS**





In
      June
      2006, FASB issued FIN No. 48, *Accounting
      for Uncertainty in Income Taxes.* FIN
      No.
      48 is an interpretation of SFAS No. 109, *Accounting
      for Income Taxes* .
      FIN No.
      48 prescribes a recognition threshold and measurement attribute for the
      financial statement recognition and measurement of a tax position taken or
      expected to be taken in an enterprise’s tax return. This interpretation also
      provides guidance on the derecognition, classification, interest and penalties,
      accounting in interim periods, disclosure, and transition of tax positions.
      The
      recognition threshold and measurement attribute is part of a two-step tax
      position evaluation process prescribed in FIN No. 48. FIN No. 48 is effective
      after the beginning of an entity’s first fiscal year that begins after December
      15, 2006. We are assessing the potential impact of FIN No. 48 on our financial
      position, results of operation, and cash flow.




9




In
      June 2006, the FASB ratified the consensuses of EITF Issue No. 06-3,
“How Taxes Collected from Customers and Remitted to Governmental Authorities
      Should Be Presented in the Income Statement” (“EITF 06-3”), which discusses the
      presentation of sales taxes in the income statement on either a gross or net
      basis. Taxes within the scope of EITF 06-3 include any taxes assessed by a
      governmental authority that are directly imposed on a revenue-producing
      transaction between a seller and a customer and may include, but are not limited
      to, sales taxes, use taxes, value-added taxes, and some excise taxes. The EITF
      concluded that the presentation of these taxes on either a gross (included
      in
      revenues and costs) or a net (excluded from revenues) basis is an accounting
      policy decision that should be disclosed. For any such taxes that are reported
      on a gross basis, a company should disclose the amounts of those taxes in
      interim and annual financial statements. EITF 06-3 is effective for interim
      and
      annual periods beginning after December 15, 2006. Our accounting
      policy is to present the taxes within the scope of EITF 06-3 on a net basis.
      The
      adoption of EITF 06-3 did not result in a change to our accounting policy
      and, accordingly, did not have a material effect on our consolidated
      financial condition, results of operations or cash flows.





In
      September 2006, the FASB issued SFAS No. 157, *Fair
      Value Measurements* (“SFAS
      157”), which defines fair value, establishes a framework for measuring fair
      value in GAAP, and expands disclosures about fair value measurements. SFAS
      157
      does not require any new fair value measurements, but provides guidance on
      how
      to measure fair value by providing a fair value hierarchy used to classify
      the
      source of the information. This statement is effective beginning in October
      2008. We are evaluating whether adoption of this statement will result in a
      change to our fair value measurements.





In
      September 2006, the Securities and Exchange Commission released Staff Accounting
      Bulletin No. 108, *Quantifying
      Financial Statement Misstatements* (“SAB 108”). SAB 108 gives guidance on how errors, built up over time
      in the balance sheet, should be considered from a materiality perspective and
      corrected. SAB 108 provides interpretive guidance on how the effects of the
      carryover or reversal of prior year misstatements should be considered in
      quantifying a current year misstatement. SAB 108 represents the SEC Staff’s
      views on the proper interpretation of existing rules and as such has no
      effective date. We are assessing the potential impact of SAB No. 108
      on our financial position, results of operation, and cash flow.





In
      February 2007, the FASB issued SFAS No. 159, *Fair
      Value Option for Financial Assets and Financial Liabilities* (“SFAS
      159”). SFAS 159 permits companies to elect to measure eligible financial
      instruments, commitments and certain arrangements at fair value at specified
      election dates, with changes in fair value recognized in earnings at each
      subsequent reporting period. SFAS 159 is effective for fiscal years beginning
      after November 15, 2007. We are assessing the potential impact of SFAS 159
      on
      our financial position, results of operation, and cash flow.




**NOTE
      C. ACQUISITION**





**** On
      March
      28, 2007, we acquired essentially all of the assets of Summit Amusement &
Distributing, Ltd. (Summit) for $41.7 million in cash. Summit is a leading
      developer and manufacturer of entertainment driven gaming devices, including
      primarily video lottery terminal equipment and related software, headquartered in Billings, Montana.





Under
      the
      purchase method of accounting, the total purchase price is allocated to Summit’s
      tangible and intangible assets based on their fair values as of the date of
      the
      closing of the acquisition. The preliminary estimated purchase price has been
      allocated based on the preliminary estimates that are described
      below.




The
      preliminary estimated total purchase price is as follows (in
      thousands):




Cash
                paid for Summit
              
              $
              39,745Estimated
                direct transaction costs
              
              
              1,954Total
                preliminary purchase price
              
              $
              41,699





The
      allocation of the preliminary purchase price and estimated useful lives and
      first year amortization associated with certain assets is as follows (in
      thousands):





Accounts
                receivable
            
            $
            2,645Prepaid
                expenses and other assets
            
            
            211Inventory
            
            
            3,312Property
                plant and equipment
            
            
            1,598Identifiable
                depreciable intangibles assets
            
            
            7,720Trade
                name
            
            
            1,600Goodwill
            
            
            25,798
            *Accounts
                payable and other accrued expenses
            
            
            (1,185
            )Total
                cash purchase price
            
            $
            41,699




*
      Includes the excess of the purchase price over the estimated fair value of
      assets and liabilities assumed.





10




Unaudited
      pro forma results of operations, assuming the acquisition of Summit had been
      completed at the beginning of each period are summarized below. The results
      reflect adjustments to amortization, interest expense, and income tax expense.
      The interest rates used in determining the pro forma adjustments are related
      to
      the credit facility and approximate a blended average rate of 9.54% for the
      three and nine months ended July 31, 2007. The pro forma adjustment for the
      income tax expense is based on our effective rate of 40%. The pro forma earnings
      per share are based on the Company’s shares outstanding, as no shares were
      issued for the acquisition.






**For
                the Three Months Ended**
            
            
            **For
                the Nine Months Ended****July
                31, 2007**
            
            
            **July
                31, 2006**
            
            
            **July
                31, 2007**
            
            
            **July
                31, 2006****(In
                Thousands, Except For Per Share Amounts)**Net
                sales
            
            $
            16,637
            
            $
            19,760
            
            $
            49,760
            
            $
            59,293Net
                earnings
            
            
            1,079
            
            
            1,990
            
            
            1,310
            
            
            4,044Basic
                earnings per share
            
            $
            0.09
            
            $
            0.16
            
            $
            0.10
            
            $
            0.33Diluted
                earnings per share
            
            $
            0.08
            
            $
            0.15
            
            $
            0.10
            
            $
            0.32







In
      the
      above acquisition, the Company acquired various intangible assets listed below:




**Acquired
        Intangible Assets** (in
        thousands)


**July
                31, 2007****Fair
                Market**
              **Value**
            
            
            **Estimated**
              **Lives**
            
            
            **Accumulated**
              **Amortization**
            
            
            **Net
                Fair Market**
              **Value****Amortized
                Intangible Assets**Customer
                relationships
            
            $
            3,600
            
            
            5
                years
            
            $
            240
            
            $
            3,360Patent
                application
            
            
            520
            
            
            10
                years
            
            
            17
            
            
            503Game
                library
            
            
            3,600
            
            
            10
                years
            
            
            120
            
            
            3,480Total
                amortizable intangible assets
            
            $
            7,720
            
            
            
            
            $
            377
            
            $
            7,343**Unamortized
                Intangible Assets**Goodwill
            
            $
            25,798Summit
                trade name
            
            
            1,600Total
            
            $
            27,398





Amortization
      expense related to the acquisition of Summit for the three and nine-months
      ended
      July 31, 2007 was $283,000 and $377,000, respectively. Estimated future
      aggregate amortization expense for intangible assets associated with the Summit
      acquisition subject to amortization as of July 31, 2007 is as follows (in
      thousands):




2007
            
            $
            2832008
            
            
            1,1322009
            
            
            1,1322010
            
            
            1,1322011
            
            
            1,132After
                2011
            
            
            2,532$
            7,343





**NOTE
      D. NET INCOME PER SHARE**





Basic
      net
      income per share is computed by dividing reported net income by the weighted
      average number of common shares outstanding each period.





Diluted
      net income per share is computed by using the weighted average number of common
      shares and other common equivalent shares outstanding during each period.
      Diluted common shares are calculated in accordance with the treasury stock
      method, which treats the proceeds from the exercise of all warrants and options
      as if they were used to reacquire stock at market value.




11






(In
      thousands, except per share amounts)




**Three
                Months Ended**
                **July
                  31,**
            
            
            **Nine
                Months Ended**
                **July
                  31,****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Income
                from operations
            
            $
            1,079
            
            $
            1,322
            
            $
            3,097
            
            $
            3,347Effect
                of accounting change
            
            
            -
            
            
            -
            
            
            261
            
            
            -Net
                income, as reported
            
            $
            1,079
            
            $
            1,322
            
            $
            3,358
            
            $
            3,347Weighted
                average number of shares outstanding
            
            
            12,580
            
            
            12,312
            
            
            12,552
            
            
            12,107Incremental
                shares from the assumed exercise of dilutive stock options
            
            
            310
            
            
            657
            
            
            477
            
            
            577Dilutive
                weighted shares
            
            
            12,890
            
            
            12,969
            
            
            13,029
            
            
            12,684BasicIncome
                from operations:
            
            $
            0.09
            
            $
            0.11
            
            $
            0.25
            
            $
            0.28Effect
                of accounting change:
            
            
            -
            
            
            -
            
            
            0.02
            
            
            -Net
                income:
            
            $
            0.09
            
            $
            0.11
            
            $
            0.27
            
            $
            0.28DilutedIncome
                from operations:
            
            $
            0.08
            
            $
            0.10
            
            $
            0.24
            
            $
            0.26Effect
                of accounting change:
            
            
            -
            
            
            -
            
            
            0.02
            
            
            -Net
                income:
            
            $
            0.08
            
            $
            0.10
            
            $
            0.26
            
            $
            0.26





**NOTE
      E. LEGAL PROCEEDINGS**





On
      March
      22, 2001, we filed GameTech International, Inc. v. Trend Gaming Systems, LLC,
      CIV 01-0540 PHX LOA, a claim in the United States District Court for the
      District of Arizona, seeking a declaratory judgment that we are not in material
      breach of our November 1, 1999 Distribution Agreement with Trend Gaming Systems,
      LLC (“Trend”), and seeking damages for past due payments and wrongful
      withholdings by Trend. Trend counterclaimed, alleging that its payments were
      in
      compliance with its contractual obligations. Trend also contended that we were
      in breach of certain of our contractual obligations to Trend, including that
      we
      had wrongfully terminated Trend. On December 16, 2002, the court entered at
      our
      request an order enjoining Trend from using approximately $540,000 in funds
      it
      had collected on our behalf, pending a trial on our ownership interest in those
      funds. The money was placed in two bank accounts/constructive trusts, subject
      to
      the court’s control. The sums in those accounts now total approximately
      $620,000. In addition, collections of accounts receivable by Trend, if any,
      are
      also being placed in that account, pending the resolution of the case. We have
      posted a $450,000 deposit with the court as a bond, which is presented as
      restricted cash on our condensed consolidated balance sheets. The accounts
      receivable from Trend were fully reserved as of July 31, 2007. Trial in this
      matter commenced October 4, 2004. On November 1, 2004, the jury returned a
      verdict in favor of Trend against us in the amount of $3.5 million in
      compensatory damages. The jury also awarded us $735,000 in compensatory damages
      against Trend for funds Trend collected on our behalf but failed to remit to
      us.
      The court denied all of our post-trial motions, except that it maintained the
      injunction imposing a constructive trust, pending resolution of the issues
      on
      appeal. The court setoff the jury awards and entered an amended judgment for
      Trend on May 12, 2005, in the amount of $2.8 million, plus interest on that
      sum
      at the rate of 3.31% per annum beginning March 30, 2005.





We
      appealed to the United States Court of Appeals for the Ninth Circuit on April
      8,
      2005. We posted a supersedeas bond on April 8, 2005, in the court-appointed
      amount of $3.4 million, which bond stays any action by Trend to collect on
      the
      judgment, pending appeal. Trend initially sought an award of $810,000 in legal
      fees and $26,000 in expenses and costs. In an amended request, Trend sought
      an
      award of $1.4 million in legal fees and $61,000 in expenses and costs. The
      court
      awarded Trend $909,000 in legal fees, expenses and costs plus interest of 3.77%
      per annum beginning August 5, 2005. We appealed the fee award to the United
      States Court of Appeals for the Ninth Circuit on August 5, 2005. We posted
      an
      additional supersedeas bond with the court on August 18, 2005, in the amount
      of
      $1.1 million, thereby staying any action by Trend to collect the fees, pending
      appeal. Any cash used in the collateralization of the bonds is accounted for
      as
      restricted short-term investments on our consolidated balance sheets. On April
      19, 2007, the United States Court of Appeals for the Ninth Circuit heard oral
      arguments for the appeal.





On
      May
      16, 2007, the United States Court of Appeals for the Ninth Circuit issued its
      ruling in our favor upholding each of the items we appealed, reversing the
      trial
      court’s rulings and remanding the matter back to the trial court for a new
      trial. Currently,
      there is no set date as to when the matter will be returned to the control
      of
      the lower court. Additionally, as a result of this decision, the supersedeas
      bonds we posted prior to filing the appeal were released by the lower court
      as
      of August 18, 2007. Upon receipt of the released supersedeas bonds from the
      court we will proceed to terminate the supporting insurance polices and have
      the
      letters of credit released so that we will have access to the certificates
      of
      deposit which served as the cash security for the supersedeas bonds. There
      is no
      set date as to when these actions will be completed.





For
      the
      year ended October 31, 2004, we recorded an estimated loss contingency in the
      Trend litigation of $3.6 million, which was estimated based on the amounts
      of
      the judgment described above. We recorded an additional loss contingency of
      $72,000 in the third quarter of fiscal 2005 to account for the increased total
      award to Trend for legal fees and expenses and costs of $909,000. In addition,
      loss contingencies of $31,000 and $124,000 were recorded in the three and
      nine-month period ended July 31, 2007, respectively. Loss contingencies of
      $33,000 and $99,000 were recorded in the three and nine-month period ended
      July
      31, 2006, respectively, to account for interest accrued on the Trend judgment.
      With the United States Court of Appeals for the Ninth Circuit ruling upholding
      each of the items we appealed, reversing the trial court’s rulings and remanding
      the matter back to the trial court for a new trial, we believe there is no
      further justification at this time for accruing additional loss
      contingencies.




12





On
      March
      2, 2004, the jury rendered a verdict in our favor awarding compensatory and
      punitive damages against Trend Gaming, LLC, a Kentucky LLC (“Trend Gaming”)
      (involving a prior distribution agreement in Virginia) in the total amount
      of
      approximately $1.5 million. The jury also returned a verdict against Steven
      W.
      and Rhonda Hieronymus awarding compensatory and punitive damages of $1.0
      million. The court reduced compensatory damages against Trend Gaming to $1.1
      million. The court affirmed $150,000 in punitive damages against Trend Gaming
      and awarded us fees and costs of suit against Trend Gaming in the amount of
      $650,000. Compensatory damages against Mr. and Mrs. Hieronymus have been reduced
      to $762,000 but the punitive damage award against them in the amount of $150,000
      remains unchanged. Of the total compensatory damages of $1.1 million awarded
      to
      us, $762,000 represents compensation for lost profits. We can only collect
      such
      damages from one of the defendants to avoid a double recovery. Defendants
      appealed the judgment against them. On March 5, 2007, the Appellate Court
      entered its ruling affirming the judgment of the lower court in our favor.
      We
      have not recorded an estimated gain contingency, as we can give no assurances
      whether we will be able to collect any award from the defendants.





We
      are
      involved in various other legal proceedings arising in the ordinary course
      of
      our business. We do not believe that any of those proceedings will have a
      material adverse effect on our business, results of operations, or financial
      condition.





**NOTE
      F. CREDIT AGREEMENT**





On
      March
      28, 2007, the Company entered into a credit facility which consists of a term
      note for $30.0 million and a revolving line of credit in the amount of $10.0
      million relating to the acquisition of Summit. The term note bears interest
      at
      the prime rate plus 1.75%, with a minimum annual rate of 9.75%. As of July
      31,
      2007 the interest rate was 10.0% and the balance of the term note was $30.0
      million. Interest payments are due monthly and beginning January 1, 2008,
      principal payments of $1.1 million are due quarterly with the remainder of
      $11.3
      million due March 28, 2012. The revolving line of credit bears interest based
      on
      the prime rate plus 0.50%, with a minimum annual rate of 8.50%. As of July
      31,
      2007 the interest rate was 8.75% and the outstanding balance of the revolver
      was
      $8.9 million. The revolving line of credit requires monthly payments of interest
      only and the outstanding balance is due on March 28, 2012. We can give no
      assurance that the revolving credit facility will be renewed. Our obligations
      under the agreement are secured by substantially all of our assets.





The
      credit facility provides for a prepayment premium of 1% in the first year and
      0.5% in the second year under specified circumstances. The credit facility
      provides for mandatory prepayments under specified circumstances, including
      a
      requirement to prepay an amount equal to 50% of Excess Cash Flow, as defined,
      if
      the ratio of Consolidated Funded Indebtedness to Consolidated EBITDA less
      Capital Expenditures, as defined, is greater than or equal to 2 to 1.





The
      credit facility contains numerous affirmative and negative covenants, including
      restrictions on liens, limitations on indebtedness, prohibitions on fundamental
      changes, restrictions on investments, prohibition of dividends or redemptions
      and limitations on capital expenditures. We must maintain Qualified Cash, as
      defined, of at least $6.0 million (see Note J Subsequent Events increasing
      Qualified Cash from $4.0 million to $6.0 million). The credit facility also
      contains specified financial covenants, including a leverage ratio, fixed charge
      coverage ratio and EBITDA ratio. Upon an event of default, the lenders under
      the
      credit facility can accelerate all obligations under the agreement and terminate
      the revolving credit commitment. We were in compliance with all terms and
      covenants of the agreement as of July 31, 2007.





On
      March
      28, 2007, we terminated our prior revolving line-of-credit as part of the
      requirements of our new credit facility.





**NOTE
      G. INCOME TAXES**





We
      recorded our income tax provision at an effective rate of 37.1% for the nine
      months ended July 31, 2007, compared with 39.2% for the nine months ended July
      31, 2006. The actual effective tax rate is different from the expected federal
      rate of 34%, reflecting certain permanent differences between financial
      accounting and tax accounting, and state and foreign tax
      provisions.





**NOTE
      H. RESTRICTED SHORT TERM INVESTMENTS**





Restricted
      short-term investments at July 31, 2007 and October 31, 2006 consisted of bank
      certificates of deposit used to collateralize irrevocable standby letters of
      credit pledged to the court to secure certain previous judgments against us
      pending results of our appeals. The certificates of deposit are in the amounts
      of $3.4 million and $1.1 million and are at interest rates of 3.78% and 4.51%,
      respectively, and mature April 6, 2008 and August 10, 2007, respectively. (See
      Note E. Legal Proceedings.)




13




**NOTE
      I. RELATED PARTY TRANSACTIONS**





On
      March
      28, 2007, we acquired essentially all of the assets of Summit Amusement &
Distributing, Ltd. (Summit). Since that time, we have sold video lottery
      terminals to Amusement Services, LLC, which is owned by the President of Summit,
      a division of the Company. For the three and nine-month period ended July 31,
      2007, we sold $128,899 and $192,023 to Amusement Services, LLC, respectively.
      As
      of July 31, 2007, the amount due from Amusement Services, LLC was $126,593
      and
      is included in our accounts receivable balance.





We
      have
      also purchased equipment from Ceronix, Inc., which is controlled by one of
      our
      board members. **** For
      the
      three and nine-month period ended July 31, 2007, we bought $4,384 and $7,132
      from Ceronix, Inc., respectively. As of July 31, 2007, there was no amount
      due.





**NOTE
      J. SUBSEQUENT EVENTS**





On
      September 4, 2007 the Board of Directors announced that they have authorized
      expending up to $5.0 million in a share repurchase program.  The shares
      from the new $5.0 million authorization are expected to be acquired through
      open
      market transactions over a period of up to the next 12 months.  The actual
      amount and timing of dollars expended and shares repurchased will be subject
      to
      business and market conditions and applicable SEC rules.





On
      August
      30, 2007, we entered into Amendment Number One to Financing Agreement dated
      effective as of August 24, 2007 amending our credit facility agreement (see
      “Note F Credit Agreement”). The Amendment Number One to Financing Agreement
      provided:





·
            The
                receipt of $4,485,000 from appeal bonds being released pursuant to
                the
                successful appeal of litigation with Trend Gaming Systems LLC, will
                be
                applied against the Revolving Loans of Financing Agreement without
                prepayment penalty applying.


·
            The
                authorization to repurchase up to $5.0 million of our publicly traded
                stock in the open market.


·
            An
                increase in the minimum limit of Qualified Cash from $4.0 million
                to $6.0
                million.





**NOTE
      K. BUSINESS SEGMENT INFORMATION**





During
      the fiscal quarter ended April 30, 2007, management reviewed the Company’s
      operating segments in accordance with SFAS 131, “Disclosure about Segments of an
      Enterprise and Related Information.” Based upon the changes beginning in March
      2007, with the acquisition of Summit, in the manner in which management manages
      the Company, as well as the current economic characteristics of its operating
      segments, management has determined that a new operating segment is appropriate.
      Therefore, the segment discussion outline below represents the adjusted segment
      structure as determined by management in accordance with SFAS 131.





The
      Company has identified two operating segments. Each operating segment is
      considered a reporting segment which is described as follows: the design,
      development, and marketing of interactive electronic bingo systems consisting
      of
      portable and fixed-based systems and the manufacturing and sale of video lottery
      terminals.





The
      accounting policies of the reporting segments are the same as those described
      in
      the summary of significant accounting policies. The Company evaluates the
      performance of these segments based on many factors including sales, sales
      trends, margins, and operating performance.





No
      significant inter-company revenue is realized in these reporting segments.
      Interest income and expense and amortization of identifiable intangibles are
      not
      allocated but are included in bingo systems in the measurement of reporting
      segments profits reviewed by management. The provision for income taxes is
      also
      not included in the measure of reporting segment operating profits reviewed
      by
      management.





14





Financial
      information for the two reporting segments is as follows: (in
      thousands)




**Three
                Months Ended**
              **July
                31,**
            
            **Nine
                Months Ended**
              **July
                31,****2007**
            
            **2006**
            
            **2007**
            
            **2006****Net
                Revenue**Bingo
                systems
            
            $
            11,623
            
            $
            12,430
            
            $
            35,972
            
            $
            37,310Video
                lottery terminal
            
            
            5,014
            
            
            -
            
            
            6,093
            
            
            -$
            16,637
            
            $
            12,430
            
            $
            42,065
            
            $
            37,310**Net
                Cost of Revenue**Bingo
                systems
            
            $
            5,177
            
            $
            5,113
            
            $
            15,400
            
            $
            14,720Video
                lottery terminal
            
            
            2,870
            
            
            -
            
            
            3,516
            
            
            -$
            8,047
            
            $
            5,113
            
            $
            18,916
            
            $
            14,720**Net
                Income**Bingo
                systems
            
            $
            (92
            )
            $
            1,322
            
            $
            2,169
            
            $
            3,347Video
                lottery terminal
            
            
            1,171
            
            
            -
            
            
            1,189
            
            
            -$
            1,079
            
            $
            1,322
            
            $
            3,358
            
            $
            3,347




**July
                    31,**
                  **2007**
            
            
            **October
                  31,**
                **2006****Identifiable
                Assets**Bingo
                systems
            
            $
            91,921
            
            $
            59,214Video
                lottery terminal
            
            
            10,643
            
            
            -$
            102,564
            
            $
            59,214





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





The
      following discussion should be read in conjunction with our unaudited condensed
      consolidated financial statements and notes thereto included elsewhere in this
      report, as well as our audited consolidated financial statements for the fiscal
      year ended October 31, 2006 contained in our Annual Report on Form
      10-K.





This
      document includes various “forward-looking statements” 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, which represent our expectations
      or
      beliefs concerning future events. Statements containing expressions such as
      “believes,” “anticipates,” or “expects,” used in our press releases and periodic
      reports on Forms 10-K and 10-Q filed with the SEC, are intended to identify
      forward-looking statements. All forward-looking statements involve risks and
      uncertainties. Although we believe our expectations are based upon reasonable
      assumptions within the bounds of our knowledge of our business and operations,
      there can be no assurances that actual results will not differ materially from
      expected results. We caution 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 include those discussed under the heading “Risk Factors” in our Annual
      Report on Form 10-K for the year ended October 31, 2006 and in this report
      readers are cautioned not to place undue reliance on forward-looking statements,
      which speak only as of the date thereof. We undertake no obligation to publicly
      release any revisions to such forward-looking statements to reflect events
      or
      circumstances after the date hereof.





**OVERVIEW**





We
      design, develop, and market interactive electronic player terminals and bingo
      systems. We currently market portable systems that can be played anywhere within
      a bingo hall and fixed-base systems with touchscreen-activated monitors. On
      March 28, 2007, we completed the acquisition of substantially all of the assets
      of Summit Amusement & Distributing, Ltd. (“Summit”) for $41.7 million,
      including approximately $1.9 million in one time expenses related to the
      acquisition. Summit is a leading developer and manufacturer of entertainment
      driven gaming devices, including primarily video lottery terminal equipment
      and
      related software. For our three most recent fiscal years ended October 31,
      2006,
      2005, and 2004, our portable terminals generated approximately 80%, 77%, and
      74%
      of our revenue, respectively, while, during those same years, our fixed-base
      terminals generated the balance of our revenue. For the three months ended
      July
      31, 2007, video lottery terminal sales accounted for 30%, portable systems
      accounted for 55%, and fixed-based units accounted for 15% of our revenue.
      For
      the nine months ended July 31, 2007, video lottery terminal sales accounted
      for
      14%, portable systems accounted for 68% and fixed-base systems accounted for
      18%
      of our revenue. As of July 31, 2007, we had bingo systems in service in 40
      states and in six non-domestic countries and video lottery terminal sales in
      15
      states and various Native American locations.




15




We
      generate revenue by placing electronic bingo systems in bingo halls under
      contracts based on (1) a fixed fee per use per session; (2) a fixed
      weekly fee per terminal; or (3) a percentage of the revenue generated by
      each terminal. We also generate revenue by placing video lottery terminals
      under
      contract in casinos based on a percentage of revenue generated by each terminal
      and through the sale of terminals, software updates, and services. Revenue
      growth for our bingo systems is affected by player acceptance of electronic
      bingo as an addition or an alternative to paper bingo, our ability to expand
      operations into new markets and our ability to increase our market share.
      Fixed-base bingo terminals generate greater revenue per terminal than portable
      bingo terminals, but also require a greater initial capital investment. Revenue
      growth for our video lottery terminal sales is affected by our ability to expand
      our customer base into new markets and increase our market share.





We
      typically install our electronic bingo systems at no charge to our customers,
      and we capitalize the costs. We record depreciation of bingo equipment over
      either a three or five-year estimated useful life using the straight-line method
      of depreciation. Video lottery terminals installed in casinos under a
      participation contract are depreciated over a five year estimated useful life
      using the straight line method of depreciation.





Our
      expenses consist primarily of: (a) cost of revenue for bingo units,
      consisting of expenses associated with technical and operational support of
      the
      bingo systems within bingo halls, depreciation and amortization of bingo
      terminals, repair, refurbishment, and disposals of bingo terminals and related
      support equipment, and excess or obsolescence allowance; (b) cost of goods
      sold for the video lottery terminals, consisting of material, labor, and
      overhead; (c) general and administrative costs, consisting of activities
      associated with management of our company and related support, which includes
      finance and accounting, legal, compliance, information systems, human resources,
      and accounts receivable reserve; (d) sales and marketing, consisting
      primarily of commissions paid to distributors for promoting and supporting
      our
      products and an internal sales force with a focus upon generating new customers
      and upgrades for existing customers; and (e) research and development,
      consisting of company-sponsored research and development activities to provide
      players with new or enhanced products on which to play electronic
      bingo.





On
      May
      16, 2007, the United States Court of Appeals for the Ninth Circuit issued its
      ruling in our favor in GameTech International, Inc. v. Trend Gaming Systems,
      LLC, upholding each of the items we appealed, reversing the trial court’s
      rulings and remanding the matter back to the trial court for a new trial. As
      a
      result of this decision, on August 18, 2007, bonds we posted prior to filing
      the
      appeal have been made available for return to us. For additional information,
      see Note E to our financial statements included herein.





In
      June
      2007, Donald Tateishi was appointed as Chief Financial Officer. In July 2007,
      Nick Greenwood was appointed as Vice President of Sales and Product
      Marketing.





On
      September 4, 2007 the Board of Directors announced that they have authorized
      expending up to $5.0 million in a share repurchase program.  The shares
      from the new $5.0 million authorization are expected to be acquired through
      open
      market transactions over a period of up to the next 12 months.  The actual
      amount and timing of dollars expended and shares repurchased will be subject
      to
      business and market conditions and applicable SEC rules.





On
      August
      30, 2007, we entered into Amendment Number One to Financing Agreement dated
      effective as of August 24, 2007 amending our credit facility agreement (see
      “Note F Credit Agreement”). The Amendment Number One to Financing Agreement
      provided:





·
            The
                receipt of $4,485,000 from appeal bonds being released pursuant to
                the
                successful appeal of litigation with Trend Gaming Systems LLC, will
                be
                applied against the Revolving Loans of Financing Agreement without
                prepayment penalty applying.


·
            The
                authorization to repurchase up to $5.0 million of our publicly traded
                stock in the open market.


·
            An
                increase in the minimum limit of Qualified Cash from $4.0 million
                to $6.0
                million.





**APPLICATION
      OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES**





Management’s
      Discussion and Analysis of Financial Condition and Results of Operations
      discusses our condensed consolidated financial statements, which have been
      prepared in accordance with U.S. generally accepted accounting principles.
      The
      preparation of these financial statements requires us to make estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      the
      disclosure of contingent assets and liabilities at the balance sheet dates
      and
      reported amounts of revenue and expenses during the reporting period. On an
      ongoing basis, we evaluate our estimates and judgments, including those related
      to revenue recognition, bad debts, bingo terminal depreciation, goodwill
      impairment, obsolescence, and contingencies and litigation. We base our
      estimates and judgments on historical experience and on various other factors
      that we believe are reasonable under the circumstances, the results of which
      form the basis for making judgments about the carrying values of assets and
      liabilities that are not readily apparent from other sources. Actual results
      may
      differ from these estimates under different assumptions or
      conditions.





16




Changes
      in internal or external conditions could cause actual results to differ from
      our
      estimates and could cause future reporting periods to be adversely affected.
      If
      changes in conditions lead us to believe that our criteria for revenue
      recognition are not met for future transactions, revenue recognized for future
      reporting periods could be significantly less. Changes in financial conditions
      of specific customers or in overall collection trends may result in adjustments
      to our reserves for doubtful accounts. Changes in technology, our competitors’
offerings, market conditions, or other factors affecting our business prospects
      could result in an increase in reserves for bingo terminal obsolescence or
      in an
      impairment to the carrying value of goodwill, other intangible assets or the
      capitalized cost of developed software. As additional information becomes
      available and we reassess our potential liability related to litigation or
      other
      contingencies, we may revise our estimates and such revisions could have an
      adverse effect on our results of operations, cash flows, and financial
      position.





***Revenue
      Recognition***





We
      recognize revenue when the following criteria are met:


·
            Persuasive
                evidence of an arrangement between us and our customer
                exists,


·
            Delivery
                has occurred or services have been
                rendered,


·
            The
                price is fixed or determinable, and


·
            Collectibility
                is reasonably assured.





We
      earn
      our revenue in a variety of ways. We offer our products for lease or sale.
      We
      also sell service and software updates for our sold equipment.





*Bingo
      Equipment*


Revenue
      is recognized for bingo terminals and bingo systems installed as a single
      element placed in bingo halls under contracts based on (1) a fixed fee per
      use per session; (2) a fixed weekly fee per terminal; or (3) a
      percentage of the revenue generated by each terminal. Revenue recognition is
      a
      key component of the Company's results of operations, and determines the timing
      of certain expenses, such as commissions. The Company recognizes revenue when
      all of the following factors exist: (a) evidence of an arrangement with the
      customer; (b) play or availability of the bingo terminals; (c) a fixed
      or determinable fee; and (d) collectibility is reasonably assured. We
      exercise judgment in assessing the credit worthiness of customers to determine
      whether collectibility is reasonably assured. Should changes in conditions
      cause
      us to determine the factors are not met for future transactions, revenue
      recognized for future reporting periods could be adversely affected.





*Video
      Lottery Terminal*


Our
      product sales revenues are generated from the sale of video lottery terminals,
      conversion kits, content fees, license fees, participation fees, equipment
      and
      services. Revenues are reported net of discounts, sales taxes and other taxes
      of
      a similar nature. Revenues related to contracted production are recognized
      as
      the related work is delivered. We recognize license fee revenues over the term
      of the associated agreement unless the fee is in exchange for products delivered
      or services performed that represent the culmination of a separate earnings
      process. Amounts received prior to completing the earnings process are deferred
      until revenue recognition criteria are met.





Our
      sales
      credit terms are predominately 30 days. In certain limited circumstances,
      we may extend credit terms up to 160 days.





***Bingo
      Equipment, Furniture, and Other Equipment***





Bingo
      equipment includes portable and fixed-base player terminals as well as file
      servers, caller units, point-of-sale units, and other support equipment. Bingo
      equipment, furniture, and other equipment are stated at cost and depreciated
      using the straight-line method over the estimated useful lives of the assets.
      The estimated useful lives are as follows:





Bingo
                equipment
            
            
            3-5
                yearsOffice
                furniture and equipment
            
            
            3-7
                yearsLeasehold
                improvements
            
            
            10
                years





We
      provide reserves for excess or obsolete bingo terminals on hand not expected
      to
      be used. The reserves are based upon several factors, including estimated
      forecast of bingo terminal demand for placement into halls. The estimates of
      future bingo terminal demand may prove to be inaccurate, in which case we may
      have understated or overstated the provision required for excess or obsolete
      bingo terminals. Although we attempt to assure the accuracy of our estimated
      forecasts, any significant unanticipated changes in demand or technological
      developments could have a significant impact on the value of bingo terminals,
      results of operations, and financial condition.




17




*Software
      Development
      Capitalization*




We
      capitalize costs related to the development of certain software products that
      meet the criteria of Statement of Financial Accounting Standards (“SFAS”) No. 86
      - *Accounting
      for the Costs of Computer Software to Be Sold,*  *Leased,
      or Otherwise Marketed* .
      SFAS
      No. 86 provides for the capitalization of computer software that is to be used
      as an integral part of a product or process to be sold or leased, after
      technological feasibility has been established for the software and all research
      and development activities for the other components of the product or process
      have been completed. We are capitalizing qualified costs of software developed
      for new products or for significant enhancements to existing products. We cease
      capitalizing costs when the product is available for general release to our
      customers. We amortize the costs on a straight-line method over the estimated
      economic life of the product beginning when the product becomes available for
      general release.





The
      achievement of technological feasibility and the estimate of a product’s
      economic life require judgment. Any changes in key assumptions, market
      conditions, or other circumstances could result in an impairment of the
      capitalized asset and a charge to our operating results.





***Accounts
      Receivable and Allowance for Doubtful Accounts***





Our
      receivables are recorded when revenue is recognized in accordance with our
      revenue recognition policy and represent claims against third parties that
      may
      be settled in cash. The carrying value of our receivables, net of allowance
      for
      doubtful accounts represents their estimated net realizable value.





*Bingo
      Equipment*


We
      have
      established an allowance for uncollectible accounts based primarily on
      management’s evaluation of the customer’s financial condition, past collection
      history and aging of accounts receivable balances. Our customer base consists
      primarily of entities operating in charitable, Native American, and commercial
      bingo halls located throughout the United States. In some jurisdictions, the
      billing and collection function is performed by a distributor as part of a
      distributor relationship, and in those instances, we maintain allowances for
      possible losses resulting from non-payment by both the customer and distributor.
      We perform ongoing evaluations of customers and distributors for credit
      worthiness, economic trends, changes in customer payment terms, and historical
      collection experience when evaluating the adequacy of our allowance for doubtful
      accounts. We also reserve a percentage of accounts receivable based on aging
      categories. In determining these percentages, we review historical write-offs
      of
      receivables, payment trends, and other available information. While such
      estimates have been within our expectations and the provisions established,
      a
      change in the financial condition of specific customers or in overall trends
      experienced may result in future adjustments of estimates of collectibility
      of
      our receivables.





*Video
      Lottery Terminal*


We
      estimate the possible losses resulting from non-payment of outstanding accounts
      receivables arising from the sale of video lottery terminals and related
      equipment. Our customer base consists of casinos located in various states
      and
      Native American casinos. We perform ongoing evaluations of our customers and
      distributors for credit worthiness, economic trends, changes in our customer
      payment terms, and historical collection experience when evaluating the adequacy
      of our allowance for doubtful accounts.





***Goodwill***





We
      are
      required to perform an annual goodwill impairment review, and depending upon
      the
      results of that measurement, the recorded goodwill may be written down and
      charged to income from operations when its carrying amount exceeds its estimated
      fair value. Goodwill is reviewed for possible impairment annually, or more
      frequently whenever events or changes in circumstances indicate that the
      carrying value may not be recoverable, such as a significant adverse change
      in
      legal factors or in the business climate, an adverse action or assessment by
      a
      regulator, unanticipated competition, or a loss of key personnel.





***Long-Lived
      Assets***





We
      have
      adopted the provisions of SFAS No. 144, *Accounting
      for the*  *Impairment
      or Disposal of Long-Lived Assets* .
      SFAS
      No. 144 requires impairment losses to be recognized for long-lived assets and
      identifiable intangibles, other than goodwill, used in operations when
      indicators of impairment are present and the estimated undiscounted cash flows
      are not sufficient to recover the assets’ carrying amount. The impairment loss
      is measured by comparing the fair value of the asset to its carrying
      amount.





***Legal
      Contingencies***





We
      are
      currently involved in various claims and legal proceedings. Periodically, we
      review the status of each matter and assess the potential financial exposure.
      If
      the potential loss from any claim or legal proceeding is considered probable
      and
      the amount can be estimated, we accrue a liability for the estimated loss.
      Significant judgment is required in both the determination of probability and
      the determination as to whether an exposure is reasonably estimable. Because
      of
      uncertainties related to these matters, accruals are based only on the best
      information available at the time. As additional information becomes available,
      we reassess the potential liability related to pending claims and litigation
      and
      may revise these estimates. Such revisions in the estimates of the potential
      liabilities could have a material impact on our results of operations, and
      financial condition.




18




**RESULTS
      OF OPERATIONS**





***Three
      Months Ended July 31, 2007 compared to Three Months Ended July 31,
      2006***


The
      following table sets forth certain selected unaudited condensed consolidated
      financial data for the periods indicated:


**Three
                  Months Ended July
                  31,****(in
                  thousands)****Including**
                **Summit**
              
              
              
              **Excluding
                  Summit****2007**
              
              
              
              **2007**
              
              **2006**
              
              **%
                  Change**Net
                  revenue
              
              $
              16,637
              
              
              
              $
              11,623
              
              $
              12,430
              
              -6.5
              %Cost
                  of revenue
              
              
              8,047
              
              
              
              
              5,177
              
              
              5,113
              
              
              1.3
              %Gross
                  profit
              
              
              8,590
              
              
              
              
              6,446
              
              
              7,317
              
              
              -11.9
              %Operating
                  expenses:General
                  and administrative
              
              
              2,430
              
              
              
              
              2,020
              
              
              1,885
              
              
              7.2
              %Sales
                  and marketing
              
              
              2,528
              
              
              
              
              2,299
              
              
              2,777
              
              
              -17.2
              %Research
                  and development
              
              
              1,064
              
              
              
              
              688
              
              
              550
              
              
              25.1
              %Loss
                  contingencies
              
              
              31
              
              
              
              
              31
              
              
              33
              
              
              -6.1
              %Total
                  operating expenses
              
              
              6,053
              
              
              
              
              5,038
              
              
              5,245
              
              
              -3.9
              %Income
                  from operations
              
              
              2,537
              
              
              
              
              1,408
              
              
              2,072
              
              
              -32.0
              %Interest
                  expense
              
              
              (977
              )
              
              
              
              (977
              )
              
              (2
              )
              
              0.0
              %Other
                  income (expense), net
              
              
              214
              
              
              
              
              203
              
              
              131
              
              
              55.0
              %Income
                  before income taxes
              
              
              1,774
              
              
              
              
              634
              
              
              2,201
              
              
              -71.2
              %Provision
                  for income taxes
              
              
              695
              
              
              
              
              725
              
              
              879
              
              
              -17.5
              %Income
                  from operations, net of tax
              
              
              1,079
              
              
              
              
              (91
              )
              
              1,322
              
              -106.9
              %Cumulative
                  effect of change in accounting estimate (net of tax)
              
              
              -
              
              
              
              
              -
              
              
              -
              
              
              0.0
              %Net
                  income
              
              $
              1,079
              
              
              
              $
              (91
              )
              $
              1,322
              
              -106.9
              %


As
      disclosed in Note C to our consolidated financial statements included in this
      quarterly report, we acquired Summit on March 28, 2007. Net revenues and income
      from operations for Summit in the three months ended July 31, 2007 were $5.0
      million and $1.2 million, respectively. The following discussion of the results
      of operations excludes the results of Summit, except for the amortization of
      identifiable intangibles and interest expense related to the Summit acquisition
      which are included in our bingo systems segment.





***Net
      Revenue***





Net
      revenue for the third quarter of 2007 decreased 6.5% to $11.6 million from
      $12.4
      million in the comparable quarter in 2006. The decrease in net revenue for
      the
      quarter is a result of several factors. Bingo net revenue decreased $0.8 million
      for the quarter, driven by increased regional competition and pricing pressures
      as well as continued migration of commercial accounts to more profitable slot
      machine style gaming over bingo. However, offsetting the decline in revenue
      was
      increased revenue in Michigan and other key states, increased expansion in
      the
      United Kingdom, as well as the continued popularity and rollout of our Traveler
      and Tracker terminals.





***Cost
      of Revenue***





Total
      cost of revenue increased 1.3% to $5.2 million, or 44.5% of net revenue in
      the
      third quarter of 2007, from $5.1 million, or 41.1% of net revenue, for the
      comparable quarter in 2006. Bingo equipment depreciation increased by
      approximately $185,000 over the comparable quarter in 2006 primarily due to
      our
      investment in Traveler and Tracker terminals. Additionally, the amortization
      of
      identifiable intangible assets increased due to the acquisition of
      Summit.





***Gross
      Profit***




Gross
      profit decreased 11.9% to $6.4 million, or 55.5% of net revenue in the third
      quarter of 2007, from $7.3 million, or 58.9% of net revenue, for the comparable
      quarter in 2006. The decrease is due to the revenue decline resulting from
      the
      factors mentioned above along with the increase in the amortization of
      identifiable intangible assets due to the Summit acquisition also noted above.




19




***Operating
      Expenses***





Total
      operating expenses decreased 3.9% to $5.0 million, or 43.3% of net revenue,
      in
      the third quarter of 2007, from $5.2 million, or 42.2% of net revenue, for
      the
      comparable quarter in 2006. Operating expenses include general and
      administrative, sales and marketing, including distributor commissions, research
      and development, and loss contingencies.





General
      and administrative costs increased 7.2% to $2.0 million, or 17.4% of net
      revenue, in the third quarter of 2007, from $1.9 million, or 15.2% of net
      revenue, for the comparable quarter in 2006. The increase was attributable
      to a
      credit posted in the comparable quarter of 2006 for a worker’s compensation
      audit adjustment. Additionally, the cost of a financial consultant was included
      in the third quarter ending July 31, 2007.





Sales
      and
      marketing expenses decreased 17.2% to $2.3 million, or 19.8% of net revenue,
      in
      the third quarter of 2007, from $2.8 million, or 22.3% of net revenue, for
      the
      comparable quarter in 2006. The decrease is primarily due to a decrease in
      salary and other employee costs along with a decrease in advertising fees for
      Canadian locations due to a legislative change, and a decrease in distributor
      commissions.





Research
      and development expenses increased 25.1% to $0.7 million, or 5.9% of net
      revenue, in the third quarter of 2007, from $0.6 million, or 4.4% of net
      revenue, for the comparable quarter in 2006. The increase was primarily due
      to
      an increase in salary and other employee costs from the prior period, as well
      as
      an increase in project costs offset by a decrease in the depreciation of fixed
      assets.





Loss
      contingencies, representing interest accrued on a legal judgment, totaled
      $31,000, or 0.3% of net revenue, in the third quarter of 2007, from $33,000,
      or
      0.3% of net revenue, for the comparable quarter in 2006. For additional
      information, see Note E to the consolidated financial statements included
      herein.





***Interest
      Expense***





Interest
      expense increased to $977,000 for the third quarter of 2007, compared with
      $2,000 of interest expense for the comparable period in 2006. The increase
      was
      due to the borrowings under our term loan and revolving credit facility which
      were used to fund the acquisition of Summit.





***Nine
      Months Ended July 31, 2007 compared to Nine Months Ended July 31,
      2006***




**Nine
                Months Ended July 31,**
              **(in
                thousands)****Including**
              **Summit**
            
            
            
            **Excluding
                Summit****2007**
            
            
            
            
            **2007**
            
            
            **2006**
            
            
            **%
                Change**Net
                revenue
            
            $
            42,065
            
            
            
            $
            35,972
            
            $
            37,310
            
            
            -3.6
            %Cost
                of revenue
            
            
            18,916
            
            
            
            
            15,400
            
            
            14,720
            
            
            4.6
            %Gross
                profit
            
            
            23,149
            
            
            
            
            20,572
            
            
            22,590
            
            
            -8.9
            %Operating
                expenses:General
                and administrative
            
            
            6,398
            
            
            
            
            5,813
            
            
            6,799
            
            
            -14.5
            %Sales
                and marketing
            
            
            8,459
            
            
            
            
            8,148
            
            
            8,288
            
            
            -1.7
            %Research
                and development
            
            
            2,451
            
            
            
            
            1,904
            
            
            2,227
            
            
            -14.5
            %Loss
                contingencies
            
            
            124
            
            
            
            
            124
            
            
            99
            
            
            25.3
            %Total
                operating expenses
            
            
            17,432
            
            
            
            
            15,989
            
            
            17,413
            
            
            -8.2
            %Income
                from operations
            
            
            5,717
            
            
            
            
            4,583
            
            
            5,177
            
            
            -11.5
            %Interest
                expense
            
            
            (1,332
            )
            
            
            
            (1,332
            )
            
            (8
            )
            
            0.0
            %Other
                income (expense), net
            
            
            539
            
            
            
            
            525
            
            
            336
            
            
            56.3
            %Income
                before income taxes
            
            
            4,924
            
            
            
            
            3,776
            
            
            5,505
            
            
            -31.4
            %Provision
                for income taxes
            
            
            1,827
            
            
            
            
            1,868
            
            
            2,158
            
            
            -13.4
            %Income
                from operations, net of tax
            
            
            3,097
            
            
            
            
            1,908
            
            
            3,347
            
            
            -43.0
            %Cumulative
                effect of change in accounting estimate(net
                of tax)
            
            
            261
            
            
            
            
            261
            
            
            -
            
            
            0.0
            %Net
                income
            
            $
            3,358
            
            
            
            $
            2,169
            
            $
            3,347
            
            
            -35.2
            %




20




As
      disclosed in Note C to our consolidated financial statements included in this
      quarterly report, we acquired Summit on March 28, 2007. Net revenues and income
      from operations for Summit in the nine months ended July 31, 2007 were $6.1
      million and $1.2 million, respectively. The following discussion of the results
      of operations excludes the results of Summit, except for the amortization of
      identifiable intangible assets and interest expense related to the Summit
      acquisition which are included in our bingo systems segment.





***Net
      Revenue***





Net
      revenue for the nine months ended July 31, 2007 decreased 3.6% to $36.0 million
      from $37.3 million in the comparable period in 2006. The decrease in net revenue
      for the year-to-date period is a result of several factors. Bingo net revenue
      decreased $1.3 million due to increased regional competition and pricing
      pressures as well as continued migration of commercial accounts to more
      profitable slot machine style gaming over bingo. However, offsetting the decline
      in revenue was increased revenue in Michigan and other key states, increased
      expansion in the United Kingdom, as well as the continued popularity and rollout
      of our Traveler and Tracker terminals.





***Cost
      of Revenue***





Cost
      of
      revenue increased 4.6% to $15.4 million, or 42.8% of net revenue in the nine
      months ended July 31, 2007, from $14.7 million, or 39.5% of net revenue in
      the
      same period in 2006. Bingo equipment depreciation increased by approximately
      $615,000 over the comparable period in 2006, primarily due to our investment
      in
      Traveler and Tracker terminals. Additionally, the amortization of identifiable
      intangible assets increased due to the acquisition of Summit. The increase
      was
      partially offset by a decrease in repairs and maintenance and obsolescence
      costs.





***Gross
      Profit***





Gross
      profit decreased 8.9% to $20.6 million, or 57.2% of net revenue in the nine
      months ended July 31, 2007, from $22.6 million or 60.5% of net revenue for
      the
      same period in 2006. The decrease is due to the revenue decline resulting from
      the factors mentioned above along with the increase in the amortization of
      identifiable intangible assets due to the Summit acquisition also noted above.





***Operating
      Expenses***





Total
      operating expense decreased by 8.2% to $16.0 million, or 44.4% of net revenue,
      for the nine months ended July 31, 2007, from $17.4 million, or 46.7% of net
      revenue, in the comparable period in 2006. Operating expenses include general
      and administrative, sales and marketing, including distributor commissions,
      research and development, and loss contingencies.





General
      and administrative costs decreased 14.5% to $5.8 million, or 16.2% of net
      revenue, in the nine months ended July 31, 2007, from $6.8 million, or 18.2%
      of
      net revenue, for the comparable period in 2006. The decrease was due to a
      decrease in the bonus, stock compensation, legal, license, and accounting
      expenses offset by an increase in bad debt.





Sales
      and
      marketing expenses decreased 1.7% to $8.1 million, or 22.7% of net revenue,
      in
      the nine months ended July 31, 2007 from $8.3 million, or 22.2% of net revenue,
      for the comparable period in 2006. The decrease is attributable to a decrease
      in
      salaries and other employee costs and also a decrease in distributor commissions
      offset by an increase in hall contract labor.





Research
      and development expenses decreased 14.5% to $1.9 million, or 5.3% of net
      revenue, in the nine months ended July 31, 2007, from $2.2 million, or 6.0%
      of
      net revenue, for the comparable period in 2006. The decrease is attributable
      to
      a decrease in salary and other employee costs from the prior period as well
      as a
      decrease in fixed asset depreciation and consulting expenses. During the
      nine-month period ended July 31, 2007, there were no payroll costs capitalized
      under FASB Statement No. 86. For the comparable period in 2006, $88,000 of
      payroll costs were capitalized related to research and development and quality
      assurance.





Loss
      contingencies, representing interest accrued on a legal judgment, totaled
      $124,000, or 0.3% of net revenue, in the nine months ended July 31, 2007 from
      $99,000, or 0.3% of net revenue, for the comparable period in 2006. For
      additional information, see Note E to the consolidated financial statements
      included herein.





***Interest
      Expense***





The
      interest expense approximated $1.3 million for the nine months ended July 31,
      2007, compared with $8,000 of interest expense in the comparable period in
      2006.
      The increase was due to the borrowings under our term loan and revolving credit
      facility which were used to fund the acquisition of Summit.




21




**LIQUIDITY
      AND CAPITAL RESOURCES**





We
      have
      funded our operations to date primarily through cash from operations and other
      capital sources. This capital is used for operations, research and development,
      and capital expenditures of bingo equipment and associated support equipment
      and
      software. As of July 31, 2007 and October 31, 2006, we had a working capital
      balance of $20.6 million and $15.4 million, respectively. As of July 31, 2007,
      our principal sources of liquidity included cash and short-term investments
      of
      $13.6 million. Current assets and current liabilities include a restricted
      short-term investment of $4.5 million and an accrued liability of $4.0 million
      in connection with litigation judgments.





The
      acquisition of Summit was financed primarily by a credit facility consisting
      of
      a term loan of $30.0 million and a revolving line of credit with a limit of
      $10.0 million. Additional information about our credit facility is contained
      in
      Note F (Credit Agreement) to our consolidated financial statements included
      herein. As of July 31, 2007, the interest rate on our term loan was 10.0% and
      on
      our revolving credit facility was 8.75%. We incurred interest expense of
      $977,000 and $1.3 million for the three and nine months ended July 31, 2007
      compared to minimal interest expense for the comparable periods in 2006. As
      a result of the debt incurred in March 2007 to finance the Summit acquisition,
      we expect our interest expense to increase substantially in future periods.





Operating
      activities provided $7.7 million of cash for the nine-month period ended July
      31, 2007 compared with $12.1 million for the nine-month period ended July 31,
      2006. The $7.7 million consisted primarily of our net income of $3.4 million
      adjusted by $8.6 million from depreciation, amortization, obsolescence
      provisions, and loss on disposal of bingo terminals and related equipment
      provisions and $4.3 million used by net changes in other operating assets and
      liabilities net of the Summit acquisition. The $12.1 million consisted
      primarily of our net income of $3.3 million adjusted by $7.7 million from
      depreciation, amortization, obsolescence provisions, and loss on disposal of
      bingo terminals and related equipment provisions and $1.1 million provided
      by
      net changes in other operating assets and liabilities.





We
      used
      approximately $5.2 million of cash in investing activities for the nine-month
      period ended July 31, 2007 compared with $13.0 million of cash for the
      nine-month period ended July 31, 2006. The $5.2 million included $5.2 million
      in
      capital expenditures for bingo terminals and associated support equipment.
      We
      used $2.4 million in the acquisition of Summit during the nine-month period
      ended July 31, 2007. In addition, a $2.5 million net change occurred in the
      purchasing and selling of short-term investments during the period ended July
      31, 2007 and $50,000 was paid for the purchase of intangible assets. The
      $13.0 million included $9.7 million of capital expenditures primarily all
      of which was expended on bingo terminals and associated support equipment,
      and
      the purchase and development of software and other intangible assets of
      $113,000. In addition, a $3.2 million net change occurred in the purchasing
      and
      selling of short-term investments.





Financing
      activities provided $435,000 of net cash for the nine-month period ended July
      31, 2007 compared with $2.3 million for the nine-month period ended July 31,
      2006. The $435,000 provided for the nine-month period ended July 31, 2007 was
      from proceeds of $271,000 from stock option exercises and $167,000 in tax
      benefits from stock options exercised offset by payments on long term debt
      of
      $3,000. The $2.3 million provided for the nine-month period ended July 31,
      2006
      was from proceeds of $2.0 million from stock option exercises and $283,000
      in
      tax benefits from stock options exercised.





Our
      credit facility agreement contains numerous restrictive covenants. These
      restrictions could result in a curtailment of our capital expenditures including
      those for bingo devices, and related equipment. In the event we were unable
      to
      raise additional capital if needed, further measures could be necessary,
      including the delay or reduction of our operations, research and development
      and
      other activities. Certain of such measures may require third-party consent
      or
      approvals, including the financial institution under the credit facility,
      certain regulatory bodies, and others, and there are no assurances such consent
      or approvals could be obtained.





We
      believe that cash flows from operations and cash, cash equivalents, short-term
      investments and amounts available under our revolving credit facility will
      be
      sufficient to support our operations, provide for budgeted capital expenditures,
      and meet liquidity requirements through the remainder of fiscal 2007. Our
      long-term liquidity requirements will depend on many factors, including the
      rate
      at which we expand our business and whether we do so internally or through
      acquisitions. In addition, we may pursue strategic opportunities that could
      require us to fund our portion of operating expenses of such ventures and may
      require us to advance additional amounts should any partners in such ventures
      be
      unable to meet unanticipated capital requirements or similar funding events.
      To
      the extent that the funds generated from the sources described above are
      insufficient to fund our activities in the long term, we may be required to
      raise additional funds through public or private financing. No assurance can
      be
      given that the additional financing will be available or that, if it is
      available, it will be on terms acceptable to us.





On
      September 4, 2007 the Board of Directors announced that they have authorized
      expending up to $5.0 million in a share repurchase program.  The shares
      from the new $5.0 million authorization are expected to be acquired through
      open
      market transactions over a period of up to the next 12 months.  The actual
      amount and timing of dollars expended and shares repurchased will be subject
      to
      business and market conditions and applicable SEC rules. We plan to use excess
      operating cash to fund this share repurchase program.




22




**Purchase
      Commitments**





From
      time
      to time, we enter into commitments with our vendors to purchase bingo terminals
      and support equipment at fixed prices and/or guaranteed quantities. During
      the
      fiscal year ended October 31, 2006, we entered into seven agreements with the
      same vendor to provide an additional $5.4 million in Traveler terminals and
      $1.1
      million in Tracker parts. As of July 31, 2007, we had fulfilled all these
      purchase commitments. During the nine-month period ending July 31, 2007, we
      entered into various additional agreements for $2.2 million in Tracker and
      Traveler parts. As of July 31, 2007, approximately $1.0 million of these
      commitments were outstanding. All
      purchases are expected to occur by the end of the first quarter in fiscal
      2008.








**ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK.**





**Market
      Risks**





We
      maintain an investment portfolio of approximately $5.2 million in investment
      grade corporate issues, and in investment grade auction rate securities. The
      values of these investments are subject to changes in interest rates. However,
      because these investments are short-term and are generally allowed to mature,
      we
      do not believe that any risk inherent in our portfolio is likely to have a
      material effect on expected cash flows. We monitor these investments for
      impairment and make appropriate reductions in carrying value when
      necessary.





On
      March
      28, 2007, the Company entered into a credit facility which consists of a term
      note for $30 million and a revolving line of credit in the amount of $10 million
      relating to the acquisition of Summit. Additional information about our credit
      facility is contained in Note F (Credit Agreement) to our consolidated financial
      statements included herein.





Because
      the interest rate on the credit facility is variable, our cash flow may be
      affected by increases in interest rates, in that we would be required to pay
      more interest in the event that interest rates increase.





**Sensitivity
      Analysis Market Risks**





Assuming
      we had a $40.0 million balance outstanding as of July 31, 2007, and the blended
      average rate of interest rate was 9.71%, our monthly interest payment, if the
      rate stayed constant, would be $318,000. If the prime rate rose to 375 basis
      points to 12.0%, which assumes an unusually large increase, our monthly payment
      would be $448,667. A more likely increase of 1.0% or 2.0%, given the recent
      trend of relatively low interest rates, would result in a monthly payment of
      $357,000 or $390,333, respectively.





**ITEM
      4. CONTROLS AND PROCEDURES.**





We
      have
      evaluated, with the participation of our Chief Executive Officer and Chief
      Financial Officer, the effectiveness of our disclosure controls and procedures
      as of July 31, 2007. Based on this evaluation, our Chief Executive Officer
      and
      Chief Financial Officer have concluded that our disclosure controls and
      procedures are effective to ensure that we record, process, summarize, and
      report information required to be disclosed by us in our reports filed or
      submitted under the Securities Exchange Act of 1934 within the time periods
      specified by the Securities and Exchange Commission’s rules and forms. During
      the quarterly period covered by this report, and other than as disclosed in
      our
      Annual Report on Form 10-K, and described below, there have not been any changes
      in our internal controls over financial reporting that have materially affected,
      or are reasonably likely to materially affect, our internal control over
      financial reporting.





In
      our
      Form 10-K for the fiscal year ended October 31, 2006, we previously reported
      a
      significant deficiency in our internal control process related to the tax
      provision.  The weakness is in the process of being remedied, but not all
      of the remedial steps had been completed as of July 31, 2007.




**PART
      II. OTHER INFORMATION**





**ITEM
      1. LEGAL PROCEEDINGS.**





For
      a
      discussion of our current litigation, see Note E (Legal Proceedings) to our
      consolidated financial statements included herein.





We
      are
      involved in various other legal proceedings arising in the ordinary course
      of
      our business. We do not believe that any of those proceedings will have a
      material adverse effect on our business, results of operations, or financial
      condition.





23





**ITEM
      1A. RISK FACTORS**





***Our
      acquisition of Summit may not produce the results we***  ***anticipate.***





Our
      acquisition of Summit was the largest acquisition undertaken by our company.
      The
      success of the acquisition will depend in large part on our management’s ability
      to integrate, maintain and grow Summit’s business. Challenges we face include
      the following:




•
              the
                  diversion of management time and effort from our existing business•
              managing a much larger combined business,
                including implementing adequate internal controls•
              the potential loss of key employees
                of
                Summit, and•
              maintaining Summit’s customers and growing
                the customer base and markets.In addition, Summit’s
                business is subject to many risks and uncertainties, including the
                following:•
              its dependence on the video lottery
                terminal
                industry•
              its
                dependence on key markets in Montana, Louisiana, South Dakota, and
                West
                Virginia•
              its ability to respond to rapid technological
                change and market demand for product enhancements, and changes in
                laws and
                regulations




***We
      incurred significant debt to finance the acquisition of
      Summit.***




We
      financed the acquisition of Summit with a $10.0 million revolving credit
      facility and a $30.0 million term loan secured by substantially all of our
      and
      Summit’s assets. Servicing the debt will require a significant amount of cash,
      and our ability to generate the required cash depends on our ability to
      successfully manage Summit’s business and upon other factors some of which are
      beyond our control. The agreement governing the new debt contains substantial
      affirmative and restrictive covenants, including the maintenance of certain
      financial ratios. A breach of any of our obligations under the debt agreement
      would result in a default allowing the lender to elect to declare all amounts
      outstanding together with accrued interest to be immediately due and payable.
      For additional information see Note F (Credit Agreement) to our consolidated
      financial statements included herein.




**ITEM
      2. UNREGISTERED SALES OF EQUITY 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**





2.1
            Asset
                Purchase Agreement dated August 30, 2006 between GameTech International,
                Inc. and Summit Amusement & Distributing Ltd. (1)3.1
            Certificate
                of Incorporation of the Registrant, as amended (2)3.3
            Certificate
                of Designation of Series A Junior Participating Preferred Stock of
                the
                Registrant (3)3.4
            Second
                Amended and Restated Bylaws of the Registrant (4)4.1
            GameTech
                International, Inc. Registration Rights
                Agreement (5)4.3
            Rights
                Agreement, dated as of March 7, 2003, between GameTech International,
                Inc.
                and Mellon Investor Services, LLC, as rights agent (6)4.4
            Specimen
                Common Stock Certificate (7)10.1
            Financing
                agreement dated March 28, 2007, by and among GameTech International,
                Inc.
                and the lenders named therein, and Ableco Finance, LLC., as collateral
                and
                administrative agent (8)10.2
            Amendment
                Number One to Financing Agreement, dated effective August 24, 2007
                (9)10.3
            Letter
                Agreement by and between the Registrant and Donald Tateishi, dated
                as of
                June 26, 2007 (10)




24




10.4
            Letter
                Agreement by and between the Registrant and Nick Greenwood, dated
                as of
                July 23, 2007 (11)31.1
            Certification
                of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)
                promulgated under the Securities Exchange Act of 1934, as
                amended.31.2
            Certification
                of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)
                promulgated under the Securities Exchange Act of 1934, as
                amended.32.1
            Certification
              of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
              pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
            Certification
                of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.




___________


(1)
            Incorporated
                by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K
                dated August 30, 2006 as filed with the Commission on or about August
                31,
                2006.


(2)
            Incorporated
                by reference to Exhibits 2.1 and 10.1 to the Registrant’s Registration
                Statement on Form S-1 (Registration No. 333-34967) as filed with
                the Commission on or about September 4,
                1997.


(3)
            Incorporated
                by reference to Exhibits 3.3 and 4.4 to the Registrant’s Quarterly Report
                on Form 10-Q for the quarterly period ended April 30, 2003 as filed
                with
                the Commission on or about March 17,
                2003.


(4)
            Incorporated
                by reference to Exhibit 3.4 to the Registrant’s Quarterly Report on Form
                10-Q for the quarterly period ended April 30, 2004, as filed with
                the
                Commission on or about March 16,
                2004.


(5)
            Incorporated
                by reference to Exhibit 4.1 to Amendment No. 1 to the Registrant’s
                Registration Statement on Form S-1 (Registration No. 333-34967)
                as filed with the Commission on or about October 17,
                1997.


(6)
            Incorporated
                by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K
                dated March 7, 2003 as filed with the Commission on or about March
                10,
                2003.


(7)
            Incorporated
                by reference to Exhibits 3.3 and 4.4 to the Registrant’s Quarterly Report
                on Form 10-Q for the quarterly period ended April 30, 2003 as filed
                with
                the Commission on or about March 17,
                2003.


(8)
            Incorporated
                by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
                8-K dated March 28, 2007, as filed with the Commission on March 28,
                2007.


(9)
            Incorporated
                by reference to Exhibit 99.1 to the Registrant’s Current Report on Form
                8-K dated September 6, 2007 as filed with the Commission on or about
                September 6, 2007.


(10)
            Incorporated
                by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
                8-K dated June 26, 2007 as filed with the Commission on or about
                June 26,
                2007.


(11)
            Incorporated
                by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
                8-K dated July 23, 2007 as filed with the Commission on or about
                July 23,
                2007.




25





**SIGNATURES**





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




**Signature**
            
            **Title**
            
            **Date**/S/
                Jay M. Meilstrup
            
            Chief
              Executive Officer and PresidentJay
              M. Meilstrup
            
            (Principal
              Executive Officer)
            
            September
                  14, 2007/S/
                Donald Tateishi
            
            Chief
              Financial Officer
            
            September
                14, 2007Donald
                Tateishi
            
            (Principal
                Financial Officer)






26


**EXHIBIT
      INDEX**




2.1
              Asset
                  Purchase Agreement dated August 30, 2006 between GameTech International,
                  Inc. and Summit Amusement & Distributing Ltd.
                  (1)3.1
              Certificate
                  of Incorporation of the Registrant, as amended (2)3.3
              Certificate
                  of Designation of Series A Junior Participating Preferred Stock
                  of the
                  Registrant (3)3.4
              Second
                  Amended and Restated Bylaws of the Registrant (4)4.1
              GameTech
                  International, Inc. Registration Rights
                  Agreement (5)4.3
              Rights
                  Agreement, dated as of March 7, 2003, between GameTech International,
                  Inc.
                  and Mellon Investor Services, LLC, as rights agent (6)4.4
              Specimen
                  Common Stock Certificate (7)10.1
              Financing
                  agreement dated March 28, 2007, by and among GameTech International,
                  Inc.
                  and the lenders named therein, and Ableco Finance, LLC., as collateral
                  and
                  administrative agent (8)10.2
              Amendment
                  Number One to Financing Agreement, dated effective August 24, 2007
                  (9)10.3
              Letter
                  Agreement by and between the Registrant and Donald Tateishi, dated
                  as of
                  June 26, 2007 (10)10.4
              Letter
                  Agreement by and between the Registrant and Nick Greenwood, dated
                  as of
                  July 23, 2007 (11)31.1
              Certification
                  of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule
                  15d-14(a)
                  promulgated under the Securities Exchange Act of 1934, as
                  amended.31.2
              Certification
                  of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule
                  15d-14(a)
                  promulgated under the Securities Exchange Act of 1934, as
                  amended.32.1
              Certification
                  of Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
                  as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002.32.2
              Certification
                  of Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
                  as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002.






(1)
            Incorporated
                by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K
                dated August 30, 2006 as filed with the Commission on or about August
                31,
                2006.


(2)
            Incorporated
                by reference to Exhibits 2.1 and 10.1 to the Registrant’s Registration
                Statement on Form S-1 (Registration No. 333-34967) as filed with
                the Commission on or about September 4,
                1997.


(3)
            Incorporated
                by reference to Exhibits 3.3 and 4.4 to the Registrant’s Quarterly Report
                on Form 10-Q for the quarterly period ended April 30, 2003 as filed
                with
                the Commission on or about March 17,
                2003.


(4)
            Incorporated
                by reference to Exhibit 3.4 to the Registrant’s Quarterly Report on Form
                10-Q for the quarterly period ended April 30, 2004, as filed with
                the
                Commission on or about March 16,
                2004.


(5)
            Incorporated
                by reference to Exhibit 4.1 to Amendment No. 1 to the Registrant’s
                Registration Statement on Form S-1 (Registration No. 333-34967)
                as filed with the Commission on or about October 17,
                1997.


(6)
            Incorporated
                by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K
                dated March 7, 2003 as filed with the Commission on or about March
                10,
                2003.


(7)
            Incorporated
                by reference to Exhibits 3.3 and 4.4 to the Registrant’s Quarterly Report
                on Form 10-Q for the quarterly period ended April 30, 2003 as filed
                with
                the Commission on or about March 17,
                2003.


(8)
            Incorporated
                by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
                8-K dated March 28, 2007, as filed with the Commission on March 28,
                2007.


(9)
            Incorporated
                by reference to Exhibit 99.1 to the Registrant’s Current Report on Form
                8-K dated September 6, 2007 as filed with the Commission on or about
                September 6, 2007.


(10)
            Incorporated
                byreference
                to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated June
                26, 2007 as filed with the Commission on or about June 26,
                2007.


(11)
            Incorporated
                by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
                8-K dated July 23, 2007 as filed with the Commission on or about
                July 23,
                2007.




27