SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-K

(Mark One)

|[X]                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934                                                                                                       
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | For the fiscal year ended                             May 31, 2000                                         
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|[   ]                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 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                          0-23588                                         
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|PAUL-SON GAMING CORPORATION
---------------------------------------------------------------------------------------------------------------------------(Exact name
of registrant as specified in its charter)                                                                                                                                                                                                                                                                                                                                                          
|NEVADA                              
                                          
                    88-0310433
       ----------------------------                               
                                         
------------------------------
     (State or other jurisdiction of                              
                                          
                        (I.R.S. Employer
      incorporation or organization)                               
                                          
                   Identification No.)
|1700 South Industrial Road, Las Vegas, Nevada                       
        89102-----------------------------------------------------------------------------------------------------------------------------------------------------
              (Address of principal executive offices)                      
                                          
           (Zip Code)                                                                                                                                                                                  
|(702) 384-2425-----------------------------------------------------------------------------------------------------------------------------------------------------
                                          
   (Registrant's telephone number, including area code)                                                                                                                                                                                                                                                                                                 
|Securities registered pursuant to Section 12(b) of the Act:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Title of each class                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Name of each exchangeon which registered                                                                                                                                                   
|Not Applicable                  
                                   Not Applicable-----------------------------------------------------------------------------------------------------------------------------------------------------                                                                                                                                                                                                                                                                                                                                
|Securities registered pursuant to Section 12(g) of the Act:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|COMMON STOCK, $ .01 PAR VALUE----------------------------------------------------------------------------------------------------------------------------------------------------
                                          
               (Title of class)                                                                                                                                                                                                                                                                                                           



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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.  [X]   Yes  [   ]  No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the
registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   [   ]

The aggregate market value of voting stock held by non-affiliates of the registrant as of August 24, 2000, based on the closing price as reported on the Nasdaq National
Market of $1.875 per share, was approximately $3,159,919.

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of August 24, 2000.

Common Stock, $.01 par value, 3,452,757 outstanding shares.

Documents Incorporated by Reference

The information required by Part III of this Report is incorporated by reference from the Paul-Son Gaming Corporation Proxy Statement to be filed with the Commission
not later than 120 days after the end of the fiscal year covered by this Report.

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PART I

Item 1.     Business

Paul-Son Gaming Corporation, a Nevada Corporation (the "Company" or "Paul-Son"), is a leading manufacturer and supplier of casino table game equipment in the
United States. The Company's products include casino chips, table game layouts, playing cards, dice, gaming furniture and miscellaneous table accessories such as chip trays, drop boxes and dealing shoes, which are used in conjunction with casino table
games such as blackjack, poker, baccarat, craps and roulette. The Company is headquartered in Las Vegas, Nevada, with its primary manufacturing facilities located in San Luis, Mexico and sales offices in Las Vegas and Reno, Nevada; Atlantic City, New
Jersey; Gulfport, Mississippi; Portland, Oregon; and Ontario, Canada. The Company sells its products in every state in which casinos operate in the United States.

The Company also has retail sales outlets mostly within many of its branch sales offices which provide casino-quality products for personal use, including poker chips, "Fantasy
Casino" chips, dice, playing cards and gift items made with Paul-Son components. Further, scaled-down gaming furniture and accessories are also offered for personal use. In fiscal 1998, the Company announced its intentions to offer many of its products to
the non-gaming and specialty markets, although this has not yet become a significant business for the Company.

The Company was founded in 1963 by its former Chairman, Paul S. Endy, Jr. and initially manufactured and sold dice to casinos in Las Vegas. In the more than 36 years since
its founding, the Company has expanded its product offerings and, as the industry has expanded and gaming has been legalized in other jurisdictions, its customer and geographic base. As a result of this growth, the Company now offers a full line of table
game products.

As a full-service supplier, Paul-Son manufactures products to meet particular customer and industry specifications, which may include a range of shapes and sizes, varied color
schemes and other graphics, and security and anti-counterfeit features. The useful lives of the Company's products typically range from several hours in the case of playing cards and dice, to several months in the case of layouts, and several years in the
case of casino chips and gaming furniture. As such, the Company's primary business is the ongoing replacement sale of these products. When a new casino opens, the Company strives to supply most of the products required to operate the casino's table games,
frequently on a sole-supplier basis. When successful, revenues are generated both from the initial sale to the new casino and on a continuing basis as the new casino becomes part of the Company's primary customer base.

Business Strategy

During its more than 36 years of operations, management believes the Company has established an excellent reputation for product quality, reliability, customer
service and value. In addition, the Company has developed an extensive distribution network and is licensed or authorized to supply gaming equipment in every state in the United States in which such licenses are required. The Company is also licensed or
authorized to supply gaming equipment on a number of Native American lands, in Victoria, Australia and Ontario, Quebec and British

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Columbia, Canada, and in certain jurisdictions in South Africa. The Company's current strategy for growth is to: (i) capitalize upon its competitive advantages to maintain its market position for those products in which it has a
dominant share and thereby benefit from the expected continued growth in the United States casino market, (ii) improve its manufacturing processes and aggressively pursue market share for products, such as playing cards, in which the Company does not have
a leading market share, (iii) expand internationally into growing casino markets, including those in Canada, Australia, Europe, South America, Central America, Asia, Africa and the Caribbean, (iv) develop or acquire new products which the Company can sell
through its existing distribution network and (v) market and sell variations of its gaming products to non-gaming markets through its wholly-owned subsidiary, Authentic Products, Inc.

Products

Casino Chips

Paul-Son designs and manufactures casino chips to meet a variety of customer preferences and specifications, including size, weight, ability to stack, ease of
handling, texture, color, graphics, durability, security and anti-counterfeit features. Casino chips are manufactured from a proprietary formulation of approximately ten raw materials using a compression molding system that management believes is unique
to the industry. The Company has developed the ability to mold detailed graphics bearing casino logos or other designs onto both sides of a chip. In addition, customized security and identifying features are incorporated into a chip.

A casino will generally order all of its chips, including replacement chips after wear and usage, from a single supplier. Accordingly, Paul-Son strives to become the original
chip supplier to a casino upon its opening. A new casino order will typically include approximately five distinct chip colors and styles, ranging in denominations from $1 to $1,000. The Company's selling price is generally between $.60 and $.80 per chip,
depending upon the specification, quantities, design and security features. Given this relatively low cost and a chip's expected lifespan of five or more years, management believes that competition is generally based upon factors other than price.

To protect its market position and satisfy the demands of its customers, the Company continuously seeks to improve the quality and features of its chips. During the past
several years, the Company has introduced improved formulations and additional security features which are incorporated in the manufacture of its casino chips.

The Company manufactures all of its chips at its facilities in San Luis, Mexico. The Company's production capacity at its Mexico facilities is approximately 50 million chips
(based on a single shift and increased labor availability). Management believes that given its current production level of approximately 10 million chips per year, the Company will have sufficient manufacturing capacity to meet potential increases in
future demand.

Since 1994, Paul-Son has marketed commemorative chips. Management of Paul-Son and its casino customers determined that casino patrons often retained casino chips which
commemorated certain types of events such as title boxing matches, significant anniversaries, and premier entertainment events. Casinos benefit to the extent that casino chips purchased are not

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redeemed, thereby resulting in added cash flow to the casino. The Company is also pursuing opportunities to sell commemorative chips outside of the gaming industry.

Table Layouts

Every gaming table is covered with a layout containing silk-screened patterns particular to each specific game, as well as multi-colored logos and other markings
according to individual casino preferences. Historically, these layouts were made from a woolen cloth material. However, in recent years, a growing percentage of layouts are being made from a synthetic cloth material, which some casinos believe is more
durable than the woolen cloth material. Paul-Son is a leading manufacturer of layouts in the United States, utilizing high quality cloths, enhanced graphics, and proprietary dye formulations which management believes result in the widest variety of
customized colors.

Layouts are typically installed by Paul-Son on new gaming tables prior to delivery to a casino. The layouts are then regularly replaced by the casinos to maintain their
appearance, generally within 60 to 150 days. Layouts typically sell in a range of approximately $65 to $325, depending on the type of table, the complexity of the patterns and the variety and difficulty of color combinations.

During the fiscal year ended May 31, 2000, the Company acquired a patent that involves, among other things, certain methodology and processes related to the screening of
inks on synthetic cloth. Paul-Son uses these processes in manufacturing gaming table layouts. The Company now has the ability to meet customer demand for synthetic layouts in a wide variety of colors and customer preferences.

The Company manufactures its layouts in its Mexico facilities. The Company's layout production capacity is approximately 50,000 "steam" woolen layouts, approximately 25,000
"hand-painted" woolen layouts and 10,000 synthetic layouts per year. In fiscal 2000, the Company produced approximately 36,000 layouts. Management believes the capacity of its layout production facilities in Mexico will allow the Company to increase
layout production as needed.

Playing Cards

The Company manufactures and sells its own line of paper casino playing cards. A deck of cards typically sells to casinos for between approximately $.75 and $1.50
and, based on casino industry practices, is generally replaced every eight hours or less. A casino typically enters into a one or two year purchase commitment with a supplier to supply its cards at regular intervals, generally monthly. Casinos
occasionally purchase cards from more than one supplier, as casino floor managers often have preferences for a particular type of card.

The Company believes that it is the third largest casino card manufacturer in the United States. Given the Company's relatively low market share, its established distribution
system for table game supplies and its low cost manufacturing facilities, management believes that playing cards represent a significant growth opportunity for the Company.

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The Company produces all of its playing cards in its Mexico facilities. The Company purchased and leased additional equipment in fiscal 1999 to increase its production capacity
to approximately 25 million decks per year (based on two production shifts), up from the Company's previous annual production capacity of approximately 13 million decks. Expanded playing card production capacity will permit management to aggressively seek
new playing card business from its existing casino customer base, from other casinos and from customers outside of the casino industry. In fiscal 2000, the Company produced approximately 7 million decks of playing cards.

The Company also distributes plastic playing cards which are used predominately in California card clubs. Traditionally, the plastic playing cards are preferred by the
California card room market while the paper cards are generally preferred by the traditional hotel-casino markets.

Gaming Furniture

The Company sells a variety of casino gaming furniture, including tables, seating and roulette and Big Six wheels. Tables range in price from approximately $1,000
for a blackjack table to approximately $15,000 for a double roulette table and wheel. The Company offers a "Premier" line of gaming furniture which has been the staple of the Company, and a "Select" line which was developed in 1995 in response to the
industry's demand for a lower priced, quality line of blackjack tables. Management believes that the "Select" line enables the Company to compete with the price structure of its competitors while maintaining Company quality standards. Paul-Son vigorously
pursues gaming table sales because the sale of a gaming table will generally bolster its ability to sell consumable products such as layouts, dice, chips, cards, and other accessories to the table purchasers. The Company, previous to fiscal year 2000,
bought its tables in unassembled form from quality wood shops. During the fiscal year ended May 31, 2000, the Company began manufacturing its own table game furniture components in its San Luis, Mexico facility. Tables are assembled by the Company and
completed by adding the felt layout, drop boxes, trays and other accessories. Table game seating is produced by nonaffiliated manufacturers and distributed by the Company. In January 1996, the Company commenced manufacturing its own roulette and Big Six
wheels. By manufacturing the wheels, management believes the Company has better control over the quality of the wheels it offers to its customers.

Dice

Paul-Son manufactures dice at its Mexico facilities from cellulose acetate specifically formulated to provide the required clarity, hardness and dimensional
stability. The Company offers a variety of spot designs, which are inserted in the body of the dice and machined flat to the surface. A casino may request the imprinting of its name and logo (in a variety and combination of colors), the insertion of a
security "key" onto the reverse side of a particular spot, the addition of a security "glow" spot, the serialization of the dice, or all or a combination of the above.

Paul-Son dice are manufactured in conformity with the strictest standards of gaming regulators, which require that each die be within 3/10,000th of an inch of a perfect cube.
The typical sales price of casino dice currently ranges between approximately $2.50 and $3.00 per pair. Generally, a set of dice (two and one-half pair) does not remain in play for more than eight hours in a busy casino. The Company currently has the
capacity to produce approximately

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800,000 pairs of dice per year (based upon one production shift). In fiscal 2000, the Company produced approximately 700,000 pairs of dice. Management believes the Company's capacity for dice production is approximately 1,000,000 pairs
of dice annually and is sufficient to accommodate an increase in production requirements.

Table Accessories and Other Products

In order to offer its customers a full product line, the Company sells a number of ancillary casino table game products which it typically does not manufacture.
These include plastic money paddles, discard holders, drop boxes, dealing shoes, trays and covers, dice sticks and on/off pucks. These products are generally sold in conjunction with the sale of gaming tables and tend to have long useful lives. The
Company generally maintains two suppliers for each of these products.

In order to compete with the increasing competition from manufacturers of these products who sell direct to the Company's casino customers, the Company began manufacturing, in
limited quantities, certain of its own plastic products, including dealing shoes, in May 1997.

Business Segments

The Company has provided Business Segment disclosure in its consolidated financial statements. See "Item 8. Financial Statements and Supplementary Data - Notes
to Consolidated Financial Statements - Note 10. Business Segments."

Sales, Advertising and Promotion

The Company generally distributes its products through its approximate 12 person sales force, which operates out of regional offices in Las Vegas and Reno, Nevada;
Atlantic City, New Jersey; Gulfport, Mississippi; Ontario, Canada; and Portland, Oregon. Management believes that the long-standing customer relationships which have been developed over the years by its individual sales representatives, as well as the
Company's reputation for quality and reliability, are key factors upon which the Company successfully competes in the market place. From time to time the Company enters into agreements for the distribution of its products on an exclusive and non-exclusive
basis.

The Company's experience has been that once a casino buys from a table game supplier, it tends to purchase replacement products from the same supplier, provided quality,
service and competitive pricing are maintained. As a result, the Company's sales efforts are primarily focused on selling a full range of table gaming products to casinos while they are in the development and licensing stage. By thereafter maintaining a
frequent contact program, the Company seeks to realize a steadily increasing base of recurring sales while capturing incremental sales to new casinos.

The Company places advertising in trade publications, produces a complete sales catalogue for the retail market, and participates in major casino industry trade shows. The
Company keeps abreast of new casino openings through personal contact with casino management, legislative and trade publications and wire service press releases. When new casinos

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are identified, Company representatives make personal contact with appropriate officers and/or purchasing agents in order to solicit the sale of the Company's products to such potential new customers.

Materials and Supplies

For certain of its products, the Company is dependent upon a limited number of suppliers to provide the Company with raw materials for manufacturing and finished
goods for distribution. The Company's policy is to maintain two or more suppliers of such raw materials and finished goods whenever possible.

Competition

There are a number of companies that compete with the Company in the United States in the sale of each of its product lines. The Company's international sales have
not been significant, and the Company has not attempted to discuss competition outside of the United States.

Casino Chips. The casino chip product line has in recent years become an increasingly competitive area of the gaming supply business. Currently, the Company's major
competitors are Chipco International Ltd. ("Chipco") and Nevada Dice Company, d/b/a The Bud Jones Company ("Bud Jones"). The Company believes key competitive factors for casino chip sales are durability, graphics, ease of handling and security.

Table Layouts. The Company's two primary competitors for casino table layouts are Bud Jones and Midwest Game Supply Co. ("Midwest"). Management believes the key
competitive factors for felt table layout sales are cloth quality, enhanced graphics, designs, clarity and range of colors.

Playing Cards. The Company's major competitors in the domestic playing card market are The U.S. Playing Card Co., Gemaco Playing Card Co. and Hoyle Products. Management
believes the primary competitive factors for playing cards are price, ease of handling, durability, brand name identification and reputation.

Gaming Furniture. The Company's principal competitors for casino gaming furniture are Bud Jones and smaller regional wood shops in certain geographic areas. Competition
is based on quality, price and durability.

Dice. The Company's principal competitors for casino dice sales are Bud Jones, T.K. Specialty Company and Midwest. Management believes the primary competitive factors
for dice sales are quality and pricing. In addition, casino shift managers typically prefer that casinos purchase dice from more than one supplier due to industry superstition that dice from one of its suppliers may run "cold" for the house from time to
time.

Table Accessories and Other Products. The Company's principal competitors for distributing table accessories and other products, which include plastic money paddles,
discard holders, drop boxes, dealing shoes, trays and covers, dice sticks and on/off pucks, are Bud Jones

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and Midwest. The Company believes that key competitive factors for these products are the ability to be a single source supplier, price and product quality.

Employees

At August 24, 2000, the Company employed approximately 525 persons. Approximately 450 of the employees are located at the Company's Mexico facilities and the
remainder is located in Las Vegas and in other regional, domestic sales offices. None of the Company's employees is covered by collective bargaining agreements.

Regulation and Licensing

Nevada. The manufacture and distribution of gaming equipment in Nevada are subject to extensive state and local regulation. The Company's operations are
subject to the licensing and regulatory control of the Nevada Gaming Commission (the "Nevada Commission"), the Nevada State Gaming Control Board (the "Nevada Board") and various local regulatory agencies (collectively with the Nevada Commission and the
Nevada Board, the "Nevada Gaming Authorities").

The laws, regulations and supervisory procedures of the Nevada Gaming Authorities seek to (i) prevent unsavory or unsuitable persons from having a direct or indirect
involvement with gaming at any time or in any capacity, (ii) establish and maintain responsible accounting practices and procedures, (iii) maintain effective control over the financial practices of licensees, including establishing minimum
procedures for internal fiscal affairs and the safeguarding of assets and revenues, providing reliable record keeping and requiring the filing of periodic reports with the Nevada Gaming Authorities, (iv) prevent cheating and fraudulent practices, and
(v) provide sources of state and local revenues through taxation and licensing fees. Changes in such laws, regulations and procedures could have an adverse effect on the Company's operations.

Paul-Son Gaming Supplies, Inc. ("Paul-Son Supplies"), the Company's wholly-owned subsidiary which manufactures and distributes casino table game equipment used in Nevada, is
required to be licensed by the Nevada Gaming Authorities. The gaming license is not transferable and must be renewed periodically. The Company is registered as a publicly traded corporation by the Nevada Commission, and is required periodically to submit
detailed financial and operating reports to the Nevada Commission and furnish any other information which the Nevada Commission may require. No person may become a stockholder of, or receive any percentage of profits from, Paul-Son Supplies without first
obtaining licenses and approvals from the Nevada Gaming Authorities. The Company and Paul-Son Supplies have obtained from the Nevada Gaming Authorities the various approvals, permits and licenses required in order to engage in its manufacturing,
distribution and sales activities in Nevada.

The Nevada Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with, the Company or Paul-Son Supplies, in order to
determine whether such individual is suitable or should be licensed as a business associate of a gaming licensee. Officers, directors and certain key employees of Paul-Son Supplies must file applications with the Nevada Gaming Authorities and may be
required to be licensed or found suitable by the Nevada Gaming Authorities. Officers, directors and key employees of the Company who are actively and directly involved in manufacturing, distribution and sales activities of Paul-Son Supplies may be
required to be licensed or found

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suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application for licensing for any cause which they deem reasonable. A finding of suitability is comparable to licensing, and both require submission of
detailed personal and financial information followed by a thorough investigation. The applicant for licensing or a finding of suitability must pay all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming
Authorities and in addition to their authority to deny an application for a finding of suitability or licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a change in a corporate position.

If the Nevada Gaming Authorities were to find an officer, director or key employee unsuitable for licensing or unsuitable to continue having a relationship with the Company or
Paul-Son Supplies, the companies involved would have to sever all relationships with such person. In addition, the Nevada Commission may require the Company or Paul-Son Supplies to terminate the employment of any person who refuses to file appropriate
applications. Determinations of suitability or of questions pertaining to licensing are not subject to judicial review in Nevada.

The Nevada Commission may also require the holder of any equity of a corporation registered under the Nevada Gaming Control Act (the "Nevada Act"), regardless of the amount
held, to file applications, be investigated and be found suitable to own the equity security of a registered corporation. If the Nevada Commission determines that a person is unsuitable to own such equity security, then pursuant to the regulations of the
Nevada Commission, the registered corporation can be sanctioned, including the loss of its approvals, if without the prior approval of the Nevada Commission and following a determination of unsuitability, it (i) pays to the unsuitable person any
dividend, interest or any distribution whatsoever, (ii) recognizes any voting right by such unsuitable person in connection with such securities, (iii) pays the unsuitable person remuneration in any form, or (iv) makes any payment to the
unsuitable person by way of principal, redemption, conversion, exchange, liquidation, or similar transaction. The applicant must pay all costs of investigation incurred by the Nevada Gaming Authorities in conducting any such investigation. If a security
holder is found unsuitable, the Company may itself be found unsuitable if it fails to pursue all lawful efforts to require such unsuitable person to relinquish such holder's voting securities for cash at fair market value. The Company's Articles of
Incorporation require a person found unsuitable to relinquish such person's voting securities upon demand of the Company.

The Nevada Gaming Authorities have the power to investigate at any time any record or beneficial stockholder of a publicly traded corporation registered under the Nevada Act.
Nevada law requires any person who acquires more than 5% of the Company's voting securities to report the acquisition to the Nevada Commission and such person may be required to be found suitable. Also, any person who becomes a beneficial owner of more
than 10% of the voting securities of a publicly traded corporation registered under the Nevada Act must apply for a finding of suitability by the Nevada Commission upon notice to do so and must pay the costs and fees incurred by the Nevada Board in
connection with the investigation. Under certain circumstances an institutional investor, as such term is defined in the regulations of the Nevada Commission and the Nevada Board ("Nevada Gaming Regulations"), which acquires more than 10%, but not more
than 15%,

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of the Company's voting securities, may apply to the Nevada Commission for a waiver of such finding of suitability requirement if such institutional investor holds the voting securities for investment purposes only. An institutional
investor shall not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or
indirectly, the election of a majority of the members of the board of directors of the Company, any change in the Company's corporate charter, bylaws, management, policies or operations of the Company, or any of its gaming affiliates, or any other action
which the Nevada Commission finds to be inconsistent with holding the Company's voting securities for investment purposes only. Activities which are not deemed to be inconsistent with holding voting securities for investment purposes only include: (i)
voting on all matters voted on by stockholders; (ii) making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in its management, policies or operations; and
(iii) such other activities as the Nevada Commission may determine to be consistent with such investment intent. If the beneficial stockholder who must be found suitable is a corporation, partnership or trust, it must submit detailed business and
financial information including a list of beneficial owners. The applicant is required to pay all costs of investigation incurred by the Nevada Authorities in conducting any such investigation.

Any person who fails or refuses to apply for a finding of suitability or a license within 30 days after being ordered to do so by the Nevada Commission or the Chairman of the
Nevada Board may be found unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. Any stockholder found unsuitable and who holds, directly or indirectly, any beneficial
ownership of the common stock of the Company beyond such period of time as may be prescribed by the Nevada Commission may be guilty of a gross misdemeanor.

The Company and Paul-Son Supplies are required to submit detailed financial and operating reports to the Nevada Commission. Substantially all material loans, leases, sales of
securities and similar financing transactions by Paul-Son Supplies must be reported to, or approved by, the Nevada Commission.

If it were determined that gaming laws were violated by Paul-Son Supplies, the gaming licenses it holds could be limited, conditioned, suspended or revoked. In addition,
Paul-Son Supplies, the Company and the persons involved, could be subject to substantial fines for each separate violation of the gaming laws. A supervisor could be appointed by the Nevada Commission to oversee the Company's operations and, under certain
circumstances, earnings generated during the supervisor's appointment could be forfeited to the State of Nevada. Limitation, conditioning or suspension of any gaming license or the appointment of a supervisor could, and revocation of any gaming license
would, materially and adversely affect the Company's operations.

In July 1996, the Nevada Board approved a detailed gaming compliance plan (the "Compliance Plan") prepared by the Company, the objective of which was to formulate a
comprehensive set of internal review and control policies and procedures to monitor and strengthen the Company's commitment to compliance with all gaming laws and regulations in all

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gaming jurisdictions including Nevada. Major provisions of the Compliance Plan include the formation by the Board of Directors of a Compliance Committee, the creation of a position in the Company of Compliance Officer, and the review of
sales transactions by the Compliance Officer.

The Company is required to maintain a current stock ledger in Nevada which may be examined by the Nevada Gaming Authorities at any time. If any securities are held in trust by
an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Nevada Gaming Authorities. A failure to make such disclosure may be grounds for finding the record holder unsuitable. The Company is also
required to render maximum assistance in determining the identity of the beneficial owner. The Nevada Commission has the power at any time to require the Company's stock certificates to bear a legend indicating that the securities are subject to the
Nevada Act and the Nevada Gaming Regulations. However, the Nevada Commission has not imposed such a requirement to date.

The Company may not make a public offering of its securities without the approval of the Nevada Commission. Such approval, if given, does not constitute a recommendation or
approval of the investment merits of the securities.

Changes in control of the Company through merger, consolidation, acquisition of assets, management or consulting agreements or any form of takeover cannot occur without the
prior investigation of the Nevada Board and approval of the Nevada Commission. The Nevada Commission may require controlling stockholders, officers, directors and other persons having a material relationship or involvement to be licensed.

The Nevada legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and other corporate defense tactics that affect
corporate gaming licensees in Nevada, and corporations whose stock is publicly-traded that are affiliated with those operations, may be injurious to stable and productive corporate gaming. The Nevada Commission has established a regulatory scheme to
ameliorate the potentially adverse effects of these business practices upon Nevada's gaming industry and to further Nevada's policy to (i) assure the financial stability of corporate gaming operators and their affiliates; (ii) preserve the
beneficial aspects of conducting business in the corporate form; and (iii) promote a neutral environment for the orderly governance of corporate affairs. Approvals are, in certain circumstances, required from the Nevada Commission before the Company
can make exceptional repurchases of voting securities above the current market price thereof (commonly referred to as "greenmail") and before a corporate acquisition opposed by management can be consummated. Nevada's Gaming Regulations also require prior
approval by the Nevada Commission if the Company were to adopt a plan of recapitalization proposed by the Company's Board of Directors in opposition to a tender offer made directly to its stockholders for the purpose of acquiring control of the Company.

New Jersey. The Company, its officers and directors, certain of its employees and stockholders, Paul-Son Supplies, and Mexicana, S.A. de C.V. (99% owned by Paul-Son
Supplies and 1% by the Company) ("Paul-Son Mexicana") are currently required to be licensed under the New Jersey Casino Control Act (the "New Jersey Act") as a casino service industry qualified to sell it products to casinos in New Jersey. The terms of
agreements which the Company enters

12

into with Atlantic City casinos may require the prior approval of the New Jersey Casino Control Commission (the "New Jersey Commission").

The sale of gaming-related devices and systems to casinos in New Jersey is also subject to the New Jersey Act and the regulations promulgated thereunder by the New Jersey
Commission. The New Jersey Commission has broad discretion in promulgating and interpreting regulations under the New Jersey Act. Amendments and supplements to the New Jersey Act, if any, may be of a material nature and, accordingly, may adversely affect
the ability of the Company or its employees to obtain any required licenses, permits and approvals from the New Jersey Commission or any renewals thereof.

The current regulations govern licensing requirements, standards for qualification, persons required to be qualified, disqualification criteria, competition, investigation of
supplementary information, duration of licenses, record keeping, causes for suspension, standards for renewals or revocation of licenses, equal employment opportunity requirements, fees and exemptions. In deciding to grant a license, the New Jersey
Commission may consider, among other things, the financial stability, integrity, responsibility, good character, reputation for honesty, business ability and experience of the Company and its directors, officers, management and supervisory personnel,
principal employees and stockholders as well as the adequacy of the financial resources of the Company.

New Jersey licenses are granted for a period of one or two years, depending on the length of time a company has been licensed, and are renewable. The New Jersey Commission may
impose such conditions upon licensing as it deems appropriate. These include the ability of the New Jersey Commission to require the Company to report the names of all of its stockholders as well as the ability to require any stockholders whom the New
Jersey Commission finds not qualified to dispose of the stock, not receive dividends, not exercise any rights conferred by the shares, nor receive any remuneration from the Company for services rendered or otherwise. Failure of such stockholder to dispose
of such stockholder's stock could result in the loss of the Company's license. Licenses are also subject to suspension, revocation or refusal for sufficient cause, including the violation of any law. In addition, licensees are also subject to monetary
penalties for violations of the New Jersey Act or the regulations of the New Jersey Commission.

Other Jurisdictions. The Company currently operates at various levels in Arizona, California, Colorado, Connecticut, Florida, Illinois, Indiana, Iowa, Louisiana,
Michigan, Minnesota, Mississippi, Missouri, New York, Oregon, South Dakota, Washington, Wisconsin, the provinces of Ontario, Quebec, British Columbia and Saskatchewan, Canada, the state of Victoria, Australia, and Mpumalanga and Gauteng, South Africa.
Although the regulatory schemes in these jurisdictions are not identical, their material attributes are substantially similar, as described below.

The manufacture, sale and distribution of gaming devices and the ownership and operation of gaming facilities in each jurisdiction are subject to various provincial, state,
county and/or municipal laws, regulations and ordinances, which are administered by the relevant regulatory agency or agencies in that jurisdiction (the "Gaming Regulators"). These laws, regulations and ordinances primarily concern the responsibility,
financial stability and character of gaming

13

equipment manufacturers, distributors and operators, as well as persons financially interested or involved in gaming or liquor operations.

In many jurisdictions, manufacturing or distributing of gaming supplies may not be conducted unless proper licenses are obtained. An application for a license may be denied for
any cause which the Gaming Regulators deem reasonable. In order to ensure the integrity of manufacturers and suppliers of gaming supplies, most jurisdictions have the authority to conduct background investigations of the Company, its key personnel and
significant stockholders. The Gaming Regulators may at any time revoke, suspend, condition, limit or restrict a license for any cause deemed reasonable by the Gaming Regulators. Fines for violation of gaming laws or regulations may be levied against the
holder of a license and persons involved. The Company and its key personnel have obtained all licenses necessary for the conduct of the Company's business in the jurisdictions in which it manufactures and sells its casino table game products. Suspension
or revocation of such licenses could have a material adverse effect upon the Company's operations.

Native American Gaming Regulation. Gaming on Native American lands is extensively regulated under federal law, tribal-state compacts and tribal law. The Indian Gaming
Regulatory Act of 1988 ("IGRA") provides the framework for federal and state control over all gaming on Native American land. IGRA regulates the conduct of gaming on Native American lands and the terms and conditions of contracts with third parties for
management of gaming operations. IGRA is administered by the Bureau of Indian Affairs and the National Indian Gaming Commission ("NIGC").

IGRA classifies games that may be conducted on Native American lands into three categories. "Class I Gaming" includes social games solely for prizes of minimal value, or
traditional forms of Native American gaming engaged in by individuals as part of, or in connection with, tribal ceremonies or celebrations. "Class II Gaming" includes bingo, pulltabs, lotto, punch boards, tip jars, instant bingo, and other games
similar to bingo, if those games are played at the same location as bingo is played. "Class III Gaming" includes all other commercial forms of gaming, such as table games, slots, video casino games, and other commercial gaming (e.g. sports betting
and pari-mutuel wagering).

Class I Gaming on Native American lands is within the exclusive jurisdiction of the Native American tribes and is not subject to the provisions of IGRA.

Class II Gaming is permitted on Native American lands if (i) the state in which the Native American lands are located permits such gaming for any purpose by any
person, organization or entity; (ii) the gaming is not otherwise specifically prohibited on Native American lands by federal law; (iii) the gaming is conducted in accordance with a tribal ordinance or resolution which has been approved by the
NIGC; (iv) a Native American tribe has sole proprietary interest and responsibility for the conduct of gaming; (v) the primary management officials and key employees are tribally licensed; and (vi) miscellaneous other requirements are met.

Class III Gaming is permitted on Native American lands if the conditions applicable to Class II Gaming are met and, in addition, the gaming is conducted in conformance
with the terms

14

of a written agreement between a tribal government and the government of the state within whose boundaries the tribe's lands are located (a "tribal-state compact").

IGRA requires states to negotiate in good faith with Native American tribes that seek to enter into a tribal-state compact for the conduct of Class III gaming. Such
tribal-state compact may include provisions for the allocation of criminal and civil jurisdiction between the state and the Native American tribe necessary for the enforcement of such laws and regulations, taxation by the Native American tribe of such
activity in amounts comparable to those amounts assessed by the state for comparable activities, remedies for breach, standards for the operation of such activity and maintenance of the gaming facility, including licensing, and any other subjects that are
directly related to the operation of gaming activities. The terms of tribal-state compacts vary from state to state. Tribal-state compacts within one state tend to be substantially similar to each other. Tribal-state compacts usually specify the types of
permitted games, entitle the state to inspect casinos, require background investigations and licensing of casino employees, and may require the tribe to pay a portion of the state's expenses for establishing and maintaining regulatory agencies.

Pursuant to tribal-state compacts, agreements with tribes or as otherwise allowed by state law, the Company is currently qualified to distribute its gaming supplies to certain
tribes in the states of Arizona, California, Louisiana, Minnesota, Mississippi, New York, North Dakota, Oregon, Iowa, Connecticut, Michigan, South Dakota, Washington, Wisconsin and the provinces of Ontario and Saskatchewan, Canada.

United States - Federal. The Federal Gambling Devices Act of 1962 makes it unlawful for a person to manufacture, deliver or receive gaming
machines, gaming machine type devices and components thereof across interstate lines unless that person has first registered with the Department of Justice of the United States.

Licensing of Officers and Directors. In each jurisdiction where the Company is presently licensed, the officers and directors who are required to be licensed have either
been approved or licensed or have applications for such licenses or approvals pending. As regulatory authorities require additional persons to be licensed or approved or when the Company seeks to enter into new jurisdictions, the Company promptly causes
necessary applications to be filed.

Application of Future or Additional Regulatory Requirements. In the future, the Company intends to seek the necessary licenses, approvals and findings of suitability for
the Company, its products and its personnel in other jurisdictions throughout the world where significant sales are anticipated to be made. However, there can be no assurance that such licenses, approvals or findings of suitability will be obtained and if
obtained will not be revoked, suspended or conditioned or that the Company will be able to obtain the necessary approvals for its future products as they are developed in a timely manner, or at all. If a license, approval or finding of suitability is
required by a regulatory authority and the Company fails to seek or does not receive the necessary license, approval or finding of suitability, the Company may be prohibited from selling its products for use in the respective jurisdiction or may be
required to sell its products through other licensed entities at a reduced profit to the Company.

15

Item 2.     Properties

The Company is based in, and operates domestically from, a Company-owned facility in Las Vegas, Nevada and currently assembles and manufactures its primary
products at facilities in San Luis, Mexico.

Las Vegas. The Company's Las Vegas headquarters (the "Las Vegas Headquarters") are located in an approximately 60,000 square foot building. The Las Vegas Headquarters
was purchased in September 1995 for approximately $2,000,000, and houses the Las Vegas sales office and corporate offices, a centralized warehouse for certain of its finished goods inventory, roulette and "Big Six" wheel manufacturing and a graphics art
department. In the Las Vegas Headquarters, the Company also maintains certain inventory of templates, graphic designs, logos, and tools and dies for casino customers' gaming equipment. Maintaining such an inventory results in time and cost savings for
product manufacture and delivery to the Company's customers. During fiscal 1998, the Company completed the transition of its primary manufacturing processes to San Luis, Mexico. Due to the relocation of virtually all of the Company's manufacturing
facilities to San Luis, Mexico, the Company has listed for sale the Las Vegas Headquarters. The Las Vegas Headquarters secures a deed of trust issued under the Company's outstanding term loans. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations-Liquidity and Capital Resources."

San Luis. The Company manufactures casino chips, playing cards, furniture, dice, plastic products and layouts at three facilities in San Luis, Mexico. These facilities
include a 34,000 square foot leased facility in which casino chips and dice are manufactured, an adjacent 45,000 square foot facility in which the layout, furniture and machine shop departments are currently located, and an approximately 66,000 square
foot facility used for playing card and plastic products production. The Company leases the Main Facility pursuant to an eight-year lease which expires in April 2001, with an option to extend the term an additional 12 years. The Company plans to exercise
its option and extend the term of the lease for the additional 12 years.

Facility Capacity. With its current approximate 145,000 square feet of manufacturing facilities, management believes that the Company has sufficient production capacity
to meet anticipated future demand for all of its products.

Item 3.     Legal Proceedings

The Company is party to various claims arising in the normal course of business. Management believes that these matters are expected to be resolved with no
material impact on the Company's financial position, liquidity, or results of operations.

In March 2000, a Complaint (the "Complaint") was filed in the Clark County District Court, State of Nevada, by Martin S. Winick, a former director and employee of the Company,
against the Company, The Paul S. Endy, Jr. Living Trust, Eric P. Endy, and Laurence A. Speiser. In the Complaint, the plaintiff alleges several causes of action against the defendants in connection with certain consulting agreements between the plaintiff
and various defendants, along with related option agreements for the purchase of the Company's common stock. The causes of

16

action included, among others, breach of contract, breach of implied covenant of good faith and fair dealing, and intentional infliction of emotional distress. The plaintiff is seeking compensatory and punitive damages in unspecified
amounts. The Company and the other defendants filed answers to the Complaint denying the allegations and asserting certain affirmative defenses. Discovery has now commenced and is ongoing. Management of the Company believes the allegations are without
merit. The Company intends to vigorously defend against the allegations.

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

Not applicable.

PART II

Item 5.     Market for Registrant's Common Equity and Related Stockholder Matters

(a)     Price Range of Common Stock

The Company's common stock ("Common Stock") is traded on the Nasdaq National Market under the symbol "PSON." The following table sets forth the high and low closing prices of
the Common Stock, as reported by the Nasdaq National Market, during the periods indicated.



|Fiscal Year
---------                        |                                                                                                                                                             | High
---------                                | Low
---------                                    
|-------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------- | -------------------------------------------------
|1999
1999
1999
1999
2000
2000
2000
2000
2001 | First Quarter
Second Quarter
Third Quarter
Fourth Quarter
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
First Quarter (through August 24, 2000) | 9 7/8
8 3/8
9
9
9 1/2
8 3/8
6 1/2
4 3/8
4 5/8 | 6 3/4
4
5 5/8
5 1/2
5 3/4
5 1/2
3 3/4
2 1/4
1 7/8



The last reported closing price of the Common Stock on the Nasdaq National Market on August 24, 2000 was $1.875 per share. There were approximately 120 holders of record
of the Common Stock as of August 24, 2000.

(b)     Dividend Policy

The Company has never paid cash dividends. Payments of dividends are within the discretion of the Company's Board of Directors and depend upon the earnings, capital
requirements, and operating and financial condition of the Company, among other factors. The Company currently expects to retain its earnings to finance the growth and development of its business and does not expect to pay cash dividends in the
foreseeable future.

17

Item 6.     Selected Consolidated Financial Data

The selected consolidated financial data included in the following tables should be read in conjunction with the Company's Consolidated Financial Statements and related
notes, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing elsewhere herein.  The selected consolidated financial data for the fiscal years ended May 31, 2000, 1999, and 1998 and as of May
31, 2000 and 1999 have been derived from the audited consolidated financial statements of the Company included elsewhere herein.  The selected consolidated financial data for the years ended May 31, 1997 and 1996 and as of May 31,
1998, 1997 and 1996 have been derived from the Company's audited consolidated financial statements not included herein.

|                                                  | Fiscal Years Ended May 31,                              
                        
----------------------------------------------------------------------------------------------------------------------------------------
|------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                  | 2000       
-------------------                                                                                                                                                                                           
|                                                  | (in thousands, except per share data)                                                                                                                                                                                     
|Operations statement data:                        |                                                                                                                                                                                                                           
|Revenues                                          | $22,662                                                                                                                                                                                                                   
|Cost of revenues                                  | 16,913
--------------------                                                                                                                                                                                               
|Gross profit                                      | 5,749                                                                                                                                                                                                                     
|Selling, general and administrative expenses      | 6,302
--------------------                                                                                                                                                                                                
|Operating income (loss)                           | (553)                                                                                                                                                                                                                     
|Other income (expense)                            | (50)
--------------------                                                                                                                                                                                                 
|Income (loss) before income tax (expense) benefit | (603)                                                                                                                                                                                                                     
|Income tax (expense) benefit                      | (568)
--------------------                                                                                                                                                                                                
|Net income (loss)                                 | $(1,171)===========                                                                                                                                                                                                       
|Earnings (loss) per share:                        |                                                                                                                                                                                                                           
|Basic                                             | $(0.34)                                                                                                                                                                                                                   
|Average shares outstanding                        | 3,454,040                                                                                                                                                                                                                 
|Diluted                                           | $(0.34)                                                                                                                                                                                                                   
|Diluted shares                                    | 3,454,040                                                                                                                                                                                                                 



|                                        | May 31,                                 
                                 
----------------------------------------------------------------------------------------------------------------------------------------
|--------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                        | 2000         
--------------------                                                                                                                                                                                 
|                                        | (in thousands)                                                                                                                                                                                                     
|Balance sheet data:                     |                                                                                                                                                                                                                    
|Cash and cash equivalents               | $2,072                                                                                                                                                                                                             
|Working capital                         | 5,063                                                                                                                                                                                                              
|Property and equipment, net             | 8,396                                                                                                                                                                                                              
|Total assets                            | 17,756                                                                                                                                                                                                             
|Current liabilities                     | 3,719                                                                                                                                                                                                              
|Long-term debt, less current maturities | 667                                                                                                                                                                                                                
|Stockholders' equity                    | 13,370                                                                                                                                                                                                             

18

Item 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations

Paul-Son provides gaming equipment and supplies to new casinos and consumable products to its existing customer base.  The principal consumable products have
limited useful lives, ranging from several hours in the case of playing cards and dice to several months in the case of table game layouts and several years in the case of casino chips and gaming furniture. The majority of the Company's revenues are
generated by sales to customers with which the Company has an established relationship. Complementing these revenues is the significant additional revenue the Company realizes when providing a full range of products to new casinos.  The Company
strives to become the casino's sole supplier of table game equipment and supplies.

During the past decade, casino entities have expanded from land-based resort properties to riverboats, both cruising and dockside, and to Native American lands.  As a licensed
supplier, the Company has vigorously pursued table gaming opportunities in emerging gaming jurisdictions.  Because of the Company's production capacity and its experience in the gaming supply industry, management believes the Company is well
positioned to capitalize on the combined growth of the gaming industry both domestically and internationally.

While the gaming industry has grown in recent years, the growth rate of table games has not matched that of the gaming industry as a whole.  This trend is attributed to an
increasing allocation of total casino gaming space to slot machines which, in certain cases, may reduce the allocation of total casino gaming space to table games.  The number of new table games in new jurisdictions typically follows this trend
after a period of operation.

Results of Operations

The following table summarizes selected items from the Company's Consolidated Statements of Operations as a percentage of revenues for the periods indicated:



|                                             | Fiscal Years Ended May 31,              
------------------------------------------------------------------
|-------------------------------------------- | -----------------------------------------------------------------------------------------------------------
|                                             | 2000
----------------                                                                                      
|Revenues                                     | 100.0%                                                                                                     
|Cost of revenues                             | 74.6%                                                                                                      
|Gross profit                                 | 25.4%                                                                                                      
|Selling, general and administrative expenses | 27.8%                                                                                                      
|Operating loss                               | (2.4)%                                                                                                     
|Interest expense                             | 1.1%                                                                                                       
|Net loss                                     | (5.2)%                                                                                                     

The following table details the Company's historical revenues by product line:



|                            | Fiscal Years Ended May 31,               
---------------------------------------------------------------------
|--------------------------- | ---------------------------------------------------------------------------------------------------------------
|                            | 2000      
-------------------                                                                                 
|                            | (in thousands)                                                                                                 
|Revenues:                   |                                                                                                                
|Casino chips	
Table layouts | $6,642
3,562                                                                                                   

19



|                                                                          | Fiscal Years Ended May 31,               
---------------------------------------------------------------------
|------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------
|                                                                          | 2000      
-------------------                                                                                 
|                                                                          | (in thousands)                                                                                                 
|Playing cards
Gaming furniture
Dice	
Table accessories and other products | 6,0083,0101,8341,606
----------------                                                                          
|Total                                                                     | $22,662=========                                                                                               

Comparison of Operations for the Fiscal Years Ended May 31, 2000 and May 31, 1999

Revenues.  For the fiscal year ended May 31, 2000, Paul-Son's revenues totaled approximately $22.7 million.  The fiscal 2000 revenues represent a
$1.2 million, or 5%, decrease from the $23.9 million in revenues which the Company generated during the previous fiscal year.  The decrease in revenues for the 2000 fiscal period resulted principally from a decrease in gaming furniture and
playing card sales of approximately $2.4 million, offset, in part, by an increase in casino chip and dice sales of approximately $1.1 million. Gaming furniture sales, which are comprised principally of gaming tables and related seating products, declined
in fiscal 2000 due to decreased casino expansions, new openings and non-recurring one-time orders for such products.  Additionally, playing card sales declined primarily due to competitive pressures which caused a 5% decrease in the average
selling price of playing cards versus the prior fiscal year.  Offsetting these revenue decreases were increases in casino chips sales from increased demand for commemorative casino chips during the "Year 2000" casino celebrations as well as
certain significant chip replacement orders.  Although management believes demand for commemorative casino chips will continue to be strong, it does not anticipate the volume of commemorative casino chips sales for the upcoming new year
celebrations to be as significant compared to the "Year 2000" commemorative chip sales volume.  Sales of Company manufactured products were approximately 84% of total revenues in fiscal 2000 compared to approximately 73% in fiscal 1999.

Cost of Revenues.  Cost of revenues, as a percentage of sales, decreased to 74.6% for the fiscal year ended May 31, 2000, as compared to 76.0% in the prior fiscal year.
This improvement in the gross margin percentage during fiscal 2000 was principally caused by the aforementioned increase in sales of products manufactured by the Company, which generally produce larger margins than products distributed by the Company.

Selling, General and Administrative Expenses.  Selling, general and administrative ("SG&A") expenses for the fiscal year ended May 31, 2000 decreased approximately
$600,000, or 9%, to approximately $6.3 million, or 27.8% of revenues, compared to approximately $6.9 million, or 28.9% of revenues, in the previous fiscal year. This decrease was primarily attributable to a reduction in administrative and sales department
personnel related costs and the closure, in fiscal 2000, of certain of the Company's retail and outlying sales offices.

Interest Expense.  For the year ended May 31, 2000, interest expense increased approximately 9% to approximately $241,000, as compared to approximately $222,000 in
the prior fiscal year.  This increase was caused by the full year impact, in fiscal 2000, of an

20

approximately $800,000 capital lease entered into in March 1999, offset, in part, by the absence of line of credit borrowings in fiscal 2000 versus fiscal 1999.

Other Income.  In fiscal 2000, other income decreased to approximately $191,000 compared to other income in fiscal 1999 of approximately $395,000.  This decline
of approximately $204,000 was primarily attributable to the gain on the sale of certain Company-owned real estate of approximately $340,000 in fiscal 1999 offset, in part, by the gain on the sale of certain non-operating assets of approximately $127,000
in fiscal 2000.

Income Taxes.  In fiscal 2000, the Company recorded a tax provision of $568,000 compared to recording a tax benefit in fiscal 1999 of $305,000.  The Company
recorded the fiscal 2000 tax provision due to present uncertainties related to the realizability of future tax benefits that were recorded as deferred tax assets in fiscal 1998 and 1999.

Net Loss.  For the year ended May 31, 2000, the Company incurred a net loss of approximately $1,171,000 versus a net loss of approximately $681,000 in the prior fiscal
year. This decline of approximately $490,000 was primarily due to the aforementioned decreases in revenues, other income and the increased tax provision offset, in part, by the aforementioned improvements in gross profit and SG&A expenses as compared
to fiscal 1999.  Basic and diluted net loss per share was $.34 for the year ended May 31, 2000 as compared with basic and diluted net loss of $.20 for the year ended May 31, 1999.

Comparison of Operations for the Fiscal Years Ended May 31, 1999 and May 31, 1998

Revenues.  For the fiscal year ended May 31, 1999, Paul-Son's revenues totaled approximately $23.9 million.  The fiscal 1999 revenue figure
represents a $2.0 million, or 8%, decrease from the $25.9 million in revenues which the Company generated during the previous fiscal year.  The decrease in revenues for the 1999 period resulted principally from a decrease in gaming furniture and
accessory sales (products not manufactured by the Company) of approximately $4.7 million offset, in part, by an increase in playing card sales of approximately $1.6 million, an increase in casino chip sales of approximately $.5 million and increases in
both layout and dice sales of $.3 million each. Gaming furniture and accessory sales, which are products purchased from third party suppliers and then sold to the customer, decreased principally due to the absence of significant orders from certain
customers associated with new openings and expansions which occurred in the previous fiscal year. Partially offsetting the decrease in gaming furniture and accessory sales was an increase in playing card sales in fiscal 1999 of approximately 34% from
fiscal 1998.  Management believes its ability to meet customers' quality expectations, competitive pricing, and its pursuit of new card contracts contributed to this growth. Sales of Company manufactured products were approximately 73% of total
revenues in fiscal 1999 compared to approximately 53% in fiscal 1998.

Cost of Revenues.  Cost of revenues, as a percentage of sales, decreased to 76.0% for the fiscal year ended May 31, 1999, as compared to 84.8% in the prior fiscal year.
This improvement in gross margins was principally caused by two significant factors: (i) the aforementioned change in the mix of products sold from marginally profitable distributed items in fiscal 1998, such as

21

gaming tables and seating furniture, to higher-margin, Company-manufactured products (casino chips, cards, dice and layouts) in fiscal 1999 and (ii) the absence of certain cost inefficiencies in fiscal 1999 resulting from the final
transition of certain manufacturing processes (i.e. playing cards, layouts, and certain plastic goods) from the Company's Las Vegas facility to its Mexico facilities which occurred in late fiscal 1998.

During certain previous reporting periods, the Company had experienced a positive impact from the decrease in the value of the Mexican peso. During the fiscal year ended May 31, 1999, the
value of the Mexican peso versus the U.S. dollar again declined; however, the decline was not significant and thus did not significantly impact the overall margins of the Company. The Company cannot predict what impact fluctuations between the Mexican
peso and the U.S. dollar will have on the future operating results of the Company.

Gross Profit.  Gross profit increased in absolute dollars by approximately $1.8 million to approximately $5.7 million as compared to approximately $3.9 million in the
prior fiscal year.  This improvement in gross profit was a result of the decrease in cost of revenues as a percentage of sales from 84.8% to 76.0% due to the cost of revenue factors discussed above offset, in part, by decreased revenues in the
fiscal 1999 period.

Selling, General and Administrative Expenses.  Selling, general and administrative ("SG&A") expenses for the fiscal year ended May 31, 1999 decreased approximately
$242,000, or 3%, to approximately $6.9 million or 28.9% of revenues compared to approximately $7.1 million, or 27.6% of revenues, in the previous fiscal year. This decrease was primarily attributable to a reduction in payroll related expenses, a decrease
in provisions for bad debts caused by lower sales volume in the current year and certain recoveries of previously written off bad debts.  These decreases were partially offset by increases in depreciation expense, costs associated with the
formation of the Company's non-gaming business operations and increased licensing and regulatory investigative costs caused by the continued worldwide proliferation of gaming.

Interest Expense.  For the year ended May 31, 1999, interest expense increased approximately 73% to $222,000 as compared to $128,000 in the prior fiscal year. 
 This increase was caused by (i) increased average outstanding borrowings under the Company's line of credit during fiscal 1999, (ii) the acquisition of a $500,000 note in October, 1998 to finance additional playing card equipment, and (iii) the full
year impact, in fiscal 1999, of $1.8 million of certain debt acquired to finance a new building and certain equipment in San Luis, Mexico in November 1997.

Other Income.  In fiscal 1999, other income increased to approximately $395,000, or 170%, over the previous fiscal year.  This increase was attributable
principally to a gain before income taxes of approximately $340,000 which resulted from the sale of certain real estate in fiscal 1999.

Net Loss. For the year ended May 31, 1999, the Company incurred a net loss of approximately $681,000, an improvement of approximately $1.5 million from the net loss of approximately
$2.2 million in the prior fiscal year. This improvement was primarily due to the aforementioned increases in gross profit, other income, and decreases to SG&A expenses from the 1998 period, offset, in part, by the decrease in revenues from the prior
fiscal year. Basic and

22

diluted net loss per share was $.20 for the year ended May 31, 1999 as compared with basic and diluted net loss of $.65 for the year ended May 31, 1998.

Liquidity and Capital Resources

Overview.  Management believes that the combination of its existing cash balances, anticipated cash flows from operations and other possible financing
alternatives, if necessary, will provide sufficient liquidity, both on a short-term and long-term basis.

Working Capital.  Working capital totaled approximately $5.1 million at May 31, 2000, versus approximately $6.8 million at May 31, 1999.  Working capital
decreased approximately $1.7 million during the year primarily due to the increase in current maturities of long-term debt of approximately $1.6 million.  The current maturities of long-term debt increased due to a June, 2000 forbearance
agreement entered into with a bank which accelerates principal payments of outstanding debt obligations during the fiscal year ending May 31, 2001 (see "Secured Debt").  Decreases in accounts receivable and inventories were offset by an increase
in cash and decreases in accounts payable, accrued liabilities and customer deposits.

Cash Flow.Cash provided by operating activities totaled approximately $1.9 million during fiscal 2000 compared to cash provided by operations of approximately $1.0 million in
fiscal 1999.  The primary contributing factors to cash provided by operating activities in fiscal 2000 were net income before depreciation, amortization and income taxes of approximately $500,000 and reductions of accounts receivable and
inventories of approximately $2.2 million, offset, in part, by decreases in accounts payable, accrued liabilities and customer deposits of approximately $800,000.  Other significant cash activities during fiscal 2000 included reductions in debt
obligations from certain credit facilities of approximately $326,000.  Overall, cash increased approximately $1.4 million from May 31, 1999 to May 31, 2000.

Line of Credit. Until its maturity date of October 31, 1999, the Company had a $1.0 million line of credit agreement with a bank.  Interest accrued on outstanding
borrowings under the line of credit at the bank's prime rate of interest plus one percent.  The bank did not renew this line of credit facility at October 31, 1999.

Secured Debt.  In November 1997, the Company obtained a $1.8 million loan (the "$1.8 Million Note") from Norwest Bank.  The proceeds were used to acquire certain
real estate in San Luis, Mexico and certain equipment used principally in the Company's manufacturing processes.  The $1.8 Million Note bears interest at 8.87% per annum, with monthly payments of principal and interest totaling $18,118.
Additionally, in October 1998, the Company obtained an additional $500,000 Note (the "$500,000 Note") to acquire additional playing card equipment. The $500,000 Note bears interest at 9.75% per annum, with monthly principal installments of $13,889 and a
final payment of approximately $42,000 in August 2001.  Both of these notes are secured by a first deed of trust on the Las Vegas Headquarters and by a first security interest in all accounts, inventory, and general intangibles of Paul-Son
Supplies.

Under the former line of credit and the existing secured debt credit facilities, the Company agreed to comply with certain financial covenants and ratios.  Specifically, the
Company agreed to

23

maintain a tangible net worth of not less than $14.0 million, a total liabilities to tangible net worth ratio of no greater than 0.5 to 1.0, certain minimum cash flow amounts and an annualized profitability of not less than $250,000 in
net income, all as defined in the agreement. During the year ended May 31, 2000, the Company was in violation of certain of its covenants.  As a result of the violations, in June 2000, the Company and the bank entered into a forbearance
agreement under which the Company agreed, among other things, to make additional principal payments each month beginning June 15, 2000.  The amount of the additional principal payments is $100,000 for the first four months, $125,000 for the
succeeding four months and $150,000 for succeeding months until all outstanding principal and interest amounts have been paid in full.  The bank has agreed to waive its rights regarding declarations of default so long as the additional monthly
principal payments are paid in accordance with the agreement.  As of August 24, 2000, the Company has made all required payments under the forbearance agreement.

Seasonality.  The Company does not typically experience seasonality relative to its revenues.

Las Vegas Facilities. In May 1997, the Company purchased its current corporate headquarters, an approximately 62,000 square foot building located in Las Vegas.  Due to the
relocation of virtually all of the Company's manufacturing facilities to San Luis, Mexico, the Company has listed the Las Vegas Headquarters for sale.  If a sale of the headquarters is consummated, the Company intends to relocate into a smaller
facility in the Las Vegas area.  The Las Vegas Headquarters secures a deed of trust issued under certain credit facilities with a bank.

San Luis Facilities.The Company leases the 34,000 square foot Main Facility pursuant to an eight-year lease which expires in April 2001, with an option to extend the
term an additional 12 years.  In December 1994, the Company purchased the adjacent 45,000 square foot facility for approximately $1.5 million.  In November 1997, the Company completed the purchase of the 66,000 square foot New San Luis
Facility for approximately $1.1 million.

Capital Expenditures.  The Company does not have plans to purchase any significant capital equipment for the fiscal year ended May 31, 2001.

Stock Repurchase Program.In July 1998, the Company announced that its Board of Directors authorized the open market repurchase of up to 5% of the outstanding Common
Stock.  As of August 24, 2000, the Company has purchased 5,000 shares at an average price of approximately $5 per share.  The Company intends to fund any future repurchases from cash on hand.

Recently Issued Accounting Guidance

The FASB issued SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities" in June 1998.  This statement establishes accounting and reporting
standards for derivative instruments and hedging activities.  This statement is effective for all fiscal quarters of fiscal years which begin after June 15, 2000.  The statement requires entities to recognize all derivatives as either
assets or liabilities in the statement of financial position and to measure

24

instruments at fair value.  Management believes that SFAS No. 133 will not have a material impact on its consolidated financial statements.

In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101").  SAB 101 clarifies
existing accounting principles related to revenue recognition in financial statements.  The Company is required to comply with the provisions of SAB 101 by the fourth quarter of its fiscal year ending May 31, 2001.  Due to the nature
of the Company's operations, management does not believe that SAB 101 will have a significant impact on the Company's consolidated financial statements.

Statement on Forward-Looking Information

Certain information included herein contains statements that may be considered forward-looking, such as statements relating to anticipated performance, financing sources and the
relocation of certain operations.  Any forward-looking statement made by the Company necessarily is based upon a number of estimates and assumptions that, while considered reasonable by the Company, is inherently subject to significant business,
economic and competitive uncertainties and contingencies, many of which are beyond the control of the Company, and are subject to change.  Actual results of the Company's operations may vary materially from any forward-looking statement made by
or on behalf of the Company.  Forward-looking statements should not be regarded as a representation by the Company or any other person that the forward-looking statements will be achieved.  Undue reliance should not be placed on any
forward-looking statements.  Some of the contingencies and uncertainties to which any forward-looking statement contained herein is subject include, but are not limited to, the following:

Reliance on Expansion of Casino Industry.  Nearly all of the Company's revenue is generated by sales relating to existing casinos, casino openings and expansions. 
 Although the Company is pursuing opportunities to sell and market its products to industries outside of the casino industry, the Company's future growth may be dependent on the continued emergence and growth of new markets for the Company's
products, including new casino openings or expansions throughout the United States and other areas of the world.  A reduction in the pace of new casino openings and casino expansions in existing and emerging legalized gaming jurisdictions would
have a negative effect on the Company's business.  Similarly, the restriction or abolishment of legalized casino gaming in jurisdictions in which the Company currently does business would have a negative impact on the Company.

Gaming Regulations.  The manufacture and distribution of gaming equipment and supplies are subject to extensive federal, state and local regulation.  Although
these regulations vary among jurisdictions, virtually all jurisdictions require licenses, permits and approvals to be held by the Company and its key personnel in connection with the manufacture and distribution of some or all of the Company's
products.  The failure of the Company or its key personnel to obtain or retain required licenses, permits or approvals in one or more jurisdictions could have an adverse effect on the Company and could adversely affect the ability of the Company
and its key personnel to obtain or retain licenses in other jurisdictions.  No assurance can be given that such licenses,

25

permits or approvals will be obtained, retained or renewed in the future in existing or emerging jurisdictions.

The regulatory environment in which the Company operates requires, among other things, that the Company develop and follow certain internal "due diligence" procedures to ensure its gaming
regulatory licenses are not jeopardized relative to its business operations and customer base.  As such, the Company may require information from, and perform inquiries into, potential customers above what certain competitors may require
depending on the extent of the competitors' internal procedural requirements or the absence of such.  To the extent potential customers are adverse to these procedures, the Company may be at a competitive disadvantage relative to its competitors.

Any beneficial holder of the Company's Common Stock may be subject to investigation by the gaming authorities in any or all of the jurisdictions in which the Company operates if such
authorities have reason to believe that such ownership may be inconsistent with such state's gaming policies.  Persons who acquire beneficial ownership of more than certain designated percentages of Common Stock will be subject to certain
reporting and qualification procedures established by the Nevada and other gaming authorities, as well as certain local licensing authorities.

Need for Tribal-State Compacts.  The Company's ability to generate greater revenues and earnings is dependent in part on the growth of Native American tribal casinos. 
 Under IGRA, the operation of a casino on Native American tribal land is not permitted until the Native American tribe and the state in which it is located have entered into a tribal-state compact authorizing gaming on the tribe's land and such
tribal-state compact is approved by the Secretary of the Department of Interior.  Many states have resisted entering into tribal-state compacts, which has resulted in litigation challenging the constitutionality of IGRA.  If IGRA were
found to be unconstitutional, the procedures that would apply to the initiation and operation of Native American tribal casinos would be uncertain.  Such a finding could severely limit or delay the expansion of gaming in additional
jurisdictions.  In addition, a recent court ruling has placed limits on the ability of Native American tribes to force states to enter into tribal-state compacts and several states, through legislation or constitutional amendment, have sought to
limit the scope of Native American gaming under IGRA.

Variability of Quarterly Operating Results.  The Company's financial results are dependent in part upon sales to new or expanding casinos, which may, in turn, be dependent
upon the authorization of gaming in additional jurisdictions.  The timing of these events does not follow consistent patterns throughout any given year.  Given this uncertain timing and the large dollar value of sales to new casinos,
the Company's future operating results may be subject to significant quarterly fluctuations.

Table Games Growth Rate.  The Company's primary products are sold to casinos with table games.  In recent years, there has been an increasing allocation of total
casino gaming space to slot machines, and in certain cases, a resulting reduction in the allocation of total casino gaming space to table games.  As a result, the growth rate of table games has not matched that of the casino industry as a
whole.  Although the Company's recurring product sales have grown

26

marginally over the past several years, the Company believes that the Company's rate of growth would have been greater if not for this trend.  An acceleration of the aforementioned trend of allocating more gaming space to slot
machines rather than table games could have a negative impact on the Company's rate of growth.

Dependence on Key Personnel.  The Company's success depends to a significant degree on the performance of Eric P. Endy, Chairman of the Board and Chief Executive
Officer.  The Company carries key man life insurance on Eric P. Endy, and the loss of the services of him could have a material adverse effect on the Company.

The Company is also dependent upon the abilities and efforts of certain other management personnel.

Management anticipates that as the Company continues to expand into new gaming jurisdictions throughout the United States and internationally, its future success will depend in part upon
its ability to attract and retain qualified personnel to fill key sales, administrative and management positions.  There can be no assurance that the Company will be able to locate and retain such individuals.

Foreign Currency.  The majority of the Company's employees are located in Mexico and are paid in Mexican pesos.  To the extent that inflationary costs of the
Company's Mexican operation is not offset by a devaluation of the Mexican peso versus the U.S. dollar, the Company could experience a material adverse financial impact.

Expansion of International Sales.  Although currently only a small percentage of the Company's sales are to casinos located in foreign countries, a component of the
Company's business strategy is the expansion of its international sales.  To the extent the Company is successful in this endeavor, it will be increasingly subject to the customary risks of doing business in foreign countries.  These
risks include fluctuations in foreign currency exchange rates and controls, competitive issues relative to established businesses with significant current market share and business/customer relationships, nationalization and other economic, tax and
regulatory policies of local governments and the possibility of trade embargoes, political instability or war or other hostility, as well as the laws and policies of the United States affecting foreign trade and investment.

Competition.  There are significant competitors in each of the Company's major product lines.  With the continuing expansion of gaming, it is possible that new
competitors may be attracted to the table game supply business, some of which may be in the business of selling gaming products, have licenses to sell gaming supplies and have greater financial resources than the Company.  The entry by such
companies into the Company's markets could adversely impact the Company's business.

Control by Existing Stockholder; Anti-takeover Effects.  Eric P. Endy is the beneficial owner of approximately 52% of the outstanding Common Stock of the Company. 
 As a result, Mr. Endy effectively controls the election of all of the members of the Board of Directors of the Company and effectively controls virtually all matters requiring approval by the stockholders of

27

the Company.  Such ownership may discourage acquisition of large blocks of the Company's securities and could have an anti-takeover effect, possibly depressing the price of the Common Stock.  In addition, Nevada
corporation law and the Company's Articles of Incorporation and Bylaws contain provisions that may have the effect of delaying, deferring or preventing a change in control of the Company.

Reliance on Suppliers.  For certain of its products, the Company is dependent upon a limited number of suppliers to provide the Company with raw materials for
manufacturing and finished goods for distribution.  The failure of one or more of these suppliers to meet the Company's performance specifications, quality standards or delivery schedules could have a material adverse effect on the Company.

Item 7a. - Quantitative and Qualitative Disclosure About Market Risk.

The Company has certain fixed-rate debt and a variable rate capital lease which it believes to have fair values that approximate reported amounts.  The Company believes that any
market risk arising from these financial instruments is not material.

28

Item 8.     Financial Statements and Supplementary Data

Independent Auditors' Report

Consolidated Balance Sheets at May 31, 2000 and 1999

Consolidated Statements of Operations for the Fiscal Years Ended May 31, 2000, 1999 and 1998

Consolidated Statements of Stockholders' Equity for the Fiscal Years Ended May 31, 2000, 1999 and 1998

Consolidated Statements of Cash Flows for the Fiscal Years Ended May 31, 2000, 1999 and 1998

Notes to Consolidated Financial Statements

Financial Statement Schedule included in Part IV of this report

29

PAUL-SON GAMING CORPORATION

AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

MAY 31, 2000





30

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Paul-Son Gaming Corporation and Subsidiaries
Las Vegas, Nevada

We have audited the accompanying consolidated balance sheets of Paul-Son Gaming Corporation and Subsidiaries (the "Company") as of May 31, 2000 and 1999, and the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended May 31, 2000.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Paul-Son Gaming Corporation and Subsidiaries as of May 31, 2000 and 1999, and the results of their operations and
their cash flows for each of the three years in the period ended May 31, 2000, in conformity with accounting principles generally accepted in the United States of America.

/s/  Deloitte & Touche LLP

DELOITTE & TOUCHE LLP
Las Vegas, Nevada

July 31, 2000

31

PAUL-SON GAMING CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

May 31, 2000 and 1999

|ASSETS                                                                                                                                                                                                                                                                                                                    | 2000                                                             | 1999                                                          
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | --------------------------------------------------------------
|-----------------------------------------------------------------------------------------------------------------------------------                                                                                                                                                                                      
|Current Assets:                                                                                                                                                                                                                                                                                                           |                                                                  |                                                               
|Cash and cash equivalents
Trade receivables, net
Inventories, net
Prepaid expenses
Other current assets                                                                                                                                                                                                                   | $2,071,952
2,298,336
4,146,065
128,128
137,162
----------------- | $656,299
3,909,732
4,788,382
174,664
232,431
-----------------
|Total current assets                                                                                                                                                                                                                                                                                                      | 8,781,643                                                        | 9,761,508                                                     
|Property and Equipment, net                                                                                                                                                                                                                                                                                               | 8,396,365                                                        | 9,416,656                                                     
|Deferred Tax Asset                                                                                                                                                                                                                                                                                                        | -                                                                | 568,000                                                       
|Other assets, net                                                                                                                                                                                                                                                                                                         | 577,868
-----------------                                        | 382,153
-----------------                                     
|Total Assets                                                                                                                                                                                                                                                                                                              | $17,755,876
==========                                           | $20,128,317
==========                                        
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                                                                                                                                                                      |                                                                  |                                                               
|Current Liabilities:                                                                                                                                                                                                                                                                                                      |                                                                  |                                                               
|Current maturities of long-term debt 
Accounts payable
Accrued expenses
Customer deposits
Income taxes payable                                                                                                                                                                                                            | $1,899,443
779,309
818,092
199,078
22,927
-----------------      | $329,201
1,641,419
508,426
479,936
49,298
-----------------   
|Total current liabilities                                                                                                                                                                                                                                                                                                 | 3,718,849
-----------------                                      | 3,008,280
-----------------                                   
|Long-Term Debt, less current maturities                                                                                                                                                                                                                                                                                   | 667,401
-----------------                                        | 2,564,244
-----------------                                   
|Commitments and Contingencies                                                                                                                                                                                                                                                                                             |                                                                  |                                                               
|Stockholders' Equity:                                                                                                                                                                                                                                                                                                     |                                                                  |                                                               
|Preferred stock, authorized 10,000,000 shares, $.01 par value, none 
   issued and outstanding
Common stock, authorized 30,000,000 shares, $.01 par value, issued 
   3,477,050 shares in 2000 and 1999
Additional paid-in capital
Treasury stock, at cost; 24,293 and 21,293 shares in 2000 and 1999
Accumulated deficit | -
34,771
13,652,936
(188,730)
(129,351)
-----------------        | -
34,771
13,652,936
(173,505)
1,041,591
------------------    
|Total stockholders' equity                                                                                                                                                                                                                                                                                                | 13,369,626
-----------------                                     | 14,555,793
-----------------                                  
|Total Liabilities and Stockholders' Equity                                                                                                                                                                                                                                                                                | $17,755,876
==========                                           | $20,128,317
==========                                        

See Notes to Consolidated Financial Statements.

32

PAUL-SON GAMING CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Fiscal years ended May 31, 2000, 1999 and 1998

|                                                                                                                                            | 2000                                        | 1999                                        | 1998                                      
|------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | ------------------------------------------- | ------------------------------------------
|-------------------------------------------------------------------------------------------------------------------------------------------
|Revenues                                                                                                                                    | $22,662,062                                 | $23,914,408                                 | $25,885,627                               
|Cost of revenues                                                                                                                            | 16,913,009
------------------               | 18,169,433
------------------               | 21,943,781
-------------------            
|Gross profit                                                                                                                                | 5,749,053                                   | 5,744,975                                   | 3,941,846                                 
|Selling, general and administrative expenses                                                                                                | 6,302,086
------------------                | 6,903,789
------------------                | 7,145,552
-------------------             
|Operating loss                                                                                                                              | (553,033)                                   | (1,158,814)                                 | (3,203,706)                               
|Other income (expense)                                                                                                                      |                                             |                                             |                                           
|Interest income
Interest expense
Other                                                                                                      | 11,135
(241,020)
179,976
------------------ | 19,330
(222,486)
375,664
------------------ | 92,096
(127,597)
54,299
------------------
|Loss before income taxes                                                                                                                    | (602,942)                                   | (986,306)                                   | (3,184,908)                               
|Income tax (expense) benefit                                                                                                                | (568,000)
------------------                | 305,000
------------------                  | 966,266
------------------                
|Net loss                                                                                                                                    | $(1,170,942)
===========                    | $(681,306)
===========                      | $(2,218,642)
===========                  
|Loss per share:                                                                                                                             |                                             |                                             |                                           
|Basic
Diluted                                                                                                                               | $(0.34)
===========
$(0.34)
===========     | $(0.20)
===========
$(0.20)
===========     | $(0.65)
===========
$(0.65)
===========   

See Notes to Consolidated Financial Statements.

33

PAUL-SON GAMING CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Fiscal years ended May 31, 2000, 1999 and 1998

|                                                                                                                                                                                                                | Common Stock         
---------------------------------- | Additional         | Treasury               | Accumulated          |                            
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------- | ------------------ | ---------------------- | -------------------- | ---------------------------
|                                                                                                                                                                                                                | Shares                                                   | Dollars            | Paid-in                | Stock                | Deficit                    
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Balance, June 1, 1997                                                                                                                                                                                           | 3,417,000                                                | $34,170            | $13,108,998            | -                    | $3,941,539                 
|Shares issued from the exercise of options                                                                                                                                                                      | 48,750                                                   | 488                | 402,802                | -                    | -                          
|Income tax benefit from exercise of options                                                                                                                                                                     | -                                                        | -                  | 55,000                 | -                    | -                          
|Net loss                                                                                                                                                                                                        | -
---------------                                        | -
---------------- | -
----------------     | -
---------------    | (2,218,642)
---------------
|Balance, May 31, 1998                                                                                                                                                                                           | 3,465,750                                                | 34,658             | 13,566,800             | -                    | 1,722,897                  
|Shares issued from the exercise of options                                                                                                                                                                      | 11,300                                                   | 113                | 86,136                 | -                    | -                          
|Treasury shares purchased and received in lieu of note receivable                                                                                                                                               | (21,293)                                                 | -                  | -                      | $(173,505)           | -                          
|Net loss                                                                                                                                                                                                        | -
----------------                                       | -
---------------  | -
-----------------    | -
---------------    | (681,306)
---------------- 
|Balance, May 31, 1999                                                                                                                                                                                           | 3,455,757                                                | 34,771             | 13,652,936             | (173,505)            | 1,041,591                  
|Treasury shares purchased                                                                                                                                                                                       | (3,000)                                                  | -                  | -                      | (15,225)             | -                          
|Net loss                                                                                                                                                                                                        | -
----------------                                       | -
---------------  | -
-----------------    | -
---------------    | (1,170,942)
-------------- 
|Balance, May 31, 2000                                                                                                                                                                                           | 3,452,757
==========                                     | $34,771
========== | $13,652,936
========== | $(188,730)
========= | $(129,351)
==========      

See Notes to Consolidated Financial Statements.

34



PAUL-SON GAMING CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Fiscal years ended May 31, 2000, 1999 and 1998

|                                                                                                                                                                                                                                                     | 2000                                                                                           | 1999                                                                                                            | 1998                                                                                                                      
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------                                                     
|Cash Flows from Operating Activities                                                                                                                                                                                                                 |                                                                                                |                                                                                                                 |                                                                                                                           
|Net loss                                                                                                                                                                                                                                             | $(1,170,942)                                                                                   | $(681,306)                                                                                                      | $(2,218,642)                                                                                                              
|Adjustments to reconcile net loss to net cash provided by (used in) 
   operating activities:                                                                                                                                                        |                                                                                                |                                                                                                                 |                                                                                                                           
|Depreciation and amortization
Provision for doubtful accounts
Provision for inventory obsolescence
(Gain) loss on sale/disposal of assets                                                                                                            | 1,111,828
244,326
375,000
(126,988)                                                            | 1,082,757
130,000
40,000
(346,094)                                                                              | 967,475
213,938
200,000
3,663                                                                                             
|Change in operating assets and liabilities:                                                                                                                                                                                                          |                                                                                                |                                                                                                                 |                                                                                                                           
|Accounts receivable
Income taxes receivable
Inventories
Prepaid expenses
Other assets
Deferred tax asset
Accounts payable and accrued expenses
Bank overdraft
Deferred tax liability
Customer deposits
Income taxes payable                          | 1,367,070
-
267,317
46,536
95,269
568,000
(552,444)
-
-
(280,858)
(26,371)
------------------- | 1,094,082
786,463
343,020
(55,971)
234,642
(305,000)
(699,192)
(431,380)
-
(201,889)
49,298
------------------- | (1,692,618)
(731,463)
(20,956)
22,269
208,485
(263,000)
1,537,629
431,380
(11,060)
(897,336)
(318,930)
-------------------
|Net cash provided by (used in) operating activities                                                                                                                                                                                                  | 1,917,743
-------------------                                                                  | 1,039,430
-------------------                                                                                   | (2,569,166)
-------------------                                                                                           
|Cash Flows from Investing Activities                                                                                                                                                                                                                 |                                                                                                |                                                                                                                 |                                                                                                                           
|Proceeds received on sale of property and equipment
Purchase of patent
Purchase of property and equipment, net                                                                                                                                       | 249,069
(245,920)
(163,413)
--------------------                                               | 714,599
-
(947,071)
--------------------                                                                        | 7,350
-
(2,834,003)
--------------------                                                                                  
|Net cash used in investing activities                                                                                                                                                                                                                | (160,264)
--------------------                                                                 | (232,472)
-------------------                                                                                   | (2,826,653)
-------------------                                                                                           
|Cash Flows from Financing Activities                                                                                                                                                                                                                 |                                                                                                |                                                                                                                 |                                                                                                                           
|Proceeds from short-term borrowings
Proceeds from long-term borrowings
Principal payments on short-term borrowings
Principal payments on long-term borrowings
Payments for acquisition of treasury stock
Proceeds from the exercise of stock options | ---(326,601)(15,225)-
-------------------                                                      | -500,000(850,000)(225,284)(9,500)86,249
-------------------                                                     | 850,0001,800,000-(62,747)-403,290
-------------------                                                                     
|Net cash provided by (used in) financing activities                                                                                                                                                                                                  | (341,826)
-------------------                                                                  | (498,535)
-------------------                                                                                   | 2,990,543
-------------------                                                                                             
|Net increase (decrease) in cash and cash equivalents                                                                                                                                                                                                 | 1,415,653                                                                                      | 308,423                                                                                                         | (2,405,276)                                                                                                               
|Cash and cash equivalents, beginning of year                                                                                                                                                                                                         | 656,299
-------------------                                                                    | 347,876
-------------------                                                                                     | 2,753,152
-------------------                                                                                             
|Cash and cash equivalents, end of year                                                                                                                                                                                                               | $2,071,952
===========                                                                         | $656,299
===========                                                                                            | $347,876
===========                                                                                                      
|Supplemental cash flows information:                                                                                                                                                                                                                 |                                                                                                |                                                                                                                 |                                                                                                                           
|Operating activities include cash payments for interest and income taxes
  as follows:                                                                                                                                                               |                                                                                                |                                                                                                                 |                                                                                                                           
|Interest paid	
Income taxes paid                                                                                                                                                                                                                     | $241,020$45,411                                                                                | $222,486$208,472                                                                                                | $127,597$299,117                                                                                                          
|Investing and financing activities exclude the following non-cash activity:                                                                                                                                                                          |                                                                                                |                                                                                                                 |                                                                                                                           
|Reduction of note and interest receivable in exchange for common stock placed into treasury	
Acquisition of capitalized lease equipment through lease arrangement                                                                                    | $     -$     -                                                                                 | $164,005$790,000                                                                                                | $     -$     -                                                                                                            

35

PAUL-SON GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.     Nature of Business and Significant Accounting Policies

Nature of business

Paul-Son Gaming Corporation, including its subsidiaries (collectively "Paul-Son" or the "Company"), is a leading manufacturer and supplier of casino table game equipment in the United States. The Company's products include casino
chips, table layouts, playing cards, dice, furniture, table accessories and other products which are used with casino table games such as blackjack, poker, baccarat, craps and roulette. The Company sells its products in every state in which casinos
operate in the United States and, to a limited extent, in various countries throughout the world.

Basis of consolidation and presentation

The consolidated financial statements include the accounts of Paul-Son and its wholly-owned subsidiaries, Paul-Son Gaming Supplies, Inc. ("Paul-Son Supplies"), Paul-Son Mexicana, S.A. de C.V. ("Mexicana") and Authentic Products,
Inc. All material intercompany balances and transactions have been eliminated in consolidation.

A summary of the Company's significant accounting policies follows:

Cash and cash equivalents

The Company considers all highly liquid investments and repurchase agreements with original maturities of three months or less to be cash and cash equivalents

Trade receivables and Customer deposits

The Company performs ongoing credit evaluations of its customers and generally requires a fifty percent deposit for manufactured or purchased products at the discretion of management. These customer deposits are classified as a
current liability on the balance sheet. The Company maintains an allowance for doubtful accounts, and charges against the allowance have been within management's expectations (see Note 9).

Inventory

Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method.

36

PAUL-SON GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Property and equipment

Property and equipment are stated at cost, net of depreciation. The Company includes capitalized lease equipment in its property and equipment for financial statement purposes. Depreciation is computed primarily on the straight-line
method for financial reporting purposes over the following estimated useful lives:

|                           | Years
|-------------------------- | -----
|Buildings and improvements | 18-27
|Furniture and equipment    | 5-10 
|Vehicles                   | 5-7  

Normal repairs and maintenance are charged to expense as incurred. Expenditures which extend useful lives of assets are typically capitalized.

Other assets

Included in other assets are goodwill and costs associated with the acquisition of a patent. Goodwill is amortized on a straight-line basis over 20 years and patent costs are amortized on a straight-line basis over 5 years.

Debt

The Company includes obligations from capitalized leases in its long and short-term debt captions for financial statement purposes.

Revenue recognition

Substantially all revenue is recognized when products are shipped to customers. The Company typically sells its products with payment terms of net 30 days or less.

Income taxes

The Company uses Statement of Financial Accounting Standards ("SFAS") No. 109 for financial accounting and reporting for income taxes. A current tax liability or asset is recognized for the estimated taxes payable or refundable on
tax returns for the current year. A deferred tax liability or asset is recognized for the estimated future tax effects, based on provisions of the enacted law, attributable to temporary differences and carryforwards.

Foreign transactions

Sales outside of the United States are not significant and substantially all sales transactions occur in United States dollars.

37

PAUL-SON GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates and assumptions have been made in determining the depreciable
lives of assets, the recoverability of deferred tax assets, the allowance for doubtful accounts receivable, and the allowance for obsolete or slow moving inventories. Actual results could differ from those estimates and assumptions.

Reliance on suppliers

For certain of its products, the Company is dependent upon a limited number of suppliers to provide the Company with raw materials for manufacturing and finished goods for distribution. The failure of one or more of these suppliers
to meet the Company's performance specifications, quality standards or delivery schedules could have a material adverse effect on the Company.

Recoverability of long-lived assets

Management evaluates the carrying value of all long-lived assets to determine recoverability based on an analysis of non-discounted future cash flows. Based on its most recent analysis, management believes that no material
impairment in the value of long-lived assets exists at May 31, 2000.

Recently issued accounting guidance

The FASB issued SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities" in June 1998. This statement establishes accounting and reporting standards for derivative instruments and hedging activities. This
statement is effective for all fiscal quarters of fiscal years which begin after June 15, 2000. The statement requires entities to recognize all derivatives as either assets or liabilities in the statement of financial position and to measure instruments
at fair value. As the Company does not have significant derivative instruments, management believes that SFAS No. 133 will not have a material impact on its consolidated financial statements.

In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 clarifies existing accounting principles related to revenue
recognition in financial statements. The Company is required to comply with the provisions of SAB 101 by the fourth quarter of its fiscal year ending May 31, 2001. Due to the nature of the Company's operations, management does not believe that SAB 101
will have a significant impact on the Company's consolidated financial statements.

38

PAUL-SON GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note 2.     Inventories

Inventories consist of the following at May 31:



|                        | 2000
------------------------     | 1999
------------------------    
|----------------------- | --------------------------------- | ---------------------------------
|Raw materials           | $   2,321,531                     | $   1,777,212                    
|Work in process         | 225,507                           | 346,761                          
|Finished goods          | 2,299,027
----------------------- | 2,989,409
-----------------------
|                        | 4,846,065                         | 5,113,382                        
|Less inventory reserves | 700,000
-----------------------   | 325,000
-----------------------  
|                        | $   4,146,065
==============      | $   4,788,382
===============    

Note 3.     Property and Equipment

Property and equipment consist of the following at May 31:



|                              | 2000
------------------------     | 1999
------------------------     
|----------------------------- | --------------------------------- | ----------------------------------
|Land                          | $       663,970                   | $       663,970                   
|Buildings and improvements    | 6,060,645                         | 6,491,881                         
|Furniture and equipment       | 5,041,687                         | 6,301,425                         
|Vehicles                      | 440,068
-----------------------   | 732,920
------------------------  
|                              | 12,206,370                        | 14,190,196                        
|Less accumulated depreciation | 3,810,005
----------------------- | 4,773,540
------------------------
|Property and Equipment, net   | $    8,396,365
==============     | $     9,416,656
==============    

Included in furniture and equipment is capitalized lease equipment with an original cost of $790,000 and a current net book value of approximately $647,000.

Note 4.     Long-Term Debt and Pledged Assets

Paul-Son Supplies has a $1.8 million note and a $500,000 note to a bank (collectively the "Facilities"). The Facilities are secured by a first deed of trust on certain real estate owned by Paul-Son Supplies and by a secured
interest in all accounts, equipment, inventory and general intangibles of Paul-Son Supplies. The Company is also the guarantor of the facilities. The Facilities contain restrictive covenants, generally requiring the Company to maintain certain financial
ratios, as defined in the agreement, and to maintain net income annually of at least $250,000. As of May 31, 2000 the Company was in violation of certain covenants. As a result of the violations, the Company and the bank, in June 2000, entered into a
forbearance agreement. This agreement requires the Company to pay additional monthly principal payments of $100,000 beginning June 15, 2000. The additional monthly principal payments increase to $125,000 beginning October 15, 2000 and to $150,000
beginning February 15, 2001. The bank has agreed to waive its rights to declare a default on the Facilities as long as principal payments are made in accordance with the forbearance agreement.

39

PAUL-SON GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Long-term debt consists of the following at May 31:

|                                                                                                                                                                                                                                                                                                                                                        | 2000
----------------------    | 1999
-------------------     
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------ | -----------------------------
|Note payable to bank in monthly installments of $18,118,
  including interest of 8.87%, plus additional monthly graduating
  principal payments of $100,000 to $150,000 from June 2000
  through May 2001, secured by a first deed of trust on the
  Company's main facility in Las Vegas, Nevada and a first
  security interest on all Company assets | $   1,643,518                  | $  1,709,443                 
|                                                                                                                                                                                                                                                                                                                                                        |                                |                              
|Note payable to bank in monthly principal installments of
  $13,889 plus interest of 9.75% through July 2001 with a
  balloon payment of approximately $42,000 due August 2002,
  secured by a first deed of trust on the Company's main facility
  in Las Vegas, Nevada and a first security interest on all
  Company assets                          | 236,111                        | 402,779                      
|                                                                                                                                                                                                                                                                                                                                                        |                                |                              
|Notes payable to mortgage company, collateralized by real estate,   interest at 7.5%, with principal and interest payments of
  approximately $500 due monthly through July 2001                                                                                                                                                                        | 6,235                          | 11,563                       
|                                                                                                                                                                                                                                                                                                                                                        |                                |                              
|Capital lease obligation payable for equipment, variable interest
  (approximately 9% at May 31, 2000), payable in monthly
  installments of approximately $12,250 through March 2006,
  collateralized by a second security interest on principally all
  Company assets                                                                               | 680,980
--------------------   | 769,660
---------------------
|                                                                                                                                                                                                                                                                                                                                                        | 2,566,844                      | 2,893,445                    
|Less current portion                                                                                                                                                                                                                                                                                                                                    | 1,899,443
-------------------- | 329,201
-------------------  
|                                                                                                                                                                                                                                                                                                                                                        | $     667,401
============     | $   2,564,244
===========    

Estimated annual principal maturities of long-term debt and future minimum payments under capital lease obligations at May 31, 2000 are as follows:



|                                  | Capital
Leases
---------------------------- | Long-Term
Debt
-----------------------
|--------------------------------- | ------------------------------------------- | --------------------------------------
|2001                              | $   147,048                                 | $  1,803,403                          
|2002                              | 147,048                                     | 82,461                                
|2003                              | 147,048                                     | -                                     
|2004                              | 147,048                                     | -                                     
|2005                              | 147,048                                     | -                                     
|Thereafter                        | 111,048
---------------------               | -
------------------                  
|Total                             | 846,288                                     | 1,885,864                             
|Less amount representing interest | 165,308
---------------------               | -
------------------                  
|                                  | $   680,980
=============                   | $  1,885,864
===========              

40

PAUL-SON GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note 5.     Related Parties

The following amounts were paid for legal, accounting, and consulting services to individuals who were members of the Company's Board of Directors during the periods reported:

|                    | 2000
----------------- | 1999
---------------- | 1998
------------------
|------------------- | ---------------------- | --------------------- | -----------------------
|Laurence A. Speiser | $       -              | $       -             | $   108,000            

Included in accounts receivable are amounts owed from an officer of the Company of approximately $10,000 and $52,000 at May 31, 2000 and 1999, respectively.

Note 6.     Commitments and Contingencies

The Company leases land, manufacturing and office space under operating leases with terms of between 3 to 8 years. Approximate minimum annual rental commitments, with remaining lease terms of greater than 1 year at May 31,
2000, are as follows:



|2001       | $     97,866                                         
|---------- | -----------------------------------------------------
|2002       | 96,092                                               
|2003       | 131,850                                              
|2004       | 131,850                                              
|2005       | 78,720                                               
|Thereafter | 8,856
--------------------
  $   545,234
============

The Company has a twelve year option to extend the lease at one of its production facilities. The annual rent during the first 8-year term, which ends in April 2001, is approximately $140,000. The rent payments during the option period
will increase 5% annually.

Rent expense totaled $255,810, $306,517 and $264,154 for the fiscal years ended May 31, 2000, 1999 and 1998, respectively.

The Company is party to various claims arising in the normal course of business. Management believes that these matters are expected to be resolved with no material impact on the Company's financial position, liquidity, or results of
operations.

41

PAUL-SON GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note 7.     Income Tax Matters

The (expense) benefit for income taxes reflected in the Consolidated Statements of Operations for the fiscal years ended May 31, 2000, 1999 and 1998 consisted of:



|         | 2000
-------------------    | 1999
--------------------  | 1998
------------------- 
|-------- | --------------------------- | -------------------------- | -------------------------
|Current  | $        -                  | $       -                  | $  678,805               
|Deferred | (568,000)
----------------- | 305,000
------------------ | 287,461
-----------------
|         | $  (568,000)
==========     | $  305,000
===========     | $  966,266
==========    

A reconciliation of the Company's income tax (expense) benefit as compared to the tax (expense) benefit calculated by applying the statutory federal tax rate (34%) to the loss before income taxes for the fiscal years ended May 31, 2000,
1999 and 1998 is as follows:



|                                              | 2000
------------------     | 1999
------------------       | 1998
----------------        
|--------------------------------------------- | --------------------------- | ----------------------------- | -----------------------------
|Computed expected income tax
  benefit at 34% | $    205,000                | $   335,344                   | $ 1,082,869                  
|Adjustments:                                  |                             |                               |                              
|State taxes                                   | 10,000                      | 11,250                        | 32,503                       
|Meals and entertainment                       | (9,844)                     | (17,125)                      | (22,987)                     
|Net operating loss carryforward               | (194,578)                   | -                             | -                            
|Allowance for deferred tax asset              | (568,000)                   |                               |                              
|Prior year items and other                    | (10,578)
------------------ | (24,469)
-------------------- | (126,119)
-------------------
|Income tax (expense) benefit                  | $ (568,000)
===========     | $   305,000
============      | $     966,266
===========    

During the second fiscal quarter of the fiscal year ended May 31, 2000, the Company recorded an allowance of $568,000 in the form of a tax provision against certain future tax benefits, the realization of which are currently uncertain.
Subsequent to the second quarter, no deferred tax benefits were recorded as assets for taxable losses of the Company. The deferred tax benefits were primarily composed of net operating losses and timing differences related to certain accounts receivable
and inventory allowances not currently deductible as expenses under IRS provisions. Although the Company recorded this allowance to the deferred tax asset, the Company may still utilize the future tax benefits from net operating losses for 15 years from
the year of the loss to the extent of future taxable income.

42

PAUL-SON GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The primary components of the deferred tax asset at May 31 were approximately as follows:



|                                      |                                  | 2000
-----------------------  | 1999
-----------------------
|------------------------------------- | -------------------------------- | ----------------------------- | ----------------------------
|Operating loss carryforwards          | $      339,000                   | $      300,000               
|Inventory and bad debt reserves       | 367,000                          | 225,000                      
|Intangible assets                     | 45,000                           | 35,000                       
|Other                                 | 12,000
---------------------     | 8,000
---------------------  
|                                      | 763,000                          | 568,000                      
|Less allowance for deferred tax asset | 763,000
---------------------    | -
---------------------      
|Deferred tax asset, net               | $               -
============== | $      568,000
==============

Note 8.     Earnings Per Share and Stock Option Programs

The following table provides a reconciliation of basic and diluted earnings (loss) per share as required by SFAS No. 128, "Earnings Per Share":

|                                                                                              | Basic
--------------------- | Dilutive
Stock
Options
--------------------- | Diluted
----------------------
|--------------------------------------------------------------------------------------------- | --------------------------- | -------------------------------------------- | ------------------------------
|For the fiscal year ended May 31, 2000
------------------------------------------------------ |                             |                                              |                               
|Net loss                                                                                      | $ (1,170,942)               | -                                            | $ (1,170,942)                 
|Shares                                                                                        | 3,454,040                   | -                                            | 3,454,040                     
|Per Share Amount                                                                              | $           (.34)           |                                              | $            (.34)            
|For the fiscal year ended May 31, 1999
------------------------------------------------------ |                             |                                              |                               
|Net loss                                                                                      | $   (681,306)               | -                                            | $    (651,306)                
|Shares                                                                                        | 3,468,427                   | -                                            | 3,468,427                     
|Per Share Amount                                                                              | $           (.20)           |                                              | $            (.20)            
|For the fiscal year ended May 31, 1998
------------------------------------------------------ |                             |                                              |                               
|Net income                                                                                    | $ (2,218,642)               | -                                            | $ (2,218,642)                 
|Shares                                                                                        | 3,437,894                   | -                                            | 3,437,894                     
|Per Share Amount                                                                              | $           (.65)           |                                              | $            (.65)            

Dilutive stock options for the years ended May 31, 2000 (106,500), 1999 (111,000) and 1998 (861,250) have not been included in the computation of the diluted net loss per share as their effect would be antidilutive.

The Company has granted certain stock options to purchase common stock which had an exercise price greater than the average market price. These options have been excluded from the computation of diluted loss per share for the respective
fiscal years. These outstanding antidilutive options for the fiscal years ended May 31, 2000, 1999 and 1998, were 422,000, 541,750 and 4,000, respectively.

The Company has stock option programs which consist of the 1994 Long-Term Incentive Plan (the "Incentive Plan") and the 1994 Directors' Stock Option Plan (the "Directors' Plan"). The Incentive Plan provides for the grant of stock
options to executive officers, key employees,

43

PAUL-SON GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

outside consultants and employee-directors. On July 29, 1996, the Board of Directors amended and stockholders subsequently approved to increase the aggregate shares issuable under the Incentive Plan to 1,000,000 from 500,000 shares.
The options granted under the Incentive Plan expire 10 years after the date of grant. The Directors' Plan, as amended in September 1999, provides that each non-employee director, upon joining the Board of Directors, will receive an option to purchase
6,000 shares of common stock. The initial option grant vests over a 3 year period, with one-third of the option grant vesting at the end of each year. At the beginning of the fourth year of service on the Board of Directors, and each year thereafter, each
nonemployee director receives an annual grant to purchase 2,000 shares of common stock. In addition, each year each non-employee director receives options to purchase 1,500 shares of common stock for serving on the following committees of the Board of
Directors for at least six months prior to the date of grant: the Audit Committee; the Compensation Committee; and the Compliance Committee. No option is exercisable sooner than 6 months and one day after the date of the grant. The options expire on the
tenth anniversary of the date of grant, 9 months after retirement or 2 years after death. Options covering 9,500, 7,000 and 4,000 shares were granted to non-employee directors during the fiscal years ended May 31, 2000, 1999 and 1998 at $5.09, $8.50 and
$10.56, respectively.

The following is a summary of option activity for the three fiscal years ended May 31, 2000:

|                                                     | Options
Available for
Grant
---------------------- | Shares
Under Plan
-------------------------- | Weighted
Average
Exercise
Price
----------------------
|---------------------------------------------------- | -------------------------------------------------- | -------------------------------------------- | ------------------------------------------------------
|Outstanding at June 1, 1997                          | 165,000                                            | 910,000                                      | $       8.96                                          
|Granted                                              | (14,000)                                           | 14,000                                       | 10.00                                                 
|Canceled                                             | 10,000                                             | (10,000)                                     | 8.75                                                  
|Exercised                                            | 48,750
------------------                          | (48,750)
--------------------                | 8.27
-------------------                              
|Outstanding at May 31, 1998                          | 209,750                                            | 865,250                                      | 9.02                                                  
|Granted                                              | (112,000)                                          | 112,000                                      | 5.31                                                  
|Canceled                                             | 313,200                                            | (313,200)                                    | 9.16                                                  
|Exercised                                            | 11,300
------------------                          | (11,300)
--------------------                | 7.63
-------------------                              
|Outstanding at May 31, 1999                          | 422,250                                            | 652,750                                      | 8.34                                                  
|Granted                                              | (9,500)                                            | 9,500                                        | 5.08                                                  
|Canceled                                             | 133,750                                            | (133,750)                                    | 8.56                                                  
|Exercised                                            | -
------------------                               | -
--------------------                       | -
-------------------                                 
|Outstanding at May 31, 2000                          | 546,500
===========                                | 528,500
============                         | $        8.32
============                            
|                                                     |                                                    |                                              |                                                       
|                                                     | 2000
--------------------                          | 1999
---------------------                   | 1998
---------------------                            
|The weighted average fair value of options
  granted | $       2.41                                       | $       2.46                                 | $        4.78                                         

44

PAUL-SON GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes information concerning currently outstanding and exercisable options:

|                                                    | Options Outstanding
--------------------------------------------------------------------- | Options Exercisable
-------------------------------------------- 
|--------------------------------------------------- | ----------------------------------------------------------------------------------------- | -----------------------------------------------------------------
|Range of
Exercise
Prices
-------------------------- | Number
Outstanding
-------------------                                                    | Weighted
Average
Remaining
Contractual
Life
---------------------
|$ 3.63 to 8.25                                      | 228,250                                                                                   | 7.43                                                             
|$ 8.26 to 13.88
-------------------                 | 300,250
--------------                                                                    | 6.66
----------------                                            
|-------------------                                 | 528,500
-------------                                                                     | ----------------                                                 

The Company accounts for these plans under APB Opinion No. 25, under which no compensation cost has been recognized. Had compensation cost for these plans been determined consistent with SFAS No. 123, "Accounting for Stock Based
Compensation", the Company's net loss and loss per share would have been reduced to the following pro forma amounts for the fiscal years ended May 31:

|                |              | 2000
-------------------- | 1999
-------------------- | 1998
-------------------
|--------------- | ------------ | ------------------------- | ------------------------- | ------------------------
|Net loss:       | As reported: | $ (1,170,942)             | $    (681,306)            | $ (2,218,642)           
|                | Pro forma:   | $ (1,668,194)             | $ (1,123,435)             | $ (2,820,169)           
|Loss per share: | As reported: |                           |                           |                         
|                | Basic        | $            (.34)        | $            (.20)        | $            (.65)      
|                | Diluted      | $            (.34)        | $            (.20)        | $            (.65)      
|                | Pro forma:   |                           |                           |                         
|                | Basic        | $            (.48)        | $            (.32)        | $            (.82)      
|                | Diluted      | $            (.48)        | $            (.32)        | $            (.82)      

Pro forma loss reflect only options granted from fiscal 1997 to fiscal 2000. Therefore, the full impact of calculating compensation cost for stock options under SFAS No. 123 is not reflected in pro forma net loss because compensation
costs are reflected over the option-vesting period and compensation costs for options granted prior to fiscal 1997 are not considered.

The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for fiscal 2000, 1999, 1998 and 1997 grants; risk-free interest rate at the date of grant
which ranged from 5.6% to 6.7%; expected dividend yield of 0.0%; expected life of 5 years; and expected volatility of 43.79%.

As of May 31, 2000 a maximum of 1,075,000 shares of common stock have been reserved for issuance under these plans. None of the options can be granted at less than the fair market value of the Company's stock on the date of grant.

45

PAUL-SON GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Note 9.     Allowance for Doubtful Accounts and Inventory Valuation Reserves

The Company records, based on periodic reviews of its trade receivables and inventories, allowances for estimated uncollectible trade accounts receivable and slow moving or obsolete inventories. A summary of amounts provisions for
estimated bad debts and obsolete or slow-moving inventories and the related charges to the allowance for doubtful accounts and inventory valuation reserves are as follows:

Trade receivables:

|Fiscal Years Ended May 31, | Beginning
of Year
Balance
----------------------- | Provisions
--------------------- | Charge-offs,
Net of
Recoveries
---------------------- | End of
Year
Balance
--------------------
|-------------------------- | ------------------------------------------------- | -------------------------------- | ----------------------------------------------------- | ----------------------------------------
|                           |                                                   |                                  |                                                       |                                         
|2000                       | $   400,000
===========                           | $   244,326
==========           | $   (264,326)
===========                             | $   380,000
==========                  
|1999                       | $   374,994
===========                           | $   130,000
==========           | $   (104,994)
===========                             | $   400,000
==========                  
|1998                       | $   269,140
===========                           | $   213,938
==========           | $   (108,084)
===========                             | $   374,994
==========                  

Inventories:

|Fiscal Years Ended May 31, | Beginning
of Year Balance
---------------------- | Provisions
---------------------- | Charge-offs/
Reclassi-
fications
--------------------- | End of
Year
Balance
--------------------
|-------------------------- | ------------------------------------------------ | --------------------------------- | ------------------------------------------------------ | ----------------------------------------
|                           |                                                  |                                   |                                                        |                                         
|2000                       | $   325,000
============                         | $   375,000
===========           | $           -
===========                              | $   700,000
==========                  
|1999                       | $   200,000
============                         | $     40,000
===========          | $     85,000
===========                               | $   325,000
==========                  
|1998                       | $          -
============                        | $   200,000
===========           | $           -
===========                              | $   200,000
==========                  

Note 10.     Business Segments

SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information" requires public business enterprises to report selected reporting information about operating segments in annual financial statements and requires
public business enterprises to report selected information about operating segments in interim financial reports. The Company's reportable segments have been identified as follows:

- Sale of Gaming Supply Products to New Casino Openings - Significant sales of products to casinos which opened during the fiscal year, the majority of which sales are not replaced on a regular, recurring basis.
- Sale of Gaming Supply Products to Established Casinos - Sales of products to casino customers which had opened prior to the fiscal year and are principally considered on-going, recurring sales.

The accounting policies of the segments are the same as those described in the "Summary of Significant Accounting Policies." The Company evaluates the performance of each segment by

46

PAUL-SON GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

allocating certain overhead expenses to the segments based on management's estimates. The following information represents the disclosure requirements and information management utilizes in measuring the profit or loss of each
significant segment:

The table below presents information about the reported operating income of the Company for the fiscal years ended May 31, 2000, 1999 and 1998. Asset information by reportable segment is not reported since no segregation of assets
exists between segments.

|               | Product Sales - 
New Casino
Openings
-------------------------------- | Product Sales - 
Established
Casinos
------------------------- | Consolidated
Totals
-----------------------
|-------------- | --------------------------------------------------------------------- | -------------------------------------------------------------- | -------------------------------------------
|2000           |                                                                       |                                                                |                                            
|Revenues       | $      2,127,847                                                      | $   20,534,215                                                 | $  22,662,062                              
|Operating loss | (90,404)
------------------------                                     | (462,629)
------------------------                             | (553,033)
-------------------              
|1999           |                                                                       |                                                                |                                            
|Revenues       | $      2,296,459                                                      | $   21,617,949                                                 | $  23,914,408                              
|Operating loss | (138,701)
------------------------                                    | (1,020,113)
------------------------                           | (1,158,814)
--------------------           
|1998           |                                                                       |                                                                |                                            
|Revenues       | $     3,185,377                                                       | $    22,700,250                                                | $  25,885,627                              
|Operating loss | (229,489)
------------------------                                    | (2,974,217)
------------------------                           | (3,203,706)
--------------------           

Corporate expenses and certain overhead expenses have been allocated to each segment based on management's estimate of the segment's utilization of the resources or expenses. During the fiscal years ended May 31, 2000, 1999 and 1998,
management estimated gross margins of the reportable segments to be equal. However, management's estimation used in the operating loss for the segments' overhead and corporate expenses was 90% from product sales to established casinos and 10% from product
sales to new casino openings.

The Company's long-lived assets are domiciled in the United States and Mexico. The table below presents information regarding the long-lived assets as of May 31:

|                              | 2000
--------------------           | 1999
---------------------       | 1998
---------------------      
|----------------------------- | ----------------------------------- | -------------------------------- | --------------------------------
|MEXICO:                       |                                     |                                  |                                 
|Property and Equipment, cost  | $    8,097,977                      | $  9,248,820                     | $  7,656,140                    
|Less accumulated depreciation | 2,508,390
--------------------      | 2,887,990
-------------------    | 2,169,682
-------------------   
|Net property and equipment    | $    5,589,587
-------------------- | $  6,360,830
------------------- | $  5,486,458
-------------------
|UNITED STATES:                |                                     |                                  |                                 
|Property and Equipment, cost  | $    4,108,393                      | $  4,941,376                     | $  6,111,713                    
|Less accumulated depreciation | 1,301,615
--------------------      | 1,885,550
-------------------    | 2,492,626
-------------------   
|Net property and equipment    | $    2,806,778
-------------------- | $  3,055,826
------------------- | $  3,619,087
-------------------
|                              | $    8,396,365
============         | $  9,416,656
===========         | $  9,105,545
===========        

47

Item 9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

PART III

Item 10.     Directors and Executive Officers of the Registrant

This information is incorporated by reference from the Company's Proxy Statement to be filed with the Securities and Exchange Commission (the "Commission") in connection
with the Annual Meeting of Stockholders to be held on November 14, 2000.

Item 11.     Executive Compensation

This information is incorporated by reference from the Company's Proxy Statement to be filed with the Commission in connection with the Annual Meeting of Stockholders to be
held on November 14, 2000.

Item 12.     Security Ownership of Certain Beneficial Owners and Management

This information is incorporated by reference from the Company's Proxy Statement to be filed with the Commission in connection with the Annual Meeting of Stockholders to be
held on November 14, 2000.

Item 13.     Certain Relationships and Related Transactions

This information is incorporated by reference the Company's Proxy Statement to be filed with the Commission in connection with the Annual Meeting of Stockholders to be held
on November 14, 2000.

PART IV

Item 14.     Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)     1.     Financial Statements

Included in Part II of this report:

Consolidated Balance Sheets at May 31, 2000 and 1999.

Consolidated Statements of Operations for the Fiscal Years Ended May 31,

                           2000, 1999 and 1998.

Consolidated Statements of Stockholders' Equity for the Fiscal Years Ended

                           May 31, 2000, 1999 and 1998.

48

Consolidated Statements of Cash Flows for the Fiscal Years Ended May 31
,
                           2000, 1999 and 1998.

Notes to Consolidated Financial Statements

2.     Financial Statement Schedules

All required schedules are omitted because of the absence of conditions under

                          which they are required or because the required information is given in the
                          financial statements or notes thereto.

(b)     Reports on Form 8-K

None.

(c)     Exhibits



|3.01  | Articles of Incorporation of Paul-Son Gaming Corporation and Certificate of Amendment of Articles of Incorporation of Paul-Son Gaming Corporation incorporated herein by reference from the Company's registration statement on Form S-1
(SEC No. 33-74758), Part II, Item 16, Exhibit 3.01.                                         
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.02  | Bylaws of Paul-Son Gaming Corporation incorporated herein by reference from the Company's registration statement on Form S-1 (SEC No. 33-74758), Part II, Item 16, Exhibit 3.02.                                                                                                                                                     
|4.01  | Specimen Common Stock Certificate for the Common Stock of Paul-Son Gaming Corporation incorporated herein by reference from the Company's registration statement on Form S-1 (SEC No. 33-74758), Part II, Item 16, Exhibit 4.01.                                                                                                     
|10.01 | Paul-Son Gaming Corporation 1994 Directors' Stock Option Plan (as amended July 29, 1996) Paul-Son Gaming Corporation 1994 Directors' Stock Option Plan (as amended July 29, 1996) incorporated herein by reference from the Company's annual
report on Form 10-K for the year ended May 31, 1996, Part IV, Item 14(c), Exhibit 10.03.
|10.02 | Paul-Son Gaming Corporation 1994 Long-Term Incentive Plan (as amended July 29, 1996) Paul-Son Gaming Corporation 1994 Long-Term Incentive Plan (as amended July 29, 1996) incorporated herein by reference from the Company's annual report
on Form 10-K for the year ended May 31, 1996, Part IV, Item 14(c), Exhibit 10.04         
|10.03 | Lease dated May 17, 1993, by and between Paul-Son Mexicana S.A. de C.V., as lessee, and Coprodiedad Arte Y Diseno, as lessor incorporated herein by reference from the Company's registration statement on Form S-1 (SEC No. 33-74758),
Part II, Item 16, Exhibit 10.05.                                                             

49



|10.04 | Letter Loan Agreement dated November 14, 1997, among Norwest Bank Nevada, National Association, Paul-Son Gaming Supplies, Inc., as borrower, and Paul-Son Gaming Corporation, as guarantor; Guaranty dated November 14, 1997, by Paul-Son
Gaming Corporation in favor of Norwest Bank Nevada, National Association; Term Note dated November 14, 1997, by Paul-Son Gaming Supplies, Inc., payable to Norwest Bank Nevada, National Association; Promissory Note dated November 14, 1997 by Paul-Son
Gaming Supplies, Inc., payable to Norwest Bank Nevada, National Association; Continuing Credit Agreement dated November 14, 1997, by Paul-Son Gaming Supplies, Inc. in favor of Norwest Bank Nevada, National Association; Continuing Security Agreement dated
November 14, 1997, by Paul-Son Gaming Corporation in favor of Norwest Bank Nevada, National Association; and Deed of Trust dated November 14, 1997, among Paul-Son Gaming Supplies, Inc., as grantor, Norwest Bank Nevada, National Association, as
beneficiary, and Americorp Financial, Inc., as trustee, incorporated by reference from the Company's quarterly report on Form 10-Q for the quarter ended November 30, 1997, Item 6, Exhibit 10.01.
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.05 | Modification/Change in Terms Agreement dated October 23, 1998 between Paul-Son Gaming Supplies, Inc. and Norwest Bank Nevada, N.A.; Promissory Note made by Paul-Son Gaming Supplies, Inc., in favor of Norwest Bank Nevada, N.A.,
dated October 23, 1998; Change in Terms Agreement dated October 23, 1998, between Paul-Son Gaming Supplies, Inc., and Norwest Bank Nevada, N.A., incorporated by reference from the Company's quarterly report on form 10-Q for the quarter ended
November 30, 1998.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.06 | Forbearance Agreement dated June 6, 2000 between Paul-Son Gaming Supplies, Inc. and Wells Fargo Bank Nevada, N.A.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|21.01 | List of subsidiaries of Paul-Son Gaming Corporation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|23.01 | Consent of Deloitte & Touche LLP                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|27.01 | Financial Data Schedule                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

50

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

|                | PAUL-SON GAMING CORPORATION
|--------------- | ---------------------------
|                |                            
|August 25, 2000 | By                         



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

|                |   
|--------------- | --
|August 25, 2000 | By



| |   
| | --
| | By
| |   
| | By
| |   
| | By

51

EXHIBIT INDEX

|EXHIBIT NO. | DESCRIPTION                                                                                                                                                                                                                                                                                                                           | PAGE NO.
|----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------
|3.01        | Articles of Incorporation of Paul-Son Gaming Corporation and Certificate of Amendment of Articles of Incorporation of Paul-Son Gaming Corporation incorporated herein by reference from the Company's registration statement on Form S-1
(SEC No. 33-74758), Part II, Item 16, Exhibit 3.01.                                          |         
|3.02        | Bylaws of Paul-Son Gaming Corporation incorporated herein by reference from the Company's registration statement on Form S-1 (SEC No. 33-74758), Part II, Item 16, Exhibit 3.02.                                                                                                                                                      |         
|4.01        | Specimen Common Stock Certificate for the Common Stock of Paul-Son Gaming Corporation incorporated herein by reference from the Company's registration statement on Form S-1 (SEC No. 33-74758), Part II, Item 16, Exhibit 4.01.                                                                                                      |         
|10.01       | Paul-Son Gaming Corporation 1994 Directors' Stock Option Plan (as amended July 29, 1996) Paul-Son Gaming Corporation 1994 Directors' Stock Option Plan (as amended July 29, 1996) incorporated herein by reference from the Company's annual
report on Form 10-K for the year ended May 31, 1996, Part IV, Item 14(c), Exhibit 10.03. |         
|10.02       | Paul-Son Gaming Corporation 1994 Long-Term Incentive Plan (as amended July 29, 1996) Paul-Son Gaming Corporation 1994 Long-Term Incentive Plan (as amended July 29, 1996) incorporated herein by reference from the Company's annual report
on Form 10-K for the year ended May 31, 1996, Part IV, Item 14(c), Exhibit 10.04          |         
|10.03       | Lease dated May 17, 1993, by and between Paul-Son Mexicana S.A. de C.V., as lessee, and Coprodiedad Arte Y Diseno, as lessor incorporated herein by reference from the Company's registration statement on Form S-1 (SEC No. 33-74758),
Part II, Item 16, Exhibit 10.05.                                                              |         

52

|EXHIBIT NO. | DESCRIPTION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | PAGE NO.
|----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------
|10.04       | Letter Loan Agreement dated November 14, 1997, among Norwest Bank Nevada, National Association, Paul-Son Gaming Supplies, Inc., as borrower, and Paul-Son Gaming Corporation, as guarantor; Guaranty dated November 14, 1997, by Paul-Son
Gaming Corporation in favor of Norwest Bank Nevada, National Association; Term Note dated November 14, 1997, by Paul-Son Gaming Supplies, Inc., payable to Norwest Bank Nevada, National Association; Promissory Note dated November 14, 1997 by Paul-Son
Gaming Supplies, Inc., payable to Norwest Bank Nevada, National Association; Continuing Credit Agreement dated November 14, 1997, by Paul-Son Gaming Supplies, Inc. in favor of Norwest Bank Nevada, National Association; Continuing Security Agreement dated
November 14, 1997, by Paul-Son Gaming Corporation in favor of Norwest Bank Nevada, National Association; and Deed of Trust dated November 14, 1997, among Paul-Son Gaming Supplies, Inc., as grantor, Norwest Bank Nevada, National Association, as
beneficiary, and Americorp Financial, Inc., as trustee, incorporated by reference from the Company's quarterly report on Form 10-Q for the quarter ended November 30, 1997, Item 6, Exhibit 10.01. |         
|10.05       | Modification/Change in Terms Agreement dated October 23, 1998 between Paul-Son Gaming Supplies, Inc. and Norwest Bank Nevada, N.A.; Promissory Note made by Paul-Son Gaming Supplies, Inc., in favor of Norwest Bank Nevada, N.A.,
dated October 23, 1998; Change in Terms Agreement dated October 23, 1998, between Paul-Son Gaming Supplies, Inc., and Norwest Bank Nevada, N.A., incorporated by reference from the Company's quarterly report on form 10-Q for the quarter ended
November 30, 1998.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |         
|10.06       | Forbearance Agreement dated June 6, 2000 between Paul-Son Gaming Supplies, Inc. and Wells Fargo Bank Nevada, N.A.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 54      
|21.01       | List of subsidiaries of Paul-Son Gaming Corporation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 59      
|23.01       | Consent of Deloitte & Touche LLP                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 61      
|27.01       | Financial Data Schedule                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 63      

53