##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K


|                                           |  |                                                                                         
|------------------------------------------ |  | ----------------------------------------------------------------------------------------
|þ                                          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|                                          
|For the fiscal year ended October 31, 2005

Commission file number 000-23401





GameTech International, Inc.


(Exact name of registrant as specified in its charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                           |  | 33-0612983                              
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification No.)

900 Sandhill Road


Reno, Nevada 89521


(775) 850-6000


(Address, including zip code, and telephone number,


including area code of principal executive offices)


Securities registered pursuant to Section 12(b) of the
Act:


|                    |  |                                          
|------------------- |  | -----------------------------------------
|Title of Each Class |  | Name of Each Exchange on Which Registered
|                    |  |                                          
|None                |  | Not applicable                           

Securities registered pursuant to Section 12(g) of the
Act:


Common Stock, par value $.001 per share


Rights to Purchase Series A Junior Participating
Preferred Stock


(Title of class)


o þ


o þ


þ o


S-K 10-K 10-K. þ




o o þ


12b-2 o þ






Documents Incorporated By Reference












---



##### 










GAMETECH INTERNATIONAL, INC.


ANNUAL REPORT ON
FORM 10-K


FISCAL YEAR ENDED OCTOBER 31, 2005


INDEX


|                                               |  |                                                                                                                       |     |      |    |  |  | 
|---------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------- | --- | ---- | -- |  |  | 
|                                               |  |                                                                                                                       |     | Page |   
|                                               |  |                                                                                                                       |     |      |   
|PART I                                        
|Item 1.                                        |  | Business                                                                                                              |     |      | 1  | 
|Item 1A.                                       |  | Risk Factors                                                                                                          |     |      | 9  | 
|Item 1B.                                       |  | Unresolved Staff Comments                                                                                             |     |      | 15 | 
|Item 2.                                        |  | Properties                                                                                                            |     |      | 16 | 
|Item 3.                                        |  | Legal Proceedings                                                                                                     |     |      | 16 | 
|Item 4.                                        |  | Submission of Matters to a Vote of
    Security Holders                                                               |     |      | 17 | 
|                                              
|PART II                                       
|Item 5.                                        |  | Market for Registrants Common
    Equity, Related Stockholder Matters, and Issuer Purchases of
    Equity Securities |     |      | 18 | 
|Item 6.                                        |  | Selected Financial Data                                                                                               |     |      | 19 | 
|Item 7.                                        |  | Managements Discussion and
    Analysis of Financial Condition and Results of Operations                             |     |      | 20 | 
|Item 7A.                                       |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                        |     |      | 28 | 
|Item 8.                                        |  | Financial Statements and Supplementary
    Data                                                                       |     |      | 29 | 
|Item 9.                                        |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                              |     |      | 29 | 
|Item 9A.                                       |  | Controls and Procedures                                                                                               |     |      | 29 | 
|Item 9B.                                       |  | Other Information                                                                                                     |     |      | 30 | 
|                                              
|PART III                                      
|Item 10.                                       |  | Directors and Executive Officers of the
    Registrant                                                                |     |      | 30 | 
|Item 11.                                       |  | Executive Compensation                                                                                                |     |      | 30 | 
|Item 12.                                       |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                    |     |      | 30 | 
|Item 13.                                       |  | Certain Relationships and Related
    Transactions                                                                    |     |      | 30 | 
|Item 14.                                       |  | Principal Accountant Fees and
    Services                                                                            |     |      | 30 | 
|                                              
|PART IV                                       
|Item 15.                                       |  | Exhibits and Financial Statement
    Schedules                                                                        |     |      | 30 | 
|SIGNATURES                                     |  |                                                                                                                       | 33  |     
|INDEX TO CONSOLIDATED FINANCIAL
    STATEMENTS |  |                                                                                                                       | F-1 |     
|Exhibit 23.1                                  
|Exhibit 23.2                                  
|Exhibit 31.1                                  
|Exhibit 31.2                                  
|Exhibit 32.1                                  
|Exhibit 32.2                                  



Statement Regarding Forward-Looking Statements


The statements contained in this report on
Form 10-K that are
not purely historical are forward-looking statements within the
meaning of applicable securities laws. Forward-looking
statements include statements regarding our
expectations, anticipation,
intentions, beliefs, or
strategies regarding the future. Forward-looking
statements also include statements regarding revenue, margins,
expenses, and earnings analysis for fiscal 2006 and thereafter;
expansion of products or product development; expansion into new
domestic and international markets; potential acquisitions or
strategic alliances; and liquidity and anticipated cash needs
and availability. All forward-looking statements included in
this report are based on information available to us as of the
filing date of this report, and we assume no obligation to
update any such forward-looking statements. Our actual results
could differ materially from the forward-looking statements.
Among the factors that could cause actual results to differ
materially are the factors discussed in Item 1A, Risk
Factors.




---



##### Table of Contents






PART I







|        |         
|------- | --------
|Item 1. | Business

General








www.gametech-inc.com. 10-K, 10-Q, 8-K,


Business Strategy






| |                                    
| | -----------------------------------
| | Emphasize Superior Customer Service





| |                                                                            
| | ---------------------------------------------------------------------------
| | Expand Product Offerings and Increase Player Usage of
    Bingo Electronics



1



---



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| |                                 
| | --------------------------------
| | Expand into New Domestic Markets





| |                       
| | ----------------------
| | Expand Internationally





| |                         
| | ------------------------
| | Develop New Applications



tm tm tm


tm






| |                                                                
| | ---------------------------------------------------------------
| | Develop Strategic Alliances/Acquire Complementary
    Companies



Products


tm Point-of


2



---



##### Table of Contents





® ®






| |   |                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the ability to play up to 600 electronic bingo card images
    during one bingo game, significantly more than can be played on
    paper;                                       
|
| |  | the ability to electronically and simultaneously mark the called
    numbers on all cards being played, thereby reducing player error
    in missing or mismarking a number; and
|
| |  | the ability to alert the player upon attaining a
    BINGO, thereby reducing the chance a player misses
    winning a prize.                                                  

picture-in






| |                       
| | ----------------------
| | Portable Bingo Systems





| |   |                                                                                              
| | - | ---------------------------------------------------------------------------------------------
| |  | the
    TED2Ctm
    terminal, our top of the line color portable terminal;                   
|
| |  | the Traveler terminal, our
    state-of-the-art color
    portable terminal;                 
|
| |  | the
    TED®
    terminal, which is our lower-cost black and white portable
    terminal; and
|
| |  | the Palm Top terminal, which is our high-end black and white
    portable terminal.          

2


3



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2 2 easy-to ®


easy-to








| |                         
| | ------------------------
| | Fixed-Base Bingo Systems



File Server.


Caller Unit.


Sales Unit. point-of


Players Terminal.


4



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##### Table of Contents



Product and System Software Development










Sales, Marketing, and Distribution














| |   |                                                         
| | - | --------------------------------------------------------
| |  | installation by us at no cost to the bingo operator;    
|
| |  | training sessions for the bingo staff;                  
|
| |  | promotional sessions to introduce players to the system;
|
| |  | advertising and
    point-of-sale
    materials; and    
|
| |  | an ongoing service and maintenance program.             

5



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| |               
| | --------------
| | Target Markets





Materials and Supplies






Intellectual Property


2 2


Competition




6



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Government Regulation


day-to




| |                  
| | -----------------
| | Nevada Regulation





| |                           
| | --------------------------
| | Native American Regulation



7



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| |                   
| | ------------------
| | Federal Regulation





| |                                       
| | --------------------------------------
| | Regulation of Electronic Bingo Systems







| |                              
| | -----------------------------
| | Systems Security Requirements





| |                                                                
| | ---------------------------------------------------------------
| | Application of Future or Additional Regulatory
    Requirements



8



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##### Table of Contents





Employees









|         |             
|-------- | ------------
|Item 1A. | Risk Factors





| |                                                          
| | ---------------------------------------------------------
| | We depend on the bingo and electronic bingo
    industry.





| |                                                                                                    
| | ---------------------------------------------------------------------------------------------------
| | Our success depends on our ability to respond to rapid
    market changes and product enhancements.





| |                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------
| | To compete successfully, we must retain and extend our
    existing contracts with customers and secure new
    customers.





| |                                                                                       
| | --------------------------------------------------------------------------------------
| | Some of our customers may terminate agreements with us on
    relatively short notice.



9



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| |                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------
| | Our compliance with several governmental and other
    regulations is costly and subjects our company to significant
    risks.





| |                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may need additional cash resources to support our
    existing operations and execute our growth strategy and such
    cash resources may not be available.







| |   |                                                     
| | - | ----------------------------------------------------
| |  | maintain, develop, or enhance our product offerings;
|
| |  | take advantage of future opportunities;             
|
| |  | respond to competitive pressures;                   
|
| |  | expand operations; or                               
|
| |  | execute our growth strategy.                        





| |                                                                                                 
| | ------------------------------------------------------------------------------------------------
| | We depend on a limited number of manufacturers and
    suppliers for components of our products.



10



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| |                                                          
| | ---------------------------------------------------------
| | We depend on our relationships with our
    distributors.





| |                                                                                     
| | ------------------------------------------------------------------------------------
| | We depend on Native American laws in the operation of a
    portion of our business.





| |                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If our games were classified as Class III games under
    the Indian Gaming Regulatory Act, we may not be able to obtain
    the necessary approvals to operate our business, or we may have
    to modify our systems to be classified as Class II
    games.





| |                   
| | ------------------
| | Nevada Regulation.



11



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| |                                                                          
| | -------------------------------------------------------------------------
| | We rely on the Texas market for a significant portion of
    our revenue.





| |                                                            
| | -----------------------------------------------------------
| | The electronic bingo industry is extremely
    competitive.





| |                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------
| | Investors may not be able to exercise control over our
    company as a result of principal stockholders
    ownership.





| |                                                             
| | ------------------------------------------------------------
| | We must be able to attract and retain skilled
    employees.



12



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##### Table of Contents





| |                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Acquisitions could divert managements time and
    attention, dilute the voting power of existing stockholders, and
    have a material adverse effect on our business.





| |   |                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | difficulties integrating the products, operations, and personnel
    of acquired companies;                                                               
|
| |  | the additional financial resources required to fund the
    operations of acquired companies;                                                             
|
| |  | the potential disruption of our business;                                                                                                                 
|
| |  | our ability to maximize our financial and strategic position by
    the incorporation of acquired technology or businesses with our
    product offerings;
|
| |  | the difficulty of maintaining uniform standards, controls,
    procedures, and policies;                                                                  
|
| |  | the potential loss of key employees of acquired companies;                                                                                                
|
| |  | the impairment of employee and customer relationships as a
    result of changes in management;                                                           
|
| |  | significant expenditures to consummate acquisitions; and                                                                                                  
|
| |  | difficulties in meeting applicable regulatory requirements.                                                                                               





| |                                                                            
| | ---------------------------------------------------------------------------
| | Our failure to manage effectively our growth could impair
    our business.





| |   |                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------
| |  | expand our facilities and equipment and further enhance our
    operational, financial, and management systems;
|
| |  | design, develop, produce, and receive products from third-party
    suppliers on a timely basis;               
|
| |  | develop new and maintain existing distribution channels in order
    to maximize revenue and profit margins;   
|
| |  | effectively manage regulatory risks in various jurisdictions;                                                  
|
| |  | successfully hire, train, retain, and motivate additional
    employees; and                                   
|
| |  | integrate successfully the operations of any acquired businesses
    with our operations.                      

13



---



##### Table of Contents







| |                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Sales of additional shares of common stock, or the
    potential for such sales, could have a depressive effect on the
    market price of our common stock.





| |                                                             
| | ------------------------------------------------------------
| | We have limited protection of our intellectual
    property.







| |                                                                              
| | -----------------------------------------------------------------------------
| | Our Stockholders Rights Plan may adversely affect
    existing stockholders.







| |                                                                                                               
| | --------------------------------------------------------------------------------------------------------------
| | Our operating results could differ materially from the
    forward-looking statements included in this report.



14



---



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| |                                                                                     
| | ------------------------------------------------------------------------------------
| | We depend on our controls to prevent and detect
    misstatements on a timely basis.





| |                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Failure to achieve and maintain effective internal
    controls in accordance with Section 404 of the
    Sarbanes-Oxley Act could have a material adverse effect on our
    business and stock price.

10-K









|         |                          
|-------- | -------------------------
|Item 1B. | Unresolved Staff Comments



15



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|        |           
|------- | ----------
|Item 2. | Properties








|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings

GameTech International,
Inc. v. Trend Gaming Systems, LLC


Civil Action
No. 3:02 CV1636WS


16



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



|                    |  |                |            |  |          |  |         | 
|------------------- |  | -------------- | ---------- |  | -------- |  | ------- | 
|Nominee             |  | Votes in Favor |            |  | Withheld | 
|                    |  |                |            |  |          | 
|Richard T. Fedor    |  |                | 10,762,689 |  |          |  | 316,167 | 
|Donald K. Whitaker  |  |                | 11,067,915 |  |          |  | 10,941  | 
|Scott H. Shackelton |  |                | 11,067,915 |  |          |  | 10,941  | 
|Richard H. Irvine   |  |                | 10,728,589 |  |          |  | 350,267 | 
|Jay M. Meilstrup    |  |                | 10,724,083 |  |          |  | 354,773 | 





| |                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Proposal to ratify the appointment of Grant Thornton LLP, an
    independent registered public accounting firm, as our
    independent auditor for the fiscal year ending October 31,
    2005.

|         |            |  |         |  |       |           |        |  |          |  |  |  |         | 
|-------- | ---------- |  | ------- |  | ----- | --------- | ------ |  | -------- |  |  |  | ------- | 
|Votes in |            |  |         |  |       |           | Broker | 
|Favor    |            |  | Opposed |  |       | Abstained |        |  | Non-Vote | 
|         |            |  |         |  |       |           |        |  |          | 
|         | 11,074,115 |  |         |  | 1,741 |           |        |  | 3,000    |  |  |  | 796,358 | 

17



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PART II







|        |                                                                                                                      
|------- | ---------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters, and Issuer Purchases of Equity
    Securities



|                            |                                          |      |   |      |     |  |   |      | 
|--------------------------- | ---------------------------------------- | ---- | - | ---- | --- |  | - | ---- | 
|                            |                                          | High |   |      | Low | 
|                            |                                          |      |   |      |     | 
|Year Ended October 31, 2004 |                                          |      |   |      |     |  |   |     
|                            | First Quarter                            |      | $ | 4.70 |     |  | $ | 3.09 | 
|                            | Second Quarter                           |      | $ | 4.55 |     |  | $ | 3.58 | 
|                            | Third Quarter                            |      | $ | 6.05 |     |  | $ | 3.66 | 
|                            | Fourth Quarter                           |      | $ | 5.47 |     |  | $ | 3.80 | 
|Year Ended October 31, 2005 |                                          |      |   |      |     |  |   |     
|                            | First Quarter                            |      | $ | 5.15 |     |  | $ | 3.46 | 
|                            | Second Quarter                           |      | $ | 4.51 |     |  | $ | 2.38 | 
|                            | Third Quarter                            |      | $ | 3.39 |     |  | $ | 2.20 | 
|                            | Fourth Quarter                           |      | $ | 4.00 |     |  | $ | 2.60 | 
|Year Ended October 31, 2006 |                                          |      |   |      |     |  |   |     
|                            | First Quarter (through January 13, 2006) |      | $ | 5.00 |     |  | $ | 3.18 | 



Dividend Policy




18



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|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data



|                                                                          |                            |                                          |        |        |        |   |         |        |        |   |        |        |        |      |        |        |        |   |        |        |        | 
|------------------------------------------------------------------------- | -------------------------- | ---------------------------------------- | ------ | ------ | ------ | - | ------- | ------ | ------ | - | ------ | ------ | ------ | ---- | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                                                                          |                            | Years Ended October 31,                  |       
|                                                                          |                            |                                          |       
|                                                                          |                            | 2005                                     |        |        | 2004   |   |         | 2003   |        |   | 2002   |        |        | 2001 |       
|                                                                          |                            |                                          |        |        |        |   |         |        |        |   |        |        |        |      |       
|                                                                          |                            | (In thousands, except per share amounts) |       
|Statements of Operations Data:                                            |                            |                                          |        |        |        |   |         |        |        |   |        |        |        |      |        |        |        |   |        |       
|Net revenue                                                               |                            | $                                        | 49,651 |        |        | $ | 51,490  |        |        | $ | 52,329 |        |        | $    | 48,861 |        |        | $ | 48,536 |       
|Cost of revenue                                                           |                            |                                          | 20,304 |        |        |   | 24,027  |        |        |   | 21,775 |        |        |      | 18,982 |        |        |   | 22,185 |       
|                                                                          |                            |                                          |        |        |        |   |         |        |        |   |        |        |        |      |       
|Gross profit                                                              |                            |                                          | 29,347 |        |        |   | 27,463  |        |        |   | 30,554 |        |        |      | 29,879 |        |        |   | 26,351 |       
|Operating expenses:                                                       |                            |                                          |        |        |        |   |         |        |        |   |        |        |        |      |        |        |        |   |        |       
|                                                                          | General and administrative |                                          |        | 11,406 |        |   |         | 11,154 |        |   |        | 11,426 |        |      |        | 9,535  |        |   |        | 14,995 |       
|                                                                          | Sales and marketing        |                                          |        | 11,952 |        |   |         | 12,561 |        |   |        | 12,323 |        |      |        | 13,245 |        |   |        | 14,400 |       
|                                                                          | Research and development   |                                          |        | 4,058  |        |   |         | 5,179  |        |   |        | 4,692  |        |      |        | 2,671  |        |   |        | 2,780  |       
|                                                                          | Loss contingencies         |                                          |        | 137    |        |   |         | 3,628  |        |   |        |       |        |      |        |       |        |   |        |       |       
|                                                                          | Impairment of goodwill     |                                          |        |       |        |   |         | 6,625  |        |   |        |       |        |      |        |       |        |   |        |       |       
|                                                                          |                            |                                          |        |        |        |   |         |        |        |   |        |        |        |      |       
|                                                                          |                            | Total operating expenses                 |        |        | 27,553 |   |         |        | 39,147 |   |        |        | 28,441 |      |        |        | 25,451 |   |        |        | 32,175 | 
|                                                                          |                            |                                          |        |        |        |   |         |        |        |   |        |        |        |      |       
|Income (loss) from operations                                             |                            |                                          | 1,794  |        |        |   | (11,684 | )      |        |   | 2,113  |        |        |      | 4,428  |        |        |   | (5,824 | )     
|Interest and other income (expense), net                                  |                            |                                          | 76     |        |        |   | 58      |        |        |   | 3      |        |        |      | (7     | )      |        |   | 144    |       
|                                                                          |                            |                                          |        |        |        |   |         |        |        |   |        |        |        |      |       
|Income (loss) before income taxes                                         |                            |                                          | 1,870  |        |        |   | (11,626 | )      |        |   | 2,116  |        |        |      | 4,421  |        |        |   | (5,680 | )     
|Provision for (benefit from) income taxes                                 |                            |                                          | 534    |        |        |   | (1,720  | )      |        |   | 925    |        |        |      | 1,688  |        |        |   | (1,285 | )     
|                                                                          |                            |                                          |        |        |        |   |         |        |        |   |        |        |        |      |       
|Net income (loss)                                                         |                            | $                                        | 1,336  |        |        | $ | (9,906  | )      |        | $ | 1,191  |        |        | $    | 2,733  |        |        | $ | (4,395 | )     
|                                                                          |                            |                                          |        |        |        |   |         |        |        |   |        |        |        |      |       
|Diluted net income (loss) per share                                       |                            | $                                        | 0.11   |        |        | $ | (0.84   | )      |        | $ | 0.10   |        |        | $    | 0.23   |        |        | $ | (0.41  | )     
|                                                                          |                            |                                          |        |        |        |   |         |        |        |   |        |        |        |      |       
|Shares used in the calculation of diluted net income (loss) per
    share |                            |                                          | 11,960 |        |        |   | 11,775  |        |        |   | 11,818 |        |        |      | 11,945 |        |        |   | 10,623 |       
|                                                                          |                            |                                          |        |        |        |   |         |        |        |   |        |        |        |      |       
|Cash dividends per common share                                           |                            | $                                        | 0.03   |        |        | $ | 0.21    |        |        | $ | 0.00   |        |        | $    | 0.00   |        |        | $ | 0.00   |       
|                                                                          |                            |                                          |        |        |        |   |         |        |        |   |        |        |        |      |       

|                                                  |  |                                          |        |  |      |   |        |      |  |   |        |  |  |      |        |  |  |   |        | 
|------------------------------------------------- |  | ---------------------------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ |  |  | ---- | ------ |  |  | - | ------ | 
|                                                  |  | As of October 31,                        |       
|                                                  |  |                                          |       
|                                                  |  | 2005                                     |        |  | 2004 |   |        | 2003 |  |   | 2002   |  |  | 2001 |       
|                                                  |  |                                          |        |  |      |   |        |      |  |   |        |  |  |      |       
|                                                  |  | (In thousands, except per share amounts) |       
|Balance Sheet Data:                               |  |                                          |        |  |      |   |        |      |  |   |        |  |  |      |        |  |  |   |        | 
|Cash, cash equivalents and short-term investments |  | $                                        | 6,833  |  |      | $ | 8,706  |      |  | $ | 11,952 |  |  | $    | 9,278  |  |  | $ | 12,955 | 
|Restricted short-term investments                 |  |                                          | 4,581  |  |      |   |       |      |  |   |       |  |  |      |       |  |  |   |       | 
|Working capital                                   |  |                                          | 10,824 |  |      |   | 5,209  |      |  |   | 14,806 |  |  |      | 16,562 |  |  |   | 16,464 | 
|Total assets                                      |  |                                          | 51,130 |  |      |   | 51,679 |      |  |   | 60,175 |  |  |      | 58,101 |  |  |   | 55,676 | 
|Total debt                                        |  |                                          |       |  |      |   |       |      |  |   | 275    |  |  |      | 13     |  |  |   | 2,395  | 
|Total stockholders equity                        |  |                                          | 41,889 |  |      |   | 40,670 |      |  |   | 52,621 |  |  |      | 50,490 |  |  |   | 46,584 | 

19



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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

The following discussion should be read in conjunction with
our consolidated financial statements and notes thereto included
elsewhere in this report. The following discussion contains
certain forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from
the results anticipated in these forward-looking statements as a
result of the factors set forth in this report, including those
set forth under Item 1A, Risk Factors.


Overview










Fiscal 2005 Highlights






| |   |                                                                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our ability to decrease our cost of revenue as a percentage of
    sales to 40.9% during 2005 from 46.7% during 2004;                                                                                                                            
|
| |  | a $1.1 million reduction in research and development
    expenses as a result of reduced and more focused project costs;                                                                                                                         
|
| |  | $3.6 million of loss contingencies and $6.6 million
    impairment of goodwill, both of which were incurred during
    fiscal 2004 and immaterial comparable amounts were included in
    fiscal 2005 results;                                   
|
| |  | other reductions in general administrative expenses, which were
    offset by $1.0 million of severance-related expenses as a
    result of management changes and staff reductions during fiscal
    2005 and elevated levels of legal expenses.

20



---



##### Table of Contents







Transactions Resulting in Stock Compensation Expense






out-of Share Based Payment


Critical Accounting Policies and Estimates




21



---



##### Table of Contents









| |                    
| | -------------------
| | Revenue Recognition





| |                                        
| | ---------------------------------------
| | Reserve for Bingo Terminal Obsolescence





| |                                    
| | -----------------------------------
| | Software Development Capitalization

Accounting for the Costs of Computer
Software to Be Sold, Leased, or Otherwise Marketed.






| |                                
| | -------------------------------
| | Allowance for Doubtful Accounts



22



---



##### Table of Contents







| |                                             
| | --------------------------------------------
| | Impairment of Goodwill and Intangible Assets







| |   |                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a significant change in the manner of our use of the acquired
    assets or the strategy for our overall business;                                                                                                            
|
| |  | a significant decrease in the market price of an asset;                                                                                                                                                                       
|
| |  | a significant adverse change in legal factors or in the business
    climate that could affect the value of an asset, including an
    adverse action or assessment by a regulator;                                           
|
| |  | a current period operating or cash flow loss combined with a
    history of operating or cash flow losses or a projection or
    forecast that demonstrates reduced profitability associated with
    the use of an asset; and
|
| |  | a current expectation that, more likely than not, an asset will
    be sold or otherwise disposed of significantly before the end of
    its previously estimated useful life.                                                





| |                    
| | -------------------
| | Legal Contingencies



Internal Control Over Accounting for Taxes




23



---



##### Table of Contents







Results of Operations




|                                                               |                            |                          |       |      |      |  |       |      |      |  |       |      |      | 
|-------------------------------------------------------------- | -------------------------- | ------------------------ | ----- | ---- | ---- |  | ----- | ---- | ---- |  | ----- | ---- | ---- | 
|                                                               |                            | Years Ended October 31,  |      
|                                                               |                            |                          |      
|                                                               |                            | 2005                     |       |      | 2004 |  |       | 2003 |     
|                                                               |                            |                          |       |      |      |  |       |      |     
|Statements of Operations Data:                                 |                            |                          |       |      |      |  |       |      |      |  |       |     
|Net revenue                                                    |                            |                          | 100.0 | %    |      |  | 100.0 | %    |      |  | 100.0 | %   
|Cost of revenue                                                |                            |                          | 40.9  |      |      |  | 46.7  |      |      |  | 41.6  |     
|                                                               |                            |                          |       |      |      |  |       |      |     
|Gross profit                                                   |                            |                          | 59.1  |      |      |  | 53.3  |      |      |  | 58.4  |     
|Operating expenses:                                            |                            |                          |       |      |      |  |       |      |      |  |       |     
|                                                               | General and administrative |                          |       | 23.0 |      |  |       | 21.7 |      |  |       | 21.8 |     
|                                                               | Sales and marketing        |                          |       | 24.1 |      |  |       | 24.4 |      |  |       | 23.6 |     
|                                                               | Research and development   |                          |       | 8.2  |      |  |       | 10.0 |      |  |       | 9.0  |     
|                                                               | Loss contingency           |                          |       | 0.2  |      |  |       | 7.0  |      |  |       |     |     
|                                                               | Impairment of goodwill     |                          |       |     |      |  |       | 12.9 |      |  |       |     |     
|                                                               |                            |                          |       |      |      |  |       |      |     
|                                                               |                            | Total operating expenses |       |      | 55.5 |  |       |      | 76.0 |  |       |      | 54.4 | 
|Income (loss) from operations                                  |                            |                          | 3.6   |      |      |  | (22.7 | )    |      |  | 4.0   |     
|Interest and other income, net                                 |                            |                          | 0.2   |      |      |  | 0.1   |      |      |  | 0.0   |     
|                                                               |                            |                          |       |      |      |  |       |      |     
|Income (loss) before provision for (benefit from) income taxes |                            |                          | 3.8   |      |      |  | (22.6 | )    |      |  | 4.0   |     
|Provision for (benefit from) income taxes                      |                            |                          | 1.1   |      |      |  | (3.3  | )    |      |  | 1.7   |     
|                                                               |                            |                          |       |      |      |  |       |      |     
|Net income (loss)                                              |                            |                          | 2.7   | %    |      |  | (19.3 | )%   |      |  | 2.3   | %   
|                                                               |                            |                          |       |      |      |  |       |      |     

Year Ended October 31, 2005 Compared with Year Ended
October 31, 2004


Revenue.


Cost of Revenue.


24



---



##### Table of Contents





General and Administrative.


Sales and Marketing.


Research and Development.




Loss Contingencies.


Impairment of Goodwill.


Provision for (Benefit from) Income Taxes.


Year Ended October 31, 2004 Compared with Year Ended
October 31, 2003


Revenue.


25



---



##### Table of Contents





Cost of Revenue. 2


General and Administrative.


Sales and Marketing.


Research and Development.




Provision for (Benefit from) Income Taxes.


26



---



##### Table of Contents



Liquidity and Capital Resources










27



---



##### Table of Contents



Contractual Obligations




|                                   |  |                        |           |           |        |   |         |       |  |       |           |  |           |         |           |  |  |   |        | 
|---------------------------------- |  | ---------------------- | --------- | --------- | ------ | - | ------- | ----- |  | ----- | --------- |  | --------- | ------- | --------- |  |  | - | ------ | 
|                                   |  | Payments Due by Period |          
|                                   |  |                        |          
|                                   |  |                        |           | Less Than |        |   | 1 - 3   |       |  | 3 - 5 |           |  | More Than |        
|                                   |  | Total                  |           |           | 1 Year |   |         | Years |  |       | Years     |  |           | 5 Years |          
|                                   |  |                        |           |           |        |   |         |       |  |       |           |  |           |         |          
|Operating Leases                   |  | $                      | 2,957,000 |           |        | $ | 724,000 |       |  | $     | 1,151,000 |  |           | $       | 1,082,000 |  |  | $ |       | 
|Other Long Term Obligations        |  |                        | 216,000   |           |        |   | 35,000  |       |  |       | 43,000    |  |           |         | 47,000    |  |  |   | 91,000 | 
|                                   |  |                        |           |           |        |   |         |       |  |       |           |  |           |         |          
|Total Contractual Cash Obligations |  | $                      | 3,173,000 |           |        | $ | 759,000 |       |  | $     | 1,194,000 |  |           | $       | 1,129,000 |  |  | $ | 91,000 | 
|                                   |  |                        |           |           |        |   |         |       |  |       |           |  |           |         |          

Purchase Commitments






Inflation and General Economic Condition









|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About Market
    Risk







28



---



##### Table of Contents



Sensitivity Analysis Market Risks.







|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data








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








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures





| |                                               
| | ----------------------------------------------
| | Accounting for Income Taxes and Other Matters.









29



---



##### Table of Contents










|         |                  
|-------- | -----------------
|Item 9B. | Other Information






PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant








|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation








|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters








|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions








|         |                                        
|-------- | ---------------------------------------
|Item 14. | Principal Accountants Fees and Services






PART IV







|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules

Financial Statements and Financial Statement
Schedules




| |                                                                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) Consolidated Financial Statements.                                                                                                                                                                                 
|
| | Consolidated Financial Statements are listed in the Index to
    Consolidated Financial Statements on page F-1 of this report.                                                                                         
|
| | (2) Consolidated Financial Statement Schedules.                                                                                                                                                                        
|
| | No financial statement schedules are included because they are
    not applicable, are not required, or because required
    information is included in the consolidated financial statements
    or the notes thereto.

30



---



##### Table of Contents



Exhibits


|        |    |                        |  |                                                                                                                                                                                                                                                                                    
|------- | -- | ---------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|Number  |    | Description of Exhibit
|        |    |                       
|        | 3  | .1                     |  | Certificate of Incorporation of the Registrant, as amended(1)                                                                                                                                                                                                                      
|       
|        | 3  | .3                     |  | Certificate of Designation of Series A Junior Participating
    Preferred Stock of the Registrant(7)                                                                                                                                                                               
|       
|        | 3  | .4                     |  | Second Amended and Restated Bylaws of the Registrant(2)                                                                                                                                                                                                                            
|       
|        | 4  | .1                     |  | GameTech International, Inc. Registration Rights Agreement(3)                                                                                                                                                                                                                      
|       
|        | 4  | .3                     |  | Rights Agreement, dated as of March 7, 2003, between
    GameTech International, Inc. and Mellon Investor Services, LLC,
    as rights agent(8)                                                                                                                                    
|       
|        | 4  | .4                     |  | Specimen Common Stock Certificate(7)                                                                                                                                                                                                                                               
|       
|        | 10 | .1                     |  | GameTech International, Inc. 1997 Incentive Stock Plan(1)                                                                                                                                                                                                                          
|       
|        | 10 | .15                    |  | GameTech International, Inc. 2001 Restricted Stock Plan(5)                                                                                                                                                                                                                         
|       
|        | 10 | .16                    |  | Lease Agreement dated November 18, 1999 between the
    Registrant and Cypress Corporate Services, including addendum to
    lease and first amendment dated April 17, 2000(4)                                                                                                     
|       
|        | 10 | .17                    |  | Revolving Line of Credit dated August 19, 1998 between the
    Registrant and Wells Fargo Bank, N.A.(4)                                                                                                                                                                            
|       
|        | 10 | .18                    |  | Letter Amendment to Revolving Line of Credit dated April 1,
    2000 by and among the Registrant, Bingo Technologies
    Corporation, and Wells Fargo Bank, N.A.(4)                                                                                                                
|       
|        | 10 | .19                    |  | Letter Amendment to Revolving Line of Credit dated April 2,
    2001 by and among the Registrant, Bingo Technologies
    Corporation, and Wells Fargo Bank, N.A.(4)                                                                                                                
|       
|        | 10 | .22                    |  | Employment Agreement dated October 1, 1997 between the
    Registrant and Andrejs K. Bunkse(4)                                                                                                                                                                                     
|       
|        | 10 | .23                    |  | Letter Amendment dated April 2, 2002 between Wells Fargo
    Bank, N.A., the Registrant, and Bingo Technologies Corporation
    amending the letter agreement between the parties dated
    August 19, 1998, together with Revolving Line of Credit
    Note dated April 2, 2002(6)
|       
|        | 10 | .24                    |  | Letter Amendment dated April 2, 2003 between Wells Fargo
    Bank, N.A., and the Registrant, amending the letter agreement
    between the parties dated August 19, 1998, together with
    the Revolving Line of Credit Note dated April 2, 2003(9)                               
|       
|        | 10 | .25                    |  | Employment Agreement dated September 2, 2004, between the
    Registrant and John B. Furman(10)                                                                                                                                                                                    
|       
|        | 10 | .26                    |  | Employment Agreement effective February 1, 2005, between
    the Registrant and Cornelius T. Klerk(11)                                                                                                                                                                             
|       
|        | 10 | .27                    |  | Letter Agreement by and between the Registrant and James C.
    Wilson, dated as of April 29, 2005(12)                                                                                                                                                                             
|       
|        | 10 | .28                    |  | Credit Agreement, dated April 2, 2005, by and between the
    Registrant and Wells Fargo Bank, National Association(13)                                                                                                                                                            
|       
|        | 10 | .29                    |  | Revolving Line of Credit Note, dated April 2, 2005 in favor
    of Wells Fargo Bank, National Association(13)                                                                                                                                                                      
|        | 10 | .30                    |  | Security Agreement relating to equipment, dated April 2,
    2005, in favor of Wells Fargo Bank, National Association(13)                                                                                                                                                          
|       
|        | 10 | .31                    |  | Continuing Security Agreement relating to rights to payment and
    inventory, dated April 2, 2005, in favor of Wells Fargo
    Bank, National Association(13)                                                                                                                     
|       
|        | 10 | .32                    |  | Settlement and Release Agreement by and between the Registrant
    and John Furman, dated as of June 28, 2005(14)                                                                                                                                                                  
|       
|        | 10 | .33                    |  | Letter Agreement by and between the Registrant and Jay M.
    Meilstrup, dated as of July 1, 2005(14)                                                                                                                                                                              
|       
|        | 21 |                        |  | List of Subsidiaries(6)                                                                                                                                                                                                                                                            
|       
|        | 23 | .1                     |  | Consent of Grant Thornton LLP, Independent Registered Public
    Accounting Firm                                                                                                                                                                                                   
|       
|        | 23 | .2                     |  | Consent of Ernst & Young LLP, Independent Registered
    Public Accounting Firm                                                                                                                                                                                                    
|       
|        | 31 | .1                     |  | Certification of Chief Executive Officer pursuant to
    Rule 13a-14(a) and Rule 15d-14(a), promulgated by the
    Securities Exchange Act of 1934, as amended                                                                                                                     
|       
|        | 31 | .2                     |  | Certification of Chief Financial Officer pursuant to
    Rule 13a-14(a) and Rule 15d-14(a), promulgated by the
    Securities Exchange Act of 1934, as amended                                                                                                                     

31



---



##### Table of Contents



|        |    |                        |  |                                                                                                                                                          
|------- | -- | ---------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|Number  |    | Description of Exhibit
|        |    |                       
|       
|        | 32 | .1                     |  | Certification of Chief Executive Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002
|       
|        | 32 | .2                     |  | Certification of Chief Financial Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002






| |     |                                                                                                                                                                                                                
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Incorporated by reference to the Registrants Registration
    Statement on
    Form S-1
    (Registration
    No. 333-34967) as
    filed with the Commission on or about September 4, 1997.                  
|
| | (2) | Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q for the
    quarterly period ended January 31, 2004, as filed with the
    Commission on or about March 16, 2004.          
|
| | (3) | Incorporated by reference to Amendment No. 1 to the
    Registrants Registration Statement on
    Form S-1
    (Registration
    No. 333-34967) as
    filed with the Commission on or about October 17, 1997.
|
| | (4) | Incorporated by reference to the Registrants Annual Report
    on Form 10-K for
    the fiscal year ended October 31, 2001 as filed with the
    Commission on or about January 29, 2002.                     
|
| | (5) | Incorporated by reference to the Registrants Registration
    Statement on
    Form S-8
    (Registration
    No. 333-72886) as
    filed with the Commission on or about November 7, 2001.                   
|
| | (6) | Incorporated by reference to the Registrants Annual Report
    on Form 10-K for
    the fiscal year ended October 31, 2002 as filed with the
    Commission on or about January 29, 2003.                     
|
| | (7) | Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q for the
    quarterly period ended January 31, 2003 as filed with the
    Commission on or about March 17, 2003.           
|
| | (8) | Incorporated by reference to the Registrants Current
    Report on Form 8-K
    dated March 7, 2003 as filed with the Commission on or
    about March 10, 2003.                                              
|
| | (9) | Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q for the
    quarterly period ended April 30, 2003 as filed with the
    Commission on or about June 16, 2003.              



|     |                                                                                                                                                                                                      
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Incorporated by reference to the Registrants Current
    Report on Form 8-K
    dated September 2, 2004 as filed with the Commission on or
    about September 9, 2004.                             
|    
|(11) | Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q for the
    quarterly period ended July 31, 2004 as filed with the
    Commission on or about September 14, 2004.
|    
|(12) | Incorporated by reference to the Registrants Current
    Report on Form 8-K
    dated May 2, 2005 as filed with the Commission on or about
    May 4, 2005.                                         
|    
|(13) | Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q for the
    quarterly period ended April 30, 2005 as filed with the
    Commission on or about June 14, 2005.    
|    
|(14) | Incorporated by reference to the Registrants Current
    Report on Form 8-K
    dated June 28, 2005 as filed with the Commission on or
    about July 5, 2005.                                      

32



---



##### Table of Contents






SIGNATURES






| |                                 
| | --------------------------------
| | Gametech International,
    inc.



| |     |                     
| | --- | --------------------
| | By: | /s/ JAY M. MEILSTRUP

| |                                                 
| | ------------------------------------------------
| |                                                 
| | Jay M. Meilstrup                                
| | President, Chief Executive Officer, and Director
| | (Principal Executive Officer)                   





|                                           |  |                                                                                     |  |                   |  | 
|------------------------------------------ |  | ----------------------------------------------------------------------------------- |  | ----------------- |  | 
|Signature                                  |  | Title                                                                               |  | Date             
|                                           |  |                                                                                     |  |                  
|                                          
|/s/ RICHARD T. FEDORRichard T. Fedor       |  | Chairman of the Board of Directors                                                  |  | February 14, 2006
|                                          
|/s/ JAY M. MEILSTRUPJay M. Meilstrup       |  | President, Chief Executive Officer, and Director
    (Principal Executive Officer)  |  | February 14, 2006
|                                          
|/s/ JAMES C. WILSONJames C. Wilson         |  | Chief Financial Officer, Treasurer, and Secretary
    (Principal Financial Officer) |  | February 14, 2006
|                                          
|/s/ ANN D. MCKENZIEAnn D. McKenzie         |  | Corporate Controller
    (Principal Accounting Officer)                             |  | February 14, 2006
|                                          
|/s/ RICHARD H. IRVINERichard H. Irvine     |  | Director                                                                            |  | February 14, 2006
|                                          
|/s/ SCOTT H. SHACKELTONScott H. Shackelton |  | Director                                                                            |  | February 14, 2006
|                                          
|/s/ DONALD K. WHITAKERDonald K. Whitaker   |  | Director                                                                            |  | February 14, 2006

33



---



##### Table of Contents



GameTech International, Inc.





Index to Consolidated Financial Statements


|                                                                                |  |  |     | 
|------------------------------------------------------------------------------- |  |  | --- | 
|Report of Grant Thornton LLP, Independent
    Registered Public Accounting Firm |  |  | F-2 | 
|Report of Ernst & Young LLP,
    Independent Registered Public Accounting Firm  |  |  | F-3 | 
|Consolidated Financial Statements                                               |  |  |     | 
|Consolidated Balance Sheets                                                     |  |  | F-4 | 
|Consolidated Statements of Operations                                           |  |  | F-5 | 
|Consolidated Statements of
    Stockholders Equity                             |  |  | F-6 | 
|Consolidated Statements of Cash Flows                                           |  |  | F-7 | 
|Notes to Consolidated Financial
    Statements                                  |  |  | F-8 | 

F-1



---



##### Table of Contents






Report of Independent Registered Public Accounting
Firm














| |                       
| | ----------------------
| | /s/ GRANT THORNTON LLP





F-2



---



##### Table of Contents






Report of Ernst & Young LLP, Independent
Registered Public Accounting Firm














| |                      
| | ---------------------
| | /s/ Ernst & Young LLP





F-3



---



##### Table of Contents



GAMETECH INTERNATIONAL, INC.





CONSOLIDATED BALANCE SHEETS


|                                                                                    |                                                                                                                                      |                       |        |        |      |   |        |        |  
|----------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------ | --------------------- | ------ | ------ | ---- | - | ------ | ------ | -
|                                                                                    |                                                                                                                                      | October 31,           |       
|                                                                                    |                                                                                                                                      |                       |       
|                                                                                    |                                                                                                                                      | 2005                  |        |        | 2004 |  
|                                                                                    |                                                                                                                                      |                       |        |        |      |  
|                                                                                    |                                                                                                                                      | (In thousands, except |       
|                                                                                    |                                                                                                                                      | share and per share   |       
|                                                                                    |                                                                                                                                      | amounts)              |       
|ASSETS:                                                                            
|Current assets:                                                                     |                                                                                                                                      |                       |        |        |      |   |        |       
|                                                                                    | Cash and cash equivalents                                                                                                            |                       | $      | 6,330  |      |   | $      | 6,101  |  
|                                                                                    | Short-term investments                                                                                                               |                       |        | 503    |      |   |        | 2,605  |  
|                                                                                    | Accounts receivable, net of allowances of $2,374 in 2005 and
    $2,454 in 2004                                                      |                       |        | 3,573  |      |   |        | 3,484  |  
|                                                                                    | Deposits                                                                                                                             |                       |        | 21     |      |   |        | 29     |  
|                                                                                    | Refundable income taxes                                                                                                              |                       |        | 742    |      |   |        | 100    |  
|                                                                                    | Restricted short-term investments                                                                                                    |                       |        | 4,581  |      |   |        |       |  
|                                                                                    | Prepaid expenses and other current assets                                                                                            |                       |        | 326    |      |   |        | 650    |  
|                                                                                    | Deferred income taxes                                                                                                                |                       |        | 2,549  |      |   |        | 2,358  |  
|                                                                                    |                                                                                                                                      |                       |        |        |      |  
|Total current assets                                                                |                                                                                                                                      |                       | 18,625 |        |      |   | 15,327 |       
|Bingo equipment, furniture and other equipment, net                                 |                                                                                                                                      |                       | 20,060 |        |      |   | 23,952 |       
|Goodwill, net                                                                       |                                                                                                                                      |                       | 10,184 |        |      |   | 10,184 |       
|Intangibles, less accumulated amortization of $4,335 in 2005 and
    $3,614 in 2004 |                                                                                                                                      |                       | 1,811  |        |      |   | 1,766  |       
|Restricted cash                                                                     |                                                                                                                                      |                       | 450    |        |      |   | 450    |       
|                                                                                    |                                                                                                                                      |                       |        |        |      |  
|Total assets                                                                        |                                                                                                                                      | $                     | 51,130 |        |      | $ | 51,679 |       
|                                                                                    |                                                                                                                                      |                       |        |        |      |  
|                                                                                   
|LIABILITIES AND STOCKHOLDERS EQUITY:                                              
|Current liabilities:                                                                |                                                                                                                                      |                       |        |        |      |   |        |       
|                                                                                    | Accounts payable                                                                                                                     |                       | $      | 641    |      |   | $      | 1,343  |  
|                                                                                    | Accrued payroll and related obligations                                                                                              |                       |        | 1,335  |      |   |        | 1,541  |  
|                                                                                    | Accrued loss contingencies                                                                                                           |                       |        | 3,765  |      |   |        | 3,628  |  
|                                                                                    | Income taxes payable                                                                                                                 |                       |        |       |      |   |        | 1,214  |  
|                                                                                    | Other accrued liabilities                                                                                                            |                       |        | 2,060  |      |   |        | 2,392  |  
|                                                                                    |                                                                                                                                      |                       |        |        |      |  
|Total current liabilities                                                           |                                                                                                                                      |                       | 7,801  |        |      |   | 10,118 |       
|Non-current employment obligations                                                  |                                                                                                                                      |                       | 181    |        |      |   | 202    |       
|Deferred income taxes                                                               |                                                                                                                                      |                       | 1,259  |        |      |   | 689    |       
|Commitments and contingencies                                                       |                                                                                                                                      |                       |       |        |      |   |       |       
|Stockholders equity:                                                               |                                                                                                                                      |                       |        |        |      |   |        |       
|                                                                                    | Common stock: $0.001 par value; 40,000,000 shares
    authorized; 13,740,539 shares issued in 2005 and 13,700,339
    issued in 2004 |                       |        | 14     |      |   |        | 14     |  
|                                                                                    | Additional paid in capital                                                                                                           |                       |        | 47,319 |      |   |        | 47,081 |  
|                                                                                    | Retained earnings                                                                                                                    |                       |        | 2,652  |      |   |        | 1,671  |  
|                                                                                    | Treasury stock, at cost, 1,855,325 shares in 2005 and 2004                                                                           |                       |        | (8,096 | )    |   |        | (8,096 | )
|                                                                                    |                                                                                                                                      |                       |        |        |      |  
|Total stockholders equity                                                          |                                                                                                                                      |                       | 41,889 |        |      |   | 40,670 |       
|                                                                                    |                                                                                                                                      |                       |        |        |      |  
|Total liabilities and stockholders equity                                          |                                                                                                                                      | $                     | 51,130 |        |      | $ | 51,679 |       
|                                                                                    |                                                                                                                                      |                       |        |        |      |  



F-4



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##### Table of Contents



GAMETECH INTERNATIONAL, INC.





CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                        |                            |                          |        |        |        |   |         |        |        |   |        |        |        | 
|------------------------------------------------------- | -------------------------- | ------------------------ | ------ | ------ | ------ | - | ------- | ------ | ------ | - | ------ | ------ | ------ | 
|                                                        |                            | Year Ended October 31,   |       
|                                                        |                            |                          |       
|                                                        |                            | 2005                     |        |        | 2004   |   |         | 2003   |       
|                                                        |                            |                          |        |        |        |   |         |        |       
|                                                        |                            | (In thousands, except    |       
|                                                        |                            | per share amounts)       |       
|Net revenue                                             |                            | $                        | 49,651 |        |        | $ | 51,490  |        |        | $ | 52,329 |       
|Cost of revenue                                         |                            |                          | 20,304 |        |        |   | 24,027  |        |        |   | 21,775 |       
|                                                        |                            |                          |        |        |        |   |         |        |       
|Gross profit                                            |                            |                          | 29,347 |        |        |   | 27,463  |        |        |   | 30,554 |       
|Operating expenses:                                     |                            |                          |        |        |        |   |         |        |        |   |        |       
|                                                        | General and administrative |                          |        | 11,406 |        |   |         | 11,154 |        |   |        | 11,426 |       
|                                                        | Sales and marketing        |                          |        | 11,952 |        |   |         | 12,561 |        |   |        | 12,323 |       
|                                                        | Research and development   |                          |        | 4,058  |        |   |         | 5,179  |        |   |        | 4,692  |       
|                                                        | Loss contingencies         |                          |        | 137    |        |   |         | 3,628  |        |   |        |       |       
|                                                        | Impairment of goodwill     |                          |        |       |        |   |         | 6,625  |        |   |        |       |       
|                                                        |                            |                          |        |        |        |   |         |        |       
|                                                        |                            | Total operating expenses |        |        | 27,553 |   |         |        | 39,147 |   |        |        | 28,441 | 
|                                                        |                            |                          |        |        |        |   |         |        |       
|Income (loss) from operations                           |                            |                          | 1,794  |        |        |   | (11,684 | )      |        |   | 2,113  |       
|Interest and other income (expense), net                |                            |                          | 76     |        |        |   | 58      |        |        |   | 3      |       
|                                                        |                            |                          |        |        |        |   |         |        |       
|Income (loss) before income taxes                       |                            |                          | 1,870  |        |        |   | (11,626 | )      |        |   | 2,116  |       
|Provision for (benefit from) income taxes               |                            |                          | 534    |        |        |   | (1,720  | )      |        |   | 925    |       
|                                                        |                            |                          |        |        |        |   |         |        |       
|Net income (loss)                                       |                            | $                        | 1,336  |        |        | $ | (9,906  | )      |        | $ | 1,191  |       
|                                                        |                            |                          |        |        |        |   |         |        |       
|Net income (loss) per share:                            |                            |                          |        |        |        |   |         |        |        |   |        |       
|                                                        | Basic                      |                          | $      | 0.11   |        |   | $       | (0.84  | )      |   | $      | 0.10   |       
|                                                        |                            |                          |        |        |        |   |         |        |       
|                                                        | Diluted                    |                          | $      | 0.11   |        |   | $       | (0.84  | )      |   | $      | 0.10   |       
|                                                        |                            |                          |        |        |        |   |         |        |       
|Shares used in calculating net income (loss) per share: |                            |                          |        |        |        |   |         |        |        |   |        |       
|                                                        | Basic                      |                          |        | 11,868 |        |   |         | 11,775 |        |   |        | 11,696 |       
|                                                        |                            |                          |        |        |        |   |         |        |       
|                                                        | Diluted                    |                          |        | 11,960 |        |   |         | 11,775 |        |   |        | 11,818 |       
|                                                        |                            |                          |        |        |        |   |         |        |       
|Dividends declared per share                            |                            | $                        | 0.03   |        |        | $ | 0.21    |        |        | $ |       |       
|                                                        |                            |                          |        |        |        |   |         |        |       



F-5



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##### Table of Contents



GAMETECH INTERNATIONAL, INC.





CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


|                                                        |  |                                      |            |  |            |   |    |           |  |                |          |  |  |        |        |   |        |  |           |       |  |   |        |   |  |   |        |  
|------------------------------------------------------- |  | ------------------------------------ | ---------- |  | ---------- | - | -- | --------- |  | -------------- | -------- |  |  | ------ | ------ | - | ------ |  | --------- | ----- |  | - | ------ | - |  | - | ------ | -
|                                                        |  | Common Stock                         |            |  | Capital in |   |    |           |  | Treasury Stock |          |  | 
|                                                        |  |                                      |            |  | Excess of  |   |    | Retained  |  |                |          |  |  |       
|                                                        |  | Shares                               |            |  | Amount     |   |    | Par Value |  |                | Earnings |  |  | Shares |        |   | Amount |  |           | Total | 
|                                                        |  |                                      |            |  |            |   |    |           |  |                |          |  |  |        |        |   |        |  |           |       | 
|                                                        |  | (In thousands, except share amounts) |           
|Balances at October 31, 2002                            |  |                                      | 13,090,764 |  |            | $ | 13 |           |  | $              | 45,716   |  |  | $      | 12,857 |   |        |  | 1,855,325 |       |  | $ | (8,096 | ) |  | $ | 50,490 |  
|Issuance of common stock upon exercise of stock options |  |                                      | 502,000    |  |            |   | 1  |           |  |                | 529      |  |  |        |       |   |        |  |          |       |  |   |       |   |  |   | 530    |  
|Tax benefit of stock option exercises                   |  |                                      |           |  |            |   |   |           |  |                | 410      |  |  |        |       |   |        |  |          |       |  |   |       |   |  |   | 410    |  
|Net income                                              |  |                                      |           |  |            |   |   |           |  |                |         |  |  |        | 1,191  |   |        |  |          |       |  |   |       |   |  |   | 1,191  |  
|                                                        |  |                                      |            |  |            |   |    |           |  |                |          |  |  |        |        |   |        |  |           |       | 
|Balances at October 31, 2003                            |  |                                      | 13,592,764 |  |            |   | 14 |           |  |                | 46,655   |  |  |        | 14,048 |   |        |  | 1,855,325 |       |  |   | (8,096 | ) |  |   | 52,621 |  
|Issuance of common stock upon exercise of stock options |  |                                      | 107,575    |  |            |   |   |           |  |                | 415      |  |  |        |       |   |        |  |          |       |  |   |       |   |  |   | 415    |  
|Tax benefit of stock option exercises                   |  |                                      |           |  |            |   |   |           |  |                | 11       |  |  |        |       |   |        |  |          |       |  |   |       |   |  |   | 11     |  
|Net loss                                                |  |                                      |           |  |            |   |   |           |  |                |         |  |  |        | (9,906 | ) |        |  |          |       |  |   |       |   |  |   | (9,906 | )
|Dividends paid                                          |  |                                      |           |  |            |   |   |           |  |                |         |  |  |        | (2,471 | ) |        |  |          |       |  |   |       |   |  |   | (2,471 | )
|                                                        |  |                                      |            |  |            |   |    |           |  |                |          |  |  |        |        |   |        |  |           |       | 
|Balances at October 31, 2004                            |  |                                      | 13,700,339 |  |            |   | 14 |           |  |                | 47,081   |  |  |        | 1,671  |   |        |  | 1,855,325 |       |  |   | (8,096 | ) |  |   | 40,670 |  
|Issuance of common stock upon exercise of stock options |  |                                      | 40,200     |  |            |   |   |           |  |                | 135      |  |  |        |       |   |        |  |          |       |  |   |       |   |  |   | 135    |  
|Stock based compensation                                |  |                                      |           |  |            |   |   |           |  |                | 103      |  |  |        |       |   |        |  |          |       |  |   |       |   |  |   | 103    |  
|Net income                                              |  |                                      |           |  |            |   |   |           |  |                |         |  |  |        | 1,336  |   |        |  |          |       |  |   |       |   |  |   | 1,336  |  
|Dividends paid                                          |  |                                      |           |  |            |   |   |           |  |                |         |  |  |        | (355   | ) |        |  |          |       |  |   |       |   |  |   | (355   | )
|                                                        |  |                                      |            |  |            |   |    |           |  |                |          |  |  |        |        |   |        |  |           |       | 
|Balances at October 31, 2005                            |  |                                      | 13,740,539 |  |            | $ | 14 |           |  | $              | 47,319   |  |  | $      | 2,652  |   |        |  | 1,855,325 |       |  | $ | (8,096 | ) |  | $ | 41,889 |  
|                                                        |  |                                      |            |  |            |   |    |           |  |                |          |  |  |        |        |   |        |  |           |       | 



F-6



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##### Table of Contents



GAMETECH INTERNATIONAL, INC.





CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                                                                                  |                                                                                |                                           |        |        |        |   |         |        |       |   |         |        |       |  
|--------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------ | ----------------------------------------- | ------ | ------ | ------ | - | ------- | ------ | ----- | - | ------- | ------ | ----- | -
|                                                                                                                                  |                                                                                | Year Ended October 31,                    |       
|                                                                                                                                  |                                                                                |                                           |       
|                                                                                                                                  |                                                                                | 2005                                      |        |        | 2004   |   |         | 2003   |      
|                                                                                                                                  |                                                                                |                                           |        |        |        |   |         |        |      
|                                                                                                                                  |                                                                                | (In thousands)                            |       
|Cash flows from operating activities:                                                                                             |                                                                                |                                           |        |        |        |   |         |        |       |   |         |       
|Net income (loss)                                                                                                                 |                                                                                | $                                         | 1,336  |        |        | $ | (9,906  | )      |       | $ | 1,191   |       
|Adjustments to reconcile net income (loss) to net cash provided
    by operating activities, net of effects of acquired business: |                                                                                |                                           |        |        |        |   |         |        |       |   |         |       
|                                                                                                                                  | Depreciation and amortization                                                  |                                           |        | 11,427 |        |   |         | 11,684 |       |   |         | 10,175 |      
|                                                                                                                                  | Obsolescence and loss on disposal of bingo terminals and related
    equipment |                                           |        | 493    |        |   |         | 1,743  |       |   |         | 562    |      
|                                                                                                                                  | Impairment of goodwill                                                         |                                           |        |       |        |   |         | 6,625  |       |   |         |       |      
|                                                                                                                                  | Loss on disposals of furniture and other equipment                             |                                           |        | 35     |        |   |         | 83     |       |   |         | 68     |      
|                                                                                                                                  | Loss on disposal of intangible assets                                          |                                           |        | 35     |        |   |         |       |       |   |         |       |      
|                                                                                                                                  | Stock compensation expense                                                     |                                           |        | 103    |        |   |         |       |       |   |         |       |      
|                                                                                                                                  | Deferred income taxes                                                          |                                           |        | 379    |        |   |         | (3,024 | )     |   |         | 706    |      
|                                                                                                                                  | Loss contingencies                                                             |                                           |        | 137    |        |   |         | 3,628  |       |   |         |       |      
|                                                                                                                                  | Other changes in operating assets and liabilities:                             |                                           |        |        |        |   |         |        |       |   |         |        |      
|                                                                                                                                  |                                                                                | Accounts receivable, net                  |        |        | (89    | ) |         |        | 140   |   |         |        | 282   |  
|                                                                                                                                  |                                                                                | Deposits                                  |        |        | 8      |   |         |        | (1    | ) |         |        | 582   |  
|                                                                                                                                  |                                                                                | Refundable income taxes                   |        |        | (642   | ) |         |        | 131   |   |         |        | 3,657 |  
|                                                                                                                                  |                                                                                | Restricted short-term investments         |        |        | (4,581 | ) |         |        |      |   |         |        |      |  
|                                                                                                                                  |                                                                                | Prepaid expenses and other current assets |        |        | 324    |   |         |        | (309  | ) |         |        | 92    |  
|                                                                                                                                  |                                                                                | Accounts payable                          |        |        | (702   | ) |         |        | 560   |   |         |        | (131  | )
|                                                                                                                                  |                                                                                | Accrued payroll and related obligations   |        |        | (206   | ) |         |        | 787   |   |         |        | (51   | )
|                                                                                                                                  |                                                                                | Other accrued liabilities                 |        |        | (332   | ) |         |        | 649   |   |         |        | (356  | )
|                                                                                                                                  |                                                                                | Income taxes payable                      |        |        | (1,214 | ) |         |        | 1,214 |   |         |        |      |  
|                                                                                                                                  |                                                                                | Non-current employment obligations        |        |        | (21    | ) |         |        | (246  | ) |         |        | 16    |  
|                                                                                                                                  |                                                                                |                                           |        |        |        |   |         |        |      
|Net cash provided by operating activities                                                                                         |                                                                                |                                           | 6,490  |        |        |   | 13,758  |        |       |   | 16,793  |       
|Cash flows from investing activities:                                                                                             |                                                                                |                                           |        |        |        |   |         |        |       |   |         |       
|Proceeds from sale of short-term investments                                                                                      |                                                                                |                                           | 2,602  |        |        |   | 2,250   |        |       |   | 4,687   |       
|Payments for purchase of short-term investments                                                                                   |                                                                                |                                           | (500   | )      |        |   | (3,105  | )      |       |   | (1,392  | )     
|Capital expenditures for bingo equipment, furniture and other
    equipment                                                       |                                                                                |                                           | (7,359 | )      |        |   | (13,619 | )      |       |   | (9,506  | )     
|Payment for the acquisition of International Gaming Systems,
    Inc.                                                             |                                                                                |                                           |       |        |        |   |        |        |       |   | (3,469  | )     
|Payments for buy out of distributorship agreements                                                                                |                                                                                |                                           |       |        |        |   |        |        |       |   | (1,006  | )     
|Proceeds from sale of assets and insurance reimbursement                                                                          |                                                                                |                                           | 17     |        |        |   |        |        |       |   |        |       
|Payments for acquisitions of intangible assets                                                                                    |                                                                                |                                           | (801   | )      |        |   | (1,054  | )      |       |   | (392    | )     
|                                                                                                                                  |                                                                                |                                           |        |        |        |   |         |        |      
|Net cash used in investing activities                                                                                             |                                                                                |                                           | (6,041 | )      |        |   | (15,528 | )      |       |   | (11,078 | )     
|Cash flows from financing activities:                                                                                             |                                                                                |                                           |        |        |        |   |         |        |       |   |         |       
|Payments on long-term debt/note payable and other obligations                                                                     |                                                                                |                                           |       |        |        |   | (275    | )      |       |   | (276    | )     
|Payment of dividends                                                                                                              |                                                                                |                                           | (355   | )      |        |   | (2,471  | )      |       |   |        |       
|Proceeds from issuance of common stock                                                                                            |                                                                                |                                           | 135    |        |        |   | 415     |        |       |   | 530     |       
|                                                                                                                                  |                                                                                |                                           |        |        |        |   |         |        |      
|Net cash (used in) provided by financing activities                                                                               |                                                                                |                                           | (220   | )      |        |   | (2,331  | )      |       |   | 254     |       
|                                                                                                                                  |                                                                                |                                           |        |        |        |   |         |        |      
|Net increase (decrease) in cash and cash equivalents                                                                              |                                                                                |                                           | 229    |        |        |   | (4,101  | )      |       |   | 5,969   |       
|Cash and cash equivalents at beginning of year                                                                                    |                                                                                |                                           | 6,101  |        |        |   | 10,202  |        |       |   | 4,233   |       
|                                                                                                                                  |                                                                                |                                           |        |        |        |   |         |        |      
|Cash and cash equivalents at end of year                                                                                          |                                                                                | $                                         | 6,330  |        |        | $ | 6,101   |        |       | $ | 10,202  |       
|                                                                                                                                  |                                                                                |                                           |        |        |        |   |         |        |      
|Supplemental cash flow information:                                                                                               |                                                                                |                                           |        |        |        |   |         |        |       |   |         |       
|Cash paid out in the year for:                                                                                                    |                                                                                |                                           |        |        |        |   |         |        |       |   |         |       
|                                                                                                                                  | Interest                                                                       |                                           | $      | 13     |        |   | $       | 31     |       |   | $       | 45     |      
|                                                                                                                                  |                                                                                |                                           |        |        |        |   |         |        |      
|                                                                                                                                  | Income taxes                                                                   |                                           | $      | 2,051  |        |   | $       | 61     |       |   | $       | 71     |      
|                                                                                                                                  |                                                                                |                                           |        |        |        |   |         |        |      
|Non cash investing and financing activities:                                                                                      |                                                                                |                                           |        |        |        |   |         |        |       |   |         |       
|Purchase of intangible assets through the issuance of debt                                                                        |                                                                                | $                                         |       |        |        | $ |        |        |       | $ | 538     |       
|                                                                                                                                  |                                                                                |                                           |        |        |        |   |         |        |      



F-7



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##### Table of Contents



GAMETECH INTERNATIONAL, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


October 31, 2005, 2004 and 2003




|   |                                                        
|-- | -------------------------------------------------------
|1. | Business and Summary of Significant Accounting Policies



| |                        
| | -----------------------
| | Description of Business

month-to




| |                         
| | ------------------------
| | Consolidation Principles





| |                 
| | ----------------
| | Use of Estimates





| |                          
| | -------------------------
| | Cash and Cash Equivalents





| |                       
| | ----------------------
| | Short-Term Investments





| |                                                
| | -----------------------------------------------
| | Bingo Equipment, Furniture, and Other Equipment

point-of


|                               |  |  |           | 
|------------------------------ |  |  | --------- | 
|Bingo equipment                |  |  | 3-5 years | 
|Office furniture and equipment |  |  | 3-7 years | 
|Leasehold improvements         |  |  | 10 years  | 



F-8



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##### Table of Contents



GAMETECH INTERNATIONAL, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                    
| | -------------------
| | Supplier Dependence





| |                                    
| | -----------------------------------
| | Software Development Capitalization

Accounting for the Costs of Computer
Software to Be Sold, Leased, or Otherwise Marketed.






| |         
| | --------
| | Goodwill





| |                                                    
| | ---------------------------------------------------
| | Impairment of Long-Lived Assets Other Than Goodwill

Accounting for the Impairment or
Disposal of Long-Lived Assets.




| |                    
| | -------------------
| | Revenue Recognition



F-9



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##### Table of Contents



GAMETECH INTERNATIONAL, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                                                            
| | -----------------------------------------------------------
| | Accounts Receivable and Allowance for Doubtful
    Accounts







| |                    
| | -------------------
| | Legal Contingencies







| |                                
| | -------------------------------
| | Advertising and Promotion Costs



F-10



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##### Table of Contents



GAMETECH INTERNATIONAL, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                               
| | ------------------------------
| | Research and Development Costs





| |                         
| | ------------------------
| | Stock Based Compensation











Share Based
Payment


F-11



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##### Table of Contents



GAMETECH INTERNATIONAL, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                                                                            |             |                                 |        |      |      |   |         |       |   |   |       |      | 
|--------------------------------------------------------------------------------------------------------------------------- | ----------- | ------------------------------- | ------ | ---- | ---- | - | ------- | ----- | - | - | ----- | ---- | 
|                                                                                                                            |             | Year Ended October 31,          |       
|                                                                                                                            |             |                                 |       
|                                                                                                                            |             | 2005                            |        |      | 2004 |   |         | 2003  |  
|                                                                                                                            |             |                                 |        |      |      |   |         |       |  
|                                                                                                                            |             | (In thousands, except per share |       
|                                                                                                                            |             | amounts)                        |       
|Net income (loss) as reported                                                                                               |             | $                               | 1,336  |      |      | $ | (9,906  | )     |   | $ | 1,191 |     
|Stock-based employee compensation expense included in reported
    net income, net of related tax benefits                  |             |                                 | 39     |      |      |   |        |       |   |   |      |     
|Stock-based employee compensation expense determined under fair
    value method for all awards, net of related tax effects |             |                                 | (1,285 | )    |      |   | (475    | )     |   |   | (425  | )   
|                                                                                                                            |             |                                 |        |      |      |   |         |       |  
|Pro forma net income (loss)                                                                                                 |             | $                               | 90     |      |      | $ | (10,381 | )     |   | $ | 766   |     
|                                                                                                                            |             |                                 |        |      |      |   |         |       |  
|Net Income (loss) per share                                                                                                 |             |                                 |        |      |      |   |         |       |   |   |       |     
|Basic:                                                                                                                      |             |                                 |        |      |      |   |         |       |   |   |       |     
|                                                                                                                            | As reported |                                 | $      | 0.11 |      |   | $       | (0.84 | ) |   | $     | 0.10 | 
|                                                                                                                            | Pro forma   |                                 | $      | 0.01 |      |   | $       | (0.88 | ) |   | $     | 0.07 | 
|Diluted:                                                                                                                    |             |                                 |        |      |      |   |         |       |   |   |       |     
|                                                                                                                            | As reported |                                 | $      | 0.11 |      |   | $       | (0.84 | ) |   |       | 0.10 | 
|                                                                                                                            | Pro forma   |                                 | $      | 0.01 |      |   | $       | (0.88 | ) |   | $     | 0.06 | 





|                         |  |                        |      |   |      |  |      |      |  |  |      |  
|------------------------ |  | ---------------------- | ---- | - | ---- |  | ---- | ---- |  |  | ---- | -
|                         |  | Year Ended October 31, |     
|                         |  |                        |     
|                         |  | 2005                   |      |   | 2004 |  |      | 2003 | 
|                         |  |                        |      |   |      |  |      |      | 
|Risk-free interest rate  |  |                        | 3.98 | % |      |  | 3.76 | %    |  |  | 4.41 | %
|Dividend yield           |  |                        |     |   |      |  | 2.63 | %    |  |  |     |  
|Volatility factor        |  |                        | 64.4 | % |      |  | 66.2 | %    |  |  | 70.3 | %
|Expected life (in years) |  |                        | 8.0  |   |      |  | 8.0  |      |  |  | 8.0  |  





| |                            
| | ---------------------------
| | Net Income (Loss) Per Share

Earnings per Share


F-12



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##### Table of Contents



GAMETECH INTERNATIONAL, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                              
| | -----------------------------
| | Concentrations of Credit Risk







| |                                     
| | ------------------------------------
| | Fair Values of Financial Instruments





| |                  
| | -----------------
| | Reclassifications





| |                                 
| | --------------------------------
| | Recent Accounting Pronouncements

Inventory Costs  an amendment of ARB No. 43,
Chapter 4.


Share-Based
Payment Accounting for Stock-Based Compensation. Accounting for Stock Issued to Employees Statement of Cash Flows.


F-13



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##### Table of Contents



GAMETECH INTERNATIONAL, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








Exchanges of Non-monetary Assets  an amendment of
Accounting Principles Board (APB) Opinion
No. 29, Accounting for Non-monetary Transactions.


Accounting Changes and Error Corrections  a
replacement of APB No. 20 and SFAS No. 3.




|   |                      
|-- | ---------------------
|2. | Acquisition of Assets



F-14



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##### Table of Contents



GAMETECH INTERNATIONAL, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Business
Combinations




|                 |                       |   |       |       | 
|---------------- | --------------------- | - | ----- | ----- | 
|Acquired assets: |                       |   |       |      
|                 | Bingo equipment       |   | $     | 582   | 
|                 | Intellectual property |   |       | 750   | 
|                 | Distributor contracts |   |       | 260   | 
|                 | Trademarks            |   |       | 28    | 
|                 | Goodwill              |   |       | 1,849 | 
|                 |                       |   |      
|                 |                       | $ | 3,469 |      
|                 |                       |   |      





|   |                         
|-- | ------------------------
|3. | Goodwill and Intangibles

Goodwill and Other Intangible Assets








F-15



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##### Table of Contents



GAMETECH INTERNATIONAL, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                 |  |              |       |             |              |   |              |                  |  |                     |            |  |  |  |     | 
|-------------------------------- |  | ------------ | ----- | ----------- | ------------ | - | ------------ | ---------------- |  | ------------------- | ---------- |  |  |  | --- | 
|                                 |  |              |       |             |              |   |              | Weighted Average | 
|                                 |  |              |       | Accumulated |              |   | Net Carrying |                  |  | Amortization Period |           
|                                 |  | Stated Value |       |             | Amortization |   |              | Value            |  |                     | (In Years) | 
|                                 |  |              |       |             |              |   |              |                  |  |                     |            | 
|Intellectual Property (software) |  | $            | 4,060 |             |              | $ | (2,351       | )                |  | $                   | 1,709      |  |  |  | 3.1 | 
|Copyrights/trademarks            |  |              | 286   |             |              |   | (284         | )                |  |                     | 2          |  |  |  | 4.5 | 
|Distributor buyouts              |  |              | 1,800 |             |              |   | (1,700       | )                |  |                     | 100        |  |  |  | 2.3 | 
|                                 |  |              |       |             |              |   |              |                  |  |                     |            | 
|                                 |  | $            | 6,146 |             |              | $ | (4,335       | )                |  | $                   | 1,811      |  |  |  |     | 
|                                 |  |              |       |             |              |   |              |                  |  |                     |            | 



|                                 |  |              |       |             |              |   |              |                  |  |                     |            |  |  |  |     | 
|-------------------------------- |  | ------------ | ----- | ----------- | ------------ | - | ------------ | ---------------- |  | ------------------- | ---------- |  |  |  | --- | 
|                                 |  |              |       |             |              |   |              | Weighted Average | 
|                                 |  |              |       | Accumulated |              |   | Net Carrying |                  |  | Amortization Period |           
|                                 |  | Stated Value |       |             | Amortization |   |              | Value            |  |                     | (In Years) | 
|                                 |  |              |       |             |              |   |              |                  |  |                     |            | 
|Intellectual Property (software) |  | $            | 3,268 |             |              | $ | (1,866       | )                |  | $                   | 1,402      |  |  |  | 3.1 | 
|Copyrights/trademarks            |  |              | 312   |             |              |   | (275         | )                |  |                     | 37         |  |  |  | 4.6 | 
|Distributor buyouts              |  |              | 1,800 |             |              |   | (1,473       | )                |  |                     | 327        |  |  |  | 2.3 | 
|                                 |  |              |       |             |              |   |              |                  |  |                     |            | 
|                                 |  | $            | 5,380 |             |              | $ | (3,614       | )                |  | $                   | 1,766      |  |  |  |     | 
|                                 |  |              |       |             |              |   |              |                  |  |                     |            | 







|     |  |   |       | 
|---- |  | - | ----- | 
|2006 |  | $ | 679   | 
|2007 |  |   | 687   | 
|2008 |  |   | 394   | 
|2009 |  |   | 51    | 
|     |  |   |      
|     |  | $ | 1,811 | 
|     |  |   |      



|   |                                  
|-- | ---------------------------------
|4. | Restricted Short-Term Investments



F-16



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##### Table of Contents



GAMETECH INTERNATIONAL, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                                               
|-- | ----------------------------------------------
|5. | Bingo Equipment, Furniture and Other Equipment



|                                                    |  |             |        |  |      |   |        | 
|--------------------------------------------------- |  | ----------- | ------ |  | ---- | - | ------ | 
|                                                    |  | October 31, |       
|                                                    |  |             |       
|                                                    |  | 2005        |        |  | 2004 |  
|                                                    |  |             |        |  |      |  
|Bingo equipment                                     |  | $           | 52,309 |  |      | $ | 51,039 | 
|Component parts                                     |  |             | 1,817  |  |      |   | 2,208  | 
|Office furniture and equipment                      |  |             | 4,328  |  |      |   | 4,515  | 
|Leasehold improvements                              |  |             | 757    |  |      |   | 747    | 
|                                                    |  |             |        |  |      |  
|                                                    |  |             | 59,211 |  |      |   | 58,509 | 
|Less accumulated depreciation and amortization      |  |             | 36,273 |  |      |   | 31,173 | 
|Less reserve for excess or obsolete terminals       |  |             | 2,878  |  |      |   | 3,384  | 
|                                                    |  |             |        |  |      |  
|Bingo equipment, furniture and other equipment, net |  | $           | 20,060 |  |      | $ | 23,952 | 
|                                                    |  |             |        |  |      |  







|   |                  
|-- | -----------------
|6. | Credit Agreements





|   |                              
|-- | -----------------------------
|7. | Commitments and Contingencies



| |       
| | ------
| | Leases



F-17



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##### Table of Contents



GAMETECH INTERNATIONAL, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|     |  |   |       | 
|---- |  | - | ----- | 
|2006 |  | $ | 724   | 
|2007 |  |   | 584   | 
|2008 |  |   | 567   | 
|2009 |  |   | 569   | 
|2010 |  |   | 513   | 
|     |  |   |      
|     |  | $ | 2,957 | 
|     |  |   |      



| |                     
| | --------------------
| | Purchase Commitments





| |           
| | ----------
| | Litigation

GameTech
International, Inc. v. Trend Gaming Systems, LLC


F-18



---



##### Table of Contents



GAMETECH INTERNATIONAL, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Civil Action
No. 3:02 CV1636WS






F-19



---



##### Table of Contents



GAMETECH INTERNATIONAL, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|   |                     
|-- | --------------------
|8. | Stockholders Equity



| |              
| | -------------
| | Stock Options





|                                                                              |           |                        |           |           |          |   |      |           |           |  |          |          |   |           |      |      |          |  |           |          |   |   |      |      | 
|----------------------------------------------------------------------------- | --------- | ---------------------- | --------- | --------- | -------- | - | ---- | --------- | --------- |  | -------- | -------- | - | --------- | ---- | ---- | -------- |  | --------- | -------- | - | - | ---- | ---- | 
|                                                                              |           | Year Ended October 31, |          
|                                                                              |           |                        |          
|                                                                              |           | 2005                   |           |           | 2004     |   |      | 2003      |          
|                                                                              |           |                        |           |           |          |   |      |           |          
|                                                                              |           |                        |           | Weighted- |          |   |      |           | Weighted- |  |          |          |   | Weighted- |     
|                                                                              |           | Number of              |           |           | Average  |   |      | Number of |           |  | Average  |          |   | Number of |      |      | Average  | 
|                                                                              |           | Shares                 |           |           | Exercise |   |      | Shares    |           |  | Exercise |          |   | Shares    |      |      | Exercise | 
|                                                                              |           | (Options)              |           |           | Price    |   |      | (Options) |           |  | Price    |          |   | (Options) |      |      | Price    | 
|                                                                              |           |                        |           |           |          |   |      |           |           |  |          |          |   |           |      |      |          | 
|Balance at beginning of year                                                  |           |                        | 970,125   |           |          | $ | 4.25 |           |           |  | 698,575  |          |   | $         | 3.80 |      |          |  | 1,254,360 |          |   | $ | 3.24 |     
|Options:                                                                      |           |                        |           |           |          |   |      |           |           |  |          |          |   |           |      |      |          |  |           |          |   |   |      |     
|                                                                              | Granted   |                        |           | 826,950   |          |   | $    | 3.12      |           |  |          | 473,600  |   |           | $    | 4.66 |          |  |           | 293,000  |   |   | $    | 3.63 | 
|                                                                              | Forfeited |                        |           | (346,675  | )        |   | $    | 4.16      |           |  |          | (94,475  | ) |           | $    | 3.84 |          |  |           | (346,785 | ) |   | $    | 5.61 | 
|                                                                              | Exercised |                        |           | (40,200   | )        |   | $    | 3.36      |           |  |          | (107,575 | ) |           | $    | 3.47 |          |  |           | (502,000 | ) |   | $    | 1.06 | 
|                                                                              |           |                        |           |           |          |   |      |           |           |  |          |          |   |           |      |      |          | 
|Balance at end of year                                                        |           |                        | 1,410,200 |           |          | $ | 4.25 |           |           |  | 970,125  |          |   | $         | 4.25 |      |          |  | 698,575   |          |   | $ | 3.80 |     
|                                                                              |           |                        |           |           |          |   |      |           |           |  |          |          |   |           |      |      |          | 
|Exercisable at end of year                                                    |           |                        | 1,410,200 |           |          | $ | 3.63 |           |           |  | 499,900  |          |   | $         | 4.20 |      |          |  | 335,450   |          |   | $ | 3.69 |     
|                                                                              |           |                        |           |           |          |   |      |           |           |  |          |          |   |           |      |      |          | 
|Weighted average grant-date fair value of options granted during
    the year |           |                        |           |           |          | $ | 2.16 |           |           |  |          |          |   | $         | 2.51 |      |          |  |           |          |   | $ | 2.66 |     
|                                                                              |           |                        |           |           |          |   |      |           |           |  |          |          |   |           |      |      |          | 

F-20



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##### Table of Contents



GAMETECH INTERNATIONAL, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                         |  |                     |           |           |                     |  |           |          |  |   |             |           |  |          |           |  |  |   |      | 
|------------------------ |  | ------------------- | --------- | --------- | ------------------- |  | --------- | -------- |  | - | ----------- | --------- |  | -------- | --------- |  |  | - | ---- | 
|                         |  | Options Outstanding |           |           | Options Exercisable | 
|                         |  |                     |           |           |                     | 
|                         |  |                     |           | Weighted- |                     |  |           |          | 
|                         |  |                     |           | Average   |                     |  | Weighted- |          |  |   |             | Weighted- | 
|                         |  |                     |           | Remaining |                     |  | Average   |          |  |   |             | Average   | 
|                         |  | Number              |           |           | Contractual Life    |  |           | Exercise |  |   | Number      |           |  | Exercise |          
|Range of Exercise Prices |  | Exercisable         |           |           | (In Years)          |  |           | Price    |  |   | Exercisable |           |  | Price    |          
|                         |  |                     |           |           |                     |  |           |          |  |   |             |           |  |          |          
|$2.66 - $3.00            |  |                     | 428,500   |           |                     |  | 9.58      |          |  | $ | 2.82        |           |  |          | 428,500   |  |  | $ | 2.82 | 
|$3.10 - $3.19            |  |                     | 208,000   |           |                     |  | 9.19      |          |  | $ | 3.16        |           |  |          | 208,000   |  |  | $ | 3.16 | 
|$3.31 - $3.63            |  |                     | 222,500   |           |                     |  | 8.17      |          |  | $ | 3.51        |           |  |          | 222,500   |  |  | $ | 3.51 | 
|$3.81 - $4.10            |  |                     | 273,200   |           |                     |  | 7.57      |          |  | $ | 3.94        |           |  |          | 273,200   |  |  | $ | 3.94 | 
|$4.15 - $5.20            |  |                     | 278,000   |           |                     |  | 8.52      |          |  | $ | 5.03        |           |  |          | 278,000   |  |  | $ | 5.03 | 
|                         |  |                     |           |           |                     |  |           |          |  |   |             |           |  |          |          
|                         |  |                     | 1,410,200 |           |                     |  | 8.67      |          |  | $ | 3.63        |           |  |          | 1,410,200 |  |  | $ | 3.63 | 
|                         |  |                     |           |           |                     |  |           |          |  |   |             |           |  |          |          



| |                             
| | ----------------------------
| | Stockholder Rights Agreement







|   |             
|-- | ------------
|9. | Income Taxes



|          |         |                        |     |      |      |   |        |        |   |   |     |     | 
|--------- | ------- | ---------------------- | --- | ---- | ---- | - | ------ | ------ | - | - | --- | --- | 
|          |         | Year Ended October 31, |    
|          |         |                        |    
|          |         | 2005                   |     |      | 2004 |   |        | 2003   |  
|          |         |                        |     |      |      |   |        |        |  
|Current:  |         |                        |     |      |      |   |        |        |   |   |     |    
|          | Federal |                        | $   | 565  |      |   | $      |       |   |   | $   | 146 | 
|          | State   |                        |     | 109  |      |   |        | 90     |   |   |     | 73  | 
|          | Foreign |                        |     | 52   |      |   |        |       |   |   |     |    | 
|Deferred: |         |                        |     |      |      |   |        |        |   |   |     |    
|          | Federal |                        |     | (243 | )    |   |        | (1,526 | ) |   |     | 698 | 
|          | State   |                        |     | 51   |      |   |        | (284   | ) |   |     | 8   | 
|          |         |                        |     |      |      |   |        |        |  
|          |         | $                      | 534 |      |      | $ | (1,720 | )      |   | $ | 925 |    
|          |         |                        |     |      |      |   |        |        |  

F-21



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##### Table of Contents



GAMETECH INTERNATIONAL, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                 |                                           |                  |       |       |             |  |     |        |  
|-------------------------------- | ----------------------------------------- | ---------------- | ----- | ----- | ----------- |  | --- | ------ | -
|                                 |                                           | October 31, 2005 |      
|                                 |                                           |                  |      
|                                 |                                           | Current          |       |       | Non-Current | 
|                                 |                                           |                  |       |       |             | 
|Deferred income tax assets:      |                                           |                  |       |       |             |  |     |       
|                                 | Amortization of intangible assets         |                  | $     |      |             |  | $   | 914    |  
|                                 | Allowance for doubtful accounts           |                  |       | 890   |             |  |     |       |  
|                                 | Loss contingencies                        |                  |       | 1,412 |             |  |     |       |  
|                                 | Accrued vacation                          |                  |       | 137   |             |  |     |       |  
|                                 | Various accruals                          |                  |       | 110   |             |  |     |       |  
|                                 | Capital loss carryforward                 |                  |       |      |             |  |     | 12     |  
|                                 |                                           |                  |       |       |             | 
|Total deferred income tax assets |                                           |                  | 2,549 |       |             |  | 926 |       
|Deferred income tax liability:   |                                           |                  |       |       |             |  |     |       
|                                 | Depreciation                              |                  |       |      |             |  |     | (2,185 | )
|                                 |                                           |                  |       |       |             | 
|                                 | Net deferred income tax asset (liability) |                  | $     | 2,549 |             |  | $   | (1,259 | )
|                                 |                                           |                  |       |       |             | 

|                                          |                                          |                  |       |        |             |   |       |        |  
|----------------------------------------- | ---------------------------------------- | ---------------- | ----- | ------ | ----------- | - | ----- | ------ | -
|                                          |                                          | October 31, 2004 |      
|                                          |                                          |                  |      
|                                          |                                          | Current          |       |        | Non-Current |  
|                                          |                                          |                  |       |        |             |  
|Deferred income tax assets:               |                                          |                  |       |        |             |   |       |       
|                                          | Amortization of intangible assets        |                  | $     |       |             |   | $     | 1,454  |  
|                                          | Allowance for doubtful accounts          |                  |       | 920    |             |   |       |       |  
|                                          | Reserve for excess or obsolete terminals |                  |       | 1,269  |             |   |       |       |  
|                                          | Loss contingencies                       |                  |       | 1,361  |             |   |       |       |  
|                                          | Accrued vacation                         |                  |       | 177    |             |   |       |       |  
|                                          | Various accruals                         |                  |       | 103    |             |   |       | 224    |  
|                                          |                                          |                  |       |        |             |  
|Total deferred income tax assets          |                                          |                  | 3,830 |        |             |   | 1,678 |       
|Deferred income tax liability:            |                                          |                  |       |        |             |   |       |       
|                                          | Depreciation                             |                  |       | (1,472 | )           |   |       | (2,367 | )
|                                          |                                          |                  |       |        |             |  
|Net deferred income tax asset (liability) |                                          | $                | 2,358 |        |             | $ | (689  | )     
|                                          |                                          |                  |       |        |             |  

F-22



---



##### Table of Contents



GAMETECH INTERNATIONAL, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                            |  |                        |       |   |      |  |       |      |  |  |      |  
|--------------------------------------------------------------------------- |  | ---------------------- | ----- | - | ---- |  | ----- | ---- |  |  | ---- | -
|                                                                            |  | Year Ended October 31, |      
|                                                                            |  |                        |      
|                                                                            |  | 2005                   |       |   | 2004 |  |       | 2003 | 
|                                                                            |  |                        |       |   |      |  |       |      | 
|Income tax provision (benefit) at the statutory rate                        |  |                        | 34.0  | % |      |  | (34.0 | )%   |  |  | 34.0 | %
|State income taxes, net                                                     |  |                        | 4.0   |   |      |  | (1.1  | )    |  |  | 2.4  |  
|Foreign income taxes, net of credits                                        |  |                        | (0.7  | ) |      |  |      |      |  |  |     |  
|Revision to income tax payable due to closure of statute of
    limitations |  |                        | (11.4 | ) |      |  |      |      |  |  |     |  
|Meals and entertainment                                                     |  |                        | 2.3   |   |      |  | 0.3   |      |  |  | 2.0  |  
|Non deductible lobbying expenses                                            |  |                        | 2.3   |   |      |  | 0.8   |      |  |  | 3.5  |  
|Impairment of goodwill                                                      |  |                        |      |   |      |  | 19.4  |      |  |  |     |  
|Other, net                                                                  |  |                        | (2.0  | ) |      |  | (0.2  | )    |  |  | 1.8  |  
|                                                                            |  |                        |       |   |      |  |       |      | 
|Income tax provision (benefit) at its effective rate                        |  |                        | 28.5  | % |      |  | (14.8 | )%   |  |  | 43.7 | %
|                                                                            |  |                        |       |   |      |  |       |      | 



|    |                       
|--- | ----------------------
|10. | Short Term Investments





|                                    |  |             |     |  |      |   |       | 
|----------------------------------- |  | ----------- | --- |  | ---- | - | ----- | 
|                                    |  | October 31, |    
|                                    |  |             |    
|                                    |  | 2005        |     |  | 2004 |  
|                                    |  |             |     |  |      |  
|U.S. Treasury and agency securities |  | $           | 503 |  |      | $ | 2,605 | 
|                                    |  |             |     |  |      |  



|    |                  
|--- | -----------------
|11. | Accrued Severance





|                    |  |             |        |   |      |   |      |  
|------------------- |  | ----------- | ------ | - | ---- | - | ---- | -
|                    |  | October 31, |       
|                    |  |             |       
|                    |  | 2005        |        |   | 2004 |  
|                    |  |             |        |   |      |  
|Beginning balance   |  | $           | 704    |   |      | $ |     |  
|Severance expenses  |  |             | 1,039  |   |      |   | 813  |  
|Less severance paid |  |             | (1,384 | ) |      |   | (109 | )
|                    |  |             |        |   |      |  
|Ending Balance      |  | $           | 359    |   |      | $ | 704  |  
|                    |  |             |        |   |      |  

F-23



---



##### Table of Contents



GAMETECH INTERNATIONAL, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                          
|--- | -------------------------
|12. | Other Accrued Liabilities



|                                |  |             |       |  |      |   |       | 
|------------------------------- |  | ----------- | ----- |  | ---- | - | ----- | 
|                                |  | October 31, |      
|                                |  |             |      
|                                |  | 2005        |       |  | 2004 |  
|                                |  |             |       |  |      |  
|Accrued professional fees       |  | $           | 870   |  |      | $ | 1,401 | 
|Accrued legal settlement        |  |             | 200   |  |      |   |      | 
|Accrued distributor commissions |  |             | 412   |  |      |   | 486   | 
|Deferred revenue                |  |             | 2     |  |      |   | 82    | 
|Accrued property tax            |  |             | 141   |  |      |   | 3     | 
|Other                           |  |             | 435   |  |      |   | 420   | 
|                                |  |             |       |  |      |  
|                                |  | $           | 2,060 |  |      | $ | 2,392 | 
|                                |  |             |       |  |      |  



|    |                            
|--- | ---------------------------
|13. | Net Income (Loss) Per Share



|                                          |               |                        |        |    |      |  |        |      |  |  |        |     | 
|----------------------------------------- | ------------- | ---------------------- | ------ | -- | ---- |  | ------ | ---- |  |  | ------ | --- | 
|                                          |               | Year Ended October 31, |       
|                                          |               |                        |       
|                                          |               | 2005                   |        |    | 2004 |  |        | 2003 | 
|                                          |               |                        |        |    |      |  |        |      | 
|Basic weighted average shares outstanding |               |                        | 11,868 |    |      |  | 11,775 |      |  |  | 11,696 |    
|Effect of dilutive securities:            |               |                        |        |    |      |  |        |      |  |  |        |    
|                                          | Stock options |                        |        | 92 |      |  |        |     |  |  |        | 122 | 
|                                          |               |                        |        |    |      |  |        |      | 
|Diluted                                   |               |                        | 11,960 |    |      |  | 11,775 |      |  |  | 11,818 |    
|                                          |               |                        |        |    |      |  |        |      | 





|    |                                                 
|--- | ------------------------------------------------
|14. | Valuation and Qualifying Accounts (in thousands)

|                                  |           |            |   |           |          |  |            |              |  |  |               |      |   |  |   |       | 
|--------------------------------- | --------- | ---------- | - | --------- | -------- |  | ---------- | ------------ |  |  | ------------- | ---- | - |  | - | ----- | 
|                                  |           |            |   | Additions |          |  | Net        |              |  | 
|                                  |           |            |   | Charged   |          |  | Deductions |              |  | 
|                                  |           | Balance at |   |           | to Costs |  |            | (Write-Offs, |  |  |              
|                                  |           | Beginning  |   |           | and      |  |            | Net of       |  |  | Balance at    |     
|Description                       |           | of Period  |   |           | Expenses |  |            | Collections) |  |  | End of Period |     
|                                  |           |            |   |           |          |  |            |              |  |  |               |     
|Allowance for accounts receivable |           |            |   |           |          |  |            |              |  |  |               |      |   |  |   |      
|Year ended October 31, 2003:      |           |            |   |           |          |  |            |              |  |  |               |      |   |  |   |      
|                                  | Allowance |            | $ | 2,342     |          |  | $          | 234          |  |  | $             | (289 | ) |  | $ | 2,287 | 
|Year ended October 31, 2004:      |           |            |   |           |          |  |            |              |  |  |               |      |   |  |   |      
|                                  | Allowance |            | $ | 2,287     |          |  | $          | 281          |  |  | $             | (114 | ) |  | $ | 2,454 | 
|Year ended October 31, 2005:      |           |            |   |           |          |  |            |              |  |  |               |      |   |  |   |      
|                                  | Allowance |            | $ | 2,454     |          |  | $          | 43           |  |  | $             | (123 | ) |  | $ | 2,374 | 

F-24



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##### Table of Contents



GAMETECH INTERNATIONAL, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                     |           |            |   |           |          |  |   |              |  |  |               |      |   |  |   |       | 
|------------------------------------ | --------- | ---------- | - | --------- | -------- |  | - | ------------ |  |  | ------------- | ---- | - |  | - | ----- | 
|                                     |           |            |   | Additions |          |  |   |              | 
|                                     |           |            |   | Charged   |          |  |   |              | 
|                                     |           | Balance at |   |           | to Costs |  |   | Deductions   |  |  |              
|                                     |           | Beginning  |   |           | and      |  |   | (Disposal of |  |  | Balance at    |     
|Description                          |           | of Period  |   |           | Expenses |  |   | Assets)      |  |  | End of Period |     
|                                     |           |            |   |           |          |  |   |              |  |  |               |     
|Allowance for property and equipment |           |            |   |           |          |  |   |              |  |  |               |      |   |  |   |      
|Year ended October 31, 2003:         |           |            |   |           |          |  |   |              |  |  |               |      |   |  |   |      
|                                     | Allowance |            | $ | 3,432     |          |  | $ | 50           |  |  | $             | (310 | ) |  | $ | 3,172 | 
|Year ended October 31, 2004:         |           |            |   |           |          |  |   |              |  |  |               |      |   |  |   |      
|                                     | Allowance |            | $ | 3,172     |          |  | $ | 355          |  |  | $             | (143 | ) |  | $ | 3,384 | 
|Year ended October 31, 2005:         |           |            |   |           |          |  |   |              |  |  |               |      |   |  |   |      
|                                     | Allowance |            | $ | 3,384     |          |  | $ |             |  |  | $             | (506 | ) |  | $ | 2,878 | 



|    |                  
|--- | -----------------
|15. | Subsequent Events





|    |                                            
|--- | -------------------------------------------
|16. | Quarterly Financial Information (Unaudited)



|                              |         |                             |        |      |         |   |        |         |  |   |         |      |  |   |        |      | 
|----------------------------- | ------- | --------------------------- | ------ | ---- | ------- | - | ------ | ------- |  | - | ------- | ---- |  | - | ------ | ---- | 
|                              |         | Year Ended October 31, 2005 |       
|                              |         |                             |       
|                              |         | First                       |        |      | Second  |   |        | Third   |  |   | Fourth  |     
|                              |         | Quarter                     |        |      | Quarter |   |        | Quarter |  |   | Quarter |     
|                              |         |                             |        |      |         |   |        |         |  |   |         |     
|Revenue                       |         | $                           | 12,320 |      |         | $ | 12,746 |         |  | $ | 12,444  |      |  | $ | 12,141 |     
|Gross profit                  |         | $                           | 6,850  |      |         | $ | 7,600  |         |  | $ | 7,674   |      |  | $ | 7,223  |     
|Income (loss) from operations |         | $                           | (33    | )    |         | $ | 687    |         |  | $ | 159     |      |  | $ | 981    |     
|Net income                    |         | $                           | 1      |      |         | $ | 303    |         |  | $ | 85      |      |  | $ | 947    |     
|Net income per share:         |         |                             |        |      |         |   |        |         |  |   |         |      |  |   |        |     
|                              | Basic   |                             | $      | 0.00 |         |   | $      | 0.03    |  |   | $       | 0.01 |  |   | $      | 0.07 | 
|                              | Diluted |                             | $      | 0.00 |         |   | $      | 0.03    |  |   | $       | 0.01 |  |   | $      | 0.07 | 

F-25



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##### Table of Contents



GAMETECH INTERNATIONAL, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |   |                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------
| |  | $360,000 was credited to provision for taxes in the Statement of
    Operations due to adjustments in income tax liabilities.

|                              |         |                             |        |      |         |   |        |         |  |   |         |      |  |   |         |       |  
|----------------------------- | ------- | --------------------------- | ------ | ---- | ------- | - | ------ | ------- |  | - | ------- | ---- |  | - | ------- | ----- | -
|                              |         | Year Ended October 31, 2004 |       
|                              |         |                             |       
|                              |         | First                       |        |      | Second  |   |        | Third   |  |   | Fourth  |     
|                              |         | Quarter                     |        |      | Quarter |   |        | Quarter |  |   | Quarter |     
|                              |         |                             |        |      |         |   |        |         |  |   |         |     
|Revenue                       |         | $                           | 12,615 |      |         | $ | 13,359 |         |  | $ | 12,916  |      |  | $ | 12,600  |      
|Gross profit                  |         | $                           | 6,905  |      |         | $ | 7,744  |         |  | $ | 6,807   |      |  | $ | 6,007   |      
|Income (loss) from operations |         | $                           | (31    | )    |         | $ | 127    |         |  | $ | 168     |      |  | $ | (11,948 | )    
|Net income (loss)             |         | $                           | (15    | )    |         | $ | 58     |         |  | $ | 33      |      |  | $ | (9,982  | )    
|Net income per share:         |         |                             |        |      |         |   |        |         |  |   |         |      |  |   |         |      
|                              | Basic   |                             | $      | 0.00 |         |   | $      | 0.00    |  |   | $       | 0.00 |  |   | $       | (0.84 | )
|                              | Diluted |                             | $      | 0.00 |         |   | $      | 0.00    |  |   | $       | 0.00 |  |   | $       | (0.84 | )





| |   |                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $3,628,000 was charged to general and administrative expenses as
    the estimated legal award to a terminated distributor.                                                                                                                                                           
|
| |  | Severance costs for involuntary terminations of personnel and
    management resignations amounting to $813,000, of which
    $157,000, $153,000 and $503,000 was charged to cost of revenue,
    research and development, and general and administrative
    expenses, respectively.
|
| |  | Impairment charge for capitalized software amounting to
    $173,000, primarily recorded in research and development
    expenses.                                                                                                                                                    
|
| |  | An impairment charge of $6,625,000 related to goodwill. The
    charge was recorded in operating expenses.                                                                                                                                                                            

F-26



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##### Table of Contents



EXHIBIT INDEX


|        |    |                        |  |                                                                                                                                                                                                                                                                                    
|------- | -- | ---------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|Number  |    | Description of Exhibit
|        |    |                       
|        | 3  | .1                     |  | Certificate of Incorporation of the Registrant, as amended(1)                                                                                                                                                                                                                      
|       
|        | 3  | .3                     |  | Certificate of Designation of Series A Junior Participating
    Preferred Stock of the Registrant(7)                                                                                                                                                                               
|       
|        | 3  | .4                     |  | Second Amended and Restated Bylaws of the Registrant(2)                                                                                                                                                                                                                            
|       
|        | 4  | .1                     |  | GameTech International, Inc. Registration Rights Agreement(3)                                                                                                                                                                                                                      
|       
|        | 4  | .3                     |  | Rights Agreement, dated as of March 7, 2003, between
    GameTech International, Inc. and Mellon Investor Services, LLC,
    as rights agent(8)                                                                                                                                    
|       
|        | 4  | .4                     |  | Specimen Common Stock Certificate(7)                                                                                                                                                                                                                                               
|       
|        | 10 | .1                     |  | GameTech International, Inc. 1997 Incentive Stock Plan(1)                                                                                                                                                                                                                          
|       
|        | 10 | .15                    |  | GameTech International, Inc. 2001 Restricted Stock Plan(5)                                                                                                                                                                                                                         
|       
|        | 10 | .16                    |  | Lease Agreement dated November 18, 1999 between the
    Registrant and Cypress Corporate Services, including addendum to
    lease and first amendment dated April 17, 2000(4)                                                                                                     
|       
|        | 10 | .17                    |  | Revolving Line of Credit dated August 19, 1998 between the
    Registrant and Wells Fargo Bank, N.A.(4)                                                                                                                                                                            
|       
|        | 10 | .18                    |  | Letter Amendment to Revolving Line of Credit dated April 1,
    2000 by and among the Registrant, Bingo Technologies
    Corporation, and Wells Fargo Bank, N.A.(4)                                                                                                                
|       
|        | 10 | .19                    |  | Letter Amendment to Revolving Line of Credit dated April 2,
    2001 by and among the Registrant, Bingo Technologies
    Corporation, and Wells Fargo Bank, N.A.(4)                                                                                                                
|       
|        | 10 | .22                    |  | Employment Agreement dated October 1, 1997 between the
    Registrant and Andrejs K. Bunkse(4)                                                                                                                                                                                     
|       
|        | 10 | .23                    |  | Letter Amendment dated April 2, 2002 between Wells Fargo
    Bank, N.A., the Registrant, and Bingo Technologies Corporation
    amending the letter agreement between the parties dated
    August 19, 1998, together with Revolving Line of Credit
    Note dated April 2, 2002(6)
|       
|        | 10 | .24                    |  | Letter Amendment dated April 2, 2003 between Wells Fargo
    Bank, N.A., and the Registrant, amending the letter agreement
    between the parties dated August 19, 1998, together with
    the Revolving Line of Credit Note dated April 2, 2003(9)                               
|       
|        | 10 | .25                    |  | Employment Agreement dated September 2, 2004, between the
    Registrant and John B. Furman(10)                                                                                                                                                                                    
|       
|        | 10 | .26                    |  | Employment Agreement effective February 1, 2005, between
    the Registrant and Cornelius T. Klerk(11)                                                                                                                                                                             
|       
|        | 10 | .27                    |  | Letter Agreement by and between the registrant and James C.
    Wilson, dated as of April 29, 2005(12)                                                                                                                                                                             
|       
|        | 10 | .28                    |  | Credit Agreement, dated April 2, 2005, by and between the
    Registrant and Wells Fargo Bank, National Association(13)                                                                                                                                                            
|       
|        | 10 | .29                    |  | Revolving Line of Credit Note, dated April 2, 2005 in favor
    of Wells Fargo Bank, National Association(13)                                                                                                                                                                      
|       
|        | 10 | .30                    |  | Security Agreement relating to equipment, dated April 2,
    2005, in favor of Wells Fargo Bank, National Association(13)                                                                                                                                                          
|       
|        | 10 | .31                    |  | Continuing Security Agreement relating to rights to payment and
    inventory, dated April 2, 2005, in favor of Wells Fargo
    Bank, National Association(13)                                                                                                                     
|       
|        | 10 | .32                    |  | Settlement and Release Agreement by and between the Registrant
    and John Furman, dated as of June 28, 2005(14)                                                                                                                                                                  
|       
|        | 10 | .33                    |  | Letter Agreement by and between the Registrant and Jay M.
    Meilstrup, dated as of July 1, 2005(14)                                                                                                                                                                              
|       
|        | 21 |                        |  | List of Subsidiaries(6)                                                                                                                                                                                                                                                            
|       
|        | 23 | .1                     |  | Consent of Grant Thornton LLP, Independent Registered Public
    Accounting Firm                                                                                                                                                                                                   
|       
|        | 23 | .2                     |  | Consent of Ernst & Young LLP, Independent Registered
    Public Accounting Firm                                                                                                                                                                                                    
|       
|        | 31 | .1                     |  | Certification of Chief Executive Officer pursuant to
    Rule 13a-14(a) and Rule 15d-14(a), promulgated by the
    Securities Exchange Act of 1934, as amended                                                                                                                     

34



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##### Table of Contents



|        |    |                        |  |                                                                                                                                                               
|------- | -- | ---------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                       
|Number  |    | Description of Exhibit
|        |    |                       
|        | 31 | .2                     |  | Certification of Chief Financial Officer pursuant to
    Rule 13a-14(a) and Rule 15d-14(a), promulgated by the
    Securities Exchange Act of 1934, as amended
|       
|        | 32 | .1                     |  | Certification of Chief Executive Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002     
|       
|        | 32 | .2                     |  | Certification of Chief Financial Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002     






| |     |                                                                                                                                                                                                                
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Incorporated by reference to the Registrants Registration
    Statement on
    Form S-1
    (Registration
    No. 333-34967) as
    filed with the Commission on or about September 4, 1997.                  
|
| | (2) | Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q for the
    quarterly period ended January 31, 2004, as filed with the
    Commission on or about March 16, 2004.          
|
| | (3) | Incorporated by reference to Amendment No. 1 to the
    Registrants Registration Statement on
    Form S-1
    (Registration
    No. 333-34967) as
    filed with the Commission on or about October 17, 1997.
|
| | (4) | Incorporated by reference to the Registrants Annual Report
    on Form 10-K for
    the fiscal year ended October 31, 2001 as filed with the
    Commission on or about January 29, 2002.                     
|
| | (5) | Incorporated by reference to the Registrants Registration
    Statement on
    Form S-8
    (Registration
    No. 333-72886) as
    filed with the Commission on or about November 7, 2001.                   
|
| | (6) | Incorporated by reference to the Registrants Annual Report
    on Form 10-K for
    the fiscal year ended October 31, 2002 as filed with the
    Commission on or about January 29, 2003.                     
|
| | (7) | Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q for the
    quarterly period ended January 31, 2003 as filed with the
    Commission on or about March 17, 2003.           
|
| | (8) | Incorporated by reference to the Registrants Current
    Report on Form 8-K
    dated March 7, 2003 as filed with the Commission on or
    about March 10, 2003.                                              
|
| | (9) | Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q for the
    quarterly period ended April 30, 2003 as filed with the
    Commission on or about June 16, 2003.              



|     |                                                                                                                                                                                                      
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Incorporated by reference to the Registrants Current
    Report on Form 8-K
    dated September 2, 2004 as filed with the Commission on or
    about September 9, 2004.                             
|    
|(11) | Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q for the
    quarterly period ended July 31, 2004 as filed with the
    Commission on or about September 14, 2004.
|    
|(12) | Incorporated by reference to the Registrants Current
    Report on Form 8-K
    dated May 2, 2005 as filed with the Commission on or about
    May 4, 2005.                                         
|    
|(13) | Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q for the
    quarterly period ended April 30, 2005 as filed with the
    Commission on or about June 14, 2005.    
|    
|(14) | Incorporated by reference to the Registrants Current
    Report on Form 8-K
    dated June 28, 2005 as filed with the Commission on or
    about July 5, 2005.                                      

35