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, 1998
                                ---------------------------------

[ ]  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
                            --------------------

                   PAUL-SON GAMING CORPORATION
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     (Exact name of registrant as specified in its charter)

              NEVADA                           88-0310433
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(State or other jurisdiction of             (I.R.S. Employer
 incorporation or organization)            Identification No.)

1700 South Industrial Road, Las Vegas, Nevada    89102
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(Address of principal executive offices)       (Zip Code)

                         (702)  384-2425
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      (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
                                                 
                                      Name of each exchange
      TITLE OF EACH CLASS              ON WHICH REGISTERED
      -------------------              -------------------

        Not Applicable                    Not Applicable
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Securities registered pursuant to Section 12(g) of the Act:
                                
                  COMMON STOCK, $ .01 PAR VALUE
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                        (Title of class)
                                
<PAGE>

     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, 1998, based on  the
last reported bid price as reported on the Nasdaq National Market
of $7.75 per share, was approximately $12,997,447.

     Indicate  the number of shares outstanding of  each  of  the
registrant's classes of common stock, as of August 24, 1998.

     Common Stock, $.01 par value, 3,474,850 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  the  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; Reno, Nevada; Atlantic City, New  Jersey;
Gulfport, Mississippi; Ft. Lauderdale, Florida; 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.  The Company opened  a  retail  sales
outlet on the Las Vegas Strip during fiscal 1998 through which it
sells  table  game products, some of which are factory  overruns,
returns or excess items, to the general public.  In fiscal  1998,
the  Company  announced that it intends  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 current  Chairman,
Paul  S. Endy and initially manufactured and sold dice to casinos
in  Las Vegas.  In the more than 35 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  core
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
core customer base.

BUSINESS STRATEGY

     During  its  more  than  35 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

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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 Columbia, Canada, and Mpumalanga  and
Gauteng, South Africa.  The Company's 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) upgrade its manufacturing
facilities  and  aggressively pursue market share  for  products,
such  as  playing  cards, in which the Company does  not  have  a
leading  share, (iii) expand internationally into growing  casino
markets,  including  those  in Canada, Australia,  Europe,  South
America,  Central  America, Asia, Africa and the  Caribbean,  and
(iv)  develop or acquire new products which the Company can  sell
through its existing distribution network.

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, and 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,  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.  Every year since  1994  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 65 million chips (based  on  a
single  shift).   Management  believes  that  given  its  current
production  level of approximately 8-10 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

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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 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.  Paul-Son is a leading manufacturer of  felt
layouts  in  the  United States, utilizing  high  quality  cloth,
enhanced   graphics,  and  proprietary  dye  formulations   which
management  believes result in the widest variety  of  customized
colors.   The  Company has introduced its own line  of  synthetic
layouts  which  management believes are more  durable  than  felt
layouts.

     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 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.

     The   Company  manufactures  its  layouts  in   its   Mexico
facilities.   The   Company's  layout  production   capacity   is
approximately  50,000  "steam" layouts and  approximately  25,000
"hand-painted"  layouts per year.  In fiscal  1998,  the  Company
produced  approximately 30,000 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 $.80 and $2.00 and, based  on  casino
industry  practices, is generally replaced every eight  hours  or
less.   A  casino  typically  enters into  a  one  year  purchase
commitment  with  a  supplier  to supply  its  cards  at  regular
intervals, generally monthly.  Casinos often 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 fourth 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 opportunity for the Company.

     The  Company produces all of its playing cards in its Mexico
facilities.   The Company plans to purchase additional  equipment
in  the  second quarter of fiscal 1999 to increase its production
capacity to approximately 30 million decks per year, up from  the
Company's current annual production capacity of approximately  15
million  decks.  Expanded playing card production  capacity  will
permit  management to aggressively seek new playing card business
from its existing

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casino  customer  base,  from other casinos  and  from  customers
outside  of  the  casino industry.  In fiscal 1998,  the  Company
produced approximately 5 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 buys its tables in unassembled form from
quality wood shops.  Tables are then 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 $2.35 and $3.05 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 600,000 pairs of dice per  year
(based  upon one production shift).  In fiscal 1998, the  Company
produced approximately 500,000 pairs of dice.

  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

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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.

SALES, ADVERTISING AND PROMOTION

     The  Company generally distributes its products through  its
approximate 15 person sales force, which operates out of regional
offices in Las Vegas and Reno, Nevada; Atlantic City, New Jersey;
Gulfport, Mississippi; Ft. Lauderdale, Florida; Ontario,  Canada;
and   Portland,   Oregon.   Additionally,  the  Company   has   a
distributor  in Lima, Peru.  Management believes that  the  long-
standing  customer  relationships  which  its  individual   sales
representatives have developed over the years and  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.

     During   the   last  fiscal  year  ended   May   31,   1998,
approximately 50% of the Company's revenue was generated by  core
sales  to  its  existing  customers.  See "Item  7.  Management's
Discussion  and  Analysis of Financial Condition and  Results  of
Operations."   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 core 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 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.

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COMPETITION

     There  are  a  number  of companies that  compete  with  the
Company in the sale of each of its product lines:

     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 and 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  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, 1998, the Company employed approximately  500
persons.  Approximately 400 of the employees are located  at  the
Company's Mexico facilities and the remainder are located in  Las
Vegas and in other regional sales offices.  None of the Company's
employees is covered by collective bargaining agreements.

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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  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.

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     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%, 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

                               10
                                
<PAGE>

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 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

                               11
                                
<PAGE>

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 environmental 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 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.

                               12
                                
<PAGE>

      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   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

                               13
                                
<PAGE>

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
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

                               14
                                
<PAGE>

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,   Florida,   Louisiana,   Minnesota,
Mississippi,  New York, North Dakota, Oregon, Iowa,  Connecticut,
Michigan,  South Dakota, Washington, Wisconsin and the  provinces
of Ontario and Saskatchewan, Canada.

      In  1996,  the Nevada Gaming Authorities took the  position
that  any Native American tribe operating Class III gaming within
the state of California, absent a valid compact with the State of
California, was doing so illegally, causing the Company to  cease
all  sales  of products to Native American tribes conducting  any
form of Class III gaming in the state of California.

      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  it
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.

ITEM 2.   PROPERTIES

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

                               15
                                
<PAGE>

      LAS  VEGAS.  The Company's Las Vegas headquarters (the "Las
Vegas  Headquarters")  are  located in  an  approximately  62,000
square foot building. The Las Vegas Headquarters was purchased in
September  1995  for  $2,000,000, and  houses  the  casino  sales
office, 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.   Additional limited warehousing space is  located  at
the  Company's  former  headquarters (the  "Original  Facility").
During  fiscal  1998,  the Company continued  to  transition  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
both  the  Las  Vegas Headquarters and the Original Facility  and
intends to reevaluate its space needs depending, in part, on real
estate  market conditions and the Company's business  objectives.
The  Las Vegas Headquarters secures a deed of trust issued  under
the  Company's  bank line of credit.  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,  dice and layouts at three facilities in San Luis, Mexico,
a  34,000  square foot leased facility in which casino chips  and
dice  are  manufactured, an adjacent 45,000 square foot  facility
purchased  by the Company in December 1994, in which  the  layout
and  the machine shop departments are currently located,  and  an
approximately 66,000 square foot facility purchased  in  November
1997 located approximately 400 yards from the Company's other San
Luis facilities used for playing card and chip production, and to
manufacture  the  Company's  own  line  of  plastic  table  games
products.   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.

      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.

      RETAIL  FACILITY.  The Company is leasing an  approximately
2,000 square foot retail store in a retail shopping center on the
Las  Vegas  Strip.  The lease term expires in December 1999,  and
the Company believes that the retail facility is adequate for its
current retail needs.

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.

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

     Not applicable.

                               16
                                
<PAGE>

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 bid prices of the Common Stock,
as  reported  by the Nasdaq National Market, during  the  periods
indicated.

 Fiscal                                                               
  Year                                                   High        Low
--------                                                ------     ------
  1997    First Quarter...............................   9 1/2        7
  1997    Second Quarter..............................   8 1/4      7 1/4
  1997    Third Quarter...............................  12 1/4      7 3/4
  1997    Fourth Quarter..............................  14 1/2     11 1/2
  1998    First Quarter...............................  14 3/4     12 1/8
  1998    Second Quarter..............................  22 1/4     13 1/2
  1998    Third Quarter...............................  16 1/4     10 3/8
  1998    Fourth Quarter..............................  11 1/2     7 5/16
  1999    First Quarter (through August 24, 1998).....   9 7/8      6 1/2


      The  last  reported bid price of the Common  Stock  on  the
Nasdaq  National Market on August 24, 1998 was $7.75  per  share.
There  were  approximately 140 holders of record  of  the  Common
Stock as of August 24, 1998.

     (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.

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 years ended May 31,

                               17
                                
<PAGE>

1998,  1997  and 1996 and as of May 31, 1998 and 1997  have  been
derived from the audited Consolidated Financial Statements of the
Company  included  elsewhere herein.  The  selected  consolidated
financial  data  as of May 31, 1996, 1995 and 1994  and  for  the
years  ended  May  31, 1995 and 1994 have been derived  from  the
Company's  audited financial statements not included herein.  The
selected  consolidated  financial  data  gives  effect   to   the
reorganization  of  the Company and certain affiliated  entities,
but  not  the acquisition ("Acquisition") of C.J. Sisk  ("Sisk"),
another affiliated entity, which occurred in connection with  the
Company's  initial public offering of its common stock  in  March
1994.   The pro forma data gives effect to the Acquisition as  if
it had occurred on June 1, 1994.

<TABLE>
<CAPTION>

                                                           YEARS ENDED MAY 31,                           PRO FORMA
                                     ---------------------------------------------------------------       MAY 31,
                                        1998         1997         1996          1995         1994           1994
                                     ----------   ----------   ----------    ----------   ----------    ------------
OPERATIONS STATEMENT DATA:                        (in thousands, except per share data)
<S>                                  <C>          <C>           <C>           <C>           <C>          <C>

Revenues............................   $25,886      $24,914       $23,379       $24,595     $21,088        $22,839

Cost of revenues....................    21,944       17,224        16,323        17,137      14,601         15,698
                                     ----------   ----------   ----------    ----------   ----------    ------------

Gross profit........................     3,942        7,690         7,056         7,458       6,487          7,141

Selling, general and adminis-                   
trative expenses....................     7,146        5,968         6,577         7,739       4,771          4,993
                                     ----------   ----------   ----------    ----------   ----------    ------------

Operating income (loss).............   (3,204)        1,722           479         (281)       1,716          2,148

Other income (expense)..............        19          412            52           140        (46)           (42)
                                     ----------   ----------   ----------    ----------   ----------    ------------

Income (loss) before income tax        
      (expense) benefit and minority 
      interests innet income of 
      consolidated companies........   (3,185)        2,134           531         (141)       1,670          2,106

Income tax (expense) benefit........       966        (762)         (194)             -       (523)          (682)

Minority interest in net  income of                 
      consolidated companies........         -            -             -             -        (90)              -
                                     ----------   ----------   ----------    ----------   ----------    ------------

      Net income (loss)<F1>.........  $(2,219)       $1,372          $337        $(141)      $1,057         $1,424
                                     ==========   ==========   ==========    ==========   ==========    ============

Earnings (loss) per share:                                                                                         

      Basic.........................   $(0.65)       $0.41          $0.10        $(.04)                      $0.61

      Average shares outstanding.... 3,437,894    3,330,764     3,324,000     3,324,000                  2,332,657

      Diluted.......................    $(.65)       $0.40          $0.10        $(.04)                      $0.59

      Diluted shares................ 3,437,894    3,443,376     3,325,125     3,324,000                  2,397,183

<FN>
<F1> Sisk  was  a  sole proprietorship and, accordingly,  was not
     subject to corporate income taxes. The pro forma information
     has  been  computed  as  if the Company,  adjusted  for  the
     Acquisition, had been  subject to corporate income taxes  at
     the applicable federal and  state rates  for  the year ended
     May 31, 1994.

</FN
</TABLE>

                               18
                                
<PAGE>

<TABLE>
<CAPTION>

                                                           MAY 31,
                                     -------------------------------------------------
                                      1998       1997       1996       1995      1994
                                     -------   --------   --------   --------  -------
BALANCE SHEET DATA:                                    (in thousands)
<S>                                  <C>        <C>        <C>       <C>       <C>

Cash and cash equivalents.........     $348     $2,753       $998    $1,254    $3,296

Working capital...................    7,106      9,308      7,601     9,832    12,288

Property and equipment, net.......    9,106      7,250      7,259     4,990     2,705

Total assets......................   21,965     20,397     17,401    19,040    20,244

Current liabilities...............    4,871      3,234      2,071     3,729     4,512

Long-term debt, less current              
  maturities......................    1,770         67        471       788     1,069

Stockholders' equity..............   15,324     17,085     14,859    14,522    14,663

</TABLE>

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.  "Core"
business revenues are generated by sales of these products to the
over  75%  of  the casinos in the United States  with  which  the
Company has an established relationship and comprise the majority
of   the  Company's  total  revenues.   Complementing  this  core
business  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.

                               19
                                
<PAGE>

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:

<TABLE>
<CAPTION>

                                                           YEARS ENDED MAY 31,
                                                       ----------------------------
                                                         1998      1997      1996
                                                       --------  --------  --------

<S>                                                    <C>        <C>       <C>
Revenues..............................................  100.0%    100.0%    100.0%

Cost of revenues......................................   84.8%     69.1%     69.8%

Gross profit..........................................   15.2%     30.9%     30.2%

Selling, general and administrative expenses..........   27.6%     24.0%     28.1%

Operating income (loss)............................... (12.4)%      6.9%      2.1%

Interest expense......................................    0.5%      0.2%      0.3%

Net income (loss).....................................  (8.6)%      5.5%      1.4%

</TABLE>

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

<TABLE>
<CAPTION>

                                                           YEARS ENDED MAY 31,
                                                       ----------------------------
                                                         1998      1997      1996
                                                       --------  --------  --------
REVENUES:                                                    (IN THOUSANDS)

<S>                                                    <C>       <C>       <C>
Casino chips.......................................... $  5,174  $  9,516  $  7,362
                                                                           
Table layouts.........................................    3,202     3,205     2,678

Playing cards.........................................    4,714     3,265     4,198

Gaming furniture......................................    9,085     4,970     5,249

Dice..................................................    1,395     1,576     1,257

Table accessories and other products..................    2,316     2,382     2,635
                                                       --------  --------  --------

  Total............................................... $ 25,886  $ 24,914  $ 23,379
                                                       ========  ========  ========

</TABLE>

COMPARISON OF OPERATIONS FOR THE YEARS ENDED MAY 31, 1998 AND
MAY 31, 1997

     REVENUES.    For  the  fiscal  year  ended  May  31,   1998,
Paul-Son's revenues reached a record total of approximately $25.9
million.   The  fiscal  1998  revenue figure  represents  a  $1.0
million, or 4%, increase from the $24.9 million in revenues which
the Company generated the previous fiscal year.  The increase  in
revenues  for  the  1998  period  resulted  principally  from  an
increase  in  gaming furniture and accessory sales (products  not
manufactured by the Company) of approximately $4.0 million and an
increase  in  playing  card sales of approximately  $1.4  million
offset,  in  part,  by  a  decrease  in  casino  chip  sales   of
approximately $4.3 million. Gaming furniture and accessory sales,
which are products purchased from third party suppliers and  then
sold  to  the  customer, increased principally due to significant
orders  from  certain customers associated with new openings  and
expansions and increased demand for these products.  Playing card
sales  in  fiscal  1998 increased nearly 45%  from  fiscal  1997.
Management  believes  its  ability  to  meet  customers'  quality
expectations, competitive pricing, and its aggressive pursuit  of
this   business   segment  have  contributed  to   this   growth.
Offsetting  the  increase in gaming furniture  and  playing  card
sales was

                               20
                                
<PAGE>

a  decrease  in  casino  chip  sales  of  approximately  45%,  or
approximately  $4.3 million.  Management believes  this  decrease
was caused by a decline in new casino openings and expansions  in
fiscal  1998  as  compared to fiscal 1997 and a  low  demand  for
casino chips during fiscal 1998.  Since casino chips may be  used
by  casinos  for  several years, related  sales  are  subject  to
varying  replacement cycles. Sales of other Company  manufactured
products (dice and table layouts) did not fluctuate significantly
between  the  two  fiscal periods. Sales of Company  manufactured
products were 53.2% of total revenues in fiscal 1998 compared  to
68.1% in fiscal 1997.

     Core  sales in fiscal 1998 were approximately $12.7  million
compared  to  approximately  $15.5  million  in  fiscal  1997,  a
decrease  of  approximately $2.8 million or 18.1%.   Core  sales,
which  are  sales of consumable gaming supplies and equipment  to
the  Company's existing customer base, decreased during the  year
primarily due to the aforementioned decline in casino chip sales,
offset, in part, by the increase in playing card sales.

     COST  OF  REVENUES.  Cost of revenues, as  a  percentage  of
sales, increased to 84.8% for the fiscal year ended May, 31 1998,
as  compared  to 69.1% in the prior fiscal year. This  percentage
increase was principally caused by three significant factors: (i)
the  aforementioned  change  in  the  mix  of products sold  from
higher-margin manufactured  products (casino  chips, cards,  dice
and layouts)  to  marginally profitable distributed  items,  such
as  gaming  tables   and   seating  furniture,  which  caused  an
approximate $1.7 million deterioration in  gross  margins,   (ii)
the  underabsorption  of  fixed manufacturing costs  due  to  the
low  production  volume of  Company  manufactured products during
1998,  and  (iii)  certain cost inefficiencies 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.

     During  certain previous reporting periods, the Company  has
experienced a positive impact from the decrease in the  value  of
the Mexican peso. During the fiscal year ended May 31, 1998,  the
value of the Mexican peso remained relatively stable. 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 decreased in absolute dollars by
approximately  $3.8  million  to approximately  $3.9  million  as
compared to approximately $7.7 million in the prior fiscal  year.
This decline in gross profit was a result of the increase in cost
of  revenues as a percentage of sales from 69.1% to 84.8% due  to
the  cost of revenue factors discussed above offset, in part,  by
slightly higher revenues in the fiscal 1998 period.

     SELLING,  GENERAL  AND  ADMINISTRATIVE  EXPENSES.   Selling,
general and administrative ("SG&A") expenses for the fiscal  year
ended  May  31,  1998 increased approximately  $1.2  million,  or
19.7%,  to  $7.1  million or 27.6% of revenues compared  to  $6.0
million, or 24.0% of revenues, in the previous fiscal year.  This
increase   was  primarily  attributable  to  sales   office   and
administrative payroll related expenses (an approximate  $600,000
increase  over  fiscal  1997) from the  expansion  into  new  and
existing gaming markets, start-up costs involved in marketing the
Company's  non-gaming products with various customers,  increased
depreciation and other occupancy costs arising from property  and
equipment purchases and the opening of retail outlets

                               21
                                
<PAGE>

and  newly opened sales offices.  Additionally, bad debt  expense
increased  due  to  an  increase in accounts  receivable  amounts
outstanding as compared to the prior year, the separation from  a
certain  Company distributor and a reevaluation of the  financial
condition of certain of the Company's significant debtors  during
fiscal 1998.

     INTEREST EXPENSE.  For the year ended May 31, 1998, interest
expense  increased approximately 200% to $128,000 as compared  to
$43,000  in  the  prior  fiscal year, as a  result  of  increased
average outstanding borrowings under the Company's line of credit
during  fiscal  1998 and the acquisition of $1.8 million  of  new
debt  to  finance a new building in San Luis, Mexico and  certain
equipment acquired in November 1997.

     OTHER  INCOME.   In  fiscal  1998,  other  income  decreased
$308,000, or 67.8%, over the previous fiscal year.  This decrease
was  attributable principally to a gain before  income  taxes  of
approximately  $326,000 which resulted from the sale  of  certain
real estate in fiscal 1997.

     NET  INCOME  (LOSS).  For the year ended May 31,  1998,  the
Company  incurred  a net loss of approximately  $2.2  million,  a
decrease  of $3.6 million from the net income of $1.4 million  in
the  prior  fiscal year. This decrease was primarily due  to  the
aforementioned  decreases  in gross  profit,  other  income,  and
increases to SG&A expenses from the 1997 period, offset, in part,
by  a  slight  increase in revenues over the prior  fiscal  year.
Basic net loss per share was $.65 for the year ended May 31, 1998
as  compared with basic net income of $.41 for the year ended May
31, 1997.

COMPARISON OF OPERATIONS FOR THE YEARS ENDED MAY 31, 1997 AND
MAY 31, 1996

     REVENUES.    For  the  fiscal  year  ended  May  31,   1997,
Paul-Son's  revenues  reached  a  total  of  approximately  $24.9
million.   This  revenue figure represented a  $1.5  million,  or
6.6%,  increase  from  the $23.4 million in  revenues  which  the
Company  generated the previous year.  The increase  in  revenues
resulted  principally  from an increase in  new  casino  openings
during  the year.  In fiscal year 1997, the Company sold products
totaling  $9.4  million to 36 new casinos (including  riverboats,
land  based  properties and Native American casinos) versus  $4.7
million  to  25  new casinos in the previous  fiscal  year.   The
increase in new casino revenues was offset by a decrease in  core
sales.   Core sales in fiscal 1997 were $15.5 million, a decrease
of  $3.1  million  or 16.6% over core sales of $18.7  million  in
fiscal  1996.   The decrease was primarily due to a  decrease  in
playing  card sales, both paper and plastic. Playing  card  sales
were  down due to a number of factors including a change  in  the
Company's  supplier of plastic playing cards  during  the  second
quarter of the fiscal year and a slowdown in shipments to many of
the Company's contract playing card customers who had a temporary
over supply of playing cards during the first quarter of the 1997
fiscal  year.   In  addition, during  fiscal  1997,  the  Company
restructured its playing card sales force, developed an  improved
playing card product and underwent the transition of a portion of
its  playing card production to San Luis, Mexico, resulting in  a
temporary  slowdown  in playing card sales  efforts.   Management
believes  the  changes implemented will result in  greater  sales
coverage  in all geographic areas, an improved product  and  more
competitive  pricing.  As a result of these changes, the  Company
experienced an increase of 37.7% in paper playing card  sales  in
the  fourth quarter of fiscal 1997 over the average of the  sales
generated in each of the first three quarters of the 1997  fiscal
year.

                               22
                                
<PAGE>

     To  a  lesser extent, the Company's core sales were affected
by  a  decline  in  the  sales of table  accessories,  which  are
generally acquired from third party manufacturers, who have  been
selling  directly  to  casino customers in competition  with  the
Company. As a result the Company began manufacturing its own line
of plastic dealing shoes in May 1997.

     In  connection  with  the increase in new  casino  openings,
sales  of casino chips, table layouts, and dice increased  29.3%,
19.6%,  and  25.3%,  respectively, while,  as  a  result  of  the
decrease  in  core  sales, playing cards, gaming  furniture,  and
table  accessories and other products decreased 22.2%,  5.3%  and
9.6%, respectively, as compared to the prior fiscal year.

     COST  OF  REVENUES.  Cost of revenues, as  a  percentage  of
sales, decreased to 69.1% for the fiscal year ended May, 31  1997
as  compared  to 69.8% in the prior fiscal year. This  percentage
decrease  was  due to a number of factors including higher  sales
volume  and  corresponding  higher operating  efficiencies  (i.e.
increased  sales resulting in a higher number of  units  produced
over the same fixed production costs), although the corresponding
higher efficiencies achieved were partially offset by a temporary
increase  in fixed production costs resulting from the relocation
of  a  portion  of the Company's playing card production  to  San
Luis,  Mexico. Also contributing to the decrease in the Company's
cost  of  revenues  percentage was a change in product  mix  sold
during the year. Chip sales, for which the Company generates  the
highest  gross margin, were $9.5 million versus $7.4  million  in
the prior fiscal year.

     During  certain previous reporting periods, the Company  has
experienced a positive impact from the decrease in the  value  of
the Mexican peso. During the fiscal year ended May 31, 1997,  the
value of the Mexican peso remained relatively stable. The Company
cannot predict what impact fluctuations will have on future costs
of the Company's products manufactured in Mexico.

     GROSS PROFIT.  Gross profit increased in absolute dollars by
approximately $634,000 to approximately $7.7 million as  compared
to  $7.1  million  in the prior fiscal year as a  result  of  the
higher revenues and a decrease in cost of revenue as a percentage
of sales from 69.8% to 69.1% due to the factors discussed above.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  SG&A expenses
for  the  fiscal year ended May 31, 1997 decreased  approximately
$610,000  or 9.3%, to $6.0 million or 24.0% of revenues  compared
to $6.6 million or 28.1% of revenues in the previous fiscal year.
SG&A  expense  reductions were achieved in almost all  categories
across  the board with few exceptions. Major reductions  in  SG&A
expenses  included  reductions in salaries and  wages  ($50,000),
outside  commissions ($126,000), advertising and promotion  costs
($98,000),   legal  and  accounting  ($66,000),  and  travel  and
entertainment costs ($63,000). Most reductions were  due  to  the
cost  cutting and restructuring program initiated by the  Company
during  the  second quarter of fiscal 1995. The most  significant
increase  in  SG&A expenses was in depreciation and  amortization
($43,000) due to the addition of property and equipment purchased
during the previous three fiscal years.

     INTEREST EXPENSE.  For the year ended May 31, 1997, interest
expense  decreased approximately 33% to $43,000  as  compared  to
$64,000 in the prior fiscal year, as a result of the

                               23
                                
<PAGE>

Company's  efforts to pay down long-term debt and fund operations
and capital expenditures out of cash generated from operations.

     OTHER  INCOME.   In  fiscal  1997,  other  income  increased
$339,000,  or 293%, over the previous fiscal year.   In  February
1997,  the  Company  sold  an  approximately  9,000  square  foot
building  which was part of the Original Facility  for  $450,000.
The   Company's  depreciated  cost  basis  of  the  building  was
$129,000,  resulting in a capital gain of $326,000 before  income
taxes ($205,000 net of income taxes).

     NET  INCOME  (LOSS).  For the year ended May 31,  1997,  the
Company  had record net income of approximately $1.4 million,  an
increase of $1.1 million over the net income of $300,000  in  the
prior fiscal year. This increase in net income was primarily  due
to  increases  in  revenues, gross profit and  other  income  and
decreases in SG&A expenses over the prior fiscal year.  Basic net
income  per  share was $.41 for the year ended May  31,  1997  as
compared with $.10 for the year ended May 31, 1996.

LIQUIDITY AND CAPITAL RESOURCES

     OVERVIEW.  Management believes that the combination of  cash
flows from operations, the Company's existing line of credit  and
additional bank financing will provide sufficient liquidity, both
on a short-term and long-term basis.

     WORKING CAPITAL.  Working capital totaled approximately $7.1
million  at  May 31, 1998, versus approximately $9.3  million  at
May   31,  1997.   Working  capital  decreased  during  the  year
primarily  due  to the Company's net loss before depreciation  of
approximately  $1.2 million and by the Company's cash  investment
in certain property, plant and equipment during the year.

     CASH  FLOW.   Operating activities used  approximately  $2.6
million  in  cash  during  the fiscal year  ended  May  31,  1998
compared  to  cash provided of approximately $2.1 million  during
the prior year. Net loss before depreciation and income taxes  of
approximately  $2.2 million was the major factor contributing  to
the  cash  used in operations. Other significant cash  activities
during fiscal 1998 included sources of cash from the issuance  of
common  stock  of  $403,000  attributable  to  the  exercise   of
approximately  49,000 stock options during the  fiscal  year  and
cash  used to purchase property, plant and equipment, net of $1.8
million  of long-term borrowings, of approximately $1.0  million.
Total  cash and cash equivalents decreased by approximately  $2.4
million  during the year as compared to an increase in  cash  and
cash  equivalents  of  approximately $1.8 million  in  the  prior
fiscal year.

     LINE  OF CREDIT. The Company maintains a line of credit (the
"Line  of Credit") with  Norwest Bank of Nevada ("Norwest") which
presently  allows the Company to borrow up to $1.0 million.   The
Line  of Credit matures on October 31, 1998.  As of May 31, 1998,
$850,000 was outstanding under the Line of Credit.  The  Line  of
Credit is collateralized by a first priority security interest on
the  Las  Vegas Headquarters and in substantially all of Paul-Son
Supplies'   assets  including  accounts  receivable,   inventory,
furniture,  fixtures  and equipment.  The Line  of  Credit  bears
interest at Norwest's prime rate (8.5% at May 31, 1998).

                               24
                                
<PAGE>

     Under  the Line of Credit, the Company has agreed to  comply
with  certain financial covenants and ratios.  Specifically,  the
Company  has agreed to maintain a net 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, and  an  annualized
profitability  of not less than $250,000 in net  income,  all  as
defined in the agreement. As of May 31, 1998, the Company was  in
violation of the requirement to maintain the $250,000 annual  net
income;  however,  the  violation has  been  formally  waived  by
Norwest  through  the  maturity  date  of  the  Line  of   Credit
(October 31, 1998).

     SECURED DEBT.  In November 1997, the Company obtained a $1.8
million  loan (the "Note") from Norwest.  The proceeds were  used
in  acquiring the New San Luis Facility and certain equipment  to
be  used  principally  in the Company's manufacturing  processes.
The Note bears interest at 8.87% per annum, with monthly payments
of  principal and interest totaling $18,118.  The Note calls  for
monthly  payments  through  November  2002,  at  which  time  the
remaining principal balance of approximately $1.5 million is due.
The  Note  is 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.   The
Note  contains the same financial covenant and ratio requirements
as under the Line of Credit.  As of May 31, 1998, the Company was
in  violation  of the covenant to maintain annual net  income  of
$250,000; however, the Company has obtained a formal waiver  from
Norwest through June 1, 1999.

     SEASONALITY.  The Company has occasionally experienced  some
seasonality relative to new casino openings, particularly in  Las
Vegas,  as new openings have tended to occur near the end of  the
calendar  year;  however,  there  does  not  appear  to  be   any
seasonality associated with the Company's core sales to  existing
customers.

     BACKLOG.    Open   orders  as  of  May  31,   1998   totaled
approximately  $2.0  million,  compared  to  approximately   $2.5
million   as   of   May  31,  1997.   Management  believes   that
substantially all of these orders will be filled within the  next
six  months,  with  the majority filled within the  first  fiscal
quarter.

     LAS VEGAS FACILITIES. In May 1997, the Company relocated its
corporate  headquarters from the Original  Facility  to  the  Las
Vegas  Headquarters, an approximately 62,000 square foot building
purchased in September of 1995 for approximately $2,000,000.  Due
to the relocation of virtually all of the Company's manufacturing
facilities to San Luis, Mexico, the Company has listed  for  sale
both  the  Las  Vegas Headquarters and the Original Facility  and
intends to reevaluate its space needs depending, in part, on real
estate  market conditions and the Company's business  objectives.
The  Las Vegas Headquarters secures a deed of trust issued  under
the Line of Credit and the Note.

     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.

                               25
                                
<PAGE>

     CAPITAL   EXPENDITURES.   The  Company  plans  to   purchase
equipment  necessary to increase its playing  card  manufacturing
efficiency  and  capacity in the second quarter of  fiscal  1999.
The  cost  of the equipment, which the Company plans  to  finance
through additional bank financing, is approximately $600,000.

     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,  1998,  no repurchases had been  made.   The  Company
intends to fund any repurchases from cash on hand.

RECENTLY ISSUED AND ADOPTED ACCOUNTING STANDARDS

     The  American  Institute  of Certified  Public  Accountants'
Accounting  Standards  Executive Committee  issued  Statement  of
Position  98-5  "Reporting on the Costs of  Start-up  Activities"
("SOP  98-5").  This standard provides guidance on the  financial
reporting for start-up costs and organization costs and  requires
costs  of  start-up  activities  and  organization  costs  to  be
expensed  as  incurred.  This standard is  effective  for  fiscal
years  beginning after December 15, 1998, though earlier adoption
is encouraged.  Management believes that SOP 98-5 will not have a
material   impact   on   the  Company's  consolidated   financial
statements.

     The  FASB  issued  SFAS  No.  130, "Reporting  Comprehensive
Income"  in  June 1997.  This statement, which is  effective  for
fiscal  years  beginning  after December  31,  1997,  requires  a
company to classify items of other comprehensive income by  their
nature  in  a  financial  statement and display  the  accumulated
balance  of  other comprehensive income separately from  retained
earnings  and  additional paid-in capital  in  the  stockholders'
equity  section  of the consolidated balance sheet.   This  is  a
disclosure item only and will have no impact on reported earnings
per share.

     The  FASB  recently  issued SFAS No. 131, "Disclosure  About
Segments  of  an  Enterprise and Related Information",  which  is
effective  for  financial statements for fiscal  years  beginning
after  December 31, 1997.  The Company is required to adopt  SFAS
No.  131  during  the  fiscal year ending  May  31,  1999.   This
statement  establishes additional standards for segment reporting
in  the financial statements.  This is a disclosure item only and
will have no impact on earnings per share.

     During  fiscal  1998,  the Company  adopted  SFAS  No.  128,
"Earnings Per Share".  SFAS No. 128 requires the presentation  of
basic  net  earnings  (loss) per share and diluted  net  earnings
(loss)  per  share  for  all periods  in  which  a  statement  of
operations is presented.  Basic net earnings (loss) per share  is
computed  by  dividing net earnings (loss) by the average  shares
outstanding  during the respective period.  Diluted net  earnings
(loss)  per  share is computed by dividing net  earnings  by  the
average  shares  outstanding and the dilutive  effect  of  common
share  equivalents for the respective period.  These common share
equivalents  are options to purchase common stock whose  exercise
price is less than the average market price.

                               26
                                
<PAGE>

YEAR 2000 PROJECT

     The  Company is conducting a review of its computer  systems
to identify those areas that could be affected by the "Year 2000"
issue  and  is  in the process of updating many of  its  existing
systems   to   improve  overall  business  performance   and   to
accommodate  business for the "Year 2000".   However,  given  the
inherent  risks for a project of this magnitude and the resources
required,  the timing and costs involved could differ  materially
from  that  anticipated by the Company.  The Company expects  its
"Year  2000" date conversion project to be completed on a  timely
basis.   However, there can be no assurance that  the  conversion
project  will be completed on schedule, and that the  systems  of
other companies on which the Company may rely also will be timely
converted  or  that  such failure to convert by  another  company
would  not have an adverse impact on the Company's systems.   The
estimated  costs  directly  or  indirectly  associated  with  the
conversion project is currently expected to be less than $50,000,
a  significant  portion of which will be in the form  of  capital
expenditures.   As of May 31, 1998, the Company has  incurred  no
significant costs which are directly or indirectly related to the
"Year 2000" project.

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.   A  significant
percentage  of  the  Company's  revenue  is  generated  by  sales
relating  to  casino  openings  and  expansions.   As  such,  the
Company's future growth will be dependent to a material degree 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

                               27
                                
<PAGE>

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

     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  sales
have  grown  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.

                               28
                                
<PAGE>

     DEPENDENCE ON KEY PERSONNEL.  The Company's success  depends
to  a  significant  degree on the performance of  Paul  S.  Endy,
Chairman  of the Board and Chief Executive Officer, and  Eric  P.
Endy, President and Director.  The Company does not carry key man
life  insurance for either of these executive officers,  and  the
loss  of  the  services of either of them could have  a  material
adverse effect on the Company.

     The Company is also dependent upon the abilities and efforts
of  certain other management personnel, particularly in the sales
department.  The Company's sales department has recently had  two
successive  senior management persons depart, while at  the  same
time   experiencing  relatively  flat  sales  and   larger   than
historical proportions of sales of lower gross margin products.

     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.

     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;  ANTITAKEOVER  EFFECTS.
Paul S. Endy is the beneficial owner of approximately 48% 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
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.

                               29
                                
<PAGE>

     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.

                               30
                                
<PAGE>

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Independent Auditors' Report

     Consolidated Balance Sheets at May 31, 1998 and 1997

     Consolidated  Statements of Operations for the  Years  Ended
     May 31, 1998, 1997 and 1996

     Consolidated  Statements  of Stockholders'  Equity  for  the
     Years Ended May 31, 1998, 1997 and 1996

     Consolidated  Statements of Cash Flows for the  Years  Ended
     May 31, 1998, 1997 and 1996

     Notes to Consolidated Financial Statements

     Financial  Statement Schedule included in Part  IV  of  this
     report

                               31
                                
<PAGE>

                   PAUL-SON GAMING CORPORATION
                                
                        AND SUBSIDIARIES
                                
                  CONSOLIDATED FINANCIAL REPORT
                                
                          MAY 31, 1998
                                

                               32
                                
<PAGE>

INDEPENDENT AUDITORS' REPORT


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

We  have audited the accompanying consolidated balance sheets  of
Paul-Son  Gaming Corporation and subsidiaries (the "Company")  as
of May 31, 1998 and 1997, and the related consolidated statements
of  operations, stockholders' equity, and cash flows for each  of
the  three  years  in  the  period ended  May  31,  1998.   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 generally  accepted
auditing  standards.  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,  1998  and
1997,  and  the results of their operations and their cash  flows
for each of the three years in the period ended May 31, 1998,  in
conformity with generally accepted accounting principles.



/s/  Deloitte & Touche LLP

DELOITTE & TOUCHE LLP
Las Vegas, Nevada
August 24, 1998

                               33
                                
<PAGE>


<TABLE>
<CAPTION>

PAUL-SON GAMING CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
MAY 31, 1998 AND 1997

<S>                                                                         <C>            <C>
ASSETS                                                                           1998           1997
------------------------------------------------------------------------------------------------------
Current Assets:                                                                                      
  Cash and cash equivalents                                                $    347,876  $   2,753,152
  Trade receivables, net                                                      5,147,819      3,669,139
  Income taxes receivable                                                       786,463            -
  Inventories, net                                                            5,171,402      5,350,446
  Prepaid expenses                                                              118,693        140,962
  Other current assets                                                          405,299        627,808
                                                                        ------------------------------
       TOTAL CURRENT ASSETS                                                  11,977,552     12,541,507
                                                                        ------------------------------
Property and Equipment, net                                                   9,105,545      7,250,030
                                                                                                   
Deferred Tax Asset                                                              263,000            -
                                                                                                     
Other Assets:                                                                                        
  Note receivable                                                               150,000        150,000
  Other assets                                                                  469,229        455,205
                                                                        ------------------------------
       TOTAL OTHER ASSETS                                                       619,229        605,205
                                                                        ------------------------------
TOTAL ASSETS                                                               $ 21,965,326  $  20,396,742
                                                                        ==============================
                                                                                                     
LIABILITIES AND STOCKHOLDERS' EQUITY                                                                 
Current Liabilities:                                                                                 
  Short-term borrowings                                                    $    850,000  $         -
  Current maturities of long-term debt                                           59,007         24,052
  Bank overdraft                                                                431,380            -
  Accounts payable                                                            1,733,122        727,196
  Accrued expenses                                                            1,115,915        584,212
  Customer deposits                                                             681,825      1,579,161
  Income tax payable                                                                -          318,930
                                                                        ------------------------------  
       TOTAL CURRENT LIABILITIES                                              4,871,249      3,233,551
                                                                        ------------------------------
                                                                                                     
                                                                                                     
Long-Term Debt, less current maturities                                       1,769,722         67,424
                                                                                                     
Deferred Tax Liability                                                              -           11,060
                                                                                                     
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
    and outstanding 3,465,750 and 3,417,000 shares in 1998 and
    1997                                                                         34,658         34,170
  Additional paid-in capital                                                 13,566,800     13,108,998
  Retained earnings                                                           1,722,897      3,941,539
                                                                        ------------------------------
       TOTAL STOCKHOLDERS' EQUITY                                            15,324,355     17,084,707
                                                                        ------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                 $ 21,965,326  $  20,396,742
                                                                        ==============================
</TABLE>
                 See Notes to Consolidated Financial Statements
                                        
                                       34

<PAGE>


<TABLE>
<CAPTION>

PAUL-SON GAMING CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED MAY 31, 1998, 1997 AND 1996

                                                        1998          1997           1996
--------------------------------------------------------------------------------------------
<S>                                                 <C>            <C>            <C>
Revenues                                          $ 25,885,627  $  24,913,706  $  23,379,252
                                                                                            
Cost of revenues                                    21,943,781     17,223,759     16,323,043
                                                 -------------------------------------------
                                                                                            
       GROSS PROFIT                                  3,941,846      7,689,947      7,056,209
                                                                                            
Selling, general and administrative expenses         7,145,552      5,967,735      6,577,397
                                                 -------------------------------------------

       OPERATING INCOME (LOSS)                      (3,203,706)     1,722,212        478,812
                                                                                            
Other income (expense)                                                                      
  Interest income                                       92,096        82,066          57,694
  Interest expense                                    (127,597)      (42,700)        (63,906)
  Other                                                 54,299       372,436          57,856
                                                 -------------------------------------------
                                                                                            
       INCOME (LOSS) BEFORE INCOME TAXES            (3,184,908)    2,134,014         530,456
                                                                                             
Income tax (expense) benefit                           966,266      (761,831)       (193,616)
                                                 -------------------------------------------
                                                                                             
       NET INCOME (LOSS)                          $ (2,218,642) $  1,372,183   $     336,840
                                                 ===========================================
                                                                                            
Earnings (loss) per share:                                                                  
  Basic                                           $      (0.65) $       0.41   $        0.10
                                                 ===========================================
  Diluted                                         $      (0.65) $       0.40   $        0.10
                                                 ===========================================
                                                                                
</TABLE>

                 See Notes to Consolidated Financial Statements
                                        
                                       35
                                        
<PAGE>


<TABLE>
<CAPTION>

PAUL-SON GAMING CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED MAY 31, 1998, 1997 AND 1996
                                               
                                                        Common Stock           Additional                      
                                                 ---------------------------    Paid-in       Retained         
                                                     Shares      Dollars        Capital       Earnings        Total
-----------------------------------------------------------------------------------------------------------------------
<S>                                                <C>         <C>           <C>           <C>            <C>
                                                                                             
Balance, June 1, 1995                               3,324,000   $ 33,240      $ 12,256,698  $ 2,232,516    $ 14,522,454
                                                                                             
  Net income                                                -          -                 -      336,840         336,840
                                                 ----------------------------------------------------------------------

Balance, May 31, 1996                               3,324,000     33,240        12,256,698    2,569,356      14,859,294
                                                                                             
  Shares issued from the exercise of options           93,000        930           771,300            -         772,230
                                                                                            
  Income tax benefit from exercise of options               -          -            81,000            -          81,000
                                                                                            
  Net income                                                -          -                 -    1,372,183       1,372,183
                                                 ----------------------------------------------------------------------
         
Balance, May 31, 1997                               3,417,000     34,170        13,108,998    3,941,539      17,084,707

  Shares issued from the exercise of options           48,750        488           402,802            -         403,290
                                                                                          
  Income tax benefit from exercise of options               -          -            55,000            -          55,000
                                                                                          
  Net loss                                                  -          -                 -   (2,218,642)     (2,218,642)
                                                 ----------------------------------------------------------------------

Balance, May 31, 1998                               3,465,750   $ 34,658      $ 13,566,800  $ 1,722,897    $ 15,324,355
                                                 ======================================================================
</TABLE>

                 See Notes to Consolidated Financial Statements
                                        
                                       36
                                        
<PAGE>

<TABLE>
<CAPTION>

PAUL-SON GAMING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MAY 31, 1998, 1997 AND 1996
                                                                                                            
                                                                         1998               1997                1996
<S>                                                                 <C>                <C>                 <C>   

Cash Flows from Operating Activities                                                                      
 Cash received from customers                                       $   23,458,056     $   24,554,494      $   24,513,389
 Cash paid to suppliers and employees                                  (25,692,604)       (22,153,199)        (23,357,951)
 Interest paid                                                            (127,597)           (42,700)            (69,060)
 Interest received                                                          92,096             82,066              57,694
 Income tax refunds                                                              -             18,940             494,019
 Income taxes paid                                                        (299,117)          (404,778)             (6,750)
                                                                    ---------------    ---------------     ---------------
   NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                  (2,569,166)         2,054,823           1,631,341
                                                                    ---------------    ---------------     ---------------
Cash Flows from Investing Activities
 Proceeds received on sale of property and equipment                         7,350            464,161              15,400
 Purchase of property and equipment                                     (2,834,003)          (919,972)         (3,059,544)
 Proceeds from short-term investments                                            -                  -           1,493,536
 Investment in note receivable                                                   -           (150,000)                  -
                                                                    ---------------    ---------------     ---------------
   NET CASH USED IN INVESTING ACTIVITIES                                (2,826,653)          (605,811)         (1,550,608)
                                                                    ---------------    ---------------     ---------------

Cash Flows from Financing Activities
 Payments on due to related party                                                -            (15,000)           (235,000)
 Proceeds from short-term borrowings                                       850,000            150,000                   -
 Proceeds from long-term borrowings                                      1,800,000                  -                   -
 Principal payments on short-term borrowings                                     -           (150,000)                  -
 Principal payments on long-term borrowings                                (62,747)          (450,599)           (102,211)
 Proceeds from the issuance of common stock                                403,290            772,230                   -
                                                                    ---------------    ---------------     ---------------
   NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                   2,990,543            306,631            (337,211)
                                                                    ---------------    ---------------     ---------------
   NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                 (2,405,276)         1,755,643            (256,478)
Cash and cash equivalents, beginning                                     2,753,152            997,509           1,253,987
                                                                    ---------------    ---------------     ---------------
Cash and cash equivalents, ending                                   $      347,876     $    2,753,152      $      997,509
                                                                    ===============    ===============     ===============
Reconciliation of Net Income (Loss) to Net Cash Provided By
 (Used in) Operating Activities
 Net income (loss)                                                  $   (2,218,642)    $    1,372,183      $      336,840
 Depreciation and amortization                                             967,475            791,643             768,787
 Provision for bad debts                                                   213,938             96,000              96,000
 Loss (gain) on sale of property and equipment                               3,663           (326,439)              5,698
 Change in assets and liabilities:                                                                                         
  (Increase) decrease in accounts receivable                            (1,692,618)        (1,163,229)            878,491
  (Increase) decrease in income taxes receivable                          (731,463)                 -             661,499
  Decrease in inventories                                                  179,044            254,184              61,251
  (Increase) decrease in other assets                                      208,485           (316,263)            449,867
  Decrease in prepaid expenses                                              22,269             29,941              11,449
  Increase in deferred tax asset                                          (263,000)                 -                   -
  Increase (decrease) in accounts payable and accrued expenses           1,537,629            246,260          (1,884,803)
  Increase in bank overdraft                                               431,380                  -                   -
  Increase (decrease) in deferred tax liability                            (11,060)            11,060                   -
  Increase (decrease) in customer deposits                                (897,336)           713,723             192,092
  Increase (decrease) in income taxes payable                             (318,930)           345,760              54,170
                                                                    ---------------    ---------------     ---------------
 NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                $   (2,569,166)    $    2,054,823      $    1,631,341
                                                                    ===============    ===============     ===============
</TABLE>                                          

         See Notes to Consolidated Financial Statements.
                                
                               37
                                
<PAGE>

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  the  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 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 AND BANK OVERDRAFT

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

Bank  overdrafts represent outstanding checks drawn  against  the
Company's bank account which had not been presented to  the  bank
as of the balance sheet date.

ACCOUNTS RECEIVABLE 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 10).

INVENTORY

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

                               38
                                
<PAGE>

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.
Depreciation  is  computed primarily on the straight-line  method
for  financial  reporting purposes over the  following  estimated
useful lives:

<TABLE>
<CAPTION>
                                                 YEARS
                                                 -----        
   <S>                                           <C>
   Buildings and improvements                    18-27
   Furniture and equipment                        5-10
   Vehicles                                        5-7
</TABLE>

GOODWILL

Goodwill is amortized on a straight-line basis over 20 years.

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 transactions occur in United States dollars.

EARNINGS PER SHARE

During  fiscal 1998, the Company adopted SFAS No. 128,  "Earnings
Per  Share".  SFAS No. 128 requires the presentation of basic net
earnings  (loss)  per share and diluted net earnings  (loss)  per
share  for  all  periods in which a statement  of  operations  is
presented.   Basic net earnings (loss) per share is  computed  by
dividing  net  earnings (loss) by the average shares  outstanding
during  the  respective period.  Diluted net earnings (loss)  per
share  is computed by dividing net earnings (loss) by the average
shares  outstanding  and  the dilutive  effect  of  common  share
equivalents  for  the  respective  period.   These  common  share
equivalents  are options to purchase common stock whose  exercise
price is less than the average market price (see Note 9).  During
the  fiscal years ending May 31, 1998, 1997 and 1996, the average
number of common shares outstanding used in

                               39
                                
<PAGE>

PAUL-SON GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
_________________________________________________________________

computing  basic  net  earnings (loss) per share  was  3,437,894,
3,330,764  and 3,324,000, respectively, and the weighted  average
number  of  common and common equivalent shares used in computing
diluted  net  earnings (loss) per share was 3,437,897,  3,443,376
and  3,325,125 for fiscal 1998, 1997, and 1996, respectively (see
Note 9).

ESTIMATES

The  preparation  of  financial  statements  in  conformity  with
generally  accepted accounting principles 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  allowance  for  doubtful
accounts  receivable,  and the provision  for  obsolete  or  slow
moving  inventories.   Actual results  could  differ  from  those
estimates.

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.

STOCK OPTIONS

The Company has adopted the disclosure requirement under SFAS No.
123, " Accounting  for  Stock-Based Compensation." SFAS  No.  123
establishes accounting and disclosure requirements using  a  fair
value  based  method  of  accounting  for  stock  based  employee
compensation  plans.  Under SFAS No. 123 the Company  may  either
adopt the new fair value based accounting method or continue  the
intrinsic value based method under APB Opinion No. 25 and provide
pro  forma  disclosures of net income (loss) and earnings  (loss)
per  share  as if the accounting provisions of SFAS No.  123  had
been  adopted.  The Company has elected to account for its  plans
under  APB Opinion No. 25 and calculate the pro forma disclosures
of net income (loss) and earnings (loss) per share required under
SFAS No. 123 (see Note 9).

FAIR VALUE OF FINANCIAL INSTRUMENTS

The  fair value of a financial instrument is the amount at  which
the  instrument  could  be  exchanged in  a  current  transaction
between  willing  parties,  other  than  in  a  forced  sale   or
liquidation.   The  carrying amounts at  May  31,  1998  for  the
Company's financial instruments approximate fair value.

                               40
                                
<PAGE>

PAUL-SON GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
_________________________________________________________________

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, 1998.

RECENTLY ISSUED ACCOUNTING STANDARDS

The   American   Institute  of  Certified   Public   Accountants'
Accounting  Standards  Executive Committee  issued  Statement  of
Position  98-5  "Reporting on the Costs of  Start-up  Activities"
("SOP  98-5").  This standard provides guidance on the  financial
reporting for start-up costs and organization costs and  requires
costs  of  start-up  activities  and  organization  costs  to  be
expensed  as  incurred.  This standard is  effective  for  fiscal
years  beginning after December 15, 1998, though earlier adoption
is encouraged.  Management believes that SOP 98-5 will not have a
material impact on the consolidated financial statements.

The FASB issued SFAS No. 130, "Reporting Comprehensive Income" in
June  1997.  This statement, which is effective for fiscal  years
beginning after December 31, 1997, requires a company to classify
items  of  other  comprehensive  income  by  their  nature  in  a
financial statement and display the accumulated balance of  other
comprehensive  income  separately  from  retained  earnings   and
additional paid-in capital in the stockholders' equity section of
the  consolidated balance sheet.  This is a disclosure item  only
and will have no impact on reported earnings per share.

The FASB recently issued SFAS No. 131, "Disclosure About Segments
of an Enterprise and Related Information", which is effective for
financial  statements for fiscal years beginning  after  December
31,  1997.  The Company  is required to adopt SFAS No. 131 during
the  fiscal year ending May 31, 1999.  This statement establishes
additional  standards  for  segment reporting  in  the  financial
statements.   This  is a disclosure item only and  will  have  no
impact on earnings per share.

NOTE 2.  INVENTORIES
Inventories consist of the following at May 31:

<TABLE>
<CAPTION>
                                            1998          1997
          <S>                           <C>           <C>
          Raw materials                 $  1,734,738  $  1,977,089
          Work in process                    333,182       465,514
          Finished goods                   3,303,482     2,907,843
                                        ------------- -------------
                                           5,371,402     5,350,446
          Less inventory reserves            200,000             -
                                        ------------- -------------
                                        $  5,171,402  $  5,350,446
                                        ============= ============= 
</TABLE>

                               41
<PAGE>

PAUL-SON GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
_________________________________________________________________

NOTE 3.  PROPERTY AND EQUIPMENT

Property and equipment consist of the following at May 31:

<TABLE>
<CAPTION>
                                           1998            1997
                                      --------------  --------------
      <S>                             <C>             <C>
      Land                            $     804,370   $     728,412
      Buildings and improvements          7,354,821       5,913,362
      Furniture and equipment             4,682,806       3,475,883
      Vehicles                              925,856         876,892
                                      --------------  --------------
                                         13,767,853      10,994,549
      Less accumulated depreciation       4,662,308       3,744,519
                                      --------------  --------------
                                      $   9,105,545   $   7,250,030
                                      ==============  ==============
</TABLE>

NOTE 4.  SHORT-TERM BORROWINGS

The  Company has a $1.0 million line of credit agreement  with  a
bank.   Interest on outstanding borrowings currently  accrues  at
the  bank's prime rate of interest (8.5% at May 31, 1998).   This
facility, which is cross collateralized with a $1.8 million  note
(see Note 5), is 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  this
facility and the $1.8 million note.  Borrowings under the line of
credit   at  May  31,  1998  and  1997  were  $850,000  and   $0,
respectively.  The line of credit agreement and the $1.8  million
note  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, 1998 the Company was in  violation  of
this  covenant; however, this violation has been formally  waived
by  the  bank through the maturity date of the line of credit  of
October  31,  1998 and through June 1, 1999 for the $1.8  million
note.

NOTE 5.  LONG-TERM DEBT AND PLEDGED ASSETS

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

<TABLE>
<CAPTION>

                                                                1998          1997
                                                         ------------------------------
    <S>                                                  <C>             <C>
    Note payable to bank in monthly installments of      
      $18,118 including interest of 8.87% through
      October 2003 with a balloon payment of
      approximately $1,450,000 due November 2003,
      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 (see Note
      4 for discussion of covenants)                     $   1,771,076   $           -
                                                                            
    Notes payable to mortgage companies, collateralized   
      by real estate, interest at 7.5% to 9.5%, with 
      principal and interest payments of $898 due monthly
      through 2016                                              57,653          64,004
</TABLE>

                                             42
<PAGE>
      
PAUL-SON GAMING CORPORATION AND SUBSIDIARIES
      
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
_________________________________________________________________
      
<TABLE>
<CAPTION>
    <S>                                                  <C>             <C> 
    Various notes payable for equipment, interest at      
      14.5% to 25.5%, payable in monthly installments of
      $6,300 through 1998                                            -          27,472
                                                         --------------  --------------
                                                             1,828,729          91,476
            Less current portion                                59,007          24,052
                                                         --------------  --------------
                                                         $   1,769,722   $      67,424
                                                         ==============  ==============
</TABLE>

Estimated  annual principal maturities of long-term debt  at  May
31, 1998 are as follows:

<TABLE>
<CAPTION>
        <S>                                        <C>
        1999                                       $     59,007
        2000                                             63,743
        2001                                             69,955
        2002                                             71,080
        2003                                             77,591
        Thereafter                                    1,487,353
                                                   -------------
                                                   $  1,828,729
                                                   =============
</TABLE>

NOTE 6.  RELATED PARTIES

Included in cost of revenues were amounts paid to a related party
from  the purchase of plastic coated playing cards in the  amount
of $0, $0, and approximately $331,000 for the years ended May 31,
1998, 1997 and 1996, respectively.

Included  in interest expense is approximately $0, $0 and  $7,000
to related parties for the years ended  May  31,  1998,  1997 and
1996, respectively.

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:

<TABLE>
<CAPTION>
                                   1998        1997        1996
                               -----------------------------------
     <S>                       <C>         <C>        <C>
     Laurence A. Speiser       $ 108,000   $ 134,317  $   128,591
     Wayne H. White                    -           -       23,819
     Michael E. Cox                    -           -       36,691
</TABLE>

Included in accounts receivable are amounts owed from an  officer
of  the  Company of approximately $30,000 and $25,000 at May  31,
1998 and 1997, respectively.

On  November  22,  1996, the Company advanced  to  a  director  a
$150,000  line of credit.  The line of credit is to be repaid  in
full  on  or before December 31, 1998, with interest only payable
to  the  Company at an interest rate equal to prime (8.5% at  May
31,  1998)  plus  2%.  The loan is secured by  a  general  pledge
agreement covering all the director's assets, rights to  purchase
certain  shares  of the Company's stock, and a guarantee  by  the
Company's majority stockholder.

                               43
                                
<PAGE>

PAUL-SON GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_________________________________________________________________

NOTE 7.  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 at May 31, 1998 are as follows:

<TABLE>
<CAPTION>
            <S>                                    <C>
            1999                                   $     281,581
            2000                                         201,527
            2001                                         130,515
                                                   --------------
                                                   $     613,623
                                                   ==============
</TABLE>

The  Company has a twelve year option to extend the lease at  one
facility.   The  annual  rent during the first  8  year  term  is
$142,380.   The  rent  payments during  the  option  period  will
increase 5% annually.

Rent  expense  totaled $264,154,  $233,633  and $228,222  for the
years ended May 31, 1998, 1997 and 1996, 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.

NOTE 8.  INCOME TAX MATTERS

The   (expense)  benefit  for  income  taxes  reflected  in   the
Consolidated Statements of Operations for the years ended May 31,
1998, 1997 and 1996 consisted of:

<TABLE>
<CAPTION>
                                  1998          1997          1996
                             -----------------------------------------
       <S>                   <C>           <C>           <C>
       Current               $   678,805   $  (799,238)  $   (193,616)
       Deferred                  287,461        37,407              -
                             -----------------------------------------
                             $   966,266   $  (761,831)  $   (193,616)
                             =========================================
</TABLE>

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  income  (loss)  before
income  taxes for the years ended May 31, 1998, 1997 and 1996  is
as follows:

<TABLE>
<CAPTION>
                                        1998        1997         1996
                                    -----------------------------------
  <S>                               <C>          <C>         <C>
  Computed expected income tax      
    (expense) benefit at 34%        $1,082,869   $(725,565)  $(180,000)
  ADJUSTMENTS:                                                        
  State taxes                           32,503     (35,348)    (10,600)
  Meals and entertainment              (22,987)    (21,697)    (23,000)
  Prior year items and other          (126,119)     20,779      19,984
                                    -----------------------------------
  Income tax (expense) benefit      $  966,266   $(761,831)  $(193,616)
                                    ===================================
</TABLE>

                               44
<PAGE>

PAUL-SON GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
_________________________________________________________________

The  primary components of the deferred tax asset ($263,000)  for
the  year  ended  May 31, 1998 were operating loss  carryforwards
(approximately   $70,000), inventory  and   bad   debt   reserves
(approximately  $130,000)  and intangible  assets  (approximately
$40,000).   There were no other significant temporary differences
or  carryforwards for the year ended May 31, 1998.  For the  year
ended   May   31,  1997,  there  were  no  significant  temporary
differences or carryforwards.

NOTE 9.  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":

<TABLE>
<CAPTION>

                                                     Dilutive         
                                                      Stock
                                      Basic          Options          Diluted
                                   -------------   -----------    -------------
<S>                                <C>                <C>         <C>

For the year ended May 31, 1998                                               
-------------------------------
Net loss                           $ (2,218,642)            -     $ (2,218,642)
Shares                                3,437,894             -        3,437,894

Per Share Amount                   $       (.65)                  $       (.65)
                                                                              

For the year ended May 31, 1997                                               
-------------------------------
Net income                         $  1,372,183             -     $  1,372,183
Shares                                3,330,764       112,612        3,443,376

Per Share Amount                   $       0.41                   $       0.40
                                                                              
For the year ended May 31, 1996                                               
-------------------------------                                                                              
Net income                         $    336,840             -     $    336,840
Shares                                3,324,000         1,125        3,325,125

Per Share Amount                   $       0.10                   $       0.10
                                                                              
</TABLE>

Dilutive  stock options for the year ended May 31, 1998 (861,250)
have  not  been  included in the computation of the  diluted  net
earnings (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  earnings  (loss)  per share for  the  respective  fiscal
years.   These  outstanding antidilutive options  for  the  years
ended  May  31,  1998,  1997 and 1996, were 4,000,  197,500,  and
317,000, 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 "DirectorsR Plan").  The

                               45
<PAGE>

PAUL-SON GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
_________________________________________________________________

Incentive  Plan  provides  for the  grant  of  stock  options  to
executive  officers,  key  employees,  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  DirectorsR  Plan
provides that each non-employee director, upon joining the  Board
of  Directors, will receive an option to purchase 3,000 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  1,000  shares  of
common  stock.  In addition, each year each non-employee director
receives  options  to purchase 1,000 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 or 9 months after retirement  or
2  years  after death.  Options covering 4,000, 3,000  and  6,000
shares were granted during the years ended May 31, 1998, 1997 and
1996 at $10.56, $8.06 and $6.50, respectively.

The  following is a summary of option activity for  the  3  years
ended May 31, 1998:

<TABLE>
<CAPTION>
                                                                                   Weighted
                                                      Options        Shares        Average
                                                     Available       Under         Exercise
                                                     for Grant       Plan          Price
                                                     ---------------------------------------
<S>                                                  <C>           <C>           <C>
Outstanding at June 1, 1995                             271,250       303,750        $11.53
                                                                                           
  Granted                                              (326,000)      326,000          8.66
  Canceled                                              306,750      (306,750)        11.49
  Exercised                                                   -             -             -
                                                     ---------------------------------------                                      
Outstanding at May 31, 1996                             252,000       323,000          8.71
                                                                                           
  Additional shares reserved                            500,000             -             -
  Granted                                              (715,000)      715,000          8.95
  Canceled                                               35,000       (35,000)         8.15
  Exercised                                              93,000       (93,000)         8.30
                                                     ---------------------------------------                                      
Outstanding at May 31, 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
                                                     =======================================

                                                          1998          1997          1996
                                                          ----          ----          ----
The weighted average fair value of options granted       $4.78         $4.27         $4.21

</TABLE>

                               46
<PAGE>

PAUL-SON GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
_________________________________________________________________

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

<TABLE>
<CAPTION>
                           Options Outstanding            Options Exercisable
                  ------------------------------------- -----------------------
                                 Weighted                                 
                                  Average     Weighted                Weighted
    Range of                     Remaining    Average                  Average
    Exercise        Number      Contractual   Exercise     Number     Exercise
     Prices       Outstanding      Life        Price    Exercisable     Price
-------------------------------------------------------------------------------
<S>               <C>               <C>        <C>        <C>           <C>
$ 6.50 to 9.00      619,500         8.03        8.20      452,000        8.20
$ 9.01 to 13.00     245,750         8.74       11.12       62,750       11.34
-------------------------------------------------------------------------------
                    865,250                               514,750
-------------------------------------------------------------------------------
</TABLE>

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 income (loss) and earnings (loss) per share  would
have been reduced to the following pro forma amounts.

<TABLE>
<CAPTION>
                                                    1998             1997            1996
                                                ------------      -----------      ---------
<S>                           <C>               <C>               <C>              <C>
Net income (loss):            As reported:      $(2,218,642)      $1,372,183       $336,840
                              Pro forma:        $(2,820,169)          11,115        177,812

Earnings (loss) per share:    As reported:                                                 
                               Basic                  $(.65)           $0.41          $0.10
                               Diluted                $(.65)           $0.40          $0.10
                              Pro forma:                                                   
                               Basic                  $(.82)              $0          $0.05
                               Diluted                $(.82)              $0          $0.05
</TABLE>

Pro  forma  earnings  (loss) reflect only  options  granted  from
fiscal  1996  to  fiscal 1998.  Therefore,  the  full  impact  of
calculating  compensation cost for stock options under  SFAS  No.
123  is  not  reflected  in pro forma net income  (loss)  because
compensation  costs are reflected over the option-vesting  period
and  compensation costs for options granted prior to fiscal  1996
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  1998,  1997 and  1996  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%.

                               47
                                
<PAGE>

PAUL-SON GAMING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
_________________________________________________________________

As  of May 31, 1998 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.

NOTE 10.    ALLOWANCE FOR DOUBTFUL ACCOUNTS

The  Company  provides, based on periodic reviews  of  its  trade
receivables, for estimated uncollectible accounts.  A summary  of
amounts  provided  for bad debt provisions  and  charges  to  its
allowance for doubtful accounts is as follows:

<TABLE>
<CAPTION>

                            BALANCE AT    PROVISIONS/                   BALANCE
                            BEGINNING     CHARGED TO                   AT END OF
   Years Ended May 31,       OF YEAR       EXPENSES     CHARGE-OFFS      YEAR
---------------------------------------------------------------------------------
<S>                         <C>           <C>           <C>           <C>
                                                                              

   1998                     $   269,140   $   213,938   $   108,084   $  374,994
                            =====================================================                                         

   1997                     $   281,712   $    96,000   $   108,572   $  269,140
                            =====================================================                                         

   1996                     $   214,000   $    96,000   $    28,288   $  281,712
                            =====================================================
</TABLE>

NOTE 11. CASH FLOW INFORMATION

There were no significant noncash investing or financing
activities during the years ended May 31, 1998, 1997, and
1996.


                               48
                                
<PAGE>
       
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 on October 13, 1998.

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 on October 13,
1998.

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 on October 13,
1998.

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 on October 13, 1998.

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,  1998  and
               1997.
               
               Consolidated  Statements  of  Operations  for  the
               Years Ended May 31, 1998, 1997 and 1996.
               
               Consolidated  Statements of  Stockholders'  Equity
               for the Years Ended May 31, 1998, 1997 and 1996.
               
                               49
<PAGE>

               Consolidated  Statements of  Cash  Flows  for  the
               Years Ended May 31, 1998, 1997 and 1996.
               
               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.

                               50
<PAGE>

          10.04   Exclusive    Distributor    Agreement    dated
                  November 1, 1993, by and between Jones  Casino
                  Supplies, Inc. and Paul-Son Supplies and Card,
                  Inc. incorporated herein by reference from the
                  Company's registration statement on  Form  S-1
                  (SEC  No. 33-74758), Part II, Item 16, Exhibit
                  10.13.

          10.05   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.

          21.01   List   of  subsidiaries  of  Paul-Son   Gaming
                  Corporation.

          23.01   Consent of Deloitte & Touche LLP.
                  
     
                               51
<PAGE>

                           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 27, 1998              By  /s/ Paul S. Endy
                                 Paul S. Endy
                                 Chief Executive Officer
                                 (Principal Executive Officer)

     
     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 27, 1998              By  /s/ Paul S. Endy
                                 Paul S. Endy
                                 Chairman of the Board and
                                 Chief Executive Officer

                             
                             
                             By  /s/ Eric P. Endy
                                 Eric P. Endy
                                 President and Director
                                 
                             
                             
                             By  /s/ John M. Garner
                                 John  M. Garner, Chief Financial
                                 Officer  and Treasurer
                                 (Principal Financial and
                                 Accounting Officer)
     
                                 
                                 
                             By  /s/ Jerry G. West
                                 Jerry G. West, Director

                               52
<PAGE>

                             By  /s/ Richard W. Scott
                                 Richard W. Scott, Director
                                 
                                 
     
                             By  /s/ Martin S. Winick
                                 Martin S. Winick, Director
                                 

                               53
<PAGE>

                          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)
               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)
               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.

   10.04       Exclusive   Distributor   Agreement    dated 
               November  1,  1993,  by  and  between  Jones
               Casino  Supplies, Inc. and Paul-Son Supplies
               and   Card,  Inc.  incorporated  herein   by
               reference  from  the Company's  registration
               statement  on  Form S-1 (SEC No.  33-74758),
               Part II, Item 16, Exhibit 10.13.

   10.05       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

                     
                                 54
<PAGE>
               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.

   21.01       List  of  subsidiaries  of  Paul-Son  Gaming    56
               Corporation.

   23.01       Consent of Deloitte & Touche LLP.               58

   27.01       Financial Data Schedule                         60

                               55
<PAGE>