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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

For the fiscal year ended October 31, 2002

Commission file number 000-23401

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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 registeredNone

Not applicable


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

Common Stock, par value $.001 per share(Title of class)

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

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

Indicate
by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2) Yes [    ] No
[X]

The
aggregate market value of common stock held by nonaffiliates of the registrant (4,802,523 shares) based on the closing price of the registrant's common stock as reported on the
NASDAQ National Market on April 30, 2002, which was the last business day of the registrants most recently completed second fiscal quarter, was $23,532,363. For purposes of this computation,
all officers, directors, and 10% beneficial owners of the registrant are deemed to be affiliates. Such determination should not be deemed to be an admission that such officers, directors, or 10%
beneficial owners are, in fact, affiliates of the registrant.

As
of January 13, 2003, there were outstanding 11,727,439 shares of the registrant's common stock, par value $.001 per share.

Documents Incorporated By Reference

None

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GAMETECH INTERNATIONAL, INC.        ANNUAL REPORT ON FORM 10-K        FISCAL YEAR ENDED OCTOBER 31, 2002        TABLE OF CONTENTS

|                              |  |                                                                                                |  | Page
|----------------------------- |  | ---------------------------------------------------------------------------------------------- |  | ----
|PART I                       
|ITEM 1.                       |  | BUSINESS                                                                                       |  | 1   
|ITEM 2.                       |  | PROPERTIES                                                                                     |  | 15  
|ITEM 3.                       |  | LEGAL PROCEEDINGS                                                                              |  | 15  
|ITEM 4.                       |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                            |  | 15  
|PART II                      
|ITEM 5.                       |  | MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                      |  | 16  
|ITEM 6.                       |  | SELECTED FINANCIAL DATA                                                                        |  | 16  
|ITEM 7.                       |  | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS          |  | 18  
|ITEM 7A.                      |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                     |  | 25  
|ITEM 8.                       |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                    |  | 25  
|ITEM 9.                       |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE           |  | 25  
|PART III                     
|ITEM 10.                      |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                             |  | 26  
|ITEM 11.                      |  | EXECUTIVE COMPENSATION                                                                         |  | 28  
|ITEM 12.                      |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |  | 32  
|ITEM 13.                      |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                 |  | 35  
|ITEM 14.                      |  | CONTROLS AND PROCEDURES                                                                        |  | 35  
|PART IV                      
|ITEM 15.                      |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                               |  | 36  
|SIGNATURES                    |  | 38                                                                                            
|CERTIFICATIONS                |  | 42                                                                                            
|INDEX TO FINANCIAL STATEMENTS |  | F-1                                                                                           

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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 2003 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 1, "BusinessSpecial
Considerations."

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PART I

Item 1. Business

General

We design, develop, and market interactive electronic bingo systems. We currently market portable hand-held systems that can be played anywhere within
a bingo hall, and fixed-base systems with light pen- or touchscreen-activated monitors. We have hand-held units and fixed-base units operating in
charitable, Native American, and commercial bingo halls. Both our portable bingo and fixed-base systems display electronic bingo card images for each bingo game. Our electronic bingo units
enable players to play substantially more bingo cards than they can play on paper cards, typically leading to a greater spend per player and higher profits per bingo session for the bingo operator. We
install the electronic bingo systems, typically at no cost to the operator, and charge either a fixed fee per use per session, a fixed weekly fee per unit, or a percentage of the revenue generated by
each unit. We typically enter into one- to three-year contracts with bingo operators.

Our
company was founded in 1994 by executives previously involved in the bingo, slot machine, lottery, and high-technology software and hardware industries to pursue their
belief that an advanced, interactive, electronic bingo system would be well received by both bingo hall operators and players. We believe our experienced management team, quality electronic bingo
systems, and reputation for superior customer service and support enable us to compete effectively in the highly competitive bingo industry.

Bingo
is a legal enterprise in 46 states (excluding Arkansas, Hawaii, Tennessee, and Utah) and the District of Columbia. Nonprofit organizations sponsor bingo games for fundraising
purposes, while Native American, commercial entities, and government-sponsored entities operate bingo games for profit. As of December 31, 2002, we had systems in over 25 of the more than 30
states that allow
electronic bingo systems for use with charitable and commercial organizations. Under the Indian Gaming Regulatory Act, or IGRA, electronic bingo may be played on Native American lands in the 46 states
where bingo is legal. We estimate that bingo currently is played on Native American lands in 30 states. As of December 31, 2002, we had units in operation in Native American bingo halls in 14
of those states. Collectively, as of December 31, 2002, we had products in 34 states and in 4 countries outside of the United States.

Business Strategy

Our goal is to be the leading provider of electronic bingo units and back-office bingo management systems in the United States, on Native American lands, and
internationally. Key elements of this strategy include the following:

Emphasize Superior Customer Service

We plan to continue to emphasize our customer service programs to enable us to maintain a high level of customer loyalty and satisfaction, which translates into
long-term customer relationships. Approximately 40% of our employees are field service technicians who are on call seven days a week to support customers and respond promptly to their
needs. We believe our dedication to superior customer service has contributed to the acceptance of our products and our ability to attract and retain long-term customers.

Expand Product Offerings

We plan to expand our product offerings to provide bingo players with more choices and price points. Our wide range of electronic bingo products allows bingo
operators to offer players a range of choices when establishing their purchases for bingo games. Operators are then better positioned to

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ensure they capture a full range of low to high spending customers. We will be focusing our efforts on expanding our product lines so bingo operators can offer players everything from low cost units
to higher priced player units that provide a higher level of entertainment value to players who are willing to spend more dollars when playing bingo. Our current product portfolio includes four
portable hand-held models and two fixed-base unit offerings.

Increase Player Usage of Bingo Electronics

There is a significant opportunity to attract bingo players who would normally only use paper bingo cards to also utilize electronic units when playing bingo.
Bingo electronics are relatively new to many jurisdictions within our markets, thus the percentage of players who utilize electronics while playing bingo is still expanding. We utilize our field
service technicians, internal sales and third-party distributors to actively promote the use of electronics with players in these markets. These efforts include partnering with bingo operators for
promotions and other marketing efforts to educate players on the benefits and entertainment value of electronics.

Expand into New Domestic Markets

We plan to expand into new domestic markets. As part of our strategy to facilitate the expansion of the charitable electronic bingo market, we are pursuing
legislative changes to allow electronic bingo in various strategic markets. In addition, we intend to expand the number of route operations to serve bingo halls that otherwise would be uneconomical to
serve. The route operations move our hand-held units between various charitable bingo halls on days that the respective halls hold bingo sessions. These route operations allow us to penetrate numerous
charitable games that only play one or two sessions of bingo each week while allowing us to maintain our desired level of utilization to ensure effective use of our products and systems.

Expand Internationally

We plan to continue to expand our operations outside of the United States. We currently have a small installed base of units in the United Kingdom, Canada, the
Philippines, and Japan. We are actively pursuing additional expansion into the United Kingdom, Norway, and certain provinces in Canada. In the United Kingdom, we are working with major bingo operators
to increase player acceptance levels and capitalize on the potential of placing additional electronic bingo units in bingo clubs. We are also evaluating opportunities to expand into other provinces in
Canada as well as other countries.

Develop New Applications

We maintain an ongoing product development program focused on enhancing our existing products and developing new products and additional applications for our
technology. We have consolidated and expanded our research and development team to better address this critical aspect of our business. We have introduced the TED2C, a color
hand-held unit that provides enhanced graphics and a higher level of entertainment to players. The TED2C has been well accepted in the market by both players and bingo
operators.

During
2002, we introduced a new product feature which supports a faster than normal bingo game played between regular bingo sessions. This new feature requires a strictly electronic
bingo atmosphere where players make their card purchases on a game-by-game basis rather than for a fixed number of games. This feature allows operators to offer bingo to
players during non-session times of the day helping them increase their revenue per square foot for bingo. We anticipate increasing demand for this feature throughout 2003 as bingo
operators seek to expand their ability to offer players a variety of entertainment choices.

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We
developed one-way radio frequency or RF for use on our portable units during 2002. We have completed the beta test and plan widespread release of this function during
2003.

Develop Strategic Alliances/Acquire Complementary Companies

We plan to continue to review opportunities to grow through strategic alliances and acquisitions that could extend our presence into new geographic markets,
expand our client and product base, add new products, and provide operating synergies.

Products

We provide bingo operators with a range of electronic player units and back-office management systems. Our player units operate on one of two
proprietary operating systems known as NED and Diamond. These operating systems include Point-of-Sale (POS) functionality for bingo operators that allow them to consolidate to
one system for selling paper and electronics, while also loading the appropriate sales information to electronic player units. Both the NED and Diamond systems also provide bingo operators with a
verifier that confirms whether a called "BINGO" is legitimate and has been won on a bingo card (whether electronic or paper) that was sold during the session being played.

We
also offer bingo operators two bingo back-office management systems: AllTrak and AllTrak 2. Although offered separately, these systems are typically integrated with
electronic bingo operations to provide a bingo hall with a package of accounting and marketing information that enhances the bingo operator's ability to manage the bingo hall. The AllTrak
back-office management system operates a multi-purpose DOS-based back-office accounting system for bingo hall operators on a PC platform. The AllTrak 2 system is a
Windows-based, multi-purpose accounting system for bingo hall operators running on standard PCs. We acquired all rights to the AllTrak 2 system in April 2002. Both AllTrak systems
operate together with the Diamond operating system and significantly enhance the user interface at the POS terminals. In addition, the systems provide inventory-tracking capabilities for bingo paper,
complete sales data, player VIP systems and more. All of the information captured by the systems can
be exported to third-party accounting packages and player tracking systems which allows operators to integrate their bingo operation with the rest of a casino operation.

We
design our bingo systems to provide maximum appeal to bingo players and hall operators. The primary benefits to players of electronic bingo units include the following:



Our
units are also designed to enhance the entertainment value of playing bingo. Our units allow players to customize certain aspects of the user interface, and our
fixed-base unit incorporates picture-in-picture and audio technology. In many markets, players can also play alternative games, such as solitaire, for entertainment
only during bingo sessions. Our hand-held units allow players to play bingo electronically while sitting in a player's preferred seat or moving around the bingo hall. The ease of using our
electronic bingo units makes playing bingo possible for players with physical disabilities that may prevent them from playing on paper, which normally involves marking multiple paper bingo cards by
hand with an ink dauber. We believe that these aspects of our electronic bingo systems make them more appealing to players than paper cards.

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We
currently market two types of electronic bingo products: portable hand-held and fixed-base electronic bingo systems. Many bingo hall operators offer players
both hand-held and fixed-base units in order to satisfy varying customer preferences and price levels.

Hand-Held Bingo Systems

We currently have the following four variations of hand-held bingo units in commercial use:



Our
hand-held bingo systems operate similarly to our fixed-base systems, except that players must manually enter the numbers as they are called. As numbers are
input into the units, each bingo card being played is then simultaneously marked. These units can mark up to 600 cards per game. In a hand-held system, the master, communications, and
sales units are similar to, and can be shared with, those of fixed-base systems. The hand-held unit can recognize almost any bingo game format that the bingo operator wishes to
play and alerts the player, both audibly and visually, when "BINGO" has been achieved. Hand-held units are battery powered with rechargeable battery packs. Hand-held units are
recharged between bingo sessions in charging crates, which handle 27 Palm Top, 25 TED, 16 BCM-2, and 12 TED2C units, respectively.

The
TED2C product is our premier hand-held product. With a full color screen and graphics similar to our fixed-base bingo systems, it offers a
superior player experience. The TED2C unit can display up to 16 cards at one time and play up to 600 cards in one game. This easy-to-use device operates using
either the AllTrak 2 back-office system or Diamond Bingo POS system.

The
Palm Top unit is the high-end black and white hand-held in our product portfolio. It shows three bingo card faces at all times and can play up to 600 cards in
one game. This device resembles a palm top PC and operates on a 386 processor using the Diamond Bingo POS system.

The
TED unit is the lower-cost version of our Palm Top. With the exception of appearance, the TED unit operates in all aspects on a similar basis as the Palm Top. The TED
unit can display four bingo cards at a time rather than three cards as in the case of the Palm Top. The TED unit functions from a proprietary motherboard and operates using the NED or
Diamond Bingo POS system and the AllTrak or AllTrak 2 back-office system.

The
BCM-2 unit, which was introduced in 1992, was the precursor to the TED. We have approximately 110 of these hand-held units still in commercial use. This unit
displays one card with a representation of the bingo board alongside it. Cards are loaded through infrared transfer.

Fixed-Base Bingo Systems

Our fixed-base bingo systems consist of a local area network of microcomputers, including the master unit, the communications unit, the sales unit,
and the player's unit. All units in the fixed-base bingo system use microcomputer hardware and can be operated with light pens or touchscreens. Fixed-base units can be played
in automatic mode or in manual mode, which requires the players to enter each number called. Players can switch between the two modes as they choose if they are playing

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in a jurisdiction that allows for automatic daubing. In either mode, up to 600 electronic bingo card images can be marked simultaneously. A complete fixed-base bingo system consists of
the following:

Master Unit.The master unit is a file server, which is located on the caller's stand and runs the network. All bingo game
data is processed and stored through this unit.

Communications Unit.The communications unit, which is also located on the caller's stand, allows the caller to communicate
with each player's unit by use of a state-of-the-art touchscreen. By simply touching the screen, the caller enters ball numbers drawn, game number, game patterns,
and wild numbers. The communications unit connects with each player's fixed-base unit for verification of 1,000,000 unique, electronic bingo card images and enables the winning electronic
bingo card images and paper cards to be displayed on monitors within the bingo hall. The communications unit stores all data from the bingo system and typically contains a modem that allows us to
access the data remotely, thereby enabling us to monitor the use of our units. Data from the system is also available to assist bingo hall operators to manage their halls. All files are protected
against unauthorized access.

Sales Unit.The sales unit is a point-of-sale terminal, typically located near the entrance of a
bingo hall, where all customer purchases are made. Using a light pen or touchscreen, the cashier activates player buy-in choices for the session and the unit automatically calculates
pricing and totals. The player receives a printed receipt with a nine-digit pack number, which is itemized by date, session, and quantity of electronic bingo card images purchased.

Player's Unit.Each player's unit consists of a separate computer, monitor, and either a light pen or touchscreen. Each
player's unit is housed in a customized wooden or metal table with up to six units per table. Players enter the nine-digit pack numbers printed on their receipts to receive their
electronic bingo card images. Players can cycle through all of their electronic bingo card images while play is proceeding. The player's unit marks the numbers called on each electronic bingo card
image being played, either automatically or after the player enters the number called. The unit displays the player's three electronic bingo card images that are closest to a "BINGO." The free space
at the center of any electronic bingo card image that is one number away from "BINGO" flashes to notify the player. The unit sounds an alert alarm and the screen flashes when "BINGO" is achieved.

Product Development

We conduct an ongoing research and development program to enhance the features and capabilities of our bingo systems, to maintain a competitive advantage in the
marketplace, and to extend our product line with new games and applications. Our product development efforts resulted in the Palm Top units introduced in January 1996, and an improved version
in April 1997. During July 1998, we introduced our Diamond operating system. In 2002, we completed an upgrade of the AllTrak 2 system to a SQL Server 2000 database. We are
dedicating resources to further enhance the AllTrak systems to provide complete business solutions to bingo operators. We have expanded our research and development team to better address this
important aspect of our business.

During
fiscal 2002, we spent approximately $2.1 million for company-sponsored research and development activities compared with approximately $1.7 million (excluding
relocation and retirement of co-founder costs) during fiscal 2001 and approximately $1.9 million during fiscal 2000.

Sales, Marketing, and Distribution

We utilize a direct sales force as well as a network of third-party distributors to promote the use and placements of our electronic bingo systems.

We
strive to work with only those third-party distributors who have the largest market share in bingo supplies for their respective geographic areas. Most distributors carry a complete
range of bingo

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supplies such as paper, ink daubers and other consumable products that bingo operations may require. Our distributors work in defined geographic jurisdictions under one- to
three-year agreements with exclusivity provisions where applicable with us. This exclusivity allows us to align our mutual interests in the market and seek to maintain our market leading
positions.

Our
internal sales force works to support our network of distributors as well as service customers directly in certain markets. Our staff of sales personnel consults with bingo operators
to optimize the use of electronics in their games and to improve their profitability.

Our
marketing strategy is to target bingo operators and demonstrate the benefits of our bingo systems to both bingo operators and bingo players. We allocate our electronic bingo units
based on utilization. This strategy is intended to maximize revenue from our placed units. Our superior customer service
orientation and quality products are designed to promote player loyalty and long-term relationships with bingo operators.

Our
installation package typically includes the following:



Target Markets

We target the thousands of charities licensed to operate bingo games in the United States and Canada and Native American bingo halls. As of December 31,
2002, we had approximately 525 locations serving approximately 1,500 bingo operators, including many charitable bingo halls in which we or our distributors have multiple customers. For the year ended
October 31, 2002, hand-held units generated approximately 77% of our revenue and fixed-based units generated approximately 23% of our revenue.

As
of December 31, 2002, we operated in over 25 of the more than 30 states in which electronic bingo is currently permitted in charitable and commercial bingo halls, and in 14 of
the 30 states in which bingo is currently played in Native American bingo halls. We are actively pursuing additional opportunities in other states and countries as well as increased activity at
existing sites.

Materials and Supplies

We purchase the assembled hardware portion of our TED and TED2C units from Electronic Evolution Technologies, Inc., or EET, a Nevada-based
manufacturer. In addition, EET refurbishes TED, Palm Top, and TED2C units. We do not have any long-term supply contracts with EET.

We
source all fixed-base bingo systems from various domestic suppliers, and we configure those systems at our facility in Nevada. We have not had any significant delays in
securing our TED, Palm Top, TED2C, or fixed-base bingo systems. We believe that manufacturers of our units are dedicated to high quality and productivity as well as support
for new product development. There are significant risks inherent in relying on few manufacturers for substantially all of our products. See Item 1, "BusinessSpecial
ConsiderationsWe depend on third-party manufacturers for our hand-held units."

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Intellectual Property

We have registered trademarks with the U.S. Patent and Trademark Office for the following names: "TED," "Bingo Card Minder," "Bingo Technologies Corporation," and
"The Electronic Dauber." We have trademark applications pending with the U.S. Patent and Trademark Office for the following names: "AllTrak," "Diamond Elite," "Diamond Pro," "Diamond VIP," "GameTech
and Design," "GTI Net," "Pay-'N-Play," "Rainbow Bingo," "TED2C," "GameTech," "Diamond Bingo," "Diamond Plus Bingo," "Diamond TED," "Everything Else is Just
Daubin," "Hot Jewels," "Race Tabs," and "The Bingo Players Choice." We also own various common law trademarks. Additionally, we own the following pending Canadian trademark registrations: "Diamond
Bingo," "Diamond Plus Bingo," "Diamond TED," "Everything Else is Just Daubin," "Life Is Good Then You Bingo," "Race Tabs," and "The Bingo Players Choice." We cannot provide assurance that any of our
domestic or Canadian trademark applications will be granted. We do not believe that the ownership of these trademarks is material to our business or our ability to compete.

Competition

The electronic bingo industry is characterized by intense competition based on various factors, including the ability to enhance bingo hall operations and to
generate incremental revenue for bingo hall operators through product appeal to players, ease of use, serviceability, customer support and training, distribution, name recognition, and price. We
compete primarily with other companies providing electronic bingo units, including California Concepts, Bettina Corp., Bingo Brain, Inc., FortuNet, Inc., Jenosys, and BK Entertainment.
In addition, we compete with other similar forms of entertainment, including casino gaming and lotteries. Increased competition may result in price reductions, reduced operating margins, conversion
from lease to sale of our units, and loss of market share, any of which
could materially and adversely affect our business, operating results, and financial condition. Furthermore, existing and new competitors may expand their operations in our existing or potential new
markets. We have attempted to counter competitive factors by providing superior service and new, innovative, and quality products. We believe that the quality of our hand-held and
fixed-base bingo systems, combined with superior service and customer support, differentiate us from our competitors.

Government Regulation

We are subject to regulation and oversight by governmental authorities in virtually all jurisdictions in which we conduct business. As of December 31,
2002, we held approximately 60 licenses with various regulatory agencies. The regulatory requirements vary from jurisdiction to jurisdiction. Governmental regulations may require licenses, approvals,
findings of suitability, or qualifications for our company as well as for our products, officers, directors, certain personnel, significant stockholders, or other associated parties. The term
"significant stockholder" typically refers to any beneficial owner of 5% or greater of our capital stock. Any person who fails or refuses to comply with these regulatory requirements could be subject
to disciplinary or legal action, which could adversely impact our company, including the loss of any existing license and our ability to conduct business. The licensing approval and finding of
suitability processes can be lengthy and expensive. On Native American lands, regulation results from the laws of each tribe, the provisions of IGRA, and various state compacts. Many jurisdictions
have comprehensive licensing, reporting, and operating requirements with respect to the manufacture, sale, lease, use, and operation of bingo and bingo-related products, including electronic bingo
equipment. These requirements have a direct impact on the conduct of our day-to-day operations. In substantially all states in which charitable bingo is legal, the state
imposes limits on prizes on a per-game, per-session, or annual basis. Many states license or otherwise regulate manufacturers and suppliers of bingo equipment; some states
prohibit the rental or leasing of bingo equipment; and other states regulate whether equipment may be rented at a fixed or percentage rate.

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Generally, regulatory authorities may deny applications for licenses, other approvals, or findings of suitability for any cause they may deem reasonable. There can be no assurance that our company or
our products, personnel, officers, directors, significant stockholders, or other associated parties will receive or be able to maintain any necessary licenses, other approvals, or findings of
suitability. The loss of a license in a particular state may prohibit us from realizing revenue in that state and may adversely impact our license and ability to realize revenue in other states. Any
change in law or regulation by a state, or an unfavorable interpretation of any law or regulation, could adversely impact us by, among other things, reducing prize limits, further regulating suppliers
of bingo equipment, prohibiting rental or leasing of bingo equipment, restricting rental rates, or causing the loss of one or more of our licenses.

Nevada Regulation

We are currently classified as a manufacturer and distributor of associated equipment pursuant to the provisions of the Nevada Gaming Control Act and regulations
promulgated thereunder. Associated equipment manufacturers and distributors that sell, transfer, or offer associated equipment for use or play in Nevada may be required to file an application for a
finding of suitability at the discretion of the
Nevada Gaming Commission on the recommendation of the Nevada State Gaming Control Board. To date, the Nevada gaming authorities have not required us to file an application for a finding of suitability
as an associated equipment manufacturer or distributor.

Our
associated equipment is subject to evaluation and approval by the state of Nevada. Each of our associated equipment products that are in distribution in Nevada (except for those
products in research and development) have been submitted to and approved by the state of Nevada.

Tribal Regulation

Gaming on Native American lands, including the terms and conditions under which gaming equipment can be sold or leased to Native American tribes, is or may be
subject to licensing and regulation under IGRA and the laws of the federal government, the tribes, and the host state, where applicable. Under IGRA, gaming activities are classified as Class I,
II, or III. Class I gaming includes social games played solely for prizes of minimal value, or traditional forms of Native American gaming engaged in as part of, or in connection with, tribal
ceremonies or celebrations. Class II gaming includes bingo and other card games authorized or not explicitly prohibited and played within the host state, but does not include banking card
games, such as baccarat or blackjack. Class III gaming includes all forms of gaming that are not Class I or Class II, including slot machines, video lottery terminals, and casino
style games. A Native American tribe may conduct Class II gaming under IGRA without having entered into a written compact with its host state if the host state permits similar forms of gaming,
but must enter into a separate written compact with the state in order to conduct Class III gaming activities. Under IGRA, tribes are required to regulate all gaming under ordinances approved
by the Chairman of the National Indian Gaming Commission. These ordinances may impose standards and technical requirements on gaming hardware and software, and may impose registration, licensing, and
background check requirements on gaming equipment manufacturers and suppliers and their key personnel, officers, directors, and stockholders.

IGRA
defines Class II gaming to include "the game of chance commonly known as bingo, whether or not electronic, computer or other technologic aids are used in connection
therewith," and defines Class III gaming to include "electronic or electromechanical facsimiles of any game of chance or slot machines of any kind." We believe that both our
hand-held and fixed-base units are Class II products. In the event that either is classified as a Class III device, such a designation would reduce the potential
market for the devices because only Native American gaming halls that have entered into a tribal-state compact that permits Class III electronic gaming systems would be permitted to use the
device, unless

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we could modify the systems to have them reclassified as a Class II game. We may not be able to make any such modifications in the event of such a classification.

Federal Regulation

The Federal Gambling Devices Act of 1962, also called the Johnson Act, generally makes it unlawful for a person to manufacture, deliver, or receive gaming
machines, gaming machine-type devices, and components across state lines or to operate gaming machines unless that person has first registered with the U.S. Department of Justice. In
addition, the Johnson Act imposes various record keeping, annual registration, equipment registration, and equipment identification requirements. Violation of the Johnson Act may result in seizure and
forfeiture of the equipment as well as other penalties.

State Regulation of Electronic Bingo Systems

Our electronic bingo products, including our hand-held and fixed-base units, encounter greater regulation than traditional paper bingo.
Applicable federal, state, tribal, and local regulations and enforcement vary significantly by jurisdiction.

Electronic
bingo in charitable halls is less widely permitted than paper bingo, primarily because many state laws and regulations were enacted before electronic bingo was introduced. We
believe that electronic bingo in charitable halls is currently permitted in more than 30 of the 50 states. Because many state laws and regulations are silent or ambiguous with respect to electronic
bingo, changes in regulatory and enforcement personnel could impact the continued operation of electronic bingo in some of these states. In addition, some regulatory authorities require the
inspection, approval, or modification of electronic bingo systems prior to placement in those states.

Systems Security Requirements

The integrity and security of electronic bingo systems are closely scrutinized by certain jurisdictions in which we operate. Changes in the technical requirements
for approved electronic bingo systems in various charitable and tribal jurisdictions could prohibit us from operating in those jurisdictions or could require us to substantially modify our products at
significant expense.

Application of Future or Additional Regulatory Requirements

We intend to seek the necessary licenses, approvals, and findings of suitability for our company, our products, or our personnel in jurisdictions in which we
anticipate significant bingo activities. However, these licenses, approvals, or findings of suitability may not be obtained timely, if at all, and, if obtained, may be subsequently revoked, suspended,
or conditioned. In addition, we may not be able to obtain the necessary approvals for our future products. If a regulatory authority in a jurisdiction requires a license, approval, or finding of
suitability and our company or stockholders fail to seek or do not receive the
necessary license or finding of suitability, we may be prohibited from distributing our products for use in the jurisdiction or may be required to distribute our products through other licensed
entities, which generally would result in a reduced profit to us.

Employees

As of December 31, 2002, we had approximately 220 full-time equivalent employees. We are not subject to collective bargaining agreements with
our employees, and we believe that our relations with our employees are good.

9

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Special Considerations

The following factors, in addition to those discussed elsewhere in this report, should be carefully considered in evaluating our company and our business.

We depend on the bingo and electronic bingo industry.

Our future revenue and profits depend upon continued market acceptance of our products and services, the continued penetration of electronic bingo into bingo
halls nationwide, and various other factors, many of which are beyond our control. For example, we depend on the continued popularity of bingo as a leisure activity and as a means of charitable
fundraising. The bingo industry is a mature industry and may decline in the future as a result of an increase in competing forms of entertainment, including those resulting from developments in online
gaming and the continued expansion of the legalization of casino gaming, such as riverboat gaming.

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

Our products utilize hardware components developed primarily for the personal computer industry, which is characterized by rapid technological change and product
enhancements. Should any of our current or potential competitors succeed in developing a better electronic bingo system, those competitors could be in a position to outperform us in our ability to
exploit developments in microprocessor, video technology, or other multimedia technology. The emergence of an electronic bingo system that is superior to ours in any respect could substantially
diminish our revenue and limit our ability to grow. Any failure of our company to respond to rapid market changes and product enhancements could have a material adverse effect on our business, results
of operations, and financial condition.

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

Some of our agreements with customers may permit termination by the customers upon relatively short notice to us and without penalty, and do not designate us as
the customer's exclusive electronic bingo system provider. Some contract terms may not be memorialized in writing.

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

We must maintain the existing licenses and approvals necessary to operate in our existing markets and obtain the necessary licenses, approvals, findings of
suitability, and product approvals in all additional jurisdictions in which we intend to distribute our products. The licensing and approval processes can involve extensive investigation into our
company and our products, officers, directors, certain personnel, significant stockholders, and other associated parties, all of which can require significant expenditures of time and resources. We
must also comply with applicable regulations for our activities in any international jurisdiction into which we expand. We may not receive licensing or other required approvals in a timely manner in
the jurisdictions in which we are currently seeking such approval. The regulations relating to company and product licensing are subject to change, and other jurisdictions, including the federal
government, may elect to regulate or tax bingo. We cannot predict the nature of any such changes or the impact that such changes would have on our business. The loss of a license in a particular
jurisdiction may prohibit us from generating revenue in that jurisdiction, may prohibit us from installing our units in other jurisdictions, and may have a material adverse effect on our business,
results of operations, and financial condition.

10

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We depend on third-party manufacturers for our hand-held units.

We purchase the assembled hardware portion of our TED and TED2C units from Electronic Evolution Technologies, Inc., or EET, a Nevada-based
manufacturer. In addition, EET refurbishes TED, Palm Top, and TED2C units. We would need to locate a replacement contract manufacturer if EET ceased doing business with us. Although we
believe that we could locate a substitute contract manufacturer, any such replacement would involve some delay, and we may not be able to procure, substitute, produce, or refurbish TED, Palm Top, or
TED2C units without significant interruption or price increase. Any failure of our company to receive refurbished TED or Palm Top units, or new TED2C units could have a
material adverse effect on our business, results of operations, and financial condition.

We
purchased the assembled hardware portion of our Palm Top units and components from Tidal Power Technologies, Inc., a Taiwan-based manufacturer. However, we ceased purchase of
units during fiscal 2001 and do not intend to make any purchases in the future. We do not have any long-term
supply contracts with Tidal Power. The design of the Palm Top is not unique or proprietary. If we renewed production of our Palm Top unit we would need to find a replacement component supplier if
Tidal Power ceased doing business with us. If our company required Palm Top components to maintain the operation of our Palm Top unit and failed to receive them it could result in a material adverse
effect on our business, results of operations, and financial condition.

We depend on our relationships with our distributors.

We derive a significant portion of our revenue from customers serviced through distributors. Our distributors place our products with our customers, and often
will maintain the primary relationship with the bingo halls. Generally, we or our distributors enter into one- to three-year agreements with the bingo halls to use our systems
and devices. We rely on our distributors to a significant degree in the states where the law requires us to place our systems and devices through qualified distributors. The loss of our relationship
with one or more of our distributors may require us to develop our internal sales force or engage new distributors to place our systems and devices, which could be time consuming and expensive. The
loss of one or more of our significant distributors may have a material adverse effect on our business, results of operations, and financial condition.

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

Our units are operated in many bingo halls located on Native American reservations in the United States. State and federal laws governing the business or other
conduct of private citizens generally do not apply on Native American lands. We may have limited recourse if any Native American tribe operating a particular bingo hall seized the units or barred
entry onto the reservation in the event of a contract or other dispute. We have the capability to render any units inoperable in the event of such action. However, any seizure of our units is likely
to result in a capital loss and loss of revenue to our company and could, were it to occur on a large scale, have a material adverse effect on our business, capital resources, results of operations,
and financial condition.

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

Our operations in Native American gaming halls, which generated approximately 26% of our revenue during fiscal 2002, are subject to tribal and federal regulation
under IGRA, which established the National Indian Gaming Commission, or NIGC. The NIGC has the authority to adopt rules and regulations to enforce certain aspects of IGRA and to protect tribal
interests. Under IGRA, electronic bingo games similar to ours have previously been determined by the NIGC to be Class II gaming activities that are subject solely to tribal regulation as
approved by the NIGC. We believe our electronic

11

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bingo systems meet all of the requirements of a Class II game. We cannot provide assurance that the NIGC would not enact future regulations or reinterpret existing regulations in such a manner
so as to limit the authority of tribes to self-regulate Class II gaming or to change the definition of Class II gaming in such a manner that our electronic bingo systems are
classified as a Class III game under IGRA. If classified as Class III games, our electronic bingo systems could become subject to state regulation through the tribal-state compacts
required for Class III games played on Native American lands. In that event, or in the event other federal laws are enacted that would subject our operations on Native American lands to state
regulation, we may not be able to modify our electronic bingo systems to be classified as Class II games, or we may not obtain the necessary state approval and licenses to continue our
operations in Native American gaming halls. Any such event could have a material adverse effect on our business, results of operations, and financial condition. Any modifications of our electronic
bingo systems would also have the additional risk that such modifications would not appeal to customers or be acceptable to the Native American tribes.

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

The concentration of our revenue in the Texas market, which generated approximately 21% of fiscal 2002 revenue, potentially heightens the exposure of regulatory
changes that may prevent or impede us from doing business in that state. Furthermore, the loss of or inability of our company to find suitable distributors in Texas, where state law requires
electronic bingo devices and systems to be placed through qualified distributors, could cause a material adverse effect on our business, results of operations, and financial condition.

The electronic bingo industry is extremely competitive.

The electronic bingo industry is characterized by intense competition based on, among other things, the ability to enhance the operations of and to generate
incremental sales for bingo hall operators through product appeal to players, ease of use, ease of serviceability, customer support and training, distribution, name recognition, and price. Increased
competition may result in price reductions, reduced operating margins, conversion of units from lease to sale, and loss of market share, any of which could materially and adversely affect our
business, operating results, and financial condition. Furthermore, existing and new competitors may expand their operations in our existing or potential new markets. In addition, we compete with other
similar forms of entertainment, including casino gaming and lotteries.

Investors may not be able to exercise control over our company as a result of management's and other principal stockholders' ownership.

The current executive officers and directors of our company beneficially own approximately 48% of our outstanding common stock. As a result, the executive
officers and directors of our company can significantly influence the management and affairs of our company and all matters requiring stockholder approval, including the election of directors and
approval of significant corporate transactions. This concentration of ownership could have the effect of delaying or preventing a change
in control of our company, even when such change of control is in the best interests of stockholders. Control by management might adversely affect the market price of the common stock and the voting
and other rights of our company's other stockholders.

We must be able to attract and retain skilled employees.

Our operations depend to a great extent on our ability to retain existing and attract new key personnel. Competition is intense for skilled marketing and product
research and development employees in particular. We may not be successful in attracting and retaining such personnel, and we may incur increased costs in order to attract and retain personnel.
Although we believe we can locate

12

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replacement personnel, the loss of key personnel, were we unable to hire suitable replacements, or our failure to attract additional qualified employees, could have a material adverse effect on our
business, results of operations, and financial condition.

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

As part of our growth strategy, we may acquire complementary businesses and assets. Acquisitions that we may make in the future could result in the diversion of
time and personnel from our business. We also may issue shares of common stock or other securities in connection with acquisitions, which could result in the dilution of the voting power of existing
stockholders and could dilute earnings per share. Any acquisitions would be accompanied by other risks commonly encountered in such transactions, including the following:



As
a part of our acquisition strategy, we may engage in discussions with various businesses regarding their potential acquisition. In connection with these discussions, we may exchange
confidential operational and financial information with each potential acquired business and each of us may conduct due diligence inquiries and consider the structure, terms, and conditions of the
potential acquisition. In certain cases, the prospective acquired business may agree not to discuss a potential acquisition with any other party for a specific period of time, may grant us certain
rights in the event the acquisition is not completed, and may agree to take other actions designed to enhance the possibility of the acquisition. Potential acquisition discussions may take place over
a long period of time, may involve difficult business integration and other issues, and may require solutions for numerous family relationship, management succession, and related matters. As a result
of these and other factors, potential acquisitions that from time to time appear likely to occur may not result in binding legal agreements and may not be consummated. Our acquisition agreements may
contain purchase price adjustments, rights of set-off, and other remedies in the event that certain unforeseen liabilities or issues arise in connection with an acquisition. These
remedies, however, may not be sufficient to compensate us in the event that any unforeseen liabilities or other issues arise.

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

Our growth plans may require full use of our current financial, managerial, and other resources as well as substantial expansion of those resources. In order to
manage effectively any significant future growth, we may have to perform various tasks, including the following:



13

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We
plan to expand within our existing markets and into foreign and domestic bingo markets in which we have no previous operating experience. We may not be able to maintain profitability
or manage successfully the aggressive expansion of our existing and planned business. Our failure to manage growth effectively could have a material adverse effect on our business, operating results,
and financial condition.

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.

As of January 13, 2003, we had outstanding 11,727,439 shares of common stock. Approximately 6,100,000 of such shares are eligible for resale in the public
market without restriction or further registration. The remaining approximately 5,600,000 shares of common stock outstanding are held by affiliates of our company, and may be sold only in compliance
with the volume and other limitations of Rule 144. Sales of substantial amounts of common stock by stockholders in the public market, or even the potential for such sales, are likely to
adversely affect the market price of the common stock and could impair our ability to raise capital by selling equity securities. Moreover, the shares of common stock issuable upon exercise of
outstanding options will be freely tradable without restriction unless acquired by affiliates of our company. The issuance of such freely tradable shares will result in additional outstanding shares
of common stock and will create additional potential for sales of additional shares of common stock in the public market.

We have limited protection of our intellectual property.

We regard our products as proprietary and rely primarily on a combination of patent law, copyrights, trademarks, trade secret laws, and employee and third-party
non-disclosure agreements to protect our proprietary rights. Defense of intellectual property rights can be difficult and costly, and we may not be able to protect our technology from
misappropriation by competitors or others. In addition, the protections offered by trademark, copyright, and trade secret laws may not prevent a competitor from designing electronic bingo systems
having appearance and functionality that closely resemble our systems.

As
the number of electronic bingo units in the industry increases and the functionality of these products further overlaps, we may become subject to infringement claims, with or without
merit. Intellectual property-related claims or litigation can be costly and can result in a significant diversion of management's attention. Any settlement of such claims or adverse determinations in
such litigation could also have a material adverse impact on our business, results of operations, and financial condition.

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

Some of the statements and information contained in this report concerning future, proposed, and anticipated activities of our company, anticipated trends with
respect to our revenue, operating results, capital resources, and liquidity or with respect to the markets in which we compete or the bingo industry in general, and other statements contained in this
report regarding matters that are not historical facts are forward-looking statements, as that term is defined in the securities laws. Forward-looking statements, by their very nature, include risks
and uncertainties, many of which are beyond our

14

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control. Accordingly, actual results may differ, perhaps materially, from those expressed in or implied by such forward-looking statements. Factors that could cause actual results to differ
materially include those discussed elsewhere under this Item 1, "BusinessSpecial Considerations."

Item 2. Properties

Our corporate headquarters are located in Reno, Nevada, in a 41,000 square-foot leased facility under a lease that expires in November 2010. We
also operate two regional facilities: a 5,400 square-foot site in Cleveland, Ohio, and a 4,115 square-foot site in Southlake, Texas, under leases that expire in
November 2004 and October 2003, respectively. We lease several other facilities, none of which are material to our operations. We believe that our facilities will be adequate for our
needs for the foreseeable future.

Item 3. Legal Proceedings

On March 22, 2001, we filed a claim in the United States District Court, District of Arizona, GAMETECH INTERNATIONAL, INC. V. TREND GAMING SYSTEMS,
LLC, CV 01-540 PHX PGR, seeking a declaratory judgment that we are not in material breach of our November 1, 1999 distribution agreement with Trend Gaming Systems, LLC or Trend, and
seeking damages for past due payments and wrongful withholdings by Trend. Trend has counterclaimed, alleging that its payments are in compliance with its contractual obligations and that it is
entitled to withhold certain monies. Trend also contends that we are in breach of certain of our contractual obligations to Trend or its customers. On December 16, 2002, the Court entered at
our request an order enjoining Trend from using approximately $540,000 in funds it had collected on our behalf, pending a trial on our ownership interest in those funds. The money has been placed in a
bank account subject to the court's control. In addition, collections of accounts receivable by Trend, if any, will also be placed in that account, pending the trial of the case. No trial date has
been set. We have denied the allegations and intend to vigorously pursue and defend this matter. However, we cannot provide assurance that we will obtain a favorable outcome. An unfavorable outcome
could have a material adverse effect on our business, financial position, and results of operations.

The
Washington State Gambling Commission, or WSGC, the agency that regulates bingo in the state of Washington, informed us that it intended to seek administrative penalties against us
for a variety of alleged violations. On November 6, 2002, we entered into an agreed order with the WSGC in which we agreed to settle the matter by paying $198,000 and accepting a technical
suspension of our manufacturers license. There was no cessation or interruption in our operations in Washington.

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

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

Not applicable.

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PART II

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

Our common stock is listed on the NASDAQ National Market under the symbol "GMTC." The following table sets forth high and low sales prices of our common stock for
the period indicated as reported on the NASDAQ National Market.

High

LowFiscal Year Ended October 31, 2001First Quarter

$
4.266

$
2.750Second Quarter

$
5.250

$
3.250Third Quarter

$
8.500

$
4.400Fourth Quarter

$
5.350

$
2.040Fiscal Year Ended October 31, 2002First Quarter

$
4.940

$
3.600Second Quarter

$
5.150

$
3.970Third Quarter

$
5.200

$
3.850Fourth Quarter

$
4.600

$
3.250Fiscal Year Ended October 31, 2003First Quarter (through January 13, 2003)

$
5.250

$
3.050


On
January 13, 2003, the closing sales price of our common stock was $3.45 per share. On January 13, 2003, there were 237 record holders of our common stock.

We
have never paid cash dividends and do not anticipate paying any cash dividends on our common stock for the foreseeable future. We intend to retain our earnings, if any, to finance the
expansion of our business and for other general corporate purposes. Any payment of future dividends will be at the discretion of our Board of Directors and will depend upon, among other factors, our
earnings, financial condition, capital requirements, level of indebtedness, contractual restrictions with respect to the payment of dividends, and other considerations that our Board of Directors
deems relevant. We have a $10 million revolving line of credit with Wells Fargo Bank, N.A., which places certain restrictions on the payment of dividends without the prior consent of the bank.

Item 6. Selected Financial Data

The selected statement of income data for the fiscal years ended October 31, 2000, 2001, and 2002 and the selected balance sheet data set forth below at
October 31, 2001 and 2002, have been derived from our financial statements, which have been audited by Ernst & Young LLP, independent auditors, included elsewhere herein. The selected
statement of income data for the years ended October 31, 1998 and 1999 and the selected balance sheet data set forth below at October 31, 1998, 1999 and 2000 have been derived from our
audited financial statements not included herein. The selected financial data set forth below should be read in conjunction with the Financial Statements and Notes thereto and with

16

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"Management's Discussion and Analysis of Financial Condition and Results of Operations," appearing elsewhere in this report.

|                                                                      |                             | Years Ended October 31,  |       
|--------------------------------------------------------------------- | --------------------------- | ------------------------ | ------
|
|
|Statement of Operations Data:                                         |                             |                          |       
|Revenue                                                               |                             | $                        | 16,177
|Cost of revenue                                                       |                             |                          | 5,327 
|                                                                      |                             |                          |       
|Gross profit                                                          |                             |                          | 10,850
|Operating expenses:                                                   |                             |                          |       
|                                                                      | General and administrative  |                          |       
|                                                                      | Sales and marketing         |                          |       
|                                                                      | Research and development    |                          |       
|                                                                      | Acquisition related charges |                          |       
|                                                                      |                             |                          |       
|                                                                      |                             | Total operating expenses |       
|                                                                      |                             |                          |       
|Income (loss) from operations                                         |                             |                          | 4,002 
|Interest and other income (expense), net                              |                             |                          | 1,368 
|Equity in net loss of affiliate                                       |                             |                          | (2,000
|                                                                      |                             |                          |       
|Income (loss) before provision for (benefit from) income taxes        |                             |                          | 3,370 
|Provision for (benefit from) income taxes                             |                             |                          | 1,300 
|                                                                      |                             |                          |       
|Net income (loss)                                                     |                             | $                        | 2,070 
|                                                                      |                             |                          |       
|Diluted net income (loss) per share                                   |                             | $                        | 0.20  
|Shares used in the calculation of diluted net income (loss) per share |                             |                          | 10,577

|                                                  |  | October 31,
|------------------------------------------------- |  | -----------
|
|
|Balance Sheet Data:                               |  |            
|Cash, cash equivalents and short term investments |  | $          
|Working capital                                   |  |            
|Total assets                                      |  |            
|Total debt                                        |  |            
|Total stockholders' equity                        |  |            

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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 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 1, "BusinessSpecial Considerations."

Overview

We design, develop, and market interactive electronic bingo systems. We currently market portable hand-held systems that can be played anywhere within
a bingo hall and a fixed-base system with light pen- or touchscreen-activated monitors. As of October 31, 2002, we had systems in service in over 25 of the more than 30
states that allow electronic bingo systems for use with charitable and commercial organizations. Under the Indian Gaming Regulatory Act, or IGRA, electronic bingo may be played on Native American
lands in the 46 states where bingo is legal. We estimate that bingo currently is played on tribal Native American lands in 30 states. As of October 31, 2002, we had units in operation in Native
American bingo halls in 14 of those states. Collectively, as of October 31, 2002, we had products in 34 states and in 4 countries outside of the United States.

We
generate revenue by placing electronic bingo systems in bingo halls under contracts based on (a) a fixed fee per use per session; (b) a fixed weekly fee per unit; or
(c) a percentage of the revenues generated by each unit. Revenue growth is affected by player acceptance of electronic bingo as an addition or an alternative to paper bingo, and our ability to
expand operations into new markets. Fixed-base bingo units generate greater revenue per unit than portable bingo units, but also require a greater initial capital investment.

We
typically install our electronic bingo systems at no charge to our customers, and we capitalize the costs. We record depreciation of bingo equipment over a three- and
five-year estimated useful life using the straight-line method of depreciation.

Our
expenses consist primarily of (a) cost of revenue, consisting of expenses associated with technical and operational support of the bingo systems within bingo halls,
depreciation of bingo units, repair, refurbishment, and disposals of bingo units and related support equipment, and excess or obsolescence reserve; (b) general and administrative, consisting of
activities associated with management of our company and related support, which includes finance and accounting, legal, compliance, information systems, human resources, accounts receivable reserve,
and goodwill amortization (prior to fiscal 2002); (c) sales and marketing, consisting primarily of commissions paid to distributors for promoting and supporting our products and an internal
sales force with a focus upon generating new customers and upgrades for existing customers; and (d) research and development (R&D), consisting of company sponsored R&D activities to provide
players with new or enhanced products on which to play bingo.

During
fiscal 2002, a number of events occurred that affected, or may in the future affect, our results of operations or liquidity and capital resources.

We
expended approximately $12.1 million as an investment in bingo units and related support equipment. This investment included the installation of over 7,000 new
TED2C portable, color-display units and the introduction of flat screens as an enhancement to our fixed-base units in many markets. In total, the number of our bingo units
installed in the field increased by over 20% during fiscal 2002. Additionally, we had more than a 200% increase in the number of installations of our redesigned back-office accounting
system software, the AllTrak 2.

During
the fourth quarter of fiscal 2002, we terminated, for cause, our relationship with our primary distributor in Texas and began transitioning the distribution of our products to our
other Texas

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distributors. While the transition caused some short-term disruption in the Texas market, we believe we have completed the process and have retained virtually all of our customer
relationships in the state. We are in litigation with our former distributor. The terms of the distributor agreement contain certain contingent commission liabilities, and other liabilities, which if
a final judgment were rendered unfavorable to us, could have an adverse effect on our financial position and results of operations. No trial date has been set and there can be no assurance of a
favorable outcome of the litigation. No amounts have been reserved for settlement of this lawsuit. All accounts receivable from the distributor have been reserved by us, although the court has ordered
approximately $540,000 of funds collected by the distributor, on our behalf, to be placed in a restricted account pending resolution of the litigation.

In
September 2002, we became aware of a situation involving the unauthorized misuse of our system in Nevada. The misuse involved our fixed-base units and was allegedly
the result of the manipulation of the system, for personal gain, by a then employee of our company. In cooperation with regulatory officials in Nevada, Texas, and Mississippi, we voluntarily shut down
our fixed-based units in those states while we worked with gaming officials to assure them of the integrity of our system security. Our units were turned back on in Texas in a matter of days, but
remained turned off in Nevada and Mississippi through fiscal year end. Units in Mississippi were restored to service in mid-November and in Nevada by mid-December.

Critical Accounting Policies and Estimates

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

We
believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

Revenue is recognized for bingo units placed in bingo halls under contracts based on: (a) a fixed fee per use per session, (b) a fixed weekly fee
per unit, or (c) a percentage of the revenue generated by each unit. Our revenue recognition is a key component of our results of operations, and determines the timing of certain expenses, such
as commissions and royalties. We recognize revenue in accordance with accounting principles generally accepted in the United States when all of the following factors exist (a) evidence of an
arrangement with the customer; (b) play or availability of the bingo units; (c) a fixed or determinable fee; and (d) collectibility is reasonably assured. We exercise judgment in
assessing the creditworthiness of our customers and therefore in our determination of whether collectibility is reasonably assured. Should changes in conditions cause us to determine these criteria
are not met for future transactions, revenue recognized for future reporting periods could be adversely affected.

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Allowance for Doubtful Accounts

We estimate the possible losses resulting from non-payment of outstanding accounts receivable. We perform ongoing evaluations of our customers and
distributors for creditworthiness, economic trends, changes in our customer payment terms, and historical collection experience when evaluating the adequacy of our allowance for doubtful accounts. We
also reserve a percentage of our accounts
receivable based on aging category. In determining these percentages, we review historical write-offs of our receivables, payment trends, and other available information. While such
estimates have been within our expectations and the provisions established, a change in financial condition of specific customers or in overall trends experienced may result in future adjustments of
our estimates of recoverability of our receivables.

Reserve for Bingo Unit Obsolescence

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

Impairment of Goodwill and Intangible Assets

We elected to early adopt Statement of Financial Accounting Standards or SFAS No. 142, "Goodwill and Other Intangible Assets," during our fiscal year end
October 31, 2002, and accordingly we discontinued amortization of our goodwill as of November 1, 2001. We completed the required measurement test as of that date and determined there was
no impairment of goodwill upon adoption of SFAS No. 142. This measurement included market multiple methodology and a discounted cash flow methodology.

In
addition, we are also required to perform an annual goodwill impairment review. The review for fiscal 2002 was completed as of July 31, 2002 (the valuation date), and we
determined there was no impairment of goodwill as of that date. Any subsequent impairment loss could have a material adverse impact on our financial condition and results of operations.

We
assess the impairment of identifiable intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider
important that could trigger an impairment review include the following:



20

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Results of Operations

The following table sets forth, for the periods indicated, certain statement of operations data for our company expressed as a percentage of revenue:

|                                                               |                            | Years Ended October 31,  |     
|-------------------------------------------------------------- | -------------------------- | ------------------------ | ----
|
|Statement of Operations Data:                                  |                            |                          |     
|Revenue                                                        |                            | 100.0                    | %   
|Cost of revenue                                                |                            | 32.2                     |     
|                                                               |                            |                          |     
|Gross profit                                                   |                            | 67.8                     |     
|Operating expenses:                                            |                            |                          |     
|                                                               | General and administrative |                          | 24.6
|                                                               | Sales and marketing        |                          | 25.5
|                                                               | Research and development   |                          | 3.9 
|                                                               |                            |                          |     
|                                                               |                            | Total operating expenses |     
|                                                               |                            |                          |     
|Income (loss) from operations                                  |                            | 13.8                     |     
|Interest and other income (expense), net                       |                            | 0.7                      |     
|                                                               |                            |                          |     
|Income (loss) before provision for (benefit from) income taxes |                            | 14.5                     |     
|Provision for (benefit from) income taxes                      |                            | 7.1                      |     
|                                                               |                            |                          |     
|Net income (loss)                                              |                            | 7.4                      | %   
|                                                               |                            |                          |     

Year Ended October 31, 2002 Compared with Year Ended October 31, 2001

Revenue.We generated revenue of $48.9 million for fiscal 2002 compared to
$48.5 million for fiscal 2001. The increase of approximately $325,000, or 0.7%, was primarily a result of growth in the Western Region and the Canadian market, partially offset with a decline
in the Northeast Region. Revenues in Nevada and Mississippi were adversely affected by the shutdown of our fixed-base units in those states for approximately the last five weeks of fiscal
2002. The two-day shutdown of our fixed-base units in Texas had a minor negative affect on our revenues. Installed units increased by over 20% from October 31, 2001 to
October 31, 2002, driven by the installation of TED2C units. However, revenue per unit was lower due to competitive pricing pressures and changes in the composition of unit usage.

Cost of Revenue.Cost of revenue decreased $2.6 million, or 11.9%, to $19.6 million for
fiscal 2002 from $22.2 million during fiscal 2001. Cost of revenue as a percentage of revenue for the current fiscal year was 40.0% compared to 45.7% for fiscal 2001. Cost of revenue includes,
among other items, charges for refurbishment, repair and disposal of bingo units as well as recognition of excess or obsolete bingo units. These charges in fiscal 2002 amounted to $4.8 million,
an improvement of $3.0 million from the prior year. Fiscal 2001 included a $2.6 million charge for excess uninstalled units as a result of the forecasted impact of the introduction of
our new hand-held product, the TED2C. Other items in cost of revenue include service and operations expenses and depreciation of bingo units. These items amounted to
$14.8 million in fiscal 2002, an increase of $400,000 over fiscal 2001. The increase was primarily due to growth of approximately $300,000 in our service and operations costs, principally as a
result of increased personnel costs. Bingo unit depreciation and other cost of revenue items increased by approximately $100,000 over fiscal 2001.

General and Administrative.General and administrative expenses totaled $9.5 million for
fiscal 2002 compared to $15.0 million for fiscal 2001, a $5.5 million decrease. General and administrative costs as a percentage of revenue for the current year were 19.5% compared to
30.9% for fiscal 2001.

21

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General and administrative expenses include costs associated with our executive management and our finance and accounting, legal, compliance, information technology, and human resources departments.
The decrease was primarily attributable to (a) a $1.7 million decrease in amortization of goodwill due to our election to early adopt the provisions of SFAS No. 142, which
eliminated the amortization of goodwill in fiscal 2002; (b) a reduction of approximately $1.8 million in the provision for uncollectable accounts receivable (despite the reserve in the
fourth quarter of fiscal 2002 of approximately $630,000 related to the termination of our largest distributor in Texas), primarily as a result of improved credit and collection controls in fiscal
2002, and fiscal 2001 including an unfavorable adjustment of approximately $760,000 for settlement of disputed account balances; and (c) an improvement of approximately $1.8 million in
personnel related costs due to a reduction of approximately $1.2 million in costs related to severance and retirement of various management employees and additional cost containment efforts in
2002.

Sales and Marketing.Sales and marketing decreased approximately $1.2 million to
$13.2 million for fiscal 2002 compared with $14.4 million for fiscal 2001. Sales and marketing as a percentage of revenue decreased from 29.7% during fiscal 2001 to 27.1% during fiscal
2002. Sales and marketing includes distributor commissions and related personnel, travel, promotional, and support costs. Distributor commissions decreased $900,000 to $8.9 million due to the
changes in mix of revenue generated by distributors and those customers served directly by us, offset by slightly higher termination and settlement costs in fiscal 2002. The balance of the decrease in
sales and marketing was primarily due to reductions in personnel related costs and travel expenses.

Research and Development.Research and development costs decreased $682,000 to $2.1 million
for fiscal 2002 compared to $2.8 million for fiscal 2001. Research and development costs as a percentage of revenue decreased from 5.7% for fiscal 2001 to 4.3% for fiscal 2002. The decrease was
primarily attributable to fiscal 2001 events: (a) retirement of a co-founder and associated costs of $810,000 and (b) costs of approximately $310,000 associated with
centralization of research and development
personnel to Reno, Nevada. Excluding those expenses from last year, research and development costs increased approximately $421,000 over the prior year, representing increased research and development
expenditures for new or enhanced products on which to play bingo.

Provision for (Benefit from) Income Taxes.Our effective income tax rate was approximately 38.2% and
(22.6%) for the fiscal years ended October 31, 2002 and 2001, respectively. The change in effective tax rates reflects the effect of state income taxes and nondeductible expenses on the
pre-tax loss in fiscal 2001, which included amortization of goodwill (without the goodwill the effective rate for fiscal 2001 was 33.0%) versus pre-tax income in the current
year.

Year Ended October 31, 2001 Compared with Year Ended October 31, 2000

Revenue.We generated revenue of $48.5 million for fiscal 2001 compared to
$49.7 million for fiscal 2000. The approximately $1.2 million, or 2.3%, net decline in revenue from fiscal 2000 was primarily attributable to competitive pricing pressures, as well as
the removal of approximately 1,600 bingo units in the Southern Region due to cancellation of a distributor contract during the second quarter of fiscal 2000. Revenue increases were experienced in the
Northeastern and Western Regions and internationally. Installed units increased 4,000 units, from approximately 53,000 units at October 31, 2000 to approximately 57,000 units at
October 31, 2001. However, revenue per unit generated by these additional units, in some cases, were lower due to fewer bingo sessions played per week or pricing pressures.

Cost of Revenue.Cost of revenue increased $6.2 million, or 38.6%, to $22.2 million
during fiscal 2001 from $16.0 million during fiscal 2000. Cost of revenue as a percent of revenue for the current fiscal year was 45.7% compared to 32.2% for fiscal 2000. The increase during
fiscal 2001 for cost of revenue was primarily attributable to: (a) increased bingo unit maintenance, repair and refurbishment

22

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expenses of $3.4 million compared to the prior year, principally as a result of an increased focus on the repair and upgrade of existing units as opposed to the acquisition of new units;
(b) an increase in the provision for excess uninstalled bingo units of $1.7 million based on forecasts of unit placements impacted by expected new product (TED2C)
placements in fiscal 2002 and beyond; and (c) bingo unit depreciation expenses increased $847,000 as a result of an increase in the number of bingo units installed and our revised estimate of
useful life for uninstalled units that began in the first quarter of fiscal 2001. Service and operational costs aggregating approximately $8.4 million and $8.3 million, during fiscal
years 2001 and 2000, respectively, remained constant.

General and Administrative.General and administrative expenses totaled $15.0 million for
fiscal 2001 compared to $12.2 million for fiscal 2000, a $2.8 million increase. General and administrative expenses include costs associated with our executive management and our
finance, legal and compliance,
information technology, and human resources departments. The increase in expenses over the prior year consists principally of an increase in personnel and related costs of $1.8 million to
$5.2 million, including increases of $793,000 for severance costs associated with the retirement of a co-founder and other executive management departures. The provision for
uncollectable accounts receivable increased $1.1 million to $2.4 million, including $760,000 relating to additional provision for distributors. Net increases in all other areas of
$465,000 were offset by a reduction of $592,000 relating to relocation costs of the corporate offices to Reno incurred during fiscal 2000.

Sales and Marketing.Sales, marketing, and distributor commission expenses increased approximately
$1.7 million to $14.4 million for fiscal 2001 compared to $12.7 million for fiscal 2000. Sales and marketing expenses as a percentage of revenue increased from 25.5% during fiscal
2000 to 29.7% during fiscal 2001. Payroll and related benefits increased $676,000 due to additional personnel and increases in compensation and benefits. Distributor commissions increased $890,000 to
$9.8 million, or 18.0% as a percentage of revenue during fiscal 2000 compared to 20.3% during fiscal 2001. The increase in distributor commissions as a percentage of revenue is a result of:
(a) higher commission rates in states with increased revenue in comparison to the prior year, versus the commission rates in states in which revenue declined from the prior year; and
(b) the settlement of a distributor issue in the first quarter of fiscal 2001 for approximately $395,000.

Research and Development.Research and development costs increased $842,000 to $2.8 million
for fiscal 2001 compared to $1.9 million for fiscal 2000. Research and development costs as a percentage of revenue increased from 3.9% during fiscal 2000 to 5.7% during fiscal 2001. The
increase was primarily attributable to: (a) retirement of a research and development co-founder and associated costs of $810,000; and (b) centralization of research and
development personnel to Reno, Nevada, and other employee costs of $310,000, offset in part by reduced project costs of $330,000.

Interest Income (Expense).Net interest income totaled $144,000 in fiscal 2001 compared to $326,000
in fiscal 2000. The decline was primarily the result of our reduction of $937,000 in short-term investments and substantially lower interest rates.

Provision for (Benefit from) Income Taxes.Our effective income tax rate was (22.6%) for fiscal 2001
and 49.0% for fiscal 2000. The change in effective tax rates reflects the effect of state income taxes and nondeductible expenses on the pre-tax loss in fiscal 2001 versus
pre-tax income in the prior year.

Liquidity and Capital Resources

Operating activities provided $10.3 million of cash during fiscal 2002 compared to $8.8 million during fiscal 2001. The $10.3 million
consisted primarily of net income of $2.7 million adjusted by $9.1 million for depreciation, amortization, and obsolescence provisions offset by a net change of $1.5 million in
other operating assets and liabilities. During fiscal 2001, the $8.8 million provided by

23

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operating activities consisted primarily of depreciation, amortization, and obsolescence provisions of $12.8 million, adjusting a net loss of $4.4 million.

We
used approximately $15.0 million of cash in investing activities during fiscal 2002 compared to $2.1 million of cash during fiscal 2001. The $15.0 million
consisted of $12.9 million of capital expenditures ($12.1 million of which was expended on bingo units and associated support equipment) and an increase in short-term
investments of $2.2 million. During fiscal 2001, the $2.1 million consisted of $3.0 million of capital expenditures ($2.1 million of which was for bingo units and
associated support equipment) offset by cash received from the sale of short-term investments.

We
used $1.2 million in cash for financing activities during fiscal 2002 compared to $675,000 during fiscal 2001. The $1.2 million used during fiscal 2002 was primarily for
payments of $2.4 million on long-term debt, offset by proceeds from stock option exercises of $1.2 million. The $675,000 used during fiscal 2001 was primarily for payments of
$1.0 million on long-term debt, offset by proceeds from stock option exercises of $570,000.

As
of October 31, 2002, we had cash and cash equivalents and short-term investments of approximately $9.3 million. On November 6, 2002, we paid cash of
$3.4 million to acquire certain assets of International Gaming Systems, LLC. Among other things, the acquisition added approximately 1,400 fixed-base bingo units to our installed
base, principally in Mississippi and New York. The purchase price was paid from our cash and cash equivalents and involved no financing. In addition to our cash and cash equivalents and
short-term investments, we have a $10.0 million line of credit with Wells Fargo Bank, N.A., which has an interest rate based on the prime rate or LIBOR plus 2.0%, at our option, on
which there was no outstanding balance at October 31, 2002. The revolving credit facility expires on April 2, 2003. We expect to renew the revolving credit facility with similar terms.
We believe that cash flow from operations and cash, cash equivalents, and short-term investments on hand, together with funds available under the revolving credit facility, will be
sufficient to support our operations and provide for budgeted capital expenditures and liquidity requirements through fiscal 2003. Our long-term liquidity requirements will depend on many
factors, including the rate at which we expand our business, and whether we do so internally or through acquisitions. In addition, strategic opportunities we may pursue could require us to fund our
portion of operating expenses of such ventures and may require us to advance additional amounts should any partners in such ventures be unable to meet unanticipated capital calls or similar funding
events. To the extent that the funds generated from the sources described above are insufficient to fund our activities in the long term, we may be required to raise additional funds through public or
private financing. No assurance can be given that additional financing will be available or that, if it is available, it will be on terms acceptable to us.

The
following table presents information on contractual obligations held as of October 31, 2002:



Payments Due by PeriodTotal

Less than 1 year

1 - 3
years

4 - 5
years

After 5 yearsOperating Leases

$
4,479,000

$
677,000

$
1,134,000

$
1,098,000

$
1,570,000Other Long Term Obligations


445,000


13,000


30,000


36,000


366,000Total Contractual Cash Obligations

$
4,924,000

$
690,000

$
1,164,000

$
1,134,000

$
1,936,000


24

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Inflation and General Economic Condition

Although we cannot accurately anticipate the effect of inflation on our operations, we do not believe that inflation has had, or is likely in the foreseeable
future to have, a material effect on our business, results of operations, or financial condition.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Our revolving credit facility with Wells Fargo is a $10.0 million line of credit with an interest rate based on the prime rate or London InterBank Offered
Rate or LIBOR plus 2.0%, at our option. The line of credit expires on April 2, 2003.

Because
the interest rate on the revolving credit facility is variable, our cash flow may be affected by increases in interest rates, in that we would be required to pay more interest in
the event that both the prime and LIBOR interest rates increase. We do not believe, however, that any risk inherent in the variable-rate nature of the loan is likely to have a material
effect on our interest expense or available cash. We currently maintain a zero balance on the revolving credit facility.

Sensitivity Analysis.Assuming we had a $2.0 million balance outstanding as of
October 31, 2002, the rate of interest calculated using the prime rate option would be 4.25%. Our monthly interest payment, if the rate stayed constant, would be $7,083. If the prime rate rose
to 8.0%, which assumes an unusually large increase, our monthly payment would be $13,333. A more likely increase of 1.0% or 2.0%, given the recent trend of decreasing or relatively low interest rates,
would result in a monthly payment of $8,750 or $10,417, respectively. We do not believe the risk resulting from such fluctuations is material or that the payment required would have a material effect
on cash flow.

Item 8. Financial Statements and Supplementary Data

The financial statements and supplementary data are as set forth in the "Index To Financial Statements" on page F-1.

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

Not applicable.

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PART III

Item 10. Directors and Executive Officers of the Registrant

The following table sets forth certain information regarding our directors and executive officers.

|Name                   |  | Position                                            
|---------------------- |  | ----------------------------------------------------
|Frederick C. Lane      |  | Chairman                                            
|Richard T. Fedor       |  | Vice-Chairman                                       
|Clarence H. Thiesen    |  | Chief Executive Officer and Director                
|Vern D. Blanchard      |  | Director                                            
|Douglas M. Hayes       |  | Director                                            
|Gerald R. Novotny, Sr. |  | Director                                            
|Charles W. Scharer     |  | Director                                            
|John P. Hewitt         |  | Chief Financial Officer/Treasurer                   
|Andrejs K. Bunkse      |  | Vice President & General Counsel/Corporate Secretary

FREDERICK
C. LANE, 53, has served as the non-executive Chairman of our Board of Directors since October 2000 and as a director since March 1998. Mr. Lane
is Chairman and Chief Executive Officer of Lane, Berry & Co. International, a private investment banking firm providing financial advice and investment banking services to corporations and
boards of directors. Mr. Lane served as a Managing Director in Investment Banking for Credit Suisse First Boston, the successor firm to Donaldson, Lufkin & Jenrette, from
November 2000 until December 2001. Mr. Lane served as a Managing Director for Donaldson, Lufkin & Jenrette, from January 1980 until November 2000. From 1989
to 1994, Mr. Lane served as Co-Head of the Mergers and Acquisitions Department of Donaldson, Lufkin & Jenrette. Mr. Lane joined Donaldson, Lufkin & Jenrette in
1976 after spending three years at Coopers & Lybrand during which time he received his CPA. He graduated from Harvard College, cum laude, in 1971 and received his MBA, With Distinction, from
Harvard Business School in 1973.

RICHARD
T. FEDOR, 57, has served as our Vice-Chairman since October 2000 and as a director since 1994. Mr. Fedor is a co-founder of our company and
served as our Chairman of the Board from 1994 until October 2000. Mr. Fedor served as our Chief Executive Officer from 1994 until March 1998. On August 1, 1999,
Mr. Fedor returned as interim Chief Executive Officer and served as such until October 2000. Mr. Fedor also served as President from 1994 until August 1, 1997. From 1991 to
1994, Mr. Fedor's occupation was that of a private investor. From 1987 to 1991, Mr. Fedor was President of ZYGO Corporation, a manufacturer of high-performance, laser-based
electro-optical measuring instruments. From 1985 to 1987, Mr. Fedor held the position of Operations Vice President at International Game Technology. Mr. Fedor has also held various
senior management positions at Hewlett Packard and GTE.

CLARENCE
H. THIESEN, 71, has served as our Chief Executive Officer since September 2001 and as a member of our Board of Directors since 1994. Mr. Thiesen is a
co-founder of our company and served as Chief Financial Officer from 1994 until March 1998. Mr. Thiesen was a financial consultant from 1992 to 1994. From 1988 to 1992,
Mr. Thiesen was Vice President, Finance of ZYGO Corporation, where he focused on sourcing in the Far East and assisted in restructuring the company. From 1986 to 1988, Mr. Thiesen was
the President of Keno Computer Systems. From 1981 to 1986, Mr. Thiesen was the Vice President of Finance at International Game Technology, where he specialized in acquisitions, the installation
of new accounting, budgeting and forecasting systems, and financial public relations. Mr. Thiesen is a graduate of Claremont McKenna College and received an MBA from the University of
CaliforniaBerkeley.

VERN
D. BLANCHARD, 47, is a co-founder of our company and has served as a member of our Board of Directors since November 2001. Mr. Blanchard held the position
of Director of Engineering

26

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of our company from 1994 until his retirement in June 2001. Mr. Blanchard has over 10 years experience in the bingo industry. He was the inventor of our initial
hand-held and fixed-base bingo systems. Mr. Blanchard has spoken before the Patent and Trademark Office concerning software patents and other intellectual property issues and is
well publicized in the software industry.    Mr. Blanchard started his business career in real estate, and at 21, became one of the youngest real estate brokers in California
honored as one of the 100 charter members of the Academy of Real Estate.

DOUGLAS
M. HAYES, 59, has served as a member of our Board of Directors since March 1998. Mr. Hayes has been President of Hayes Capital Corporation since 1997.
Mr. Hayes was Chairman of Compass Aerospace Corporation from 1997 to 2002. From 1986 to 1997, Mr. Hayes was a Managing Director, Investment Banking of Donaldson, Lufkin & Jenrette
in Los Angeles. Mr. Hayes also serves as a director of Reliance Steel & Aluminum Co. and Circor International, Inc., both publicly traded companies. Mr. Hayes, a graduate
of Dartmouth College, served two years in the U.S. Navy and received an MBA from Harvard Business School.

GERALD
R. NOVOTNY, 59, has served as a member of our Board of Directors since February 1999. He was our Vice President of Strategic Business Development from February 1999
through February 2001. In 1986, Mr. Novotny founded BCMC, which in 1997 merged with Opportunity Software Inc. to form Bingo Technologies Corporation or BTC, a leading
full-service provider of electronic video bingo services. Mr. Novotny was Chairman of the Board and Chief Executive Officer of both BCMC and BTC until our company acquired both
companies in February 1999. Mr. Novotny graduated from the University of Nebraska in 1966 with a Bachelor of Science Degree in Electrical Engineering.

CHARLES
W. SCHARER, 47, has served as a member of our Board of Directors since September 2001. A 22-year veteran of the gaming industry, Mr. Scharer ended an
18-year career with Harveys Casino Resorts in January 2001. He was Harveys President and Chief Executive Officer from 1995 until his retirement in January 2001. From 1988 to
1995, Mr. Scharer served as Chief Financial Officer and held various other management positions during his tenure with Harveys. Mr. Scharer is a Commissioner on the Nevada Commission on
Tourism, appointed by Governor Kenny C. Guinn in November 1999. He also sits on the Board of Directors of Monarch Casino & Resort, Inc., a public company, and serves as a Trustee
of the University of Nevada, Reno Foundation. Mr. Scharer, a Certified Public Accountant, graduated from San Jose State University in 1979.

JOHN
P. HEWITT, 57, joined our company in October 2002 as Chief Financial Officer and Treasurer with responsibilities for finance and administration. Mr. Hewitt has over
22 years experience in the gaming industry, most recently as an independent consultant. From March 1984 until October 2001, he served as Corporate Controller with Harveys Casino
Resorts. Before joining Harveys, Mr. Hewitt worked for Harrah's Entertainment, Inc. where he was Director of Internal Audit from August 1980 until March 1984. Prior to
joining Harrah's, Mr. Hewitt spent over six years with Grant Thornton LLP during which time he received his CPA. Mr. Hewitt is a member of the Nevada Society of Certified Public
Accountants and the American Institute of Certified Public Accountants.

ANDREJS
K. BUNKSE, 33, has served as our Vice President, General Counsel, and Secretary since December 2001. Mr. Bunkse joined our company in April 1997 as General
Counsel and Corporate Secretary. From 1995 to 1997, Mr. Bunkse was an associate at the law firm of Mitchell, Brisso, Delaney & Vrieze. Mr. Bunkse is a graduate of Syracuse
University and the Santa Clara University of Law, is a member of the State Bar of California and the American Bar Association, and is admitted to practice before the United States District Court for
the Southern District of California.

27

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Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Exchange Act requires our directors, officers, and persons that own more than 10% of a registered class of our equity securities to
file reports of ownership and changes in ownership with the Securities and Exchange Commission. Directors, officers, and greater than 10% stockholders are required by Securities and Exchange
Commission regulations to furnish us with copies of all Section 16(a) forms they file.

Based
on our review of such forms received by us during the fiscal year ended October 31, 2002 and written representation that no other reports were required, we believe that each
person that at any time during the fiscal year was a director, officer, or beneficial owner of more than 10% of our common stock complied with all Section 16(a) filing requirements during such
fiscal year except that Messrs. Blanchard and Fedor each filed one late report on Form 4 covering one transaction.

Item 11. Executive Compensation

The following table sets forth the total compensation received for services rendered to us in all capacities for the fiscal years ended
October 31, 2000, 2001, and 2002 by our Chief Executive Officer and one other executive officer who was in office as of October 31, 2002. The table also sets forth this
information for our former Chief Financial Officer who was no longer with our company as of October 31, 2002, whose aggregate cash compensation exceeded $100,000.

|                                                                       |  | Annual Compensation |  | Long-Term Compensation |     |                 | 
|---------------------------------------------------------------------- |  | ------------------- |  | ---------------------- | --- | --------------- | 
|
|Clarence H. Thiesen
Chief Executive Officer                            |  | 2002
2001           |  | 200,000
13,333         | (4) | 45,000
        | 
|Andrejs K. Bunkse
Vice President & General Counsel/Corporate Secretary |  | 2002
2001
2000      |  | 155,324
129,125
80,000 |     | 30,000

45,000 | 
|Richard M. Kelley (6)
Chief Financial Officer and Treasurer            |  | 2002
2001           |  | 158,449
108,391        |     | 
             | 

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28

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Option Grants

The following table sets forth certain information with respect to stock options granted to the named executive officers during fiscal 2002.

OPTION GRANTS IN LAST FISCAL YEAR

|                    |  |        |     | % of Total Options Granted to Employees in Fiscal Year |   |   |      |  |          | Potential Realized Value at Assumed Annual Rates of Stock
Price Appreciation for Option
Term (1)
|------------------- |  | ------ | --- | ------------------------------------------------------ | - | - | ---- |  | -------- | ------------------------------------------------------------------------------------------------
|
|
|
|Clarence H. Thiesen |  | 10,000 | (2) | 7                                                      | % | $ | 3.70 |  | 11-06-11 |                                                                                                 
|Andrejs K. Bunkse   |  |       |     |                                                       |   |   |     |  |         |                                                                                                 
|Richard M. Kelley   |  |       |     |                                                       |   |   |     |  |         |                                                                                                 

---

Year-End Option Values

The following table sets forth the number and value of stock options held by each listed officer as of the end of October 31, 2002. None of these officers
exercised options during fiscal 2002.

FISCAL YEAR-END OPTION VALUES

|                      |  | Number of Securities Underlying
Unexercised Options
at Fiscal Year-End |     | Value of Unexercised
In-the-Money Options
at Fiscal Year-End (1)
|--------------------- |  | ---------------------------------------------------------------------- | --- | ----------------------------------------------------------------
|
|Clarence H. Thiesen   |  | 18,000                                                                 | (2) |                                                                
|Andrejs K. Bunkse     |  | 31,250                                                                 |     | 18,750                                                          
|Richard M. Kelley (3) |  |                                                                       |     |                                                                

---

29

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1997 Incentive Stock Plan

We have adopted the 1997 Incentive Stock Plan, which authorizes the grant of options to purchase up to 4,000,000 shares of our common stock. As of
January 13, 2003, 1,620,700 shares of common stock have been issued upon exercise of options granted under the plan, and there were outstanding options to acquire 942,160 shares of common stock
under the plan. As of that date, an additional 1,437,140 shares of common stock were available for grant under the plan. The 1997 plan provides for the grant of incentive stock options or
non-qualified stock options.

Directors,
officers, employees, and consultants of our company, as selected from time to time by our Board of Directors or the committee administering the 1997 plan, will be eligible to
participate in the plan. The 1997 plan may be administered by different bodies with respect to directors, officers who are not directors, and employees who are neither directors nor officers of our
company. Subject to certain limitations, the plan administrator has complete discretion to determine which individuals are eligible to receive awards under the plan, the form and vesting schedule of
awards, the number of shares subject to each award, and the exercise price, the manner of payment and expiration date applicable to each award. Options that expire or become unexercisable for any
reason without being exercised in full will become available for future grant under the 1997 plan. Under the terms of the 1997 plan, all options will expire.



The
exercise price per share of an incentive stock option will be determined by the plan administrator at the time of grant, but in no event may be less than the fair market value of our
common stock on the date of grant. Notwithstanding the foregoing, if an incentive stock option is granted to a participant who owns more than 10% of the voting power of all classes of stock of our
company, the exercise price will be at least 110% of the fair market value of our common stock on the date of grant and the exercise period will not exceed five years from the date of grant. The plan
administrator in its sole discretion will determine the exercise price per share of non-qualified stock options.

The
1997 plan contains provisions that will proportionately adjust the number of shares of common stock underlying each outstanding option, the exercise price per share of such options,
and the number of shares of common stock authorized for issuance under the plan but as to which no options have yet been granted in the event of any increase or decrease in the number of issued shares
of common stock resulting from a stock split, stock dividend, combination, or reclassification of our common stock, or any other increase or decrease in the number of issued shares of our common stock
effected without receipt of consideration by our company.

In
the event of a proposed dissolution or liquidation of our company each option will terminate immediately prior to the consummation of such proposed action, unless otherwise provided
by our Board of Directors. Our Board of Directors may, in the exercise of its sole discretion in such instances, declare that any option will terminate as of a date fixed by the Board of Directors,
and give each optionee the right to exercise outstanding options as to all or any part of the options, including shares as to which the option would not otherwise be exercisable. In the event of a
proposed sale of all or substantially all of the assets of our company, or the merger of our company with or into another corporation, each option may be assumed or an equivalent option may be
substituted by the successor corporation, or if such successor corporation does not assume the option or substitute an equivalent option, our Board of Directors may, in lieu of such assumption or
substitute, provide the optionee the right to exercise the option as to all of the shares underlying the option, including shares as to which

30

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the option would not otherwise be exercisable. If our Board of Directors makes an option fully exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Board
will notify the optionee that the option will be fully exercisable for a period of 15 days from the date of such notice, and the option will terminate upon the expiration of such period.

Our
Board of Directors may amend or terminate the 1997 plan from time to time in such respects as the Board deems advisable. We will obtain stockholder approval of any amendment to the
plan to the extent necessary and desirable to comply with Rule 16b-3 of the Securities Exchange Act or with Section 422 of the Internal Revenue Code. Any such amendment or
termination of the plan will not affect options already granted and such options will remain in full force and effect as if the plan had not been amended or terminated, unless mutually agreed between
the optionee and the Board of Directors.

Employment Contracts and Severance Agreements

Clarence H. Thiesen entered into an employment agreement on December 20, 2001 to serve as our Chief Executive Officer. Mr. Thiesen's employment
agreement was for a one-year term from October 1, 2001 to September 30, 2002, and provides for a base salary of $200,000 for this one-year term.
Mr. Thiesen may be awarded an annual bonus at the discretion of the Board of Directors. If Mr. Thiesen's employment is terminated by our company without cause or for reason of disability
or death, he is entitled to receive an amount equal to his base salary for the remainder of the term and any stock options vest immediately. Mr. Thiesen's agreement is terminable by us for
cause. The
agreement provides that Mr. Thiesen may not compete with our company during the term of his employment and for a period of six months following his retirement. In the event of termination of
his employment, Mr. Thiesen has agreed not to compete with our company for the longer of (a) the period of time that we provide any compensation or benefits to Mr. Thiesen, or
(b) six months. The agreement also provides that Mr. Thiesen is entitled to participate in any long-term incentive plan that we provide to our executives. Mr. Thiesen
continues to serve as our Chief Executive Officer despite the fact that we have not formally extended his employment agreement beyond September 30, 2002. His current salary is $200,000.

Andrejs
K. Bunkse entered into an employment agreement on October 1, 1997 to serve as our General Counsel and Corporate Secretary through September 30, 2003. The employment
agreement provides for a base salary of $160,000 per year and may be increased, but not decreased, at the discretion of the Board of Directors. Mr. Bunkse may be awarded an annual bonus at the
discretion of the Board of Directors as described below. Mr. Bunkse's employment agreement is for a term of two years, and will automatically renew unless otherwise terminated. If
Mr. Bunkse's employment is constructively terminated or terminated by us without cause, or if he elects to terminate his employment within 12 months of any change of control, he is
entitled to receive an amount equal to two years of his base salary and immediate vesting of any stock options. If Mr. Bunkse's employment is terminated due to our decision not to renew the
term of Mr. Bunkse's employment agreement, he is entitled to receive an amount equal to one year of his base salary and immediate vesting of any stock options. In the event of a change of
control, the term of Mr. Bunkse's agreement will automatically extend for two years following the effective date of the change of control. Mr. Bunkse's employment is terminable by us for
cause. The agreement provides that Mr. Bunkse may not compete with us during the term of his employment and for a period of two years after his retirement or other termination of his
employment. The agreement also provides that Mr. Bunkse is entitled to participate in any long-term incentive plan that we provide to our executives.

John
Hewitt entered into an employment letter agreement on October 2, 2002 to serve as our Chief Financial Officer and Treasurer. The employment agreement provides for a base
salary of $140,000 per year. In the event of a change of control, the 10,000 stock options that Mr. Hewitt was granted at the time of his hire will immediately vest.

31

---

Richard
M. Kelley entered into an employment agreement on February 28, 2001 to serve as our Chief Financial Officer and Treasurer. Mr. Kelley resigned as Chief Financial
Officer and Treasurer as of October 4, 2002. He entered into a Severance Agreement and Release on October 4, 2002. Pursuant to this agreement, Mr. Kelley received a gross payment
of $170,000. In addition, he received a gross payment of $30,000 in consideration for the cancellation of 100,000 stock options previously granted, and Mr. Kelley's agreement not to compete
with our company through October 4, 2003.

Indemnification of Directors, Officers, Employees, and Agents

We have adopted provisions in our bylaws that require us to indemnify our directors, officers, employees, and agents against expenses and certain other
liabilities arising out of their conduct on behalf of our company to the maximum extent and under all circumstances permitted by law. Indemnification may not apply in certain circumstances to actions
arising under the federal securities laws.

Compensation of Directors

Directors who are full-time employees of our company receive no additional compensation for serving as directors. Non-employee directors
receive a quarterly director's fee of $4,000 and reimbursement of expenses per board or committee meeting attended. Our Chairman, in recognition for the time and effort committed to our company,
receives a monthly fee of $8,000. In addition, under our Incentive Stock Option Plan, each outside director receives a grant of 4,000 shares upon joining the Board of Directors and an annual grant of
options to purchase 4,000 shares of common stock. The exercise price of the options is the fair market value of common stock on the date of grant, and each option has a term of ten years and becomes
exercisable immediately.

Compensation Committee Interlocks and Insider Participation

The Compensation Committee consists of Messrs. Lane, Hayes, Scharer, Blanchard, and Fedor. Mr. Scharer currently serves as Chairman.

Mr. Fedor
is a co-founder of our company and served as our Chief Executive Officer from 1994 until March 1998. On August 1, 1999, Mr. Fedor
returned as interim Chief Executive Officer and served as such until October 2000. Mr. Fedor also served as President from 1994 until August 1, 1997.

Mr. Blanchard
is a co-founder of our company and served as our Director of Engineering from 1994 until his retirement in June 2001.

Item 12. Security Ownership Of Certain Beneficial Owners And Management and Related Stockholder Matters

The following table sets forth certain information regarding beneficial ownership of our common stock as of January 13, 2003 for (i) all directors,
our Chief Executive Officer, and our current and former executive officers listed in the Summary Compensation Table under "Item 11, Executive

32

---

Compensation," (ii) all directors and executive officers as a group, and (iii) each person known by us to beneficially own more than 5% of our outstanding shares of common stock.

|Name of Beneficial Owner (1)      |                                | Number of Shares Beneficially Owned (2)(3)                                                                    |           | Percent   |     
|--------------------------------- | ------------------------------ | ------------------------------------------------------------------------------------------------------------- | --------- | --------- | ----
|Directors and Executive Officers: |                                |                                                                                                               |           |           |     
|                                  | Clarence H. Thiesen            |                                                                                                               | 453,000   | (4)       | 3.9 
|                                  | Frederick C. Lane              |                                                                                                               | 41,000    | (5)       | *   
|                                  | Richard T. Fedor               |                                                                                                               | 2,990,836 | (6)       | 25.5
|                                  | Gerald R. Novotny              |                                                                                                               | 1,030,778 | (7)       | 8.8 
|                                  | Douglas M. Hayes               |                                                                                                               | 59,667    | (8)       | *   
|                                  | Charles W. Scharer             |                                                                                                               | 8,000     | (9)       | *   
|                                  | Vern D. Blanchard              |                                                                                                               | 1,049,555 | (10)      | 8.9 
|                                  | Richard M. Kelley              |                                                                                                               |          |           |    
|                                  | Andrejs K. Bunkse              |                                                                                                               | 50,000    | (11)      | *   
|                                  |                                | All directors and executive officers as group (consisting of 9 current and 1 previous directors and officers) |           | 5,682,836 |     
|5% Stockholders:                  |                                |                                                                                                               |           |           |     
|                                  | Delta Partners, LLC            |                                                                                                               | 968,475   | (12)      | 8.7 
|                                  | Keane Capital Management, Inc. |                                                                                                               | 607,480   | (13)      | 5.4 

---

33

---



Equity Compensation Plan Information

The following table sets forth information with respect to our common stock that has been authorized for issuance under all of our equity compensation plans as of
October 31, 2002.

|Plan Category                                          |  | (a)
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights |  | (b)
Weighted Average Exercise Price of Outstanding Options, Warrants, and Rights |      | (c)
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) |          
|------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------ |  | -------------------------------------------------------------------------------- | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------- | ---------
|Equity-Compensation Plans Approved by Stockholders     |  | 1,254,360                                                                                        |  | $                                                                                | 3.24 |                                                                                                                                                 | 1,616,940
|Equity-Compensation Plans Not Approved by Stockholders |  |                                                                                                 |  |                                                                                  |     |                                                                                                                                                 | 31,100   
|                                                       |  |                                                                                                  |  |                                                                                  |      |                                                                                                                                                 |          
|Total                                                  |  | 1,254,360                                                                                        |  |                                                                                  |      |                                                                                                                                                 | 1,648,040
|                                                       |  |                                                                                                  |  |                                                                                  |      |                                                                                                                                                 |          

---

34

---

Item 13. Certain Relationships And Related Transactions

On February 8, 1999, we acquired BTC by entering into a Stock Purchase Agreement and Escrow Agreement with BTC and its stockholders: John A. Larsen, Keith
A. Novotny, and Gerald R. Novotny. The consideration that we paid in connection with the acquisition was as follows: Siblings Partner's L.P., of which Gerald R. Novotny is the General Partner and
Keith A. Novotny is the Initial Limited Partner, received 1,866,938 unregistered shares of our common stock, $5.9 million in cash, as well as $943,000 in unsecured promissory notes;
Mr. Larsen individually received $2.9 million in cash and $3.7 million in unsecured promissory notes.

In
connection with the acquisition, the parties entered into certain ancillary documents, including, executive employment agreements and non-competition agreements with
Gerald Novotny, Keith Novotny, and John Larsen, the Chairman and Chief Executive Officer, Chief Operating Officer, and
President, respectively, of BTC. Gerald Novotny, Keith Novotny, and John Larsen also joined our Board of Directors. Keith Novotny and John Larsen have both subsequently resigned from our Board.

In
connection with the acquisition, BTC's stockholders made certain representations and warranties, and a portion of the purchase price was placed into escrow as security for the breach
of any of these representations and warranties. During February 2000, we notified BTC's stockholders that we had certain claims for indemnification against them for breaches of representations
and warranties from the acquisition. We estimated that our claims exceeded the amounts held in escrow, and we requested that no amounts in escrow be released pending a final determination of our
claims. The escrow fund consisted of 373,387 shares of our common stock and approximately $2.0 million cash. BTC's stockholders delivered their objections to the escrow on February 24,
2000, objecting to all of our indemnification claims. The parties settled the claims on June 25, 2002, which resulted in payment to us from the escrow account. In a separate agreement, we
prepaid certain note obligations to BTC's stockholders at a 9% discount rate.

Mr. Held
entered into a consulting agreement with us on June 13, 2001. Pursuant to the consulting agreement, Mr. Held will provide consulting services in exchange
for payment of a single lump sum of $297,083, the equivalent of two years' salary, made in July 2001. Also pursuant to the consulting agreement, we will reimburse Mr. Held and certain
dependants for health insurance coverage according to certain limitations, and Mr. Held has agreed to not compete with our company through June 13, 2003. Mr. Held resigned as a
member of our Board of Directors as of October 31, 2002.

Item 14. Controls and Procedures

Based on their evaluation, as of a date within 90 days prior to the date of the filing of this report, of the effectiveness of our disclosure controls and
procedures, our Chief Executive Officer and Chief Financial Officer have each concluded that our disclosure controls and procedures are effective and sufficient to ensure that we record, process,
summarize, and report information required to be disclosed by us in our periodic reports filed under the Securities Exchange Act within the time periods specified by the Securities and Exchange
Commission's rules and forms. Subsequent to the date of their evaluation, there have not been any significant changes in our internal controls or in other factors that could significantly affect these
controls, including any corrective action with regard to significant deficiencies and material weaknesses.

35

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PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

Financial
statements are listed in the Index to Financial Statements on page F-1 of this report.

No
financial statement schedules are included because they are not applicable, are not required, or because required information is included in the financial statements or the notes thereto.

None.

|Exhibit
Number |  | Description of Exhibit                                                                                                                                                                                                                                           
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1            |  | Stock Purchase Agreement dated February 8, 1999 by and among the Registrant, Bingo Technologies Corporation, and the Stockholders and Indemnitors named therein (1)                                                                                              
|3.1            |  | Certificate of Incorporation of the Registrant, as amended (2)                                                                                                                                                                                                   
|3.2            |  | Bylaws of the Registrant (2)                                                                                                                                                                                                                                     
|4.1            |  | GameTech International, Inc. Registration Rights Agreement (3)                                                                                                                                                                                                   
|4.2            |  | Specimen Common Stock Certificate (4)                                                                                                                                                                                                                            
|10.1           |  | GameTech International, Inc. 1997 Incentive Stock Plan (2)                                                                                                                                                                                                       
|10.6           |  | Distribution Agreement dated November 1, 1999 between the Registrant and Trend Gaming Systems (5)                                                                                                                                                                
|10.15          |  | GameTech International, Inc. 2001 Restricted Stock Plan (6)                                                                                                                                                                                                      
|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 (5)                                                                                          
|10.17          |  | Revolving Line of Credit dated August 19, 1998 between the Registrant and Wells Fargo Bank, N.A. (5)                                                                                                                                                             
|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. (5)                                                                                                     
|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. (5)                                                                                                     
|10.20          |  | Employment Agreement dated December 20, 2001 between the Registrant and Clarence Thiesen (5)                                                                                                                                                                     
|10.21          |  | Employment Agreement dated February 28, 2001 between the Registrant and Richard Kelley (5)                                                                                                                                                                       
|10.22          |  | Employment Agreement dated October 1, 1997 between the Registrant and Andrejs K. Bunkse (5)                                                                                                                                                                      
|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.
|21             |  | List of Subsidiaries                                                                                                                                                                                                                                             
|23.1           |  | Consent of Ernst & Young LLP                                                                                                                                                                                                                                     
|99.1           |  | 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.                                                                                                               

36

---

|99.2 |  | 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.
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------

---

37

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

|                        |  | GAMETECH INTERNATIONAL, INC.
|----------------------- |  | ----------------------------
|Dated: January 29, 2003 |  | By:                         

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

|Signature                                 |  | Title                                                              |  | Date            
|----------------------------------------- |  | ------------------------------------------------------------------ |  | ----------------
|                                          |  |                                                                    |  |                 
|/s/FREDERICK C. LANEFrederick C. Lane     |  | Chairman of the Board of Directors                                 |  | January 29, 2003
|/s/CLARENCE H. THIESENClarence H. Thiesen |  | Chief Executive Officer and Director
(Principal Executive Officer) |  | January 29, 2003
|/s/JOHN P. HEWITTJohn P. Hewitt           |  | Chief Financial Officer
(Principal Financial Officer)              |  | January 29, 2003
|/s/ANN D. MCKENZIEAnn D. McKenzie         |  | Corporate Controller
(Principal Accounting Officer)                |  | January 29, 2003
|/s/RICHARD T. FEDORRichard T. Fedor       |  | Vice-Chairman of the Board of Directors                            |  | January 29, 2003
|/s/DOUGLAS M. HAYESDouglas M. Hayes       |  | Director                                                           |  | January 29, 2003
|/s/GERALD R. NOVOTNYGerald R. Novotny     |  | Director                                                           |  | January 29, 2003
|                                          |  |                                                                    |  |                 

38

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|/s/CHARLES W. SCHARERCharles W. Scharer |  | Director |  | January 29, 2003
|--------------------------------------- |  | -------- |  | ----------------
|/s/VERN D. BLANCHARDVern D. Blanchard   |  | Director |  | January 29, 2003

39

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EXHIBIT INDEX

|Exhibit
Number |  | Description of Exhibit                                                                                                                                                                                                                                           
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1            |  | Stock Purchase Agreement dated February 8, 1999 by and among the Registrant, Bingo Technologies Corporation, and the Stockholders and Indemnitors named therein (1)                                                                                              
|3.1            |  | Certificate of Incorporation of the Registrant, as amended (2)                                                                                                                                                                                                   
|3.2            |  | Bylaws of the Registrant (2)                                                                                                                                                                                                                                     
|4.1            |  | GameTech International, Inc. Registration Rights Agreement (3)                                                                                                                                                                                                   
|4.2            |  | Specimen Common Stock Certificate (4)                                                                                                                                                                                                                            
|10.1           |  | GameTech International, Inc. 1997 Incentive Stock Plan (2)                                                                                                                                                                                                       
|10.6           |  | Distribution Agreement dated November 1, 1999 between the Registrant and Trend Gaming Systems (5)                                                                                                                                                                
|10.15          |  | GameTech International, Inc. 2001 Restricted Stock Plan (6)                                                                                                                                                                                                      
|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 (5)                                                                                          
|10.17          |  | Revolving Line of Credit dated August 19, 1998 between the Registrant and Wells Fargo Bank, N.A. (5)                                                                                                                                                             
|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. (5)                                                                                                     
|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. (5)                                                                                                     
|10.20          |  | Employment Agreement dated December 20, 2001 between the Registrant and Clarence Thiesen (5)                                                                                                                                                                     
|10.21          |  | Employment Agreement dated February 28, 2001 between the Registrant and Richard Kelley (5)                                                                                                                                                                       
|10.22          |  | Employment Agreement dated October 1, 1997 between the Registrant and Andrejs K. Bunkse (5)                                                                                                                                                                      
|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.
|21             |  | List of Subsidiaries                                                                                                                                                                                                                                             
|23.1           |  | Consent of Ernst & Young LLP                                                                                                                                                                                                                                     
|99.1           |  | 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.                                                                                                               
|99.2           |  | 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.                                                                                                               

---

40

---

41

---

CERTIFICATION

I, Clarence H. Thiesen, certify that:



Date:
January 29, 2003

| |  | /s/CLARENCE H. THIESENClarence H. Thiesen
Chief Executive Officer
(Principal Executive Officer)
| |  | -----------------------------------------------------------------------------------------------

42

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CERTIFICATION

I, John P. Hewitt, certify that:



Date:
January 29, 2003

| |  | /s/JOHN P. HEWITTJohn P. Hewitt
Chief Financial Officer
(Principal Financial Officer)
| |  | -------------------------------------------------------------------------------------

43

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GameTech International, Inc.        Consolidated Financial Statements        Years ended October 31, 2000, 2001 and 2002        Contents

|Report of Ernst & Young LLP, Independent Auditors |  | F-2
|------------------------------------------------- |  | ---
|Financial Statements                              |  |    
|Consolidated Balance Sheets                       |  | F-3
|Consolidated Statements of Operations             |  | F-4
|Consolidated Statements of Stockholders' Equity   |  | F-5
|Consolidated Statements of Cash Flows             |  | F-6
|Notes to Consolidated Financial Statements        |  | F-7

F-1

---



Report of Ernst & Young LLP, Independent Auditors

The
Board of Directors and Stockholders
GameTech International, Inc.

We
have audited the accompanying consolidated balance sheets of GameTech International, Inc. as of October 31, 2001 and 2002, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in the period ended October 31, 2002. These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based on our audits.

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

In
our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of GameTech International, Inc. at
October 31, 2001 and 2002 and the consolidated results of its operations and its cash flows for each of the three years in the period ended October 31, 2002, in conformity with
accounting principles generally accepted in the United States.



Reno,
Nevada
December 9, 2002

F-2

---



GameTech International, Inc.        Consolidated Balance Sheets        (in thousands, except share and per share amounts)

|                                                                                                             |                                                                                                                      | October 31, |       
|------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------------------- | ----------- | ------
|
|Assets:                                                                                                      |                                                                                                                      |             |       
|Current assets:                                                                                              |                                                                                                                      |             |       
|                                                                                                             | Cash and cash equivalents                                                                                            |             | $     
|                                                                                                             | Short-term investments                                                                                               |             |       
|                                                                                                             | Accounts receivable, less allowance for doubtful accounts of $2,772 in 2001 and $2,342 in 2002                       |             |       
|                                                                                                             | Deposits                                                                                                             |             |       
|                                                                                                             | Refundable income taxes                                                                                              |             |       
|                                                                                                             | Prepaid expenses and other current assets                                                                            |             |       
|                                                                                                             | Deferred income taxes                                                                                                |             |       
|                                                                                                             |                                                                                                                      |             |       
|Total current assets                                                                                         |                                                                                                                      |             | 22,899
|Bingo units, furniture and equipment, net                                                                    |                                                                                                                      |             | 15,913
|Goodwill, less accumulated amortization of $5,029 in 2001 and 2002                                           |                                                                                                                      |             | 15,437
|Intangibles and other non-current assets, less accumulated amortization of $2,140 in 2001 and $2,028 in 2002 |                                                                                                                      |             | 1,427 
|                                                                                                             |                                                                                                                      |             |       
|Total assets                                                                                                 |                                                                                                                      | $           | 55,676
|                                                                                                             |                                                                                                                      |             |       
|Liabilities and stockholders' equity:                                                                        |                                                                                                                      |             |       
|Current liabilities:                                                                                         |                                                                                                                      |             |       
|                                                                                                             | Accounts payable                                                                                                     |             | $     
|                                                                                                             | Accrued payroll and related obligations                                                                              |             |       
|                                                                                                             | Acquisition related accrued liabilities                                                                              |             |       
|                                                                                                             | Other accrued liabilities                                                                                            |             |       
|                                                                                                             | Current portion of long-term debt                                                                                    |             |       
|                                                                                                             |                                                                                                                      |             |       
|Total current liabilities                                                                                    |                                                                                                                      |             | 6,435 
|Long-term debt                                                                                               |                                                                                                                      |             | 1,361 
|Non-current employment obligations                                                                           |                                                                                                                      |             | 370   
|Deferred income taxes                                                                                        |                                                                                                                      |             | 926   
|Commitments and contingencies                                                                                |                                                                                                                      |             |       
|Stockholders' equity:                                                                                        |                                                                                                                      |             |       
|                                                                                                             | Common stock: $.001 par value; 40,000,000 shares authorized; 12,701,839 shares issued in 2001 and 13,090,764 in 2002 |             |       
|                                                                                                             | Capital in excess of par value                                                                                       |             |       
|                                                                                                             | Retained earnings                                                                                                    |             |       
|                                                                                                             | Less: treasury stock, at cost: 1,855,325 shares in 2001 and 2002                                                     |             |       
|                                                                                                             |                                                                                                                      |             |       
|Total stockholders' equity                                                                                   |                                                                                                                      |             | 46,584
|                                                                                                             |                                                                                                                      |             |       
|Total liabilities and stockholders' equity                                                                   |                                                                                                                      | $           | 55,676
|                                                                                                             |                                                                                                                      |             |       

See
accompanying notes.

F-3

---



GameTech International, Inc.        Consolidated Statements of Operations        (in thousands, except share and per share amounts)

|                                                               |                            | Year ended October 31,   |       
|-------------------------------------------------------------- | -------------------------- | ------------------------ | ------
|
|Revenue                                                        |                            | $                        | 49,695
|Cost of revenue                                                |                            |                          | 16,011
|                                                               |                            |                          |       
|Gross profit                                                   |                            |                          | 33,684
|Operating expenses:                                            |                            |                          |       
|                                                               | General and administrative |                          |       
|                                                               | Sales and marketing        |                          |       
|                                                               | Research and development   |                          |       
|                                                               |                            |                          |       
|                                                               |                            | Total operating expenses |       
|                                                               |                            |                          |       
|Income (loss) from operations                                  |                            |                          | 6,843 
|Interest and other income (expense), net                       |                            |                          | 326   
|                                                               |                            |                          |       
|Income (loss) before provision for income taxes                |                            |                          | 7,169 
|Provision for (benefit from) income taxes                      |                            |                          | 3,513 
|                                                               |                            |                          |       
|Net income (loss)                                              |                            | $                        | 3,656 
|                                                               |                            |                          |       
|Basic net income (loss) per share                              |                            | $                        | .33   
|                                                               |                            |                          |       
|Diluted net income (loss) per share                            |                            | $                        | .30   
|                                                               |                            |                          |       
|Shares used in the calculation of net income (loss) per share: |                            |                          |       
|                                                               | Basic                      |                          |       
|                                                               |                            |                          |       
|                                                               | Diluted                    |                          |       
|                                                               |                            |                          |       

See
accompanying notes.

F-4

---



GameTech International, Inc.        Consolidated Statements of Stockholders' Equity        (in thousands, except share amounts)

|                                                        |  | Common Stock |  |   |    |  |   | Treasury stock |  |   |       
|------------------------------------------------------- |  | ------------ |  | - | -- |  | - | -------------- |  | - | ------
|
|
|Balances at October 31, 1999                            |  | 12,284,323   |  | $ | 12 |  | $ | 43,418         |  | $ | 10,863
|Issuance of common stock upon exercise of stock options |  | 86,900       |  |   |   |  |   | 123            |  |   |      
|Repurchase of common stock for treasury                 |  |             |  |   |   |  |   |               |  |   |      
|Net income                                              |  |             |  |   |   |  |   |               |  |   | 3,656 
|                                                        |  |              |  |   |    |  |   |                |  |   |       
|Balances at October 31, 2000                            |  | 12,371,223   |  |   | 12 |  |   | 43,541         |  |   | 14,519
|Issuance of common stock upon exercise of stock options |  | 312,116      |  |   | 1  |  |   | 567            |  |   |      
|Restricted stock issued to employees                    |  | 18,500       |  |   |   |  |   | 50             |  |   |      
|Tax benefit from stock option exercises                 |  |             |  |   |   |  |   | 385            |  |   |      
|Repurchase of common stock for treasury                 |  |             |  |   |   |  |   |               |  |   |      
|Net loss                                                |  |             |  |   |   |  |   |               |  |   | (4,395
|                                                        |  |              |  |   |    |  |   |                |  |   |       
|Balances at October 31, 2001                            |  | 12,701,839   |  |   | 13 |  |   | 44,543         |  |   | 10,124
|Issuance of common stock upon exercise of stock options |  | 388,525      |  |   |   |  |   | 1,172          |  |   |      
|Restricted stock issued to employees                    |  | 400          |  |   |   |  |   | 1              |  |   |      
|Net income                                              |  |             |  |   |   |  |   |               |  |   | 2,733 
|                                                        |  |              |  |   |    |  |   |                |  |   |       
|Balances at October 31, 2002                            |  | 13,090,764   |  | $ | 13 |  | $ | 45,716         |  | $ | 12,857
|                                                        |  |              |  |   |    |  |   |                |  |   |       

See
accompanying notes.

F-5

---



GameTech International, Inc.        Consolidated Statements of Cash Flows        (in thousands)

|                                                                                         |                                                                  | Year ended October 31,                       |                                          
|---------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | -------------------------------------------- | -----------------------------------------
|
|Cash flows from operating activities:                                                    |                                                                  |                                              |                                          
|Net income (loss)                                                                        |                                                                  | $                                            | 3,656                                    
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |                                                                  |                                              |                                          
|                                                                                         |                                                                  | Depreciation, amortization and obsolescence  |                                          
|                                                                                         |                                                                  | Employee share grant                         |                                          
|                                                                                         |                                                                  | Deferred income taxes                        |                                          
|                                                                                         |                                                                  | Changes in operating assets and liabilities: |                                          
|                                                                                         |                                                                  |                                              | Accounts receivable, net                 
|                                                                                         |                                                                  |                                              | Deposits                                 
|                                                                                         |                                                                  |                                              | Refundable income taxes                  
|                                                                                         |                                                                  |                                              | Prepaid expenses and other current assets
|                                                                                         |                                                                  |                                              | Other non-current assets                 
|                                                                                         |                                                                  |                                              | Accounts payable                         
|                                                                                         |                                                                  |                                              | Accrued payroll and related obligations  
|                                                                                         |                                                                  |                                              | Acquisition related accrued liabilities  
|                                                                                         |                                                                  |                                              | Other accrued liabilities                
|                                                                                         |                                                                  |                                              | Income taxes payable                     
|                                                                                         |                                                                  |                                              | Non-current employment obligations       
|                                                                                         |                                                                  |                                              |                                          
|Net cash provided by operating activities                                                |                                                                  |                                              | 13,955                                   
|Cash flows from investing activities:                                                    |                                                                  |                                              |                                          
|Decrease (increase) in short-term investments                                            |                                                                  |                                              | 3,074                                    
|Capital expenditures for bingo units, furniture and equipment                            |                                                                  |                                              | (9,614                                   
|Proceeds from Bingo Technologies Corporation escrow account                              |                                                                  |                                              |                                         
|Intangible assets                                                                        |                                                                  |                                              | (1,290                                   
|                                                                                         |                                                                  |                                              |                                          
|Net cash used in investing activities                                                    |                                                                  |                                              | (7,830                                   
|Cash flows from financing activities:                                                    |                                                                  |                                              |                                          
|Proceeds from short-term borrowings from bank                                            |                                                                  |                                              | 4,019                                    
|Payments on short-term notes payable and borrowings from bank                            |                                                                  |                                              | (4,019                                   
|Payments on long-term debt                                                               |                                                                  |                                              | (1,155                                   
|Payments for buy out of distributorship agreement                                        |                                                                  |                                              | (345                                     
|Proceeds from sales of common stock                                                      |                                                                  |                                              | 123                                      
|Payments for repurchase of common stock for treasury                                     |                                                                  |                                              | (5,173                                   
|                                                                                         |                                                                  |                                              |                                          
|Net cash used in financing activities                                                    |                                                                  |                                              | (6,550                                   
|                                                                                         |                                                                  |                                              |                                          
|Net increase (decrease) in cash and cash equivalents                                     |                                                                  |                                              | (425                                     
|Cash and cash equivalents at beginning of year                                           |                                                                  |                                              | 4,554                                    
|                                                                                         |                                                                  |                                              |                                          
|Cash and cash equivalents at end of year                                                 |                                                                  | $                                            | 4,129                                    
|                                                                                         |                                                                  |                                              |                                          
|Supplemental disclosure of cash flow information:                                        |                                                                  |                                              |                                          
|Cash paid for interest                                                                   |                                                                  | $                                            | 46                                       
|                                                                                         |                                                                  |                                              |                                          
|Cash paid for income taxes                                                               |                                                                  | $                                            | 4,404                                    
|                                                                                         |                                                                  |                                              |                                          
|Supplemental schedule of non-cash transactions:                                          |                                                                  |                                              |                                          
|                                                                                         | Acquisition of capitalized software in exchange for note payable |                                              | $                                        
|                                                                                         |                                                                  |                                              |                                          
|                                                                                         | Tax benefit from stock option exercises                          |                                              | $                                        
|                                                                                         |                                                                  |                                              |                                          

See accompanying notes.

F-6

---



GameTech International, Inc.        Notes to Consolidated Financial Statements        October 31, 2000, 2001 and 2002

1. Business and Summary of Significant Accounting Policies

Description of Business

GameTech International, Inc. (the "Company") was incorporated in Delaware on April 18, 1994. The Company operates in a single business segment and
designs, develops, and markets interactive electronic bingo systems consisting of hand-held and fixed based units under contractual arrangements with terms generally ranging from
month-to-month to three years with bingo hall customers. All inter-company accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

Short-Term Investments

Short-term investments, which consist of interest-bearing securities, are carried at fair value and are classified as available for sale. Unrealized
gains and losses are not material.

Bingo Units, Furniture, and Equipment

Bingo units, furniture and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets.
The estimated useful lives are as follows:

Bingo units

3-5 yearsOffice furniture and equipment

5-7 yearsLeasehold improvements

10 years


The
Company provides reserves for excess or obsolete bingo units on hand, which are not expected to be used. The reserves are based upon several factors, including estimated forecast of
bingo unit demand for placement into halls.

Supplier Dependence

Certain of the Company's bingo units are purchased from only one supplier. Any interruption in this supply source could impact the Company's ability to meet
customer demand and in turn adversely affect future operating results.

Goodwill

The Company is required to perform an annual goodwill impairment review, and depending upon the results of that measurement, the recorded goodwill may be written
down and charged to income

F-7

---

from operations when its carrying amount exceeds its estimated fair value. In addition, the Company assesses the impairment of goodwill whenever events or changes in circumstances indicate that the
carrying value may not be recoverable, such as a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, or a
loss of key personnel.

Long-Lived Assets

The Company has adopted the provisions of the Statement of Financial Accounting Standards ("SFAS") No. 121,Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of. SFAS No. 121 requires impairment losses to be recognized for
long-lived assets and identifiable intangibles, other than goodwill, used in operations when indicators of impairment are present and the estimated undiscounted cash flows are not
sufficient to recover the assets' carrying amount. The impairment loss is measured by comparing the fair value of the asset to its carrying amount.

Revenue Recognition

Revenue is recognized for bingo units placed in bingo halls under contracts based on: (a) a fixed fee per use per session, (b) a fixed weekly fee
per unit, or (c) a percentage of the revenue generated by each unit. Revenue recognition is a key component of the Company's results of operations, and determines the timing of certain
expenses, such as commissions and royalties. The Company recognizes revenue when all of the following factors exist (a) evidence of an arrangement with the customer; (b) play or
availability of the bingo units; (c) a fixed or determinable fee; and (d) collectibility is reasonably assured.

Allowance for Doubtful Accounts

The Company estimates the possible losses resulting from non-payment of outstanding accounts receivable. The Company's customer base consists
primarily of entities operating in charitable, Native American, and commercial bingo halls located throughout the United States. In some jurisdictions, the billing and collection function is performed
as part of a distributor relationship, and in those instances, the Company maintains allowances for possible losses resulting from non-payment by both the customer and distributor. The
Company performs ongoing evaluations of customers and distributors for credit worthiness, economic trends, changes in customer payment terms, and historical collection experience when evaluating the
adequacy of its allowance for doubtful accounts. The Company also reserves a percentage of accounts receivable based on aging category. In determining these percentages, the Company reviews historical
write-offs of receivables, payment trends, and other available information.

Advertising Costs

Advertising costs are expensed as incurred. Advertising costs during the fiscal years 2000, 2001, and 2002 were not material.

F-8

---

Stock Based Compensation

The Company has adopted the disclosure provision for stock-based compensation of SFAS No. 123,Accounting for Stock-Based
Compensation, but continues to account for such items using the intrinsic value method as outlined under Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to
Employees. Under APB 25, when the exercise price of the Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.

Net Income (Loss) Per Share

Net income (loss) per share is computed in accordance with SFAS No. 128,Earnings per Share, which requires
companies to present both basic and diluted net income (loss) per share. Basic income (loss) per share is based solely upon the weighted average number of common shares outstanding and excludes any
dilutive effects of options, warrants and convertible securities. Diluted income (loss) per share is based upon the weighted average number of common shares and common-share equivalents outstanding
during the year. The difference between basic and diluted income (loss) per share is attributable to stock options.

Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of cash and cash equivalents,
short-term investments, and trade receivables. Cash equivalents and short-term investments are investment-grade, short-term debt instruments, primarily treasury
bills, mortgage-backed securities, and money market accounts, all of which are maintained with high credit quality financial institutions. Cash and cash equivalents are in excess of Federal Deposit
Insurance Corporation ("FDIC") insurance limits.

No
single customer comprised more than ten percent of the Company's total revenue during fiscal years 2000, 2001 and 2002. However, the Company conducts a substantial amount of its
business through distributor relationships, many of which act as a collection agent.

Fair Values of Financial Instruments

The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, short-term investments, accounts receivable, accounts
payable, and accrued liabilities approximate fair value because of the immediate or short-term maturity of these financial instruments.

Reclassifications

Certain amounts in the prior year's financial statements have been reclassified to conform with 2002 presentation.

New Accounting Pronouncement

In October 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 144,Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. SFAS

F-9

---

No. 144 retains many of the fundamental recognition and measurement provisions of the superseded SFAS No. 121, impairment pronouncement. The new standard resolves implementation issues
in relation to goodwill and cash flow estimations for long-lived assets to be held and used. The new standard is effective for fiscal years beginning after December 15, 2001. The
Company believes the adoption of the standard will not have a material impact on its financial position or results of operations.

2. Goodwill and Intangibles

In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible Assets,effective for
fiscal years beginning after December 15, 2001.Under the new rules, goodwill will no longer be systematically amortized, but will be reviewed
for impairment each year and, depending upon the results of that measurement, the recorded goodwill may be written down and charged to income from operations when its carrying amount exceeds its
estimated fair value. Amortization is still required for identifiable intangible assets with finite lives. The Company elected to early-adopt the statement at the beginning of fiscal 2002,
discontinuing amortization of goodwill.

Goodwill,
resulting primarily from the February 1999 acquisition of Bingo Technologies Corporation ("BTC"), was being amortized on a straight-line basis over twelve
years and amounted to $15,437,000 and $14,960,000, net of accumulated amortization, at October 31, 2001 and 2002, respectively. Goodwill amortization expense in fiscal years 2000, 2001 and 2002
was $1,779,000, $1,732,000 and $0, respectively. The Company assessed the value of its goodwill as of November 1, 2001 and July 31, 2002 (its annual review date) and concluded there was
no goodwill impairment.

In
accordance with SFAS No. 142, the current year results reflect no amortization of goodwill. A reconciliation of previously reported income and earnings per share for the
comparative periods adjusted for the exclusion of goodwill amortization is as follows (in thousands, except per share amounts):

October 31,Year Ended2000

2001

2002Reported net income (loss)

$
3,656

$
(4,395
)
$
2,733Add back: Goodwill amortization


1,779


1,732


Adjusted net income (loss)

$
5,435

$
(2,663
)
$
2,733Basic earnings (loss) per share:Reported net income (loss)

$
0.33

$
(0.41
)
$
0.25Add back: Goodwill amortization


0.16


0.16


Adjusted basic earnings (loss) per share

$
0.49

$
(0.25
)
$
0.25


Other
intangibles, consisting of capitalized software, distribution agreements and copyrights are being amortized over the respective useful lives of the assets ranging from three to
five years. Amortization expense related to the other intangibles in fiscal years 2000, 2001 and 2002 was $775,000, $744,000 and $828,000, respectively.

F-10

---

Estimated
aggregate amortization expense for intangible assets subject to amortization as of October 31, 2002 is as follows:

2003

$
360,0002004


186,0002005


107,0002006


2,000$
655,000


3. Bingo Units, Furniture and Equipment

Bingo units, furniture and equipment consist of the following (in thousands):

October 31,2001

2002Bingo units and related support equipment

$
27,983

$
37,467Raw materials


1,774


966Office furniture and equipment


3,927


3,103Leasehold improvements


360


52634,044


42,062Less accumulated depreciation and amortization


18,131


20,442$
15,913

$
21,620


Depreciation
for bingo units is applied over three- and five-year periods. Units on-hand that are not expected to be re-used are reserved for as
excess or obsolete.

Depreciation
expense during the fiscal years ended October 31, 2000, 2001 and 2002 amounted to approximately $5.6 million, $6.7 million and $6.7 million,
respectively. In addition, during the fiscal years ended October 31, 2000, 2001 and 2002, respectively, the Company reserved $900,000, $2.6 million and $0 for bingo units not expected to
be re-used.

Office
furniture and equipment includes assets under capital leases amounting to $38,000 and $1,000 at October 31, 2001 and 2002, respectively, net of accumulated amortization of
$310,000 and $13,000, respectively.

4. Credit Agreements

Effective April 2, 2002, the Company renewed its revolving line-of-credit agreement with a bank. The maximum amount available under
the terms of the agreement is $10.0 million, and borrowings bear interest based on the bank's prime rate or London InterBank Offered Rate ("LIBOR") plus 2.0 percent, at the Company's
option. Interest is payable monthly and the agreement expires on April 2, 2003. The agreement is secured by substantially all of the Company's assets. The agreement contains certain restrictive
covenants, which among other things require that specified financial balances and ratios be maintained, quarterly profitability be maintained, and restrict the payment of dividends

F-11

---

and the incurrence of additional indebtedness. The Company has received a waiver from the bank for non-compliance with the quarterly profitability requirement. At October 31, 2001
and 2002, there was no outstanding balance under the line-of-credit.

5. Long-Term Debt

Long-term debt consisted of the following (in thousands):

|                                                                                                                                                                                         |  | October 31,
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------
|
|$3.7 million zero interest note payable to a BTC stockholder, discounted at 5.5 percent per annum with monthly principal and interest payments of $61,000. The balance was paid in 2002. |  | $          
|$943,000 zero interest note payable to a BTC stockholder, discounted at 5.5 percent per annum with monthly principal and interest payments of $16,000. The balance was paid in 2002.     |  |            
|Obligations under capital leases                                                                                                                                                         |  |            
|Other                                                                                                                                                                                    |  |            
|                                                                                                                                                                                         |  |            
|                                                                                                                                                                                         |  |            
|Less amounts due within one year                                                                                                                                                         |  |            
|                                                                                                                                                                                         |  |            
|                                                                                                                                                                                         |  | $          
|                                                                                                                                                                                         |  |            

Aggregate
contractual future principal payments of long-term debt for the years following October 31, 2002 are $13,000 in fiscal year 2003.

6. Commitments and Contingencies

Leases

The Company leases administrative and manufacturing facilities and certain equipment under non-cancelable operating leases. Rent expense during fiscal
years ended October 31, 2000, 2001 and 2002 amounted to approximately $645,000, $802,000 and $631,000, respectively.

Future
minimum lease payments under these leases as of October 31, 2002 are as follows:

2003

$
677,0002004


583,0002005


551,0002006


549,0002007


549,000Thereafter


1,570,000$
4,479,000


F-12

---

Litigation

The Company is in litigation with a former distributor in Texas in which each party is seeking damages from the other resulting from alleged mutual material
breaches and resultant termination of the related distributor agreement. As a result of the termination of the agreement during the Company's fourth quarter, the Company fully reserved its existing
accounts receivable from the distributor at October 31, 2002. Certain monies received by the distributor and owed to the Company have been placed in a bank account subject to the court's
control. Subsequent collections by the distributor, if any, against accounts receivable existing at the contract termination date will also be placed in that account. In addition, the Company has
posted a $450,000 deposit with the court, which is included in other non-current assets on the accompanying consolidated balance sheet. The disposition of the funds (monies held in the
bank account and the Company's deposit) is pending the outcome of the litigation. The Company has not accrued any liability at October 31, 2002 for this matter.

The
Company is involved in various other legal proceedings arising out of its operations in the ordinary course of its business. The Company does not believe that any of these
proceedings will have a material adverse effect on its business, financial condition, or results of operations beyond the amounts recorded in the accompanying consolidated financial statements. At
October 31, 2001 and 2002, the Company has recorded $1.1 million and $130,000, respectively, in current liabilities for the estimated settlement of specific lawsuits. However, if
settlement is not reached and the lawsuits proceed to trial, an unfavorable outcome could have a material adverse effect on the Company's financial position and results of operations.

7. Stockholders' Equity

Stock Options

In August 1997, the Company adopted the 1997 Incentive Stock Plan (the "1997 Plan"). Under the 1997 Plan, either incentive stock options ("ISO's") or
nonqualified stock options ("NSO's") may be granted to employees, directors, and consultants to purchase the Company's common stock at an exercise price determined by the Board of Directors on the
date of grant. ISO's may be granted only to employees at an exercise price that equals or exceeds the fair value of such shares on the date such option is
granted. The options generally have a term of ten years and vesting periods are determined at the discretion of the Board of Directors. The Company has reserved 4,000,000 shares of common stock for
issuance under the 1997 Plan, which included options granted during the twelve months immediately preceding the adoption of the 1997 Plan. As of October 31, 2002, options to purchase 1,254,360
shares of common stock were outstanding at exercise prices ranging from $0.16 to $6.00 per share under the 1997 Plan. In addition, as of October 31, 2002, 1,616,940 shares of common stock were
available for future grants under the 1997 Plan.

Pro
forma information regarding net income and earnings per share is required by SFAS No. 123, and has been determined as if the Company had accounted for its employee stock
options under the

F-13

---

fair value method of that statement. The fair value for these options was estimated at the date of grant using a Black-Scholes pricing model with the following assumptions:

|                        |  | Year ended October 31,
|----------------------- |  | ----------------------
|
|Risk-free interest rate |  | 6.00%                 
|Dividend yield          |  | 0%                    
|Expected volatility     |  | 0.749%                
|Expected life           |  | 8 years               

The
Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition,
option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair
value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of the Company's employee stock options.

For
the purpose of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting periods. The Company's pro forma information follows:

|                                              |  | Year ended October 31,
|--------------------------------------------- |  | ----------------------
|
|Pro forma net income (loss)                   |  | $                     
|Pro forma net income (loss) per basic share   |  |                       
|Pro forma net income (loss) per diluted share |  |                       

A
summary of the Company's stock option activity and related information is presented below:

|                                                               |  | Year ended October 31,
|-------------------------------------------------------------- |  | ----------------------
|
|
|Outstanding at beginning of year                               |  | 1,754,441             
|Granted                                                        |  | 255,285               
|Forfeited                                                      |  | (73,000               
|Exercised                                                      |  | (86,900               
|                                                               |  |                       
|Outstanding at end of year                                     |  | 1,849,826             
|                                                               |  |                       
|Exercisable at end of year                                     |  | 1,217,701             
|                                                               |  |                       
|Weighted average fair value of options granted
during the year |  |                       
|                                                               |  |                       

F-14

---

The following table summarizes information regarding stock options outstanding and exercisable as of October 31, 2002:

|              |  | Options Outstanding |  | Options Exercisable
|------------- |  | ------------------- |  | -------------------
|
|$0.16         |  | 2,500               |  | 3.59               
|$1.00  $1.10 |  | 492,000             |  | 4.01               
|$2.88  $4.00 |  | 337,075             |  | 7.70               
|$4.13  6.00  |  | 422,785             |  | 6.37               
|              |  |                     |  |                    
|              |  | 1,254,360           |  | 5.79               
|              |  |                     |  |                    

Restricted Stock Plan

On October 4, 2001, the Company adopted the 2001 Restricted Stock Plan (the "2001 Plan"). Under the 2001 Plan, the Company authorizes the granting of
restricted stock to employees who are not officers or directors, consultants, and independent contractors. The Company has reserved 50,000 shares of common stock for grant under the 2001 Plan, which
included 18,500 shares and 400 shares granted on October 4, 2001 and June 30, 2002, respectively. Based on the market price of the Company's shares at that date, compensation expense of
$50,000 and $1,000 was recorded on October 4, 2001 and June 30, 2002, respectively.

8. Income Taxes

The income tax provisions (benefit) consist of the following (in thousands):

|          |         | Year ended October 31, |      
|--------- | ------- | ---------------------- | -----
|
|Current:  |         |                        |      
|          | Federal |                        | $    
|          | State   |                        |      
|Deferred: |         |                        |      
|          | Federal |                        |      
|          | State   |                        |      
|          |         |                        |      
|          |         | $                      | 3,513
|          |         |                        |      

F-15

---

The
significant components of the Company's deferred income tax assets and liabilities at October 31, 2001 and 2002 are as follows (in thousands):

|                                 |                                           | October 31, 2002 |      
|-------------------------------- | ----------------------------------------- | ---------------- | -----
|
|Deferred income tax assets:      |                                           |                  |      
|                                 | Amortization of intangible assets         |                  | $    
|                                 | Various accruals                          |                  |      
|                                 |                                           |                  |      
|Total deferred income tax assets |                                           |                  | 2,278
|Deferred income tax liability:   |                                           |                  |      
|                                 | Depreciation                              |                  |      
|                                 |                                           |                  |      
|                                 | Net deferred income tax asset (liability) |                  | $    
|                                 |                                           |                  |      

|                                          |                                   | October 31, 2001 |      
|----------------------------------------- | --------------------------------- | ---------------- | -----
|
|Deferred income tax assets:               |                                   |                  |      
|                                          | Amortization of intangible assets |                  | $    
|                                          | Various accruals                  |                  |      
|                                          |                                   |                  |      
|Total deferred income tax assets          |                                   |                  | 3,308
|Deferred income tax liability:            |                                   |                  |      
|                                          | Depreciation                      |                  |      
|                                          |                                   |                  |      
|Net deferred income tax asset (liability) |                                   | $                | 3,308
|                                          |                                   |                  |      

The
differences between the Company's provision for income taxes as presented in the accompanying statements of operations and provision for income taxes computed at the federal
statutory rate is comprised of the items shown in the following table as a percentage of pre-tax earnings:

|                                           |  | Year ended October 31, |  
|------------------------------------------ |  | ---------------------- | -
|
|Income tax provision at the statutory rate |  | 34.0                   | %
|State income taxes, net of federal benefit |  | 5.2                    |  
|Goodwill amortization                      |  | 8.3                    |  
|Other, net                                 |  | 1.5                    |  
|                                           |  |                        |  
|                                           |  | 49.0                   | %
|                                           |  |                        |  

F-16

---

9. Other Accrued Liabilities

Other accrued liabilities consist of (in thousands):

October 31,2001

2002Estimated legal settlements

$
691

$
130Accrued legal fees


208


611Accrued distributor commissions


841


517Deferred revenue


133


267Other


525


533$
2,398

$
2,058


10. Net Income (Loss) Per Share

A reconciliation of the shares used in the basic and fully diluted net income (loss) per share calculations is:

Year ended October 31,2000

2001

2002Basic

11,202,883

10,623,068

11,150,064Effect of dilutive securities:Stock options

860,771



862,450Diluted

12,063,654

10,623,068

12,012,514


Employee
stock options to purchase approximately 401,000 shares in fiscal 2002 and 413,000 shares in fiscal 2000 were outstanding, but were not included in the computation of diluted
earnings per share because the exercise price of the stock options was greater than the average share price of the common shares and, therefore, the effect would have been antidilutive.

11. Valuation and Qualifying Accounts (in thousands)

|                             |                               |                                 |  | Additions |       | Deductions |   |      
|---------------------------- | ----------------------------- | ------------------------------- |  | --------- | ----- | ---------- | - | -----
|
|Year ended October 31, 2000: |                               |                                 |  |           |       |            |   |      
|                             | Deducted from asset accounts: |                                 |  |           |       |            |   |      
|                             |                               | Allowance for doubtful accounts |  | $         | 503   |            | $ | 1,308
|Year ended October 31, 2001: |                               |                                 |  |           |       |            |   |      
|                             | Deducted from asset accounts: |                                 |  |           |       |            |   |      
|                             |                               | Allowance for doubtful accounts |  | $         | 1,335 |            | $ | 2,438
|Year ended October 31, 2002: |                               |                                 |  |           |       |            |   |      
|                             | Deducted from asset accounts: |                                 |  |           |       |            |   |      
|                             |                               | Allowance for doubtful accounts |  | $         | 2,772 |            | $ | 654  

F-17

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12. Subsequent Event

On November 6, 2002, the Company acquired certain assets of International Gaming Systems, Inc. ("IGS") for a cash price of $3.4 million. A
portion of the purchase price is being held in escrow pending (a) satisfactory transfer of certain of IGS' customer contracts to the Company; (b) satisfaction of certain debt obligations
of IGS; (c) verification of the number of bingo units acquired; and (d) verification of certain warranties and representations of IGS. Among other things, the acquisition added
approximately 20 new bingo halls with approximately 1,400 fixed-base bingo units to the Company's operations, principally in Mississippi and New York. The acquisition will be accounted for
as a purchase of a business in accordance with SFAS No. 141,Business Combinations.The Company is in the process of determining the appropriate
purchase price allocation.

13. Quarterly Financial Information (Unaudited)

Summarized unaudited quarterly financial information for the years 2002 and 2001 are noted below (in thousands, except per share amounts):

|                                    |  | Fiscal year 2002 |       
|----------------------------------- |  | ---------------- | ------
|
|Net revenue                         |  | $                | 11,851
|Gross margin                        |  |                  | 6,888 
|Income (loss) from operations       |  |                  | 1,469 
|Net income (loss)                   |  |                  | 913   
|Basic net income (loss) per share   |  |                  | .08   
|Diluted net income (loss) per share |  |                  | .08   

During
the fourth quarter ended October 31, 2002, the Company recorded the following expenses:



|                                    |  | Fiscal year 2001 |       
|----------------------------------- |  | ---------------- | ------
|
|Net revenue                         |  | $                | 11,981
|Gross margin                        |  |                  | 6,707 
|Income (loss) from operations       |  |                  | (1,551
|Net income (loss)                   |  |                  | (785  
|Basic net income (loss) per share   |  |                  | (.07  
|Diluted net income (loss) per share |  |                  | (.07  

During
the fourth quarter ended October 31, 2001, the Company recorded the following expenses:



F-18

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F-19

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