U.S. SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB


(Mark One)
[x]        ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
           EXCHANGE ACT OF 1934

                     For The Fiscal Year Ended: December 31, 1997

                                       or

[ ]        TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
           EXCHANGE ACT OF 1934





For the transition period from                to

Commission file number    000-21991

                        ADVANCED GAMING TECHNOLOGY, INC.
                 (Name of small business issuer in its charter)




         Wyoming                                                  98-0152226
State or other jurisdiction of                                 (I.R.S. Employer
incorporation or organization                                 Identification No.



2482 - 650 West Georgia Street, 
P.O. Box 11610,
Vancouver, British Columbia                        V6B 4N9
(Address of  principal executive offices)         (Zip code)

Issuer's telephone number                       (604) 689-8841


Securities registered under Section 12(b) of the Act:     NONE

Securities registered under Section 12(g) of the Act:

                          Common Stock Par Value $.005
                                (Title of Class)

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     Check  whether  the issuer:  (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing required for the past 90 days. Yes X No

                                                                 Total pages: 34
                                                          Exhibit Index Page: 32



     Check if there is no disclosure of delinquent  filers  pursuant to Item 405
of  Regulation  S-B is not  contained in this form,  and no  disclosure  will 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-
KSB or any amendment to this form 10-KSB. [X]

     State issuer's revenues for its most recent fiscal year: $1,338,121


     As of February 28, 1998, there were 110,985,561  shares of the Registrant's
common stock,  par value $0.005,  issued and  outstanding.  The aggregate market
value of the Registrant's  voting stock held by non-affiliates of the Registrant
was approximately  $15,260,514 computed at the average bid and asked price as of
February 28, 1998.


                       DOCUMENTS INCORPORATED BY REFERENCE

     If the following documents are incorporated by reference,  briefly describe
them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) Into
which the document is incorporated:  (1) any annual report to security  holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"):

 None

     Transitional Small Business Disclosure Format (check one): Yes NO X











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                                TABLE OF CONTENTS


Item Number and Caption                                                    Page

PART I

Item 1    Description of Business ..........................................  4

Item 2    Description of Property .......................................... 15

Item 3    Legal Proceedings ................................................ 16

Item 4    Submission of Matters to a Vote of Security Holders .............. 18

PART II

Item 5    Market for Common Equity and Related Stockholder Matters ......... 19

Item 6    Management's Discussion and Analysis or Plan of Operations ....... 20

Item 7    Financial Statements ............................................. 23

Item 8    Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosure.............................................. 23

PART III

Item 9    Directors, Executive Officers, Promoters and Control Persons;
          Compliance with Section 16(a) of the Exchange Act ................ 24

Item 10   Executive Compensation ........................................... 25

Item 11   Security Ownership of Certain Beneficial Owners and Management ... 30

Item 12   Certain Relationships and Related Transactions ................... 31

Item 13   Exhibits and Reports on form 8-K ................................. 32









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                                     PART I




                         ITEM I DESCRIPTION OF BUSINESS



GENERAL

     Advanced Gaming Technology, Inc., a Wyoming corporation (the "Company"), is
engaged in the design,  assembly,  supply, marketing and servicing of electronic
gaming products, the core of which is its MAX Bingo Systems. The Company is also
engaged in designing and developing a wireless, hand-held bingo unit, it's Parti
MAX for use in the United  Kingdom.  Advanced  Gaming  Technology,  Inc. is also
developing a  fast-paced,  progressive  linked speed bingo game,  to be marketed
under the name "Sonic Bingo".  The Company  anticipates  that both Parti MAX and
Sonic Bingo will generate  revenues in the fourth  quarter of 1998. In addition,
the Company owns,  through one of its  wholly-owned  subsidiaries,  178 acres of
undeveloped  property in Stone County,  Missouri.  The Company's common stock is
traded on the National Association of Securities Dealers,  Inc. (the "NASD") OTC
Bulletin Board Under the symbol "AGTI."

     The Company was  incorporated  pursuant to the laws of the state of Wyoming
on November 20, 1963,  under the name "MacTay  Investment Co." On June 19, 1987,
the Company  changed its name to "Auto N  Corporation."  On April 22, 1991,  the
Company  changed its name again to "Advanced  Gaming  Technology,  Inc." when it
acquired all of the assets and certain  liabilities  of Selectro  Vision Ltd., a
California corporation, in exchange for 1,359,000 shares of the Company's common
stock, $.005 par value per share (the "Common Stock").

     The Company has the following  wholly owned  subsidiaries:  Executive Video
Systems, Inc., a Maryland corporation  ("Executive Video"), Palace Entertainment
Limited,  a company  organized  under  the laws of the  British  Virgin  Islands
("Palace"),  Branson Signature Resorts, Inc., a Nevada corporation  ("Branson"),
River Oaks Holdings, Inc., a Missouri corporation ("River Oaks"), Branson Bluffs
Resorts,  Inc. ("Branson Bluffs") a Missouri  corporation,  Allied Resorts, Inc.
("Allied") a Missouri  corporation,  River Oaks Resorts and Country  Club,  Inc.
("River  Oaks  Resort") a Texas  corporation,  Prisms,  Inc.,  a North  Carolina
corporation  ("Prisms"),  Pleasure  World  Ltd.,  ("Pleasure  World"),  and  its
subsidiary Prisms (Bahamas) Ltd. ("Prisms  Bahamas"),  both companies  organized
under the laws of the Bahamas, and A.G.T. Acceptance Corp., a Nevada Corporation
("A.G.T. Acceptance Corp.").

     Executive Video owns certain  proprietary  software and technology relating
to the MAX Bingo  Systems,  and prior to the merger with the  Company,  supplied
five bingo locations .

     Palace  Entertainment,  an inactive company was organized in August 1996 to
be a joint venture  partner with various  entities in China for the operation of
entertainment centers in China, none of which materialized.  See "Description of
Business - Proposed Operations in Asia."

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     Branson and its  wholly-owned  subsidiaries are a resort and land developer
located in Branson,  Missouri  which owned two separate real estate  properties:
(i) a resort  property with limited  existing  development on site; and (ii) 178
acres of undeveloped property in Stone County,  Missouri.  On November 17, 1995,
the Company  disposed of the resort  property.  The Company  transferred the 178
acres of  undeveloped  property  to River Oaks and is  currently  attempting  to
develop or sell such  property.  See  "Description  of  Business  - Real  Estate
Holdings."

     Prisms, Inc.  transferred certain patents to Prisms (Bahamas) Ltd., for the
development  of bingo and other  entertainment  games  which  management  of the
Company believes  favorably  complement the Company's MAX Bingo Systems.  Prisms
has invented  several games under the patents and Prisms  Bahamas has trademarks
in place for such games. See "Description of Business Recent Acquisition."

     The principal executive offices of the Company are located at 2482-650 West
Georgia Street, P.O. Box 11610,  Vancouver,  British Columbia,  Canada, V6B 4N9,
telephone (604) 689-8841.  The Company also has an office in Branson,  Missouri,
where its real estate holdings are located.


     RECENT  DEVELOPMENTS.  In February,  1998 the Company executed a Financing,
Licensing,  and Royalty  Agreement with a major competitor,  Bingo  Technologies
Corporation  ("BTC").  This  Agreement  grants BTC the exclusive  right to sell,
market,  manufacture,  and distribute  the MAXPLUS and TurboMAX  products in the
United  States only for a period of five years.  This  Agreement  has produced a
licensing  fee  ($1,500,000),  and will  generate  royalties of 15% based on the
gross revenues generated by BTC from marketing these products. Minimum royalties
in the first year of the  Agreement are $350,000 and are to be negotiated by the
parties thereafter, with the minimum royalty in subsequent years not to be lower
than the royalty amount negotiated in the preceding year.

     On March 25, 1998, the Company executed a Letter of Understanding  with its
partner in the Sonic Bingo  project,  SEGA  Gaming  Technology,  Inc.  This is a
refinement  of the previous  Letter of Intent signed by the parties May 13, 1996
and includes the formation of a new corporation which will result in:

     o    Sega Gaming Technology, Inc. licensing the use of the name "SEGA".
     o    Advanced  Gaming  Technology,  Inc.  licensing  its MAX  Bingo  System
          software,  Prisms  patented  game  technology,  and  rights to use the
          "Sonic Bingo" trademark.
     o    Net income,  capital  expenditures and other product development costs
          will be shared equally.

     Additionally,  SEGA Gaming Technology,  Inc. has committed to acquire up to
5,000,000  common  shares of  Advanced  Gaming  Technology,  Inc. in open market
transactions and/or by way of private placement.

     Effective with the filing of this report,  and subject to  finalization  of
severance packages,  Mr. Robert C. Silzer, Sr. resigned as Chairman of the Board
of  Directors of the Company and all  subsidiary  companies.  Mr. Firoz  Lakhani
resigned as President,  Chief Operating  Officer and Director of the Company and
all subsidiary companies.


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     OPERATING  LOSSES.  The Company has incurred net losses of  $9,575,512  and
$5,629,961  for the fiscal years ended  December 31, 1997 and December 31, 1996,
respectively.  Such operating  losses reflect  developmental  and other start-up
activities.  The  Company  expects  to incur  losses  in the near  future  until
profitability  is achieved.  The  Company's  operations  are subject to numerous
risks  associated  with  establishing  any new  business,  including  unforeseen
expenses,  delays and complications.  There can be no assurance that the Company
will achieve or sustain profitable  operations or that it will be able to remain
in business.


     FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FUNDING. The Company has
generated  minimal  revenues  from  product  distribution.  Revenues are not yet
sufficient to support the Company's  operating  expenses and are not expected to
reach  such  levels  until the  fourth  quarter  of 1998 . Since  the  Company's
formation,  it has funded its  operations  and  capital  expenditures  primarily
through private placements of debt and equity  securities.  See "Recent Sales of
Unregistered  Securities."  The  Company  will be  required  to seek  additional
financing in the future.  There can be no assurance  that such financing will be
available at all or available on terms acceptable to the Company.


     GOVERNMENT REGULATION. The Company's operations are subject to gaming laws,
which vary according to the jurisdiction in which each product is marketed.  The
state and local  laws in the  United  States  which  govern the lease and use of
gaming products are widely disparate and continually changing due to legislative
and administrative actions and judicial interpretations. If any changes occur in
gaming laws through  statutory  enactment  or  amendment,  judicial  decision or
administrative  action restricting the manufacture,  distribution or use of some
or all of the Company's  products,  the Company's  present and proposed business
could be  adversely  affected.  The  operation  of  gaming  on  Native  American
reservations is subject to the Indian Gaming  Regulatory Act ("IGR").  Under IGR
certain types of gaming  activities are classified as Class I, Class II or Class
III. The  Company's  business  will be impacted  based upon how its products are
ultimately  classified.  See "Business - Government  Regulation" and "Business -
Native American Bingo Operations."


     RISK OF LOW-PRICED STOCKS.  Rules 15g-1 through 15g-9 promulgated under the
Securities  Exchange Act of 1934 (the "Exchange  Act") impose sales practice and
disclosure  requirements  on certain  brokers  and dealers who engage in certain
transactions involving "a penny stock."

     Currently,  the  Company's  Common  Stock is  considered  a penny stock for
purposes of the  Exchange  Act. The  additional  sales  practice and  disclosure
requirements imposed on certain brokers and dealers could impede the sale of the
Company's  Common  Stock  in the  secondary  market.  In  addition,  the  market
liquidity and price for the Company's securities may be adversely affected.

     Under the penny stock  regulations,  a broker or dealer selling penny stock
to  anyone  other  than  an  established  customer  or  "accredited   investor"'
(generally,  an  individual  with a net worth in excess of  $1,000,000 or annual
incomes  exceeding  $200,000,  or $300,000 together with his or her spouse) must
make a special suitability  determination for the purchaser and must receive the
purchaser's

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written consent to the transaction prior to sale, unless the broker or dealer or
the transaction is otherwise  exempt.  In addition,  the penny stock regulations
require the broker or dealer to deliver,  prior to any  transaction  involving a
penny  stock,  a disclosure  schedule  prepared by the  Securities  and Exchange
Commission (the "SEC") relating to the penny stock market, unless the broker, or
dealer,  or the  transaction is otherwise  exempt.  A broker,  or dealer is also
required  to  disclose  commissions  payable  to the  broker or  dealer  and the
registered   representative  and  current  quotations  for  the  Securities.  In
addition,  a broker or dealer is required to send monthly statements  disclosing
recent  price  information  with respect to the penny stock held in a customer's
account and information with respect to the limited market in penny stocks.


     LACK  OF  TRADEMARK  AND  PATENT  PROTECTION.   The  Company  relies  on  a
combination of patent, trade secret,  copyright and trademark law, nondisclosure
agreements   and   technical   security   measures  to  protect  its   products.
Notwithstanding these safeguards,  it is possible for competitors of the Company
to imitate it products.  Furthermore,  others may independently develop products
similar or  superior to those  developed  or planned by the  Company.  While the
Company may obtain patents with respect to certain of its products,  the Company
may not have sufficient  resources to defend such patents;  such patents may not
afford all  necessary  protection  and  competitors  may develop  equivalent  or
superior  products which may not infringe such patents.  See "Business - Patents
and Trademarks."


PRODUCTS

MAX BINGO SYSTEMS
     The Company's MAX Bingo Systems products  currently include three different
products:

     [i] MAXPLUS.  The MAXPLUS Bingo System is the first proprietary  electronic
bingo  system  developed  by the Company.  Approximately  295 MAXPLUS  units are
currently in use in the United States.

     MAXPLUS is  designed  to  increase  bingo  revenue at bingo  halls,  reduce
administration costs and increase the excitement of play and the opportunity for
bingo players to win.  MAXPLUS gives players the  opportunity to  electronically
play up to 300 bingo cards simultaneously.  The maximum physical number of cards
an average  bingo player can  manually  daub  (cover) is  approximately  18. The
electronically  operated  MAXPLUS  system keeps track of each card and gives the
player the option to display  on the  screen  those most  likely to reach  bingo
first.  As the  bingo  numbers  are  called  they  can be  entered  manually  or
automatically.  The manual setting keeps the players focused and feeling part of
the game as if they were playing a paper-based  system.  The  automatic  setting
lets the  players  relax and  concentrate  on their paper  daubing,  if they are
playing paper bingo as well, or eating, drinking, or engaging in conversation if
they are not.

     For the bingo hall operator,  electronic bingo systems, such as the MAXPLUS
Bingo  System,  may increase the revenue  generated on a daily basis by allowing
players  to play  many more  cards at a time.  Concession  stand  sales may also
increase  because  players can  consume  greater  amounts  within the same bingo
session. By generating greater gross revenues, the hall operator may be able

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to increase the size of the prizes awarded and thereby attract larger crowds. In
addition,  the MAXPLUS Bingo System lets the operator track necessary  financial
and analytical information by providing a fully integrated accounting package.

     [ii]  MAXLITE.  The  MAXLITE  Bingo  system is the newest  addition  to the
Company's electronic bingo product line. It is a portable,  hand-held electronic
bingo unit which stores up to 50 different  games and allows users to play up to
300 bingo  cards per game.  The unit  measures  12" x 9" and offers  many of the
advantages of the MAXPLUS system in a lightweight wireless package, which allows
players  freedom of movement in the bingo hall,  thus  increasing  the  players'
enjoyment and the hall operators'  revenue.  Approximately 525 MAXLITE units are
currently in use in the United States.

     [iii] TurboMAX. TurboMAX is a pari-mutual system which has five progressive
jackpots  with five  different  patterns for each game.  A percentage  of player
purchases can be selected and allocated toward a jackpot, which allows a jackpot
to be offered on every  game.  TurboMAX  is a high speed bingo game which can be
played every 45 to 60 seconds.  Approximately 30 TurboMAX units are currently in
use in the United States.


SONIC BINGO

     Sonic  Bingo is a  high-stakes  electronic  speed bingo unit which uses the
Company's  TurboMAX   software,   and  is  capable  of  playing  multiple  cards
simultaneously  in sixty  (60)  second  intervals.  Sonic  Bingo  units  will be
available in various  styles  capable of  accommodating  from 4 to 250 stations.
This system is capable of being networked  throughout gaming halls as well as an
entire  city or even a country  (depending  upon  regulatory  approvals),  which
facilitates games involving major progressive jackpots.

     The Sonic Bingo  prototype was introduced to the market at the World Gaming
Show in Las Vegas held in October, 1996. Development is being finalized for beta
testing in the third  quarter  of 1998,  and  introduction  in the market in the
fourth quarter of 1998.

     On March 25, 1998, the Company executed a Letter of Understanding  with its
partner in the Sonic Bingo  project,  SEGA  Gaming  Technology,  Inc.  This is a
refinement  of the previous  Letter of Intent signed by the parties May 13, 1996
and includes the  formation  of a new  corporation  which will result in: 

     o    Sega Gaming Technology, Inc. licensing the use of the name "SEGA".
     o    Advanced  Gaming  Technology,  Inc.  licensing  its MAX  Bingo  System
          software,  Prisms  patented  game  technology,  and  rights to use the
          "Sonic Bingo" trademark.
     o    Net income,  capital  expenditures and other product development costs
          will be shared equally. Additionally, SEGA Gaming Technology, Inc. has
          committed to acquire up to 5,000,000  common shares of Advanced Gaming
          Technology,  Inc. in open market transactions and/or by way of private
          placement.

     Pursuant to an agreement  with Fortune  Entertainment  Corporation,  and in
order to assist in

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the  development of Sonic Bingo,  in September  1996, the Company sold an 18.75%
share of the Company's interest in this project for $750,000;  $390,000 of which
had been received up to December 31, 1997.


Parti MAX

     The Company,  having  developed its MAXLITE hand held unit,  identified the
United  Kingdom as a natural  new market for a  portable  unit,  since  there is
currently no portable  electronic  bingo systems in that country,  and the bingo
market  there is  substantial.  The Company  entered  into a Leasing and Service
Agency  Agreement dated September 15, 1996 with Edward Thompson Group ("ETG") of
the United  Kingdom,  a private  company  established  in 1867,  and the leading
manufacturer  and supplier of bingo paper and related  products in that country.
Pursuant  to the  Agreement  the  Company is  developing  a  wireless  hand-held
electronic bingo system suitable for the United Kingdom market.  Advanced Gaming
Technology, Inc. is responsible for design, engineering, manufacture, and supply
of the product. Edward Thompson Group will be responsible for marketing and sale
or lease of the Parti MAX system in bingo halls  throughout  the U.K.  Also, ETG
will be responsible for personnel training, repair and maintenance, all customer
service activities, and for administration of each installation. ETG will obtain
all necessary regulatory approvals.

     The Company and Edward Thompson Group will share net revenues equally after
Advanced  Gaming has recouped  certain of its  development  costs (up to 500,000
pounds sterling, approximately $800,000), until then revenues will accrue 60% to
Advanced Gaming Technology, Inc., and 40% to ETG.

     The Company is at an advanced stage of  development  for the Parti MAX, and
expects  preliminary testing in bingo halls to commence in the second quarter of
1998, with revenues anticipated to begin in the fourth quarter of 1998.

     Pursuant to an agreement  with Fortune  Entertainment  Corporation,  and in
order to assist in the  development of Parti MAX, in September 1996, the Company
sold a 15.0% share of the Company's interest in this project for $600,000.


SALES AND MARKETING

     The MAX  Bingo  Systems  are  leased to bingo  halls.  The cost to the hall
operator  is based on a daily  lease rate per unit,  which  reduces  the initial
capital  outlay of the operator.  The  Company's  MAX Bingo  Systems  complement
paper-based  bingo  halls.  The  Systems  are  modular;  consequently,  as their
popularity builds, additional units can be added to the systems.

     In February, 1998 the Company executed a Financing,  Licensing, and Royalty
agreement with a major competitor,  Bingo Technologies Corporation ("BTC"). This
agreement  grants BTC the  exclusive  right to sell,  market,  manufacture,  and
distribute  the MAXPLUS and  TurboMAX  products in the United  States only for a
period of five years.  This agreement has produced a licensing fee ($1,500,000),
and will generate  royalties of 15% based on the gross revenues generated by BTC
from

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marketing these products.  Minimum  royalties in the first year of the agreement
are  $350,000  and are to be  negotiated  by the  parties  thereafter,  with the
minimum royalty not to be lower than $350,000 in any year.


     TARGET MARKETS. Native American,  charity, military, casino and cruise line
bingo operations are considered by the Company to be prospective markets for the
Company's  electronic  bingo  systems.  Currently,  the Company is focusing  its
marketing efforts on the Native American and charity markets.

     Initially,  the Company has targeted the United States and Canadian markets
due  to  their  size,  proximity  and  familiarity.  Other  world  markets  with
significant bingo operations are the United Kingdom,  Australia, New Zealand and
Europe.  A large potential for electronic  bingo also exists in Asia and Central
and South America. The Company may pursue these and other international  markets
in the future.

     Advanced Gaming will focus it's activities concerning the MAX Bingo Systems
as follows:

          MAXPLUS & TurboMAX - Canada and other world markets

          MAXLITE            - United States, Canada and other world markets


     MARKET SEGMENTS. The key segments of the bingo market are as follows:

     HIGH STAKES  NATIVE  AMERICAN  BINGO.  There are  presently  over 200 bingo
operations  located on Native  American  reservations  in the United  States and
Canada. It is believed that the largest bingo games in the United States are run
on Native American  reservations.  The bingo halls located on these reservations
typically seat between 300 and 2,000 players. Bingo games are conducted three to
seven days per week, playing up to 28 bingo sessions per week.

     CHARITY  BINGO.  Charity bingo sessions are conducted on a regular basis by
parochial,  private and public schools, churches,  fraternal orders, sororities,
little  leagues,   symphony   orchestras,   cultural  and  civic  organizations,
auxiliaries,   various   clubs,   synagogues,   day-care   centers,   retirement
associations and most of other  not-for-profit  organizations  across the United
States and Canada.  Some of these bingo operations,  because of their small size
or  infrequency  of  operation,  are not  candidates  for  permanent  electronic
installations,  although portable  electronic systems may be provided to certain
operations on a predetermined date and removed after completion of the session.

     In many states,  it is legal for a number of  charities  to associate  with
each other for the purpose of operating  bingo halls.  In North  America,  it is
estimated that the majority of charity bingo is conducted in this manner.  Under
this concept, the association leases a suitable hall, plays bingo seven days per
week, with a specific charity accepting  responsibility  for operations for that
particular  day of the week.  In the United  States,  this type of  operation is
known as a "bingo  barn."  The  result  is a bingo  operation  that is much more
efficient than isolated charity games. All of these charity bingo

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operations are strong candidates for the electronic bingo systems.

REAL ESTATE HOLDING

     On June 22, 1995,  pursuant to an Agreement and Plan of  Reorganization  by
and among the Company,  Branson Signature Resorts,  Inc. ("Branson") and certain
shareholders  of Branson,  dated June 1, 1995 (the  "Exchange  Agreement"),  the
Company  acquired  all  the  capital  stock  of  Branson  and  its  wholly-owned
subsidiaries  in exchange for 5,999,820  shares of the  Company's  Common Stock.
Branson and its subsidiaries are a resort and land developer located in Branson,
Missouri, which owned two separate real estate properties: (i) a resort property
with limited  existing  development  on site;  and (ii) 178 acres of undeveloped
property in Stone County,  Missouri.  On November 17, 1995, the Company disposed
of the resort  property by  forfeiture  to the mortgage  holder.  The Company is
currently  attempting to capitalize on the 178 acres of undeveloped  property by
way of a sale or development of the property with a joint venture partner.

     The  undeveloped  property has been pledged to secure the repayment of: (i)
promissory notes in an aggregate principal amount of $1,339,792 bearing interest
at nine percent (9%) per annum and due in July 2002;  (ii) a promissory  note in
the principal  amount of $60,812 bearing interest at ten percent (10%) per annum
and due on demand; and (iii) a convertible  debenture in the principal amount of
$1,249,286 and accrued  interest in the amount of $228,538  bearing  interest at
two percent (2%) per month,  compounded monthly,  which was due December 1, 1997
and is currently being renegotiated.


RECENT ACQUISITION

     PRISMS,  INC. The Company  entered into a Share Purchase  Agreement,  dated
September 26, 1996 (the "Prisms Agreement"), among (i) the Company, (ii) Prisms,
and (iii) the shareholders of Prisms,  to acquire all the issued and outstanding
shares of Prisms.  The purchase price for the acquisition was $600,000,  payable
in 300,000  shares of the  Company's  Common  Stock,  with such shares  having a
deemed  value of $2.00 per share (the  "Acquisition  shares").  Prism's  primary
assets are certain patents for the development of bingo and other  entertainment
games  which  management  of  the  Company  believes  favorably  complement  the
Company's MAX Bingo Systems. Prisms has invented several games under the patents
(the  "Patented  Products")  and has intent to use  trademarks  in place for the
Patented Products.

     Pursuant to the Prisms  Agreement,  in October  1997,  the  Company  issued
2,567,755  additional  shares  of Common  Stock so that the  total  value of the
Acquisition shares issued equaled $600,000. In addition, upon the receipt by the
Company of $10,000 of net sales for a Patented Product,  the Company is required
to issue an additional 28,572 shares of Common Stock, at a deemed value of $2.00
per share, for each such Patented Product (the "Product  Shares").  In the event
the issued  Product  Shares do not trade at a minimum  average  closing price of
$2.00  per  share as  reported  by the NASD  for a ten (10) day  trading  period
commencing  12 months after the issuance of the Product  Shares,  the Company is
required to issue  additional  shares of Common Stock so that the total value of
the Product Shares is $57,144. The Company has not issued any Product Shares.


                                      -11-

<PAGE>



     The former Prisms shareholders are also entitled to a royalty, payable on a
quarterly basis, equal to two percent (2%) of the net sale price of the products
after deduction of packaging and shipping  costs,  allowances made for defective
products,  excise  duties,  value-added  taxes or other similar taxes charged or
included in the price to the customer.


NATIVE AMERICAN BINGO OPERATIONS

     THE INDIAN GAMING  REGULATORY ACT. IGR classifies  games that may be played
on  Native  American  land  into  three  categories.  Class  I  gaming  includes
traditional Native American social and ceremonial games and is regulated only by
the tribes.  Class II gaming  includes  bingo,  pulltabs,  lotto,  punch boards,
instant bingo,  certain card games played under limited  circumstances and other
games  similar  to bingo if those  games are played at the same  location  where
bingo is played.  Class III gaming  consists of all forms of gaming that are not
Class I or Class II, such as video casino games, slot machines, most table games
such as black jack, craps and keno. Generally,  Class II gaming may be conducted
on Native American lands if the state in which the Native  American  reservation
is located permits such gaming for any purpose by any person.  Class III gaming,
on the other hand, may only be conducted  pursuant to a compact  reached between
the  Native  American  tribe and the state in which  the tribe is  located.  See
"Business - Government Regulation."


PROPOSED OPERATIONS IN ASIA

     The Company  embarked on a  restructuring  of the  Company's  operations in
December 1997, and consequently has abandoned all projects in Asia.

     Due to the Company's limited financial resources,  the inability to execute
its intentions  from afar, and the political  uncertainty of Asia, all prospects
regarding  any projects in Asia have been  terminated.  The Company is currently
disposing of all assets,  and believes all potential costs and charges have been
adequately reflected in the financial statements for the year ended December 31,
1997.

     The  Company's  proposed  operations  in Asia  were  subject  to  political
instability  and  government  regulations  relating to the gaming  industry  and
foreign investors.  Any changes in regulations or shifts in political conditions
were beyond the control of the  Company.  Corporations  are  affected in varying
degrees by government  regulations with respect to restrictions on production of
sales,  price controls,  import/export  controls,  income tax,  expropriation of
property  and  environmental  legislation.  Operations  may  also be  materially
affected by political  and  economic  instability,  economic or other  sanctions
imposed  by  other  countries,  terrorism,  civil  wars,  guerrilla  activities,
military repression,  crime, extreme fluctuations in currency exchange rates and
inflation.  The instability of China and the Philippines  made it more difficult
for  the  Company  to  attain  any  required  project   financing  from  lending
institutions or private funding sources.





                                      -12-

<PAGE>



PARTICIPATION AGREEMENT WITH FORTUNE ENTERTAINMENT CORPORATION

     The  Company  entered  into an  Agreement,  dated  July 17,  1996,  amended
September 15, 1996 (the "Participation  Agreement"),  with Fortune Entertainment
Corporation,  a Delaware  corporation  ("FEC")  under which FEC has the right to
receive a participating interest in certain of the Company's projects as well as
having the option to provide  funding  for the  Company's  MAXLITE  handset on a
lease basis.

     Under  the  Participation   Agreement,   FEC  has  acquired  the  following
interests:

     Parti MAX

     The right to acquire up to a fifteen percent (15%) carried  interest in the
     Company's  interest in the bingo projects  currently being developed in the
     United   Kingdom  for  $600,000  to  be  paid  to  the   Company.   Fortune
     Entertainment  must pay its pro rata share of the costs and  liabilities of
     the  United  Kingdom  bingo   projects.   On  October  31,  1996,   Fortune
     Entertainment exercised its right and paid the Company $600,000.

     Sonic Bingo

     The right to acquire an 18.75%  interest in the  Company's  interest in the
     development  of the Sonic Bingo game in exchange for $750,000 to be paid on
     or before  September 30, 1996, of which $390,000 was paid to the Company on
     September 30, 1996. Fortune  Entertainment  still owes the Company $360,000
     in order to secure it's interest.

     The  parties  are  currently   re-negotiating  certain  of  the  terms  and
conditions of the  Participation  Agreement,  including the  possibility  of the
Company repurchasing FEC's interest in these projects.  As at December 31, 1997,
Fortune Entertainment had provided the Company with a total of $1,025,738.


GOVERNMENT REGULATION

     In the United States,  bingo is a legal gambling enterprise in the District
of Columbia and all states,  except Utah and Hawaii.  In 46 of those states,  it
must  be  operated  either  by,  or  in  association   with,  a   not-for-profit
organization.  The two states where it may be played under private ownership for
profit are Nevada and certain  parts of Maryland.  In any of the 48 states where
bingo and other forms of gaming are legal,  bingo may be played on tribal  lands
under tribal  ordinance and with licensing  approval by the tribes without state
regulation.

     In each of the states where bingo is legal,  the opening and operation of a
game  requires a license.  In some states  licensing is  controlled at the state
level and in other states it is controlled  and issued at the local level.  Some
states have formed and maintain  formal gaming  commissions.  In several states,
the gaming commissions require that distributors, manufacturers and suppliers of
bingo  products  and  equipment  as well as their  sales  representative  obtain
licenses.  State  regulations may limit the amount of revenues which the Company
can generate by limiting the number of sessions, revenues per session, number of
locations  which  may  be  operated,  or  other  matters.  The  application  for
administrative approval by the Nevada Gaming Control Board to market and operate
the Company's  electronic bingo systems was filed to obtain access to the Nevada
market. The Company is licensed in Alaska, Mississippi,  Nevada, Texas, Virginia
and Wisconsin, and has submitted an

                                      -13-

<PAGE>



application for licensing to the Province of British Columbia, Canada.

     The state and local laws in the United  States  which  govern the lease and
use of gaming  products are widely  disparate  and  continually  changing due to
legislative  and  administrative  actions and judicial  interpretations.  If any
changes occur in gaming laws through statutory enactment or amendment,  judicial
decision or administrative  action restricting the manufacture,  distribution or
use of some or all of the Company's products, the Company's present and proposed
business could be adversely affected.

     Under IGR certain  types of gaming  activities  are  classified as Class I,
Class II or Class  III.  Class I gaming  includes  traditional  Native  American
Social and ceremonial games and is regulated only by the tribes. Class II gaming
includes bingo,  pull-tabs,  lotto,  punch boards,  instant bingo,  certain card
games played under  limited  circumstances  and other games  similar to bingo if
those games are played at the same  location  where  bingo is played.  Class III
gaming consists of all forms of gaming that are not Class I or Class II, such as
video casino games,  slot machines,  most table games such as black jack,  craps
and keno.  Generally,  Class II gaming may be conducted on Native American lands
if the state in which the Native  American  reservation is located  permits such
gaming for any purpose by any person.  Class III gaming,  on the other hand, may
only be  conducted  pursuant to a compact  reached  between the Native  American
tribe and the state in which the tribe is located.  The Company's  business will
be impacted based upon how its products are ultimately classified.

     No  assurances  can be given that any of the  Company's  contracts  will be
renewed upon the  expiration  of their term or that,  if renewed,  the terms and
conditions  thereof will be favorable to the Company,  nor can any assurances be
given  that a tribe or  tribes  will not  cancel  any such  agreements  prior to
expiration of their stated term.


COMPETITION

     The  Company  believes  it has five main  competitors,  most of which  have
substantially greater financial,  marketing and technological resources than the
Company. In addition, since electronic bingo comprises only a very small segment
of the  industry,  it is  conceivable  that there will be new  products  and new
companies  entering this area of business.  Notwithstanding  this, the Company's
management  is of the opinion that with its constant  upgrading of its MAX Bingo
Systems and  introduction of new products,  the Company will be able to attain a
meaningful share of this relatively untapped market.


PATENTS AND TRADEMARKS

     The Company relies on a combination of patent, trade secret,  copyright and
trademark  law,  nondisclosure  agreements  and technical  security  measures to
protect its  products.  Notwithstanding  these  safeguards,  it is possible  for
competitors  of the Company to imitate  its  products.  Furthermore,  others may
independently develop products similar or superior to those developed or planned
by the Company.  While the Company may obtain patents with respect to certain of
its  products,  the Company  may not have  sufficient  resources  to defend such
patents, such patents may not afford all

                                      -14-

<PAGE>



necessary protection and competitors may develop equivalent or superior products
which may not infringe such patents.


RESEARCH AND MARKET DEVELOPMENT

     During the fiscal  years ended  December  31, 1997 and 1996,  research  and
market development expenses of the Company totaled approximately  $1,230,426 and
$1,691,546  respectively.  During 1997 and 1996 the  majority of these  expenses
were related to the  development  of MAXLITE,  the  refinement  of MAXPLUS,  and
TurboMAX and the further  development  of its new  products  Parti MAX and Sonic
Bingo.


EMPLOYEES

     As of February  28,  1998,  the Company had 21  employees,  none of whom is
represented by a labor union.




                         ITEM 2. DESCRIPTION OF PROPERTY



     The Company's principal executive offices are located in Vancouver, British
Columbia,  Canada. In addition, the Company has an office in Branson,  Missouri,
where its real estate holding is located.  The Company intends on relocating its
executive and administrative offices to Las Vegas, Nevada by mid 1998.

     Pursuant to a lease dated March 13, 1995 and amended February 22, 1996 (the
"Vancouver Lease"),  the Company leases 4,252 square feet in Vancouver,  British
Columbia  for its  principal  executive  office.  The annual base rent under the
Vancouver  Lease is CDN $34,788.  The Vancouver Lease expires on March 31, 2000.
The  Company  intends to assign  this lease in  conjunction  with its  corporate
restructuring whereby executive and administrative  functions will be re-located
to Las Vegas, Nevada.

     The Company's  wholly-owned  subsidiary,  River Oaks Holding,  Inc. ("River
Oaks"), leases approximately 900 square feet in Branson,  Missouri pursuant to a
lease dated  November 1, 1996 (the  "Branson  Lease").  River Oaks pays $300 per
month rent under the Branson Lease, which is month to month.

     In  February,  1998  pursuant  to  an  agreement  with  Bingo  Technologies
Corporation, ("BTC") the Company assigned it's obligations for it's distribution
facility in Colorado, and its sales and marketing office located in Ohio to BTC.


                                      -15-

<PAGE>



     On June 22, 1995, pursuant to the Exchange Agreement,  the Company acquired
all the capital stock of Branson and its  wholly-owned  subsidiaries in exchange
for 5,999,820 shares of the Company's Common Stock. Branson is a resort and land
developer  located in Branson,  Missouri,  which owned two separate  real estate
properties: (i) a resort property with limited existing development on site; and
(ii) 178 acres of undeveloped  property in Stone County,  Missouri.  On November
17,  1995,  the Company  disposed of the resort  property by  forfeiture  to the
mortgage  holder.  The Company is currently  attempting to capitalize on the 178
acres  of  undeveloped  property  by way of a sale or  development  with a joint
venture partner.

     The  undeveloped  property has been pledged to secure the repayment of: (i)
promissory notes in an aggregate principal amount of $1,339,792 bearing interest
at nine percent (9%) per annum and due in July 2002;  (ii) a promissory  note in
the principal  amount of $60,812 bearing interest at ten percent (10%) per annum
and due on demand; and (iii) a convertible  debenture in the principal amount of
$,1,249,286 and accrual  interest in the amount of $228,538  bearing interest at
two percent (2%) per month,  compounded monthly,  which was due December 1, 1997
and is currently being renegotiated.




                            ITEM 3. LEGAL PROCEEDINGS



     In addition to  ordinary  routine  litigation  incidental  to its  business
operations,  which the Company does not believe,  in the aggregate,  will have a
material  adverse  effect on the  Company,  or its  operations,  the  Company is
engaged in the following lawsuits:

     Braintech,  Inc.  ("Braintech")  filed a statement  of claim in the Supreme
Court of British  Columbia  on  November  24, 1995 and amended on March 26, 1996
claiming default by the Company on three  promissory  notes.  Braintech  claimed
damages in the amount of $200,000, plus interest of ten percent (10%) per annum,
and costs.  In 1997, the Company  settled this dispute for $75,000 to be paid by
issuance of stock.

     In January 1996, Tierra Corporation  ("Tierra")  commenced an action in the
Circuit  Court of Stone  County,  Missouri,  claiming that River Oaks Resort and
Country Club, Inc. a Texas  corporation and a subsidiary of Branson ("River Oaks
Resort")  defaulted on a promissory  note. A judgment is sought in the principal
amount of $75,106,  plus interest  since October 18, 1995, at 10% per annum.  An
answer has been filed on behalf of River Oaks  Resort  averring  that Tierra has
not  performed  conditions  precedent to assessing  any  deficiency  and that no
accounting regarding the disposition of security for such note has been provided
and, in addition, a counter claim was filed,  asserting Tierra disposed of stock
collateral  in a  commercially  unreasonable  manner.  A principal of Tierra has
recently  filed  suit  in  Dallas,   Texas  concerning  the  stock   collateral.
Preliminary discovery has occurred but no depositions have been taken.



                                      -16-

<PAGE>



     In February 1996, P.D.I., LLC, a Missouri limited liability company ("PDI")
commenced  an action in the Circuit  Court of Stone  County  Missouri,  claiming
breach of a real  estate  purchase  agreement  which in part,  provided  for the
construction  of a sewage  treatment  facility  for which  damages are  claimed,
including the awarding to PDI of all escrow funds,  costs and expenses  incurred
by PDI  over and  above  the  amount  of  escrow  funds  and cost and  expenses,
including  attorney fees in connection with the  commencement of the action.  In
response, the Company and River Oaks Resort have counter claimed for damages, in
an amount to be determined at trial,  incurred when plaintiff PDI withdrew funds
from the escrow fund created for construction of the sewage  treatment  facility
and the permit application for construction  approval by the Missouri Department
of Natural Resources.  Moreover, a claim has also been made by River Oaks Resort
and the Company that subsequent development attempted by PDI has encroached upon
property development  belonging to River Oaks Resort and the Company without the
right to do so, including damages for disruption resulting therefrom.

     In April 1996, Larry Newman  ("Newman")  commenced a mechanics' lien in the
Circuit Court of Stone County,  Missouri,  seeking $177,282,  plus interest, for
excavation  work performed  during the period between July 19, 1995 to September
25,  1995  on a  road  across  the  River  Oaks  development  in  Stone  County.
Thereafter,  on or about June 24, 1996,  Jack L. Holt  ("Holt")  filed a similar
petition in the Circuit Court of Stone County,  Missouri,  claiming a mechanics'
lien for engineering  and land surveying  during the period May 16, 1995 to July
4, 1995 for a road across the River Oaks  development  property in the amount of
$9,610,  plus  interest.  The Holt  case has now been  consolidated  in the case
originally filed by Newman. The Company has filed a counterclaim alleging Newman
and Holt extended the road beyond the  boundaries of the River Oaks  development
property onto land owned by Sunset Cove, Ltd., a Missouri corporation. The court
has  since  ordered  Sunset  Cove,  Ltd.  joined  as a  party  needed  for  just
adjudication. Discovery has not yet commenced.

     On November 15, 1996,  Fortunet,  Inc., a Nevada corporation  ("Fortunet"),
filed a patent  infringement  claim in the United States District court Southern
District of  California  against the company and certain other  companies  which
manufacture  and  distribute  electronics  bingo  systems,   claiming  that  the
defendants, including the Company, infringed Fortunet's United States Patent No.
4,624,462  (the  "Patent").  Fortunet  seeks to enjoin the  defendants  from any
further  alleged  infringement  of the Patent and is seeking actual and enhanced
damages as well as attorneys  fees and other costs.  In July 1997,  the case was
transferred from the federal court in San Diego, California to the federal court
in Phoenix, Arizona. Discovery is expected to commence in May, 1998.

     The Company entered into a Lease License Agreement,  dated December 7, 1995
with  G&J  Production  Trust.  Pursuant  to the  Lease  License  Agreement,  G&J
Production  Trust leased 200 MAXPLUS Bingo System units from the Company for use
in G&J Production's  bingo operation located in Victorville,  California.  As of
January 23, 1997, G&J Production Trust was approximately  three months behind in
their  payments  to the  Company and the  Company  removed  its  equipment  from
Victorville. In July 1997, the Company commenced a lawsuit. This action includes
a claim  for all  outstanding  accounts  receivable,  breach  of  Contract,  and
reimbursement  for  various  costs  expended  by the  Company  in regards to the
Contract.

     In December 1997, a former employee commenced an action against the Company
in the District Court of the County of Hennepin,  Minnesota alleging non payment
of certain expenses

                                      -17-

<PAGE>



incurred  while in the employ of the Company.  The Company has entered a defense
and denies any liability.

     In February and March 1998, actions were brought against the Company in the
District  Court in the States of New York and  Colorado  by certain  Convertible
Debenture  holders.  The  plaintiffs  are  alleging the Company is in default in
regard to the conversion of these debentures. The Company has responded to these
allegations, and settlements are pending.

     The Company is vigorously defending these law suits.  However, no assurance
can be given as to the outcome of these cases,  but in the opinion of management
and  counsel,  the  ultimate  liability  will not have a material  effect on its
financial position or results of operations.




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



     No matters  were  submitted to a vote of security  holders  during the year
ended December 31, 1997.

























                                      -18-

<PAGE>



                                     PART II




                      ITEM 5. MARKET FOR COMMON EQUITY AND
                           RELATED STOCKHOLDER MATTERS



     MARKET INFORMATION.  The Company's Common Stock is traded on the NASD's OTC
Bulletin  Board under the symbol  "AGTI." The following  table presents the high
and low bid  quotations  for the Common  Stock as  reported by the NASD for each
quarter during the last two years. Such prices reflect  inter-dealer  quotations
without  adjustments  for retail  markup,  markdown  or  commission,  and do not
necessarily represent actual transactions.

           Year         Period                     Low             High
           ----         ------                     ---             ----
           1996         First Quarter            $ .25           $  .99
                        Second Quarter             .64             2.19
                        Third Quarter              .99             1.61
                        Fourth Quarter             .49             1.26

           1997         First Quarter              .45             1.04
                        Second Quarter             .31              .83
                        Third Quarter              .18              .46
                        Fourth Quarter             .04              .20


     DIVIDENDS.  The Company has never  declared  or paid  dividends.  It is the
present  policy of the Company to retain any  earnings to finance the growth and
development  of the business  and,  therefore,  the Company does not  anticipate
paying dividends on its Common Stock in the foreseeable future.

     The number of  shareholders  of record of the Company's  Common Stock as of
February 28, 1998 was 368.


     RECENT SALES OF UNREGISTERED  SECURITIES.  Sales of unregistered securities
during the past year were filed  pursuant to 8-K on the following  dates:  March
17, 1997;  April 7, 1997;  April 24, 1997; May 27, 1997; June 18, 1997; July 15,
1997;  July 31, 1997;  August 26,  1997;  September  22, 1997;  October 6, 1997;
November 3, 1997; and subsequent to year end, January 14, 1998; March 3, 1998.





                                      -19-

<PAGE>





                       ITEM 6. MANAGEMENT'S DISCUSSION AND
                         ANALYSIS OR PLAN OF OPERATIONS



GENERAL

     Entering  1997,  the  Company's  primary  goal was to secure the  necessary
financing  to enhance the software  for its MAX Bingo  System  products,  and to
develop an  infrastructure  capable of  marketing,  distributing  and  providing
technical  support for these products in a manner which would result in Advanced
Gaming Technology, Inc., finally achieving profitability.

     From a financing  perspective the Company  committed to raise this capital,
through an agent,  by issuing a series of Convertible  Debentures,  issued under
Regulation S of the Securities Act of 1933. Between February 1997 and July 1997,
the Company raised a net total of $4.7 million.  These funds were used to settle
debt, and provide working capital to build the  infrastructure.  By August 1997,
the Company  centralized its U.S. operations in a 20,000 square foot facility in
Denver,  Colorado.  This included  sales,  distribution,  training,  and support
personnel.  Additionally,   software  version  3.0  of  the  MAXLITE  electronic
hand-held  bingo unit was  introduced,  and has been  virtually  trouble free in
bingo balls since this date. At its peak, the Company's employee base reached 46
which was a doubling of the 1996 staffing levels.

     However,  the  nature  of, and the  conversion  terms of these  Convertible
Debentures  has  ultimately  resulted in serious  consequences  to the Company's
image,  undermined  investor  confidence,  and  impaired  its  ability to secure
additional  financing on reasonable  terms to continue with the execution of its
business plan.  Trading in the Company's stock increased  dramatically,  however
the trading price  declined  steadily from an annual high in March 1997 of $1.04
to an all time low of $0.04 by the end of the year.

     Consequently, the Company was unable to generate any material funding since
July 1997, and thus embarked on a new strategy.  Advanced Gaming recognized that
its  strength  lies  in the  development  of  technology  and  products  related
primarily to the bingo  industry.  The Company's MAX Bingo Systems are among the
leading products in the electronic bingo industry. Pursuant to this, the Company
throughout  1997 had a series of  negotiations  with a major  competitor,  Bingo
Technologies Corporation ("BTC") to form a strategic alliance;  ranging from the
distribution  of the  Company's  MAXplus  and Turbo MAX  products to a potential
merger  between  the two  companies.  This  culminated  in the  announcement  in
February 1998, of a Financing, Royalty, and Licensing Agreement granting BTC the
exclusive right to market,  manufacture and distribute the Company's MAXplus and
Turbo  MAX  products  for a five  year term in the U.S.  market  only.  The core
benefits to Advanced Gaming are as follows:

     o    $1,500,000 one time licensing fee;
     o    15% royalty on gross revenues  generated by BTC, with a minimum in the
          first year of the  Agreement of $350,000 and are to be  negotiated  by
          the parties thereafter, with

                                      -20-

<PAGE>



          the  minimum  royalty  in  subsequent  years not to be lower  than the
          royalty amount negotiated in the preceding year;
     o    25% commission on all orders generated by the Company;
     o    Substantial reduction of overhead (approximately 40%) by assignment of
          the Denver distribution  facility,  and the Cleveland marketing office
          to BTC.

     The   execution  of  this   agreement   completes   the  initial  phase  of
restructuring  announced by the Company in December,  1997.  Going forward,  the
Company will focus on the following:

     o    Negotiating  marketing  and  distribution  agreements  for the MAXLITE
          hand-held units in Canada, United States and other world markets;
     o    Working in  conjunction  with BTC, to enhance the MAXPLUS and TurboMAX
          products to maximize the  penetration  of these  products into the key
          U.S. market;
     o    Marketing and licensing of MAXPLUS and TurboMAX products in Canada and
          other world markets;
     o    Introduction of Parti MAX, the first ever  by-directional  handset, in
          the United Kingdom;
     o    The  completion  of the  development  of  Sonic  Bingo,  a fast  paced
          multi-site   progressive   game  in   partnership   with  SEGA  Gaming
          Technology, Inc.;
     o    Development  of other  products  utilizing  the  Company's  library of
          patented Prisms technology.

           Coinciding  with the above,  the  Company  has  appointed a new Chief
Executive  Officer,  Mr. Tom Nieman, who will implement a new Board of Directors
and management  team. Under Mr. Nieman's  direction the Company's  executive and
administration functions will be relocated to Las Vegas, Nevada by mid 1998. The
relocation  will help  position  the  Company  as Las Vegas is the  acknowledged
center of gaming in the U.S.


RESULTS OF OPERATIONS

1997 Compared to 1996

     Net loss for 1997 was $9.6 million  compared to $5.6 million for 1996.  The
$4 million increase is explained as follows:

     o    Increase in general and administrative  expenses of $2.3 million,  the
          majority of which  relate to the building of  infrastructure  to sell,
          market, and distribute the Company's MAX Bingo System products;
     o    Increase in financing  costs and interest of $1.6  million,  primarily
          related to the discounted convertible debentures;
     o    Restructuring  charge of $0.8 million  regarding costs associated with
          changing   executive   management,   relocation   of   executive   and
          administrative  offices  to  Las  Vegas,  Nevada,  and  inventory  and
          equipment   write-downs  relating  to  the  Licensing,   royalty,  and
          Financing Agreement with BTC.


                                      -21-

<PAGE>



INFLATION AND REGULATION

     The  Company's  operations  have not  been,  and in the  near  term are not
expected to be, materially affected by inflation or changing prices. This is due
in part to the highly capital  intensive  nature of the majority of the business
of the Company,  thereby reducing the chances of competition providing for sales
price  reductions  while  inflation  in the costs  are more  likely to be passed
through to the customer.

     The Company's operations are subject to state and local gaming laws as well
as various  federal laws and  regulations  governing  business  activities  with
Native  American  Tribes.  The State and local laws in the United  States  which
govern the lease and use of gaming products are widely disparate and continually
changing   due  to   legislative   and   administrative   actions  and  judicial
interpretations. If any changes occur in gaming laws through statutory enactment
or  amendment,  judicial  decision  or  administrative  action  restricting  the
manufacture,  distribution or use of some or all of the Company's products,  the
Company's  present  and  proposed  business  could be  adversely  affected.  The
operation  of gaming on Native  American  reservations  is subject to the Indian
Gaming Regulatory Act ("IGR").  Under IGR certain types of gaming activities are
classified  as Class I, Class II or Class III. The  Company's  business  will be
impacted based upon how its products are  ultimately  classified.  However,  the
Company does not believe that any recently enacted or presently pending proposed
legislation will have a material adverse effect on its results of operations.


LIQUIDITY AND CAPITAL RESOURCES

     The Company has generated minimal revenues from product sales. Revenues are
not yet sufficient to support the Company's  operating  expenses,  however,  the
Company is cautiously  optimistic  that  operating  revenues will be adequate to
meet operating expenses during the next year. Since the Company's formation,  it
has funded its operations and capital  expenditures  primarily  through  private
placements of debt and equity  securities.  The Company will be required to seek
additional  financing  in the  future.  There  can  be no  assurance  that  such
financing  will be  available at all or  available  on terms  acceptable  to the
Company.

     There are no formal  commitments  from banks or other  lending  sources for
lines of credit or similar borrowings.

     The increase in capital  resources for 1997 is  attributable to the private
placements of Common Stock and the conversion of debt to equity.

     For the  development of some of its new products,  i.e. Parti MAX and Sonic
Bingo,  the Company has been  successful  in  arranging  some off Balance  Sheet
financing  to advance the  development  of these  projects.  (See  Participation
Agreement - Fortune Entertainment Corporation).






                                      -22-

<PAGE>





                          ITEM 7. FINANCIAL STATEMENTS



     The financial statements of the Company and supplementary data are included
immediately  following the signature page to this report. See Item 13 for a list
of the financial statements and financial statement schedules included.




              ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                     ON ACCOUNTING AND FINANCIAL DISCLOSURE



     The Company has no changes in or disagreements  with its accountants on any
accounting and financial disclosure.



























                                      -23-

<PAGE>



                                    PART III



           ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


                                                                        Director
Name, Age and Principal Employment for Past Five Years                  Since

Firoz Lakhani, 53, has been the President, Chief Operating Officer      1995
and Director since September 1995.  Mr. Lakhani served as a
Director at Olds Industries, Inc., a Canadian public company, from
August 1993 to September 1995, and was employed at Park Georgia
Realty, a real estate and land development brokering company, from
July 1990 to August 1993. From 1979 to 1990, Mr. Lakhani was
employed at Montreal Trust Company, where he headed the
Commercial Real Estate Division.  See "Description of Business -
Recent Developments" 

Robert C. Silzer, Sr., 51, has been the Chairman, Chief Executive       1993
Officer and Director of the Company since November 1993.  Mr. 
Silzer, Sr., resigned as Chief Executive Officer effective February
15, 1998. He also currently serves as a Director of InFOREtech
Golf  Technology,  Inc., since September 1995. From 1986 to 1992,
Mr. Silzer served as President and Chief Executive Officer of
Supercart International,  Inc. See "Description of Business
Recent Developments" 

Robert L. Hunziker, 53, was appointed as a Director of the Company      1998
effective January 14, 1998.  Mr. Hunziker has been employed in
corporate relations and corporate finance with public companies
since 1992.  Previously, he was a limited partner (associate director)
of Bear, Sterns & Company, Inc., and he was a principal of
Oppenheimer & Company, Inc. 

The Company has three additional executive officers:

Thomas S. Nieman, 49, was appointed Chief Executive Officer of the Company as of
February 15, 1998.  Mr. Nieman served as Vice President of Sales & Marketing for
Shuffle Master, Inc., a public company supplying the casino gaming industry from
1995 to 1997, and was Vice President of Marketing for Bally Gaming Inc., a major
supplier of gaming equipment from 1992 to 1995.

Robert C.  Silzer,  Jr.,  32, was a director of the Company  from March 31, 1997
until December 17, 1997.  Mr.  Silzer,  Jr. holds the position of Executive Vice
President.  From  December 1992 through  December  1993,  Robert C. Silzer,  Jr.
worked as a sales representative at Mills Printing in Vancouver.

                                      -24-

<PAGE>



Robert C. Silzer, Jr., is the son of Robert C. Silzer, Sr.

Donald Robert MacKay,  45, has been the Chief  Financial  Officer of the Company
since  August  1995.  Prior to joining the  Company,  Mr.  MacKay  served as the
Manager-Business  Analysis at TCG  International,  Inc.  from March 1994 to July
1995.  Prior to that, Mr. MacKay was the Controller of Attachmate  Canada,  Inc.
(formerly KEA Systems Ltd.) from  September  1993 to March 1994 and was a Senior
Financial Accountant at GLENTEL, Inc. from 1989 to 1993.


Compliance with Section 16(a) of the Exchange Act

     Based  solely  upon a review of forms 3, 4, and 5 and  amendments  thereto,
furnished to the Company during or respecting its last fiscal year, no director,
officer,  beneficial owner of more than 10% of any class of equity securities of
the  Company  or any other  person  known to be  subject  to  Section  16 of the
Exchange  Act of 1934,  as  amended,  failed to file on a timely  basis  reports
required by Section  16(a) of the Exchange Act for the last fiscal year or prior
fiscal years.




                         ITEM 10. EXECUTIVE COMPENSATION



     The following  summary  compensation  table sets forth certain  information
regarding  compensation  paid in each of the Company's  last two fiscal years to
the  Company's  Chief  Executive  Officer  and other  executive  officers  whose
salaries and bonus exceeded $100,000:


                           SUMMARY COMPENSATION TABLE

                                                       Other          All
Name and Principal          Fiscal                     Annual        Other
   Position                  Year  Salary     Bonus Compensation Compensation(1)

Robert C. Silzer, Sr.,       1996 $175,000 (2)    -  $  10,000     $  16,692
Chairman and Chief           1997 $225,000 (3)    -  $  10,000     $  16,832 (4)
Executive Officer(10)

Firoz Lakhani                1996 $125,000 (5)    -  $  10,000     $  16,692
President and                1997 $175,000 (6)    -  $  10,000     $  13,004 (7)
Chief Operating Officer

Robert C. Silzer, Jr.,       1997 $101,667 (8)    -  $       -     $   2,292 (9)
Executive Vice               1996 $ 85,937        -  $       -     $       -
President

                                      -25-

<PAGE>



(1)  Amounts  under "All Other  Annual  Compensation"  represent  an  automobile
     allowance for: Robert C. Silzer, Sr., of $10,800 for 1996, $12,000 for 1997
     and certain employee benefits; an automobile allowance for Firoz Lakhani of
     $9,600  for  1996,  $10,800  for 1997 and  certain  employee  benefits;  an
     automobile  allowance for Robert Silzer, Jr. of $2,000 for 1997 and certain
     employee benefits.
(2)  Includes $37,500 deferred to subsequent year.
(3)  Includes $29,375 deferred to subsequent year.
(4)  Includes $1,500 deferred to subsequent year.
(5)  Includes $33,333 deferred to subsequent year.
(6)  Includes $23,125 deferred to subsequent year.
(7)  Includes $1,350 deferred to subsequent year.
(8)  Includes $22,917 deferred to subsequent year.
(9)  Includes $2,000 deferred to subsequent year.
(10) Effective  February 15, 1998, Mr. Silzer,  Sr.  resigned as Chief Executive
     Officer.

No bonuses were paid in 1996 and 1997.


Director Compensation

     There are no  arrangements  pursuant to which Directors are compensated for
any services provided as a Director.


Option Grants in Last Fiscal Year

     The following table sets forth information covering the grant of options to
acquire  Common  Stock  in the last  year to the  persons  named in the  Summary
Compensation Table.


                    GRANT OF OPTIONS TO ACQUIRE COMMON STOCK

                                           % of Total
                                           Options
                             Number of     Granted to   Exercise or
                             Options       Employees    Base Price    Expiration
Name                         Granted       in Year      Per Share     Date

Robert C. Silzer, Sr         800,000       22.6%        $0.052        01/05/2003
Firoz Lakhani                600,000       16.9%        $0.052        01/05/2003
Robert  C. Silzer, Jr        600,000       16.9%        $0.052        01/05/2003






                                      -26-

<PAGE>



Aggregate Option Exercises in Last Year, and Year-End Option Values

     The  following  table sets  forth,  for the  persons  named in the  Summary
Compensation Table, information regarding aggregate exercises of options in 1997
and the number and value of unexercised options at December 31, 1997.

<TABLE>

                     AGGREGATE EXERCISES OF OPTIONS IN 1997

<CAPTION>

                  Shares                                                  Value of Unexercised
               Acquired on                   Number of Unexercised        In-the-Money Options
                              Value            Options at FY-End               FY-End ($)(1)
                 Exercise    Realized ($)   Exercisable/Unexercisable    Exercisable/Unexercisable(3)
<S>            <C>           <C>            <C>             <C>          <C>           <C>

Robert C.
Silzer, Sr.      1,000,000   $    27,400       800,000(2)   1,000,000     $        -   $       25,000

Firoz
Lakhani          1,320,000   $    30,837       780,000(2)     750,000     $        -   $       18,750

Robert C.
Silzer, Jr.              -   $         -     1,000,000              -     $        -   $            -

</TABLE>


(1)  Based upon the difference  between the exercise price and the closing price
     of the shares on December 31, 1997.

(2)  Includes options for 1997.

(3)  Based on 50% of the ten day trading  average prior to the effective date of
     the option in 1999.


Employment Agreements

     Effective January 1, 1994, the Company entered into an employment agreement
with Robert C. Silzer, Sr. (the "Silzer Sr. Employment Agreement"),  under which
Robert C.  Silzer,  Sr.  serves as Chairman and Chief  Executive  Officer of the
Company.  Pursuant to the Silzer Sr. Employment Agreement, Mr. Robert C. Silzer,
Sr,.  was paid a salary of $75,000 in 1994,  $125,000  in 1995 and  $137,500  in
1996. He deferred $37,500 of his salary for the year 1996. Robert C. Silzer, Sr.
was paid a salary of $225,000 in 1997 and deferred  $29,375 to 1998. Mr. Silzer,
Sr. will be paid a salary of $275,000 in 1998,  $325,000 in 1999 and $375,000 in
2000. In addition,  Robert C. Silzer, Sr. is eligible to receive an annual bonus
in an amount  equal to 5% of the net income of the Company and its  subsidiaries
(the  Company  and its  subsidiaries  did not have net  income in 1996 or 1997).
Robert C.  Silzer,  Sr.  received a signing  bonus of  250,000  shares in common
stock.  Robert C. Silzer, Sr. was also paid an automobile  allowance of $900 per
month in 1996 and $1,000 per month in 1997 of which  $1,500 was deferred to 1998
and will be paid an additional $100 per month for each remaining

                                      -27-

<PAGE>



calendar year of the term of the Silzer Sr.  Employment  Agreement.  Pursuant to
the Silzer Sr. Employment  Agreement,  Robert C. Silzer, Sr. was granted options
to  purchase;  (i) 500,000  shares of the  Company's  Common Stock in 1995 at an
exercise  price of $.30 per  share;  and (ii)  750,000  shares of the  Company's
Common Stock in 1996 at an exercise  price of $.50 per share and will be granted
options to purchase  1,000,000 shares of Common Stock of the Company for each of
the years 1997,  1998 and 1999,  all at an exercise price equal to fifty percent
(50%) of the ten day average  trading price prior to the  effective  date of the
option.

     In addition,  pursuant to the Silzer, Sr. Employment  Agreement,  Robert C.
Silzer,  Sr. is  entitled  to receive a lump sum  payment  equal to the  present
value,  using an eight  percent  (8%)  discount  factor,  of his  salary for the
unexpired term of the Silzer Sr.  Employment  Agreement,  plus the amount of any
performance  bonus,  grants of Common Stock and options  which Robert C. Silzer,
Sr. is entitled,  which shall be a minimum of $5,500,000  (the Silzer  Severance
Payment")  if (i) Robert C. Silzer,  Sr. is  terminated  by the Company  without
"just cause" as determined under the common law of British Columbia or, (ii) (a)
there is a change of control (as  defined),  (b) the  Company  employs any other
senior  executive  without Robert C. Silzer,  Sr.'s prior written consent or (c)
materially alters the duties of Robert C. Silzer,  Sr. without Robert C. Silzer,
Sr.'s prior written consent.  The Silzer Sr. Employment  Agreement also provides
that Robert C.  Silzer,  Sr.  shall not compete with the Company for a period of
twelve (12) months after  termination  of his employment  with the Company.  The
Silzer, Sr. Employment Agreement terminates on December 31, 2000.

     Effective  September  5,  1995,  the  Company  entered  into an  employment
agreement with Firoz Lakhani (the Lakhani  Employment  Agreement"),  under which
Mr.  Lakhani  serves as President  and Chief  Operating  Officer of the Company.
Pursuant to the Lakhani Employment  Agreement,  Mr. Lakhani was paid a salary of
$6,250 per month from  September  1, 1995 to  December  31,  1995 and $91,667 in
1996. He deferred  $33,333 of his salary for the year 1996. Mr. Lakhani was paid
a salary of $175,000 in 1997,  and deferred  $23,125 1998.  Mr.  Lakhani will be
paid a salary of $225,000 in 1998,  $275,000  in 1999 and  $325,000 in 2000.  In
addition,  Mr. Lakhani is eligible to receive an annual bonus in an amount equal
to 3.5% of the net income of the Company and its  subsidiaries  (the Company and
its  subsidiaries  did not have any net  income  in 1996 or 1997).  Mr.  Lakhani
received a signing bonus of 200,000 shares of Common Stock. Mr. Lakhani was also
paid an  automobile  allowance of $800 per month in 1996 and $10,800 for 1997 of
which $1,350 was deferred to 1998, and will be paid an additional $100 per month
for  each  remaining  calendar  year  of  the  term  of the  Lakhani  Employment
Agreement. Pursuant to the Lakhani Employment Agreement, Mr. Lakhani was granted
options to purchase (i) 300,000 shares of the Company's  Common Stock in 1995 at
an exercise  price of $.30 per share and (ii)  500,000  shares of the  Company's
Common Stock in 1996 at an exercise  price of $.50 per share and will be granted
options to purchase  750,000  shares of Common  Stock of the Company for each of
the years 1997,  1998 and 1999,  all at an exercise price equal to fifty percent
(50%) of the ten day average  trading price prior to the  effective  date of the
option.

     In addition,  pursuant to the Lakhani Employment Agreement,  Mr. Lakhani is
entitled to receive a lump sum  payment  equal to the  present  value,  using an
eight percent (8%) discount factor,  of his salary for the unexpired term of the
Lakhani Employment  Agreement,  plus the amount of any performance bonus, grants
of Common Stock options which Mr. Lakhani is entitled,  which shall be a minimum
of $4,250,000 (the Lakhani Severance  Payment") if (i) Mr. Lakhani is terminated
by the

                                      -28-

<PAGE>



Company  without  "just  cause" as  determined  under the  common law of British
Columbia  or (ii) there is a change of control  (as  defined),  (b) the  Company
employs any other executive  without Mr.  Lakhani's prior written consent or (c)
materially  alters the duties of Mr. Lakhani without Mr. Lakhani's prior written
consent.  The Lakhani Employment  Agreement also provides that Mr. Lakhani shall
not  compete  with  the  Company  for a  period  of  twelve  (12)  months  after
termination of his employment with the Company. The Lakhani Employment Agreement
terminates on December 31, 2000.

     Effective  February  15,  1994,  the  Company  entered  into an  employment
agreement,  amended  December  8, 1997 and  February  17,  1998,  with Robert C.
Silzer,  Jr. (the "Silzer Jr.  Employment  Agreement") under which Mr. Robert C.
Silzer,  Jr.  serves as  Executive  Vice  President  of the  Company,  effective
September  1, 1997.  Pursuant  to the  Silzer,  Jr.  Employment  Agreement,  and
amendments thereto,  Robert C. Silzer, Jr. was paid a salary of $49,000 in 1994,
$55,000 in 1995 and $85,937 in 1996 and effective  September 1, 1997, his annual
salary  increased to $125,000.  In addition,  Robert C. Silzer,  Jr. was granted
options to purchase  50,000 shares of the  Company's  Common Stock on January 1,
1994,  1995, 1996 and 1997, all at an exercise price of $1.00 per share and will
be granted  options to purchase 50,000 shares of Common Stock on January 1, 1998
at an  exercise  price  of  $1.00  per  share.  Mr.  Silzer  is to be paid a car
allowance  of $500 per month for the period  September  1, 1997 up to August 31,
1998 and thereafter $600 per month. The Silzer, Jr. Employment Agreement expires
February 14, 2000.

     Effective March 6, 1998, the Company  entered into an employment  agreement
with Thomas N.  Nieman  (the  "Nieman  Employment  Agreement"),  under which Mr.
Nieman serves initially as Chief Executive  Officer and will assume the title of
President  upon the  resignation  of Mr. Firoz  Lakhani.  Pursuant to the Nieman
Employment  Agreement,  Mr.  Nieman will be paid a base  salary of $180,000  per
annum,  which will be reviewed  annually by the Board of Directors to the end of
the term on February 15, 2001.  Mr. Nieman will  participate  in a new executive
bonus plan for Senior  Management,  which  allocates 3% of the Net Income of the
Company each year to be allocated at the Board of Director's  discretion.  As an
additional  part of Mr.  Nieman's  compensation,  he will be granted  options to
purchase  up to  1,000,000  shares  of the  Company  at $0.06  upon the  Company
achieving a positive operational cash flow.

     In addition,  Mr.  Nieman is granted a minimum of 500,000 stock options for
each of the years 1998,  1999 and 2000,  at an exercise  price of $0.06.  If the
Company has a positive cash flow at the date Mr. Nieman exercises these options,
the Company may loan Mr. Nieman the sums necessary for such exercise,  including
interest at a reasonable rate.

     Mr.  Nieman also  receives the following  compensation  and benefits:  four
weeks  annual  vacation;  an  automobile  allowance  of $500.00 per month;  full
coverage of employee benefits including medical and dental.

     In addition,  pursuant to the Nieman  Employment  Agreement,  Mr. Nieman is
entitled to receive a lump sum  payment  equal to the  present  value,  using an
eight percent (8%) discount factor,  of his salary for the unexpired term of the
Nieman Employment Agreement, plus the amount of any performance bonus, grants of
Common  Stock  options  which Mr.  Nieman is entitled,  (the  "Nieman  Severance
Payment") if (i) Mr. Nieman is terminated by the Company without "just cause" as

                                      -29-

<PAGE>



determined under the common law of Nevada,  or (ii) there is a change of control
(as defined),  (b) the Company  employs any other  executive  with Mr.  Nieman's
prior  written  consent,  or (c) fails to comply with any  material  term of his
Agreement.  The Nieman Employment  Agreement also provides that Mr. Nieman shall
not  compete  with the  Company for a period of  twenty-four  (24) months  after
termination of his employment with the Company.




                ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                              OWNERS AND MANAGEMENT



     The  following  table  sets  forth  information  as of  February  28,  1998
regarding  the  beneficial  ownership  of Common stock of the Company by (i) the
directors of the Company,  (ii) each executive named in the Summary Compensation
Table that appears under "Executive  Compensation-Summary  Compensation  Table,"
(iii) each person who was known by the Company to own beneficially  more than 5%
of the  outstanding  shares of Common Stock of the Company and (iv) all officers
and directors as a group.

Name and address of Beneficial Owner   Number of Shares Owned  Percent of Class
--------------------------------------------------------------------------------

Robert C. Silzer, Sr.
2482-650 West Georgia Street                6,132,448  (2)          5.2%  (2)
P.O. Box 11610
Vancouver, British Columbia

Firoz Lakhani
2482-650 West Georgia Street                3,800,000  (3)          3.3%  (3)
P.O. Box 11610
Vancouver, British Columbia

Robert C. Silzer, Jr. (1)
2482-650 West Georgia Street                1,606,243  (4)          1.4%  (4)
P.O. Box 11610
Vancouver, British Columbia

Robert L. Hunziker                          1,730,734  (5)          1.5%  (5)
2482 - 650 West Georgia Street
PO Box 11610
Vancouver, British Columbia

All officers and directors                 13,944,425              12.5%  (6)
  as a group (5 persons)


                                      -30-

<PAGE>



(1)  Robert C. Silzer, Jr. is the son of Robert C. Silzer, Sr.
(2)  Includes stock options which are  exercisable by Mr. Robert C. Silzer,  Sr.
     to acquire 4,117,500 shares of Common Stock and 115,000 shares held by Madj
     Silzer, Mr. Robert C. Silzer, Sr.'s wife.
(3)  Includes  stock options  which are  exercisable  by Mr.  Lakhani to acquire
     2,030,000 shares of Common Stock.
(4)  Includes stock options which are  exercisable by Mr. Robert C. Silzer,  Jr.
     to acquire 1,257,693 shares of Common Stock.
(5)  Includes  stock options which are  exercisable  by Mr.  Hunziker to acquire
     750,000  shares of Common Stock and also  includes  897,720  shares held by
     indirect ownership.
(6)  Includes  all  shares  currently   outstanding  and  those  which  are  not
     outstanding  but which are  subject  to  issuance  upon  exercise  of stock
     options. See footnotes (2), (3),(4) and (5).




             ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



     In  December  1995,  the Board of  Directors  instituted  a program to make
available to its  directors and key  employees  corporate  loans to exercise the
options  granted.  This program  allowed for directors to borrow up to $600,000,
secured by Promissory  Notes (Note),  with  principal due and payable five years
from the date of the Note and interest  payable  monthly at the U.S.  base rate.
Other  key  employees  were  allowed  to  borrow  up to  $50,000,  with  monthly
repayments including interest at U.S. base rate and principal.

     Firoz Lakhani,  the President,  Chief Operating Officer,  and a Director of
the Company,  executed  Promissory  Notes ("Lakhani  Notes") in January 1996 and
1997,  totaling  $599,325,  which  allowed  the  exercise  of  options  totaling
1,770,000 common shares.

     Robert C. Silzer, Sr., the Chairman and a Director of the Company, executed
Promissory  Notes ("Silzer  Notes") in January 1996,  totaling  $597,800,  which
allowed the exercise of options totaling 1,530,000 common shares.

     In view of the precipitous decline of the stock price, and given that these
shares were not freely transferable, the Board of Directors determined to:

     1)   reduce the exercise  price to more closely  reflect the market  value;
          and
     2)   permit the interest remittances made on the Notes to be applied to the
          revised exercise price of the shares.

     As a result the exercise  price for options was adjusted from a range $0.26
to $0.30 per share to $0.054 per share which more closely  reflected  the market
value at December 31, 1997.

     The Lakhani Notes were  therefore  revised to reflect a total of $95,757 of
which $79,834 had

                                      -31-

<PAGE>



been paid by Mr. Lakhani as of December 31, 1997. The balance of $15,923 will be
offset by monies owing to Mr. Lakhani by the Company.

     The Silzer Notes were also revised to reflect a total of $82,773  which was
fully paid by Mr. Silzer as of December 31, 1997.

     During the fiscal year ended December 31, 1997, the Board of Directors held
approximately 40 meetings. The Company does not have a standing audit committee,
nominating committee or compensation committee.




                   ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K



           (a) The following documents are filed as part of this report.

1.   Financial Statements
                                                                           Page
Report of Robison, Hill & Co., Independent Certified Public Accountants    F - 1

Consolidated Balance Sheets as of December 31, 1997, and 1996              F - 2

Consolidated Statements of Operations for the years ended
December 31, 1997, and 1996                                                F - 4

Consolidated Statement of Stockholders' Deficit for the year ended
December 31, 1997                                                          F - 5

Consolidated Statement of Stockholders' Deficit for the year ended
December 31, 1996                                                          F - 6

Consolidated Statements of Cash Flows for the years ended
December 31, 1997, and 1996                                                F - 7

Notes to Financial Statements                                              F - 9

2.   Financial Statement Schedules

The following  financial  statement  schedules  required by  Regulation  S-X are
included herein.

All  Schedules  are omitted  because  they are not  applicable  or the  required
information is shown in the financial statements or notes thereto.


                                      -32-

<PAGE>



3.  Exhibits
      The following exhibits are included as part of this report:

      Exhibit
      Number         Exhibit

2.1 (1)    Articles of Amendment to Articles of Incorporation of the Company.
2.2 (1)    Articles of Amendment to Articles of Incorporation of the Company.
2.3 (1)    Articles of Amendment to Articles of Auto N Corporation.
2.4 (1)    Articles of Amendment to Articles of MacTay Investments Co.
2.5 (1)    Articles of Incorporation of MacTay Investments Co.
2.6 (1)    Bylaws of the Company.
6.1 (1)    Leasing and Service Agency Agreement with Edward Thompson Group.
6.2 (1)    Letter of Intent with Sega Gaming Technology, Inc.
6.2.1      Letter of Understanding  with  Sega Gaming  Technology, Inc. dated  
           March 25, 1998.
6.3 (1)    Agreement with Fortune Entertainment Corporation.
6.4 (1)    Share Purchase Agreement among the Company, Prisms and the 
           Shareholders of Prisms.
6.10 (1)   Employment Agreement with Robert C. Silzer, Sr.
6.11 (1)   Employment Agreement with Firoz Lakhani.
6.12 (1)   Employment Agreement with Robert C. Silzer, Jr.
6.12.1     Amendments to Employment Agreement with Robert C.Silzer, Jr. dated 
           December
           8, 1997 and February 17, 1998.
6.13 (1)   $250,000 Promissory Note with Firoz Lakhani.
6.14 (1)   $90,000 Promissory Note with Firoz Lakhani.
6.15 (1)   $104,000 Promissory Note with Firoz Lakhani.
6.16 (1)   $150,000 Promissory Note with Robert C. Silzer Sr.
6.17 (1)   $375,000 Promissory Note with Robert C. Silzer Sr.
6.18 (1)   $72,800 Promissory Note with Robert C. Silzer Sr.
6.19       Employment Agreement with Thomas S. Nieman, dated March 6, 1998.
6.20       Financing, Royalty and Licensing agreement with Bingo Technologies
           Corporation, dated February 9, 1998.
27.1       Financial Data Schedule

(1)        Documents  previously filed and incorporated by reference herein, the
           same numbered exhibit to Registrant's  Registration Statement on Form
           10-SB filed on January 16, 1997.

          (b)  Sales of unregistered  securities during the past year were filed
               pursuant to 8-K on the following dates:  March 17, 1997; April 7,
               1997; April 24, 1997; May 27, 1997; June 18, 1997; July 15, 1997;
               July 31, 1997;  August 26, 1997;  September 22, 1997;  October 6,
               1997;  November 3, 1997; and subsequent to year end,  January 14,
               1998; March 3, 1998 and are incorporated by reference.
          (c)  The exhibits  listed  under Item  14(a)(3)  are  incorporated  by
               reference.  (d) No financial statement schedules required by this
               paragraph are required to be filed as a part of this form.

                                      -33-

<PAGE>





                                   SIGNATURES



     Pursuant  to the  requirements  of  section  13 or 15(d) of the  Securities
Exchange Act of 1934, as amended,  the Registrant has duly caused this report to
be signed on its behalf by the undersigned, hereunto duly authorized.

                                                ADVANCED GAMING TECHNOLOGY, INC.



           Dated: April 14, 1998                By     /s/  Donald Robert MacKay
                  ----------------------          ------------------------------
                                                Chief Financial Officer

     Pursuant to the  requirements  of the  Securities  Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on this 14th day of April, 1998.

Signatures                                      Title


/s/ Robert C. Silzer, Sr.                       Chairman and Director
-----------------------------------------       (Principal Executive Officer)
 
Robert C. Silzer, SR.                           

/s/ Donald Robert Mackay                        Chief Financial Officer
-----------------------------------------       (Principal Financial and
                                                Accounting Officer)

Donald Robert MacKay                            

/s/ Firoz Lakhani                               President, Chief Operating
-----------------------------------------       Officer and Director
 
Firoz Lakhani                                   


                                                Director
-----------------------------------------
Robert L. Hunziker


                                                Chief Executive Officer
-----------------------------------------
Thomas S. Nieman





                                      -34-

<PAGE>






               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors
Advanced Gaming Technology, Inc.


     We have audited the  accompanying  consolidated  balance sheets of Advanced
Gaming  Technology,  Inc. and subsidiaries as at December 31, 1997 and 1996, and
the consolidated statements of operations, stockholders' deficit, and cash flows
for the years then ended.  These financial  statements are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

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

     In our opinion,  the financial statements referred to above present fairly,
in all material respects,  the financial position of Advanced Gaming Technology,
Inc. and  subsidiaries as of December 31, 1997 and 1996 and the results of their
operations,  and their cash flows for the years  then ended in  conformity  with
generally accepted accounting principles.

     The accompanying  financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial  statements,
the  Company  incurred  a net  loss of  $9,575,512  for  1997  and has  incurred
substantial  net  losses  in  recent  years.  At  December  31,  1997,   current
liabilities  exceed current assets by $10,131,380 and total  liabilities  exceed
total assets by $4,753,593.  These factors, and the others discussed in note 18,
raise  substantial  doubt  about the  Company's  ability to  continue as a going
concern. The financial statements do not include any adjustments relating to the
recoverability  and  classification  of  recorded  assets,  or the  amounts  and
classification  of liabilities  that might be necessary in the event the Company
cannot continue in existence.

                                                    Respectfully submitted,

                                                    /s/ Robison, Hill & Co.
                                                    Certified Public Accountants

Salt Lake City, Utah
March 6,  1998




                                       F-1

<PAGE>



                        Advanced Gaming Technology, Inc.
                           CONSOLIDATED BALANCE SHEETS


                                                               As at December 31
                                                                1997        1996
ASSETS

Current Assets
       Cash and cash equivalents (note 2(h)) .........   $   17,276   $   76,615
       Accounts receivable, net of  allowance of
       $236,082 ($85,500 in 1996) ....................      234,187       56,492
       Inventory (note 2 (c)) ........................      163,156       43,000
       Deferred charges ..............................      248,564         --
       Prepaid expenses ..............................       84,640      129,969
       Notes receivable (note 3) .....................        9,878      129,426
                                                         ----------   ----------
                     Total current assets ............      757,701      435,502
                                                         ----------   ----------

Notes Receivable (note 3) ............................         --      1,099,300
                                                         ----------   ----------

Property and Equipment (note 2(d))
       Office and warehouse equipment ................      231,558      103,985
       Leasehold improvements ........................       76,372       30,132
       Display equipment .............................       48,720       20,763
       Product molds .................................      363,478      330,718
       Revenue generating equipment - uninstalled ....    1,804,100      930,564
       Revenue generating equipment - installed ......    1,003,179    1,137,131
                                                         ----------   ----------
                                                          3,527,407    2,553,293
       Less - accumulated depreciation ...............    1,407,590      583,412
                                                         ----------   ----------
                 Net property and equipment ..........    2,119,817    1,969,881
                                                         ----------   ----------

Other Assets
       Security deposits .............................      124,042       50,930
       Deferred development costs ....................       55,604      131,313
       Gaming equipment ..............................       40,000      765,138
       Intangible assets (notes 2 (f) and 4) .........      625,194      856,069
       Investment - land .............................    4,137,432    4,137,432
                                                         ----------   ----------
                 Total other assets ..................    4,982,272    5,940,882
                                                         ----------   ----------

                 Total assets ........................   $7,859,790   $9,445,565
                                                         ==========   ==========








   The accompanying notes are an integral part of these financial statements.

                                       F-2

<PAGE>

<TABLE>


                        Advanced Gaming Technology, Inc.
                           CONSOLIDATED BALANCE SHEETS
                                   (Continued)
<CAPTION>

                                                                       As at December 31
                                                                      1997          1996
<S>                                                           <C>            <C>   

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities
       Bank loan (note 5) ..................................  $       --     $    354,100
       Accounts payable ....................................     1,463,624      1,494,617
       Accrued liabilities
         Salaries, wages and other compensation ............       813,717        696,849
         Other .............................................     2,032,984        984,644
       Stockholder's loan (note 6) .........................          --           28,387
       Notes payable (note 7) ..............................       800,000        619,356
       Convertible notes (note 8) ..........................     3,477,500      3,292,715
       Deferred revenue (note 2(k)) ........................       390,000        765,380
       Current maturities of long-term debt (note 9) .......     1,911,256      2,459,528
                                                              ------------   ------------
                 Total current liabilities .................    10,889,081     10,695,576

Long-Term Debt (note 9) ....................................     1,724,302      1,911,864
                                                              ------------   ------------
                  Total liabilities ........................    12,613,383     12,607,440
                                                              ------------   ------------


Commitments and Contingencies (notes 15 and 16)


Stockholders' Deficit
       Preferred stock - 10% cumulative $.10
       par value; authorized 4,000,000
       shares; issued - nil ................................          --             --
       Common stock - $.005 par value; authorized
       150,000,000 shares; issued and outstanding
       98,439,431 in 1997 and 42,248,368 in 1996 ...........       492,197        211,242
       Additional paid-in capital ..........................    27,703,310     20,000,471
       Accumulated deficit .................................   (32,949,100)   (23,373,588)
                                                              ------------   ------------
                 Net stockholders' deficit .................    (4,753,593)    (3,161,875)
                                                              ------------   ------------

                 Total liabilities and stockholders' deficit  $  7,859,790   $  9,445,565
                                                              ============   ============

</TABLE>







   The accompanying notes are an integral part of these financial statements.

                                       F-3

<PAGE>

<TABLE>


                        Advanced Gaming Technology, Inc.
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<CAPTION>

                                                             For the Years Ended
                                                                  December 31
                                                         ---------------------------
                                                                 1997           1996
                                                         ------------   ------------
<S>                                                      <C>            <C>  
Revenues ..............................................  $  1,338,121   $  1,155,035

Cost of revenues ......................................       623,272        282,509
                                                         ------------   ------------

Gross margin ..........................................       714,849        872,526
                                                         ------------   ------------

Expenses
       Research and development .......................     1,230,426      1,691,546
       General and administration .....................     4,824,253      2,510,106
                                                         ------------   ------------

                                                            6,054,679      4,201,652
                                                         ------------   ------------

Operating loss ........................................    (5,339,830)    (3,329,126)

Other (expense) income
       Foreign exchange adjustments (note 2 (g)) ......         1,992         (6,616)
       Financing costs and interest ...................    (2,831,981)    (1,223,210)
       Asia development costs and equipment write-downs      (564,062)      (976,129)
       Restructuring charge ...........................      (841,631)          --
       Equipment write-downs ..........................          --          (94,880)
                                                         ------------   ------------

Net Loss ..............................................  $ (9,575,512)  $ (5,629,961)
                                                         ------------   ------------

Net loss per common share (note 2(i)) .................  $      (0.15)  $      (0.16)
                                                         ============   ============

Weighted average common shares outstanding (note 2 (i))    64,582,372     35,794,434
                                                         ============   ============

</TABLE>














   The accompanying notes are an integral part of these financial statements.

                                       F-4

<PAGE>


<TABLE>

                        Advanced Gaming Technology, Inc.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
                      For the Year Ended December 31, 1997

<CAPTION>


                                            Price Range                            Additional
                                             per Share        Common Stock          Paid-in      Accumulated
                                                 $         Shares       Amount      Capital        Deficit         Total
                                             ---------  -----------  -----------  ------------   ------------   -----------
<S>                                          <C>        <C>          <C>          <C>            <C>            <C>

Balance at January 1, 1997 ................              42,248,368  $   211,242  $ 20,000,471   $(23,373,588)  $(3,161,875)

           to settle liabilities ..........  0.05-0.91      651,269        3,256       297,103           --         300,359
           to settle convertible notes ....  0.04-0.75   32,537,271      162,686     6,913,998           --       7,076,684
           for security ...................  0.10-0.34   10,558,039       52,790          --             --          52,790
           for financing costs and interest  0.04-0.42      589,262        2,946       215,820           --         218,766
           for deferred finance charges ...       --           --           --        (936,392)          --        (936,392)
           for cash .......................      0.175    4,000,000       20,000       680,000           --         700,000
           Prisms, Inc. acquisition,
            additional consideration ......       --      2,567,755       12,840       (12,840)          --            --
           for share and warrant options ..  0.25-0.55    3,310,238       16,551     1,207,757           --       1,224,308
           for employee options ...........       --           --           --      (1,094,224)          --      (1,094,224)
           for finders' fees ..............  0.10-0.71    1,360,823        6,804       223,941           --         230,745
           for compensation ...............  0.59-0.91       96,406          482        57,018           --          57,500
           for consulting & other expenses   0.10-0.50      520,000        2,600       150,658           --         153,258

Net loss for the year .....................                    --           --            --       (9,575,512)   (9,575,512)
                                                        -----------  -----------  ------------   ------------   -----------

Balance at December 31, 1997 ..............              98,439,431  $   492,197  $ 27,703,310   $(32,949,100)  $(4,753,593)
                                                        ===========  ===========  ============   ============   ===========

</TABLE>






   The accompanying notes are an integral part of these financial statements.

                                       F-5

<PAGE>


<TABLE>

                        Advanced Gaming Technology, Inc.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
                      For the Year Ended December 31, 1996

<CAPTION>


                                          Price Range                            Additional
                                           per Share       Common Stock           Paid-in      Accumulated
                                               $         Shares      Amount       Capital        Deficit        Total
                                           ---------  -----------  -----------  ------------   ------------   -----------
<S>                                        <C>        <C>          <C>          <C>            <C>            <C>

Balance at January 1, 1996 ..............              27,138,517  $   135,693  $ 15,611,020   $(17,743,627)  $(1,996,914)

           for cash, less finder's fee of  0.15-0.50    7,266,666       36,333     1,233,667           --       1,270,000
                                                                                                              $    30,000
           to settle stockholders' loans   0.25-0.50    1,346,452        6,732       465,962           --         472,694
           for security .................  0.45-0.61    1,099,794        5,499          --             --           5,499
           to acquire subsidiary ........       1.25      300,000        1,500       373,500           --         375,000
           for signing bonuses ..........       0.06      450,000        2,250        23,850           --          26,100
           for consulting services ......  0.30-0.79      105,000          525        43,650           --          44,175
           for share and warrant options   0.22-0.50    3,380,273       16,902     1,314,880           --       1,331,782
           to settle convertible notes ..  0.50-1.20      666,666        3,333       621,667           --         625,000
           for finders' fees ............  0.20-1.20      395,000        1,975       290,775           --         292,750
           to terminate employment ......       0.22      100,000          500        21,500           --          22,000
             contract

Net loss for the year ...................                    --           --            --       (5,629,961)   (5,629,961)
                                                      -----------  -----------  ------------   ------------   -----------

Balance at December 31, 1996 ............              42,248,368  $   211,242  $ 20,000,471   $(23,373,588)  $(3,161,875)
                                                      ===========  ===========  ============   ============   ===========



</TABLE>





   The accompanying notes are an integral part of these financial statements.

                                       F-6

<PAGE>




                        Advanced Gaming Technology, Inc.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                         For the Years Ended
                                                              December 31
                                                             1997          1996
                                                      -----------   -----------
Cash flows from operating activities:
       Net loss ....................................  $(9,575,512)  $(5,629,961)
       Adjustments to reconcile net loss to net cash
         used in operating activities:
         Depreciation and amortization .............    1,535,791     1,178,357
         Issuance of common stock for expenses .....      429,523       471,955
         Deferred revenue ..........................     (375,380)      758,307
       Change in operating assets and liabilities:
         Accounts receivable .......................     (177,695)      (21,665)
         Inventory .................................     (120,156)      (25,000)
         Deferred charges ..........................     (248,564)         --
         Prepaid expenses ..........................       45,329       (58,264)
         Bank loan .................................     (354,100)      178,203
         Accounts payable ..........................      (30,993)      308,156
         Accrued liabilities .......................    1,165,208       293,718
                                                      -----------   -----------
              Net cash used in operating activities    (7,706,549)   (2,546,194)
                                                      -----------   -----------

Cash flows from investing activities:
       Intangible assets ...........................         --        (414,432)
       Purchase of property and equipment ..........     (974,114)   (2,568,638)
       Disposal of property and equipment ..........      244,400          --
       Security deposits ...........................      (73,112)         --
       Investment in land ..........................         --         (11,125)
       Deferred development costs ..................       75,709      (131,313)

              Net cash used in investing activities   $  (727,117)  $(3,125,508)
                                                      -----------   -----------













   The accompanying notes are an integral part of these financial statements.

                                       F-7

<PAGE>



                        Advanced Gaming Technology, Inc.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Continued)


                                                          For the Years Ended
                                                              December 31
                                                      -------------------------
                                                             1997          1996
                                                      -----------   -----------

Cash flows from financing activities:
       Stockholder's loan ........................... $   (28,387)  $    28,387
       Proceeds from issuance of common stock .......   8,773,119     1,986,483
       Proceeds from convertible notes ..............   7,350,000     3,169,089
       Payments of convertible notes ................  (7,165,000)         --
       Finder's fee .................................        --         (30,000)
       Principal payments on notes payable ..........    (744,356)         --
       Proceeds from notes payable ..................     925,000        15,676
       Principal payments of long-term debt .........    (986,049)     (926,345)
       Proceeds from long-term debt .................     250,000     1,487,288
                                                      -----------   -----------
          Net cash provided by financing activities .   8,374,327     5,730,578
                                                      -----------   -----------

Net change in cash and cash equivalents .............     (59,339)       58,876
Cash and cash equivalents at beginning of year ......      76,615        17,739
                                                      -----------   -----------

Cash and cash equivalents at end of year ............ $    17,276   $    76,615
                                                      ===========   ===========


Supplemental disclosure of cash flow information:

Cash paid during the year for interest .............. $   340,626   $   403,602

Non cash investing and financing activities:
       Issuance of common stock for finders' fees ... $   230,745   $   292,750
       Issuance of common stock as settlement of
         stockholders' loans ........................ $      --     $   472,694
       Issuance of common stock for acquisition of
         subsidiary ................................. $      --     $   375,000
       Issuance of common stock for debt reduction .. $   300,359   $      --
       Issuance of common stock as settlement of
         convertible notes .......................... $ 7,076,684   $      --








     The accompany notes are an integral part of these financial statements.

                                       F-8

<PAGE>



                        Advanced Gaming Technology, Inc.
                       NOTES TO THE CONSOLIDATED FINANCIAL
                        STATEMENTS December 31, 1997 and
                                December 31, 1996


NOTE 1 - HISTORY AND ORGANIZATION

     The Company was incorporated under the laws of the State of Wyoming in 1963
under the name of Mactay Investment Co. At a special  shareholders' meeting held
in 1987, the Corporation's  name was changed to Auto N Corporation.  The Company
changed its name to Advanced Gaming Technology, Inc. in 1991.

     The Company's executive offices are located in Vancouver, British Columbia,
Canada.  The Company is principally  engaged in the development and marketing of
electronic bingo equipment in the United States and the United Kingdom.

NOTE 2 - SUMMARY OF ACCOUNTING POLICIES

     A summary of the significant accounting policies applied in the preparation
of the accompanying financial statements is as follows:

(a)  Principles of Consolidation

     The  consolidated  financial  statements  include the  accounts of Advanced
Gaming  Technology,  Inc. and its  wholly-owned  subsidiaries,  Executive  Video
Systems,  Inc., Palace Entertainment  Limited,  Branson Signature Resorts, Inc.,
Branson Bluffs Resorts,  Inc., River Oaks Resorts and Country Club, Inc., Allied
Resorts,  Inc., River Oaks Holding,  Inc.,  Prisms,  Inc.,  Pleasure World Ltd.,
Prisms (Bahamas) Ltd., and A.G.T. Acceptance Corp. All significant  intercompany
accounts and transactions have been eliminated.

(b)  Joint Venture Operations Accounting

     Joint  venture  operations  are  accounted  for under the equity  method of
accounting.

(c)  Inventory

     Inventory consists of bingo equipment parts and is carried at lower of cost
(first-in, first-out method) and market value.

(d)  Property and Equipment

     Property  and  equipment  is stated at cost.  Depreciation  is  provided in
amounts  sufficient to relate the cost of depreciable  assets to operations over
their estimated service lives,  principally on a straight-line basis from 3 to 5
years.

                                       F-9

<PAGE>



                        Advanced Gaming Technology, Inc.
                       NOTES TO THE CONSOLIDATED FINANCIAL
                        STATEMENTS December 31, 1997 and
                                December 31, 1996
                                   (Continued)


NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (Continued)

     Upon sale or other  disposition  of property  and  equipment,  the cost and
related  accumulated  depreciation or amortization are removed from the accounts
and any gain or loss is included in the determination of income or loss.

     Expenditures  for  maintenance  and  repairs  are  charged  to  expense  as
incurred.  Major overhauls and betterments are capitalized and depreciated  over
their useful lives.

(e)  Investment - Land

     Investment in land is carried at the lower of cost or net realizable value.

(f)  Intangible Assets

     Organization costs are recorded at their acquisition cost and are amortized
to operations  over their estimated  useful lives of ten years.  Amortization is
computed on the straight-line method.

     Goodwill  and  software  rights were  created by the excess of the purchase
price over the cost of the acquisitions made in 1995 and 1996, and are amortized
on a straight-line basis over five years.  Software rights are capitalized after
technological  feasibility  has been  established.  Capitalization  of  computer
software cost is discontinued when the computer software product is available to
be sold,  leased or  otherwise  marketed.  Costs for  maintenance  and  customer
support are charged to operations when incurred,  or when the related revenue is
recognized,  whichever occurs first.  Management regularly assesses the carrying
amount of intangible assets and where, in their opinion,  the value is less than
the carrying amount, the loss is recognized  immediately.  Unamortized  computer
software costs that have been capitalized are reported at net realizable value.

     The company has implemented the provisions of SFAS No. 121, "Accounting for
the impairment of Long-Lived Assets and for Long-Lived Assets Disposed of." SFAS
No. 121 requires that long-lived assets and certain identifiable  intangibles to
be held and used by the Company be reviewed for  impairment  whenever  events or
changes in  circumstances  indicate that the carrying amount of an asset may not
be recoverable. If the sum of the expected future cash flows from the use of the
assets and its eventual disposition  (undiscounted and without interest charges)
is less than the carrying amount of the asset, an impairment loss is recognized.

                                      F-10

<PAGE>



                        Advanced Gaming Technology, Inc.
                       NOTES TO THE CONSOLIDATED FINANCIAL
                        STATEMENTS December 31, 1997 and
                                December 31, 1996
                                   (Continued)


NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (Continued)

(g)  Translation of Foreign Currency

     All balance sheet accounts of foreign  operations are translated  into U.S.
dollars at the year-end  rate of exchange.  Statement  of  operations  items are
translated at the weighted  average  exchange  rates for the year. The resulting
translation  adjustments  are  made  directly  to a  separate  component  of the
stockholders'  equity.  Certain  foreign  activities  are  considered  to  be an
extension  of  the  U.S.  operations,  and  the  gain  or  loss  resulting  from
re-measuring these  transactions into U.S. dollars is included in income.  Gains
or losses from other foreign currency transactions, such as those resulting from
the settlement of foreign receivables or payables, are included in the Statement
of Operations.

(h)  Cash and Cash Equivalents

     For purposes of the  Statement  of Cash Flows,  the Company  considers  all
highly  liquid debt  instruments  purchased  with a maturity of three  months or
less, as cash equivalents.

(i)  Net Loss per Common Share

     In 1997,  the  Financial  Accounting  Standards  Board issued SFAS No. 128,
"Earnings per Share" (EPS). SFAS No. 128 replaced the calculation of primary and
fully  diluted EPS with basic and diluted EPS. The  application  of SFAS No. 128
had no effect on the loss per share for 1996 as previously reported.

     The effect of outstanding  common stock  equivalents are  antidilutive  for
1997 and 1996 and are thus not considered.

     The  reconciliations  of the numerators and  denominators  of the basic EPS
computations are as follows:
<TABLE>
<CAPTION>

                                      1997                                1996
                     ------------------------------------  -----------------------------------

                                     Number                                 Number
                                       of         Loss                        of       Loss
                         Loss        Shares     per Share      Loss         Shares   per Share
<S>                  <C>           <C>           <C>        <C>           <C>          <C>

Basic EPS
  Loss available to
common stockholders  $(9,575,512)  64,582,372    $(0.15)    $(5,629,961)  35,794,434   $(0.16)
                     ===========   ==========    ======     ===========   ==========    =====

</TABLE>




                                      F-11

<PAGE>



                        Advanced Gaming Technology, Inc.
                       NOTES TO THE CONSOLIDATED FINANCIAL
                        STATEMENTS December 31, 1997 and
                                December 31, 1996
                                   (Continued)


NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (Continued)

(j)  Revenue Recognition

     Revenue is generated on operating  leases and is  recognized  on an accrual
basis.

(k)  Deferred Revenue

     Revenues are deferred until commencement of the project operations.

(l)  Persuasiveness of Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from these estimates.

     Certain  reclassifications  have been made in the 1996 financial statements
to conform with the 1997 presentation.


NOTE 3 - NOTES RECEIVABLE

Notes receivable consists of the following:
                                                             1997          1996
                                                      -----------   -----------

Due from employees pursuant to the exercise of        $     3,448   $   103,595
   stock options, interest at U.S. base rate,
   principal due
Due from officers and directors pursuant to the             6,430     1,125,131
   exercise of stock options, interest repayable
   monthly at U.S. base rate, principal due
                                                            9,878     1,228,726
Less current maturities                                    (9,878)     (129,426)
                                                      -----------   -----------
Net notes receivable                                  $      --     $ 1,099,300
                                                      ===========   ===========


     In 1997,  with respect to the  Promissory  Notes  entered into with certain
employees,  officers and  directors of the Company,  in view of the  precipitous
decline of the stock  price,  the Board of  Directors  determined  to reduce the
exercise price to more closely reflect the market value; and permit the interest
remittances made on the Notes to be applied to the exercise price of the shares.




                                      F-12

<PAGE>



                        Advanced Gaming Technology, Inc.
                       NOTES TO THE CONSOLIDATED FINANCIAL
                        STATEMENTS December 31, 1997 and
                                December 31, 1996
                                   (Continued)


NOTE 4 - INTANGIBLE ASSETS
                                                       1997                1996
                                                -----------         -----------

Software rights
     Gross                                      $ 1,106,837         $ 1,106,837
     Accumulated amortization                      (511,457)           (286,042)
                                                -----------         -----------
     Net                                            595,380             820,795
                                                -----------         -----------

Organization costs
     Gross                                           57,175              57,175
     Accumulated amortization                       (27,361)            (21,901)
                                                -----------         -----------
     Net                                             29,814              35,274
                                                -----------         -----------

Net intangible assets                           $   625,194         $   856,069
                                                ===========         ===========



NOTE 5 - BANK LOAN

The Company's line-of-credit agreement with a bank was discontinued in 1997.


NOTE 6 - STOCKHOLDER'S LOAN

Stockholder's loan consists of the following:
                                                              1997        1996
                                                         ---------     -------

Due to an officer and director, non-interest bearing     $    --       $28,387
                                                         =========     =======

The loan was settled in 1997, for stock.















                                      F-13

<PAGE>



                        Advanced Gaming Technology, Inc.
                       NOTES TO THE CONSOLIDATED FINANCIAL
                        STATEMENTS December 31, 1997 and
                                December 31, 1996
                                   (Continued)


NOTE 7 - NOTES PAYABLE
                                                                  1997      1996
                                                              --------  --------

Due to an individual, interest at $300 per day, principal and $150,000  $   --
   interest due on demand, secured by certain revenue
   generating equipment and a personal guarantee of an
   officer and director
Due to a corporation, interest at $300 per day, principal and  150,000      --
   interest due on demand, secured by certain revenue
   generating equipment and a personal guarantee of an
   officer and director
Due to a corporation, interest at $350 per day, principal      105,000      --
   and interest due on demand, secured by certain revenue
   generating equipment and a personal guarantee of an
   officer and director
Due to an individual, interest at 59%, principal and interest  200,000      --
   due on January 17, 1998, secured by shares of the Company,
   and a personal guarantee of an officer and director
Due to a corporation,  interest negotiated at $10,000 per      120,000      --
month, principal and interest due on demand, unsecured
Due to a corporation, non-interest bearing, due on              75,000   199,910
  demand, unsecured
Due to a corporation, interest at 12%                             --     109,785
Due to an individual, interest at U.S. base rate                  --     100,000
Due to an individual, interest negotiated at $20,000              --     106,441
Due to a corporation, interest negotiated at $10,000              --     103,220
                                                              --------  --------

Total notes payable                                           $800,000  $619,356
                                                              ========  ========

Of the 1997 notes,  $505,000 was settled in 1998, for stock.  Of the 1996 notes,
$109,785 was settled in 1997, for stock.


NOTE 8 - CONVERTIBLE NOTES

     Due to individuals and corporations, bearing interest at rates between U.S.
base rate and 12% per year with varying maturity dates up to July, 1998. Certain
of the notes are  convertible  into common shares of the Company at fixed prices
ranging from $0.049 to $0.102,  and others are  convertible at a 20% discount to
the closing bid price at the time of conversion.  Certain convertible notes have
warrants attached  thereto,  granting the holders the option to purchase a total
of 1,404,348 common shares of the Company at prices ranging from $0.10 to $0.40,
(see notes 10 and 18).




                                      F-14

<PAGE>



                        Advanced Gaming Technology, Inc.
                       NOTES TO THE CONSOLIDATED FINANCIAL
                        STATEMENTS December 31, 1997 and
                                December 31, 1996
                                   (Continued)

NOTE 9 - LONG-TERM DEBT
<TABLE>
<CAPTION>

Long-term debt consists of the following:
                                                                         1997        1996
                                                                   ----------  ----------
<S>                                                                <C>         <C>

Notes payable, interest at 9%, quarterly interest only payments    $1,339,792  $1,339,792
   until July 2002, principal due in July 2002, collateralized by
   deed of trust
Note payable, interest at 10%, quarterly interest only payments,       60,812      60,812
   balance due on demand, collateralized by deed of trust
Loan payable, interest at 13.2%, due in monthly installments of        86,862     293,862
   $31,000 including interest, due on demand, secured by
   equipment
Note payable, interest at 3% above the Chase Manhattan                464,286     464,286
   prime lending rate, due in quarterly principal installments
   of $17,857 plus accrued interest, matures January 2002
Note payable, interest at 10%, principal is due, and is secured        75,106      75,106
   by 100,000 common shares of the Company
Note payable, interest at 10%, due on demand                           37,644      37,644
Note payable, interest at 10%, due on demand                            3,600       3,600
Note payable, interest at 9%, due on demand                            55,000      55,000
Note payable, interest at 8%                                             --        94,020
Loan payable, interest at 20%                                            --       102,965
Convertible debenture, total facility $1,000,000 plus accrued       1,249,286   1,698,492
   interest, interest at 2% per month compounded monthly,
   principal and accrued interest convertible into common stock
   in whole or part at holder's option, redeemable by the
   Company at any time to maturity; bonus consideration of
   $150,000 per year for four years, convertible into stock at
   holder's option, due on demand
Loan payable, interest at 16%, monthly installments of                231,100        --
   $20,833 in year one, monthly installments in year two of
   $3,125, year three of $1,505, and $1,462 in years four and
   five, secured by certain revenue generating equipment, and
   a personal guarantee of an officer and director
Loan payable, interest at 12%, due in monthly installments             32,070      32,070
   of $1,000 including interest, matures December 1999, secured
   by a patent
Loan payable, interest at 8.5%, monthly installments of $56,121          --       113,743
   including interest, secured by equipment and 1,200,000
   common shares of the Company
                                                                    3,635,558   4,371,392
Less:  current maturities                                           1,911,256   2,459,528
                                                                   ----------  ----------

            Net long-term debt                                     $1,724,302  $1,911,864
                                                                   ==========  ==========
</TABLE>

                                      F-15
<PAGE>



                        Advanced Gaming Technology, Inc.
                       NOTES TO THE CONSOLIDATED FINANCIAL
                        STATEMENTS December 31, 1997 and
                                December 31, 1996
                                   (Continued)


NOTE 9 - LONG-TERM DEBT (Continued)

     Annual principal payments on long-term debt are as follows:
            1998                                                $ 1,911,256
            1999                                                    107,656
            2000                                                     99,836
            2001                                                     84,016
            2002                                                  1,432,794
                                                               ------------
                                                                $ 3,635,558
                                                               ============

Certain of the  long-term  debt  obligations  are in default as at December  31,
1997, (see note 18).


NOTE 10 - STOCK OPTIONS AND WARRANTS

     All options and warrants have been granted at exercise  prices greater than
the market  value on the date of  granting  except for  5,015,000  options.  All
options vest 100% at the date of granting of the options.

                                                             1997          1996
                                                      -----------   -----------
Options and warrants outstanding, beginning of year    14,423,367     7,224,097

           Granted                                     24,441,019    11,791,667
           Expired                                     (5,686,708)   (1,212,124)
           Exercised                                   (3,310,238)   (3,380,273)
                                                      -----------   -----------

Options and warrants outstanding, end of year          29,867,440    14,423,367
                                                      ===========   ===========
Option and warrant price for options and warrants
   outstanding, end of year                         $0.04 - $3.00 $0.25 - $3.00
                                                      ===========   ===========

Options and warrants granted subsequent to year end     2,850,000     1,850,000
                                                      ===========   ===========

Option and warrant price range granted subsequent
   to year end                                      $0.03 - $1.00 $0.50 - $1.00
                                                      ===========   ===========

     In October 1995, the FASB issued SFAS No. 123,  "Accounting for Stock-Based
Compensation." As permitted by the standard, the Company has elected to continue
to follow existing accounting guidance,  Accounting Principles Board Opinion No.
25 and related  interpretations  (APB No.  25),  for  stock-based  compensation.
However,  SFAS No. 123 requires companies electing to follow existing accounting
rules to  disclose  in a note the pro forma  effects as if the fair value  based
method of accounting had been applied. The Company recorded compensation expense
of  $210,756  and  $1,074,453  for the years  ended  December  31, 1997 and 1996
respectively,  in connection with its performance  shares,  restricted stock and
other stock compensation  awards. In accordance with APB No. 25, no compensation
expense has been recognized for the Company's stock options. The

                                      F-16

<PAGE>



                        Advanced Gaming Technology, Inc.
                       NOTES TO THE CONSOLIDATED FINANCIAL
                        STATEMENTS December 31, 1997 and
                                December 31, 1996
                                   (Continued)


NOTE 10 - STOCK OPTIONS AND WARRANTS (Continued)

fair value of each  option  grant is  estimated  on the date of grant  using the
Black-Scholes   option-pricing   model  with  the  following   weighted  average
assumptions  for grants in 1997 and 1996,  respectively:  dividend  yield of 0.0
percent  for both  years,  expected  volatility  of 149.75 and  149.05  percent,
respectively,  risk-free  interest  rates  of 6.2  percent  for both  years  and
expected  lives of 5 years  for both  years.  If  compensation  expense  for the
Company's stock options  granted in 1997 and 1996 had been  determined  based on
the fair value at the grant  dates for such awards in  accordance  with SFAS No.
123, the effect on the  Company's  net income and earnings per share for each of
the years ended December 31, 1997 and 1996 would have been immaterial.


NOTE 11 - SEGMENTED INFORMATION

Geographic segments:                                        1997            1996
                                                      ----------      ----------

Revenue
           United States                              $1,338,121      $1,155,035
                                                      ==========      ==========


Operating loss
           Asia                                       $  213,454      $  461,017
           United States                               2,093,127         779,278
           Other corporate expenses                    3,033,249       2,088,831
                                                      ----------      ----------

                                                      $5,339,830      $3,329,126
                                                      ==========      ==========


Assets
           Asia                                       $   40,000      $  805,138
           United States                               7,592,640       8,538,575
           Canada                                        227,150         101,852
                                                      ----------      ----------

                                                      $7,859,790      $9,445,565
                                                      ==========      ==========










                                      F-17

<PAGE>



                        Advanced Gaming Technology, Inc.
                       NOTES TO THE CONSOLIDATED FINANCIAL
                        STATEMENTS December 31, 1997 and
                                December 31, 1996
                                   (Continued)


NOTE 12 - SELECTED FINANCIAL DATA (Unaudited)

     The  following  tables  set forth  certain  unaudited  quarterly  financial
information:

                                             1997 Quarters Ended

                               Mar. 31      Jun. 30       Sep. 30       Dec. 31
                              --------    ----------    ----------    ----------

Revenues                      $510,366    $  212,836    $  304,662    $  310,257
Gross margin                   403,632        79,096       135,309        96,812
                              --------    ----------    ----------    ----------
Operating loss                 435,409     1,712,895     1,314,409     1,877,117
Other expenses, net            298,301       692,142       520,784     2,724,455
                              --------    ----------    ----------    ----------

Loss before taxes              733,710     2,405,037     1,835,193     4,601,572
Income taxes                      --            --            --            --
                              --------    ----------    ----------    ----------

Net Loss                      $733,710    $2,405,037    $1,835,193    $4,601,572
                              ========    ==========    ==========    ==========



                                             1996 Quarters Ended

                                 Mar. 31     Jun. 30      Sep. 30       Dec. 31
                                --------    --------    ----------    ----------

Revenues                        $141,210    $224,488    $  220,442    $  568,895
Gross margin                      88,278     170,171       164,865       449,212
                                --------    --------    ----------    ----------
Operating loss                   749,023     727,169       880,838       972,096
Other expenses, net              249,617     267,412       643,600     1,140,206
                                --------    --------    ----------    ----------

Loss before taxes                988,640     994,581     1,524,438     2,122,302
Income taxes                        --          --            --            --
                                --------    --------    ----------    ----------

Net Loss                        $988,640    $994,581    $1,524,438    $2,122,302
                                ========    ========    ==========    ==========


NOTE 13 - INCOME TAXES

     Deferred  taxes result from  temporary  differences  in the  recognition of
income and expenses for income tax reporting and financial  statement  reporting
purposes.  Deferred  benefits of $11,000,000  and $8,000,000 for the years ended
December 31, 1997 and 1996 respectively,  are the result of net operating losses
and the gaming license rights reserve.





                                      F-18

<PAGE>



                        Advanced Gaming Technology, Inc.
                       NOTES TO THE CONSOLIDATED FINANCIAL
                        STATEMENTS December 31, 1997 and
                                December 31, 1996
                                   (Continued)


NOTE 13 - INCOME TAXES (continued)

     The Company has  recorded net  deferred  income  taxes in the  accompanying
consolidated balance sheets as follows:

                                                             1997          1996
                                                     ------------   -----------
Future deductible temporary differences related to
   reserves, accruals, and net operating losses      $ 11,000,000   $ 8,000,000

Valuation allowance                                   (11,000,000)   (8,000,000)
                                                     ------------   -----------

Net deferred income tax                              $       --     $      --
                                                     ------------   ===========


     As of December 31, 1997, the Company had a net operating loss ("NOL") carry
forward for income tax reporting purposes of approximately $31,000,000 available
to offset future taxable income.  This net operating loss carry-forward  expires
at various dates between December 31, 2008 and 2012. A generated in a particular
year will  expire for  federal tax  purposes  if not  utilized  within 15 years.
Additionally,  the Internal Revenue Code contains  provisions which could reduce
or limit the  availability  and  utilization of these NOLs if certain  ownership
changes have taken place or will take place.  In accordance with SFAS No. 109, a
valuation allowance is provided when it is more likely than not that all or some
portion of the deferred tax asset will not be realized.  Due to the  uncertainty
with respect to the ultimate  realization of the NOLs, the Company established a
valuation  allowance for the entire net deferred income tax asset of $11,000,000
as of December 31, 1997,  which  includes  $240,000 from the gaming  license and
manufacturing  rights  reserve and  $10,700,000  from net  operating  loss carry
forward.  Also  consistent  with  SFAS No.  109,  an  allocation  of the  income
(provision) benefit has been made to the loss from continuing operations.

The differences  between the effective income tax rate and the federal statutory
income tax rate on the loss from continuing operations are presented below:

                                                            1997           1996
                                                     -----------    -----------
Benefit at the federal statutory rate of 34%         $ 3,202,000    $ 1,914,000
Non-deductible expenses                                  (21,000)       (20,000)
Utilization of gaming license rights                     527,000       (212,000)
Utilization of net operating loss carryforward        (3,542,000)    (1,467,000)
Other                                                   (166,000)      (215,000)
                                                     -----------    -----------
                                                     $         -    $         -
                                                     ===========    ===========







                                      F-19

<PAGE>



                        Advanced Gaming Technology, Inc.
                       NOTES TO THE CONSOLIDATED FINANCIAL
                        STATEMENTS December 31, 1997 and
                                December 31, 1996
                                   (Continued)


NOTE 14 - ACQUISITION OF SUBSIDIARY

Prisms, Inc.

     On September 26, 1996,  pursuant to an agreement,  the Company acquired all
of the capital stock of Prisms,  Inc., a North Carolina  corporation which holds
certain   patents  and  trademarks  for  the  development  of  bingo  and  other
entertainment  games, in exchange for 300,000 common shares of the Company.  The
acquisition has been accounted for by the purchase method.

     Pursuant to the  acquisition  agreement,  an  additional  2,567,755  common
shares  were  issued to the former  shareholders  so that the total value of the
shares issued upon  acquisition  equaled $600,000 on the anniversary date of the
agreement.

     The Company is also  required to issue up to an additional  200,000  common
shares at a guaranteed  price of $2.00 upon  commencement  of revenues from each
patented product developed.  In addition, a royalty of 2% will be payable on the
net revenues generated from these products.


NOTE 15 - COMMITMENTS

     The  Company  leases its  offices and  certain  equipment  under  long-term
operating leases. Future minimum lease payments under these operating leases are
as follows:

            1998                                               $134,669
            1999                                                124,423
            2000                                                 37,008
            2001                                                    664

NOTE 16 - CONTINGENCIES

(a)  The Company  entered  into a Leasing and Service  Agency  Agreement,  dated
     September 15, 1996 with Edward Thompson Group, a privately held corporation
     established  in 1867 and  organized  under the laws of the United  Kingdom.
     Edward  Thompson  has been  producing  bingo  tickets  since 1957,  and the
     Company believes,  is the leading  manufacturer and supplier of bingo paper
     and related products in the United Kingdom.

     The Service Agency  Agreement  requires the Company to use its best efforts
     to  engineer,  manufacturer,  design  and  develop  a  wireless  electronic
     hand-held bingo unit named Parti MAX for the United Kingdom bingo market.





                                      F-20

<PAGE>



                        Advanced Gaming Technology, Inc.
                       NOTES TO THE CONSOLIDATED FINANCIAL
                        STATEMENTS December 31, 1997 and
                                December 31, 1996
                                   (Continued)


NOTE 16 - CONTINGENCIES (continued)

(b)  The  Company  entered  into an  agreement,  dated  July 17,  1996,  amended
     September  15,  1996 with  Fortune  Entertainment  Corporation,  a Delaware
     corporation   ("FEC"),   under  which  FEC  has  the  right  to  receive  a
     participating  interest in certain of the Company's  projects.  The parties
     are currently  re-negotiating  certain of the terms and  conditions of this
     agreement,  including the  possibility  of the Company  repurchasing  FEC's
     interest in these projects.  As of December 31, 1997, Fortune Entertainment
     had provided the Company with $1,025,738.

(c)  In addition to  ordinary  routine  litigation  incidental  to its  business
     operations, which the Company does not believe, in the aggregate, will have
     a material adverse effect on the Company, or its operations, the Company is
     engaged in the following lawsuits:

     Braintech,  Inc.  ("Braintech")  filed a statement  of claim in the Supreme
     Court of British  Columbia  on  November  24, 1995 and amended on March 26,
     1996 claiming default by the Company on three promissory  notes.  Braintech
     claimed  damages in the amount of  $200,000,  plus  interest of ten percent
     (10%) per annum,  and costs.  In 1997, the Company settled this dispute for
     $75,000 to be paid by issuance of stock (see note 7).

     In January 1996, Tierra Corporation  ("Tierra")  commenced an action in the
     Circuit  Court of Stone County,  Missouri,  claiming that River Oaks Resort
     and Country  Club,  Inc., a Texas  corporation  and a subsidiary of Branson
     ("River Oaks Resort")  defaulted on a promissory note. A judgment is sought
     in the principal  amount of $75,106,  plus interest since October 18, 1995,
     at 10% per annum  (see note 9). An answer has been filed on behalf of River
     Oaks Resort averring that Tierra has not performed  conditions precedent to
     assessing any deficiency and that no accounting  regarding the  disposition
     of security for such note has been  provided  and, in  addition,  a counter
     claim  was  filed,  asserting  Tierra  disposed  of stock  collateral  in a
     commercially unreasonable manner. Preliminary discovery has occurred but no
     depositions  have been taken.  A principal of Tierra has  recently  filed a
     suit in Dallas, Texas concerning the stock collateral.

     In February 1996, P.D.I., LLC, a Missouri limited liability company ("PDI")
     commenced an action in the Circuit Court of Stone County Missouri, claiming
     breach of a real estate purchase agreement which in part,  provided for the
     construction of a sewage treatment  facility for which damages are claimed,
     including  the  awarding  to PDI of all escrow  funds,  costs and  expenses
     incurred  by PDI over and  above the  amount  of escrow  funds and cost and
     expenses,  including  attorney fees in connection with the  commencement of
     the action.  In  response,  the Company and River Oaks Resort have  counter
     claimed for damages, in an amount to be determined at trial,  incurred when
     plaintiff PDI withdrew funds from the escrow fund created for  construction
     of  the  sewage   treatment   facility  and  the  permit   application  for
     construction  approval by the  Missouri  Department  of Natural  Resources.
     Moreover,  a claim has also been made by River Oaks  Resort and the Company
     that subsequent  development  attempted by PDI has encroached upon property
     development  belonging  to River Oaks  Resort and the  Company  without the
     right to do so, including damages for disruption resulting therefrom.


                                      F-21

<PAGE>



                        Advanced Gaming Technology, Inc.
                       NOTES TO THE CONSOLIDATED FINANCIAL
                        STATEMENTS December 31, 1997 and
                                December 31, 1996
                                   (Continued)


NOTE 16 - CONTINGENCIES (continued)

     In April 1996, Larry Newman  ("Newman")  commenced a mechanics' lien in the
     Circuit Court of Stone County,  Missouri,  seeking $177,282, plus interest,
     for excavation  work  performed  during the period between July 19, 1995 to
     September  25,  1995 on a road across the River Oaks  development  in Stone
     County.  Thereafter, on or about June 24, 1996, Jack L. Holt ("Holt") filed
     a similar petition in the Circuit Court of Stone County, Missouri, claiming
     a mechanics' lien for engineering and land surveying  during the period May
     16,  1995 to July 4,  1995 for a road  across  the River  Oaks  development
     property in the amount of $9,610, plus interest. The Holt case has now been
     consolidated in the case originally filed by Newman.  The Company has filed
     a  counterclaim  alleging  Newman  and Holt  extended  the road  beyond the
     boundaries of the River Oaks development property onto land owned by Sunset
     Cove,  Ltd., a Missouri  corporation.  The court has since  ordered  Sunset
     Cove,  Ltd. joined as a party needed for just  adjudication.  Discovery has
     not yet commenced.

     On November 15, 1996,  Fortunet,  Inc., a Nevada corporation  ("Fortunet"),
     filed a patent  infringement  claim in the  United  States  District  court
     Southern  District of  California  against  the  company and certain  other
     companies  which  manufacture  and  distribute  electronics  bingo systems,
     claiming that the defendants,  including the Company,  infringed Fortunet's
     United States Patent No. 4,624,462 (the "Patent"). Fortunet seeks to enjoin
     the defendants from any further  alleged  infringement of the Patent and is
     seeking  actual and enhanced  damages as well as  attorneys  fees and other
     costs. In July 1997, the case was transferred from the federal court in San
     Diego,  California to the federal court in Phoenix,  Arizona.  Discovery is
     expected to commence in May, 1998.

     The Company entered into a Lease License Agreement,  dated December 7, 1995
     with G&J Production  Trust.  Pursuant to the Lease License  Agreement,  G&J
     Production Trust leased 200 units MAXPLUS Bingo System from the Company for
     use in G&J Production's bingo operation located in Victorville, California.
     As of January 23, 1997, G&J Production Trust was approximately three months
     behind  in their  payments  to the  Company  and the  Company  removed  its
     equipment from Victorville.  In July 1997, the Company commenced a lawsuit.
     This  action  includes  a claim for all  outstanding  accounts  receivable,
     breach of Contract,  and  reimbursement  for various costs  expended by the
     Company in regards to the Contract.

     In December 1997, a former employee commenced an action against the Company
     in the  District  Court of the County of Hennepin,  Minnesota  alleging non
     payment of certain  expenses  incurred  while in the employ of the Company.
     The Company has entered a defense and denies any liability.

     In February and March 1998, actions were brought against the Company in the
     District  Courts  in the  States  of  New  York  and  Colorado  by  certain
     Convertible  Debenture holders.  The plaintiffs are alleging the Company is
     in default in regard to the conversion of these debentures. The Company has
     responded to these allegations, and settlements are pending.

                                      F-22

<PAGE>



                        Advanced Gaming Technology, Inc.
                       NOTES TO THE CONSOLIDATED FINANCIAL
                        STATEMENTS December 31, 1997 and
                                December 31, 1996
                                   (Continued)


NOTE 16 - CONTINGENCIES (continued)

     The Company is vigorously defending these law suits.  However, no assurance
     can be given  as to the  outcome  of these  cases,  but in the  opinion  of
     management  and counsel,  the ultimate  liability  will not have a material
     effect on its financial position or results of operations.


NOTE 17 - SUBSEQUENT EVENTS

     In February  1998,  Mr. Tom Nieman was  appointed to replace Mr.  Robert C.
Silzer Sr. as Chief  Executive  Officer of the Company.  This is the first major
step in a plan of restructure announced in December 1997.

     Effective February 9, 1998 the Company executed a Financing,  Royalty,  and
Licensing  agreement with a major competitor - Bingo  Technologies  Corporation.
("BTC").  This agreement grants BTC the exclusive right to market and distribute
MAXPLUS and TurboMAX products in the United States only, for a five year period.
The  benefits  to  Advanced  Gaming  Technology,  Inc.  are  highlighted  by the
following:

     -    $1,500,000 licensing fee;
     -    15%  royalties on gross  revenues  generated by BTC, with a minimum in
          the first year of the  Agreement of $350,000 and are to be  negotiated
          by the  parties  thereafter,  with the minimum  royalty in  subsequent
          years  not to be  lower  than the  royalty  amount  negotiated  in the
          preceding year;
     -    Substantial reduction of overhead (approximately 40%) by assignment of
          the Denver distribution facility, and the Cleveland marketing office;
     -    Elimination  of capital  expenditures  required  for  installation  of
          MAXPLUS and TurboMAX orders.

     On March 25, 1998, the Company executed a Letter of Understanding  with its
partner in the Sonic Bingo  project,  SEGA  Gaming  Technology,  Inc.  This is a
refinement  of the  previous  Letter of Intent  signed by the parties on May 13,
1996 and includes the formation of a new corporation which will result in:

     -    SEGA Gaming Technology, Inc. licensing the use of the name "SEGA";
     -    Advanced  Gaming  Technology,  Inc.  licensing  its MAX  Bingo  System
          software,  Prisms patented game technology,  and the rights to use the
          "Sonic Bingo" trademark;
     -    Net income, capital expenditures,  and other product development costs
          will be shared equally.




                                      F-23

<PAGE>


                        Advanced Gaming Technology, Inc.
                       NOTES TO THE CONSOLIDATED FINANCIAL
                        STATEMENTS December 31, 1997 and
                                December 31, 1996
                                   (Continued)


NOTE 17 - SUBSEQUENT EVENTS (continued)

     Additionally,  SEGA Gaming Technology,  Inc. has committed to acquire up to
5,000,000  common  shares of  Advanced  Gaming  Technology,  Inc. in open market
transactions  and/or  by  way  of  private  placement.  The  parties  anticipate
launching Sonic Bingo by the end of 1998.

     Subsequent to the year end, $1,619,021 of certain debt and liabilities were
settled by the issuance of 21,968,656 common shares of the Company.


NOTE 18 - GOING CONCERN

     The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of the
Company as a going  concern.  However,  the  Company has  sustained  substantial
operating losses in recent years. In addition,  the Company has used substantial
amounts of working  capital in its  operations.  Further,  at December 31, 1997,
current liabilities exceed current assets by $10,131,380,  and total liabilities
exceed  total  assets by  $4,753,593.  The  Company is in  technical  default on
certain of the  convertibles  notes (note 8) and  long-term  debt (note 9) as at
December  31,  1997.  The  Company  is in the  process  of  renegotiating  these
obligations.  The Company is helpful that  satisfactory  repayment terms will be
reached,  or that these amounts will be converted into an equity position in the
Company.

     In view of these  matters,  realization of a major portion of the assets in
the  accompany  balance  sheet is dependent  upon  continued  operations  of the
Company  which in turn is  dependent  upon  the  Company's  ability  to meet its
financing  requirements  and the  success of its future  operations.  Management
believes that actions  presently  being taken to revise the Company's  operating
and financial  requirements  provide the opportunity for the Company to continue
as going concern.


                                      F-24
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