<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                                  FORM 10-K/A

  X     Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
-----   Act of 1934 for the fiscal year ended December 31, 1999 or

_____   Transition report pursuant to Section 13 or 15(d) of the Securities
        Exchange Act of 1934


                        Commission File Number: 0-22752

                          MIKOHN GAMING CORPORATION
--------------------------------------------------------------------------------
            (Exact name of registrant as specified in its Charter)


                 Nevada                                        88-0218876
--------------------------------------------------------------------------------
       (State or other jurisdiction                          (IRS Employer
     of incorporation or organization)                     Identification No.)

             920 Pilot Road,
     (Formerly 1045 Palms Airport Dr.),
      P. O. Box 98686, Las Vegas, NV                              89119
--------------------------------------------------------------------------------
  (Address of principal Executive Office)                      (Zip Code)

Registrant's telephone number, including area code: (702) 896-3890
                                                   -----------------------------

          Securities registered pursuant to Section 12(b) of the Act:
                                                      Name of each Exchange
Title of each class:                                   on which registered:
--------------------                                   --------------------
        None                                                    None

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

                    Common Stock, par value $.10 per share
                    --------------------------------------
                               (Title of Class)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
filing requirement for the past 90 days. Yes  X  No___
                                             ---

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

     The number of shares of common stock outstanding as of March 13, 2000, was
10,891,515. The market value of the common stock held by nonaffiliates of the
Registrant as of March 13, 2000, was approximately $42,111,926. The market value
was computed by reference to the closing sales price of $7.125 per share of
common stock on the NASDAQ National Market System as of March 13, 2000.

                                       I
<PAGE>

                     DOCUMENTS INCORPORATED BY REFERENCE:

     Part III hereof incorporates by reference portions of the Proxy Statement
for the Annual Meeting of Stockholders to be held on May 9, 2000 (to be filed
with the Securities and Exchange Commission within 120 days after December 31,
1999).

                                      II
<PAGE>

                               CAUTIONARY NOTICE

     This Annual Report of Mikohn Gaming Corporation on Form 10-K/A contains
forward-looking statements subject to the "safe harbor" legislation appearing at
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Statements expressing expectations
regarding the Company's future and projections relating to products, sales,
revenues and earnings are typical of such statements.

     All forward-looking statements, although made in good faith, are subject to
the uncertainties inherent in predicting the future. Factors such as
competition, customer dissatisfaction, failure to gain new product acceptance,
the Company's operating history, its high leverage and accompanying debt service
obligations, onerous taxation and other adverse government action, unusual risks
attending foreign transactions and general deterioration in economic conditions
may cause results to differ materially from any that are projected. However,
management knows of no extraordinary risk associated with any projection
contained in this report.

     Forward-looking statements speak only as of the date they are made. Readers
are warned that the Company undertakes no obligation to update or revise such
statements to reflect new circumstances or unanticipated events as they occur,
and are urged to review and consider disclosures made by the Company in this and
other reports that discuss factors germane to the Company's business. See
particularly the Company's reports on Forms 10-K, 10-Q and 8-K filed from time
to time with the Securities and Exchange Commission.

                                      III
<PAGE>

                           MIKOHN GAMING CORPORATION
                     ANNUAL REPORT ON FORM 10-K/A FOR THE
                         YEAR ENDED DECEMBER 31, 1999


                               TABLE OF CONTENTS

<TABLE>
<S>                                                                                        <C>
                Item 1 of Part I and Items 6, 7, 8 and 9 of Part II of the
                Registrant's Form 10-K for the year ended December 31, 1999 are
                hereby amended to read as follows:

                                               PART I
Item 1.         Business...............................................................     2
Item 2.         Properties.............................................................    23
Item 3.         Legal Proceedings......................................................    23
Item 4.         Submission of Matters to a Vote of Security Holders....................    24

                                              PART II

Item 5.         Market for Registrant's Common Stock and Related Security Holder
                Matters................................................................    25
Item 6.         Selected Financial Data................................................    26
Item 7.         Management's Discussion and Analysis of Financial Condition and
                Results of Operations..................................................    27
Item 7A.        Quantitative and Qualitative Disclosures About Market Risk.............    38
Item 8.         Consolidated Financial Statements and Supplementary Data...............    39
Item 9.         Changes in and Disagreements with Accountants on Accounting and
                Financial Disclosure...................................................    80

                                              PART III

Item 10.        Directors and Executive Officers of the Registrant.....................    80
Item 11.        Executive Compensation.................................................    80
Item 12.        Security Ownership of Certain Beneficial Owners and Management.........    80
Item 13.        Certain Relationships and Related Transactions.........................    80

                                              PART IV

Item 14.        Exhibits, Financial Statement Schedules and Reports on Form 8-K........    80
</TABLE>

                                       1
<PAGE>

                                    PART l

Item 1.  Business

Overview of the Company

     Your company is a leading developer, manufacturer and distributor to the
gaming industry of (i) merchandising products for casino operators and gaming
machine manufacturers including interior and exterior signage, (ii) electronics
components used in progressive jackpot systems for gaming machines and in player
tracking and information control systems for gaming machines and table games and
(iii) proprietary table games and gaming machines. It has achieved leading
market positions with a number of its products, which are recognized as
innovative and technologically advanced.

     In this report, you will see your company referred to as "Mikohn,"
"Company" and often simply as "we" or "our". These terms are used
interchangeably, and unless otherwise noted, they include domestic and foreign
subsidiaries, whether wholly or partially owned.

     Our signage products are customized, highly sophisticated and characterized
by their extraordinary visual appeal, quality of construction and advanced
technology. The Company is the industry leader in interior casino signage, which
is often sold in combination with its progressive jackpot systems and provides
the casino operator and gaming machine manufacturer with unique merchandising
solutions for the gaming machine area of the casino.

     The Company also is the principal original equipment manufacturer and
independent supplier of specialized electronic components used in progressive
jackpot systems to casino operators and the major gaming machine manufacturers.

     The Company's product lines are complementary and provide the casino
operator with integrated, value-added solutions that can increase revenues and
reduce costs. Our products are found throughout the casino, both on the floor
and in the back office. For areas of the casino featuring gaming machines, the
Company (i) designs and manufactures customized interior signage as an extension
of the casino's interior thematic design, (ii) provides progressive jackpot and
bonusing systems that stimulate player wagering (in terms of the number of
participants, the wagering level and the duration of play) and increase casino
revenues and (iii) provides networks using proprietary software to link tables
and multiple gaming machines. Such networks facilitate, on a real-time basis,
player tracking and data collection, which promote patron loyalty and enhance
the cost effectiveness of casino marketing programs.

     As part of its proprietary gaming machine business, the Company develops
and distributes several specialty gaming machines, including branded theme
games, coin-push games, oversized slot machines and customized touch-screen
multi-game and multi-coin video machines with second game bonus features. These
products provide casino operators with greater product variety and opportunities
for increased win.

     In the table game area, the Company develops and distributes proprietary
versions of stud poker, draw poker, pai gow poker and blackjack that incorporate
networked progressive jackpot systems to create additional wagering
opportunities and stimulate play. We own exclusive rights to the TableLink(TM)
technology, a patented, state-of-the-art player tracking, accounting and
security system for blackjack and other table games.

                                       2
<PAGE>

     We believe that our principal business strengths include (i) our
demonstrated ability to supply the legal gaming industry with superior products,
(ii) our worldwide manufacturing, sales and service facilities, (iii) our
long-standing customer relationships, (iv) our reputation for experience,
competence and integrity, and (v) our knowledge of how to successfully conduct
business in the exceedingly complex regulatory environments of the numerous
legal gaming jurisdictions into which the industry is segmented. Amplifying our
strengths is the reality that any new competitor would face the formidable task
of substantially duplicating them in order to successfully challenge us in the
marketplace. The magnitude of this task in the regulatory area alone may be
measured by the amount of time, energy, information and commitment required of
applicants for licenses to conduct business with casinos and other gaming
operators in many disparate regulatory jurisdictions. Mikohn has applied for and
been granted 150 licenses or equivalent authorizations in gaming jurisdictions
around the world.

     The Company conducts its operations directly and through subsidiaries that
are generally wholly owned. The Company's primary domestic subsidiaries are
Mikohn Nevada, Progressive Games, Inc. (PGI), MGC, Inc., Mikohn International,
Inc. and Casino Excitement, Inc. The Company's primary foreign subsidiaries are
Mikohn Europe, B.V., a Netherlands corporation, Mikohn Australasia Pty., Ltd.,
an Australian joint venture and Mikohn South America, S.A., a Peruvian
corporation. In November 1999, Mikohn sold 50% of the issued shares in the
capital of Mikohn Australasia Pty., Ltd. to TAB Limited. (See Note 1 -
Organization and Note 22 - Restatement in the Notes to Consolidated Financial
Statements).

     The Company's headquarters and its principal executive offices are located
in Las Vegas, Nevada, where it maintains part of its production facilities.
Additional production facilities are located in Gulfport, Mississippi and
Hurricane, Utah and sales, service and/or support offices are located in Nevada,
Mississippi and eight additional states. To better serve international markets,
we maintain comprehensive production, sales and service facilities in the
Netherlands, Australia and Peru, and a sales office in Argentina. We employ over
800 people worldwide.

     The address of the Company's headquarters office is 920 Pilot Road,
(formerly 1045 Palms Airport Drive), Las Vegas, Nevada 89119 and its telephone
number is (702) 896-3890.

Overview of the Legal Gaming Industry

     In recent years, the legal gaming industry has enjoyed extraordinary
growth, both domestically and internationally. The increase in gaming demand
results in part from the greater public acceptance of legal casino gaming.
Research conducted by Yankelovich Partners, Inc. found that 92% of U.S. adults
view casino gambling as an acceptable form of entertainment for themselves and
others. This acceptance is reflected in the number of domestic jurisdictions in
which casino gaming in some form is now permitted.

     Many foreign jurisdictions have legalized or have expanded legal casino
gaming in recent years. Significant foreign gaming jurisdictions now include
Canada, Australia, New Zealand, France, the Netherlands, and various South
American, Asian and Eastern European nations.

     The growth of legal gaming has resulted in a huge increase in the number of
gaming machines, among them a host of video poker and other games as well as
more traditional slot machines. Gaming machines are by far the most popular form
of gambling; at the major Nevada, New Jersey and Mississippi casinos they
account for approximately two-thirds of total gaming revenues. These gaming
machines, along with traditional casino table games such as blackjack, can be
more accurately controlled and accounted for with the help of Mikohn's
technologically innovative products and systems, and we believe we are well
positioned to usefully and profitably serve this expanding

                                       3
<PAGE>

market. A large expansion of casino gaming is now occurring in Detroit, Michigan
and California. In Detroit, two of the city's three authorized temporary casinos
have opened. The third is set to open in mid 2000. The more elaborate, permanent
casinos are scheduled to open four years later. Recently, the voters in
California approved Proposition 1A, which allows casino style gaming on Native
American lands in that state.

Competitive Strengths

     Management believes that the Company's competitive strengths include the
following:

     Substantial Gaming Industry Presence and Strong Relationships with
Customers. The Company's products can be found in nearly every major domestic
casino and most major international casinos, including casinos operated by Boyd
Gaming, Crown Casino, Mandalay Bay Group, Harrah's, Park Place (formerly Grand
Casino, Hilton/Bally's and Caesars), Holland Casinos, MGM Grand, Mirage and
Station Casinos. Our products also are sold to major gaming machine
manufacturers including Alliance/Bally Gaming, Aristocrat, IGT, Sigma and WMS
Industries. Management believes that the Company's interior signage is preferred
by most developers of major new casino projects that employ extensive thematic
design and by gaming machine manufacturers to merchandise progressive jackpot
gaming machine networks. The Company's Caribbean Stud(R) poker game is the most
popular proprietary table game in the world. The Company's progressive jackpot
systems for gaming machines and table games are the most widely used in the
industry. The Company's proprietary player tracking software is among the most
technologically advanced and has gained acceptance in new international markets,
notably Canada, where there is need to network and monitor multiple remote sites
involving thousands of gaming machines.

     Worldwide Distribution Capability / Diversified Revenue Base. The Company's
revenues are highly diversified by customer and geography. The Company's
products are distributed in more than 60 countries by the Company's own sales
force as well as by independent sales representatives.

     Significant Recurring Revenue. Since 1993, the Company has emphasized the
development and expansion of its proprietary gaming machine and table game
products and its progressive jackpot, bonusing and player tracking systems, all
of which can be marketed through lease, license, structured participation and/or
ongoing maintenance arrangements and all of which generate recurring revenue.

     Product Innovation and Technology Development. The Company focuses on
developing technology platforms that can be utilized with numerous new and
existing products. Progressive jackpot systems originally developed for
individual gaming machines have evolved into networks of multiple gaming
machines linked to common jackpots and, most recently, have been further
enhanced with bonusing features such as the Company's MoneyTime(TM) system which
increase the frequency of payouts among multiple players.

     The Company's TableLink(TM) technology and progressive jackpot table game
platforms reflect the evolution and adaptation of technology for table games.
PGI's side-bet progressive jackpot technology was originally developed for stud
poker and more recently has been adapted for draw poker and blackjack, pai gow
poker and Monopoly(R) Poker(TM). TableLink(TM) currently runs on all game types.
Chip tracking and game tracking versions operate on blackjack and are in the
process of being adapted for use with other games such as roulette and baccarat.
The Company's SuperLink(TM) and CasinoLink(TM) systems provide multi-site gaming
machine monitoring, data collection, real-time player tracking, game management
and progressive slot system monitoring. These advanced systems have been
installed in many large domestic and international gaming venues that employ
state-of-the-art information technology to manage thousands of gaming machines
at multiple

                                       4
<PAGE>

locations.

     Significant Patent and Trademark Protection. The Company has secured and
endeavors to secure exclusive rights in its proprietary games, electronics,
bonusing and control systems, and displays, primarily by obtaining U.S. and
foreign patents. The Company owns or holds exclusive rights to more than 60
issued patents and has more than 30 patent applications pending. In addition,
the Company maintains trademarks relating to more than 50 products.

     Mikohn's U.S. patents and pending patent applications relate to, among
other things, our Flip-It(TM) coin-push gaming machines, Mystery Jackpot(TM)
system, MoneyTime(TM) system and jackpot features which may be incorporated into
new or existing table games. We also hold rights to patents and pending patent
applications for table monitoring systems relating to the TableLink(TM) system.

     Our exclusive rights to patents and pending patent applications cover a
number of key products, including: (i) the method of playing Caribbean Stud(R);
(ii) methods of playing progressive blackjack; (iii) methods of jackpot table
gaming, including progressive jackpots; (iv) various types of apparatus used for
jackpot table gaming, including progressive jackpots; and (v) methods of playing
electronic poker with an optional side-bet for jackpots including progressive
jackpots.

     We actively seek patent and trademark protection and vigorously enforce our
intellectual property rights. Management believes that the Company's protection
of its patents and trademarks and other intellectual property raises additional
barriers to entry for prospective competitors and results in higher marginal
revenues than could be earned from non-proprietary products.

     Extensive Jurisdictional Approvals. Licensing or other regulatory approval
is required of the Company and its senior managers, directors, large
shareholders, gaming equipment components, proprietary gaming machines and table
games. The Company is licensed in 25 states, 90 Native American Indian tribes
and 17 foreign countries. In addition, the Company sells products in more than
45 additional foreign jurisdictions that do not require licensing approval.
Management believes that the time and cost necessary to obtain licensing and
product approvals in numerous jurisdictions present significant obstacles to
potential competitors.

Operations

     For the periods reported, the Company's worldwide operations are
concentrated in three principal business segments: (i) signs, (ii) gaming
products and (iii) gaming operations. Set forth below is a description of each
of the Company's three principal business segments. For the financial results by
the Company's business unit segments see Note 20 - Segment Reporting in the
Notes to Consolidated Financial Statements.

     Signs:

     Interior Casino Signage. Mikohn's product design, manufacturing capacity
and worldwide distribution make it the industry leader in interior casino
signage. The Company designs and manufactures interior signage and displays that
are marketed and sold either as stand-alone signs or in combination with
progressive jackpot systems.

     Interior casino signage differs in many respects from other forms of
signage. Casino signage typically features intricately detailed artwork, is
constructed in a wide variety of unusual shapes, is finished and detailed with
more expensive and delicate materials than other types of signage and often is
covered by an artistic finish such as polished aluminum or acrylic laminate.
Laser printers

                                       5
<PAGE>

are used to make sign faces which are then painted or laminated, and color laser
printers are used to make finished sign faces. The electrical components of the
signs include fluorescent or incandescent backlighting and a wide range of
artistic lighting, including neon tubes, star-tubes and flashing incandescent
lighting.

     Interior signage is used extensively in connection with the "theming" of
interiors and the differentiation and identification of facilities. Custom
processes enable us to conform signs to a casino's existing theme or to create
distinctive themes for particular areas in a casino. Sales and creative
personnel work closely with the customer in the development of the design plans.
State-of-the-art installations by Mikohn may be seen in recently opened
mega-casinos such as the Bellagio, Venetian, Paris and Mandalay Bay resorts in
Las Vegas, and are also found in numerous other casinos in both domestic and
foreign gaming jurisdictions.

     The average construction period for an interior signage project is
approximately 6 to 8 weeks. The costs of interior signage projects vary widely,
but most fall within a range of $50,000 to $4.0 million. We typically require a
50% downpayment before commencing manufacturing, with an additional 25% due at
shipping and the balance due upon completion of the installation. While our
interior signage is increasingly being incorporated into large projects,
remodeling and small projects continue to stimulate demand.

     Demand for interior signage has also been stimulated by the popularity and
growth of progressive jackpots throughout the gaming industry. These often
incorporate Mikohn interior signage into sophisticated merchandising programs.

     Exterior Signage. Mikohn also designs, manufactures, installs and maintains
exterior signage. These projects can vary from themed directional signage to
multi-story, double-faced pylon signage such as the two exterior signs at the
Bellagio in Las Vegas. Mikohn targets the gaming industry for its exterior
lighting and signage products and has supplied signs or lighting systems to
major casinos in the U.S. and to a number of international customers.

     Mikohn has successfully developed MikohnVision(R), a system that enables
users to produce spectacular displays on huge outdoor screens in up to 16.7
million colors. Mikohn has patents to protect various features unique to the
MikohnVision(R) system. MikohnVision(R) makes it possible to offer real-time
graphics, animation, text and video clips; to display photos, logos, video and
real-time images; and to create instant, spectacular animations and messages at
adjustable speeds.

     The exterior signage business is much more competitive and therefore less
profitable than interior signage. The sales price of exterior signage varies
widely, although most contracts fall within a range of $200,000 to $2.0 million.
Typically, Mikohn receives payments during the course of design, manufacture and
installation.


                                       6
<PAGE>

     Gaming Products:

     Progressive Jackpot Systems. A progressive jackpot system monitors play on
one or more gaming machines and accumulates, in real-time, a predetermined
percentage of each coin bet to create a jackpot. This jackpot increases
continuously until won by a player. The system then can be reset automatically
to accumulate and present subsequent jackpots. Progressive jackpot systems can
serve a single machine or can be electronically linked with a number of gaming
machines to generate a collective jackpot. Progressive jackpot systems create
larger jackpots to contribute added excitement to the game and provide an
incentive for players to play the maximum number of coins. Management believes
progressive jackpots can increase the revenues from gaming machines by 15% to
30%.

     Mikohn's progressive jackpot and bonusing systems typically are comprised
of three components: controllers, a color display of light emitting diodes
("LEDs") and accompanying software. The controllers draw data from the linked
gaming machines and continuously update the amount of the progressive jackpot
from a number of games. This information is flashed in real-time to the
electronic displays in and around carousels of participating machines,
accompanied by graphics, animation and sound effects. The software enables the
casino operator to program the controllers and displays and to set various game
options. The electronic displays capture and maintain a player's interest by
continuously showing on a real-time basis the current amounts of the progressive
jackpot and subsequently by celebrating when a jackpot is hit.

     Although controllers, displays and software are all included in every
Mikohn progressive jackpot system, controllers and displays also are sold
separately to gaming machine manufacturers and casino operators. The software
used to program the displays and controllers and monitor the systems and machine
usage is proprietary, thereby inhibiting the operator from substituting
components made by other manufacturers. Mikohn's progressive jackpot systems can
be connected into multi-site progressive links among a number of casinos. The
operator of the gaming machine, not Mikohn, is responsible for payouts of all
jackpots.

     Controllers. Mikohn's proprietary controllers are designed to be compatible
     -----------
with the gaming equipment made by the major gaming machine manufacturers,
including Aristocrat, Atronic, Alliance/Bally Gaming, Novomatic Industries
("Novomatic"), Sigma, Universal de Desarrollos Electroonicos, S.A. ("UNIDESA/
Cirsa"), WMS Industries and the industry giant, IGT. Mikohn's controllers are
licensed in every major gaming jurisdiction. We believe we have the largest
installed base of controllers in the industry. The sale of Mikohn's controllers
for a progressive jackpot system is frequently accompanied by the sale of Mikohn
electronic displays promoting the system.

     Electronic Displays. Mikohn manufactures displays in the widest variety of
     -------------------
sizes and designs in the industry to accommodate the technical, aesthetic and
price requirements of its casino customers. Management believes that Mikohn's
electronic displays are installed with most gaming machines manufactured by
Alliance/Bally Gaming, Aristocrat, IGT, Novomatic, Sigma, UNIDESA/Cirsa and WMS
Industries. These electronic displays are found in casinos in virtually every
major gaming jurisdiction throughout the world. The Company produces
alphanumeric and graphic electronic displays for use in real-time applications
with all major brands and models of gaming machines. Our displays primarily use
LEDs which can be turned on and off approximately 100 times per second and can
be programmed to display information in a wide variety of formats, including
flashing, traveling from side to side, odometer, pulsating, scrolling up or
down, painting (each character is formed from the top down), morphing and
dancing colors (each character alternates color). LEDs also can utilize
foreground or background color, user selectable and downloadable font and text
justification. Cells of LEDs may be combined to display characters and graphics
in a variety of sizes ranging from small to very large. The Company supplies
displays to

                                       7
<PAGE>

casinos and gaming equipment manufacturers including IGT for its wide-area
progressive systems.

     In addition to the Company's proprietary line of LED displays, Mikohn
offers casinos the ability to attract players using the latest in high-
resolution plasma displays. Utilizing Mikohn's PC based PlasmaPack(TM)
controller, casinos can run real-time applications such as bonusing and
progressives on large, high-resolution plasma displays.

     The flexibility of the Company's software enables us to implement our
competition's software protocol so that our displays can still be sold even when
we are not the chosen progressive system vendor.

     Software. Mikohn designs application software for use in connection with
     --------
its progressive jackpot systems. The software permits the casino operator to set
jackpot frequencies and levels in response to competitive factors and variations
in customer demand and to set a maximum amount to be displayed as a jackpot
(which effectively limits the casino's liability in the event of a programming
or technical error). The software is programmable to accommodate a variety of
international currencies, and is supplied either on a diskette for installation
on the casino's stand-alone personal computer or on a memory card sold by Mikohn
for installation in a palmtop computer.

     Mikohn's SuperLink(TM) software package supplies a comprehensive,
multi-faceted system for managing a progressive jackpot network from a central
location. The SuperLink(TM) system consists of Mikohn bonus and/or standard
progressive controllers, a Mikohn smart interface board for each machine and a
PC hosted monitoring system. The system PC provides reports and statistics of
bonus game play and features screens for configuration and set-up. It also links
the interface packages of electronic displays, controllers and software into one
total integrated package, permitting centralized control and facilitating the
operation, programming and monitoring of progressive jackpots and bonuses. As a
result, management believes that the SuperLink(TM) system enables casino
operators to manage their slot machines with greater efficiency, which can
increase productivity, enhance security and reduce costs. Moreover, the
SuperLink(TM) system, with its built-in flexibility, is a system that will
enhance both existing and new gaming machines with new progressive, bonusing and
merchandising features, including Mikohn's MoneyTime(TM), Mystery Jackpot(TM)
and Bonus Jackpot(TM).

     Bonusing Systems. A bonusing system provides a cash bonus which can be
random or preset separate from the normal payout for a winning combination.
While bonus amounts are typically lower than the top pay of the game, the
frequency is high, providing a valuable merchandising tool for stimulating,
extending and increasing the rate of play.

     Bonus Jackpot(TM) provides a random cash bonus along with the normal payout
for a winning combination. Any or all of eight progressive pay levels may be
selected as the bonus level and up to eight random bonuses can be set for each
selected level. Mystery Jackpot(TM) is a progressive system that rewards patrons
at random according to a fixed pay schedule. The bonus is triggered when the
mystery (hidden) jackpot reaches a random level within a specified range. Once a
winner is identified, a payout is randomly selected from one of eight awards.
Mystery Jackpot(TM) awards a player a progressive jackpot just for playing; no
winning reel combination or minimum coin-in is required. The range for the
jackpot can be configured by the operator, and the system randomly selects a
jackpot amount within that range and awards the jackpot via the credit meter to
the player. Controllers and displays are designed by Mikohn and assembled using
components manufactured to its specifications by various suppliers.

                                       8
<PAGE>

     Player Tracking and Data Collection Systems.

     CasinoLink(TM). Our CasinoLink(TM) system is an integrated management
system for the gaming enterprise. Operating on a Microsoft Windows NT(R) / SQL
Server(R) platform, CasinoLink(TM) provides its users with robust, highly
scalable applications for accounting and auditing, administration and security,
jackpot management and player marketing. CasinoLink(TM) is exceptionally well
suited to fulfill the requirements of large, geographically dispersed casino
operators who require multi-site capability.

     The CasinoLink(TM) system is installed throughout the gaming operations of
more than 20 casino operators worldwide. CasinoLink(TM) is utilized domestically
by single-site operators in Colorado, Nevada and Oregon as well as by one
multi-site operator in Nevada. Mikohn holds the dominant share of the gaming
system market in Canada, with installations in the multi-site, provincial
lottery corporations of Alberta, British Columbia, Ontario and Saskatchewan. The
European market is home to single-site installations in Finland, Greece and
Italy as well as to multi-site installations in the Netherlands, the Slovak
Republic, Slovenia and Russia.

     In November of 1999, Mikohn reached an agreement with TAB, Ltd. of Sydney,
Australia where Mikohn will serve as the exclusive provider of progressive
jackpot management software.

     TableLink(TM). Mikohn also develops and markets automated data collection
systems for player tracking and accounting for table games. These products
include the Company's patented TableLink(TM) technology.

     In 1995, Mikohn acquired the exclusive worldwide rights to develop,
manufacture, market and distribute the technology incorporated in the Company's
TableLink(TM) system, a player tracking and data collection system for table
games. This system enables the casino to recognize and reward players, and
enhances game security. Mikohn's TableLink(TM) system employs (i) special casino
chips that are embedded with computer microchips which transmit encrypted radio
frequency signals, (ii) sensors at each player position at the table, (iii)
player identification card readers, (iv) optical readers that read playing cards
as they are dealt for card game applications, (v) touch-screen computer displays
at the gaming table or pit stand and (vi) proprietary software networked to a
central data collection point. Information is compiled by patented instruments
and computer and sensor technology, which electronically track all bets in
real-time as the chips are placed, producing a record of each game. In addition
to providing player tracking, chip tracking and game tracking, the technology
can be used to integrate a progressive jackpot system with other table games to
stimulate player excitement and improve revenue production. The technology used
in the TableLink(TM) system, for the first time, provides casino operators with
real-time accounting of the play of each table game player. Improved accuracy
and player initiated ratings not only are very useful to the casino in
identifying and directing complimentary benefits to the customer, but improve
customer loyalty. It also redirects supervisor time from administrative to
customer relationship tasks.

     TableLink(TM) brings to table games the benefits of accurate and automated
data collection and player tracking, previously seen only in the slot machine
sector. Players initiate their ratings using their player cards when they begin
play. The TableLink(TM) system tracks the time played, wagers made and game
results. The information can be interfaced with the casino's main database and
used for rewarding patrons as well as building marketing information.
TableLink(TM) is available in three tiers: PT (Player Tracking), CT (Chip
Tracking) and GT (Game Tracking). TableLink(TM) PT is the base product upon
which the CT and GT product offerings are built.

     Management believes TableLink(TM) has the potential to become one of the
most important technological advances in casino gaming since the introduction of
microprocessors in gaming

                                       9
<PAGE>

machines. It already has been adapted to blackjack, the world's most popular
table game, with approximately 20,000 tables in use worldwide as a potential
customer base. Management believes that Mikohn's TableLink(TM) technology can be
adapted for use with other popular table games, including baccarat and roulette.

     Oversized Gaming Machines. Mikohn holds an exclusive license from IGT to
manufacture and distribute oversized and giant gaming machines known as Mini-
Bertha(TM) and Colossus(TM), respectively. These oversized gaming machines come
in electronic video and slot-reel formats, feature many of IGT's popular games
and can be linked within a casino on a progressive network. Because of their
size they provide greater visual appeal and variety, and management believes
that they generate a greater win per machine than conventional gaming machines.
The machines are available for sale, lease or license and IGT receives a license
fee based upon the income derived from the machines that are placed. The
revenues relating to these machines as reported by Mikohn in its financial
statements are net of license fees paid to IGT.

     Keno. Under a licensing agreement with XpertX, Inc. ("XpertX"), Mikohn
holds the exclusive worldwide distribution rights (except for Nevada) to the
XpertX(TM) keno system. Key features of this keno system include player tracking
(player account information, player trip history, play and win amounts and buy-
in limits); reporting (customized audit/management reports and inter-property
progressive capabilities); display functions (in-room television keno display
and advertising options); and built-in diagnostic software and disc mirroring
features.

     Accessories. The Company's also supplies a number of accessory products
that allow the casino customer to operate a wider variety of progressive games,
provide promotional messages, animated and graphic displays, and generate
additional statistical and operating information from the gaming machines linked
to progressive jackpot systems. Available accessories also include devices to
boost electrical outputs to a large number of displays, cable and fiber-optic
connectors, devices to trigger visual or aural signals when a progressive
jackpot is hit, and circuitry for the display of progressive jackpot amounts on
the screens of video gaming machines.

     Gaming Operations:

     In 1993, Mikohn established its games division to develop, acquire,
manufacture and distribute proprietary games, and these have become an
increasingly important segment our business. We have devoted increased attention
to the games division because of the high recurring revenue and profit margin
potential in this business line. The Company owns or licenses the rights to
several categories of proprietary games, which it places in casinos under sale,
license, lease or structured participation arrangements. Sales of proprietary
games are reflected in the reported results of our Gaming Products business
segment while revenues derived from licenses, leases or structured participation
arrangements are included in the results of our Gaming Operations business
segment.

     Set forth below are descriptions of some of the Company's significant
proprietary gaming machines and table games that are placed under license, lease
or structured participation arrangements.

Table Games.

     Tre' Card Stud(TM). Tre' Card Stud(TM) is a new three card stud poker game.
     ------------------
This is a fast-paced, fun game in which all hands including the dealer's hand
have only three cards. Players ante one unit to receive hands of three cards,
face down, and at this point may either call with a bet of two units (twice the
ante) or fold. The dealer needs a certain combination of cards to play. An
optional

                                       10
<PAGE>

additional bet may be made for bonus jackpots on certain hands. The game is
approved in Mississippi and under submission to regulatory authorities in
Nevada.

     Caribbean Stud(R). Caribbean Stud(R) is one of the most popular table games
     -----------------
in the gaming industry and the most popular proprietary table game in the world.
More than 900 Mikohn Caribbean Stud(R) tables are in service worldwide, in more
than 370 casinos in 38 jurisdictions. Mikohn does not have the rights to
Caribbean Stud(R) in Nevada. Caribbean Stud(R) allows a player to make two
wagers, one that pays if the player's hand beats the dealer's hand and one that
pays either a flat fee jackpot or a portion of a progressive jackpot if the
player receives a flush or better. In order to win 100% of the jackpot, the
player must have placed the optional side-bet and have been dealt a royal flush.
Jackpots of lesser amounts are awarded for a straight flush, four of a kind,
full house and flush. Caribbean Stud(R) table games have been available in
casinos since 1988.

     Caribbean Draw(R). Caribbean Draw(R) resembles Caribbean Stud(R) and
     -----------------
includes an optional side-bet feature, but the player has the opportunity to
exchange up to two cards originally dealt for new cards, as in a standard draw
poker game.

     Wild Aruba Stud(TM). Wild Aruba Stud(TM) is Mikohn's latest offering in
     -------------------
this line of poker games. Wild Aruba Stud(TM) is a variation of 5-card stud
poker. Each player makes an ante bet and may fold or call with an additional
back bet of twice the ante. The game uses wild deuces to increase the fun. The
dealer qualifies with a pair of eights or better. A player who makes the
additional progressive bet can win all or part of the progressive jackpot even
if he loses the hand. Wild Aruba Stud(TM) can also be linked to the same
progressive jackpot as Caribbean Stud(R) and Caribbean Draw(R). Wild Aruba
Stud(TM) has been approved in Nevada and Mississippi and is pending approval in
other jurisdictions.

     Progressive Blackjack. Progressive Blackjack fills out the rest of the
     ---------------------
current Mikohn table game line-up. Progressive Blackjack is played as a basic
blackjack with an optional side-bet. Players receive jackpot payments determined
by a payout formula based on certain card combinations, which may be dealt to a
player. Casinos benefit from the game because of the additional volume and win
generated by increased play.

     Monopoly Poker(R) Edition(TM). Monopoly(R) Poker Edition(TM) is a novel
     -----------------------------
casino table game played with a special "Monopoly" deck of 50 cards. One or more
players simultaneously play against a pay table and the ranking of hands is
performed in a manner thematic to the popular home game. The mechanics of
Monopoly(R) Poker Edition(TM) allow the rapid play and resolution of wagers.

     In the game, a player makes an initial one-unit ante wager to receive a
four-card hand. The player may then either fold, thereby ending the hand and
losing the ante, or "Go" (play), thereby wagering an additional amount equal to
the ante. The dealer then turns over a common fifth card and all remaining
players' hands are resolved according to the Monopoly(R) Poker Edition(TM) pay
table. The object of the game is to collect at least one color-group (for
example, three orange property cards or two blue property cards), at least two
railroads, or both utilities.

     An optional side wager allows players to win all or a portion of a
progressive prize. The progressive jackpot bet must be made at the same time the
ante is placed. Monopoly(R) Poker Edition(TM) is approved in Mississippi. We
expect regulatory approval in Nevada and other jurisdictions by the middle of
2000.

     Yahtzee(R). Mikohn's Yahtzee(R) game is a casino table game played with a
     ----------
table layout showing winning dice roll combinations, wagering odds, and a large
table box containing five mounted mechanical dice. A hand of Yahtzee is played
according to a selected house version. Players are

                                       11
<PAGE>

allowed to make "game wagers" on the outcome of the roll of the dice, as well as
"next roll wagers" on the outcome of the next roll.

     The Yahtzee(R) table game is played with five mechanical dice that behave
in a random fashion. As with the game played by millions in their homes, the
hand consists of an initial roll of the five dice, followed by up to two re-
rolls of one or more dice. Each player has a chance to "roll" the dice a maximum
of three times in an attempt to create combinations similar to those found in
poker. The word "roll" refers to the player pressing the interactive player
button, which enables the player to roll the dice. For example, three-of-a-kind,
four-of-a-kind, straight and full house are all winning combinations. The
ultimate combination would be "Yahtzee", or all five dice the same. Yahtzee has
been submitted for regulatory approval in most jurisdictions.

     Jackpot Pai Gow(TM). Jackpot Pai Gow(TM) combines elements of the ancient
     -------------------
Chinese game of pai gow with classic American poker. Jackpot Pai Gow(TM) is a
seven-card stud poker table game played with a standard 52-card deck and one
joker in which one to six Players play against the house dealer. The joker can
only be used as an ace, or to complete a straight or a flush. As with similar
card table games, the mechanics of Jackpot Pai Gow(TM) allow for quick play and
wager resolution.

     All players, including the dealer, receive a seven-card hand, which they
"set" into a back hand of five cards, and a front hand of two cards. The back
hand must always outrank the front hand. For example, if the two-card hand is a
pair of sevens, the five-card hand must contain a pair of eight's or higher.
Rankings are based on poker rankings, with the exception of A-2-3-4-5, which is
the second highest straight. The highest two-card hand is aces; the highest
five-card hand is a royal flush or five aces (four aces plus the joker).

     The object of the game is for both the player's hands to rank higher than
the corresponding dealer's hands. The dealer wins all tie results. If the player
wins one hand and loses the other a "push" results and no money changes hands.
Winning hands are paid 1 to 1 with a 5% commission to the dealer; therefore
actual winning payout to the player is 95%. Losing hands lose the amount
wagered. Players win if both of their hands are higher than the dealer's two
hands.

     In Jackpot Pai Gow(TM), players place an initial wager to receive a
seven-card hand, face down. The cards are dealt to the player who is selected to
get the first set of cards and then from right to left. Each Player position has
areas on the layout marked bet, cards and a coin accept to be used for the
optional, $1.00 or $5.00 side-bet to qualify for the progressive jackpot. This
optional jackpot bet is accepted on the condition that an initial wager has also
been placed for that hand and that both wagers are made prior to any cards being
dealt. A hand winning the optional side-bet is not affected by the dealer's
hand. Jackpot Pai Gow(TM) will be submitted for regulatory approval in mid-2000.

     Mikohn places table games directly with casino operators for a monthly
license fee that is a fixed rate per table. Most of the agreements with the
casinos are for three-year terms with a 30-day early cancellation clause. As of
December 31, 1999, Mikohn had 1,096 revenue producing table games installed.

     New Table Games in Development.  Mikohn has several new table games in
     ------------------------------
various stages of development.

     Branded Slot Games. In 1999, under an exclusive license from Hasbro, Inc.,
Mikohn developed a series of casino slot games based on Yahtzee(R), one of the
best known and most popular of all dice games. Mikohn's Yahtzee(R) series games
were named among the top 20 most innovative products for 2000 by the Casino
Journal Publishing group.

                                       12
<PAGE>

     Introduced in Nevada casinos in late summer, the first two versions were
spinning reel slots topped with oversize mechanical dice, designed to be fast
moving, fun and entertaining. In the Yahtzee Bonus(TM) game, patrons have the
opportunity to play an actual hand of Yahtzee(R) complete with up to three
rolls, just like the home game. In Yahtzee Take A Chance(TM), players who reach
the bonus round may make successive rolls of five dice, hoping to hit "chance"
which increases their awards. For these games, Sigma Game, Inc. is the exclusive
supplier of the slot machine platform, which has been integrated with Mikohn
bonusing technology.

     In December 1999, Mikohn introduced its Yahtzee(R) Video(TM) game, a
five-reel, 45-coin, nine-line slant top video game utilizing up to 45 nickels.
An interactive second screen is animated with five three-dimensional dice
characters which wiggle and roll to guide the player in an actual hand of
Yahtzee(R) with two re-rolls just as in the classic game. An added feature is
the random scatter-pay bonus showcased by another set of three-dimensional dice
characters in super hero costumes. Mikohn has selected the Pentium CD-ROM-based
Millennium(TM) series' video platform from Sigma Game, Inc., featuring new
technology which provides powerful graphic and audio capabilities.

     Coin-Push Games. In 1995, Mikohn acquired the exclusive U.S. patent rights
to an electromechanical coin-push gaming machine, known as Flip-It(TM), that it
now manufactures and distributes. Mikohn leases Flip-It(TM) to operators on a
participation or fixed rental basis that produces a recurring revenue stream.
Currently, Flip-It(TM) games have been approved for play in Nevada, where Mikohn
participates in the casino revenues generated by the game, and in Michigan,
Mississippi, New Mexico and Uruguay, where Mikohn leases the game for a flat
rental. During the last three years, there has been a general decline in the
number of Mikohn's Flip-It(TM) games in service. Management believes that the
decline in the number of Flip-It(TM) games is due in part to the level of
maintenance that has been required for the mechanical components in the game. We
are in the process of developing an electronic version of the game, which
management believes will have greater reliability and correspondingly increased
casino acceptance.

     MoneyTime(TM). MoneyTime(TM) is a branded progressive jackpot system
developed by Mikohn in 1997. It uses bonusing to initiate, extend and increase
play. Typically, 40 gaming machines are configured in a carousel with extensive
overhead thematic signage manufactured by Mikohn promoting the MoneyTime(TM)
progressive jackpot system. Each gaming machine is linked into one MoneyTime(TM)
system. When the progressive pool generated reaches a randomly determined level
within a specified range, the system triggers a bonus mode in which multiple
players are awarded portions of the jackpot in rapid succession.

     Hot Potato(TM). Mikohn's newest bonusing jackpot system, to be launched in
2000, is Hot Potato(TM). Hot Potato(TM) is designed to operate on IGT's Vision
games, which are IGT's latest and most technologically advanced gaming machines.
Hot Potato(TM) is a multiplier bonus system.

Competition

     The markets for the Company's products are highly competitive. The Company
competes with a number of developers, manufacturers and distributors of products
similar to those that the Company produces and distributes. Some of these
competitors are larger and have greater access to capital resources than the
Company. The Company's future performance may be affected by numerous factors,
some of which are (i) the continued popularity of the Company's existing
products and its ability to develop and introduce new products that gain market
acceptance and satisfy consumer preferences, (ii) the Company's ability to
maintain existing regulatory approvals and obtain future approvals in order to
conduct its business and (iii) the Company's ability to enforce its existing

                                       13
<PAGE>

intellectual property rights and to adequately secure and enforce such rights
for new products.

     Many of the Company's products require regulatory approval. Management
believes that the amount of time and money consumed in the course of obtaining
licenses in new jurisdictions and new product approvals in multiple
jurisdictions constitute significant obstacles to entry or expansion by new
competitors. In addition to regulatory constraints, the Company's patents and
trademarks protect its products. The Company actively seeks patent and trademark
protection and vigorously enforces its intellectual property rights.

     Signs:

     Management believes that Mikohn not only is the leading worldwide
manufacturer of interior casino signs, it is also the dominant competitor in
this specialized market and is recognized as the industry leader in technology
integration, artistic concepts, library of designs, creative staff, distribution
network and structural design, all of which are essential to the more complex
thematic signage found in the new mega-casinos. These factors, in the aggregate,
create significant obstacles to entry by new competitors. Competitors in the
interior sign business include Young Electric Sign Company (YESCO), B&D Signs,
DID Signs and A.C. Coin & Slot Company.

     Gaming Products:

     In the electronics, bonusing and control systems market, we believe that
the Company's components for progressive jackpot systems have the highest market
share and name recognition in the industry. The primary competitors for the
Company's progressive jackpot system components are Casino Data Systems (CDS)
and Acres Gaming (Acres) (see "Legal Proceedings"). Although IGT currently uses
the controllers and software it manufactures solely in connection with its own
proprietary gaming machines, there can be no assurance that IGT will not
commence sales of such components to other gaming machine manufacturers and
casino operators. In the placement of progressive jackpot bonusing systems, the
Company competes with Acres and the major gaming machine manufacturers who have
developed their own proprietary gaming products that incorporate progressive
jackpot bonusing systems into their games.

     Mikohn's CasinoLink(TM) system competes against systems from Alliance/Bally
Gaming, Acres, CDS, IGT and, to a lesser extent, Gaming Systems International.
This market is highly competitive. Pricing, product features and functions,
accuracy and reliability are key factors in determining a provider's success in
selling its system. Because of the high initial costs of installing a
computerized monitoring system, customers for such systems generally do not
change suppliers once they have installed such a system. Our future growth in
this product line will be based on penetration of the international markets and
further expansion in the established and emerging markets, as well as continued
development efforts by the Company to provide customers with new and innovative
hardware and software products. Management believes that the Company has a
competitive advantage because its CasinoLink(TM) system, the first player
tracking and accounting control system using the Microsoft Windows NT platform,
provides greater ease of use and the ability to link multiple sites.

     Mikohn's TableLink(TM) technology is unique in its ability to automatically
capture and record exact wagering information in real-time. This information
includes the exact amount wagered, a critical element that gaming operators
traditionally have had great difficulty in ascertaining and confirming.
Management believes that there currently is no other system on the market that
has the ability to identify and record all wagers placed, all cards dealt and
the results of each hand played. Prior to the introduction of the TableLink(TM)
technology, casinos could only estimate amounts wagered. Mikohn holds exclusive
worldwide rights to this system. Patents protecting the system and several

                                       14
<PAGE>

of its unique features have been issued in the U.S. and several foreign
jurisdictions and additional applications are pending, thereby creating a
significant barrier to entry for potential competitors.

     In the gaming machine market, the Company competes against major gaming
machine manufacturers as well as manufacturers of specialty gaming products. The
major gaming machine manufacturers are Alliance/Bally Gaming, Aristocrat,
Atronic Casino Technology, Ltd., IGT, Novomatic, Sega Enterprises Ltd., Sigma,
UNIDESA/Cirsa, Universal Distributing of Nevada, Inc., Anchor Gaming and WMS
Industries. Although these major gaming machine manufacturers compete against
the Company directly with specialty gaming products and indirectly with mass
market gaming products (a market in which the Company does not compete
significantly), management believes that the Company competes most directly
against other specialty gaming machine manufacturers, such as Anchor Gaming,
A.C. Coin & Slot Company, CDS and Shuffle Master, Inc. (Shuffle Master). In
addition, other technology-oriented companies, such as Silicon Gaming, Inc.,
have entered or may enter the gaming machine business. Specialty gaming product
manufacturers compete primarily on player appeal and the resulting relative win
per unit generated for the casino. Management believes that the Company is in a
strong competitive position in the specialty gaming product market because of
its extensive distribution network and historic customer relationships across a
number of diverse product lines.

     Gaming Operations:

     In the proprietary table game market, the Company is the premier designer,
manufacturer and distributor of proprietary progressive jackpot table games, and
we believe our patents significantly limit the development of competing table
games with progressive or electronically enhanced side-bet features. The only
significant competitor in proprietary table games is Shuffle Master, which
markets the Let It Ride(TM) and Three Card Poker(TM) games.

     In the slot participation market which includes the Company's Yahtzee(R)
branded games as well as the non-branded games such as Flip-Its(TM),
Mini-Berthas(TM) and MoneyTime(TM), the Company competes for floor space with
Alliance/Ballys, Anchor Gaming, CDS, IGT, Shuffle Master and WMS Gaming.

Manufacturing

     The Company's several production facilities are primarily manufacturing,
assembly and subassembly operations. Most manufacturing relates to the interior
sign business, but we also assemble exterior signs, electronic displays and
controllers and proprietary games. We routinely contract with outside vendors
for assembly services to keep idle production capacity to a minimum and maintain
a constant level of employment. A computerized material requirements planning
system is used to schedule production and to ensure that inventory levels are
adequate to meet customer demand. The table below lists the Company's several
manufacturing, administrative, engineering and service facilities.

<TABLE>
<CAPTION>
===============================================================================================
                                                                  Area
                     Location / Activity                       (Sq. Ft.)    Owned / Leased
                     -------------------                       ---------    --------------
<S>                                                            <C>          <C>
Las Vegas, NV - Corporate Administration                           36,429       Leased
Las Vegas, NV - Interior Signs - Manufacturing                     47,350        Owned
Las Vegas, NV - Exterior Signs - Manufacturing                     45,976        Owned
Las Vegas, NV - Games And Electronics - Manufacturing              85,638       Leased
Las Vegas, NV - Engineering And Service                            30,500       Leased
===============================================================================================
</TABLE>

                                       15
<PAGE>

<TABLE>
<CAPTION>
===============================================================================================
                                                                  Area
                     Location / Activity                       (Sq. Ft.)    Owned / Leased
                     -------------------                       ---------    --------------
<S>                                                            <C>          <C>
Las Vegas, NV - Slot Glass / Human Resources                       17,225       Leased
Reno, NV - Administration / Service                                 8,575       Leased
Gulfport, MS - Manufacturing                                       28,000       Leased
Hurricane, UT - Manufacturing                                      79,230       Leased
Rapid City, SD - Manufacturing  *                                  48,881        Owned
Kansas City, MO - Service                                           1,650       Leased
Ft. Lauderdale, FL - Service                                       11,000       Leased
Golden, CO - Service                                                3,000       Leased
Egg Harbor, NJ - Service                                            2,800       Leased
Pleasantville, NJ - Manufacturing and Service                       7,000       Leased
Amsterdam, The Netherlands - Manufacturing                         20,000       Leased
Lima, Peru - Manufacturing                                         35,674       Leased
                                                                ---------
 .   Closed in 1999 and sold in March 2000                         508,928
                                                                =========
===============================================================================================
</TABLE>

                                       16
<PAGE>

its casino customers with new and upgraded products, games and services that
enhance their revenue stream and facilitate operating efficiencies. The
Company's current emphasis in research and development is the enhancement of the
CasinoLink(TM) and TableLink(TM) systems and the development of new game
machines and progressive table games.

Employees

     As of December 31, 1999, the Company had 822 employees worldwide, of whom
approximately 380 were in manufacturing, 62 were in sales and distribution, 57
were in art/CAD design, 135 were in installation and service, 53 were in
research and development and 135 were in administration. Of that total, 109 were
in management. A total of 83 of the Company's employees, all of whom are
employed in its exterior signs operations in Las Vegas and Atlantic City, are
represented by unions. We enjoy good relationships with our employees.

Backlog

     As of December 31, 1999, 1998, and 1997, the Company had backlogs of
orders, believed to be firm, of $16.8 million, $22.0 million and $19.4 million,
respectively. Orders in the backlog at December 31/st/ typically are filled
within 120 days.

Government Regulation

     Overview

     The Company is subject to regulation by authorities in most jurisdictions
in which its products are sold or used by persons or entities licensed to
conduct gaming activities. Gaming regulatory requirements vary from jurisdiction
to jurisdiction, and obtaining licenses, findings of suitability and/or other
required approvals with respect to the Company, its personnel and its products
(collectively, "authorizations") is time consuming and expensive.

     Generally, gaming regulatory authorities have broad discretionary powers
and may deny applications for or revoke authorizations on any basis they deem
reasonable. Although our experience is excellent, there is no guarantee that the
Company, its products or its personnel will receive or be able to maintain any
necessary authorizations.

     The Company, directly and through subsidiaries, has authorizations that
enable it to conduct its business in numerous jurisdictions, subject in each
case to the conditions of the particular authorization. These conditions may
include limitations as to the type of game or product the Company may sell or
lease, as well as limitations on the type of facility (such as riverboats) and
the territory within which the Company may operate (such as tribal nations).
Jurisdictions in which the Company (together with its subsidiaries, and specific
personnel where required) has authorizations with respect to some or all of its
products and activities include Nevada, South Dakota, Mississippi, Iowa,
Missouri, Oregon, Louisiana, Colorado, Illinois, Washington, Arizona,
Connecticut, Montana, New Jersey, North Carolina, North Dakota, New Mexico,
Kansas, Minnesota, Indiana, Michigan, New York, Wisconsin, California; the
Canadian provinces of Alberta, Manitoba, Nova Scotia, Quebec, Saskatchewan,
British Columbia and Ontario; the Australian provinces of New South Wales,
Victoria, Queensland, Northern Territory, Western Australia and Australia
Capital Territories and Tasmania; New Zealand; Mpumalanga, South Africa and
Greece.

                                       17
<PAGE>

    The Company has a provisional license in Puerto Rico, which permits the
Company to transact its business pending completion of the license application
process.

    Certain Indian tribes throughout the United States that have compacts with
the states in which their tribal dominions are located, operate or propose to
operate casinos, and these tribes may require suppliers of gaming and gaming
related equipment, such as the Company, to obtain authorizations. The Company
has and will continue to work with these tribes to obtain the necessary
authorizations when requested to do so.

    Associated Equipment

    Most of the Company's products fall within the general classification of
"associated equipment". "Associated equipment" is equipment that is not
classified as a "gaming device", but which has an integral relationship to the
conduct of licensed gaming. Regulatory authorities in some jurisdictions have
discretion to require manufacturers and distributors to meet licensing or
suitability requirements prior to or concurrently with the use of associated
equipment. In other jurisdictions, associated equipment must be approved by the
regulatory authorities in advance of its use at licensed locations. The Company
has obtained approval of its associated equipment in each jurisdiction that
requires such approval and in which its products that are classified as
associated equipment are sold or used.

    Gaming Devices and Equipment

    The Company also sells products which are considered to be "gaming devices"
and/or "gaming equipment" in jurisdictions in which gaming has been legalized.
Although regulations vary among jurisdictions, each jurisdiction requires
various licenses, approvals or permits to be held by companies and their key
personnel in connection with the manufacture and distribution of gaming devices
and equipment.

    Regulation of Stockholders

    In most jurisdictions, any beneficial owner of the Company's Common Stock
may, at the discretion of the gaming regulatory authorities, be required to file
an application for a license, finding of suitability or other approval, and in
the process to subject himself or herself to an investigation by those
authorities. The gaming laws and regulations of substantially all jurisdictions
require beneficial owners of more than 5% of the Company's outstanding Common
Stock to file certain reports, and may require them, as in the case of directors
and executive officers, to undergo investigation for licensing and/or findings
of suitability.

    Regulation and Licensing - Nevada

        Gaming

    The manufacture, sale and distribution of gaming devices for use or play in
Nevada or for distribution outside of Nevada, the manufacture and distribution
of associated equipment for use in Nevada, and the operation of slot machine
routes and inter-casino linked systems in Nevada are subject to (i) The Nevada
Gaming Control Act and the regulations promulgated thereunder (collectively,
"Nevada Act") and (ii) various local ordinances and regulations. Such activities
are subject to the licensing and regulatory control of the Nevada Gaming
Commission ("Nevada Commission"), the Nevada State Gaming Control Board ("Nevada
Board"), and various local, city

                                       18
<PAGE>

and county regulatory agencies (collectively referred to as the "Nevada Gaming
Authorities").

    The laws, regulations and supervisory practices of the Nevada Gaming
Authorities are based upon declarations of public policy having as their
objectives (i) preventing any involvement, direct or indirect, of any unsavory
or unsuitable persons in gaming or the manufacture or distribution of gaming
devices at any time or in any capacity; (ii) strictly regulating all persons,
locations, practices and activities related to the operation of licensed gaming
establishments and the manufacture or distribution of gaming devices and
equipment; (iii) establishing and maintaining responsible accounting practices
and procedures; (iv) maintaining effective controls over the financial practices
of licensees (including requirements covering minimum procedures for internal
fiscal controls and safeguarding assets and revenues, reliable recordkeeping and
periodic reports to be filed with Nevada Gaming Authorities); (v) preventing
cheating and fraudulent practices and (vi) providing and monitoring sources of
state and local revenue based on taxation and licensing fees. Changes in such
laws, regulations and procedures, depending upon their nature, could have an
adverse effect on the Company's operations.

    The Company is registered by the Nevada Commission as a publicly traded
corporation (a "Registered Corporation") and has been found to be suitable to
own the stock of Mikohn Nevada which is licensed as a manufacturer and
distributor of gaming devices, and as an operator of a slot machine route. The
Company and Mikohn Nevada have obtained from the Nevada Gaming Authorities the
various authorizations they require to engage in Nevada in manufacturing,
distribution, slot route operations and inter-casino linked system activities
consisting of slot machines. The regulatory requirements set forth below apply
to the Company as a Registered Corporation and to Mikohn Nevada as a
manufacturer, distributor and operator of a slot machine route.

    All gaming devices that are manufactured, sold or distributed for use or
play in Nevada, or for distribution outside of Nevada, must be manufactured by
licensed manufacturers and distributed and sold by licensed distributors. All
gaming devices manufactured for use or play in Nevada must be approved by the
Nevada Commission before distribution or exposure for play. The approval process
for gaming devices includes rigorous testing by the Nevada Board, a field trial
and a determination that the gaming device meets strict technical standards set
forth in the regulations of the Nevada Commission. Associated equipment must be
administratively approved by the Chairman of the Nevada Board before it is
distributed for use in Nevada.

    As a Registered Corporation, the Company is required periodically to submit
detailed financial and operating reports to the Nevada Commission and furnish
any other information the Nevada Commission may require. No person may become a
stockholder of or receive any percentage of profits from Mikohn Nevada without
first obtaining authorizations from the Nevada Gaming Authorities.

    The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company or Mikohn
Nevada in order to determine whether such individual is suitable or should be
licensed as a business associate of a gaming licensee. Officers, directors and
certain key employees of Mikohn Nevada are required to file applications with
the Nevada Gaming Authorities and may be required to be licensed or found
suitable by the Nevada Gaming Authorities. Officers, directors and key employees
of the Company who are actively and directly involved in gaming activities of
Mikohn Nevada may be required to be licensed or found suitable by the Nevada
Gaming Authorities. The Nevada Gaming Authorities may deny an application for
licensing for any cause that they deem reasonable. A finding of suitability is
comparable to licensing. Both require submission of detailed personal and
financial information, which is followed by a thorough investigation. The
applicant for licensing or a finding of suitability

                                       19
<PAGE>

must pay all the costs of the investigation. Changes in licensed positions must
be reported to the Nevada Gaming Authorities. In addition to their authority to
deny an application for a finding of suitability or licensure, the Nevada Gaming
Authorities have the power to disapprove a change in a corporate position.

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

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

    Should Mikohn Nevada be found to have violated the Nevada Act, the licenses
it holds could be limited, conditioned, suspended or revoked. In addition,
Mikohn Nevada, the Company and the persons involved could be required to pay
substantial fines, at the discretion of the Nevada Commission, for each separate
violation of the Nevada Act. Limitation, conditioning or suspension of any
license held by Mikohn Nevada could (and revocation of any license would)
materially adversely affect the Company's manufacturing, distribution and slot
route operations.

        Regulation of Security Holders

    Any beneficial holder of the Company's voting securities, regardless of the
number of shares owned, may be required to file an application, be investigated,
and have his or her suitability as a beneficial holder of the Company's voting
securities determined if the Nevada Commission finds reason to believe that such
ownership would otherwise be inconsistent with the declared policies of the
State of Nevada. The applicant must pay all costs of investigation incurred by
the Nevada Gaming Authorities in conducting any such investigation.

    The Nevada Act requires any person who acquires more than 5% of a Registered
Corporation's voting securities to report the acquisition to the Nevada
Commission. It also requires beneficial owners of more than 10% of a Registered
Corporation's voting securities to apply to the Nevada Commission for a finding
of suitability within thirty days after the Chairman of the Nevada Board mails a
written notice requiring such filing. Under certain circumstances, an
"institutional investor", as defined in the Nevada Act, which acquires more than
10%, but not more than 15%, of the Registered Corporation's voting securities
may apply to the Nevada Commission for a waiver of such finding of suitability
if such institutional investor holds the voting securities for investment
purposes only.

    An institutional investor is not deemed to hold voting securities for
investment purposes if the voting securities were acquired and are held in the
ordinary course of its business as an institutional investor and were not
acquired and are not held for the purpose of causing, directly or indirectly,
(i) the election of a majority of the members of the board of directors of the
Registered Corporation; (ii) any change in the Registered Corporation's
corporate charter, bylaws, management, policies or operations or those of any of
its gaming affiliates or (iii) any other action that the Nevada Commission finds
to be inconsistent with holding the Registered Corporation's voting securities
for investment purposes only. Activities which are not deemed to be inconsistent
with holding voting

                                       20
<PAGE>

securities for investment purposes only include (i) voting on all matters voted
on by stockholders; (ii) making financial and other inquiries of management of
the type normally made by securities analysts for informational purposes and not
to cause a change in management, policies or operations and (iii) such other
activities as the Nevada Commission may determine to be consistent with such
investment intent. If the beneficial holder of voting securities who must be
found suitable is a corporation, partnership or trust, it must submit detailed
business and financial information including a list of beneficial owners. The
applicant is required to pay all costs of investigation.

    Any person who fails or refuses to apply for a finding of suitability or a
license within thirty days after being ordered to do so by the Nevada Commission
or the Chairman of the Nevada Board, may be found unsuitable. The same
restrictions apply to a record owner if the record owner, after request, fails
to identify the beneficial owner. Any stockholder of a Registered Corporation
found unsuitable and who holds, directly or indirectly, any beneficial ownership
in the common stock beyond such period of time as the Nevada Commission may
specify for filing any required application may be guilty of a criminal offense.
Moreover, the Registered Corporation will be subject to disciplinary action if,
after it receives notice that a person is unsuitable to be a stockholder or to
have any other relationship with the Registered Corporation, it (i) pays that
person any dividend on its voting securities; (ii) allows that person to
exercise, directly or indirectly, any voting right conferred through securities
ownership; (iii) pays remuneration in any form to that person for services
rendered or otherwise or (iv) fails to pursue all lawful efforts (including, if
necessary, the immediate purchase of said voting securities for cash at fair
market value) to require such unsuitable person to completely divest all voting
securities held.

    The Nevada Commission may, in its discretion, require the holder of any debt
security of a Registered Corporation to file applications, be investigated and
be found suitable to own the debt security of a Registered Corporation if the
Nevada Commission finds reason to believe that such ownership would otherwise be
inconsistent with the declared policies of the State of Nevada. If the Nevada
Commission determines that a person is unsuitable to own such security, it may
sanction the Registered Corporation, which sanctions may include the loss of its
approvals if, without the prior approval of the Nevada Commission, it (i) pays
to the unsuitable person any dividend, interest, or other distribution; (ii)
recognizes any voting right of such unsuitable person in connection with such
securities; (iii) pays the unsuitable person remuneration in any form or (iv)
makes any payment to the unsuitable person by way of principal, redemption,
conversion, exchange, liquidation or similar transaction.

    The Company and Mikohn Nevada are required to maintain in Nevada a current
stock ledger that may be examined by the Nevada Gaming Authorities at any time.
If any securities are held in trust by an agent or by a nominee, the record
owner may be required to disclose the identity of the beneficial owner to the
Nevada Gaming Authorities. A failure to make such disclosure may be grounds for
finding the record owner unsuitable.

    The Company also is required to render maximum assistance in determining the
identity of the beneficial owners of its securities. The Nevada Commission has
the power to require the Company to imprint its stock certificates with a legend
stating that the securities are subject to the Nevada Act. To date, the Nevada
Commission has imposed no such a requirement on the Company.

    The Company may not make a public offering of its securities without the
prior approval of the Nevada Commission if the securities or proceeds therefrom
are to be used to construct, acquire or finance gaming facilities in Nevada, or
to retire or extend obligations incurred for such purposes. Such approval, if
given, does not constitute a finding, recommendation or approval by the Nevada
Commission or the Nevada Board as to the accuracy or adequacy of the prospectus
or the investment merit of the offered securities, and any representation to the
contrary is unlawful.

                                       21
<PAGE>

    Changes in control of a Registered Corporation through merger,
consolidation, stock or asset acquisitions, management or consulting agreements,
or any act or conduct, by which anyone obtains control, may not lawfully occur
without the prior approval of the Nevada Commission. Entities seeking to acquire
control of a Registered Corporation must meet the strict standards established
by the Nevada Board and the Nevada Commission prior to assuming control of a
Registered Corporation. The Nevada Commission also may require persons who
intend to become controlling stockholders, officers or directors, and other
persons who expect to have a material relationship or involvement with the
acquired company to be investigated and licensed as part of the approval
process.

    The Nevada legislature has declared that some corporate acquisitions opposed
by management, repurchases of voting securities and corporate defense tactics
affecting Nevada corporate gaming licensees, and Registered Corporations that
are affiliated with those operations, may be injurious to stable and productive
corporate gaming. The Nevada Commission has established a regulatory scheme to
minimize the potentially adverse effects of these business practices upon
Nevada's gaming industry and to further Nevada's policy to (i) assure the
financial stability of corporate gaming licensees and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form and
(iii) promote a neutral environment for the orderly governance of corporate
affairs. Approvals are, in certain circumstances, required from the Nevada
Commission before the Registered Corporation can make exceptional repurchases of
voting securities above market price and before a corporate acquisition opposed
by management can be consummated. The Nevada Act also requires prior approval of
a plan of recapitalization proposed by the Registered Corporation's Board of
Directors in response to a tender offer made directly to the Registered
Corporation's stockholders for the purpose of acquiring control of the
Registered Corporation.

    License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, must be paid to the State of Nevada and to the
counties and cities in which gaming operations are conducted. These fees and
taxes, depending upon their nature, are payable monthly, quarterly or annually
and are based upon either (i) a percentage of the gross revenues received or
(ii) the number of gaming devices operated. Annual fees are also payable to the
State of Nevada for renewal of licenses as an operator of a slot machine route,
manufacturer and/or distributor.

    Any person who is licensed, required to be licensed, registered, required to
be registered, or who is under common control with any such persons
(collectively, "Licensees") and who proposes to become involved in a gaming
venture outside of Nevada is required to deposit with the Nevada Board, and
thereafter maintain, a revolving fund in the amount of $10,000 to pay the
expenses of investigation by the Nevada Board of his or her participation
outside of Nevada. The revolving fund is subject to increase or decrease at the
discretion of the Nevada Commission. Thereafter, Licensees are required to
comply with certain reporting requirements imposed by the Nevada Act. Licensees
also are subject to disciplinary action by the Nevada Commission if they
knowingly violate any laws of the foreign jurisdiction pertaining to the
non-Nevada gaming operation, fail to conduct the foreign gaming operation in
accordance with the standards of honesty and integrity required of Nevada gaming
operations, engage in activities that are harmful to the State of Nevada or its
ability to collect gaming taxes and fees, or employ a person in the non-Nevada
operation who has been denied a license or finding of suitability in Nevada on
the ground of personal unsuitability.

    Other Jurisdictions

    All jurisdictions that have legalized gaming require various licenses,
permits and approvals for manufacturers and distributors of gaming devices and
equipment. In general, such requirements

                                       22
<PAGE>

involve restrictions similar to those of Nevada.

    Federal Regulation

    The Federal Gambling Devices Act of 1962 (the "Federal Act") makes it
unlawful, in general, for a person to manufacture, deliver, or receive gaming
machines, gaming machine type devices, and components across state lines or to
operate gaming machines unless that person has first registered with the
Attorney General of the United States. The Company has registered and must renew
its registration annually. In addition, various recordkeeping and equipment
identification requirements are imposed by the Federal Act. Violation of the
Federal Act may result in seizure and forfeiture of the equipment, as well as
other penalties.

    Application of Future or Additional Regulatory Requirements

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

Item 2.  Properties

    The properties the Company owns and leases are listed in detail in the table
under the heading "Business - Manufacturing", above. In Nevada, the Company
currently leases nine facilities, seven of which are currently occupied by the
Company. These leases expire over various periods through the end of 2005. Both
the Las Vegas interior and exterior sign manufacturing facilities are owned by
the Company; all other facilities are leased.

    The Company leases sales, service and/or support offices and other
facilities in Colorado, Florida, Mississippi, Missouri, New Jersey and Utah.
These leases expire on various dates through the end of 2004.

Item 3.  Legal Proceedings

    The Company is involved in routine litigation, including bankruptcies,
collection efforts, disputes with former employees and other matters in the
ordinary course of its business operations. Management knows of no matter,
pending or threatened, that in its judgment will or might have a material
adverse effect on the Company or its operations including those noted below.

    On October 2, 1997, the Company filed suit against Acres Gaming, Inc.
("Acres") in the U.S. District Court, Las Vegas, Nevada seeking a declaratory
judgment that its MoneyTime(TM) system does not infringe a patent issued to
Acres in August 1997 (U.S. Patent No. 5,655,961) and that the Acres patent is
invalid (the "'961 Action"). In the '961 Action, the Company asserts claims for
relief

                                       23
<PAGE>

against Acres for tortious interference with business relationships, tortious
interference with prospective business relationships, and trade libel. Acres has
counterclaimed for patent infringement. Two subsequently filed actions in the
same court involving two subsequently issued patents (U.S. Patent Nos. 5,741,183
and 5,752,882), one filed by the Company against Acres and one filed by Acres
against the Company, Casino Data Systems ("CDS"), Sunset Station Hotel & Casino
and New York-New York Hotel & Casino, involve claims for patent infringement,
non-infringement and invalidity similar to the claims asserted in the '961
Action (the "'183 Action" and the "'882 Action"). The '183 Action and the '882
Action have been consolidated with the '961 Action (the three actions hereafter
referred to as the "Consolidated Action"). Discovery in the Consolidated Action
closed on February 26, 1999. No trial date has been set. Management believes
that the Company will prevail in the Consolidated Action.

    On October 13, 1998, Acres brought suit against the Company and CDS
alleging, as against the Company, that the MoneyTime(TM) system infringes a
patent (U.S. Patent No. 5,820,459) issued to Acres on October 13, 1998 (the
"'459 Action"). The Company has responded denying infringement and asserting
that the Acres patent is invalid. The '459 Action is in an early stage of
discovery. No trial date has been set. Management believes that the Company will
prevail in the `459 Action.

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

    See Proxy Statement.

                                       24
<PAGE>

                                    PART II

Item 5. Market for Registrant's Common Stock and Related Security Holder Matters

    The Company's Common Stock trades on the NASDAQ National Market System under
the symbol "MIKN". The following table sets forth the range of high and low last
sale prices per share by quarter for the Common Stock.

                                         High       Low
                                         ----       ---
1999
----
   First Quarter                        $ 4.500    $ 2.875
   Second Quarter                         4.063      2.750
   Third Quarter                          4.875      3.563
   Fourth Quarter                         5.750      3.875

1998
----
   First Quarter                        $ 8.750    $ 6.750
   Second Quarter                         7.750      5.875
   Third Quarter                          7.375      3.875
   Fourth Quarter                         5.750      3.500

    The Company believes there were approximately 2,528 beneficial owners of its
Common Stock as of March 13, 2000. The approximate number of beneficial owners
as of that date was reached by estimating the number of holders whose stock is
held for them in street name by brokerage houses, by trusts and other nominees
and by participants in a clearing agency. There were 235 holders of record of
the Company's Common Stock on March 13, 2000.

    The Company has never paid dividends nor has it any plans to pay dividends
in the future. It is the present intent of the Board of Directors to retain all
future earnings for use in the development of the Company's business. The $86.0
million Credit Agreement dated September 2, 1998, between the Company, First
Source Financial LLP, as agent, and a lending consortium expressly prohibits the
payment of cash dividends.

                                       25
<PAGE>

Item 6. Selected Financial Data

    The table below sets forth a summary of selected financial data of the
Company for the five years ended December 31 (in thousands except per share
amounts):

<TABLE>
<CAPTION>
                                            1999 (1)        1998         1997        1996        1995
                                            --------        ----         ----        ----        ----
                                                 As Restated (2)
                                                 ---------------
<S>                                       <C>            <C>          <C>         <C>         <C>
Statement of Operations Data:
  Net sales                                 $  106,884     $ 99,032     $ 98,548    $ 91,402    $ 77,796
  Cost of sales                                 54,846       60,163       61,200      59,647      54,876
                                           ------------  -----------  -----------  ----------  ----------
  Gross profit                                  52,038       38,869       37,348      31,755      22,920
  Selling, general and administrative           41,966       38,982       31,073      29,190      29,186
  Write-off of assets and other                  1,352        4,493                                3,572
                                           ------------  -----------  -----------  ----------  ----------
  Operating income (loss)                        8,720       (4,606)       6,275       2,565      (9,838)
  Interest expense                              (8,850)      (5,115)      (2,555)     (1,934)     (1,126)
  Other income and expense                         720          112           11         410         666
                                           ------------  -----------  -----------  ----------  ----------
  Income (loss) before income taxes                590       (9,609)       3,731       1,041     (10,298)
  Income tax (provision) benefit                   342        3,335       (1,357)       (429)      3,650
                                           ------------  -----------  -----------  ----------  ----------
  Income (loss) before extraordinary
   item                                            932       (6,274)       2,374         612      (6,648)
  Extraordinary loss (net of taxes)                          (1,752)
                                           ------------  -----------  -----------  ----------  ----------
  Net income (loss)                         $      932     $ (8,026)    $  2,374    $    612    $ (6,648)
                                           ============  ===========  ===========  ==========  ==========

Weighted average common shares outstanding:
  Basic                                         10,720       10,527        9,952       9,847       9,802
                                           ============  ===========  ===========  ==========  ==========
  Diluted                                       10,784       10,527       10,057      10,070       9,802
                                           ============  ===========  ===========  ==========  ==========
Income (loss) from continuing operations
before extraordinary loss per
common share:

  Basic                                     $     0.09     $  (0.60)    $   0.24    $   0.06    $  (0.68)
                                           ============  ===========  ===========  ==========  ==========
  Diluted                                   $     0.09     $  (0,60)    $   0.24    $   0.06    $  (0.68)
                                           ============  ===========  ===========  ==========  ==========

Net income (loss) per common share:

  Basic                                     $     0.09     $  (0.76)    $   0.24    $   0.06    $  (0.68)
                                           ============  ===========  ===========  ==========  ==========
  Diluted                                   $     0.09     $  (0.76)    $   0.24    $   0.06    $  (0.68)
                                           ============  ===========  ===========  ==========  ==========

Balance Sheet Data:
  Total assets                              $  178,295     $167,841     $ 97,588    $ 90,453    $ 86,324
  Total debt / obligations                     108,221      101,612       30,226      22,719      23,091
  Stockholders' equity                          48,116       46,727       52,570      50,144      49,352
</TABLE>

(1) In December 1999, the Company sold 50% of the issued shares in the capital
    of Mikohn Australasia Pty, Ltd. (See Note 1 - Organization and Note 22 -
    Restatement in the Notes to Consolidated Financial Statements.)

(2) For a description of the restatements, see Note 22 - Restatement in the
    Notes to Consolidated Financial Statements.

                                       26
<PAGE>

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


Background Information

    For background information on the formation and history of the Company, the
public sale of its Common Stock and the acquisitions of its principal business
units, see Note 1 - Organization in the Notes to Consolidated Financial
Statements.

    In 1995, Mikohn acquired the exclusive worldwide rights to develop,
manufacture, market and distribute its TableLink(TM) technology, a player
tracking and data collection system for table games. Mikohn TableLink(TM) system
enables the casino to recognize and reward players, and enhances game security
and integrity. The TableLink(TM) system employs (i) special casino chips that
incorporate computer microchips which transmit encrypted radio frequency
signals, (ii) sensors at each player position at the table, (iii) player
identification card readers, (iv) optical readers for card game applications,
(v) table computer displays and (vi) proprietary software networked to a central
data collection point. Information is compiled by patented instruments and
computer and sensor technology which electronically track all bets in real-time
as the chips are placed, producing a record of each game. In addition to
providing player tracking, chip tracking and game tracking, the technology can
be used to integrate a progressive jackpot system with other table games to
stimulate player excitement and improve revenue production. The TableLink(TM)
system, for the first time, provides casino operators with real-time accounting
of the play of each table game player. Improved accuracy and player initiated
ratings not only are very useful to the casino in identifying and directing
complimentary benefits to the customer, but improve customer loyalty through
acceptance of rating information and redirecting supervisor time to the
customer.

    The Company's CasinoLink(TM) system is the first system which integrated the
advanced features of the Microsoft Windows NT platform in a gaming machine
accounting, player tracking and game management module. The advanced technology
of the CasinoLink(TM) system provides real-time information on player activity,
casino revenues and cashier functions, monitors gaming machines and table games,
and has the capability to network multiple remote sites. The system tracks
gaming machines, keno and bingo and is available from remote terminal units that
allow casinos to access player related information, such as a player's game
preference and wagering history. The CasinoLink(TM) advanced tracking system
enables casinos among other things to offer players complimentary benefits
commensurate with their play.

    In recent years, proprietary games have become an increasingly important
segment of the Company's business. In 1993, Mikohn established its games
division to develop, acquire, manufacture and distribute proprietary games,
machines and tables. We have devoted increased attention to the games division
because of the high recurring revenue and profit margin potential in this
business line. The Company owns or licenses the rights to several categories of
proprietary games, including progressive jackpot table games, coin-push gaming
machines, oversized gaming machines and touch screen multi-game video machines.
In 1998, the Company acquired from Hasbro, Inc. the rights to develop slots and
table games under the Yahtzee(R) name and table games under the Monopoly(R)
name. The Company places its proprietary games in casinos under sale, license,
lease or structured participation arrangements.

    In 1994, Mikohn entered into an exclusive license agreement with IGT to
manufacture and distribute oversized and giant gaming machines known as
Mini-Bertha(TM) and Colossus(TM), respectively. Under the terms of the license
agreement with IGT, Mikohn has exclusive worldwide distribution rights. These
oversized gaming machines come in electronic video and slot-reel formats,

                                       27
<PAGE>

feature many of IGT's popular games and can be linked on a progressive network.
These oversized gaming machines provide greater visual appeal and variety. The
machines are available for sale, lease or structured participation and IGT
receives a royalty based upon the income derived from the machines that are
placed. The revenues relating to these machines as reported by Mikohn in its
financial statements are net of such amounts paid to IGT.

    In September, 1998, the Company acquired PGI and two of its distributors.
With these acquisitions, the Company gained the rights to Caribbean Stud(R),
Caribbean Draw(TM) and Progressive Blackjack(TM). Each of these games has an
optional side-bet feature. We expect our player-appealing signs to help bring
the same excitement to the table games business that they have added to the
gaming machine business.

    As the Company has realigned the reporting of its business units, certain
items of prior year revenue and expense have been reclassified to follow the
Company's current reporting practice. Additionally, all intercompany activity
has been eliminated. Amounts reported in prior years have been adjusted to be
consistent with the Company's current reporting of intercompany activity. All
amounts reported in this section are rounded to the nearest thousand unless
otherwise stated. All percentages reported are based on those rounded numbers.
See Note 20 - Segment Reporting in the Notes to Consolidated Financial
Statements.

    The Management's Discussion and Analysis of Financial Condition and Results
of Operations for the years ended December 31, 1999, 1998 and 1997 presented
below reflect certain restatements to the Company's previously reported results
of operations for these periods. See Note 22 - Restatement in the Notes to
Consolidated Financial Statements.

RESULTS OF OPERATIONS

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
---------------------------------------------------------------------

SALES

<TABLE>
<CAPTION>
                                                                  Change
                                                                  ------
      Business Segment              1999        1998        Amount         %         Comment
      -----------------             ----        ----        ------         -         -------
<S>                               <C>         <C>         <C>          <C>          <C>
 Revenues:
    Signs                           $46,278     $50,840      $(4,562)      -9.0%        1
    Gaming products                  33,541      36,216       (2,675)      -7.4%        2
    Gaming operations                27,065      11,976       15,089      126.0%        3
                                 -----------  ----------  -----------
                                   $106,884     $99,032       $7,852        7.9%
                                 ===========  ==========  ===========

 Percentage of total revenues:
    Signs                              43.3%       51.3%
    Gaming products                    31.4%       36.6%
    Gaming operations                  25.3%       12.1%
                                 -----------  ----------
                                      100.0%      100.0%
                                 ===========  ==========
</TABLE>

1.  The net decrease of $4,562 between the comparable periods is due to: (i) a
    decrease in domestic interior visual display revenue of $2,502, (ii) a
    decrease in exterior sign revenue of $3,472, (iii) a decrease in service
    revenue of $123, (iv) an offsetting increase in slot glass

                                       28
<PAGE>

    revenue of $1,048 and (v) an offsetting increase in international interior
    visual display revenue of $487.

2.  The net decrease of $2,675 between the comparable periods is primarily due
    to: (i) a decrease in electronics revenue of $677, (ii) a decrease slot
    machine sales revenue of $2,010, and (iii) increases in domestic and
    international systems revenue of $373 and $346, respectively. The decrease
    in electronics revenue is due to lower sales volume to OEM's (Original
    Equipment Manufacturer) and lower sales levels for surveillance and security
    equipment. The decrease in slot machine sales revenue is due to lower sales
    of our MiniBertha(TM) slot machine game. Increases in systems revenue are
    due primarily to increased sales of our CasinoLink(TM) system in
    international markets and the introduction of our TableLink(TM) system in
    the United States.

3.  The increase of $15,089 between the comparable periods is due to: (i) an
    increase in leased or participation based slot machine revenue of $1,637,
    (ii) an increase in table game lease revenue of $10,283, and (iii) an
    increase in table game patent licensing revenue and other licensing revenue
    of $3,169. The increase in leased or participation based slot machine
    revenue resulted primarily from the full year impact of the number of
    MoneyTime(TM) slot machines in place at the end of 1998. The increase in
    table game revenue is the direct result of full year impact of the Company's
    acquisitions of PGI and P&S Leasing on September 2, 1998 ("PGI
    Acquisitions") on the current year results. The increase in table game
    patent licensing and other licensing revenue is primarily due to the recent
    litigation settlement with Shuffle Master.

GROSS PROFIT

<TABLE>
<CAPTION>
                                                                 Change
                                                                 ------
     Business Segment             1999         1998         Amount       %        Comment
     -----------------            ----         ----         ------       -        -------
<S>                           <C>          <C>           <C>          <C>       <C>
 Gross profit:
    Signs                         $15,610      $14,723         $ 887      6.0%       1
    Gaming products                12,571       13,992        (1,421)   -10.2%       2
    Gaming operations              23,857       10,154        13,703    135.0%       3
                               -----------  -----------   -----------
    Total                         $52,038      $38,869       $13,169     33.9%
                               ===========  ===========   ===========

 Gross profit margin:
    Signs                            33.7%        29.0%
    Gaming products                  37.5%        38.6%
    Gaming operations                88.1%        84.8%

    Total                            48.7%        39.2%
</TABLE>

1.  This increase of $887 is due to: (i) a decrease in gross profit levels in
    domestic interior visual displays and exterior signs of $502 and $625,
    respectively, (ii) an increase in slot glass gross profit of $687, (iii) an
    increase in service gross profit of $744 and (iv) an increase in
    international interior visual display gross profit of $583. The decrease in
    domestic interior visual display gross profit and exterior sign gross profit
    is primarily due to the decrease in volume between the periods. The increase
    in slot glass gross profit is the result of increased revenues and gross
    margins. The gross profit margin on slot glass revenue increased from 29.7%
    for the year ended December 31, 1998 to 46.2% for the year ended December
    31, 1999. Profit margins on service revenue increased from 14.4% for the
    year ended December 31, 1998 to 28.1% for the year ended December 31, 1999.
    Increases in international interior visual display gross profit resulted
    from both increases in revenue and gross margins. International interior
    sign margins increased

                                       29
<PAGE>

    from 31.3% for the year ended December 31, 1998 to 37.1% for the year ended
    December 31, 1999.

2.  This decrease of $1,421 is primarily due to: (i) a decrease in slot sales
    gross profit of $928, (ii) a decrease in domestic electronics gross profit
    of $1,153, (iii) an increase in domestic systems gross profit of $845 and
    (iv) a decrease in international systems gross profit of $387. The decrease
    in slot sales gross profit is the result of lower sales volume during the
    current period as well as a lower gross profit rate. The gross profit rate
    on slot sales decreased from 32.7% for the 12 months ended December 31, 1998
    to 25.8% for the year ended December 31, 1999. The decrease in domestic
    electronics gross profit is also due to lower sales volume combined with a
    decreased gross profit rate. Domestic electronic gross profit margins
    decreased from 51.2% for the 12 months ended December 31, 1998 to 48.7% for
    the year ended December 31, 1999. The increase in domestic and international
    systems gross profit is predominantly due to the increased sales volume
    during the most recent 12 month period.

3.  This increase of $13,703 is due to: (i) an increase in leased or
    participation based slot machine gross profit of $1,322, (ii) an increase in
    table games gross profit of $9,212 and (iii) an increase in table game
    patent licensing and other licensing gross profit of $3,169. The increase in
    leased or participation based slot machine gross profit is predominantly due
    to the increased number of MoneyTime(TM) slot machine games in place during
    the year ended December 31, 1999. The increase in table games profit is due
    to the full year impact of the "PGI Acquisitions" of September 2, 1998 on
    the current year. The increase in table game patent licensing gross profit
    resulted from the recent litigation settlement with Shuffle Master. See Note
    13 - Deferred License Fees in the Notes to Consolidated Financial Statements
    for a discussion of the Shuffle Master settlement.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

    Selling, general and administrative expenses for the year ended December 31,
1999, increased by 8% or $2,984, from $38,982 for the year ended December 31,
1998, to $41,966 for the year ended December 31, 1999. The significant factors
causing this increase were as follows:

    Selling and marketing expenses for the year ended December 31, 1999,
decreased by 1% or $184, from $14,672 for the year ended December 31, 1998, to
$14,488 for the year ended December 31, 1999.

    General and administrative expenses for the year ended December 31, 1999
increased by 2% or $215, from $11,901 for the year ended December 31, 1998 to
$12,116 for the year ended December 31, 1999.

    Research and development expenses for the year ended December 31, 1999,
increased by 9% or $475, from $5,538 for the year ended December 31, 1998, to
$6,013 for the year ended December 31, 1999. This increase is due to increased
expenses for the development of new games and increased expenses related to the
further development of our TableLink(TM) product line.

    For the year ended December 31, 1999, we capitalized certain costs related
to software development of new products that have achieved technological
feasibility. Capitalized software development costs recorded during the year
ended December 31, 1999 increased by 8% or $37, from $437 for the year ended
December 31, 1998, to $474 for the year ended December 31, 1999. For the year
ended December 31, 1999 we recognized amortization expense related to these
costs of $220. At December 31, 1999, the net book value of capitalized software
development costs totaled $1,307.

                                       30
<PAGE>

    Depreciation expense for the year ended December 31, 1999, increased by 28%
or $1,137, from $4,091 for the year ended December 31, 1998, to $5,228 for the
year ended December 31, 1999. This increase is the result of increased
depreciation associated with our capitalized recurring revenue games and
increased depreciation related to the "PGI Acquisitions".

    Amortization expense for the year ended December 31, 1999, increased by 48%
or $1,341, from $2,780 for the year ended December 31, 1998, to $4,121 for the
year ended December 31, 1999. This increase is primarily due to increased
perpetual license amortization related to the "PGI Acquisitions" as well as
increased depreciation from the increased number of slot machines and table
games on lease or participation agreement.

INTEREST EXPENSE

    Interest expense for the year ended December 31, 1999, increased by 73% or
$3,735, from $5,115 for the year ended December 31, 1998, to $8,850 for the year
ended December 31, 1999. This increase is predominantly due to the full year
effect of the increased debt associated with our debt refinancing and "PGI
Acquisitions" of September 2, 1998. The average interest rate on the average
amount of all outstanding debt for the year ended December 31, 1999 was 9.2% as
compared to 9.5% for the year ended December 31, 1998.

WRITE-OFF OF ASSETS AND OTHER

    Write-off of assets and other for the year ended December 31, 1999 decreased
by 70% or $3,141, from $4,493 for the year ended December 31, 1998 to $1,352 for
the year ended December 31, 1999. During the fourth quarter of 1999, pursuant to
SFAS No. 121 - Accounting for the Impairment of Long-Lived Assets, to more
accurately reflect the value of the P&M Coin slot machine product line, we
recorded a write-off of assets of $1,352. These charges included write-offs of
both the investment in the product line as well as prepaid royalties associated
with the product line.

OTHER INCOME AND EXPENSE

    For the year ended December 31, 1999, the net of other income and expense
excluding interest income was a net other income increase of $654, from a net
expense of $299 for the year ended December 31, 1998 to a net other income of
$355 for the year ended December 31, 1999.

    Interest income for the year ended December 31, 1999, decreased by 11% or
$46, from $411 for the year ended December 31, 1998, to $365 for the year ended
December 31, 1999. This increase is due to lower levels of contract receivables
held during 1999 as compared to 1998.

INCOME TAXES

    Income taxes from continuing operations for the year ended December 31,
1999, increased as compared to the year ended December 31, 1998, from a tax
benefit of $3,335 for the year ended December 31, 1998 to a tax benefit of $342
for the year ended December 31, 1999. This decrease in tax benefits is primarily
due to the tax benefits associated with the non-recurring charges taken during
1998 as well as the pre-tax operating loss we experienced during the 1998 annual
period, neither of which occurred during the year ended December 31, 1999. For
1999, the Company reported estimated research and development tax credits of
$628 which resulted in a tax benefit. The effective tax rate for the year ended
December 31, 1999, was (58%) as compared to (35%) for the year ended December
31, 1998

                                       31
<PAGE>

EARNINGS (LOSS) PER SHARE

     Both basic and diluted earnings per share for the year ended December 31,
1999, were $0.09 on basic and diluted weighted average common shares outstanding
of 10,720 and 10,784, respectively. For the year ended December 31, 1998, basic
and diluted (losses) per share were $(0.76) on basic and diluted weighted
average common shares outstanding of 10,527 and 10,527, respectively.

RESULTS OF OPERATIONS

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
---------------------------------------------------------------------

SALES

<TABLE>
<CAPTION>
                                                                  Change
                                                                  ------
      Business Segment             1998         1997        Amount         %         Comment
      -----------------            ----         ----        ------         -         -------
<S>                                <C>          <C>         <C>           <C>        <C>
 Revenues:
    Signs                          $50,840      $57,478      $(6,638)     -11.5%        1
    Gaming products                 36,216       35,621          595        1.7%        2
    Gaming operations               11,976        5,449        6,527      119.8%        3
                                 ---------    ---------   ----------
                                   $99,032      $98,548        $ 484        0.5%
                                 =========    =========   ==========

 Percentage of total revenues:
    Signs                             51.3%        58.3%
    Gaming products                   36.6%        36.2%
    Gaming operations                 12.1%         5.5%
                                 ---------    ---------
                                     100.0%       100.0%
                                 =========    =========
</TABLE>

1.   This decrease is due primarily to: (i) reduced domestic sign sales of
     $5,478 as a result of fewer major casino openings and significant
     refurbishment projects as compared to 1997, (ii) reduced international sign
     sales of $2,628 as a result of regulatory and market conditions in
     Australia and (iii) increased exterior sign sales of $1,950.

2.   This increase is related to increased sales of slot management systems
     which were partially offset by lower Mini-Bertha(TM) sales.

3.   This increase is due to: (i) the inclusion of four months results of PGI
     and P&S Leasing following their acquisition by the Company and (ii) the
     roll-out of the Company's MoneyTime(TM) slot bonusing system.

                                       32
<PAGE>

GROSS PROFIT

<TABLE>
<CAPTION>
                                                                 Change
                                                                 ------
     Business Segment              1998         1997         Amount        %     Comment
     -----------------             ----         ----         ------        -     -------
<S>                               <C>          <C>           <C>        <C>      <C>
 Gross profit:
    Signs                         $14,723      $17,741      $(3,018)    -17.0%       1
    Gaming products                13,992       15,129       (1,137)     -7.5%       2
    Gaming operations              10,154        4,478        5,676     126.8%       3
                               ----------   ----------    ---------
    Total                         $38,869      $37,348     $  1,521       4.1%
                               ==========   ==========    =========

 Gross profit margin:
    Signs                            29.0%        30.9%
    Gaming products                  38.6%        42.5%
    Gaming operations                84.8%        82.2%

    Total                            39.2%        37.9%
</TABLE>

1.   This decrease is due to lower interior sign sales volume and lower margins
     on several large casino projects during 1998.

2.   This decrease is due to (i) lower gross profit from the Company's
     surveillance and security division, (ii) decreased sales and related
     profits for the Company's slot machines and (iv) increased inventory
     reserves. Offsetting what would have been a larger unfavorable variance
     were increased sales of the Company's system products.

3.   This increase is due to the higher gross margins associated with increased
     sales volume from the Company's MoneyTime(TM) system and the inclusion of
     four months of results of PGI and P&S Leasing.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

     Selling, general and administrative expenses for the year ended December
31, 1998, increased by 25% or $7,909, from $31,073 for the year ended December
31, 1997, to $38,982 for the year ended December 31, 1998. The significant
factors causing this increase were as follows:

     Selling, product development and marketing expenses for the year ended
December 31, 1998, increased by 17% or $2,107, from $12,565 for the year ended
December 31, 1997, to $14,672 for the year ended December 31, 1998.
Individually, these departmental expenses increased by $368, $1,138 and $601,
respectively. These increases were due primarily to (i) increased marketing
expenses associated with the roll-out of the Company's MoneyTime(TM) system and
(ii) the full expansion of the product development and management unit within
the Company to bring new products to market on a more timely basis.

     General and administrative expenses for the year ended December 31, 1998
increased by 15% or $1,563, from $10,338 for the year ended December 31, 1997 to
$11,901 for the year ended December 31, 1998. This increase is due mostly to an
accounts receivable reserve charge of $1,400 taken during the third quarter of
1998. This additional reserve was taken to provide a greater measure of
protection from the occurrence of bad debts and as well to more closely match
the higher levels of accounts receivable and contract receivables at the year
end.

     Research and development expenses for the year ended December 31, 1998,
increased by 44%

                                       33
<PAGE>

or $1,682, from $3,856 for the year ended December 31, 1997, to $5,538 for the
year ended December 31, 1998. This increase reflects (i) increased expenses for
the development of new games and (ii) increased expenses related to the further
development of the Company's CasinoLink(TM) product line.

     For the year ended December 31, 1998, the Company capitalized certain costs
related to software development of new products that have achieved technological
feasibility. Capitalized software development costs for the year ended December
31, 1998 decreased by 38% or $272, from $709 for the year ended December 31,
1997, to $437 for the year ended December 31, 1998. For the year ended December
31, 1998 the Company recognized amortization expense related to these costs of
$93. At December 31, 1998, the net book value of capitalized software
development costs totaled $1,053.

     Depreciation expense for the year ended December 31, 1998, increased by 47%
or $1,307, from $2,784 for the year ended December 31, 1997, to $4,091 for the
year ended December 31, 1998. This increase is primarily the result of (i)
increased depreciation associated with the Company's capitalized recurring
revenue games and (ii) increased depreciation related to the acquisition of PGI.

     Amortization expense for the year ended December 31, 1998, increased by 82%
or $1,250, from $1,530 for the year ended December 31, 1997, to $2,780 for the
year ended December 31, 1998. This increase is primarily due to increased
perpetual license amortization related to the acquisitions of PGI and P&S
Leasing.

INTEREST EXPENSE

     Interest expense for the year ended December 31, 1998, increased by 100% or
$2,560, from $2,555 for the year ended December 31, 1997, to $5,115 for the year
ended December 31, 1998. This increase is due to (i) the full year effect of the
increased debt associated with the Company's debt refinancing of October 1997
and (ii) the increased debt related to the acquisitions of PGI and P&S Leasing.
The average interest rate on the average amount of all outstanding debt for the
year ended December 31, 1998 was 9.5% as compared to 9.3% for the year ended
December 31, 1997.

WRITE-OFF OF ASSETS AND OTHER

     For the year ended December 31, 1998, the Company incurred several non-
recurring charges that amounted to $4,493. These charges mainly consisted of (i)
the write-off of expenses related to the Company's debt refinancing and
acquisitions of September 2, 1998 in the amount of $711, (ii) the write-off of
certain goodwill amounts associated with the Company's surveillance and security
division in the amount of $1,500, (iii) management reorganization expenses in
the amount of $736, (iv) the write-off of certain non-compete agreements in the
amount of $739, (v) reserves for the closure of the Company's manufacturing
facility in Rapid City, South Dakota in the amount of $500 and (vi) other items
in the amount of $307.

OTHER INCOME AND EXPENSE

     For the year ended December 31, 1998, the net of other income and expense
activity was a net expense decrease of 7% or $23, from a net expense of $322 for
the year ended December 31, 1997 to a net expense of $299 for the year ended
December 31, 1998.

     Interest income for the year ended December 31, 1998, increased by 23% or
$78, from $333 for the year ended December 31, 1997, to $411 for the year ended
December 31, 1998. This increase is due entirely to the increased levels of
contract receivables held during 1998 as compared to 1997.

                                       34
<PAGE>

INCOME TAXES

     Income taxes from continuing operations for the year ended December 31,
1998, decreased as compared to the year ended December 31, 1997, from a tax
provision of $1,357 for the year ended December 31, 1997 to a tax benefit of
$3,335 for the year ended December 31, 1998. This decrease is primarily due to
the tax benefits associated with the non-recurring charges taken during 1998 and
the pre-tax loss the Company experienced during the 1998 annual period. The
effective tax rate, after add-backs and adjustments, for the year ended December
31, 1998, was (35%) as compared to 36% for the year ended December 31, 1997.

EXTRAORDINARY ITEM

     For the year ended December 31, 1998 the Company recorded an extraordinary
loss on the early extinguishment of debt in the amount of $2,662. The associated
tax benefit of $910 was offset to arrive at the net extraordinary loss of
$1,752. These charges were related to the debt refinancing in September 1998.

EARNINGS (LOSS) PER SHARE

     Both basic and diluted earnings (loss) per share for the year ended
December 31, 1998, were $(0.76) on basic and diluted weighted average common
shares outstanding of 10,527 and 10,527, respectively. For the year ended
December 31, 1997, basic and diluted earnings (loss) per share were $0.24 and
$0.24 on basic and diluted weighted average common shares outstanding of 9,952
and 10,057, respectively.

LIQUIDITY AND CAPITAL RESOURCES

     For the year ended December 31, 1999, we earned net income of $932. Net
cash provided by operating activities for the period was $7,148. The principal
balance sheet items impacting the cash provided by operating activities were:
(i) an increase in inventory of $4,530, (ii) an increase in prepaid expenses and
other assets of $1,885, (iii) a decrease in customer deposits of $934, (iv) a
decrease in accrued and other current liabilities of $1,498 and (v) an increase
in deferred taxes of $2,348. The principal balance sheet items providing cash
were: (i) a decrease in trade accounts receivable of $1,437 and (ii) an increase
in trade accounts payable of $3,599. Although the principal causes of these
changes resulted from normal operating activities, changes in assets and
liabilities were also impacted during 1999 by the sale of 50% of the issued
shares in the capital of our Australian subsidiary. See Note 1 -Organization and
Note 22 -Restatement in the Notes to Consolidated Financial Statements.

     Net cash used in investing activities totaled to $10,210 for the year ended
December 31, 1999 and consists primarily of: (i) purchases of property, plant
and equipment of $3,170, which includes the purchase of the Mikohn Lighting and
Sign manufacturing facility, Year 2000 computer and software purchases, and
maintenance capital expenditures, (ii) gaming equipment leased to customers of
$5,804, which represents the roll-out of the Yahtzee(R) Slot Machine game and
various table games and (iii) an increase in intangibles of $2,119.

     Net cash used in financing activities totaled $622 for the year ended
December 31, 1999 and consists primarily of: (i) the net activity of our
revolver loan and (ii) the refinancing of the debt incurred in acquiring the
Mikohn Lighting and Sign production facility.

                                       35
<PAGE>

     Cash balances at December 31, 1999 were $48, down from $3,732 for the year
ended December 31, 1998. We expect that cash provided by operating activities,
as well as our ability to increase the revolver loan by an additional $5,000 and
our ability to obtain other financing allowed under the Amended and Restated
Credit Agreement will be sufficient to meet our cash requirements for the near
future.

     On September 2, 1998, the Company completed the closing of an Amended and
Restated Credit Agreement. This package was funded by First Source Financial LLP
and a consortium of lenders and consisted of a $13,500 fixed rate term loan; a
$67,500 variable rate term loan; and a $5,000 variable rate revolving line of
credit. The proceeds of this placement were used to acquire the stock of PGI and
P&S Leasing as well as to provide additional working capital. First Source
Financial LLP is acting as the lenders' agent for this transaction. The term
loans will begin maturing in April 2002, with equal 16.7% principal repayments
due every six months until complete maturity on October 24, 2004. As of April
11, 2000, the Company has borrowed $4,700 of the funds available under the
revolving line of credit and has $300 available under this line. For a full
description of the new credit facility, see Note 12 - Long-Term Debt and Note
21 - Subsequent Events in the Notes to Consolidated Financial Statements.

YEAR 2000

     The approach of the year 2000 posed potential problems for businesses
utilizing computers or embedded technology (such as micro controllers) in their
operations. Many computer programs and systems operating machinery and equipment
are date sensitive and only recognized the last two digits of the year and thus
might only recognize the year 2000 as the year 1900 or not at all. This problem
is commonly described as the "Year 2000 Issue" or Y2K and it had the potential
to produce errors in information and system failures. Assessments of the
potential cost and effect of the Year 2000 Issue varied significantly among
businesses. Recognizing this uncertainty, management made a comprehensive
assessment of the Company's exposure to the Year 2000 Issue and what was
required to ensure that the Company was Year 2000 compliant.

     The Company incurred no major interruptions in either the products and
services provided to its customers nor in its software applications, embedded
software or hardware utilized in operations and financial statements as related
to Y2K.

     The Company incurred total costs to achieve Year 2000 compliance on its
internal software and systems of $289 of which $245 was capitalized as part of
the Company's internally used software upgrade program, the remaining $44 was
expensed.

     The Company incurred $1,340 in costs for efforts associated with achieving
compliance with the products that it manufactures, markets, distributes or
otherwise sells to its customers. Of this, $1,270 was capitalized in accordance
with the Company's capitalization of costs related to the Company's Caribbean
Stud(R) product line. The costs associated with the Year 2000 Issue upgrade of
the Company's Caribbean Stud(R) product line will be charged back to the
previous owner under the terms and conditions of the Stock Purchase Agreement
between Mikohn and PGI and as such, were charged to perpetual license in August
1999. The remaining $147 of costs are related to the Company's CasinoLink(TM)
product line and were expensed as incurred.

                                       36
<PAGE>

RECENTLY ISSUED ACCOUNTING STANDARDS

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133 - Accounting for Derivative
Instruments and Hedging Activities. SFAS 133 standardizes the accounting for
derivative instruments, including certain derivative instruments embedded in
other contracts. Under the standard, entities are required to carry all
derivative instruments in the statement of financial position at fair value.
SFAS 133 is effective for all fiscal years beginning after June 15, 2000, which
for the Company will be the year beginning on January 1, 2001. Although the
Company does not believe SFAS 133 will have a material impact on its
consolidated financial statements, because of the complexity of SFAS 133, the
ultimate impact of its adoption has not yet been determined.

                                       37
<PAGE>

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk


MARKET RISK

Foreign Currency Risk

     There are two types of foreign currency exchange risks that a firm may be
subject to: transaction and translation gains or losses. Foreign currency
transaction gains or losses are distinguished from translation gain or losses as
follows: Translation adjustments do not involve the movement of cash. They are
accounting conversion calculations of an existing non-functional currency to a
functional currency. Transaction gain or losses, however, are based on an actual
transaction that requires formal payment at a future point in time.

     The Company is subject to foreign currency exchange risk relating to the
translation of the Company's foreign subsidiaries' asset, liability, income and
expense accounts. The Company's foreign subsidiaries use the local currency as
their functional currency. The assets and liabilities of these subsidiaries are
translated into U.S. dollars at the rate of exchange at the end of the period.
The income and expense accounts are translated using the average rate of
exchange during the period. Due to the long-term nature of the Company's
investment in its foreign operations, 80% of the Company's translation
adjustments are reflected as a separate component of stockholders' equity, the
remaining amount is recognized in the Company's Consolidated Statement of
Operations. Although the Company does not regularly incur, nor are the amounts
material, gains or losses of specific foreign currency transactions would be
reflected in the Company's Consolidated Statement of Operations. The Company has
established a foreign currency translation hedging program that will use either
forward or option contracts to hedge the Company's risk of translation
adjustments when it is deemed appropriate. At the year ended December 31, 1999,
the Company did not have any forwards, options or other derivative contracts in
force. The Company does not consider its existing foreign currency translation
exposure to be material. Management estimates that unfavorable changes of 10% in
the foreign currency exchange rates between the U.S. dollar and the Dutch
guilder, as well as the U.S dollar and the Australian dollar, would adversely
impact the Company's stockholders' equity account by $225 and the Company's
pre-tax income by $56.

Interest Rate Risk

     The Company has exposure to the fluctuation of market interest rates on
portions of its long term debt. The Company has $67,500 of long term debt (see
Note 12 - Long-Term Debt in the Notes to Consolidated Financial Statements) that
bears interest at either the prime rate plus 225 basis points or LIBOR plus 325
basis points per annum. In addition, the Company has $1,400 of revolving debt
(see Note 12 - Long-Term Debt in the Notes to Consolidated Financial Statements)
that bears interest at either prime plus 175 basis points or LIBOR plus 275
basis points per annum. The Company periodically reviews its interest rate
exposure on its long-term debt and, as market conditions warrant, the Company
may enter into interest rate cap or swap agreements in order to manage this
exposure. As of the year ended December 31, 1999, the Company did not have any
agreements in force and does not consider its existing interest rate exposure to
be material. Management estimates that a 10% increase in interest rates,
specifically the prime rate and the LIBOR rate, would unfavorably impact the
Company's pre-tax income by $645.

                                       38
<PAGE>

Item 8.  Consolidated Financial Statements and Supplementary Data


                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
  For the Years Ended December 31, 1999 (Restated), 1998 (Restated) and 1997

<TABLE>
<S>                                                                                        <C>
Independent Auditors' Report..............................................................  40

Consolidated Balance Sheets as of December 31, 1999 and 1998..............................  41

Consolidated Statements of Operations for the Years Ended December 31, 1999, 1998 and
1997......................................................................................  43

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31,
1999, 1998 and 1997.......................................................................  44

Consolidated Statements of Changes in Stockholders' Equity for the Years Ended
December 31, 1999, 1998 and 1997..........................................................  45

Consolidated Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and
1997......................................................................................  46

Notes to Consolidated Financial Statements................................................  48

Quarterly Results of Operations (Unaudited)...............................................  77
</TABLE>

    All other schedules are omitted because of the absence of conditions under
which they are required or because the information is included in the financial
statements or the notes thereto.

                                       39
<PAGE>

                         INDEPENDENT AUDITORS' REPORT

Mikohn Gaming Corporation:

    We have audited the accompanying consolidated balance sheets of Mikohn
Gaming Corporation and Subsidiaries (the "Company") as of December 31, 1999 and
1998, and the related consolidated statements of operations, comprehensive
income (loss), changes in stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1999. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

    In our opinion such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1999 and
1998, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States of America.

    As discussed in Note 22, the accompanying 1999 and 1998 financial statements
have been restated.

DELOITTE & TOUCHE LLP



Las Vegas, Nevada
February 26, 2000 (January 18, 2001
as to Notes 21 and 22)

                                       40
<PAGE>

                           MIKOHN GAMING CORPORATION
                          CONSOLIDATED BALANCE SHEETS
                       as of December 31, 1999 and 1998

<TABLE>
<CAPTION>
(Amounts in thousands except per share amounts)                       1999               1998
                                                                      ----               ----
                                                                      (Restated; See Note 22)
                                                                      -----------------------
<S>                                                               <C>                <C>
                         ASSETS
                         ------
Current assets:
   Cash and cash equivalents                                       $      48          $   3,732
   Accounts receivable, net                                           30,447             28,641
   Notes receivable-related parties - current                          2,144
   Installment sales receivable - current                              1,030              1,387
   Inventories, net                                                   26,793             25,251
   Prepaid expenses                                                    4,582              4,611
   Assets held for sale                                                  781
   Deferred tax asset - current                                        1,420                884
                                                                  ----------         ----------
      Total current assets                                            67,245             64,506

Notes receivable-related parties - non-current                           150                142
Installment sales receivable - non-current                               865                860
Property and equipment, net                                           25,385             22,625
Intangible assets                                                     70,097             64,188
Goodwill                                                               5,572              7,067
Other assets                                                           8,423              8,453
Net assets of business transferred under contractual
 agreement                                                               558
                                                                  ----------         ----------
Total assets                                                       $ 178,295          $ 167,841
                                                                  ==========         ==========
</TABLE>

                                       41
<PAGE>

                           MIKOHN GAMING CORPORATION
                          CONSOLIDATED BALANCE SHEETS
                       as of December 31, 1999 and 1998

<TABLE>
<CAPTION>
(Amounts in thousands except per share amounts)                       1999               1998
                                                                      ----               ----
                                                                      (Restated; See Note 22)
                                                                      -----------------------
<S>                                                               <C>                 <C>
          LIABILITIES AND STOCKHOLDERS' EQUITY
          ------------------------------------
Current liabilities:
   Current portion of long-term debt and notes payable             $   1,436           $  2,122
   Trade accounts payable                                             11,615              9,098
   Customer deposits                                                   3,600              4,675
   Accrued and other current liabilities                               6,743              5,729
   Deferred license fees - current                                       451
                                                                   ---------          ---------
      Total current liabilities                                       23,845             21,624
                                                                   ---------          ---------

Long-term debt, net of current portion                                85,417             84,881
                                                                   ---------          ---------

Deferred license fees - noncurrent                                     1,806
                                                                   ---------          ---------

                                                                       4,890
                                                                   ---------          ---------

Deferred tax liability - noncurrent                                   14,221             14,609
                                                                   ---------          ---------

Commitments and contingencies (See Note 14)

Stockholders' equity:
   Preferred stock, $.10 par value, 5,000 shares authorized,
      none issued and outstanding
   Common stock, $.10 par value, 20,000 shares authorized,
      10,799 and 10,681 shares issued and outstanding                  1,080              1,068
   Additional paid-in capital                                         53,350             52,983
   Notes receivable from stockholders                                 (1,251)            (1,365)
   Foreign currency translation                                         (597)            (1,018)
   Accumulated deficit                                                (4,238)            (4,713)
                                                                   ---------          ---------
      Subtotal                                                        48,344             46,955
   Less treasury stock, 19 shares, at cost                              (228)              (228)
                                                                   ---------          ---------
      Total stockholders' equity                                      48,116             46,727
                                                                   ---------          ---------

Total liabilities and stockholders' equity                         $ 178,295          $ 167,841
                                                                   =========          =========
</TABLE>

See notes to consolidated financial statements

                                       42
<PAGE>

                           MIKOHN GAMING CORPORATION
                     CONSOLIDATED STATEMENTS OF OPERATIONS
             For the Years Ended December 31, 1999, 1998, and 1997

<TABLE>
<CAPTION>
(Amounts in thousands except per share amounts)          1999               1998              1997
                                                         ----               ----              ----
                                                      (Restated; See Note 22)
                                                      -----------------------
<S>                                                  <C>               <C>               <C>
Sales                                                 $  106,884        $   99,032        $   98,548
Cost of sales                                             54,846            60,163            61,200
                                                     -----------       -----------       -----------
   Gross profit                                           52,038            38,869            37,348

Selling, general and administrative expenses              41,966            38,982            31,073
Write-off of assets and other                              1,352             4,493
                                                     -----------       -----------       -----------
   Operating income (loss)                                 8,720            (4,606)            6,275

Interest expense                                          (8,850)           (5,115)           (2,555)
Other income and (expense)                                   720               112                11
                                                     -----------       -----------       -----------
   Income (loss) before income tax (provision)
      benefit                                                590            (9,609)            3,731

Income tax (provision) benefit                               342             3,335            (1,357)
                                                     -----------       -----------       -----------
  Income (loss) from continuing operations
    before extraordinary item                                932            (6,274)            2,374
                                                     -----------       -----------       -----------

Extraordinary item:
  Loss on early extinguishment of debt                                      (2,662)
  Tax benefit                                                                  910
                                                     -----------       -----------       -----------
   Extraordinary loss                                                       (1,752)
                                                     -----------       -----------       -----------

Net income (loss)                                      $     932        $   (8,026)       $    2,374
                                                     ===========       ===========       ===========

Weighted average common shares:

  Basic                                                   10,720            10,527             9,952
                                                     ===========       ===========       ===========
  Diluted                                                 10,784            10,527            10,057
                                                     ===========       ===========       ===========

Earnings per share information:
  Basic:
    Income (loss) from continuing operations
      before extraordinary item                        $    0.09        $    (0.60)        $    0.24
    Extraordinary loss                                                       (0.16)
                                                     -----------       -----------       -----------
      Basic                                            $    0.09        $    (0.76)        $    0.24
                                                     ===========       ===========       ===========

  Diluted:
    Income (loss) from continuing operations
      before extraordinary item                        $    0.09        $    (0.60)        $    0.24
    Extraordinary loss                                                       (0.16)
                                                     -----------       -----------       -----------
      Diluted                                          $    0.09        $    (0.76)        $    0.24
                                                     ===========       ===========       ===========
</TABLE>

See notes to consolidated financial statements

                                       43
<PAGE>

                          MIKOHN GAMING CORPORATION
            CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
             For the Years Ended December 31, 1999, 1998, and 1997

<TABLE>
<CAPTION>
(Amounts in thousands)                           1999                   1998               1997
                                                 ----                   ----               ----
                                         (Restated; See Note 22)
                                         -----------------------
<S>                                      <C>                          <C>                <C>
Net income (loss)                                     $   932          $ (8,026)          $  2,374

Comprehensive loss -
   Foreign currency translations                          (36)             (192)              (656)
                                         ---------------------        ----------         ----------

Total comprehensive income (loss)                     $   896          $ (8,218)          $  1,718
                                         =====================        ==========         ==========
</TABLE>

See notes to consolidated financial statements

                                       44
<PAGE>

                           MIKOHN GAMING CORPORATION
          CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
 For the Years Ended December 31, 1999 (Restated; See Note 22), 1998, and 1997

<TABLE>
<CAPTION>
                                                                       Notes                                  Foreign
(Amounts in thousands)                                  Additional   Receivable                               Currency
                                     Common Stock        Paid-in        from       Accumulated   Treasury    Translation
                                     ------------
                                 Shares      Amount     Capital     Stockholders     Deficit       Stock     Adjustment    Total
                                 --------    --------   ---------   ------------     -------       -----     ----------    -----
<S>                              <C>         <C>        <C>         <C>            <C>           <C>         <C>           <C>
Balance, January 1, 1997            9,894      $  990     $48,436      $               $   939      $  (51)     $  (170)   $50,144
Issuance of treasury stock              6                                                               26                      26
Issuance of common stock              344          34       1,927         (1,453)                                              508
Stock options exercised                12           1          54                                       (3)                     52
IRC Section 422 disqualifying
   disposition on stock options
   exercised                                                  133                                                              133
Employee stock purchase plan           29           3         186                                                              189
Treasury stock reacquired             (20)                                                            (200)                   (200)
Net income                                                                               2,374                               2,374
Translation adjustments                                                                                            (656)      (656)
                                 --------   ---------   ---------   -------------  -----------   ----------  -----------   -------

Balance, December 31, 1997         10,265       1,028      50,736         (1,453)        3,313        (228)        (826)    52,570
Issuance of common stock              172          17       1,263                                                            1,280
Stock options exercised               176          18         734                                                              752
Employee stock purchase plan           69           7         362                                                              369
Cancellation of common stock          (20)         (2)       (112)            88                                               (26)
Net loss                                                                                (8,026)                             (8,026)
Translation adjustments                                                                                            (192)      (192)
                                 --------   ---------   ---------   ------------   -----------   ---------   ----------    -------

Balance, December 31, 1998         10,662       1,068      52,983         (1,365)       (4,713)       (228)      (1,018)    46,727
Stock options exercised                27           3         103                                                              106
Employee stock purchase plan          111          11         376                                                              387
Cancellation of common stock          (20)         (2)       (112)           114
Net income                                                                                 932                                 932
Translation adjustments                                                                                             (36)       (36)
Disposition of cost basis
  subsidiary to 50% equity
  basis owned affiliate                                                                   (457)                     457
                                 --------   ---------   ---------   ------------   -----------   ---------   ----------    -------

Balance, December 31, 1999         10,780    $  1,080     $53,350      $  (1,251)   $   (4,238)     $ (228)     $  (597)   $48,116
                                 ========   =========   =========   ============   ===========   =========   ==========    =======
</TABLE>

See notes to consolidated financial statements

                                       45
<PAGE>

                           MIKOHN GAMING CORPORATION
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
             For the Years Ended December 31, 1999, 1998 and 1997


<TABLE>
<CAPTION>
(Amounts in thousands)                                                            1999          1998          1997
                                                                                  ----          ----          ----
<S>                                                                               <C>           <C>           <C>
                                                                                   (Restated; See Note 22)
                                                                                   -----------------------
Cash flows from operating activities:
 Net income (loss)                                                               $     932      $ (8,026)      $  2,374
 Adjustments to reconcile net income (loss) to net cash provided by
   (used in) operating activities:
   Depreciation                                                                      5,228         4,091          2,784
   Amortization                                                                      4,121         2,780          1,530
   Write-off of assets                                                               1,352         3,022
   Provision for bad debts                                                             522           392           (608)
   Reserve for obsolete inventory                                                      836           304            200
   Change in exchange rate variance                                                    (36)         (192)          (656)
   Extraordinary loss, net of tax                                                                  1,752
 Changes in assets and liabilities:
   Accounts receivable                                                               1,437        (6,591)         3,717
   Installment sales receivable                                                        352          (186)          (682)
   Inventories                                                                      (4,530)         (211)        (2,532)
   Prepaid expenses and other assets                                                (1,885)       (5,538)        (3,032)
   Trade accounts payable                                                            3,599         2,226           (482)
   Accrued and other current liabilities                                            (1,498)          410            547
   Customer deposits                                                                  (934)        1,171         (3,062)
   Deferred licenses payable
   Deferred taxes                                                                   (2,348)       (3,796)           700
                                                                                 ---------      --------       --------

 Net cash provided by (used in) operating activities                                 7,148        (8,392)           798
                                                                                 ---------      --------       --------

 Cash flows from investing activities:
  Purchase of business operations                                                                (39,147)
  Purchase of property and equipment                                                (3,170)       (5,166)        (1,000)
  Gaming equipment leased to others                                                 (5,804)       (5,630)        (1,919)
  Proceeds from sales of property and equipment                                        897            35             27
  Proceeds from note receivable, sale of subsidiary                                    471
  Cash retained by former subsidiary                                                  (485)
  Increase in intangible assets                                                     (2,119)       (2,016)        (2,890)
                                                                                 ---------      --------       --------

 Net cash used in investing activities                                             (10,210)      (51,924)        (5,782)
                                                                                 ---------      --------       --------

 Cash flows from financing activities:

  Proceeds from long-term debt and notes payable                                     6,072        57,050         31,100
  Principal payments on notes payable and long-term debt                            (7,187)         (273)       (23,593)
  Proceeds from sale of common stock                                                   493         2,375            778
  Purchases of treasury stock                                                                                      (203)
                                                                                 ---------      --------       --------

 Net cash provided by (used in) financing activities                                  (622)       59,152          8,082
                                                                                 ---------      --------       --------

 Increase (decrease) in cash and cash equivalents                                   (3,684)       (1,164)         3,098

 Cash and cash equivalents, beginning of period                                      3,732         4,896          1,798
                                                                                 ---------      --------       --------

 Cash and cash equivalents, end of period                                        $      48      $  3,732       $  4,896
                                                                                 =========      ========       ========
</TABLE>

Continued

                                       46
<PAGE>

                           MIKOHN GAMING CORPORATION
               CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
 For the Years Ended December 31, 1999 (Restated; See Note 22), 1998 and 1997

<TABLE>
<CAPTION>


                                                                          1999           1998              1997
                                                                          ----           ----              ----
<S>                                                                   <C>             <C>                <C>
Supplemental disclosure of cash flows information:
  Cash paid (received) during the year for:
   Interest                                                           $     8,832     $    4,959         $  2,452
                                                                      ===========     ===========        ========
   State and federal taxes                                            $       161     $      218          $   922
                                                                      ===========     ===========        ========
Supplemental schedule of non-cash investing
 and financing activities:
 Issuance of stock in exchange for assets                                                                 $   392
                                                                      ===========     ===========        ========
 IRC Section 422 disqualifying disposition on
  stock options exercised                                                                                 $   133
                                                                      ===========     ===========        ========
 Issuance of stock in exchange for intellectual
  technology                                                                          $    1,000
                                                                      ===========     ===========        ========
  Acquisition of Progressive Games, Inc. (PGI):
   Assets acquired                                                                    $    6,013
                                                                      ===========     ===========        ========
   Liabilities assumed                                                                $    3,149
                                                                      ===========     ===========        ========
 Acquisition of P&S Leasing:
  Assets acquired                                                                     $       28
                                                                      ===========     ===========        ========
 Perpetual license accrual for PGI and P&S Leasing                    $     2,627
                                                                      ===========     ===========        ========
 Deferred taxes on acquisition of perpetual license                   $     1,424     $   17,833
                                                                      ===========     ===========        ========
 Reclassify property held for sale                                    $       781
                                                                      ===========     ===========        ========
 Australian foreign currency translation                              $       457
                                                                      ===========     ===========        ========
 Property and equipment acquired through capital lease                $     1,060
                                                                      ===========     ===========        ========
 Deferred license fees                                                $     2,257
                                                                      ===========     ===========        ========
 Cancellation of note receivable from stockholder                     $       114
                                                                      ===========     ===========        ========
 Net investment in subsidiary converted to note receivable
  upon sale                                                           $       557
                                                                      ===========     ===========        ========
</TABLE>


See notes to consolidated financial statements

                                       47
<PAGE>

                           MIKOHN GAMING CORPORATION

                  Notes to Consolidated Financial Statements

Note:  All amounts (dollars and numbers) reported in the Notes to Consolidated
Financial Statements are rounded to the nearest thousand unless otherwise
specified. Additionally, certain amounts reported in prior years have been
restated. (See Note 22 - Restatement).

1.  ORGANIZATION

    In this report, you will see your company referred to as "Mikohn," "Company"
and often simply as "we" or "our". These terms are used interchangeably, and
unless otherwise noted, they include domestic and foreign subsidiaries, whether
wholly or partially owned. The Company was formed in 1986 to develop,
manufacture and distribute technologically advanced progressive jackpot systems
for use with gaming machines. In 1993 the Company consummated an initial public
offering of 3,450 shares of its Common Stock at $15.00 per share (the
"Offering") which represented approximately 35.4% of the Company's outstanding
Common Stock after giving effect to the 1993 acquisitions described below. Net
proceeds to the Company after underwriting discounts and commissions and other
offering costs were $46,666. Stockholders of Mikohn prior to the initial public
offering owned a total of 3,125 shares of Common Stock.

    At the close of business on November 28, 1993, the Company merged with
Casino Signs North, Inc. (and its affiliate A&D Sign Manufacturing, Inc.) and
Peterson Sign Art, Inc. (the "Merger"). The stockholders of Casino Signs North,
Inc. and Peterson Sign Art, Inc. each received 1,562.5 shares of Common Stock,
or a combined total of 3,125 shares. Such acquisitions through merger were
accounted for by the purchase method and valued at historical cost. In
connection with the Merger, the stockholders of Mikohn, Casino Signs North, Inc.
and Peterson Sign Art, Inc. received distributions of $4.9 million of previously
taxed undistributed income through the date of the Merger in connection with the
termination of the Subchapter S corporation status of those companies.

    Concurrently with the closing of the Merger, the Company purchased the
principal operating assets of Casino Signs, Inc. and its affiliate, Casino
Products (collectively "Casino Signs") for approximately $13.4 million, and
Current Technology Systems, Inc. for approximately $4.2 million. In each case
the consideration paid included ten-year worldwide covenants not to compete from
the companies and their principals.

    In April 1994, the Company acquired Casino Signs Pty Limited and its
affiliate, Club Casino Products Pty Limited, companies based in Sydney,
Australia, through the issuance of 42 shares of the Company's Common Stock. The
acquisition was accounted for by the purchase method.

    In September 1994, the Company merged with Trans Sierra Communications, Inc.
("Trans Sierra"), a producer of high performance surveillance, security and
communications systems, through the issuance of 251 shares of the Company's
treasury stock which had been purchased by the Company at a cost of
approximately $3,198. The acquisition of Trans Sierra was accounted for by the
purchase method. In 1995, 20 shares of the Company's Common Stock issued in
connection with the merger with Trans Sierra were returned to the Company as a
result of Trans Sierra's operations not achieving targeted sales levels for the
year then ended. Such shares were recorded as treasury stock at a cost of $201
and were canceled.

    In November 1994, Casino Excitement, Inc. ("CEI"), a wholly owned subsidiary
of the Company, completed the first step of a plan to acquire the business
operations of a group of companies from John Renton Young (the "JRY Companies")
by acquiring the net assets of the JRY Companies in

                                       48
<PAGE>

consideration for the conditional obligation to issue up to 217 shares of the
Company's Common Stock (see below) and the assumption of certain liabilities,
including a $500 loan made to the JRY Companies by the Company prior to November
15, 1994. The liabilities assumed by CEI in this transaction, net of a deposit
in the amount of approximately $781 towards the purchase of certain real
property owned by an affiliate of the JRY Companies, exceeded the book value of
the assets acquired by approximately $129. In addition, the Company agreed to
pay John Renton Young $500 for his ten-year covenant not to compete.

    John Renton Young died in September 1997 and was succeeded by the John
Renton Young Trust (the "Trust"). In December 1998, the Company entered into a
settlement agreement with the Trust consummating the acquisition of the JRY
Companies. The Company paid the Trust $1,916 and in return acquired JRY
Companies and certain real property in Clark County valued at $2,450.

    In January 1995, the Company paid $2.0 million for the purchase of certain
inventory and intangible assets from Michael Wichinsky doing business as Games
of Nevada. With exceptions that are immaterial, the assets included all rights
to all games developed by Games of Nevada, including certain patent and
trademark rights to a number of coin operated specialty games.

    Also in 1995 the Company consummated the purchase of a slot machine route,
including specialty "Flip-It(TM)" games and other inventory from Mr. Wichinsky.
In return for these assets, the Company paid Mr. Wichinsky $1.5 million in cash
and a promissory note, secured by gaming equipment and slot route rights, in the
principal amount of $4.5 million.

    In 1997, the Company consummated the purchase of 49.7% of the stock of
Mikohn South America, SA with the issuance of 5.75 shares of the Company's
Common Stock held in its treasury and a participation in profits of Mikohn South
America, SA net of prior year losses equal to 25% in 1997, 15% in 1998 and 10%
in 1999. With this acquisition the Company became the owner of 99.7% of Mikohn
South America, SA. Also in 1997, the Company entered into an exclusive licensing
agreement with P&M Coin ("P&M") in which it acquired the intellectual rights to
P&M's multi-game touch-screen machines which was written-off in 1999.

    In 1998, the Company acquired all of the outstanding stock of Progressive
Games, Inc. ("PGI") the developer of Caribbean Stud(R), for an aggregate cash
consideration of $35,847. Also acquired were the two exclusive distributors of
Caribbean Stud(R) in the major markets of Mississippi and Louisiana, P&S Leasing
Corporation, Inc. and P&S Leasing LLC, (collectively referred to as "P&S
Leasing") for an aggregate cash consideration of $3,300. In addition to these
proprietary games, the assets of PGI include equipment and other physical
property used in the manufacture and distribution of these games. The excess of
the purchase price over the net liabilities assumed acquired for these
acquisitions totaled $50,952 which is reported as a perpetual license. In 1999,
an additional perpetual license was recorded in the amounts of $3,774 and $293
in the acquisitions of PGI and P&S Leasing, respectively. (See Note 22 -
Restatement). These amounts were for the Year 2000 costs and international tax
withholding issues (see Note 14 - Commitments and Contingencies).

    On November 4, 1999, the Company entered into four agreements with TAB
Limited, a publicly traded Australian corporation ("TAB"). (See Note 22 -
Restatement).

    Under a Share Sale Agreement, the Company sold 50% of the issued shares in
the capital of its Australian subsidiary, Mikohn Gaming Australasia Pty Limited
("MGA"), for cash in the amount of $4.9 million. The agreement acknowledges the
Company's loans to MGA totaling $2,053, provides that the loans shall carry
interest at 9.5% from January 1, 2000, and shall be repaid as soon as MGA
determines it has sufficient reserves to do so but in no event later than
November 4, 2001.

                                       49
<PAGE>

    Under the terms of the Share Sale Agreement, the Company was entitled to
100% of the income of MGA for 1999. Therefore, MGA's income statement was
included in the Company's consolidated statements of operations and cash flows
for 1999. Additionally, due to circumstances surrounding certain put and call
options included in the arrangement, as discussed below, a determination has
been made that, although a legal transfer of business ownership has been
transferred to TAB, the transaction should not currently be recognized as a
divestiture for accounting purposes. As such, the net assets of MGA have been
appropriately segregated in the balance sheets of the Company in order to
appropriately convey the distinction between the legal form of the transaction
and its accounting treatment. This accounting treatment will be followed for
each period until circumstances surrounding the put and call options have
sufficiently changed.

    A Shareholders Agreement between TAB, MGA and the Company provides for the
appointment and removal of directors, voting procedures, restrictions on share
transfers, activities requiring super majority approval and other matters
commonly found in agreements of this nature. The agreement also contains a call
option in favor of the Company and a put option in favor of TAB. The call option
is exercisable by the Company upon termination of the System Acquisition and
Services Agreement by TAB for any reason other than a breach of the agreement by
the Company. The call option price is 75% of the fair market value of the MGA
shares then held by TAB. The put option is exercisable by TAB in the event the
Company does not meet the delivery timetable specified in the Systems
Acquisition and Services Agreement. The put option price is the amount paid by
TAB for the MGA shares plus 50% of the profit margin before tax on all orders
placed with MGA by TAB prior to the exercise of the put option. The timetable
originally specified in the System Acquisition and Services Agreement has been
modified to extend certain milestone dates to February 28, 2001 and March 31,
2001. Although the Company believes it will meet the modified timetable, it is
also the Company's position that TAB has waived the right to exercise the put
option. Under the Shareholders Agreement, the Company and TAB each appoint two
members to the four-member MGA board of directors.

    A Management Services Agreement between the Company and MGA provides that
the Company will make management personnel available to MGA. MGA is responsible
for compensating such personnel. The agreement terminates if the Company's
ownership of the issued share capital in MGA falls below 35% or if the audited
consolidated financial statements of MGA in a fiscal year show a net loss on an
after tax basis. Other than reimbursement for expenses, the Company receives no
compensation under this agreement.

    A System Acquisition and Services Agreement between TAB and the Company
requires the Company to provide hardware and software to operate a wide area
progressive jackpot system in New South Wales, Australia. Under this agreement,
the Company is to provide the hardware component of the system at cost and will
receive a software license fee of $(AUD)50.00 per month per device with a
minimum license fee of $(AUD)1.5 million per year commencing upon delivery of
the system.

 (See Note 21 - Subsequent Events).


2.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    Principles of Consolidation: The consolidated financial statements include
    ---------------------------
the accounts for the Company and all of its majority-owned subsidiaries and are
maintained in accordance with accounting principles generally accepted in the
United States of America. All material intercompany balances and transactions
have been eliminated. The Company sold 50% of the issued shares in the capital
of its Australian operation at the end of 1999. The Australian operation's
income is included in the accompanying consolidated statements of operations.
However, the balance sheet at December 31, 1999 does not include the Australian
operation's balances. (See Note 1 - Organization).


                                       50
<PAGE>

    Cash and Cash Equivalents: Investments which mature within 90 days from the
    -------------------------
date of purchase are treated as cash equivalents and are included in cash and
cash equivalents.

    Fair Values of Financial Instruments: In accordance with reporting and
    ------------------------------------
disclosure requirements of the Statement of Financial Accounting Standards
("SFAS") No. 107 - Disclosures about Fair Values of Financial Instruments, the
Company calculates the fair value of financial instruments and includes this
information in the Company's Notes to Consolidated Financial Statements when the
fair value is different than the book value of those financial instruments. When
fair value is equal to book value, no disclosure is made. Fair value is
determined using quoted market prices whenever available. When quoted market
prices are not available, the Company uses alternative valuation techniques such
as calculating the present value of estimated future cash flows utilizing
discount rates commensurate with the risks involved.

    Concentration of Credit Risk: The Company sells its products and services to
    ----------------------------
distributors and gaming properties primarily in the United States, Canada,
Europe, Australia and South America. The Company established a financing program
under which interest bearing installment sales contracts collateralized by the
equipment sold were entered into with credit worthy customers, with payment
terms typically ranging over periods of 12 to 24 months. The Company performs
credit evaluations of its customers, and typically requires advance deposits of
approximately 50%. The Company maintains reserves for potential credit losses
and the amounts of such losses have not exceeded management's projections.

    Notes Receivable-Related Parties: The Company classifies certain receivables
    --------------------------------
from officers and its 50% owned subsidiary as notes receivable - related
parties. In October 1997, the Board authorized a loan in the amount of $122.5 to
the chairman of the Company at an interest rate of 6.37% secured by 20 shares of
the Company's Common Stock which is due to mature on October 20, 2002. In
addition, on December 31, 1999, due to the sale of 50% of the issued shares in
the capital of the Australian operation, the Company's intercompany balance with
Mikohn Australasia was converted to a note receivable with an interest rate of
9.5%. (See Note 1 -Organization).

    Notes Receivable from Stockholders: In October 1997, the Board adopted
    ----------------------------------
resolutions (i) allowing each director and senior officer to purchase up to 20
shares of authorized but unissued restricted Common Stock from the Company at
the closing price of $5.687 on October 30, 1997 and (ii) authorizing each such
person to borrow the price of the shares purchased from the Company. Each
purchaser gave the Company a promissory note for a principal amount equal to the
purchase price, maturing October 20, 2002 (or at termination of employment by
the Company, whichever first occurs), bearing interest at the rate of 6.37% per
annum payable annually in arrears on each anniversary date, and secured by a
pledge of the shares so purchased. All of the Company's directors except Mr.
Campbell and all of its senior officers except Mr. Thompson are participating in
the program. Each participating director and officer has borrowed $113.7,
representing the aggregate purchase price of 20 shares of Common Stock at $5.687
per share.

    Inventories:  Inventories are stated at the lower of cost (determined using
    -----------
the first-in, first-out method) or market.

    Assets Held for Sale: During 1999, the Company closed its manufacturing
    --------------------
facility in Rapid City, South Dakota. The cost of the land and unamortized cost
of the building and building improvements was transferred from property and
equipment to assets held for sale and were subsequently sold.

    Prepaid Expenses and Other Assets: At the end of 1999, other assets included
    ---------------------------------
$2,751 of prepaid royalties related to the TableLink(TM) product line.
Recoverability of the asset is dependent upon successful completion of the
development of the TableLink(TM) product line and sufficient sales





                                       51
<PAGE>

of the TableLink(TM) product.

    Long-Lived Assets: Property and equipment are stated at cost and are
    ------------------
depreciated by the straight-line method over the useful lives of the assets,
which range from 5 to 39 years. Costs of major improvements are capitalized;
costs of normal repairs and maintenance are charged to expense as incurred.
Management requires long-lived assets and certain identifiable intangibles that
are held and used by the Company to be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable.

    Patents and Trademarks:  The Company capitalizes the cost of developing and
    -----------------------
defending patents and trademarks. These costs are amortized over the useful life
of the patent or trademark.

    Intangible Assets: Intangible assets consist of patent and trademark rights,
    ------------------
goodwill, intellectual property rights, covenants not to compete, software
costs, license fees and perpetual license. They are recorded at cost and are
amortized on a straight-line basis over periods of 5 to 40 years. At the end of
1999, intangible assets included $759 of unamortized software costs related to
the TableLink(TM) product line.

    Deposits and Product Sales Recognition: Deposit liabilities represent
    ---------------------------------------
amounts collected in advance from customers pursuant to agreements under which
the related sale of inventory has not been completed. Sales are recorded when
the inventory has been delivered to or installed for the customer.

    Foreign Currency Translation: The Company classifies foreign currency
    -----------------------------
gains/(losses) on its long-term investments in its foreign subsidiaries as
adjustments to the equity section of the balance sheet.

    Revenue Recognition:  The Company recognizes revenue as follows:
    --------------------

    Product sales are executed by a signed contract or customer purchase order.
If the agreement calls for Mikohn to perform an installation after delivery,
revenue is recognized when the installation has been completed and accepted by
the customer. In the case where installation is not required, revenue is
recognized upon the delivery of the product.

    System sales consists of a suite of products (some of which are sold
separately) that enable gaming entities to track customer gaming activity,
account for slot machine activity, and operate progressive jackpot systems.
There are proprietary hardware and software components to the systems. The
Company accounts for Systems sales in accordance with Statement of Position 97-2
- Software Revenue Recognition ("SOP 97-2"). System sales are considered
multiple element arrangements because they include hardware, software,
installation, training and post customer support. System sales are evidenced by
a signed contract. Follow-up spare parts and hardware only sales are evidenced
with a purchase order. Revenue for Systems sales are recognized when:

    .  There are signed contracts with a fixed determinable price;
    .  Collectibility of the sale is probable;
    .  The hardware and software has been delivered, installed, training has
       been completed and acceptance has occurred.

    Not all systems contracts require installation. This is the case with sales
of hardware only to 1) previous customers that are expanding their systems; 2)
customers that have multiple locations and do installation themselves and
require an additional software license and hardware; and 3) customers purchasing
spare parts.

                                       52
<PAGE>

    Maintenance and support is sold under agreements, with established vendor
specific objective evidence of price. Maintenance contracts are generally for a
period of twelve months, with revenue recognized ratably over the contract
service period.

    Further training is sold under agreements with established vendor specific
objective evidence of price, which is based on daily rates and is recognized
upon delivery.

    The leasing of proprietary table games to casino customers occur under
signed lease agreements. The lease revenue is recognized on a monthly basis.

    The leasing of proprietary slot machines occur under signed lease
agreements. These contracts will either be on participation or a lease basis. On
a participation basis, the Company earns a share of the revenue that the casino
earns from these slot machines. On a lease basis, the Company charges a fixed
amount per slot machine per day. Both types of revenue are recognized on a
monthly basis.

    Research and Development: Costs associated with the development of products
    -------------------------
are expensed when incurred. Such expenses totaled approximately $6,013, $5,538
and $3,856 for the years ended December 31, 1999, 1998 and 1997, respectively.

    Software  Development  Capitalization: The Company capitalizes costs related
    --------------------------------------
to the development of certain software products that meet the criteria under
SFAS No. 86 - Accounting for the Costs of Computer Software to Be Sold, Leased,
or Otherwise Marketed.

    Income Taxes: The Company accounts for income taxes under SFAS No. 109,
    -------------
Accounting for Income Taxes, pursuant to which the Company records deferred
income taxes for temporary differences that are reported in different years for
financial reporting and for income tax purposes. Such deferred tax liabilities
and assets are classified into current and non-current amounts based on the
classification of the related assets and liabilities.

    Use of Estimates and Assumptions: 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 at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

    Reclassifications: Certain amounts in the prior years' consolidated
    ------------------
financial statements have been reclassified to make them consistent with the
presentation used in 1999.

                                       53

<PAGE>

3.  FAIR VALUES OF FINANCIAL INSTRUMENTS

    The following table presents the carrying amount and estimated fair value of
our financial instruments at December 31, 1999:

                                                    Carrying        Estimated
                                                     Amount            FMV

Assets:
   Cash and cash equivalents                        $    48          $    48
   Notes and installment sales receivable             4,189            4,173

Liabilities:
   Notes payable                                     85,297           85,429
   Capitalized leases                                 1,556            1,566

    The estimated fair value of cash and cash equivalents is the same as the
carrying amount. The estimated fair value of notes and contract receivables were
calculated by discounting the stream of receipts using discount rates determined
by management to reflect the risk, remaining maturities and current comparable
market rates of similar notes receivable and contract receivables. The estimated
fair value of the notes payable and capitalized leases was calculated by
discounting the expected amortization principal and interest payments by the
discount rates most closely approximating that which would be required to place
similar notes payable and capitalized leases at the current time.

4.      ACCOUNTS RECEIVABLE

    Accounts receivable at December 31, 1999 and 1998 consist of the following:

                                                  1999              1998
                                                  ----              ----
Trade accounts                                 $  26,345         $  29,057
Other                                              5,541               501
                                               ---------         ---------
   Subtotal                                       31,886            29,558
Less allowance for doubtful accounts              (1,439)             (917)
                                               ---------         ---------

   Net                                         $  30,447         $  28,641
                                               =========         =========

                                      54

<PAGE>

    Changes in the allowance for doubtful accounts for the years ended December
31, 1999, 1998 and 1997 are summarized as follows:

                                            1999          1998            1997
                                            ----          ----            ----
Allowance for doubtful accounts -
  beginning                               $   (917)     $   (245)      $   (853)
Allowance - acquired companies                              (280)
Provision for bad debts                       (538)       (1,623)          (108)
Write-offs                                      16         1,231            716
                                         ---------      --------       --------

Allowance for doubtful accounts -
ending                                   $  (1,439)     $   (917)      $   (245)
                                         =========      ========       =========

    (See Note 12 - Long-Term Debt)


5.  INSTALLMENT SALES RECEIVABLE

    The Company finances certain sales (see Note 19 - Concentrations of Credit
Risk). The amounts financed during 1999 and 1998 totaled approximately $449 and
$2,086, respectively. At December 31, 1999 and 1998, the balance of installment
sales receivable was $1,895 and $2,247, of which $1,030 and $1,387,
respectively, were due within 12 months.

    (See Note 12 - Long-Term Debt)


6.  INVENTORIES

    Inventories at December 31, 1999 and 1998 consist of the following:

                                                   1999               1998
                                                   ----               ----
Raw materials                                    $  14,616         $  14,703
Finished goods                                       6,247             5,304
Work-in-progress                                     7,693             6,171
                                                ----------        ----------
   Subtotal                                         28,556            26,178
Less reserve for obsolete inventory                 (1,763)             (927)
                                                ----------        ----------

   Total                                         $  26,793         $  25,251
                                                ==========        ==========

    Changes in the reserve for obsolete inventory for the years ended December
31, 1999, 1998 and 1997 are summarized as follows:

                                                 1999       1998          1997
                                                 ----       ----          ----
Reserve for obsolete inventory -
beginning                                     $   (927)   $   (623)    $   (423)
Provision for obsolete inventory                (1,375)     (1,465)        (238)
Write-offs                                         539       1,161           38
                                             ---------    --------     --------

Reserve for obsolete inventory - ending      $  (1,763)   $   (927)    $   (623)
                                             =========    ========     ========

                                      55

<PAGE>

    (See Note 12 - Long-Term Debt)


7.  ASSETS HELD FOR SALE

    Assets held for sale at December 31, 1999 and 1998 consist of the following:

                                                               1999     1998
                                                               ----     ----
Land                                                         $   62
Buildings and building improvements                             826
                                                             ------    ------
   Subtotal                                                     888
Less accumulated depreciation                                  (107)
                                                             ------    ------

   Total                                                     $  781
                                                             ======    ======

    During 1999, the Company closed its manufacturing facility in Rapid City,
South Dakota. The cost of the land and unamortized cost of the building and
building improvements was transferred from property and equipment to assets held
for sale and were subsequently sold.

    (See Note 12 -  Long-Term Debt)

8.  PROPERTY AND EQUIPMENT

    Property and equipment at December 31, 1999 and 1998 consist of the
following:

                                                    1999              1998
                                                    ----              ----
Land                                              $  1,668          $  1,781
Buildings and leasehold improvements                 5,110             6,472
Machinery and equipment                              8,273             6,851
Equipment leased to others                          18,001            12,104
Furniture and fixtures                               7,339             6,331
Transportation equipment                             2,120             1,941
                                                 ---------        ----------
   Subtotal                                         42,511            35,480
Less accumulated depreciation                      (17,126)          (12,855)
                                                 ---------        ----------

   Total                                          $ 25,385         $  22,625
                                                 =========        ==========

    (See Note 12 - Long-Term Debt)

                                      56

<PAGE>

9.  INTANGIBLE ASSETS

    Intangible assets at December 31, 1999 and 1998 consist of the following:

                                                        1999           1998
                                                        ----           ----
Perpetual license  (See Note 22 - Restatement)        $ 55,019      $  50,952
Patent and trademark rights
                                                        11,610          8,960
Covenants not to compete                                10,684         10,684
Proprietary property rights                              1,229          1,229
Software costs                                           1,620          1,146
License fees                                             2,257
                                                     ---------      ---------
   Subtotal                                             82,419         72,971
Less accumulated amortization                          (12,322)        (8,783)
                                                     ---------      ---------

   Total                                              $ 70,097       $ 64,188
                                                     =========      =========

    Patent and trademark rights in the amount of $617 were acquired from a
former stockholder in 1987 and 1988. In 1989, 1995 and 1996 additional trademark
and patent rights in the amount of $227, $100, and $140 respectively, were
acquired from employees. In 1997, $245 was spent on patent and trademark rights
development. In 1998, $1,531 was spent on patent and trademark rights
development while an additional $6,100 was acquired as part of the PGI
acquisition. In 1999, $2,650 was spent on patent and trademark rights
development and protection.

    Covenants not to compete in the amount of $617 were acquired from a former
stockholder. The covenants not to compete include ten-year covenants acquired in
November 1993 from the former stockholders of Casino Signs, Inc. in the amount
of $6,469 which in 1994 was increased by approximately $294 in settlement of a
dispute pertaining to the valuation of certain assets included in the November
1993 acquisition. Also in 1993, covenants not to compete were acquired from the
former stockholders of Current Technology Systems, Inc. for $3,705 which was
subsequently written down to $2,192 in 1995. In 1994, covenants not to compete
were acquired from the former stockholders of Trans Sierra for $100 and from
John Renton Young for $500. In addition, covenants not to compete were acquired
from employees in the amount of $226. In 1997,covenants not to compete were
acquired from John Jones, Peter Mandas and Dale Frey in the amounts of $48, $143
and $95, respectively.

    In April 1994, certain proprietary intellectual property rights were
acquired from employees in exchange for Common Stock valued at the fair market
value of the stock of $229. In 1998, $1,000 of intellectual property rights were
acquired with Harrah's Total Track system.

    In 1999, license fees in the amount of $2,257 were acquired from Shuffle
Master, Inc. (Shuffle Master) as part of the Company's settlement with Shuffle
Master (See Note 13 - Deferred License Fees).

                                      57
<PAGE>

10.  GOODWILL

     Goodwill at December 31, 1999 and 1998 consist of the following:

<TABLE>
<CAPTION>
                                                                  1999               1998
                                                                  ----               ----
<S>                                                          <C>                <C>
Goodwill  (See Note 22 - Restatement)                               $  8,355          $  9,497
Less accumulated amortization                                         (2,783)           (2,430)
                                                             ---------------    --------------

   Total                                                            $  5,572          $  7,067
                                                             ===============    ==============
</TABLE>

     During 1994 goodwill was recorded in connection with the acquisition Trans
Sierra in the amount of $3,104 based on the market value of the Company's Common
Stock issued in the acquisition and the valuation of the net assets acquired. On
December 31, 1995, 20 shares of the Company's Common Stock issued in the
acquisition of Trans Sierra were returned to the Company as a result of Trans
Sierra's operations not achieving certain sales levels. Goodwill was reduced by
$232. In 1998, the Company wrote-off an additional $1,500 of the surveillance
and security operation's goodwill. This reduction in goodwill was based on that
operation's value to the Company on a going-forward basis. The amount of the
asset impairment was determined by taking the net present value of the expected
future cash flows over the next 10 years and writing the asset down to that
expected value.

     In 1995, goodwill was recorded in the amount of $5,485 in the acquisition
of the assets of Games of Nevada. In 1997, goodwill was recorded in connection
with the second closing in the acquisition of the JRY Companies and in the
acquisition of Mikohn South America, SA in the amounts of $1,392 and $106,
respectively. (See Note 1 - Organization).

11.  WRITE-OFF OF ASSETS AND EXTRAORDINARY ITEM

     During the fourth quarter of the year ended December 31, 1999, we incurred
a non-recurring asset write-off of $1,352 related to our P&M Coin product line,
which includes our Classic slot machine games. During the fourth quarter of
1999, pursuant to SFAS No. 121 - Accounting for the Impairment of Long-Lived
Assets, to more accurately reflect the value of the P&M Coin slot machine
product line, we recorded a write-off of assets of $1,352. These charges
included write-offs of both the investment in the product line as well as
prepaid royalties associated with the product line. We believe the remaining
intangible asset value matches the discounted cash flow stream we expect to
receive from the Classic products over the remaining life of this product line.

     For the year ended December 31, 1998, the Company incurred several
non-recurring charges that amounted to $4,493. These charges mainly consisted of
(i) the write-off of expenses related to the Company's debt refinancing and
acquisitions of September 2, 1998 in the amount of $711, (ii) the write-off of
certain goodwill amounts associated with the Company's security and surveillance
division in the amount of $1,500, (iii) management reorganization expenses in
the amount of $736, (iv) the write-off of certain non-compete agreements in the
amount of $739, (v) reserves for the closure of the Company's manufacturing
facility in Rapid City, South Dakota in the amount of $500 and (vi) other items
in the amount of $307.

     During the third quarter of 1998 as a result of the acquisition of PGI and
P&S Leasing, the Company recorded an extraordinary loss that was associated with
the early extinguishment of debt under its prior Credit Agreement (see Note 12 -
Long-Term Debt). The extraordinary loss, net of tax benefits, was $1,752 and
consisted of a gross extraordinary loss of $2,662 and the related tax

                                       58
<PAGE>

benefit of $910.

12.  LONG-TERM DEBT

     Long-term debt at December 31, 1999 and 1998 consist of the following:

<TABLE>
<CAPTION>
                                                                     1999               1998
                                                                     ----               ----
<S>                                                                <C>                 <C>
Notes payable collateralized by transportation and                 $  1,556            $  909
manufacturing equipment. This total consists of 15
capital leases that bear individual interest rates
between 7.8% to 11.0% and whose terms are scheduled to
mature at various dates through 2005.

Note payable repaid during 1999.                                                        1,916

Revolving loan payable to ABN-AMRO Bank N.V., equal to                  852             1,178
the amount of 60% of eligible accounts receivable of
Mikohn's European subsidiary and guaranteed by all
accounts receivable of that subsidiary. This loan
payable is also partially secured by a corporate
guarantee by Mikohn Gaming Corporation in the amount
of $500 NLG, and by credit insurance which was
required by ABN-AMRO as a condition to making the
loan. The interest rate of 6.5% per annum is payable
on a monthly basis.

Term Loans payable to First Source Financial LLP,                    81,000            81,000
acting as agent and participant in the Amended and
Restated Credit Agreement dated September 2, 1998;
Term Loan A, a variable rate loan of $67,500 with an
interest rate of either prime plus 225 basis points or
LIBOR plus 325 basis points per annum; Term Loan B, a
fixed rate loan of $13,500 with an interest rate of
10.25% per annum; secured by all the Company's
personal property assets including furniture,
equipment, fixtures, real estate, intangible assets
and contract rights; each term loan is payable in
equal, semi-annual installments beginning in April
2002.  As of December 31, 1999, the interest rate in
effect on the $67,500 of outstanding variable rate
term loan was 9.37%.

Revolving loan payable to First Source Financial LLP,                 1,400             2,000
acting as agent and participant in the Amended and
Restated Credit Agreement dated September 2, 1998.
The revolving loan availability, in the amount of $5,000
is a variable rate loan with an interest rate of either
prime plus 175 basis points or LIBOR plus 275 basis points
and is secured by the inventory and accounts receivable of
the Company. The revolving loan is payable by the expiration
date of October 15, 2002 and
</TABLE>

                                       59
<PAGE>

<TABLE>
<CAPTION>
                                                                     1999               1998
                                                                     ----               ----
<S>                                                                <C>                 <C>
can be extended by two years until October 15, 2004 if
the Company meets certain requirements. As of December
31, 1999, the interest rate in effect on the $1,400 of
outstanding variable rate revolving loan was 8.87%.

30 year mortgage note payable to Wells Fargo Mortgage                 1,780
for $1,793 for the purchase of Mikohn Lighting and
Sign's exterior sign manufacturing facility. This
mortgage note bears an interest rate of 250 basis
points above the U.S. Treasury rate for the period
closest to the term of the loan.  As of December 31,
1999 the interest rate in effect was 8.64%.  This loan
amortizes over a 30 year period and is due to mature
on June 1, 2029.

Unsecured new project economic development loan                         265
payable to the State of Utah.  This is a 5 year loan
and bears an interest rate of 10.0% per annum payable
annually on the last day of April of the following
year for the preceding year. The loan requires annual
principal repayments in the form of either cash or
earned credits for: (i) new jobs created, (ii)
products purchased from Utah based businesses and
(iii) maintenance of a specific average annual salary
range for Utah employees. The loan is due to mature on
April 30, 2004
                                                           ----------------    --------------
   Total                                                             86,853            87,003
Less current portion                                                 (1,436)           (2,122)
                                                           ----------------    --------------
   Long-term portion                                                $85,417           $84,881
                                                           ================    ==============
</TABLE>

     On September 2, 1998, the Company completed the closing of an Amended and
Restated Credit Agreement in the amount of $86,000. This facility was funded by
a consortium of lenders including First Source Financial LLP, The Travelers
Insurance Company, Allstate Life Insurance Company, Allstate Insurance Company,
Eaton Vance Senior Debt Portfolio, Highland Capital Management LLP, Mt.
Washington Investment Group, Sanwa Business Credit Corporation, and Triton
Partners and consisted of a $13,500, fixed rate term loan; a $67,500, variable
rate term loan; and a $5,000, variable rate, revolving line of credit. The fixed
interest rate on the fixed rate term loan is 10.25%, the interest rate on
variable rate term loan is either the prime rate plus 225 basis points or LIBOR
plus 325 basis points, and the interest rate applicable to revolver loans is
either prime plus 175 basis points or LIBOR plus 275 basis points. Security for
the term loans include all of the Company's personal property assets including
contract rights, furniture, fixtures, equipment, real estate, and intangible
assets. In addition, the Company has pledged 60% of the stock in its foreign
subsidiaries as security for the term loans. Security for loans under the
revolving credit facility shall be secured by accounts receivable and
inventories. As part of this credit agreement the Company has agreed to maintain
certain financial ratios; to comply with certain financial covenants; not allow
the incurrence of additional debt or payment of cash dividends, unless expressly
allowed within the credit agreement; as well as adhere to a number of other
financial restrictions. The term loans are due to begin maturing in April 2002
with equal 16.7% principal repayments due every six months until complete
maturity on October 24, 2004. The revolving credit facility is due to expire on
October 31,

                                       60
<PAGE>

2002, with the availability to extend the term by one year on two separate
occasions if the Company meets certain requirements. In effect, this allows the
extension of the revolving credit facility until October 31, 2004. In addition,
the Amended and Restated Credit Agreement allows the Company to add an
additional $5,000 of revolving credit. (See Note 21 - Subsequent Events).

     On May 14, 1999, we closed a 30 year commercial mortgage in the amount of
$1,793 for the purchase and financing of our Mikohn Lighting and Sign exterior
sign production facility in Las Vegas, Nevada. This mortgage bears a per annum
interest rate of 250 basis points over the U.S. Treasury rate for the period
most closely corresponding to the loan term. The mortgage loan is secured by the
deed of trust on the property and is due to mature on June 1, 2029.

     On September 17, 1999, we closed an unsecured economic development loan in
the amount of $265 with the State of Utah. This loan is related to the operation
of our interior sign production facility in Hurricane, Utah, which was completed
in June of 1999. The note bears an interest rate of 10.0% per annum which is
payable annually on the last day of April of the following year for the
preceding year. The loan requires annual principal repayments in the form of
either cash or earned credits. The credits are earned based on how many new jobs
are created in Hurricane, Utah and the dollar value of products purchased from
vendors located in the State of Utah and are reported to the State of Utah on an
annual basis. These earned credits reports or cash payments are due or payable
on or before the last day of April in each year from April 2000 to April 2004.
In the event that we do not meet the requirements for earned credits, the
principal repayment amounts would equal $27 in April 2000, $43 in April 2001,
$53 in April 2002, $63 in April 2003 and the remaining outstanding balance in
April 2004.

     Following is the long-term debt maturity schedule:

2000                                                      $  1,436
2001                                                           596
2002                                                        27,490
2003                                                        27,166
2004                                                        28,523
Thereafter                                                   1,642
                                                     -------------
   Total                                                  $ 86,853
                                                     =============


13.  DEFERRED LICENSE FEES

     Deferred license fees at December 31, 1999 and 1998 consist of the
following:

<TABLE>
<CAPTION>
                                                                 1999               1998
                                                                 ----               ----
<S>                                                        <C>                 <C>
Deferred license fees                                              $  2,257
                                                           ================    ==============
</TABLE>

     On December 29, 1999, the Company and Shuffle Master entered into an
agreement settling a complex and long-standing series of lawsuits between PGI
and Shuffle Master and dozens of casinos arising out of claims by PGI that
several table games offered by Shuffle Master infringed numerous patents held by
PGI (now held by the Company). Under the terms of the settlement, Shuffle Master
acknowledged the validity and enforceability of the Company's patents and agreed
to pay Mikohn $2.75 million to settle all outstanding patent issues with respect
to Shuffle Master's Let It Ride Bonus(R), Let It Ride The Tournament(R), Bahama
Bonus(TM) and Three Card Poker(TM) games. The agreement provides that all future
revenue of Let It Ride Bonus(R), Let It Ride The

                                       61
<PAGE>

Tournament(R), and Three Card Poker(TM) will be royalty free to Shuffle Master.
The settlement also (i) granted Mikohn the exclusive rights to Bahama Bonus(TM)
worldwide, except for Nevada where Shuffle Master retains exclusive rights
subject to Mikohn's rights to receive certain royalties and (ii) requires
Shuffle Master to pay royalties to Mikohn based on future revenues from certain
new games that may be developed by Shuffle Master.

     Under separate license agreements executed in conjunction with the
settlement agreement, Shuffle Master licensed certain of its intellectual
property to Mikohn including rights under its coin sensing patents and multi-
tiered game wagering patents. For these rights, Mikohn agreed to pay Shuffle
Master future noncancellable royalties of approximately $580 per year over the
next five years including interest.

     Following is the schedule of principal payments:

2000                                                        $  451
2001                                                           451
2002                                                           451
2003                                                           452
2004                                                           452
                                                     -------------
   Total                                                   $ 2,257
                                                     =============

     In addition, Mikohn and Shuffle Master entered into a cross-supplier
agreement covering a broad range of product lines including Mikohn's progressive
table game and slot signage, controllers, electronic displays and slot glass, as
well as Shuffle Master's card shuffling systems, coin sensors and other
associated table game electronics. Under this agreement, Mikohn was appointed
Shuffle Master's exclusive source in North America for progressive controllers
and displays for table games. Shuffle Master was appointed Mikohn's exclusive
source for automatic card shuffling machines.

14.  COMMITMENTS AND CONTINGENCIES

     At December 31, 1999, the Company was leasing all of its facilities with
the exception of its Las Vegas, Nevada and Gulfport, Mississippi interior sign
assembly facilities and the exterior sign facility in Las Vegas, Nevada. These
leases expire on various dates through 2004. Following is a schedule of future
minimum rental payments required under these operating leases:

2000                                                      $  3,001
2001                                                         2,838
2002                                                         2,639
2003                                                         2,412
2004                                                         1,658
Thereafter                                                     923
                                                     -------------
   Total                                                  $ 13,471
                                                     =============

     Rent expense was $2,865, $2,540 and $2,218 for the years ended December 31,
1999, 1998 and 1997, respectively.

     In consideration for its assistance in the acquisition of Trans Sierra, the
Company issued to a third party warrants exercisable through October 1, 1999, to
purchase up to 50 shares of Common Stock at an exercise price (subject to
certain provisions protecting against dilution) of $15.00 per

                                       62
<PAGE>

share. The warrants expired without exercise.

     The Company is involved in routine litigation, including bankruptcies,
collection efforts, disputes with former employees and other matters in the
ordinary course of its business operations. Management knows of no matter,
pending or threatened, that in its judgment will or might have a material
adverse effect on the Company or its operations including those noted below.

     On October 2, 1997, the Company filed suit against Acres Gaming, Inc.
("Acres") in the U.S. District Court, Las Vegas, Nevada seeking a declaratory
judgment that its MoneyTime(TM) system does not infringe a patent issued to
Acres in August 1997 (U.S. Patent No. 5,655,961) and that the Acres patent is
invalid (the "'961 Action"). In the '961 Action, the Company asserts claims for
relief against Acres for tortious interference with business relationships,
tortious interference with prospective business relationships, and trade libel.
Acres has counterclaimed for patent infringement. Two subsequently filed actions
in the same court involving two subsequently issued patents (U.S. Patent Nos.
5,741,183 and 5,752,882), one filed by the Company against Acres and one filed
by Acres against the Company, Casino Data Systems ("CDS"), Sunset Station Hotel
& Casino and New York-New York Hotel & Casino, involve claims for patent
infringement, non-infringement and invalidity similar to the claims asserted in
the '961 Action (the "'183 Action" and the "'882 Action"). The '183 Action and
the '882 Action have been consolidated with the '961 Action (the three actions
hereafter referred to as the "Consolidated Action"). Discovery in the
Consolidated Action closed on February 26, 1999. No trial date has been set.
Management believes that the Company will prevail in the Consolidated Action.

     On October 13, 1998, Acres brought suit against the Company and CDS
alleging, as against the Company, that the MoneyTime(TM) system infringes a
patent (U.S. Patent No. 5,820,459) issued to Acres on October 13, 1998 (the
"'459 Action"). The Company has responded denying infringement and asserting
that the Acres patent is invalid. The '459 Action is in an early stage of
discovery. No trial date has been set. Management believes that the Company will
prevail in the `459 Action.

     The Company is addressing tax issues relating to its table games
operations. They are summarized below:

     New Jersey Sales Tax Audit Issue: The State of New Jersey (the "State")
     --------------------------------
Division of Taxation audited Mikohn's sales tax returns and issued a Notice of
Assessment Related to Final Audit Determination in the amount of $406 plus
interest of $201. At issue is how the Company accounts for and remits sales tax
on its table game leases. Previously, the Company remitted sales tax on a
monthly basis based on the amounts invoiced to its casino customers. It is the
State's position and the Company now concurs, that the Company as the lessor of
the table game, is the end user and is thus ultimately responsible for the sales
tax at the inception of the lease. At issue is the method of computation of the
use tax due. It is the Company's contention that use tax should be based upon
the lessor's purchase price for the equipment, materials and other tangible
personal property purchased for lease rather than on the lease revenue stream.
The State has assessed the Company for the entire amount of the sales tax
liability based on the lease revenue stream and interest from the original date
of the leases. In July 1999, the Company objected to the assessment, filed a
protest and paid the use tax due based upon the purchase price of the equipment,
materials and other tangible personal property.

    A further issue is the passing of the use tax on to the lessee. The
Company's Caribbean Stud(R) Lease Agreement provides, in part, that the "Lessee
shall promptly reimburse to Mikohn any personal property taxes, gaming device
taxes, and any similar taxes or levies that Mikohn is obligated to pay for
tables". The State has already refunded to many of the casinos most of the sales
tax that was remitted by the Company. Although the casinos are contractually
obligated for

                                       63
<PAGE>

the payment of sales tax, as it is a pass-through tax, there is no guarantee
that the casinos will reimburse the Company for any assessment paid by it.

    International Withholding Tax Issues: The Company has exposure to potential
    ------------------------------------
additional withholding taxes on payments remitted to the U.S. by the previous
owner of PGI estimated at $1,379. The Company has provided to the former owner a
Power of Attorney with which to handle the withholding tax issues. To the extent
that the Company does not prevail, any payments made would be charged back to
the previous owner under the terms of the Stock Purchase Agreement for the
acquisition of Progressive Games, Inc. The Company had one year from date of
acquisition in which to affect a change in the amount of perpetual license.
Based on the potential withholding tax exposure, the Company adjusted perpetual
license in the amount of the $1,379 during August 1999.

15. INCOME TAXES

    The provision (benefit) for income taxes for the years ended December 31,
1999, 1998 and 1997 consist of:

<TABLE>
<CAPTION>
                                                1999              1998               1997
                                                ----              ----               ----
<S>                                          <C>                <C>                <C>
Current                                      $  2,006           $   (449)          $   657
Deferred                                       (2,348)            (3,796)              700
                                             --------           --------           -------
   Total provision (benefit)                 $   (342)          $ (4,245)          $ 1,357
                                             ========           ========           =======
</TABLE>

    The provision (benefit) for income taxes for the years ended December 31,
1999, 1998 and 1997 differs from the amount computed at the federal income tax
statutory rate as a result of the following:

<TABLE>
<CAPTION>
                                     1999       %        1998        %        1997        %
                                     ----       -        ----        -        ----        -
<S>                                  <C>        <C>      <C>         <C>       <C>        <C>
Amount at statutory rate             $   206    35.0%    $ (4,295)   35.0%     $ 1,306    35.0%
Adjustments:
   Non-deductible expenses                61    10.3%          52    -0.4%          44     1.2%
   State income tax and other             19     3.2%          (2)    0.0%           7     0.2%
   Tax credits                          (628) -106.4%
                                  ----------          -----------          -----------

   Total provision (benefit)         $  (342)  -57.9%    $ (4,245)   34.6%     $ 1,357    36.4%
                                  ==========          ===========          ===========
</TABLE>

                                      64
<PAGE>

    The components of the net deferred tax asset at December 31, 1999 and 1998
consist of the following:

<TABLE>
<CAPTION>

                                                                       1999               1998
                                                                       ----               ----
<S>                                                                   <C>               <C>
Deferred tax assets:
-------------------
Current:
   Inventory book / tax differences                                   $    935          $    614
   Prepaid expenses and other                                              515               298
                                                                      --------          --------
      Subtotal                                                           1,450               912
                                                                      --------          --------

Non-current:
   Deferred revenue                                                      1,516
   Tax credits                                                             814                63
   Intangible assets                                                     1,094             2,058
   Net operating loss carryforward                                       1,494             2,165
                                                                      --------          --------
      Subtotal                                                           4,918             4,286
                                                                      --------          --------

      Total deferred tax assets                                          6,368             5,198
                                                                      --------          --------


Deferred tax liabilities:
------------------------
Current:
   Prepaid expenses and other                                               30                28

Non-current:
   Perpetual license                                                    18,651            17,688
   Property and equipment and other                                        488             1,207
                                                                      --------          --------
      Total deferred tax liabilities                                    19,169            18,923
                                                                      --------          --------

         Net deferred tax liability                                   $ 12,801          $ 13,725
                                                                      ========          ========
</TABLE>

    At December 31, 1999, the Company had federal and alternative minimum tax
("AMT") net operating loss carryforwards of $4,269 and $2,830, which will begin
to expire after the year ended December 31, 2018. The Company also had General
Business and AMT tax credit carryforwards of $628 and $186, respectively.

16.  EARNINGS PER SHARE

     The following table reflects the Company's basic and diluted earnings per
share for the years ended December 31, 1999, 1998 and 1997:

<TABLE>
<CAPTION>
                                                 1999              1998               1997
                                                 ----              ----               ----
<S>                                                <C>             <C>                 <C>
Net income (loss)                                  $    932        $   (8,026)         $   2,374
                                                   ========        ==========          =========

Weighted average number of shares outstanding:
   Basic                                             10,720            10,527              9,952
   Assumed conversion of stock
     options                                             64                                  105

</TABLE>

                                      65
<PAGE>

<TABLE>

<S>                                               <C>               <C>                 <C>
                                                  ---------         ---------           --------

   Diluted                                           10,784            10,527             10,057
                                                  =========         =========           ========

Earnings per share:
   Basic                                          $    0.09         $   (0.76)          $   0.24
                                                  =========         =========           ========

   Diluted                                        $    0.09         $   (0.76)          $   0.24
                                                  =========         =========           ========
</TABLE>

17.  STOCK BASED COMPENSATION PLANS

     In 1993, the Company adopted, and in 1996 and 1997 amended, (i) a Stock
Option Plan under which non-qualified and incentive stock options (as defined by
the Internal Revenue Code) to purchase up to 2,400 shares of the Company's
Common Stock which may be issued to officers, directors (other than non-employee
directors), employees, consultants, advisers, independent contractors and agents
and (ii) a Director Plan under which stock options to purchase up to 150 shares
of the Company's Common Stock which may be issued only to non-employee
directors. Generally, options have been granted at the fair market value on the
date of grant and typically become exercisable at the rate of 20% of the options
granted on each of the first through the fifth anniversaries of the date of the
grant. The Company accounts for these plans under APB Opinion No. 25, under
which no compensation cost has been recognized.

     Had compensation cost for these plans been determined in accordance with
SFAS No. 123 -Accounting for Stock - Based Compensation ("Statement 123"), the
Company's net income and earnings per share would have been reduced to the
following pro forma amounts:

<TABLE>
<CAPTION>
                                                 1999              1998               1997
                                                 ----              ----               ----
<S>                                                <C>             <C>                <C>
Net income:
   As reported                                     $  932          $  (8,026)         $  2,374
                                                   ======          =========          ========
   Proforma                                        $   83             (8,977)         $  1,328
                                                   ======          =========          ========

Earnings Per Share:
   As reported -
      Basic                                        $ 0.09          $   (0.76)         $   0.24
                                                   ======          ==========         ========
      Diluted                                      $ 0.09          $   (0.76)         $   0.24
                                                   ======          ==========         ========

   Proforma -
      Basic                                       $  0.01           $  (0.85)         $   0.13
                                                  =======           ========          ========
      Diluted                                     $  0.01           $  (0.85)         $   0.13
                                                  =======           ========          ========
</TABLE>

    Because the Statement 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that which may be expected in future years.
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions used for the
1995 through 1999 grants: risk-free interest at the date of grant which ranged
from 3.5% to 7.78%; expected dividend yield of 0.0 percent; expected lives from
1 to 6 years; and expected volatility between 50 and 60 percent.

                                      66
<PAGE>

     A summary of the status of the Company's stock option plans at December 31,
1999, 1998 and 1997 and changes during the years then ended is presented in the
table below:

<TABLE>
<CAPTION>
(Amounts in thousands                  1999                   1998                   1997
                                       ----                   ----                   ----
except per option amounts)                   Wtd. Avg.              Wtd. Avg.              Wtd. Avg.
                                             Exercise               Exercise               Exercise
                               Shares        Price      Shares      Price       Shares     Price
                               ------        -----      ------      -----       ------     -----
<S>                            <C>         <C>          <C>       <C>           <C>     <C>
Director Plan:
-------------
Options, beginning of year         104     $ 7.0241        66     $ 7.8561         43   $ 9.7965
Granted                             50       2.9076        44       6.9886         26     4.3750
Exercised                                                                          (3)    5.5000
Cancelled                                                  (6)     15.9167
                               -------                -------                 -------

Options, end of year               154       5.6876       104       7.0241         66     7.8561
                               =======                =======                 =======

Exercisable at end of year          67       7.3242        39       8.3158         27    12.3704
                               =======                =======                 =======

Weighted average (Wtd.
Avg.) fair value of
options granted during the
year                                       $ 2.1266                $5.1941              $ 3.0433
                                          =========              =========              ========


Employee Plan:
-------------
Options, beginning of year       1,956     $ 5.9613     2,172     $ 5.6185      1,141    $7.0061
Granted                            250       3.9950       299       5.7024      1,206     4.3122
Exercised                          (28)      3.8418      (176)      4.2677         (9)    4.0474
Cancelled                         (218)      5.9193      (339)      4.4183       (166)    5.7583
                               -------                -------                 -------

Options, end of year             1,960       5.7451     1,956       5.9613      2,172     5.6185
                               =======                =======                 =======

Exercisable at end of year         930       5.1594       614       5.5815        499     5.5114
                               =======                =======                 =======

Weighted average (Wtd.
Avg.) fair value of
options granted during the
year                                      $  2.9355               $ 4.1814               $2.9617
                                          =========              =========              ========
</TABLE>

                                       67
<PAGE>

    The following table summarizes information concerning options outstanding
and options exercisable as of December 31, 1999:

<TABLE>
<CAPTION>
                                   Options Outstanding                 Options Exercisable
                         ----------------------------------------    -------------------------
                                        Weighted
                                        Average       Weighted                     Weighted
                                       Remaining       Average                      Average
      Range of           Number of    Contractual     Exercise       Number of     Exercise
   Exercise Prices        Options         Life          Price         Options        Price
   ---------------        -------         ----          -----         -------        -----
<S>                      <C>          <C>             <C>            <C>           <C>
Director Plan:
--------------
  $2.7500 - $4.0630             52             9.6      $ 2.9496             2       $ 4.0000
  $4.3750 - $5.5000             50             7.6        4.8250            40         4.9375
  $7.2500 - $9.2500             42             8.8        7.3452            15         7.5109
      $17.2500                  10             4.0       17.2500            10        17.2500
                         ---------                                   ---------

                               154                                          67
                         =========                                   =========

Employee Plan:
--------------
 $ 3.0000 - $ 4.5000         1,547             7.6      $ 4.0694           714       $ 4.0754
 $ 4.5625 - $ 6.7500           236             7.8        5.5900            96         5.5371
 $ 6.8750 - $10.0000           127             7.9        8.2248            70         8.7235
 $10.8250 - $15.0000            50             4.0       15.0000            50        15.0000
                         ---------                                   ---------

                             1,960                                         930
                         =========                                   =========
</TABLE>

18. BENEFIT PLANS

    Certain employees of CEI are covered by union-sponsored, collectively
bargained, multi-employer, defined benefit plans. The Company's contributions to
these plans, as determined in accordance with the provisions of the negotiated
labor contracts based on the hours worked, for 1999, 1998 and 1997 were $401,
$401 and $316, respectively.

    The Company adopted a savings plan (the "401(k) Plan") qualified under
Section 401(k) of the Internal Revenue Code of 1986, as amended. The 401(k) Plan
covers substantially all employees who are not covered by a collective
bargaining unit. The Company's matching contributions for 1999, 1998 and 1997
were $162, $156, and $141, respectively.

                                       68
<PAGE>

19. CONCENTRATIONS OF CREDIT RISK

    The financial instruments that potentially subject the Company to
concentrations of credit risk are primarily accounts and installment sales
receivable. Product sales are primarily to casinos and gaming equipment
manufacturers.

    At December 31, 1999, accounts and installment sales receivable on a
operations basis are as follows:

                                                  Installment
                                 Accounts            Sales
                                Receivable        Receivable           Total
                                ----------        ----------           -----
Trade receivables:
   Signs                          $ 10,858             $  884          $ 11,742
   Gaming products                  10,135                835            10,970
   Gaming operations                 5,352                176             5,528
                            --------------    ---------------    --------------
      Subtotal                      26,345              1,895            28,240
                            --------------    ---------------    --------------

Other receivables:
   Other                             5,541                                5,541
                            --------------    ---------------    --------------
      Subtotal                       5,541                                5,541
                            --------------    ---------------    --------------

      Total                       $ 31,886            $ 1,895          $ 33,781
                            ==============    ===============    ==============


20. SEGMENT REPORTING

    The Company operates in three business segments: Signs, Gaming Products and
Gaming Operations. The Signs segment designs, manufactures and installs interior
signage and displays. It also, designs, manufactures, installs and maintains
exterior signage. The Gaming Products segment includes manufacturing of
progressive jackpot systems; it develops, markets and installs automated data
collection systems for player tracking and accounting for gaming machines. It
also manufactures and sells oversized gaming machines and touch-screen
multi-game video machines. The Gaming Operations segment leases, licenses and
places proprietary games, machines and tables on lease, structured participation
or license agreement. It owns or licenses the rights to several categories of
proprietary games, including progressive jackpot table games, coin-push gaming
machines, oversized gaming machines and touch-screen multi-game video machines.
These table games and gaming machines produce recurring revenue on a lease,
participation or licensing agreement. The Company does not allocate corporate
expenses to the business segments.

                                       69
<PAGE>

    Business segment information for the years ended December 31, 1999, 1998 and
1997 consist of:

<TABLE>
<CAPTION>

                                      1999            1998            1997
                                      ----            ----            ----
Business Segments:
<S>                                  <C>             <C>             <C>
Revenue:
 Signs                                $ 46,278        $ 50,840        $ 57,478
 Gaming products                        33,541          36,216          35,621
 Gaming operations                      27,065          11,976           5,449
                                     ---------       ---------        --------
                                      $106,884        $ 99,032        $ 98,548
                                     =========       =========        ========

Gross profit:
 Signs                                $ 15,610        $ 14,723        $ 17,741
 Gaming products                        12,571          13,992          15,129
 Gaming operations                      23,857          10,154           4,478
                                     ---------       ---------        --------
                                      $ 52,038        $ 38,869        $ 37,348
                                     =========       =========        ========

Operating income (loss):
 Signs                                $  9,111        $  7,613        $ 11,829
 Gaming products                         9,559          12,494          13,433
 Gaming operations                      18,129           6,092           2,380
 Corporate                             (28,079)        (30,805)        (21,367)
                                     ---------       ---------        --------
                                      $  8,720        $ (4,606)       $  6,275
                                     =========       =========        ========

Depreciation and amortization:
 Signs                                $  1,534        $  1,103        $    862
 Gaming products                           496             885             362
 Gaming operations                       4,832           2,711           1,409
 Corporate                               2,487           2,172           1,681
                                     ---------       ---------        --------
                                      $  9,349        $  6,871        $  4,314
                                     =========       =========        ========

Assets:
 Signs                                $ 31,868        $ 36,385        $ 31,752
 Gaming products                        30,066          30,482          29,767
 Gaming operations                      80,116          76,281          15,813
 Corporate                              36,245          24,693          20,256
                                     ---------       ---------        --------
                                      $178,295        $167,841        $ 97,588
                                     =========       =========        ========

Capital expenditures:
 Signs                                $  2,684        $  5,485        $  1,127
 Gaming products                            14           2,226             279
 Gaming operations                       6,002           2,718           1,009
 Corporate                               1,334             367             504
                                     ---------       ---------        --------
                                      $ 10,034        $ 10,796        $  2,919
                                     =========       =========        ========
</TABLE>

                                       70
<PAGE>

The following functions are included in corporate expense:

<TABLE>
<CAPTION>

            Department                 1999         1998        1997
            ----------                 ----         ----        ----
<S>                                   <C>          <C>         <C>
Human Resources                        $   604      $   493     $   418
Executive and Administration             2,897        3,321       2,777
Finance and MIS                          2,381        2,099       2,080
Legal and Compliance                     1,686        1,197       1,356
Corporate Facilities Management            360          309         274
Research and Development                 5,407        4,936       3,553
Art and Design                           1,472        1,513       1,747
Corporate Sales                          5,838        5,482       6,072
Product Development                      1,237        1,266
Marketing                                1,858        1,937       1,409
Depreciation and Amortization            2,487        2,172       1,681
Bad Debt Expense                           500        1,587
Write-off of Assets and Other            1,352        4,493
                                    ----------   ----------  ----------

   Total                               $28,079      $30,805     $21,367
                                    ==========   ==========  ==========
</TABLE>

    For the years ended December 31, 1999, 1998 and 1997, the Company did not
have in place a mechanism to allocate the above departmental expenses to the
individual business segments. Such a mechanism will be implemented to allocate
the costs associated with Legal and Compliance, Research and Development, Art
and Design, Corporate Sales, Product Development and Marketing for the year
ended December 31, 2000. The following is a description of the costs associated
with each of the above departments:

Human Resources: The Human Resources department is responsible for the following
---------------
corporate functions: employee relations, labor relations, employment
organizational development, records management and administration of the
Company's benefit plans. Although most of the Human Resource functions are
handled at corporate, each of the manufacturing facilities has its own human
resource staff member who not only is responsible for the human resource
function for that business segment but whose salary and benefits are also
charged to that business segment.

Executive and Administration: The Executive and Administration department
----------------------------
expenses consist of the salary and fringe benefits associated with the office of
Chief Executive Officer, Executive Vice President of Operations, and their
support staffs. It also includes the cost of the corporate headquarters,
including rent and maintenance costs, office equipment, maintenance supplies,
and office supplies.

Finance and MIS: The Finance department expenses consist of the salary and
---------------
fringe benefits associated with the office of the Chief Financial Officer,
Director of Finance, Corporate Controller, Tax and SEC Reporting Manager and
their staff. These individuals are responsible for handling most of the
accounting functions for all domestic operations including all financial
statement preparation for internal and external reporting for both governmental
and non-governmental entities. Prior to 1998, the Finance and MIS functions were
combined. Although most of the Finance

                                       71
<PAGE>

department functions are handled at orporate, each of the manufacturing
facilities has its own Finance department staff member who not only is
responsible for the accounting functions for that business segment but whose
salary and benefits are also charged to that business segment.

    The MIS department is responsible for the following: the determination of,
acquisition of, and set-up of computer hardware and software for all domestic
operations of the Company. The MIS department expenses include the salary and
fringe benefits of the Manager of Information Systems and his staff as well as
the cost of computer equipment maintenance, data lines and related costs.

Legal and Compliance: The Legal and Compliance department expense consists of
--------------------
the salary and fringe benefits associated with the office of General Counsel,
Executive Director of Compliance and Patent Counsel as well as their support
staff. The Legal and Compliance department is responsible for the administration
of all gaming licensing in more than 160 jurisdictions in which the Company is
licensed. In addition, this department is responsible for the coordination of
the shipping of all Company products to jurisdictions, that requiring regulatory
approval prior to placing products in a casino.

Corporate Facilities Management: The Corporate Facilities Management department
-------------------------------
is responsible for the maintenance of the corporate headquarters building in Las
Vegas as well as five other facilities of the Company in the Las Vegas area.
Transportation of inter-company mail to those same five facilities in Las Vegas
as well as distribution of mail to individual offices at the corporate
headquarters and outgoing mail are handled by this department as well.

Research and Development: The Research and Development department is responsible
------------------------
for the development of all the Company's products including ongoing upgrades of
the Company's technology based products such as systems, slot machines and table
games. All of the costs of developing a product from inception until the product
is released to the Product Development / production departments are included in
this department. In addition, all of the costs of testing these products at the
various gaming jurisdictions and approved laboratories are included as well.

Art and Design: The Art and Design department prepares art renderings of the
--------------
Company's products, which are used by the sales force in their presentations to
the Company's customers. This department is also responsible for the development
of software utilized in the animation of the Company's slot products.

Corporate Sales: The Corporate Sales department is responsible for the domestic
---------------
sales of all the Company's products excluding exterior signage. The Company's
sales management and its sales force operate from 10 sales offices located
throughout the United States. Sales managers are responsible for the sale of all
of the Company's products based on geographic regions / locations. Effective
January 1, 2000, the Corporate Sales department absorbed the activities and
costs of the Product Development department which previously were reported as a
separate department. Although most of the Corporate Sales functions are handled
at corporate, each of the manufacturing facilities have their own sales staff
who not only is responsible for the sales function for that business segment but
whose salary and benefits are also charged to that business segment.

Product Development: During 1998 and 1999 the Product Development department was
-------------------
responsible for developing new products once they were released from the
Research and Development department. This department was combined with Corporate
Sales on January 1, 2000.

Marketing: In conjunction with the Company's executive management, the Marketing
---------
department is responsible for establishing corporate policies, statements and
operational procedures to create

                                       72
<PAGE>

and continuously seek to present a positive image of the Company to key
stakeholders including investors, customers and employees. In addition, it is
also responsible for formulating, recommending and implementing marketing
policies and programs in the areas of customer and sales support, advertising,
promotions, public relations, investor relations and related activities.

Depreciation and Amortization: Depreciation and amortization for all corporate
-----------------------------
functions are reported together grouped into one caption.

Bad Debt Expense: Senior management manages bad debts in the aggregate rather
----------------
than on a  segment-by-segment basis.

Write-off of Assets and Other: Senior management manages write-offs and other
-----------------------------
one-time charges in the aggregate rather than on a segment by segment basis.

<TABLE>
<CAPTION>
                                            1999           1998          1997
                                            ----           ----          ----
<S>                                       <C>            <C>            <C>
Geographic Operations:

Revenue:
   North America                          $ 86,876       $ 82,489      $ 83,068
   Australia / Asia                          7,773          5,817         8,924
   Europe / Africa                          10,117          8,955         5,818
   South America                             2,118          1,771           738
                                          --------       --------      --------
                                          $106,884       $ 99,032      $ 98,548
                                          ========       ========      ========

Gross profit:
   North America                          $ 46,246       $ 31,930        30,989
   Australia / Asia                          2,249          2,372         3,073
   Europe / Africa                           2,490          3,886         3,063
   South America                             1,053            681           223
                                          --------       --------      --------
                                          $ 52,038       $ 38,869      $ 37,348
                                          ========       ========      ========

Operating income (loss):
   North America                          $  8,327       $ (5,782)     $  4,959
   Australia / Asia                           (291)           217         1,146
   Europe / Africa                             780            783            64
   South America                               (96)           176           106
                                          --------       --------      --------
                                          $  8,720       $ (4,606)     $  6,275
                                          ========       ========      ========

Depreciation and amortization:
   North America                          $  8,904       $  6,741      $  4,108
   Australia / Asia                            149             31            72
   Europe / Africa                             230             90           122
   South America                                66              9            12
                                          --------       --------      --------
                                          $  9,349       $  6,871      $  4,314
                                          ========       ========      ========
</TABLE>

                                       73
<PAGE>

<TABLE>
<CAPTION>
                                            1999           1998          1997
                                            ----           ----          ----
<S>                                       <C>            <C>            <C>
Assets:
   North America                          $171,624       $157,076      $ 87,892
   Australia / Asia                            558          4,620         5,112
   Europe / Africa                           4,318          4,702         3,523
   South America                             1,795          1,443         1,061
                                          --------       --------      --------
                                          $178,295       $167,841      $ 97,588
                                          ========       ========      ========


Capital expenditures:
   North America                          $  9,689       $ 10,266      $  2,460
   Australia / Asia                            127            218           178
   Europe / Africa                             113             83           102
   South America                               105            229           179
                                          --------       --------      --------
                                          $ 10,034       $ 10,796      $  2,919
                                          ========       ========      ========
</TABLE>

21.  SUBSEQUENT EVENTS

     As of December 31, 1999, we were in non-compliance with certain covenants
under the Amended and Restated Credit Agreement (see Note 12 - Long-Term Debt)
for which we have received waivers. The restatement of the 1999 financial
statements (See Note 22 - Restatement) results in the Company being in non-
compliance with the net worth covenant at December 31, 1999. On January 18,
2001, the Company received a waiver on this covenant. Due to the nature of these
covenants, we found it necessary to amend the existing credit agreement and
certain covenants in order to avoid the occurrence of non-compliance during
2000. On April 7, 2000, we completed the Second Amendment to the Amended and
Restated Credit Agreement. This amendment, in addition to revising certain
covenants during 2000, also provides us with the opportunity to seek additional
financing, divest certain assets and repay portions of the term loans without
incurring pre-payment penalties, and choose between adding the additional $5,000
revolver allowed under the Amended and Restated Credit Agreement, or
alternatively, adding a new $5,000 term loan instead of the additional revolver.
In exchange for this amendment we agreed to a pricing increase on all
outstanding debt tranches, which includes Term Loan A, Term Loan B and the
Revolver Loan. Term Loan A will bear a variable interest rate equal to the Prime
Lending Rate plus 275 basis points or the LIBOR rate plus 375 basis points. Term
Loan B will bear a fixed interest rate of 10.75%. The Revolver Loan will bear a
variable interest rate equal to the Prime Lending Rate plus 225 basis points or
the LIBOR rate plus 325 basis points .

NOTE 22 - RESTATEMENT

     The transactions with TAB (See Note 1 - Organization) were previously
considered separate transactions and a divestiture of MGA. Subsequent to the
issuance of the Company's 1999 financial statements, the Company's management
determined that the transactions are considered multi-element contracts and the
accounting for such transactions will be in a manner similar to that required
under the provisions of Statement of Position 97-2 Software Revenue Recognition
("SOP 97-2"). Additionally, due to circumstances surrounding certain put and
call options included in the arrangement, a determination has been made that,
although a legal transfer of business ownership has been transferred to TAB, the
transaction should not currently be recognized as a divestiture for accounting
purposes. As such, the net assets of MGA have been appropriately segregated in
the balance sheets of the Company in order to appropriately convey the
distinction between the legal form of the transaction and its accounting
treatment. This accounting treatment will be followed for each period until
circumstances surrounding the put and call options have sufficiently changed.


                                       74
<PAGE>

     In addition, in 1998, goodwill was recorded in the amount of $29,892 and
$3,223, as part of the acquisitions of PGI and P&S Leasing, respectively. The
amount originally recorded as goodwill for the acquisition of PGI was subject to
change for items, such as Year 2000 costs and international tax withholding,
with the former owner of PGI. In 1999, additional goodwill was recorded in the
amounts of $2,460 and $187 with regard to the acquisitions of PGI and P&S
Leasing, respectively. These amounts were for the Year 2000 costs and
international tax withholding issues. Subsequent to the issuance of the
Company's 1999 financial statements, the Company's management determined that
such amounts previously classified as goodwill should be classified as a
perpetual license with an estimated useful life of 40 years.

     As a result, the 1999 and 1998 financial statements have been restated from
amounts previously reported to account for the non-divestiture of MGA to
reclassify goodwill to perpetual licenses as described above. A summary of the
effects of the restatement follows:


<TABLE>
<CAPTION>
                                                      1999                           1998
                                                      ----                           ----
                                               As                             As
                                           Previously         As          Previously        As
                                            Reported       Restated        Reported      Restated
                                            --------       --------        --------      --------
<S>                                        <C>             <C>            <C>            <C>
At December 31:
  Intangible assets                          $16,810       $70,097          $13,651       $64,188
  Goodwill                                    40,208         5,572           39,916         7,067
  Net assets of business
   transferred under contractual
    agreement                                                  558
  Deferred tax asset - noncurrent              2,914                          3,079
  Deposit on net assets
   transferred under contractual
   agreement                                                 4,890
  Deferred gain on sale of
    Australian subsidiary                                    4,332
  Deferred tax liability - noncurrent                       14,221                         14,609
  Stockholders' equity                        50,932        48,116

For the year end December 31:
  Selling, general and
    administrative expenses                   41,505        41,966           38,837        38,983
  Other income and (expense)                   5,052           720
  Income (loss) from continuing
    operations before income tax
    (provision) benefit                        5,383           590
  Income tax (provision) benefit              (1,635)          342            3,190         3,335
  Net income (loss)                            3,748           932
  Net income (loss) per share:
    Basic                                    $  0.35       $  0.09
    Diluted                                  $  0.35       $  0.09
</TABLE>

                                       75
<PAGE>

MIKOHN GAMING CORPORATION
QUARTERLY RESULTS OF OPERATIONS (Unaudited)

<TABLE>
<CAPTION>
                           1/st/         2/nd/         3/rd/        4/th/ - (1)        Annual
                           -----         -----         -----        -----------        ------
<S>                      <C>          <C>           <C>             <C>            <C>
Sales:
   1999                   $25,175       $29,010        $25,834        $26,865        $106,884
                         ==========   ============  =============   ============   =============
   1998                   $21,633       $24,615        $19,716        $33,068        $ 99,032
                         ==========   ============  =============   ============   =============

Gross profit:
   1999                   $12,831       $13,856        $12,537        $12,814        $ 52,038
                         ==========   ============  =============   ============   =============
   1998                   $ 7,686       $10,518        $ 6,902        $13,763        $ 38,869
                         ==========   ============  =============   ============   =============

Net income (loss):
   1999                   $   911       $ 1,183        $   830        $(1,992)       $    932
                         ==========   ============  =============   ============   =============
   1998                   $  (599)      $   366        $(8,817)       $ 1,024        $ (8,026)
                         ==========   ============  =============   ============   =============

Weighted average shares outstanding:
   Basic -
      1999                 10,675        10,707         10,730         10,769          10,720
                         ==========   ============  =============   ============   =============
      1998                 10,306        10,520         10,626         10,652          10,527
                         ==========   ============  =============   ============   =============

   Diluted -
      1999                 10,675        10,708         10,747         10,769          10,784
                         ==========   ============  =============   ============   =============
      1998                 10,306        10,639         10,626         10,658          10,527
                         ==========   ============  =============   ============   =============

Net income (loss) per share:   (2)
   Basic -
      1999                $  0.09       $  0.11        $  0.08        $ (0.19)       $   0.09
                         ==========   ============  =============   ============   =============
      1998                $ (0.06)      $  0.03        $ (0.83)       $  0.10        $  (0.76)
                         ==========   ============  =============   ============   =============

   Diluted -
      1999                $  0.09       $  0.11        $  0.08        $ (0.19)       $   0.09
                         ==========   ============  =============   ============   =============
      1998                $ (0.06)      $  0.03        $ (0.83)       $  0.10        $  (0.76)
                         ==========   ============  =============   ============   =============
</TABLE>

The Company's interim financial information for the quarterly periods ended
March 31, 1998, June 30, 1998, September 30, 1998 and 1999, and December 31,
1998 and 1999 have been restated due to the requirements of SOP 97-2 for the
recognition of software revenue. as well as to account for the non-divestiture
for accounting purposes of MGA, to reclassify goodwill to perpetual licenses as
described in Note 22 - Restatement in the Notes to Consolidated Financial
Statements. A summary of the effects of the discussed restatements follows:

<TABLE>
<CAPTION>
                                                 As                              As
                                              Previously          As         Previously       As
                                               Reported         Restated      Reported      Restated
                                               --------         --------      --------      --------

For the quarter ended:                              March 31, 1999               March 31, 1998
                                                    --------------               --------------
<S>                                           <C>               <C>          <C>            <C>
   Sales                                        $               $            $ 21,779        $21,633
   Cost of sales                                                               14,032         13,947
   Gross profit                                                                 7,747          7,686
   Selling, general and administrative
</TABLE>

                                       76
<PAGE>

<TABLE>
<CAPTION>
                                                            As                          As
                                                        Previously       As        Previously       As
                                                         Reported     Restated      Reported      Restated
                                                         --------     --------      --------      --------
<S>                                                     <C>          <C>           <C>           <C>
      expenses                                              9,451        9,563
   Income (loss) from continuing
     operations before income tax
     (provision) benefit                                    1,414        1,302          (861)         (922)
   Income tax (provision) benefit                            (503)        (391)          302           323
   Net income (loss)                                                                    (559)         (599)

   Net income (loss) per share:
     Basic                                                                          $  (0.05)      $ (0.06)
     Diluted                                                                        $  (0.05)      $ (0.06)

<CAPTION>

For the quarter ended:                                      June 30, 1999                 June 30, 1998
                                                            -------------                 -------------
<S>                                                      <C>           <C>          <C>           <C>
   Sales                                                 $             $            $ 25,621      $ 24,615
   Cost of sales                                                                      14,593        14,097
   Gross profit                                                                       11,028        10,518
   Selling, general and administrative
      expenses                                              9,941       10,052
   Income (loss) from continuing
     operations before income tax
     (provision) benefit                                    1,930        1,819         1,120           609
   Income tax (provision) benefit                            (747)        (636)         (422)         (243)
   Net income (loss)                                                                     698           366

   Net income (loss) per share:
     Basic                                                                          $   0.07      $   0.03
     Diluted                                                                        $   0.07      $   0.03

<CAPTION>

For the quarter ended:                                   September 30, 1999          September 30, 1998
                                                         ------------------          ------------------
<S>                                                      <C>           <C>          <C>           <C>
   Sales                                                 $ 27,322      $25,834      $ 20,209      $ 19,716
   Cost of sales                                           14,120       13,297        13,267        12,814
   Gross profit                                            13,202       12,537         6,942         6,902
   Selling, general and administrative
      expenses                                              9,677        9,795        11,547        11,583
   Income (loss) from continuing
     operations before income tax
     (provision) benefit                                    1,573          790       (10,701)      (10,776)
   Income tax (provision) benefit                            (311)          40         3,660         3,711
   Income (loss) from operations before
     extraordinary items                                                              (7,041)       (7,065)
   Net income (loss)
                                                            1,262          830        (8,793)       (8,817)
Net income (loss) per share before extraordinary
     item:
     Basic                                               $   0.12      $  0.08      $  (0.66)     $  (0.66)
     Diluted                                             $   0.12      $  0.08      $  (0.66)     $  (0.66)

Net income (loss) per share:
     Basic                                               $   0.12      $  0.08      $  (0.83)     $  (0.83)
     Diluted                                             $   0.12      $  0.08      $  (0.83)     $  (0.83)

<CAPTION>

For the quarter ended:                                     December 31, 1999         December 31, 1998
                                                           -----------------         -----------------
<S>                                                      <C>           <C>          <C>           <C>
   Sales                                                 $ 25,377      $26,865      $ 31,423      $ 33,068
   Cost of sales                                           13,228       14,051        18,271        19,305
   Gross profit                                            12,149       12,814        13,152        13,763
   Selling, general and administrative
      expenses                                             12,436       12,556        10,378        10,486
</TABLE>

                                       77
<PAGE>

<TABLE>
<CAPTION>
                                                   As                          As
                                               Previously       As        Previously       As
                                                Reported     Restated      Reported      Restated
                                                --------     --------      --------      --------
<S>                                            <C>         <C>            <C>           <C>
   Income (loss) from continuing
     operations before income tax
     (provision) benefit                                                        978         1,480
   Other income and expense                        4,471          139
   Income tax (provision) benefit                    (74)       1,329          (350)         (456)
   Net income (loss)                                 392       (1,992)          628
                                                                                            1,024

   Net income (loss) per share:
     Basic                                      $   0.04      $ (0.19)       $ 0.06        $ 0.10
     Diluted                                    $   0.04      $ (0.19)       $ 0.06        $ 0.10
</TABLE>

(1) During the fourth quarter of 1999 the Company incurred the following (i) it
    incurred a non-recurring asset write-off of $1,352 related to our P&M Coin
    product line, which includes our Classic slot machine games (see Note 11 -
    Write-off of Assets) and (ii) it entered into an agreement settling a
    complex and long-standing series of lawsuits between PGI and Shuffle Master
    arising out of claims by PGI that several table games offered by Shuffle
    Master infringed numerous patents held by PGI (now held by the Company) (see
    Note 13 - Deferred License Fees).

(2) The sum of the quarterly earnings per common share does not equal the amount
    reported for the year in total as the quarterly calculations are made
    independently during the year.

                                       78
<PAGE>

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

     The Company filed a current report on Form 8-K dated June 13, 2000 under
Item 4, Changes in Registrant's Certifying Accountant, reporting the dismissal
of Deloitte & Touche LLP on June 13, 2000 and replacing them with Arthur
Andersen LLP on that same date.

                                   PART III

Item 10.  Directors and Executive Officers of the Registrant

Item 11.  Executive Compensation

Item 12.  Security Ownership of Certain Beneficial Owners and Management

Item 13.  Certain Relationships and Related Transactions

     The information required by Items 10 through 13 is set forth under the
captions "Election of Directors", "Management", "Executive Compensation",
"Principal Stockholders" and "Certain Transactions" in Mikohn Gaming
Corporation's definitive proxy statement for the 1999 Annual Meeting of
Stockholders, to be filed with the Securities and Exchange Commission pursuant
to Regulation 14A of the Securities Exchange Act of 1934, as amended, and is
incorporated herein by reference as if set forth in full.

                                    PART IV

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

       (a)     1. and 2. Financial Statements and Schedules

               The financial statements and schedules filed as part of this
               report are listed in the Index to Consolidated Financial
               Statements under Item 8.

       (3)     Exhibits required by Securities and Exchange Commission
               Regulation S-K:


       3.1            Amended and Restated Articles of Incorporation,
                      incorporated by reference to Exhibit 3.1 to Amendment No.
                      1 to the Company's Registration Statement on Form S-1 (No.
                      33-69076).

       3.2            Amended and Restated Bylaws, incorporated by reference to
                      Exhibit 3.2 to Amendment No. 1 to the Company's
                      Registration Statement on Form S-1 (No. 33-69076).

       4.6            Agreement between the Company, The Young Group, Inc. and
                      John R. Young, dated November 7, 1994 (the "Young
                      Agreement"), including certain exhibits thereto and a
                      supplemental list identifying all exhibits and schedules

                                       79
<PAGE>

                      thereto, incorporated by reference to Exhibit 2.1 to the
                      Company's Form 10-Q for the quarter ended September 30,
                      1994.
       *10.9          Stock Option Plan, as amended, incorporated by reference
                      to Exhibit 4.3 to the Company's Registration Statement on
                      Form S-8 (No. 33-73506).

       *10.10         Director Stock Option Plan, as amended, incorporated by
                      reference to Exhibit 10.18 to the Company's Quarterly
                      Report on Form 10-Q for the quarter ended June 30, 1994.

       10.12          Form of Indemnification Agreement between the Company and
                      its directors and executive officers, incorporated by
                      reference to Exhibit 10.9 to Amendment No. 1 to the
                      Company's Registration Statement on Form S-1 (No. 33-
                      69076)

       *10.13         Employment Agreement dated October 17, 1988, as amended,
                      between the Company and David J. Thompson, incorporated by
                      reference to Exhibit 10.10 to Amendment No. 1 to the
                      Company's Registration Statement on Form S-1 (No. 33-
                      69076).

       *10.14         Second Amendment to Employment Agreement, dated as of July
                      1, 1993, between the Company and David J. Thompson,
                      incorporated by reference to Exhibit 10.10 to the
                      Company's Quarterly Report on Form 10-Q for the quarter
                      ended March 31, 1994.

       *10.20         Employment Agreement, dated as of May 1, 1994, between the
                      Company and Charles H. McCrea, Jr., incorporated by
                      reference to Exhibit 10.1 to the Company's Report on Form
                      8-K/A dated September 1, 1994.

       10.25          Sales Agreement dated January 6, 1995, between Michael
                      Wichinsky dba Games of Nevada and the Company incorporated
                      by reference to Exhibit 10.25 to the Company's Report on
                      Form 10-K for the year ended December 31, 1994.

       *10.34         Employment Agreement dated May 19, 1996, between the
                      Company and Carolan Pepin incorporated by reference to
                      Exhibit 10.24 to the Company's Quarterly Report on Form
                      10-Q for the quarter ended June 30, 1996.

       *10.35         Employment Agreement dated June 2, 1996, between the
                      Company and Don Stevens incorporated by reference to
                      Exhibit 10.25 to the Company's Quarterly Report on Form
                      10-Q for the quarter ended June 30, 1996.

       *10.36         Employment Agreement dated January 27, 1997, between the
                      Company and Louie Peyton incorporated by reference to
                      Exhibit 10.26 of the Company's Form 10-Q dated March 31,
                      1997.

       *10.37         Employment Agreement dated April 25, 1997, between the
                      Company and Behnam Bavarian incorporated by reference to
                      Exhibit 10.27 of the Company's Form 10-Q dated June 30,
                      1997.

       10.38          Credit Agreement dated October 24, 1997, between the
                      Company and First Source Financial LLP ("Credit
                      Agreement") documenting the Company's new $40.0 million
                      secured credit facility including exhibits incorporated by

                                       80
<PAGE>

                      reference to Exhibit 10.35 of the Company `s Form 10-Q
                      dated September 30, 1997.

       10.39          Assignment from First Source Financial LLP to Eaton Vance
                      under the Credit Agreement incorporated by reference to
                      Exhibit 10.36 of the Company `s Form 10-Q dated September
                      30, 1997.

       10.40          $10.0 million Revolving Note under the Credit Agreement
                      incorporated by reference to Exhibit 10.37 of the Company
                      `s Form 10-Q dated September 30, 1997.

       10.41          Term Loan Note A under the Credit Agreement incorporated
                      by reference to Exhibit 10.38 of the Company `s Form 10-Q
                      dated September 30, 1997.

       10.42          Term Loan Note B under the Credit Agreement incorporated
                      by reference to Exhibit 10.39 of the Company `s Form 10-Q
                      dated September 30, 1997.

       10.43          Guaranty Executed by Borrower and Each Guarantor under the
                      Credit Agreement incorporated by reference to Exhibit
                      10.40 of the Company's Form 10-Q dated September 30, 1997.

       10.44          Security Agreement Executed by Borrower and Each Guarantor
                      under the Credit Agreement incorporated by reference to
                      Exhibit 10.41 of the Company's Form 10-Q dated September
                      30, 1997.

       10.45          Trademark Security Agreement under the Credit Agreement
                      incorporated by reference to Exhibit 10.42 of the
                      Company's Form 10-Q dated September 30, 1997.

       10.46          Patent Security Agreement under the Credit Agreement
                      incorporated by reference to Exhibit 10.43 of the
                      Company's Form 10-Q dated September 30, 1997.

       10.47          Stock Pledge Agreement Executed by Mikohn under the Credit
                      Agreement incorporated by reference to Exhibit 10.44 of
                      the Company's Form 10-Q dated September 30, 1997.

       10.48          Bank Agency Agreements under the Credit Agreement
                      incorporated by reference to Exhibit 10.45 of the
                      Company's Form 10-Q dated September 30, 1997.

       10.49          Post Closing Agreement under the Credit Agreement
                      incorporated by reference to Exhibit 10.46 of the
                      Company's Form 10-Q dated September 30, 1997.

       10.50          Deed of Trust under the Credit Agreement incorporated by
                      reference to Exhibit 10.47 of the Company's Form 10-Q
                      dated September 30, 1997.

       10.51          Deed of Trust under the Credit Agreement incorporated by
                      reference to Exhibit 10.48 of the Company's Form 10-Q
                      dated September 30, 1997.

       10.52          Composition Mortgage under the Credit Agreement
                      incorporated by reference

                                       81
<PAGE>

                      to Exhibit 10.49 of the Company's Form 10-Q dated
                      September 30, 1997.

       10.53          Agreement dated April 9, 1998, between the Company and
                      Progressive Games, Inc. for the Company to acquire the
                      stock of Progressive Games, Inc. incorporated by reference
                      to Exhibit 10.53 of the Company's Form 10-Q dated March
                      31, 1998.

       10.54          $86.0 million Amended and Restated Credit Agreement among
                      Mikohn Gaming Corporation, as Borrower, Each of the
                      Financial Institutions together with their Lenders, and
                      First Source Financial LLP, as Agent dated as of August
                      28, 1998 incorporated by reference to Exhibit 10.53 of the
                      Company's Form 10-Q dated September 30, 1998.

       10.55          Annex and Schedules to Amended and Restated Credit
                      Agreement Dated as of August 28, 1998 incorporated by
                      reference to Exhibit 10.54 of the Company's Form 10-Q
                      dated September 30, 1998.

       *10.56         Employment Agreement dated September 22, 1998, between the
                      Company and Robert J. Smyth incorporated by reference to
                      Exhibit 10.24 to the Company's report on Form 10-K for the
                      year ended June 30, 1998.

        21.1          Subsidiaries

        23.1          Consent of Deloitte & Touche LLP

        27            Financial Data Schedules

        * Management contracts and compensation plans

       (b)         Reports on Form 8-K filed during the last quarter of 1999.

                   None

                                       82
<PAGE>

                                  SIGNATURES

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

                                            MIKOHN GAMING CORPORATION


January 29, 2001                            By:  /s/  Don W. Stevens
                                                ------------------------------
                                                 Don W. Stevens, Executive Vice
                                                 President, Treasurer, Principal
                                                        Financial Officer

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

<TABLE>
<CAPTION>

             Signature                         Title                        Date
             ---------                         -----                        ----
<S>                                      <C>                           <C>
 /s/ David J. Thompson                     Chairman of the              January 29, 2001
---------------------------------
David J. Thompson                          Board, President and
                                           Chief Executive Officer

 /s/ Dennis A. Garcia                      EVP - Proprietary Games      January 29, 2001
-----------------------------------
Dennis A. Garcia                           Director


 /s/ Bruce E. Peterson                     Director                     January 29, 2001
----------------------------------
Bruce E. Peterson

 /s/ Terrance W. Oliver                    Director                     January 29, 2001
---------------------------------
Terrance W. Oliver

 /s/ John K Campbell                       Director                     January 29, 2001
---------------------------------
John K. Campbell

 /s/ James E. Meyer                        Director                     January 29, 2001
----------------------------------
James E. Meyer

 /s/ Douglas M. Todoroff                   Director                     January 29, 2001
--------------------------------
Douglas M. Todoroff
</TABLE>

                                       83