CASINOVATIONS INC, SB-2/A, 1998-04-02

CASINOVATIONS INC
SB-2/A, 1998-04-02
DURABLE GOODS, NEC

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<PAGE>2

Commission File Number 333-31373
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM SB-2/A
REGISTRATION STATEMENT
Under The Securities Act of 1933

CASINOVATIONS INCORPORATED

Washington 91-1696010
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdictions Classification Code Number) Identification
Number)
of incorporation
or organization)
3909 South Maryland Parkway
Suite 311
Las Vegas, Nevada 89119
Telephone: 702-733-7195
Facsimile: 702-733-7197
(Address and telephone number of registrant's principal executive
offices and principal place of business.)

Jay L. King
3909 South Maryland Parkway
Suite 311
Las Vegas, Nevada 89119
Telephone: 702-733-7195
Facsimile: 702-733-7197
(Name, address and telephone number of agent for service.)

with copies to:
Jody M. Walker
Attorney At Law
7841 South Garfield Way
Littleton, Colorado 80122

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box: | x |
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Title of each Proposed Proposed Amount of
class of Amount to be offering aggregate registration
securities registered price offering price fee
<S> <C> <C> <C> <C>
Common Stock
$.001 par value 1,500,000 $2.50 $3,750,000 $1,171.87
Common Stock<F1> 2,219,041 $2.50 $5,547,603 $1,733.63
Common Stock<F2> 200,000 $3.75 $750,000 $234.38
Common Stock<F3> 200,000 $4.00 $800,000 $250.00
Common Stock<F4> 250,000 $6.00 $1,500,000 $468.75

Total 4,369,041 $12,347,603 $3,858.63
</TABLE>
[FN]
<F1>Represents Common Stock to be registered on behalf of Selling
Shareholders.
<F2>Represents Common Stock underlying the A Warrants to be registered on
behalf of Selling Shareholders.
<F3>Represents Common Stock underlying the B Warrants to be registered on
behalf of Selling Shareholders.
<F4>Represents Common Stock underlying the C Warrants to be registered
on behalf of Selling Shareholders.

The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.

<PAGE>3

PRELIMINARY PROSPECTUS DATED APRIL 1, 1998
SUBJECT TO COMPLETION

Up to a Maximum of 1,500,000 Common Shares
2,219,041 Common Shares on behalf of Selling Shareholders
200,000 Common Shares underlying the A Warrants
200,000 Common Shares underlying the B Warrants
250,000 Common Shares underlying the C Warrants

CASINOVATIONS INCORPORATED
Common Stock
($.001 Par Value)

The Company is offering up to a maximum of 1,500,000 Common Shares at the
purchase price of $2.50 per Common Share. There is no minimum investment
amount. The Company is registering 2,219,041 common shares on behalf of its
selling security holders. The Company is registering the stock underlying
its A, B and C Warrants on behalf of its selling security holders. The A
Warrants are exercisable into one common share at the purchase price of
$3.75. The A Warrants shall be exercisable for a period of four years from
July, 1996 and shall be redeemable by the Company at $.001 per A Warrant upon
thirty days notice. The B Warrants are exercisable into one common share at
the purchase price of $4.00. The B Warrants shall be exercisable for a
period of four years from July, 1996 and shall be redeemable by the Company
at $.001 per B Warrant upon thirty days notice. The C Warrants are
exercisable into one common share at the purchase price of $6.00. The C
Warrants shall be exercisable for a period of four years from July, 1996 and
shall be redeemable by the Company at $.001 per C Warrant upon thirty days
notice. The D Warrants are exercisable into one common share at the purchase
price of $1.50.

The 2,219,041 common shares being registered on behalf of selling security
holders consist of 513,511 Common Shares on behalf of the Company's officers,
directors and affiliates, 1,211,516 Common Shares on behalf of shareholders
who purchased in a previous private placement and 294,014 Common Shares to
other unaffiliated shareholders. See "Selling Security Holders". Prior to
the date hereof, there has been no trading market for the Common Stock of the
company. There can be no assurance that the Common Stock will ever be
quoted, that an active trading and/or a liquid market will ever develop or,
if developed, that it will be maintained.

The Company intends to register its securities under Section 12G of the
Exchange Act of 1934.

THE COMPANY IS CONSIDERED TO BE IN UNSOUND FINANCIAL CONDITION. PERSONS
SHOULD NOT INVEST UNLESS THEY CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT.

THERE ARE MATERIAL RISKS IN CONNECTION WITH THE PURCHASE OF THE SECURITIES.
SEE RISK FACTORS, PAGE 8.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. DUE TO THE CONTEMPORANEOUS PRIMARY OFFERING
BY THE COMPANY AND SECONDARY OFFERING BY SELLING SHAREHOLDERS, CONFLICTS OF
INTERESTS BETWEEN THE COMPANY AND SELLING SHAREHOLDERS MAY ARISE. SEE TERMS
OF THE OFFERING AND RISK FACTORS.

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an offer
to sell or the solicitation of an offer to buy nor shall there be any sales
of these securities in any State in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities
laws of any state.

The Company is engaged in the manufacture and marketing of certain gaming
products and concepts.

<TABLE>
<CAPTION>
Price to Proceeds to
Public Commissions Company

<S> <C> <C> <C>
Per Common Share 2.50 $.25 $2.25
Maximum Offering<F1><F2> $3,750,000 $375,000 $3,375,000
</TABLE>

(Footnotes on following page)
April 1, 1998

<PAGE>4
[FN]
<F1>The Common Shares are being offered on a "direct participation" basis by
the Company (employees, officers and directors) and possibly selected broker-
dealers. No sales commission will be paid for Common Shares sold by the
Company. Selected broker-dealers shall receive a sales commission of up to
10% for any Common Shares sold by them. The Company reserves the right to
withdraw, cancel or reject an offer in whole or in part. See "TERMS OF THE
OFFERING - Plan of Distribution and Offering Period."

This Offering will terminate on or before September 30, 1998. In the
Company's sole discretion, the offering of Common Shares may be extended for
up to three Thirty day periods, but in no event later than December 31, 1998.

There is no minimum offering amount and no escrow account. Proceeds of this
Offering are to be deposited directly into the operating account of the
Company. See "TERMS OF THE OFFERING - Plan of Distribution."

<F2>The amount as shown in the preceding table does not reflect the
deductions of (1) general expenses payable by the Company; and (2) fees
payable in connection with legal and accounting expenses incurred in this
Offering. These expenses are estimated to be $41,919.53 if the total
offering amount is obtained. The selling shareholders will not pay any of
the expenses associated with this offering.

REPORTS TO SECURITY HOLDERS

Although the Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith
will file reports and other information with the Securities and Exchange
Commission, the Company has not yet filed any reports with the Securities
and Exchange Commission. The reports and other information filed by the
Company can be inspected and copied at the public reference facilities
maintained by the Commission in Washington, D.C. and at the Chicago
Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and the New York Regional Office, 7 World
Trade Center, New York, New York 10048. Copies of such material can
be obtained from the Public Reference Section of the Commission,
Washington, D.C. 20549 at prescribed rates.

The Company intends to register its securities under Section 12G of the
Exchange Act of 1934

The Company will furnish to shareholders: (i) an annual report containing
financial information examined and reported upon by its certified public
accountants; (ii) unaudited financial statements for each of the first three
quarters of the fiscal year; and (iii) additional information concerning the
business and operations of the Company deemed appropriate by the Board
of Directors.

The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement (together with all amendments and
exhibits thereto, the "Registration Statement") under the Act with respect to
the securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the Rules and Regulations of the Commission.
For further information with respect to the Company and the securities
offered hereby, reference is made to the Registration Statement. Copies of
such materials may be examined without charge at, or obtained upon payment of
prescribed fees from, the Public Reference Section of the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549, at the
Chicago Regional Office, Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511 and the New York Regional Office, 7 World
Trade Center, New York, New York 10048.

The Commission maintains a Web site -- //www.sec.gov -- that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the Commission.

UNTIL _____ , 1998 (90 DAYS AFTER THE DATE OF THE PROSPECTUS), ALL PERSONS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THE OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
IS IN ADDITION TO THE OBLIGATION OF SUCH PERSONS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.

<PAGE>5

NO DEALER, SALESMAN, AGENT OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, OR THE
UNDERWRITER, IF AN UNDERWRITER ASSISTS IN THE SALE OF THE SECURITIES.

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR A SOLICITATION BY ANYONE TO
ANY PERSON IN ANY STATE, TERRITORY OR POSSESSION OF THE UNITED STATES IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED BY THE LAWS THEREOF, OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.

NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY
CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF.

<PAGE>6

<TABLE>
TABLE OF CONTENTS

<S> <C>
PROSPECTUS SUMMARY 7
RISK FACTORS 8
SELLING SECURITY HOLDERS 12
SOURCE AND USE OF PROCEEDS 15
DILUTION 16
THE COMPANY 17
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION 21
MANAGEMENT 23
CERTAIN TRANSACTIONS 27
PRINCIPAL SHAREHOLDERS 30
SHARES ELIGIBLE FOR FUTURE SALE 33
MARKET FOR REGISTRANT'S COMMON EQUITY 33
TERMS OF THE OFFERING 34
DESCRIPTION OF SECURITIES 36
LEGAL MATTERS 37
LEGAL PROCEEDINGS 37
EXPERTS 37
INTERESTS OF NAMED EXPERTS AND COUNSEL 37
</TABLE>

<PAGE>7
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information, financial statements and notes to the financial statements
including the notes thereto appearing elsewhere in this Prospectus.

The Company. The Company was incorporated in the state of Washington on
September 20, 1995. The Company's operations are the development and
marketing of certain gaming products and concepts invented and developed by
the Sines-Forte General Partnership ("Sines-Forte") of which Steve Forte, a
Director of the Company and Randy Sines, former Vice President of the Company
are general partners. The Company is authorized to issue a total of
20,000,000 shares of its capital stock (Common Shares), par value per share
of $.001.

The Company has four products that are completed or are near completion.
First, the Random Ejection Shuffler, which can shuffle automatically up to
six decks of playing cards in random order. There have been five proto
types built and tested. The first production run is complete and parts have
been ordered for the second, much larger run. Second, the Company has five
pre-production units of the Fantasy 21 Table Game which were assembled on
October 13, 1997 and are being used for sales demonstrations and field
testing. Parts for the production run of Fantasy 21 Table Game have been
ordered. Third, the Safety Peek Card, a new type of casino playing
card, is already in use and is under distribution agreements with selected
playing cards distributor. Fourth is the SecureDrop Coin Box system.
This product was not developed internally by the Company, but has been
exclusively licensed from an outside developer in an agreement dated October
10, 1997. The SecureDrop is in advanced development stages, with one
working prototype available. Based on information from the developer, the
Company expects to receive initial production units of the SecureDrop around
January 1, 1998.

The Company intends to sell or lease its products to the world-wide gaming
industry directly, through distributors or subcontracts with non-affiliated
manufacturers. The Company is/ in the process of negotiating distribution
and marketing arrangements for its products, but has no significant history
of operations and no profits.

The Company's principal offices are located at 3909 South Maryland Parkway,
Suite 311, Las Vegas, Nevada 89119. Its telephone number at such address is
(702) 733-7195.

The Offering. The Company hereby offers
up to 1,500,000 Common Shares
at $2.50 per Common Share.

Common Shares outstanding
prior to Public Offering 6,179,944

Common Shares to be outstanding
after Offering 7,679,944

Percent of Common Shares owned by
current shareholders after Maximum
Offering 80.47%

Gross Proceeds After Maximum Offering $3,750,000

Use of Proceeds. The Company intends to utilize
the sale of its Common Shares
for debt reduction, to increase
inventory levels of current
products, to expand current
product line and for working
capital. See "Source and Use of
Proceeds."

This Prospectus also relates to
securities being registered on
behalf of selling security
holders and the Company will not
receive any cash or other
proceeds from the sale. Any
proceeds received from the
subsequent exercise of the A, B
or C Warrants shall be used as
working capital, and to expand
operations. See "Source and Use
of Proceeds."

<PAGE>8

MARKET FOR COMMON STOCK
AND WARRANTS. Prior to the date hereof, there
has been no trading market for
the Common Stock or Warrants of
the Company. The Company has
agreed to use its best efforts
to apply for the quotation of
its Common Stock on the
Electronic Bulletin Board.

There can be no assurance that
the Common Stock will be quoted,
that an active trading and/or a
liquid market will develop or,
if developed, that it will be
maintained. See "Risk Factors"
and "Market Listing."
RESALES BY SELLING
SHAREHOLDERS. This Prospectus relates to
common Shares being registered
on behalf of selling security
holders. The Company will not
receive any cash or other
proceeds in connection with the
subsequent sale. Current
officers and directors do not
plan on selling their Common
Shares until the Company's offer
is fully subscribed. The
Company is not selling any
Common Shares on behalf of
Selling Shareholders and has no
control or affect on these
Selling Shareholders. See
"Selling shareholders."
RISK FACTORS There are material risks, such
as uncertainty of future
financial results, liquidity
dependent on additional capital
and debt financing and risks
related to the gaming industry,
in connection with the purchase
of the securities. See "Risk
Factors."

Absence of Dividends; Dividend Policy The Company does not currently
intend to pay regular cash
dividends on its Common Stock;
such policy will be reviewed by
the Company's Board of Directors
from time to time in light of,
among other things, the
Company's earnings and financial
position. The Company does not
anticipate paying dividends on
its Common Stock in the
foreseeable future. See "Risk
Factors."

Transfer Agent The Company acts as its own
transfer agent for the Company's
securities.
</TABLE>

RISK FACTORS

In analyzing this offering, prospective investors should read this entire
Prospectus and carefully consider, among other things, the following Risk
Factors:

Possible Adverse effects due to contemporaneous primary offering by the
Company and secondary offering by Selling Shareholders. The Company, through
its officers and directors, will undertake a direct participation self-
underwritten offering at the same time as the selling shareholders will be
selling their registered shares. Officers and directors of the Company are
participating as selling shareholders. Current officers and directors and Mr.
Richard Huson, a principal shareholders have entered into written agreements
not to sell their Common Shares until the Company's offer is fully
subscribed. The Company is not selling any Common Shares on behalf of
Selling Shareholders and has no control or affect on the 1,605,530 Common
Shares of these Selling Shareholders which are not subject to any lock-up
agreement. The offering of securities by these Selling Shareholders will
occur regardless of the outcome of the primary offering by the Company.

<PAGE>9

Selling Shareholders. Due to the fact that the secondary offering will be
conducted contemporaneously with a primary offering by the Company, the
market price of the Company's common stock (upon commencement of trading) may
be less than the offering price of $2.50. Conflicts of interests may arise
due to the fact that the primary offering of the Company and the secondary
offering of the Selling Shareholders will be conducted contemporaneously.
In the event the stock price falls below $2.50, the primary offering will be
terminated. There is a strong risk that the primary offering will never be
fully concluded.

Gaming Venture is the beneficial owner of 200,000 Common Shares, all of which
are being registered and are not being locked up. Additionally, Sines-Forte
Partnership is the beneficial owner of 1,261,900, 126,190 of which are being
registered and are not being locked up. These Common Shares can be sold and
push the stock price below $2.50.

No Established Business/No Independent Market Research of Potential Demand
for Current Operations. The Company is in the development stage and has
only recently commenced formal efforts to manufacture and market its gaming
devices. No independent organization has conducted market research providing
management with independent assurance from which to estimate potential demand
for the Company's business operations. Even in the event a market demand is
independently identified, there is no assurance the Company will be
successful. See "BUSINESS ACTIVITIES."

Regulation. The gaming industry is a highly regulated industry and is
subject to numerous statutes, rules and regulations administered by the
gaming commissions or similar regulatory authorities of each jurisdiction.
Generally, the Company and other entities which seek to introduce gaming
products or concepts into such jurisdictions may be required to submit
applications relating to their activities or products (including detailed
background information concerning controlling persons within their
organization) which are then reviewed for approval. The Company may incur
significant expenses in seeking to obtain licenses for its gaming products
and concepts, and no assurance can be given that its products will be
approved in any particular jurisdiction. A failure to obtain such approval
in any jurisdiction in which the Company may seek to introduce its products
or concepts, could have a material adverse effect on the Company's business.

Newly Formed Corporation; Lack of Operating Results. The Company was formed
in September of 1995, and its activities have been limited to product
development, analyzing the gaming industry, consulting with persons in the
industry, negotiating agreements with Sines-Forte and Sharps International
Limited Partnership ("Sharps"), negotiating interim financing arrangements
and developing and consummating the plan of reorganization with Sharps.

Sines-Forte and Sharps are or were owned or controlled by persons who are
also directors, executive officers and principal shareholders of the Company.
Sharps has been dissolved. The Company is still in the development stage.
Higher than normal operating expenses will in all likelihood be incurred
during initial operations.

Additional Financing May be Required. Even if all of the 1,500,000 Common
Shares offered hereby are sold, the funds available to the Company may not be
adequate for its business activities. Accordingly, the ultimate success of
the Company may depend upon its ability to raise additional capital or to
have other parties bear a portion of the required costs to further develop or
exploit its business activities. Currently, the Company is seeking additional
debt or equity financing, however, there can be no assurance that any
additional financing can be obtained. See "USE OF PROCEEDS" AND "BUSINESS
ACTIVITIES."

Risks Attributable to a Direct Participation, Self-Underwritten Offering.
This offering is being offered on a direct participation, self-underwritten
basis. As a result, due to the absence of an underwriter, there may be less
due diligence performed in conjunction with this offering than would be
performed in an underwritten offering.

Potential Adverse Impact of Sale of Shares by Selling Shareholders. Sales
by selling shareholders may have an adverse impact on the Company's primary
offering of securities at $2.50 per share. The current officers and
directors have entered into a written agreement with the Company regarding
their intent to not sell their registered Common Shares until the Company's
offer is fully subscribed. However, the Company is not selling any
Common Shares on behalf of the other Selling Shareholders and has not control
over or affect on these Selling Shareholders.

Influence on Election of Directors and All Other Matters by Current Officers
and Directors. After the offering, the officers and directors of the
Company will own 32.84% of the outstanding common shares. As a result, the
officers and directors of the Company, through their aggregate ownership in
the securities of the Company may be able to influence the election of
directors and all other matters submitted to a vote of the Company's
shareholders.

Uncertainty of Market for Company's Products. The Company's products are
still in the development status and, as such, the market for these products
is uncertain.

<PAGE>10

Future Sales of and Market for the Common Shares. Upon completion of the
offering there shall be 7,679,644 Common Shares outstanding. This does not
include any Common Shares which shall be issued upon conversion of the A, B
or C Warrants, 75,000 Common Shares reserved for issuance pursuant to loan
conversion options, 593,000 shares reserved pursuant to outstanding options
for issuance to key employees and others. If the maximum number of Common
Shares are sold, 3,721,599 of the Common Shares to be outstanding will be
considered "restricted securities" as that term is defined in Rule 144
adopted under the United States Securities Act of 1933, as amended and in the
future may be sold only in compliance with the resale provisions set forth
therein. Rule 144 provides, in essence, that persons holding restricted
securities for a period of one years may sell in brokerage transactions an
amount equal to one percent of the Company's securities or outstanding Common
Shares every three months. Additionally, if persons hold restricted
securities for two years, there are virtually no resale limitations. Hence,
the possibility of sale under Rule 144 may in the future have a depressive
effect on the price of the Company's Common Shares in any market which may
develop.

Conflicts of Interest. Officers and directors of the Company are
participating as selling shareholders in this offering while the Company
undertakes its primary offering by its officers and directors. Additionally,
some of the directors of the Company are currently principals of other
businesses. As a result, conflicts of interest may arise. The directors
shall immediately notify the other directors of any possible conflict which
may arise due to their involvement with other businesses. The interested
directors in any conflict shall refrain from voting on any matter in which a
conflict of interest has arisen. The Company has adopted a policy that any
transactions with directors, officers or entities of which they are also
officers or directors or in which they have a financial interest, will only
be on terms which are fair and reasonable to the Company and approved by a
majority of the disinterested directors of the Company's Board of Directors.
For further discussion see "Management - Conflicts of Interest Policy." There
can be no assurance that such other activities will not interfere with the
officers' and directors' ability to discharge their obligation herein.
Possible Affect on Company's Ability to Obtain Approval for the Licensing of
the Company Due to Actions of Director of the Company. Steven L. Forte, a
consultant to and director of the Company, was convicted of a gambling-
related third degree felony in New Jersey in 1990, and in 1982 pled guilty to
a misdemeanor trespass charge arising from a gambling related charge
emanating from Harrah's Casino in Reno, Nevada. Mr. Forte was sentenced to
120 days and served 61 days. Mr. Forte also paid restitution of $11,200.
All restitution and probation were cleared in 1991. Such convictions could
affect the Company's ability to obtain approval for the licensing of the
Company, if required, in any number of prospective jurisdictions.

Benefit to Management. The Company may, in the future, compensate the
Company's management with substantial salaries and other benefits. The
payment of future larger salaries, commissions and the costs of these
benefits may be a burden on the Company and may be a factor in limiting or
preventing the Company from achieving profitable operations in the future.
However, the Company would not continue to compensate management with such
substantial salaries and other benefits under circumstances where to do so
would have a material negative effect on the Company's financial condition.
See "MANAGEMENT - Remuneration."

No Diversification. The Company intends to manufacture and market certain
gaming products and concepts. Therefore, the Company's financial viability
will depend almost exclusively on its ability to generate revenues from its
operations and the Company will not have the benefit of reducing its
financial risks by relying on revenues derived from other operations.

Dilution. Purchase of the Common Shares offered hereby will incur
immediate dilution of $2.19 or 87.50% in the net tangible book value of their
investment. This does not include any of the Common Shares to be issued
upon exercise of the A, B, C Warrants. The Company has 75,000 Common
Shares reserved for issuance pursuant to loan conversion options or 593,000
shares reserved for issuance pursuant to outstanding options and commitments
to key employees and others. The Company may issue additional shares in
private business transactions and may pursue a public offering in the future
to complete its business plan. Any sales under Rule 144 after the
applicable holding period may have a depressive effect upon the market price
of the Company's Common Shares and investors in this offering upon
conversion. As a result, the investors in this Offering may experience
substantial dilution. See "DILUTION" and "CAPITALIZATION."

Investors May Bear Risk of Loss. The capital required by the Company to
acquire assets needed for its proposed operations is being sought from the
proceeds of this Offering. Therefore, investors of this Offering may bear
most of the risk of the Company's expansion of operations. Conversely,
management stands to realize benefits from the payment of salaries, expenses
and receipt of stock options regardless of the profitability of the Company.

Financial Condition. Although the officers of the Company anticipate that
the Company will have adequate funds to pay all of its operating expenses
assuming the expansion and promotion of the Company's operations, there can
be no assurance that this will in fact occur or that the Company can be

<PAGE>11

operated in a profitable manner. Profitability depends upon many factors,
including the success of this Offering and the success of the Company's
operations.

Competition. There is significant competition in the gaming industry. The
Company competes with established companies and other entities (many of which
possess substantially greater resources than the Company). Almost all of
the companies with which the Company competes are substantially larger, have
more substantial histories, backgrounds, experience and records of successful
operations, greater financial, technical, marketing and other resources, more
employees and more extensive facilities than the Company now has, or will
have in the foreseeable future. It is also likely that other competitors
will emerge in the near future. There is no assurance that the Company will
continue to compete successfully with other established gaming product
Manufacturers. The Company shall compete on the basis of quality and price.
Inability to compete successfully might result in increased costs, reduced
yields and additional risks to the investors herein. See "The Company -
Competition."

Forward-Looking Statements and Associated Risk. This Prospectus, including
the information incorporated herein by reference, contains forward-looking
statements including statements regarding, among other items, the Company's
growth strategies, and anticipated trends in the Company's business and
demographics. These forward-looking statements are based largely on the
Company's expectations and are subject to a number of risks and
uncertainties, certain of which are beyond the Company's control. Actual
results could differ materially from these forward-looking statements as a
result of the factors described in this section "Risk Factors," including
among others, regulatory or economic influences. In light of these risks
and uncertainties, there can be no assurance that the forward-looking
information contained in this Prospectus will be accurate.

Arbitrary Offering Price. The initial offering price of $2.50 per Common
Share has been arbitrarily determined by the Company based upon such factors
as the objectives of the Company, the proceeds to be raised by the Offering
and the percentage of ownership to be held by the purchasers thereof. Having
established that the total gross proceeds of the maximum offering would be
$3,750,000, the actual price of $2.50 per Common Share was thereupon determined
by the Company and accordingly bears no relationship whatsoever to assets,
earnings, book value or any other objective standard of worth. See
"DILUTION."

Lack of Dividends. There can be no assurance that the operations of the
Company will become profitable. At the present time, the Company intends to
use any earnings which may be generated to finance the growth of the
Company's business. See "DESCRIPTION OF SECURITIES".

Dependence on Key Individuals. The future success of the Company is highly
dependent upon the management skills of its key employees and the Company's
ability to attract and retain qualified key employees. The inability to
obtain and employ these individuals would have a serious effect upon the
business of the Company. The Company has entered into definitive employment
agreements with Jay King and Randy Sines. Mr. Steven Forte has entered into
a personal services agreement with the Company. Mr. Sines has
recently resigned from the Company and will continue on a consultant basis.
There can be no assurance that the Company will be successful in retaining
its two remaining key employees or that it can attract or retain additional
skill personnel required. The Company has not obtained any key man life
Vulnerability to Fluctuations in the Economy. Demand for the Company's
products is dependent on, among other things, general economic conditions
which are cyclical in nature. Prolonged recessionary periods may be damaging
to the Company.

"Penny" Stock Regulation of Broker-Dealer Sales of Company Securities. The
Company intends to list its Common Shares, at least initially, on the OTC
Bulletin Board and on NASDAQ Small Cap Market upon meeting the requirements
for a NASDAQ listing, if ever. Upon completion of this offering, the Company
will not meet the requirements for a NASDAQ Small Cap Market listing. The
OTC Bulletin Board has no quantitative written standards and is not connected
with the NASD. Until the Company obtains a listing on the NASDAQ Small Cap
Market, if ever, the Company's securities may be covered by a Rule 15g-9
under the Securities Exchange Act of 1934 that imposes additional sales
practice requirements on broker-dealers who sell such securities to persons
other than established customers and institutional accredited investors
(generally institutions with assets in excess of $5,000,000 or individuals
with net worth in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 jointly with their spouse). For transactions covered by the rule,
the broker-dealer must furnish to all investors in penny stocks, a risk
disclosure document required by Rule 15g-9 of the Securities Exchange Act of
1934, make a special suitability determination of the purchaser and have
received the purchaser's written agreement to the transaction prior to the
sale. In order to approve a person's account for transactions in penny
stock, the broker or dealer must (i) obtain information concerning the
person's financial situation, investment experience and investment
objectives; (ii) reasonably determine, based on the information required by
paragraph (i) that transactions in penny stock are suitable for the person
and that the person has sufficient knowledge and experience in financial
matters that the person reasonably may be expected to be capable of
evaluating the rights of transactions in penny stock; and (iii) deliver to

<PAGE>12

the person a written statement setting forth the basis on which the broker or
dealer made the determination required by paragraph (ii) in this section,
stating in a highlighted format that it is unlawful for the broker or dealer
to effect a transaction in a designated security subject to the provisions of
paragraph (ii) of this section unless the broker or dealer has received,
prior to the transaction, a written agreement to the transaction from the
person; and stating in a highlighted format immediately preceding the
customer signature line that the broker or dealer is required to provide the
person with the written statement and the person should not sign and return
the written statement to the broker or dealer if it does not accurately
reflect the person's financial situation, investment experience and
investment objectives and obtain from the person a manually signed and dated
copy of the written statement. A penny stock means any equity security
other than a security (i) registered, or approved for registration upon
notice of issuance on a national securities exchange that makes transaction
reports available pursuant to 17 CFR 11Aa3-1 (ii) authorized or approved for
authorization upon notice of issuance, for quotation in the NASDAQ system;
(iii) that has a price of five dollars or more or . . . . (iv) whose issuer
has net tangible assets in excess of $2,000,000 demonstrated by financial
statements dated less than fifteen months previously that the broker or
dealer has reviewed and has a reasonable basis to believe are true and
complete in relation to the date of the transaction with the person.
Consequently, the rule may affect the ability of broker-dealers to sell the
Company's securities and also may affect the ability of purchasers in this
Offering to sell their shares in the secondary market. See "Market for
Registrant's Common Equity and Related Stockholder Matters - Broker-Dealer
Sales of Company's Securities."

SELLING SECURITY HOLDERS

The Company shall register pursuant to this prospectus 2,219,041 Common
Shares currently outstanding for the account of the following individuals or
entities. The percentage owned prior to and after the offering reflects all
of the then outstanding common shares. The amount and percentage owned
after the offering assumes the sale of all of the Common Shares being
registered on behalf of the selling shareholders.

<TABLE>
<CAPTION>
Name and Amount Total Number % Owned Number of % Owned
Being Registered Owned Prior to Shares Owned After
Currently Offering After Offering Offering
<S> <C> <C> <C> <C>
Stacy Haskins - 15,478 15,478 .25% 0 0%
Martin Petri - 15,478 15,478 .25% 0 0%
Michael Szeremeta -15,477 15,477 .25% 0 0%
The Argus Group<F1> - 700 7,000 .11% 6,300 .10%
Sines-Forte Partnership<F2>
126,190 1,261,900 20.42% 1,135,710 14.79%
Cheryl Forte - 25,461<F3> 254,610 4.52% 229,149 2.98%
Cheryl & Steve Forte
- 4,512<F4> 45,122 .83% 40,610 .53%
Richard S. Huson<F5>
- 312,229 2,561,589 43.78% 2,349,360 30.59%
Leonard A. Hale - 15,478 15,478 .25% 0 0%
David A. Krise - 91,910 91,910 1.44% 0 0%
Norman G. Kelln<F6>
- 11,362 113,628 1.78% 102,266 1.33%
John F. Curran - 10,193 10,193 .16% 0 0%
Randy D. Sines<F7>
- 25,461 254,610 3.99% 229,149 2.98%
David E. Sampson<F8>-4,096 40,955 .64% 36,859 .48%
Jay Willoughby - 50,000 50,000 .81% 0 0%
David Goldsmith - 50,000 50,000 .81% 0 0%
C. Culver Smith - 30,000 30,000 .49% 0 0%
Don Ludwick - 20,000 20,000 .32% 0 0%
William Martin - 10,000 10,000 .15% 0 0%
Adam Chase - 10,000 10,000 .15% 0 0%
Adam W. Jaslow - 30,000 30,000 .49% 0 0%
Jennifer L. Jaslow-50,000 50,000 .81% 0 0%
Jennifer L. Jaslow Trust
- 50,000 50,000 .81% 0 0%
John Horstmann - 6,000 6,000 .11% 0 0%
Richard S. Jaslow, IRA
- 100,000 100,000 1.62% 0 0%
Lori K. Jaslow Trust
- 20,000 20,000 .32% 0 0%
Adam Jaslow Trust - 70,000 70,000 1.24% 0 0%
John Plati - 20,000 20,000 .32% 0 0%
Doris Ljubicich - 3,400 3,400 .06% 0 0%
Joseph Hroncich - 3,000 3,000 .05% 0 0%
John S. Cole - 3,000 3,000 .05% 0 0%
Vito Bavaro - 3,000 3,000 .05% 0 0%
Lori K. Jaslow, Trust
- 80,000 80,000 1.29% 0 0%
Kevo Plumbing & Heating
- 10,000 10,000 .15% 0 0%
Tami L. Dirienzo - 6,000 6,000 .11% 0 0%
Peter Jankowski - 10,000 10,000 .15% 0 0%

<PAGE>13

Renaldo C. Forcellati - 3,000 3,000 .05% 0 0%
Frank Stein - 3,000 3,000 .05% 0 0%
Joan Carranza - 3,000 3,000 .05% 0 0%
Joseph Criscione Sr. - 3,000 3,000 .05% 0 0%
Paul M. Reichenberg - 6,000 6,000 .11% 0 0%
Kathleen M. Mahaffey - 3,000 3,000 .05% 0 0%
Balieri Associates <F9> 3,000 3,000 .05% 0 0%
William S. Dean - 6,000 6,000 .11% 0 0%
Pratt, Wylce & Lords, Ltd. <F10>
- 29,100 29,100 .47% 0 0%
Clinton Clark - 60,900 60,900 .99% 0 0%
Victor & Lana Woinski
- 3,000 3,000 .05% 0 0%
James J. & Sheila Criscione
- 3,000 3,000 .05% 0 0%
Catherine O'Connell - 3,400 3,400 .06% 0 0%
Joseph & Ida Dellaroba
- 3,000 3,000 .05% 0 0%
Mark R. Alleman - 3,000 3,000 .05% 0 0%
William Megnin - 3,400 3,400 .05% 0 0%
James P. Rose - 3,000 3,000 .05% 0 0%
Mark Megnin - 3,000 3,000 .05% 0 0%
Daniel Morgan & Sara
Andelina - 3,010 3,010 .05% 0 0%
Richard P. Keshishian - 3,000 3,000 .05% 0 0%
Robert Jouas - 4,000 4,000 .06% 0 0%
David E. & Margaret Winkelman
- 3,000 3,000 .05% 0 0%
Carl & Birte Mainardi - 3,400 3,400 .06% 0 0%
Mark Megnin & Helen Connor
- 3,400 3,400 .06% 0 0%
Paul S. & Renee Spiegler
- 6,500 6,500 .11% 0 0%
Diana Forcellati - 3,000 3,000 .05% 0 0%
Richard Napolitano - 3,000 3,000 .05% 0 0%
Gaming Venture Corp.U.S.A. <F11>
- 200,000 200,000 3.24% 0 0%
Jeremy B. & W. Stern
- 10,000 10,000 .15% 0 0%
Aldo R. Beretta 1993
Family Trust - 10,000 10,000 .15% 0 0%
Dr. David Adelberg - 10,000 10,000 .15% 0 0%
Michael Schaeffer - 10,000 10,000 .15% 0 0%
Joseph & Julie Vaccaro
- 7,000 7,000 .11% 0 0%
George & Selma Spiegler
- 3,000 3,000 .05% 0 0%
Susan Jaslow - 50,000 50,000 .81% 0 0%
Maria Cunha IRA - 8,500 8,500 .15% 0 0%
Henry and John Horstmann
- 8,000 8,000 .14% 0 0%
Antonio Tommolillo - 3,000 3,000 .05% 0%
Salvatore LaCognata - 3,000 3,000 .05% 0 0%
Harry & Adele Conti - 3,000 3,000 .05% 0 0%
Nicola Attanasio - 5,000 5,000 .09% 0 0%
Lawrence Mendosa - 5,000 5,000 .09% 0 0%
Janet Ausiello - 5,000 5,000 .09% 0 0%
Michael Ausiello - 5,000 5,000 .09% 0 0%
Mark Malzberg - 6,000 6,000 .11% 0 0%
Laura Giostra - 6,700 6,700 .11% 0 0%
David Lupo - 3,000 3,000 .05% 0 0%
Peter O'Hare, Jr. - 4,000 4,000 .07% 0 0%
Giovanni Granata - 3,000 3,000 .05% 0 0%
Mario Tommolillo - 4,000 4,000 .07% 0 0%
Jeffrey Kerne - 6,000 6,000 .11% 0 0%
Gino Ramundo - 6,000 6,000 .11% 0 0$
Evelyn Alleman - 3,000 3,000 .05% 0 0%
Thelma Zube - 3,400 3,400 .06% 0 0%
Vincent & F. Ponte - 6,667 6,667 .11% 0 0%
Laura Giostra - 6,700 6,700 .11% 0 0%
Philip & Concetta Vincenti
- 6,800 6,800 .11% 0 0%
Andrew Lesnak - 3,400 3,400 .06% 0 0%
Susan Miller - 6,700 6,700 .11% 0 0%
Uphill c/o Paul Scott
- 9,400 9,400 .17% 0 0%
Martin Feldman - 3,400 3,400 .06% 0 0%
Mark DeLorenzo - 3,000 3,000 .05% 0 0%
Steven Blad<F12> - 1,000 10,000 .15% 9,000 .12%
Micro Cap World, L.L.C.<F13>
- 10,000 10,000 .15% 0 0%
Jay L. King<F14> - 2,500 25,000 .40% 22,500 .29%
Jayport Holdings, Inc. (BUI)<F15>
- 20,339 20,339 .33% 0 0%
Glenn Fine - 30,000 30,000 .49% 0 0%
Casino Journal of Nevada, Inc.<F16>
- 20000 20,000 .32% 0 0%
Robert Smith - 6,000 6,000 .11% 0 0%
John Wasden - 5,000 5,000 .09% 0 0%

<PAGE>14

Althea Duggins - 1,000 1,000 .02% 0 0%
James Beard - 1,000 1,000 .02% 0 0%
Michele Gilbert - 10,000 10,000 .15% 0 0%
Thomas DiSalvatore - 90,000 90,000 1.46% 0 0%
</TABLE>

[FN]
<F1> The Argus Group is controlled by Glen (Tom) Pickell). Mr. Pickell is
currently an officer and director of the Company.
<F2> Randy Sines, a former officer and director of the Company and Steven
Forte, a current officer and director of the Company are general partners of
Sines-Forte Partnership.
<F3> Cheryl Forte is married to Steven Fortes, a director of the
Company.
<F4> Steve Forte is a director of the Company.
<F5> Norman G. Kelln is a director of the Company.
<F6> Richard Huson has agreed to lock up his 312,229 Common Shares being
registered in this offering until completion of the primary offering of the
Company. See "Certain Transactions and Principal Shareholders."
<F7> Randy Sines was an officer and director of the Company.
<F8> David Sampson is a director of the Company.
<F9> Balieri Associates is not affiliated with the Company or its officers
and directors and the Company does not know the principals of Balieri
Associates
<F10> Timothy Miles and Alan Schafler are the principals of Pratt, Wycle &
Lords, Ltd.
<F11> Alan Woinski and Kim Santangelo-Woinski are the principals of Gaming
Venture Corp., U.S.A.
<F12> Steven Blad is an officer of the Company.
<F13> Clinton Clark is the principal of Micro Cap World, L.L.C.
<F14> Jay L. King is an officer and director of the Company.
<F15> Jayport Holdings, Inc. is not affiliated with the Company or its
officers and directors and the Company does not know the principals of
Jayport Holdings, Inc.
<F16> Glenn Fine is the principal of Casino Journal of Nevada, Inc.

The Company shall register pursuant to this prospectus the 200,000 Common
Shares underlying the Class A Warrants currently outstanding for the account
of the following individuals or entities. The percentage owned prior to and
after the offering reflects all of the then outstanding Class A Warrants.
The amount and percentage owned after the offering assumes the exercise of
all of the Class A Warrants and sale of underlying Common Shares being
registered on behalf of the selling shareholders.

<TABLE>
<CAPTION>
Name and Amount Total Number % Owned Number of % Owned
Being Registered Owned Prior to Warrants Owned After
Currently Offering After Offering Offering
<S> <C> <C> <C> <C>
Norman G. Kelln 5,717 2.86% 0 0%
Sines/Forte Partnership<F1> 63,492 31.75% 0 0%
Cheryl Forte<F2> 30,421 15.21% 0 0%
David Sampson 1,557 .78% 0 0%
Randy Sines 30,421 15.21% 0 0%
Richard Huson 51,586 25.79% 0 0%
Stacey Haskins 779 .39% 0 0%
Martin Petri 779 .39% 0 0%
Michael Szeremeta 779 .39% 0 0%
Leonard Hale 779 .39% 0 0%
David Krise 4,624 2.31% 0 0%
John F. Curran 513 .26% 0 0%
Jay Willoughby 2,516 1.26% 0 0%
David M. Goldsmith EVP Director
Buchingham Research Group 2,516 1.26% 0 0%
C. Culver Smith 1,509 .75% 0 0%
Don Ludwick 1,006 .50% 0 0%
William Martin 503 .25% 0 0%
Adam Chase 503

</TABLE>

[FN]
<F1>Randy Sines and Steve Forte are General Partners of Sines-Forte
partnership and would be deemed to be beneficial owners of the 63,492 Class A
Warrants shown above.
<F2>Steve Forte is married to Cheryl Forte and would be deemed to be a
beneficial owners of the 30,421 Class A Warrants shown above.

The Company shall register pursuant to this prospectus the 200,000 Common
Shares underlying the Class B Warrants currently outstanding for the account
of the following individuals or entities. The percentage owned prior to and
after the offering reflects all of the then outstanding Class B Warrants.
The amount and percentage owned after the offering assumes the exercise of
all of the Class B Warrants and sale of underlying Common Shares being
registered on behalf of the selling shareholders.

<PAGE>15

The Company shall register pursuant to this prospectus the 250,000 Common
Shares underlying the Class C Warrants currently outstanding for the account
of the following individuals or entities. The percentage owned prior to and
after the offering reflects all of the then outstanding Class C Warrants.
The amount and percentage owned after the offering assumes the exercise of
all of the Class C Warrants and sale of underlying Common Shares being
registered on behalf of the selling shareholders.

<TABLE>
<CAPTION>
Name and Amount Total Number % Owned Number of % Owned
Being Registered Owned Prior to Warrants Owned After
Currently Offering After Offering Offering
<S> <C> <C> <C> <C>

Norman G. Kelln 7,146 2.86% 0 0%
Sines/Forte Partnership<F1> 79,385 31.75% 0 0%
Cheryl Forte<F2> 38,026 15.21% 0 0%
David Sampson 1,947 .78% 0 0%
Randy Sines 38,026 15.21% 0 0%
Richard Huson 64,483 25.79% 0 0%
Stacey Haskins 973 .39% 0 0%
Martin Petri 973 .39% 0 0%
Michael Szeremeta 973 .39% 0 0%
Leonard Hale 973 .39% 0 0%
David Krise 5,781 2.31% 0 0%
John F. Curran 641 .26% 0 0%
Jay Willoughby 3,145 1.26% 0 0%
David M. Goldsmith EVP Director
Buckingham Research Group 3,145 1.26% 0 0%
C. Culver Smith 1,667 .75% 0 0%
Don Ludwick 1,258 .50% 0 0%
William Martin 629 .25% 0 0%
Adam Chase 629 .25% 0 0%
</TABLE>
[FN]
<F1>Randy Sines and Steve Forte are General Partners of Sines-Forte
Partnership and would be deemed to be beneficial owners of the 79,365 Class C
Warrants shown above.
<F2>Steve Forte is married to Cheryl Forte and would be deemed to be a
beneficial owners of the 38,026 Class C Warrants shown above.

- --------------------------------------------------------------
SOURCE AND USE OF PROCEEDS
- --------------------------------------------------------------

If the maximum amount of securities is sold in the offering, the Company
shall have net proceeds of $3,333,080 after the payment of commissions of
$375,000 and offering expenses of $41,920. The Company shall utilize the
net proceeds from the sale of its Common Shares for working capital,
including (approximately)

<PAGE>16

Total Proceeds $3,750,000
Less Commissions 375,000
Less Offering Expenses 41,920
----------
Net Offering Proceeds $3,333,080

Building of product inventory 325,000
Research and development
to expand the current product line 450,000
International Marketing 200,000
Debt Reduction 750,000
Tooling and Equipment 130,000
Working Capital 1,475,080
-----------
$3,333,080

If substantially less than the maximum proceeds is raised, the priority for
the use of proceeds is i) to expand sales of current products; ii) to
increase inventory levels of current products, iii) tooling and equipment
and iv) debt reduction The proceeds are anticipated to be utilized over a
twelve month period.

Securities are being registered on behalf of the selling security holders and
the Company will not receive any cash or other proceeds in connection with
the subsequent sale.

Any proceeds received from the subsequent exercise of the A, B or C Warrants
shall be used as working capital and to expand operations. Due to the
uncertainty of the timing and amount of actual funds which may be received
upon exercise of the Warrants, no specific breakdown of uses have been
established by the Company. The aggregate amount of proceeds if all of the
Warrants are exercised is $4,000,000. If all of the A, B or C Warrants are
exercised, the proceeds shall be utilized over a two year period.

- -------------------------------------------------------
DILUTION
- -------------------------------------------------------

Dilution. Assuming completion of maximum offering amount, there will
be a total of 7,679,944 Common Shares outstanding. The following table
illustrates the per Share dilution as of the date of this Prospectus, which
may be experienced by investors upon reaching the maximum offering.

Offering price $2.50
Net tangible book value per
Share before offering (.1511)
Increase per Share .1614
attributable to investors ------
Pro forma net tangible
book value per Common
Share after offering .3125
------
Dilution to investors $2.1875
Dilution as a percent of
offering price 87.50%

Comparative Per Common Share Data.
<TABLE>

Total Price
Number of Paid Per Consider-
Shares % Share ation Paid %
<C> <S> <S> <S> <S> <S>
Existing Shareholders 6,179,944 80.47% $ .64 3,953,315 51.32%
New Investors
of Common Shares 1,500,000 19.53% $2.50 3,750,000 48.68%
</TABLE>

Further Dilution. The Company may issue additional restricted Common Shares
pursuant to private business transactions. Any sales under Rule 144 after
the applicable holding period may have a depressive effect upon the market
price of the Company's Common Shares and investors in this offering upon
conversion. See "SALES OF STOCK PURSUANT TO RULE 144."

- -------------------------------------------------------
THE COMPANY
- -------------------------------------------------------

The Company. The Company was incorporated in the State of Washington on
September 20, 1995. The Company's principal offices are located at 3909 South
Maryland Parkway, Suite 311, Las Vegas, Nevada 89119. Its telephone number
at such address is (702) 733-7195. These offices consist of 2,100 square
feet on a month to month lease with a lease payment of $2,800 per month.

The Company's operations are the development and marketing of certain gaming
products and concepts invented and developed by Sines-Forte, and others,
which are indirectly affiliated with the Company.

<PAGE>17

The Company intends to sell or lease its products to the world-wide gaming
industry directly, or through subcontracts with non-affiliated manufacturers.
The Company is in the process of negotiating distribution and marketing
arrangements for its products, but has no significant history of operations
and no profits.

Products. The Company currently has four different types of products and is
considering variations of said products:

(i) Random Ejection Shuffler - an automatic, multi-deck card
shuffler. The machine can shuffle up to six decks of playing cards. The
shuffler shall lease for approximately $10-15 per day. Additionally, the
Company intends to offer a maintenance contract for approximately $50 per
month which would include annual refurbishing of the Random Ejection
Shuffler. The sales price of the shuffler is in the process of being
determined. There have been five proto types built and tested. The first
production run is complete and parts have been ordered for the second, much
larger run.

(ii) Fantasy 21 Table Game - a jackpot table game variation of
Casino 21. This game incorporates a jackpot and bonus payment schedule
based on consecutive player high hands (counts of 20 or 21) or dealer busts,
allowing players to win very large jackpots while playing the traditional
game and wagering minimum side bets or antes. The game utilizes a modern
version of the traditional table layout and features an electronic tracking
and display system that documents each player's progress toward the jackpots.
As few as three successive high hands are required to win the smallest
jackpot and eleven successive high hands for the super jackpot. As a
result of the ante structure, simplicity of operation and probable patterns
of play, the casino's profit potential can be significantly higher than that
of the traditional game. The Fantasy 21 Table Game may be leased at the
basis of approximately $400 per month. The Company has five pre-production
units of the Fantasy 21 Table Game which were assembled on October 13, 1997
and are being used for sales demonstrations and field testing. Parts for
the production run of Fantasy 21 Table Game have been ordered.

(iii) Safety Peek Card - a new type of Casino 21 playing card. This
product features a new playing card design which eliminates the holecard
problem in the game of Casino 21 when used with a modified form of the
classic peeking action. In the game of Casino 21, if the dealer is showing
an ace of face card, they will generally peek at the hole or down card.
With this peeking action, there is the chance of players seeing the hole card
and adjusting their bets accordingly. With the patented card design of the
Safety Peek Card, the dealer, by peeking at the opposite corner (which is
considered a modified form of peeking action) can determine if the hole card
is an ace without showing any card value. The Safety Peek Card, a new type of
casino playing card, is already in use and is under distribution agreements
with selected playing cards distributor.

(iv) SecureDrop coin box system - An electronic method to accurately
track the number of coins in a slot machine when the funds are transferred
from the machine, counted and later deposited with a banking institution.
This product was not developed internally by the Company, but has been
exclusively licensed from an outside developer in an agreement dated October
10, 1997. The SecureDrop is in advanced development stages, with one
working prototype available. Based on information from the developer, the
Company expects to receive initial production units of the SecureDrop around
January 1, 1998.

Proprietary Technology. The Company's products are protected under various
pending patents, patents, copyrights and trademarks.

All patent applications filed before June 8, 1995 will have a term which is
either 17 years from the date of issue or 20 years from the filing date (or
priority date). U.S. patent applications filed on or after June 8, 1995
have a term of 20 years from the filing date of the application or filing
date of any parent patent application upon which priority is claimed.

Design patents have a term of 14 years from the issue date. utility patents
require maintenance fees be paid to have the full term. The term of patents
may vary depending upon other consideration in special cases.

The Safety Peek Playing cards patent claims are directed at both the novel
playing cards and methods for playing blackjack using the novel playing
cards.

Title: Cards and Methods for Playing Casino 21 or Blackjack
Status: Issued U.S. Patent
Serial No: 08/165,302
Filing Date: December 9, 1993
Patent No: 5,403,015
Issue Date: April 4, 1995

Title: Cards and Methods for Playing Blackjack
Status: issued U.S. Patent
Serial No: 08/353,526
Filing Date: December 8, 1994
Patent No.: 5,518,249
Issue Date: May 21, 1996

<PAGE>18

Title: Blackjack Card Deck
Status: Issued U.S. Design Patent
Serial No: 29/028,882
Filing Date: September 23, 1994
Patent No. Des. 366,503
Issue Date: January 23, 1996

Patents for the Playing Card Shuffling Machine have been applied for and
their status is as follows:

Title: Playing Card Shuffler
Status: Pending U.S. Patent Application - case has been allowed and
issue fee has been paid. Patent is expected at any time.
Serial No: 08/228,609
Filing Date: April 18, 1994
Patent No: Not Issued
Issued Date: Not Issued

Title: Playing Card Shuffling Machines and Methods
Status: Issued U.S. Patent
Serial No: 08/423/408
Filing Date: April 18, 1995
Patent No: 5,584,483
Issue Date: December 17, 1996

Title: Playing Card Shuffling Machines and Methods
Status: Pending Canadian Patent Application
Serial No. 2,188,137
Filing Date April 18, 1995 (International Filing Date)
Patent No. Not issued
Issue Date: Not issued

Title: Playing Card Shuffling Machines and Methods
Status: Pending European Patent Application
Serial No: 95916434.4
Filing Date: April 18, 1995 (International Filing Date)
Patent No: Pending European Patent Application
Issue Date: Not issued

Title: Playing Card Shuffling Machines and Methods
Status: Pending Australian Patent Application
Serial No: 22936/95
Filing Date: April 18, 1995 (International Filing Date)
Patent No: Not issued
Issue Date: Not issued

The Blackjack Game System and Methods patent claims are as follows:

Title: Blackjack Game System and Methods
Status: Pending application
Serial No: 08/242,229
Filing Date: May 13, 1994
Patent No: Not issued
Issue Date: Not issued

Title: Blackjack Game System and Methods
Status: Issued Patent
Serial No: 08/439,687
Filing Date: May 12, 1995
Patent No: 5,586,766
Issue Date: December 24, 1996

Title: Blackjack Game System and Methods
Status: Pending Canadian patent application
Serial No: 2190266
Registration #1483441 and #1483442
Filing Date: November 13, 1996
Patent No: Not issued
Issue Date: Not issued

Title: Blackjack Game System and Methods
Status: Pending European patent application
Serial No: 95920444.7
Filing Date: May 12, 1995
Patent No: Not issued
Issue Date: Not issued

Title: Blackjack Game System and Methods
Status: Pending Australian patent application
Serial No: 25892/95
Filing Date: November 12, 1996
Patent No: Not issued
Issue Date: Not issued

<PAGE>19

Title: Blackjack Game System and Methods
Status: Pending Patent Cooperation Treaty patent application
Designates about 80 foreign countries for possible patents
Serial No: PCT/US95/12908
Filing Date: October 13, 1995
Patent No: not issued
Issue Date: Not issued

The Company has applied for the following additional patents:

Title: Slot Machine and Methods of Operation
Status: Pending U.S. Patent Application
Serial No: 08/60317
Filing Date: 2/2/96
Patent No: Not issued
Issue Date: Not issued

Title: Drop Slot Game Machine
Status: Pending U.S. Patent Application
Serial No: 08/649821
Filing Date: 5/17/96
Patent No: Not issued
Issue Date: Not issued

Title: Blackjack Game System and Methods
Status: unknown
Serial No: 08/798642
Filing Date: 2/11/97
Patent No: Not issued
Issue Date: Not issued

Title: Slot Machine and Methods of Operation
Status: Pending Patent Cooperation Treaty patent application
Designates about 80 foreign countries for possible patents
Serial No: PCT/US96/02157
Filing Date: 2/20/96

U.S. trademark registrations issued or renewed prior to November 16, 1989
remain in force for 20 years from their date of issue or renewal. Those
U.S. trademark registrations issued or renewed on or after November 16, 1989
have a term of 10 years unless canceled or surrendered. The Company has
made and received the following trademarks.

Mark: SAFETY PEEK
Status: Registered U.S. trademark
Serial No: 74/640,372
Filing Date: February 21, 1995
Reg. No: 1,944,346
Reg. Date: December 26, 1995

Mark: FANTASY 21
Status: Pending U.S. Trademark Application
Serial No: 74/456,337
Filing Date: November 3, 1993
Reg. No: Not yet registered
Reg. Date: Not yet registered

Mark: CASINOVATIONS
Status: Pending U.S. Trademark Application
Serial No: 74/640,371
Filing Date: February 21, 1995
Reg. No: Not yet registered
Reg. Date: Not yet registered

Proprietary information is available to investors upon signature of a Non-
Disclosure Agreement.

Research and Development. Prior to the incorporation of the Company and to
date, most of the time and effort of the Company has been spent on research
and product development. The Company or its predecessors incurred research
and development costs aggregating $244,117 and $436,871 for the years ended
December 31, 1996 and 1995, respectively. These funds were expended on
engineering, tooling, parts and other related expenditures. The Company
intends to have a continued emphasis on research and development as funding
and cash flow allow.

Manufacturing. The Company shall manufacture the Random Ejection
Shuffler and Fantasy 21 through Western Electronics Corporation, an
independent third party supplier. The Safety Peek Card is currently being
manufactured by the George C. Mattheson Company ("GEMACO"), and distributed
to the U.S. Playing Card Company.

Production. It is anticipated that the actual production for the Random
Ejection Shuffler and Fantasy 21 will be subcontracted to Western Electronics
Corporation in Boise, Idaho, a contract manufacturing company.

Packaging and Transportation. The Company shall utilize custom boxes on
which its name, logo and a silk screen of the product itself will be printed.

<PAGE>20

It is expected that transportation will be by UPS ground or a similar carrier
in the continental United States, and by other arrangements as appropriate.
Initial installations will be made by the Company's sales and/or service
personnel, or, if distributors are used, by their sales and service
personnel.

Service and Maintenance Policy. The Company intends to establish
appropriate service capabilities for each product in each market it services,
either through its distributors or with in-house personnel.

Marketing. The Company shall market and distribute its products in one of
three ways, depending upon the regulatory market and the specific product.

(i) Directly by the Company's sales force;
(ii) Through OEM's who incorporate a Company's product into a
product they manufacture; or
(iii) Through distributors with a significant market presence in
one or more regulatory markets.

OEM's, original equipment manufacturers, are manufacturers who build product
to the product owner's specifications and place the owner's name on the
product.

Exclusive Distributorship Agreements. The Company currently has an
exclusive distributorship agreement with Sodak Gaming, Inc. The term of the
agreement is Five (5) years. The Company agrees to offer to Sodak a minimum
discount of twenty-five percent (25%) less than the promoted retail price in
Nevada. The territory includes all Indian lands of the United States and
First Nation/Aboriginal Lands in Canada, Deadwood, South Dakota and Miss
Marquette Riverboat and Casino, Marquette, Iowa. The Company also has an
exclusive distributorship agreement with RGB SDN BHD. , a Malaysia
corporation. The term of the agreement is Five (5) years. The Company
agrees to offer to RGB SDN BHD a minimum discount of twenty-five percent
(25%) less than the promoted retail price in Nevada. The territory including
the entire Asian RIM area including but not limited to Malaysia, Singapore,
China, Hong Kong, Korea, Vietnam, Indonesia, Thailand, The Philippines,
Nepal, Cambodia, India, Sri Lanka, Macau, Myanmar, Laos, Cruise Ships based
in Malaysia, Singapore & Hong Kong and the Islands in the Asian areas. The
territory specifically excludes Japan, Australia and New Zealand which will
be treated as common distributor areas. Additionally, the Company has an
exclusive distributorship agreement with B. Joel Rahn (company name to be
designated). The term of the agreement is Five (5) years. The Company
agrees to offer to B. Joel Rahn a minimum discount of twenty-five percent
(25%) less than the promoted retail price in Nevada. The territory consists
of South America, Central America, the Caribbean Islands, the State of
Florida and Cruise Ships worldwide, excluding Cruise Ships based in Malaysia,
Singapore and Hong Kong. The territory consisting of the Bahamas shall be
non-exclusive.

Exclusive Licensing Agreements. The Company has granted joint exclusive
licenses to the George C. Matheson Company ("Gemaco" ) and to The US Playing
Card Company specifically for the Safety Peek Playing Card. The terms of
the Gemaco agreement provides for a royalty of $.04 per deck of playing cards
being paid to the Company on a quarterly basis. Additionally, Gemaco agreed
that during the term of the agreement, it will use .02 on each deck for
promotion and advertising of the product. The US Playing Card Company pays a
royalty of $.075 per deck.

Technology Development Center, LLC, has grant an exclusive license to the
Company relating to its technology known as a "Coin Operating Machine Having
An Electronically Identified Coin Collection Box"....The geographical scope
of the license is the United States of America and all foreign countries.
As consideration for the exclusive license, the Company executed a promissory
note secured by assets of the Company payable to Technology Development
Center, LLC, for $50,000 payable in five monthly installments beginning on
November 14, 1997 and a promissory note secured by the assets of the Company,
payable to Technology Development Center, LLC for $50,000 payable in twelve
monthly installments beginning on April 15, 1998. The Company shall pay a
royalty of $7.50 per each licensed product sold, rented, leased, or otherwise
used for profit, provided that the Company receives a net compensation in
excess of $7.50 for each Product Development and Ownership History. Sines-
Forte, a general partnership formed in September, 1993 owned the rights to
currently existing patents and trademarks to a variety of gaming devices,
including the Safety Peek Playing Cards, Fantasy 21 and the Random Ejection
Card Shuffler.

Pursuant to the terms of a financing agreement dated January 15, 1996 between
the Company, Sines-Forte and Sharps International Limited Partnership
("Sharps") which initially held exclusive rights to manufacture and market
these gaming products and concepts under the terms of a licensing agreement
with Sines-Forte, and certain of their affiliates, substantially all of the
gaming products and concepts owned by Sines-Forte and licensed to Sharps were
transferred and assigned to Sharps. Subsequently, the ownership of these
products/concepts was transferred to the Company as part of the
reorganization transaction.

Sines-Forte and Sharps are or were owned or controlled by persons who are
also directors, executive officers and principal shareholders of the Company.

<PAGE>21

Effective January 1, 1996, the Company and Sharps concluded a plan of
reorganization whereby all of the outstanding general and limited partnership
interests in Sharps were exchanged for shares of the Company in a tax-free
transaction, at the rate of 5,160 shares of Capital Stock for each unit of
general or limited partnership interest in Sharps. An aggregate of 2,513,000
shares of Capital Stock of the Company were issued to the Sharps' partners in
this transaction. In addition, 1,261,900 shares of Capital Stock were
issued to Sines-Forte in exchange for substantially all of Sines-Forte's
assets and an additional 130,000 shares of Capital Stock were issued to
certain investors at the price of $1.00 per share.

As a consequence of the reorganization transaction, Sharps was liquidated,
and all of its assets and liabilities were assumed by the Company.
Such assets included substantially all of the gaming products and concepts
formerly owned by Sharps, together with certain contractual arrangements
relating to the manufacture and sale of the Safety Peek Playing Cards.

Royalty Agreement with Sines-Forte. Pursuant to the aforementioned
financing agreement, the Company assumed an obligation of Sharps to pay
royalties to Sines-Forte generated from revenues received by the Company on
certain intellectual properties. Sines-Forte is to receive a quarterly
royalty fee of 3% of the net revenues earned by the Company with respect to
certain products and an option to purchase from the Company 40,000 shares of
the Company's common stock at the price of $1.00 per share. Royalties owed
in a given period shall not be a credit toward any royalties owed for a past
or future royalty period. The term "Net Revenues" means gross cash revenues
received by the Company for the relevant quarter attributable to the
products, minus the Company's cost of such goods sold for such quarter.

If the Company leases product instead of selling or having others sell in
their behalf, or if leasing of product otherwise occurs under the Agreement,
the Company shall be obligated to pay royalties on the same terms as if the
lease payments are considered to be Net Revenues. Such treatment of leasing
for determination of royalties shall not apply where a third party pays the
Company and acts as a financial leasing agent or where the Company actually
receives payments on a basis other than the actual lease payments. In such
cases, royalties are determined based on the amount and timing of payments
received by the Company and not those received by any financing and leasing
organization.

Employees. As of the date of this Prospectus, the Company has four full time
and two part time employees. See "RISK FACTORS."

The Company will, as operations demand, sub-contract the balance of its
personnel through independent contractors or hire additional employees.

Competition. There is significant competition in the gaming industry. The
Company competes with established companies and other entities (many of which
possess substantially greater resources than the Company). Almost all of
the companies with which the Company competes are substantially larger, have
more substantial histories, backgrounds, experience and records of successful
operations, greater financial, technical, marketing and other resources, more
employees and more extensive facilities than the Company now has, or will
have in the foreseeable future. It is also likely that other competitors
will emerge in the near future. There is no assurance that the Company will
continue to compete successfully with other established gaming product
manufacturers. The Company shall compete on the basis of quality and price.
Inability to compete successfully might result in increased costs, reduced
yields and additional risks to the investors herein.

- -----------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- ----------------------------------------------------------------

Trends and Uncertainties. Demand for the Company's products will be
dependent on, among other things, general economic conditions which are
cyclical in nature. Inasmuch as a major portion of the Company's activities
is the manufacture and sale of gaming products and concepts, new technologies
may reduce and/or restrict the Company's activities.

In addition, the outcome of this offering is uncertain. The lack of sales of
this offering would negatively impact the Company's ability to successfully
continue operations.

<PAGE>22

Capital and Source of Liquidity. The Company currently has no material
commitments for capital expenditures. The Company has planned expenditures
of $900,000 for the cost of sales and $140,000 for additional tooling costs
of manufacturing the Random Ejection Shuffler. These costs will be less if
the sales projections are not met. The Company intends to use a majority of
the proceeds of this offering to make a portion of the proposed expenditures.
If this offering is not successful, the Company's cash flow will be
negatively effected if the expenditures are made.

The Company has commitments under its consulting agreements and employment
agreements. The payments to Mr. Blad of $12,500 per month plus commissions
of 3.73% on the gross margin received by the Company on its product sold
though sales arranged and completed primarily by the efforts of Mr. Blad,
$10,000 per month to Mr. Forte, and $7,500 per month for Mr. King will have a
negative effect on the cash flow of the Company.

During December 1997 the Company entered into financing type lease
transactions with a leasing company whereby the Company sold and leased back
from the lessor all of its furniture and equipment, tooling and a total of
twenty six of its shuffler machines.

Scheduled maturities of the obligations as of December 31, 1997 are
as follows:

Year Amount
1998 $209,425
1999 170,097
2000 170,097
--------
Minimum future lease payments 549,619
Less interest component (102,519)
Present value of future net
minimum lease payments 447,100
--------
Less current portion (153,851)
--------
Due after one year $293,249

Property recorded under capital leases includes the following as of
December 31, 1997:

Office furniture and equipment $ 31,110
Tooling 271,500
---------
302,610
Less accumulated amortization (22,749)
---------
Net capitalized leased equipment 279,861
Shuffler machines, at cost 52,598
---------
Total assets subject to capital leases $ 332,459

Although the sale had an immediate positive effect on the cash flow of the
Company, the lease payments will have a future negative effect on the
liquidity of the Company.

During December 1997 and January 1998, the Company received proceeds from
unsecured convertible debentures aggregating $100,000 during December 1997
and $400,000 during January 1998. The debentures bear interest at 6% per
annum and are due on or before January 31, 1999. The principal amount of the
debentures is convertible at the holder's option into shares of the Company's
common stock at a conversion price of $2.98 per share

The Company shall attempt to develop business plans, operations and sales
that will permit the Company to be self-supportive 30 to 60 days after
production begins. The funding requirement to complete this time period is
estimated to be between $100,000 and $300,000 and may come in the form of
this offering proceeds, deposits on future sales or debt financing. Based
on the completion of a successful offering subscription and final product
development and refinement, the Company anticipates that the monthly cash
flow will be at a break-even point within four months. No additional
capital needs are anticipated. This planning, if effective, would permit
funds raised in this offering, if any, to be used to develop new products in
the next six months.

If the Company has to add a significant amount of capital equipment to
develop an in-house production capacity, this will impact cash flow in a
potentially significant way. The Company expects that the net proceeds from
this offering and the cash flow from operations will be sufficient to allow
the Company to meet the expected growth in demand for its products for at
least the next twelve months. However, there can be no assurance that
sufficient capital will be raised or that future product sales will meet the
Company's growth expectations. Should either of these fail to occur, the
Company may elect to (i) reduce the planned introduction of new products to a
level consistent with its resources or (ii) pursue other financing
alternatives such as loans. The Company is pursuing debt financing and has
received $400,000 to date. Implementation of either of the foregoing options
could delay or diminish the Company's planned growth and adversely affect its
profitability.

<PAGE>23

For the year ended December 31, 1997, the Company acquired plant and
equipment valued at $296,156. The Company had an increase in patents and
trademarks of $29,110. As a result, the Company had net cash used in
investing activities of $325,266 for the year ended December 31, 1997.

For the year ended December 31, 1996, the Company acquired plant and
equipment valued at $12,969. The Company had an increase in patents and
trademarks of $65,781. As a result, the Company had net cash used in
investing activities of $78,750 for the year ended December 31, 1996.

For the year ended December 31, 1997, the Company sold common stock for cash
in the amount of $1,015,510. The Company received proceeds from long-term
debt of $547,100. The Company had an increase in stockholder loans of
$120,000 and the Company repaid $38,886 of shareholder loans. As a result,
the Company had net cash provided by financing activities of $1,841,244 for
the year ended December 31, 1997.

For the year ended December 31, 1996, the Company sold common stock for cash
in the amount of $887,265. The Company had an increase in stockholder
loans of $630,168. As a result, the Company had net cash provided by
financing activities of $1,517,433 for the year ended December 31, 1996.

Management is of the opinion that its current working capital and anticipated
funds from operations are sufficient to meet its cash requirements for
moderate growth in the year ahead. However, in order to achieve the
Company's plans for growth, additional capital is required.

On a long term basis, liquidity is dependent on increased revenues from
operations, additional infusions of capital and debt financing. The Company
believes that additional capital and debt financing in the short term will
allow the Company to commence its marketing and sales efforts and thereafter
result in revenue and greater liquidity in the long term. However, there can
be no assurance that the Company will be able to obtain additional equity or
debt financing in the future, if at all.

Results of Operations. For the year ended December 31, 1997, the Company has
a net loss of $2,606,071. The Company had revenues from card royalties of
$2,226, interest income of $8,290 and the sale of patent rights of $3,000 for
the year ended December 31, 1997. The Company had depreciation and
amortization of $40,262 and amortized deferred interest of $186,000 for the
year ended December 31, 1997. The Company had an increase in accounts
receivable of $15,327, an increase in prepaid expenses of $39,276, an
increase in accounts payable of $335,459 and a decrease in accrued expenses
of $57,809.

The Company issued stock for interest valued at $117,332. The Company
issued stock and options for services of 136,000. The compensation value of
cash stock sales was $177,000 for the year ended December 31, 1997. For the
year ended December 31, 1997, the Company had net cash used in operating
activities of $1,949,467.

The Company had general and administrative expenses of $1,826,250. These
expenses consisted of salaries of $363,497, payroll taxes & benefits of
$49,604, travel and entertainment of $313,425, fees to consultants of
627,913, legal expenses of $72,785, gaming shows of $151,425, rent of
$26,646, printing, video and other of $22,489, and miscellaneous expenses of
$198,416.

For the year ended December 31, 1996, the Company has a net loss of
$1,638,227. The Company had revenues in card royalties of $2,450 and
interest income of $1,803 for the year ended December 31, 1996. The Company
issued stock for services valued at $700,500. Interest added to loan
balances was $23,245. The Company exchanged equipment valued at $2,903 for
services. The Company had depreciation and amortization of $2,553 for the
year ended December 31, 1996. Due to the commencement of operations, the
Company had an increase in accounts receivable of $2,833, an increase in
prepaid expenses of $300, an increase in other assets of $6,119, and increase
in accounts payable of $73,330 and an increase in accrued expenses of
$104,351 for the year ended December 31, 1996. For the year ended December
31, 1996, the Company had net cash used in operative activities of $887,257.

For the year ended December 31, 1996, the Company had general and
administrative expenses of $1,318,327. These expenses consisted of
consulting services valued at $826,824, salaries and wages of $254,200, legal
and accounting of $108,510, development costs of 68,520, reimbursement of
services of $33,497, patent and trademark costs of $27,312, telephone of
$12,880, travel of $24,943, and other miscellaneous expenses of $38,359.

The Company also paid general and administrative expenses of $52,313 to a
related party. Research and development costs to a related party for the
year ended December 31, 1996 was $244,117.

The Company shall seek to maintain low operating and administrative expenses
while expanding operations and increasing the number of distributors and
operating revenues. However, increased marketing expenses will probably
occur in future periods as the Company attempts to further increase its
marketing and sales efforts.

<PAGE>24

- ---------------------------------------------------------
MANAGEMENT
- ---------------------------------------------------------

Officers and Directors. Pursuant to the Articles of Incorporation, each
Director shall serve until the annual meeting of the stockholders, or until
his successor is elected and qualified. The Company's basic philosophy
mandates the inclusion of directors who will be representative of management,
employees and the minority shareholders of the Company. Directors may only
be removed for "cause". The term of office of each officer of the Company is
at the pleasure of the Company's Board.

The principal executive officers and directors of the Company will be as
follows:

<TABLE>
<CAPTION>
Name Position Term(s) of Office
<S> <C> <C>

Jay L. King, age 50 Vice President From March 12, 1996
of Finance & Controller to present
and Director

Steven Blad, age 45 President and Chief From April 30, 1997
Operations Officer to present

Norman G. Kelln, age 62 Director From March 12, 1996
to present

Glen (Tom) Pickell,
age 52 Director From March 12, 1996
to present
Chief Executive
Officer From Sept. 24, 1996
and President to April 30, 1997
Chairman of the Board
and Chief Executive officer From April 30, 1997
to present

Steven Forte, age 40 Director From March 12, 1996
to present

David Sampson, age 55 Director From March 12, 1996
to present

Mr. Randy Sines resigned as an officer and director of the Company on August
27, 1997.

Resumes:

Jay L. King. Mr. King has extensive experience in all phases of financial
management for a variety of companies and circumstances. He was Controller
for Sigma Game, Inc., a manufacturer and developer of electronic based and
software driven gaming machines from December 1994 to October 1995. Mr.
King was consultant to the corporation from November 1995 through February
1996 and elected Vice President of Finance and Controller and Director in

March 1996. He still serves in these positions. From July 1993 to
November 1994, Mr. King was an independent financial consultant and Chief
Financial Officer for I.C. Refreshment Corporation, a startup
beverage company. From 1986 to 1993, Mr. King was director of financial
management for PG&E, a public utility company. Mr. King managed full
financial responsibilities for engineering, construction and manufacturing
business unit.

Mr. King holds a BS in Accounting (1971) and an MBA (1973) from the
University of Utah and is a Certified Public Accountant.

Steven Blad. Mr. Blad was President and Chief Executive Officer of
Flagship Games International from 1987 to July 1991. From July 1991 to
September 1994, Mr. Blad was a consultant for Marketing and Gaming in
Atlanta, Georgia. From October 1994 to September 1996, Mr. Blad was a
consultant for Spintek Gaming Technologies. Mr. Blad joined the Company in
October 1996 as Vice President of Sales and Marketing until April 30, 1997
when he was named President of the Company.

Mr. Blad received a Bachelor of Arts degree in 1973 from Carson Newman. He
obtained a Masters of Arts degree in 1975 from Southern Baptist Graduate
School. From 1975 to 1976, Mr. Blad attended additional graduate studies at
the University of Alabama.

Norman G. Kelln. Mr. Kelln has been President and sole owner of Designed
Devices Co., a Spokane, Washington consulting engineering firm since 1980.
During his career, Mr. Kelln has worked in various engineering capacities for
several well-known companies including RCA, Tally Corporation, Boeing,
Keytronic Corporation and ISC Systems, Inc.

<PAGE>25

Glen (Tom) Pickell. Mr. Pickell has been President of The Arcus Group, a
financial and management consulting firm he formed since 1989. From 1981 to
1988, Mr. Pickell was Chief Financial Officer and Vice President of Finance
and Administration for Chronicle Broadcasting. Mr. Pickell graduated magna
cum laude with a Bachelor of Science degree in accounting from Golden Gate
University in San Francisco in 1975 and held a CPA certificate in California.
Mr. Pickell also serves as an advisor to Mr. Richard Huson who is a major
shareholder of the Company.

Steven Forte. Mr. Forte is currently the President of his own consulting
company, International Gaming Specialists. In this capacity Mr. Forte
provides consulting assistance in the areas of security, employee

productivity and profitability to casinos throughout the world. Mr. Forte's
recent clients include some of the largest and most successful casino
operations in the world, including Harrahs, Caesar's Palace, The Mirage,
Resorts International and the world's largest casinos in Malaysia and
Austria. Numerous law enforcement agencies have employed his services,
including the FBI and The Royal Canadian Mounted Police.

Mr. Forte is currently a general partner of the Sines-Forte General
Partnership which was formed to hold certain ownership rights and to receive
certain product royalties developed by the two partners. Before entering
the consulting business, Mr. Forte was employed by several different casinos
and is experienced in all aspects of gaming management from
dealer to casino manager. Mr. Forte also gambled professionally for seven
years. He has published several books, articles and video tapes on various
gaming topics.

Steven L. Forte, a consultant to, and an employee and director of the
Company, was convicted of a gambling-related third degree felony in New
Jersey in 1990, and in 1982 pled guilty to a misdemeanor trespass charge
arising from a gambling related charge emanating from Harrah's Casino in
Reno, Nevada. Such convictions could affect the Company's ability to obtain
approval for the licensing of the Company, if required, in any number of
prospective jurisdictions. Were this to occur, Mr. Forte has agreed that he
and the Company would restructure Mr. Forte's relationship with the Company,
and in particular, the terms of Mr. Forte's Personal Services Agreement with
the Company, in order to conform to the gaming requirements of such
jurisdictions.

David Sampson. From August, 1985 to 1991, Mr. Sampson was the owner and
manager of University Bistro in Seattle, Washington. From March 1994 to
April 1996, Mr. Sampson has served as President and Chairman of MITT USA
Corporation, a sporting goods manufacturer. Mr. Sampson joined Rendova
Boats as General Manager and Director of Rendova Boats, L.L.C., a boat
manufacturer located in Olympia, Washington, in October 1996 and still holds
that position. Mr. Sampson received a Bachelor of Science at Oregon State
University in Social Science in 1965. He received a Masters degree in
Political Science from the State University of New York at Buffalo in 1968
and a post-graduate degree from the Pacific Coast Banking School at the
University of Washington.

Remuneration. The following table sets forth certain summary information
concerning the total remuneration paid or accrued by the Company, to or on
behalf of the Company's Chief Executive Officer and the Company's four most
highly compensated executive officers determined as of the end of each of the
last three years.

SUMMARY COMPENSATION TABLE

</TABLE>
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (h) (i)

Other ALL
Name Annual Restricted LTIP Other
and Compen- Stock Options/ Pay-
compen-
Principal Salary Bonus sation Awards SARs Outs
sation
Position(1) Year ($) ($) ($) ($) ($) ($) ($)

Randy Sines 1995 - - - - - - -
President 1996 40,000 (2) (2) (2) - - -
1997 80,000 - - - - - 15,641

David E. Sampson 1995 - - - - - - -
Vice President 1996 15,000 - - - - - -
1997 0 - 1,500 - - - -

Jay King 1995 - - - - - - -
Vice President 1996 73,750 12,500 10,200 - - - -
1997 90,000 3,600 - - - - -

<PAGE>26

Steven Blad 1995 - - - - - - -
President 1996 - - - - - -27,750<F1>
1997 19,500 - - 15,000 - - -

Glen (Tom) Pickell 1995 - - - - - - -
President 1996 - - - - - -20,479<F1>
1997 - - - - - -71,210<F1>
</TABLE>

(1) Affiliated entities of current officers and directors received
compensation in fiscal year ended December 31, 1996. The Arcus Group
controlled by Glen (Tom) Pickell provides management consulting services to
the Company and received $20,479 in 1996 and $71,210 in 1997, Gametek
controlled by Steven J. Blad provides sales, marketing and management
consulting services to the Company received $152,780 and Designed Devices,
Co. controlled by Norman Kelln provides engineering and management
consulting services to the Company received $302,551 in 1996 and $64,663
in 1997.

(2) Effective January 15, 1996, the Company, Sines-Forte, Randy D. Sines,
Steven L. Forte, Cheryl L. Forte and Richard S. Huson entered into a series
of transactions to provide additional financing to Sharps. Mr. Huson is a
major shareholder of the Company; Mr. Sines is a director and was president
of the Company and a partner of Sines-Forte; Mr. Forte is a consultant to,
employee and a director of the Company, and a partner of Sines-Forte; and
Cheryl L. Forte is the spouse of Steven L. Forte.

Employment and Personal Services Agreements. Mr. Forte entered into a
Personal Service Agreement with the Company providing for monthly
compensation to each of $10,000 per month on a pro rata basis for time worked
and restricting either from competing, directly or indirectly with the
Company during the terms of the agreements and for a period of two years
thereafter, or from using trade secrets or other proprietary information of
the Company except in furtherance of the Company's business. The personal
service agreements will be terminable by the Company for cause (which is
defined to include breach of the agreement; deception; fraudulent, dishonest
or illegal acts; the failure or refusal to carry out the reasonable
directions of the board of directors; or a willful failure or refusal to
comply in any material respect with the reasonable policies or procedures of
the Company), or without cause (in which event the terminated individual will
be entitled to six months' compensation).

The Company entered into an employment agreement with Jay L. King, effective
January 1, 1997 for a term of two years. At the expiration date of this
agreement, it shall be considered renewed for regular successive periods of
one year terms unless either party submits a notice of termination thirty
days prior to the end of the preceding period. Mr. King receives a monthly
base salary of $7,500 and shall be entitled to a quarterly bonus in an amount
not to exceed $2,500 per month upon the Company achieving its goals as set by
the Board of Directors, upon the fulfillment of the Employees duties and the
Company achieving its goals. Additionally, Mr. King shall receive stock
options to purchase up to 150,000 Common Shares of the Company at $1.50 per
Common Share I) 50,000 Common Shares upon successful completion of the SB-2,
ii) 50,000 Common Shares upon Mr. King fulfilling his obligations and the
Company reaching its goals for 1997 and iii) 50,000 Common Share upon Mr.
King fulfilling his obligations and the Company reaching its goals for 1998.
No options or stock were granted in 1997.

Board of Directors Compensation. Members of the Board of Directors will
receive $500 per meeting if said Directors are not separately compensated by
the Company and will be required to attend a minimum of four meetings per
fiscal year. All expenses for meeting attendance or out of pocket expenses
connected directly with their Board representation will be reimbursed by the
Company. No differentiation is made in the compensation of "outside
Directors" and those officers of the Company serving in that capacity.

The Company has obtained Directors and Officers Insurance. Pursuant to the
policy with National Union Fire Insurance Company, the coverage includes
Company reimbursement and sections action claims entity coverage. The
coverage has a $1,000,000 aggregate limit of liability in each policy year
(inclusive of defense costs) and there is a retention of $25,000 for each
claim.

Conflicts of Interest Policy. The Company has adopted a policy that any
transactions with directors, officers or entities of which they are also
officers or directors or in which they have a financial interest, will only
be on terms consistent with industry standards and approved by a majority of
the disinterested directors of the Company's Board of Directors. The Bylaws
of the Company provide that no such transactions by the Company shall be
either void or voidable solely because of such relationship or interest of
directors or officers or solely because such directors are present at the
meeting of the Board of Directors of the Company or a committee thereof which
approves such transactions, or solely because their votes are counted for
such purpose if: (i) the fact of such common directorship or financial
interest is disclosed or known by the Board of Directors or committee and
noted in the minutes, and the Board or committee authorizes, approves or
ratifies the contract or transaction in good faith by a vote for that purpose
without counting the vote or votes of such interested directors; or (ii) the
fact of such common directorship or financial interest is disclosed to or
known by the shareholders entitled to vote and they approve or ratify the

<PAGE>27

contract or transaction in good faith by a majority vote or written consent
of shareholders holding a majority of the Common Shares entitled to vote (the
votes of the common or interested directors or officers shall be counted in
any such vote of shareholders), or (iii) the contract or transaction is fair
and reasonable to the Company at the time it is authorized or approved. In
addition, interested directors may be counted in determining the presence of
a quorum at a meeting of the Board of Directors of the Company or a committee
thereof which approves such transactions. If there are no disinterested
directors, the Company shall obtain a majority vote of the shareholders
approving the transaction.

Indemnification. The Company shall indemnify to the fullest extent permitted
by, and in the manner permissible under the laws of the State of Washington,
any person made, or threatened to be made, a party to an action or
proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that he is or was a director or officer of the Company, or
served any other enterprise as director, officer or employee at the request
of the Company. The Board of Directors, in its discretion, shall have the
power on behalf of the Company to indemnify any person, other than a director
or officer, made a party to any action, suit or proceeding by reason of the
fact that he/she is or was an employee of the Company.

Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceedings) is asserted by such director, officer, or controlling person in
connection with any securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issues.

INDEMNIFICATION OF OFFICERS OR PERSONS CONTROLLING THE COMPANY
FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933, IS HELD TO BE
AGAINST PUBLIC POLICY BY THE SECURITIES AND EXCHANGE COMMISSION AND IS
THEREFORE UNENFORCEABLE.

- ------------------------------------------------------
CERTAIN TRANSACTIONS
- ------------------------------------------------------

Distribution of Securities. In July, 1996, the Board of Directors
authorized the distribution of 200,000 A Warrants each exercisable into one
Common Share of the Company at the exercise price of $3.75 per Common Share,
200,000 B Warrants each exercisable into one Common Share of the Company at
the exercise price of $4.00 per Common Share and 250,000 C Warrants each
exercisable into one Common Share of the Company at the exercise price of
$6.00 per Common Share. The A, B and C Warrants are exercisable for a
period of 48 months from the date of issue and are callable with 30 days
notice at a price of $.001 per warrant. These distributions were made to
the owners of record of Common Shares on the books of the Company as of July
22, 1996.

Lockup Agreement. Pursuant to a written agreement in March 1998, the
principal shareholders and officers and directors (Tom Pickell, Jay L. King,
Steven Blad, David Sampson, Norman G. Kelln, Steve and Cheryl Forte and
Richard Huson) who received Warrants agreed as follows:

The principal shareholders, officers and directors agreed not to sell the
Warrants during the offering period. The offering period consists of both
the primary offering by the Company and the secondary offering by the Selling
Security Holders. After the offering period, in the event the shareholder
exercises any warrants, the stock issued to the shareholder pursuant to the
exercise shall be locked in and restricted from trading for a period of one
year. A notice is to be placed on the face of each stock certificate
covered by the terms of the Agreement stating that the transfer of the stock
evidenced by the certificate is restricted until twelve (12) months from the
date of issuance. The shareholder also agrees not to sell or otherwise
transfer their interest in the warrants except to an underwriter or other
market makers in the stock once a market is established. The shareholder
further agrees that the total value in cash, or other consideration, paid by
the buyer to the seller shall not exceed $.01 per warrant.

Consulting Agreement. On July 15, 1996, the Company entered into a
consulting agreement with Pratt, Wylce & Lords, Ltd. ("Pratt") to assist the
Company in its capitalization and the obtainment of additional financing. The
agreement was amended January 28, 1997 and subsequently canceled. The net
payment to Pratt after amendment and termination of the consulting agreement
was $35,000 cash and 25,000 Common Shares. Due to the date of the
consulting agreement, the Company distributed A, B and C Warrants to Pratt,
however, Pratt disclaimed the A, B and C Warrants and these Warrants were
then redistributed on a pro rata basis to the remaining shareholders.

<PAGE>28

Additionally, the Company entered into a consulting agreement with Gaming
Venture Corp., U.S.A. (GVC) to assist the Company with the promotion of its
product and its Common Shares. The original agreement with GVC was dated
July 8, 1996 and was amended on December 1, 1996 and again on February 1,
1997. The contract began on July 8, 1996, and by amendment, will run
through July 7, 1998. GVC received 200,000 shares of the Company,
$45,000 in cash and Options to acquire an additional 100,000 Common Shares.
By action of the Company's Board of Directors, on April 30, 1997, the options
were exchanged for D Warrants which were subsequently exercised.

Loan Collateralized by Related Party. On July 11, 1997, GVC placed $200,000
in a 200 day Certificate of Deposit with Bank West located at 3500 West
Sahara Avenue in Las Vegas, Nevada. Bank West lent the Company up to the
full amount of GVC's CD and charge the Company an interest rate which is the
rate of the CD plus 2%.

The Company agreed to pay GVC a payment equal to 8.5% of the total amount
when the Company pays off the principal of the loan to Bank West.
The payment will be 8.5% of the principal of $200,000 or a total of $17,000.
If the Company is unable to pay off the loan balance after the 200 day
period, half of the $17,000 payment must be paid to GVC. GVC will then have
the option of renewing the CD and allowing the Company to continue with the
loan or convert the principal balance of the loan into the Company's common
stock with registration rights. If GVC elects to renew the CD, the same
terms from the first 200 day period will be in effect including a full 8.5%
of the principal being due when the loan is repaid. The $8,500 which is due
after the first 200 day period will not be deducted from the 8.5% due when
the loan is repaid if the CD is rolled over for another 200 day period.

Consulting Agreement with Related Party. On February 1, 1997, the Company
entered into a consulting agreement with Gametek, and Steven Blad, an officer
of the Company. Mr. Blad is a consultant to Gametek. Pursuant to the
agreement, Mr. Blad shall, for two years commencing January 1, 1997, act as
an officer of the Company and shall receive a base salary of $12,500 per
month. Additionally, Mr. Blad shall receives a commission of 3.73% on the
Gross Margin received by the Company on its product sold through sales
arranged and completed primarily by the efforts of Mr. Blad. Mr. Blad is
also entitled to a one time licensing bonus of 10,000 Common Shares of the
Company each time Mr. Blad successfully obtains a license from the Nevada
Gaming Commission approving current products of the Company for use in the
gaming industry. Mr. Blad is entitled to receive a bonus, payable on a
quarterly basis and in an amount not to exceed $2,000 per month upon the
Company achieving its goals as set by the Board of Directors, The bonus
payable shall be reduced by the commissions received during the same period.

In addition to the base salary, commissions, licensing bonus and quarterly
bonus stated above, the Mr. Blad shall receive "Stock Options" to purchase
up to three hundred thousand (300,000) shares of the Company's common stock
("Shares") under the following terms and conditions:
(i) Upon execution of the consulting agreement, the Consultant
received the right to acquire up to one hundred thousand (100,000) Shares at
One Dollar and Fifty Cents ($1.50) per Share.
(ii) Upon the Consultant fulfilling his obligations and the Company
reaching its goals for 1997, the Consultant shall have the right to acquire
up to an additional one hundred thousand (100,000) Shares at One Dollar and
Fifty Cents ($1,50) per Share. The determination of whether Mr. Blad
has met his obligations and the Company has reached its goals shall be made
at the discretion of the President and Chief Executive Officer and approved
by the Company's Board of Directors. Mr. Blad shall be entitled to a
meeting with the President and Chief Executive Officer during January 1998
to discuss the bonus to be paid hereunder, if any. The Stock Options to be
issued shall be vested in the Consultant no later than January 31, 1998.
(iii) Upon Mr. Blad fulfilling his obligations and the Company
reaching its goals for 1998, Mr. Blad shall have the right to acquire
up to an additional one hundred thousand (100,000) Shares at One Dollar and
Fifty Cents ($1,50) per Share. The determination of whether Mr. Blad
has met his obligations and the Company has reached its goals shall be made
at the discretion of the President and Chief Executive Officer and approved
by the Company's Board of Directors. Mr. Blad shall be entitled to a
meeting with the President and Chief Executive Officer during January 1999
to discuss the bonus to be paid hereunder, if any. The Stock Options to be
issued shall be vested in Mr. Blad no later than January 31, 1999.
(iv) The Stock Options must be exercised within Five (5) years from
the date Mr. Blad's rights are vested. The Shares will be issued
within Thirty (30) days from when Mr. Blad notifies his intent to
exercise the options and tenders the purchase price to the Company. The
Company offers no warranty as to the tradability of the Shares or as to
whether such shares will be registered with the Securities and Exchange
Commission.
(v) If the Company is to be sold, a portion of the Stock Options
not yet issued hereinabove shall vest in the Consultant thirty (30) days
prior to such sale. The number of Stock Options to vest under this
subparagraph shall be determined pro rata based upon the number of Stock
Options that Mr. Blad may be entitled to for the year and the number of
months Mr. Blad was retained under the Agreement during this same year.

<PAGE>29

For example, if the Company was to be sold on April 1, 1998, Mr. Blad
would have an additional twenty-five thousand Stock Options vest on March 1,
1998. [(100,000 stock options for 1998) x (3 months of consulting/12
months)].

The Company shall notify Mr. Blad in writing of (1) the impending sale,
(2) the right of Mr. Blad to exercise the Stock Options and (3) the
terms and conditions of the proposed sale of the Company. For purposes
herein, the Company shall be deemed sold if substantially all of its assets
are sold, including patents and goodwill, or the Company's stock is sold or
transferred causing a change in the person or persons who currently have
majority control of the Company. This Paragraph does not apply to transfers
of stock of the Company, (1) by an assignment to a revocable living trust in
which the holder is and remains a trustee and a beneficiary, or (2) by reason
of death of the holder. It is Mr. Blad's discretion to exercise the
Stock Options prior to the proposed sale. Any Stock Options vested in this
subparagraph shall remain vested in Mr. Blad, whether or not they are
exercised before the sale, under the terms of subparagraph (vi).

Related Party Transaction. Steven Forte, who was a partner of Sines-Forte
partnership retains a 3% royalty interest in the gross margin earned from the
sale of products covered by intellectual property rights which were exchanged
by the partnership for Common Shares of the Company. Royalty amounts due
pursuant to the royalty interest amounted to $150 at December 31, 1997.

During the year ended December 31, 1996, Steven Forte, an officer and
director, Randy Sines, a former director and Richard Huson, a principal
shareholder of the Company made advances to the Company for working capital
purposes. The balances payable by the Company aggregated $441,017 at
December 31, 1997, including accrued interest. No cash repayments have been
made against the advances, which are due on demand. Mr. Huson made an
addition advance in the amount of $300,000 on January 15, 1996. The advance
was due on July 15, 1996. The advance was collateralized by partnership
shares of Sharps equivalent to 700,000 Common Shares of the Company
controlled by Steven and Cheryl Forte and Randy Sines. On October 1, 1996,
Mr. Huson exercised his rights against the collateral and as a result, the
collection rights to the advance plus accrued interest, which aggregated
$320,168 at October 1, 1996, transferred to the other officer/shareholders.
The advances accrue interest at between 9.5% and 14.5% per annum. One of the
advances in the amount of $250,000 from Mr. Huson provides for repayment of
the loan by December 31, 1997 or, upon default, at the option of the
shareholder, by the issuance of the Company's common shares at a conversion
rate of $.82 per share. On December 31, 1997, Mr. Huson elected to convert
the principle and interest due ($279,229.29) to 339,304 Common Shares (at
$.82 per Common Shares).

During the year ended December 31, 1997, Mr. Huson made additional advances
to the Company aggregating $120,000 which are due on demand and bear interest
at 9.5% per annum. The Company made cash payments of principal ($18,866) and
interest ($37,563) against advances from two other shareholders during the
year ended December 31, 1997.

During September 1996, the Company entered into personal services agreements
with two of its officers which provide for aggregate monthly compensation of
up to $20,000 per month on a pro rata basis for time spent on Company related
business. The agreements had a term of two years.

Amendment to Employment Agreement (Personal Service Agreement) and Covenant
Not to Compete and Funding Agreements with Randy Sines. The Company and
Randy Sines had previously entered into an Employment Agreement (Personal
Service Agreement) and Covenant Not to Compete dated March 31, 1996. In
connection with the Employment Agreement, the parties entered
into a Funding Agreement dated January 15, 1996 and Third Round Funding
Agreement dated September 30, 1996. The Third Round Funding Agreement
subordinated the $300,000 promissory note assigned to Cheryl Forte/Steve
Forte and the Employee to the $500,000 promissory note, dated September 30,
1996, payable to Richard S. Huson. This subordination requires payments of
$10,000 each to Employee and Cheryl Forte. The $300,000 promissory note was
further subordinated by the agreement, dated July 8, 1997, to the $45,000
promissory note, dated July 8, 1997, payable to Richard S. Huson. (These
agreements and their amendments are referred to as the "Funding Agreements").

Mr. Sines resigned as an officer, director and employee of the Company
effective August 27, 1997. As a result of Mr. Sine's resignation, the
parties confirmed and modified each other's obligations under the Employment
Agreement and Funding Agreements.

1. Assignment of Drop Slot and Anticipation Slot Concepts. Pursuant to
a letter dated June 26, 1997, the Company attempted to transfer to Mr.
Sines all of the Company's right, title and interest in the Drop Slot and
Anticipation Slot inventions/concepts for the sum of $15,000. Pursuant to
the above referenced letter, the payment was reflected in a reduction of the
debt owed to the Mr. Sines from the Company. The parties have raised
questions surrounding the purported transfer and have agreed to restate and
settle on the terms and conditions of the assignment as follows:

a. The Company assigned all of its right, title and interest to
the Drop Slot and Anticipation Slot concepts to Mr. Sines.

<PAGE>30

b. The obligations owed by the Company to Mr. Sines contained in
the Funding Agreements will be decreased by the sum of $5,000, not the
$15,000 as previously agreed, in return for the assignment of the Royalty to
the Company provided herein below.

c. Mr. Sines agreed to reduce the monetary obligations owed by the
Company to him under the Funding Agreements to an interest rate at nine
and one-half percent (9 1/2%) per annum, effective October 1, 1997 and to
extend the due date of such obligations for a twelve (12) month period from
this same date. If the obligations are not paid on or before September 30,
1998, the interest rate shall increase at such date to fourteen and one-half
percent (14 1/2%) per annum. All other terms of the Funding Agreements,
including the subordination provisions, remain unchanged.

d. Mr. Sines agreed to pay to the Company a five percent (5%)
Royalty on the Net Revenue received by Mr. Sines, his heirs or assigns from
the sale, development, or manufacture of the Drop Sot and Anticipation Slot
concepts, including any derivatives or accessories pertaining thereto. The
term "Net Revenue" is defined as gross cash (or equivalents) revenues
received by Mr. Sines, his heirs or assigns from the sale, development, or
manufacture of the Drop Slot and Anticipation Slot concepts minus the cost of
goods sold for such products. In determining the cost of goods sold,
Generally Accepted Accounting Principles shall be used. Mr. Sines shall remit
the Royalty payments to the Company on a calendar quarter basis. The
Royalty payments due for each calendar quarter shall be paid within thirty
(30) days after the expiration of each quarter. Interest shall accrue at the
rate of nine and one-half percent (9 1/2%) per annum on any Royalty payments
that are not paid when due.

Mr. Sines will use prudent efforts to protect the intellectual and
proprietary rights associated with the Drop Slot and Anticipation Slot
concepts, including but not limited to, the procurement and the filing of
patents, trade names or copyrights as may be applicable. Upon thirty (30)
days written notice, Mr. Sines agreed to provide access to the Company or
its auditors to review and audit Mr. Sine's books and records containing
information pertinent to calculating the Royalty due the Company under
this agreement.

The Company allowed Mr. Sine's termination to be effective August 27,
1997. Mr. Sines remains obligated under the terms and conditions of the
Employment Agreement, as amended for those clauses which by their terms
survive termination and consist only of the Non-Competition, Confidential
Information, and Personal Property clauses. It is agreed and understood that
the execution of the agreement is additional consideration from the parties
for the amendment to the Non-Competition clause of the Employment Agreement
as contained herein.

3. Amendment. The parties agreed to amend Paragraph 14, Non-
Competition, ("Non-Competition Clause") of the Employment Agreement to
increase the term to three (3) years and to limit its scope as follows:

a. The Non-Competition Clause was amended to exclude from its
restrictions the Drop Slot and Anticipation Slot inventions/concepts and any
accessories or derivatives pertaining thereto. Mr. Sines is permitted
to market, develop and sell the Drop Slot and Anticipation Slot concepts so
long as such business actions are limited solely to such products and do not
involve any other gaming product not otherwise excluded herein below.

b. It is understood and agreed by the parties that Mr. Sines will not
be in violation of the Non-Competition Clause as amended herein for those
activities that are limited to the invention and development of gaming
products (not manufacturing or marketing), provided that such invention and
development does not pertain to the Company's Current Products and Future
Products defined herein below in sub-paragraph (d).
c. Mr. Sines shall only be required to abide by the terms of the Non-
Competition Clause as it is currently written and as amended herein by
Paragraph 3(a) and (3)(b) for a period of six (6) months, beginning as of
August 27, 1997, with the exception of Paragraphs 3(d) and 3(e).

d. After the expiration of the six (6) month period stated
above, Mr. Sines agreed to remain obligated under the terms of the Non-
Competition Clause for an additional eighteen (18) months, but this
restriction shall be limited solely to products that are substantially
similar to the Company's current products (the "Current Products") and to
the Company's future products referred to or described in the letter
dated August 28, 1997, executed by Steve Forte.

e. After the expiration of the two (2) year period stated above in sub-
paragraph (b) and (c), Mr. Sines agreed not to compete with the Company as
defined in the Employment Agreement for an additional one (1) year period
only as to such products that are substantially similar to the Future
Products defined previously herein.

A state court may determine not enforce (or only partially enforce) non-
compete clauses in the employment.

<PAGE>31

- ----------------------------------------------------------------
PRINCIPAL SHAREHOLDERS
- ----------------------------------------------------------------

There are currently 6,179,944 Common Shares outstanding. Assuming exercise of
the 200,000 A Warrants, 200,000 B Warrants, 250,000 C Warrants and 593,000
options currently outstanding, there would be 8,922,944 Common Shares
outstanding on a fully diluted basis. The following tabulates holdings of
shares of the Company by each person who, subject to the above, as of
February 28 1998, holds of record or is known by Management to own
beneficially more than 5.0% of the Common Shares and, in addition, by all
directors and officers of the Company individually and as a group.

Shareholdings at Date of
This Prospectus<F1>
<TABLE>
<CAPTION>
Percentage of
Outstanding
Shares as
Adjusted
to Reflect
Percentage Number of Conclusion
Number Prior to shares outstanding of the
Name and Address of Shares<F1><F4> Offering after offering Offering

<C> <C> <C> <C>
Richard S. Huson<F2> 2,661,589 43.07 2,349,360 30.59%
121 S.W. Morrison
Suite 1400
Portland, Oregon 97204

Steve and Cheryl Forte<F3><F4> 1,906,849 30.86% 1,836,024 23.91%
315 San Francisco Street
Henderson, Nevada 89014

Randy D. Sines<F4><F5> 1,861,727 30.13% 1,607,117 20.93%
4056 South Madelia
Spokane, Washington 99203

Sines-Forte Partnership 1,508,249 24.41% 1,382,059 18.00%
315 Francisco Street
Henderson, Nevada 89014

Steven Blad <F6> 110,000 1.78% 109,000 1.42%
286 Doe Run Circle
Henderson, Nevada 89012

Norman G. Kelln<F7> 257,208 4.16% 245,846 3.20%
2031 S. Eastern Lane
Spokane, Washington 99212

Jay L. King<F8>
4600 North Donna Street
North Las Vegas, Nevada 89031 100,000 1.62% 97,500 1.27%

David E. Sampson<F9> 141,016 2.28% 136,925 1.78%
4009 - 205th Avenue N.E.
Woodinville, Washington 98072

Glen (Tom) Pickell<F10> 7,000 .11% 6,300 .08%
115 NW Oregon Avenue, Suite 20
Bend, Oregon 97701

All Officers and Directors 2,522,073 40.81% 2,320,796 30.22%
as a Group (7 persons)
</TABLE>

[FN]
<F1> Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, beneficial ownership of a security consists of sole or shared voting
power (including the power to vote or direct the voting) and/or sole or
shared investment power (including the power to dispose or direct the
disposition) with respect to a security whether through a contract,
arrangement, understanding, relationship or otherwise. Unless otherwise
indicated, each person indicated above has sole power to vote, or dispose or
direct the disposition of all shares beneficially owned, subject to
applicable community property laws.
<F2> Includes 167,655 Common Shares which may be issued upon exercise of A,
B and C Warrants.
<F3>Includes 206,349 Common Shares which may be issued to Sine/Forte
Partnership upon exercise of the A, B and C Warrants 98,868 Common Shares
which may be issued to Cheryl Forte upon exercise of the A, B and C Warrants,
and 40,000 Common Shares which may be issued to Sines/Forte Partnership.
Additionally, Steven Forte is a General Partners of Sines-Forte Partnership
and would be deemed to be beneficial owners of the 1,2508,249 Common Shares
shown above.

<PAGE>32

<F4>Former partners of Sharps International Limited Partnership.
<F5>Includes 206,349 Common Shares which may be issued to Sine/Forte
Partnership upon exercise of the A, B and C Warrants and 40,000 Common Shares
which may be issued to Sines/Forte partnership. Additionally, Randy Sines is
a General Partner of Sines-Forte Partnership and would be deemed to be
beneficial owners of the 1,261,900 Common Shares shown above.
<F6>Includes 100,000 Common Shares which may be issued upon exercise of
100,000 options.
<F7>Includes 18,580 Common shares which may be issued upon exercise of the
Warrants and 125,000 Common Shares which may be issued upon exercise of
125,000 options.
<F8>Includes 75,000 Common Shares which may be issued upon exercise of 75,000
options.
<F9>Includes 5,061 Common Shares which may be issued upon exercise of the
warrants and 95,000 Common Shares which may be issued upon exercise of 95,000
options.
<F10>Common Shares are owned of record by The Argus Group, a company
controlled by Mr. Pickell.

This does not include 75,000 Common Shares reserved for issuance pursuant to
loan conversion options. Additionally On September 24, 1996, Mr. Huson
agreed to loan up to $500,000 to the Company for a period not to exceed
December 31, 1997. The note shall be secured by agreement of Randy Sines
and Cheryl Forte to provide Mr. Huson a minimum of 51% of the voting rights
by pledging sufficient voting rights of their Common Shares in the Company
until the note is paid in full and a total of $2.4 million is raised through
all sources. See "Certain Transactions" for further discussion.

There are currently 200,000 A Warrants outstanding. The following
tabulates holdings of A Warrants of the Company by each person who, subject
to the above, at the date of this Prospectus, holds of record or is known by
Management to own beneficially more than 5.0% of the A Warrants and, in
addition, by all directors and officers of the Company individually and as a
group.

<TABLE>
<CAPTION>
Name Total Number Of % Amount %
A Warrants Owned Owned Owned
Owned Prior to After After
Offering Offering
Offering
<S> <C> <C> <C> <C>

Tom Pickell 0 0% 0 0%

Jay L. King 0 0% 0 0%

Steven Blad 0 0% 0 0%

Norman G. Kelln 5,717 2.86% 5,717 2.86%

Sines/Forte Partnership<F1> 63,492 31.75% 63,492 31.75%

Cheryl Forte<F2> 30,421 15.21% 30,421 15.21%

David Sampson 1,557 .78% 1,557 .78%

Randy Sines 30,421 15.21% 30,421 15.21%

Richard Huson 51,586 25.79% 51,586 25.79%

All Officers and
Directors
As a Group (6) 131,608 65.80% 131,608 65.80%
</TABLE>

There are currently 200,000 B Warrants outstanding. The following
tabulates holdings of B Warrants of the Company by each person who, subject
to the above, at the date of this Prospectus, holds of record or is known by
Management to own beneficially more than 5.0% of the B Warrants and, in
addition, by all directors and officers of the Company individually and as a
group.

<PAGE>33

<TABLE>
<CAPTION>
Name Total Number Of % Amount %
B Warrants Owned Owned Owned
Owned Prior to After After
Offering Offering
Offering
<S> <C> <C> <C> <C>

Tom Pickell 0 0% 0 0%
Jay L. King 0 0% 0 0%
Steven Blad 0 0% 0 0%
Norman G. Kelln 5,717 2.86% 5,717 2.86%
Sines/Forte Partnership<F1> 63,492 31.75% 63,492 31.75%
Cheryl Forte<F2> 30,421 15.21% 30,421 15.21%
David Sampson 1,557 .78% 1,557 .78%
Randy Sines 30,421 15.21% 30,421 15.21%
Richard Huson 51,586 25.79% 51,536 25.79%
All Officers and
Directors
As a Group (7) 131,608 65.80% 131,608 65.80%
</TABLE>
[FN]
<F1>Randy Sines and Steve Forte are General Partners of Sines-Forte
Partnership and would be deemed to be beneficial owners of the 63,492 Class B
Warrants
shown above.
<F2>Steve Forte is married to Cheryl Forte and would be deemed to be a
beneficial owners of the 30,421 Class B Warrants shown above.

There are currently 250,000 C Warrants outstanding. The following
tabulates holdings of C Warrants of the Company by each person who,
subject to the above, at the date of this Prospectus, holds of record or is
known by Management to own beneficially more than 5.0% of the C Warrants and,
in addition, by all directors and officers of the Company
individually and as a group.

<TABLE>
<CAPTION>
Name Total Number Of % Amount %
C Warrants Owned Owned Owned
Owned Prior to After After
Offering Offering
Offering
<S> <C> <C> <C> <C>

Tom Pickell 0 0% 0 0%

Jay L. King 0 0% 0 0%

Steven Blad 0 0% 0 0%

Norman G. Kelln 7,146 2.86% 7,146 2.86%

Sines/Forte Partnership<F1> 79,365 31.75% 79,365 31.75%

Cheryl Forte<F2> 38,026 15,21% 38,026 15.21%

David Sampson 1,947 .78% 1,947 .78%

Randy Sines 38,026 15.21% 38,026 15.21%

Richard Huson 64,483 25.79% 64,483 25.79%

All Officers and
Directors
As a Group (6) 164,510 65.80% 164,510 65.80%
</TABLE>
[FN]
<F1>Randy Sines and Steve Forte are General Partners of Sines-Forte
Partnership and would be deemed to be beneficial owners of the 79,365 Class C
Warrants shown above.
<F2>Steve Forte is married to Cheryl Forte and would be deemed to be a
beneficial owners of the 38,026 Class C Warrants shown above.

<PAGE>34

transfer their interest in the warrants except to an underwriter or other
market makers in the stock once a market is established. The shareholder
further agrees that the total value in cash, or other consideration, paid by
the buyer to the seller shall not exceed $.01 per warrant.

There are currently outstanding options to purchase 593,000 Common Shares of
the Company. The following tabulates holdings of options of the Company by
each person who, subject to the above, at the date of this Prospectus, holds
of record or is known by Management to own beneficially more than 5.0% of the
options and, in addition, by all directors and officers of the Company
individually and as a group.

<TABLE>
<CAPTION>
Name Total Number Of % Amount %
Options Owned Owned Owned
Owned Prior to After After
Offering Offering Offering
<S> <C> <C> <C> <C>

Tom Pickell 0 0% 0 0%

Jay L. King 75,000 12.65% 75,000 12.65%

Steven Blad 100,000 16.86% 100,000 16.86%

Sine/Forte Partnership<F1> 40,000 6.75% 40,000 6.75%

Steven Forte 0 0% 0 0%

Randy Sines 0 0% 0 0%

Norman Kelln 125,000 21.08% 125,000 21.08%

David Sampson 95,000 16.02% 95,000 16.02%

Donald Peterson 100,000 16.86% 100,000 16.86%

John Wasden 45,000 7.59% 45,000 7.59%

All Officers and
Directors
As a Group (7) 435,000 73.32% 435,000 73.32%
</TABLE>

(1)Randy Sines and Steve Forte are General Partners of Sines-Forte
Partnership
and would be deemed to be beneficial owners of the 40,000 options shown
above.

- ----------------------------------------------------------
SHARES ELIGIBLE FOR FUTURE SALE
- ----------------------------------------------------------

The Company currently has 6,179,944 shares of Common Stock outstanding.
Other securities may be issued, in the future, in private transactions
pursuant to an exemption from the Securities Act are "restricted securities"
and may be sold in compliance with Rule 144 adopted under the Securities Act
of 1933, as amended. Rule 144 provides, in essence, that a person who has
held restricted securities for a period of one years may sell every three
months in a brokerage transaction or with a market maker an amount equal to
the greater of 1% of the Company's outstanding shares or the average weekly
trading volume, if any, of the shares during the four calendar weeks
preceding the sale. The amount of "restricted securities" which a person who
is not an affiliate of the Company may sell is not so limited.
Nonaffiliates may each sell without limitation shares held for three years.
The Company will make application for the listing of its Shares in the over-
the-counter market. Sales under Rule 144 may, in the future, depress the
price of the Company's Shares in the over-the-counter market, should a market
develop. Prior to this offering, there has been no public market for the
Common Stock of the Company. The effect, if any, of a public trading market
or the availability of shares for sale at prevailing market prices cannot be
predicted. Nevertheless, sales of substantial amounts of shares in the
public market could adversely effect prevailing market prices.

- ----------------------------------------------------------
MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
- ----------------------------------------------------------

Prior to this Offering, there has been no market for the Company's common
stock. Upon successful completion of this offering, the Company intends
to apply to have its common stock traded in the over-the-counter market and
listed on the OTC Bulletin Board.

<PAGE>35

Holders. The approximate number of holders of record of the Company's
.0010 par value common stock, as of May 31, 1997 was One Hundred (100).

Dividends. Holders of the Company's common stock are entitled to
receive such dividends as may be declared by its Board of Directors.

Broker-Dealer Sales of Company Securities. " The Company intends to list its
Common Shares, at least initially, on the OTC Bulletin Board and on NASDAQ
Small Cap Market upon meeting the requirements for a NASDAQ listing, if ever.
Upon completion of this offering, the Company will not meet the requirements
for a NASDAQ Small Cap Market listing. As of February 23, 1998, the
requirements for a NASDAQ listing are net tangible assets of $4,00,000 or
market capitalization of $50,000,000 or net income (in latest fiscal year or
2 of last 3 fiscal years) of $750,000, a public float of 1,000,000 Common
Shares, a market value of the public float of $55,000,000, a minimum bid
price of $4.00 per share, three market makers, 300 round lot shareholders, an
operating history of one year or a market capitalization of $50,000,000 and
compliance with corporate governance. The OTC Bulletin Board has no
quantitative written standards and is not connected with the NASD. Until
the Company obtains a listing on the NASDAQ Small Cap Market, if ever, the
Company's securities may be covered by a Rule 15g-9 under the Securities
Exchange Act of 1934 that imposes additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and institutional accredited investors (generally institutions with
assets in excess of $5,000,000 or individuals with net worth in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their
spouse). For transactions covered by the rule, the broker-dealer must
furnish to all investors in penny stocks, a risk disclosure document required
by Rule 15g-9 of the Securities Exchange Act of 1934, make a special
suitability determination of the purchaser and have received the purchaser's
written agreement to the transaction prior to the sale. In order to approve
a person's account for transactions in penny stock, the broker or dealer must
(i) obtain information concerning the person's financial situation,
investment experience and investment objectives; (ii) reasonably determine,
based on the information required by paragraph (i) that transactions in penny
stock are suitable for the person and that the person has sufficient
knowledge and experience in financial matters that the person reasonably may
be expected to be capable of evaluating the rights of transactions in penny
stock; and (iii) deliver to the person a written statement setting forth the
basis on which the broker or dealer made the determination required by
paragraph (ii) in this section, stating in a highlighted format that it is
unlawful for the broker or dealer to effect a transaction in a designated
security subject to the provisions of paragraph (ii) of this section unless
the broker or dealer has received, prior to the transaction, a written
agreement to the transaction from the person; and stating in a highlighted
format immediately preceding the customer signature line that the broker or
dealer is required to provide the person with the written statement and the
person should not sign and return the written statement to the broker or
dealer if it does not accurately reflect the person's financial situation,
investment experience and investment objectives and obtain from the person a
manually signed and dated copy of the written statement. A penny stock
means any equity security other than a security (i) registered, or approved
for registration upon notice of issuance on a national securities exchange
that makes transaction reports available pursuant to 17 CFR 11Aa3-1 (ii)
authorized or approved for authorization upon notice of issuance, for
quotation in the NASDAQ system; (iii) that has a price of five dollars or
more or . . . . (iv) whose issuer has net tangible assets in excess of
$2,000,000 demonstrated by financial statements dated less than fifteen
months previously that the broker or dealer has reviewed and has a reasonable
basis to believe are true and complete in relation to the date of the
transaction with the person. Consequently, the rule may affect the ability
of broker-dealers to sell the Company's securities and also may affect the
ability of purchasers in this Offering to sell their shares in the secondary
market. See "Market for Registrant's Common Equity and Related Stockholder
Matters - Broker-Dealer Sales of Company's Securities."

- ----------------------------------------------------------
TERMS OF OFFERING
- ----------------------------------------------------------

Plan of Distribution. The Company hereby offers up to 1,500,000 Common Shares
at the purchase price of $2.50 per Common Share. The Common Shares are
being offered on a "direct participation" basis by the Company (employees,
officers and directors) and possibly selected broker-dealers. The employees,
officers and directors who shall sell the offering on behalf of the Company
are Jay L. King, Steven Blad, Glen (Tom) Pickell, David Sampson and Norman
Kelln. These individuals will be relying on the safe harbor in Rule 3a4-1 of
the Securities Exchange Act of 1934 to sell the Company's securities.
No sales commission will be paid for Common Shares sold by the Company.
Selected broker-dealers shall receive a sales commission of up to 10% for any
Common Shares sold by them. The Company reserves the right to withdraw,
cancel or reject an offer in whole or in part. The Common Shares offered
hereby will not be sold to insiders, control persons, or affiliates of the
Company. There are no plans, proposals, arrangements or understandings with
any potential sales agent with respect to participating in the distribution
of the Company's securities. When, in the future, assuming such
participation develops, the registration statement will be amended to
identify such persons.

<PAGE>36

The Company, through its officers and directors, will undertake a direct
participation self-underwritten offering at the same time as the selling
shareholders will be selling their registered shares. Officers and
directors of the Company are participating as selling shareholders. Current
officers and directors and Richard Huson, a principal shareholder have
entered into written agreements not to sell their Common Shares until the
Company's offer is fully subscribed. The Company is not selling any Common
Shares on behalf of Selling Shareholders and has no control or affect on the
1,605,530 Common Shares of these Selling Shareholders which are not subject
to any lock-up agreement. The offering of securities by these Selling
Shareholders will occur regardless of the outcome of the primary offering by
the Company.

Other than the written agreements with the current officers and directors,
the Company has not taken any measures to delay the offering by Selling
Shareholders until after the completion of the primary offering by the
Company. The demand for the Company's Common Stock may be decreased due to
the large number of Common Shares being sold in the secondary offering by the
Selling Shareholders. Due to the fact that the secondary offering will be
conducted contemporaneously with a primary offering by the Company, the
market price of the Company's common stock (upon commencement of trading) may
be less than the offering price of $3.50. Conflicts of interests may arise
due to the fact that the primary offering of the Company and the secondary
offering of the Selling Shareholders will be conducted contemporaneously.
The Company shall concentrate its sales efforts in the period immediately
after the effective date of the offering until the Company's Common Stock is
listed on the OTC Bulletin Board. Additionally, the Company may pursue
alternate financing to avoid said conflict of interests once trading of its
Common Stock commences.

The Selling Shareholders may sell the Common Shares offered hereby in one or
more transactions (which may include "block" transactions in the over-the-
counter market, in negotiated transactions or in a combination of such
methods of sales, at fixed prices which may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The Selling Shareholders may effect such
transactions by selling the Shares directly to purchasers, or may sell to or
through agents, dealers or underwriters designated from time to time, and
such agents, dealers or underwriters may receive compensation in the form of
discounts, concessions or commissions from the Selling Shareholders and/or
the purchaser(s) of the Common Shares for whom they my act as agent or to
whom they may sell as principals, or both. The Selling Shareholders and
any agents, dealers or underwriters that act in connection with the sale of
the Common Shares might be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act, and any discount or commission received
by them and any profit on the resale of the Common Shares as principal might
be deemed to be underwriting discounts or commissions under the Securities
Act.

The Company is not aware of any current or future plans, proposals,
arrangements or understandings by any Selling Shareholders to distribute
their registered shares of Common Stock of the Company to their respective
outstanding shareholders or partners.

The Company is not aware of any plans, arrangements or understandings by any
Selling Shareholders to sell their registered shares of Common Stock to any
particular individual(s) or to use such registered shares to satisfy
contractual obligations.

The Company will receive no portion of the proceeds from the sale of the
Common Shares by the selling shareholder and will bear all of the costs
relating to the registration of this Offering (other than any fees and
expenses of counsel for the Selling Shareholders). Any commissions,
discounts or other fees payable to a broker, dealer, underwriter, agent or
market maker in connection with the sale of any of the Common Shares will be
borne by the Selling Shareholders.

<PAGE>37

Determination of Offering Price. The offering price and other terms
of the Common Shares were arbitrarily determined by the Company after
considering the total offering amount needed and the possible dilution to
existing and new shareholders.

Offering Procedure. This Offering will terminate on or before
January 31, 1998. In the Company's sole discretion, the offering of
Common Shares may be extended for up to three Thirty day periods, but in
no event later than April 30, 1998.

Subscription Procedure. The full amount of each subscription will be
required to be paid with a check payable to the Company in the amount of
the subscription. Such payments are to be remitted directly to the Company
by the purchaser or by the soliciting broker/dealer before 12:00 noon, on the
following business day, together with a list showing the names and
addresses of the person subscribing for the offered Common Shares or
copies of subscribers confirmations.

No Escrow Account. There is no minimum offering amount and no escrow
account. As a result, any and all offering proceeds will be deposited
directly into the operating account of the Company.

- --------------------------------------------------------------
DESCRIPTION OF SECURITIES
- --------------------------------------------------------------

Qualification. The following statements constitute brief summaries of the
Company's Certificate of Incorporation and Bylaws, as amended. Such
summaries do not purport to be complete and are qualified in their entirety
by reference to the full text of the Certificate of Incorporation and Bylaws.

The Company's articles of incorporation authorize it to issue up to
20,000,000 Common Shares. Shares of common stock purchased in this offering
will be fully paid and non-assessable. There are no provisions in the
Company's articles of incorporation or By-Laws that would delay, defer or
prevents a change-in-control of the Company.

Pursuant to Section 23B.19.040 of the Revised Code of Washington, a target
corporation shall not engage in any significant business transaction for a
period of five years following the acquiring person's share acquisition time
unless the significant business transaction or the purchase of shares made by
the acquiring person is approved prior to the acquiring person's share
acquisition time by a majority of the members of the board of directors of
the target corporation. Additionally, Section 23B.11.030 of the Revised
Code of Washington requires that shareholder approval be obtained to approve
any plan of merger or share exchange. These provisions could delay, defer
or prevent a change-in-control of the Company.

Common Stock. There are presently outstanding 6,179,944 Common Shares. As a
result, up to 7,679,944 Common Shares will be outstanding upon completion of
this Offering. This does not include 75,000 Common Shares reserved for
issuance pursuant to loan conversion options, 593,000 shares reserved for
issuance to key employees and others pursuant to outstanding options and
commitments.

Holders of Common Shares of the Company are entitled to cast one vote for
each share held at all shareholders meetings for all purposes. There are no
cumulative voting rights. Upon liquidation or dissolution, each outstanding
Common Share will be entitled to share equally in the assets of the Company
legally available for distribution to shareholders after the payment of all
debts and other liabilities. Common Shares are not redeemable, have no
conversion rights and carry no preemptive or other rights to subscribe to or
purchase additional Common Shares in the event of a subsequent offering. All
outstanding Common Shares are, and the shares offered hereby will be when
issued, fully paid and non-assessable.

There are no limitations or restrictions upon the rights of the Board of
Directors to declare dividends out of any funds legally available therefor.
The Company has not paid dividends to date and it is not anticipated that any
dividends will be paid in the foreseeable future. The Board of Directors
initially may follow a policy of retaining earnings, if any, to finance the
future growth of the Company. Accordingly, future dividends, if any, will
depend upon, among other considerations, the Company's need for working
capital and its financial conditions at the time.

Warrants. In July, 1996, the Board of Directors authorized the
distribution of 200,000 A Warrants each exercisable into one Common Share of
the Company at the exercise price of $3.75 per Common Share, 200,000 B
Warrants each exercisable into one Common Share of the Company at the
exercise price of $4.00 per Common Share and 250,000 C Warrants each
exercisable into one Common Share of the Company at the exercise price of
$6.00 per Common Share. The A, B and C Warrants are exercisable for a
period of four years from July, 1996 and are callable with 30 days
notice at a price of $.001 per warrant. The Warrants have the same
expiration period, which the Board of Directors arbitrarily determined was
sufficient in length to allow for the growth of the Company such that the
Warrants could be deemed attractive to current Warrantholders for exercise.
These distributions were be made to the owners of record of Common Shares on
the books of the Company as of July 22, 1996.

<PAGE>38

In June 1997, the Company authorized the issuance of 200,000 Class D
Warrants. The D Warrants are exercisable into one common share at the
purchase price of $1.50. The D Warrants shall be exercisable for a period
of two years from January 31, 1997 and shall be redeemable by the Company at
$.001 per D Warrant upon thirty days notice. To date, all of the Class D
Warrants have been exercised.

The Company is registering the stock underlying its A, B and C Warrants on
behalf of its selling security holders.

Transfer Agent. The Company acts as its own transfer agent. Subsequent to
the offering, the Company shall retain a separate transfer agent.

- -----------------------------------------------------------
LEGAL MATTERS
- -----------------------------------------------------------
The due issuance of the Common Shares offered hereby will be opined upon for
the Company by J. M. Walker, Attorney-At-Law, in which opinion Counsel will
rely on the validity of the Certificate and Articles of Incorporation issued
by the State of Washington, as amended and the representations by the
management of the Company that appropriate action under Washington law has
been taken by the Company.

- --------------------------------------------------------
LEGAL PROCEEDINGS
- --------------------------------------------------------

The Company is not involved in any legal proceedings as of the date of this
Prospectus.

- --------------------------------------------------------
EXPERTS
- --------------------------------------------------------

The audited financial statements included in this Prospectus have been so
included in reliance on the report of Winter, Scheifley & Associates, Inc.,
P.C., Certified Public Accountants, on the authority of such firm as experts
in auditing and accounting.

- --------------------------------------------------------
INTERESTS OF NAMED
EXPERTS AND COUNSEL
- --------------------------------------------------------

None of the experts or counsel named in the Prospectus are affiliated with
the Company.

<PAGE>39

INDEPENDENT AUDITOR'S REPORT

Board of Directors and Stockholders
Casinovations Incorporated
(A Development Stage Company)

We have audited the balance sheet of Casinovations Incorporated as of
December 31, 1997, and the related statements of income, changes in
stockholders' equity, and cash flows for each of the two years in the
period then ended and for the period from inception (April 29, 1994)
to December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above, present
fairly, in all material respects, the financial position of
Casinovations Incorporated as of December 31, 1997, and the results
of its operations and cash flows for each of the two years in the
period then ended and for the period from inception (April 29, 1994)
to December 31, 1997, in conformity with generally accepted
accounting principles.

The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in
Note 11 to the financial statements, the Company has suffered
recurring losses from operations, maintains a stockholders' deficit
and has made significant commitments, which raise substantial doubts
about its ability to continue as a going concern. Management's plans
in regard to these matters are also described in Note 11. The
financial statements do not include any adjustments that might result
from the outcome of this uncertainty.

James E. Scheifley & Associates, P.C.
Certified Public Accountants

Englewood, Colorado
February 5, 1998

<PAGE>40
Casinovations Incorporated
(A Development Stage Company)
Balance Sheet
December 31, 1997

ASSETS
<TABLE>

Current assets:
<S> <C>
Cash $ 119,389
Accounts receivable, trade 75
Accounts receivable - employees 18,085
Inventories 129,695
Inventories subject to capital leases 52,598
Prepaid expenses 40,000
_______
Total current assets 359,842

Property and equipment subject to capital lease
at cost, net ofaccumulated depreciation
of $22,749 279,861

Leasehold improvements, at cost net of
accumulated amortization of $2,383 4,966

Intangible assets, at cost, net of
accumulated amortization of $18,095 158,167
Deposits 47,719

$ 850,555
===========
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Note payable - bank $ 197,500
Notes payable - other 75,000
Current portion of leases payable 153,851
Accounts payable 406,944
Accounts payable - related party 35,367
Accrued wages 37,563
Accrued interest 26,315
Customer deposits 17,309
Shareholder loans 441,017
_________
Total current liabilities 1,390,866

Convertible debentures 100,000
Leases payable - non-current 293,249

Stockholders' equity:
Common stock, $.001 par value,
20,000,000 shares authorized,
6,179,638 shares issue and outstanding 6,180
Additional paid-in capital 3,970,070
Unpaid subscriptions to common stock (66,500)
Accumulated deficit (4,843,310)
__________
(933,560)
__________
$ 850,555
===========

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>41

Casinovations Incorporated
(A Development Stage Company)
Statements of Operations
Years Ended December 31, 1997 and 1996
and Period From Inception (April 29, 1994) to December 31, 1997

<TABLE>
<CAPTION>
Period from
Inception
(April 29, 1994)
to
December 31, December 31, December 31,
1997 1996 1997
___________ ____________ ____________
<S> <C> <C> <C>

Sales $ 2,226 $ 2,450 $ 4,961
Interest income 8,290 - 10,083
Other income 3,000 1,803 3,010
_____ _____ ______
13,516 4,253 18,054

Other costs and expenses:
General and administrative 1,826,250 977,827 3,042,080
General and administrative - - 52,313 76,768
related parties
Research and development 464,304 244,117 1,171,260
_________ _______ _________
2,290,554 1,274,257 4,290,108
_________ _________ _________

(Loss) from operations (2,277,038) (1,270,004) (4,272,054)

Interest expense 34,515 14,780 49,295
Interest expense - related parties 294,518 399,943 674,347
_______ _______ _______
329,033 414,723 723,642

(Loss) before income taxes (2,606,071) (1,684,727) (4,995,696)
Provision for income taxes - - -
__________ __________ ___________

Net (loss) $(2,606,071) $(1,684,727) $(4,995,696)
============ =========== ============

Basic (loss) per share $ (0.47) $ (0.41) $ (1.19)
============ ============ =============

Weighted average shares outstanding 5,603,588 4,133,909 4,215,522
============ ============ =============
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>42
Casinovations Incorporated
(A Development Stage Company)
Statement of Changes in Stockholders' Equity
For the Period From Inception (April 29, 1994) to December 31, 1997
<TABLE>
<CAPTION>
Deficit
Additional Unpaid Accumulated
Common Stock Paid -in Stock During Develop-
ACTIVITY Shares Amount Capital Subscriptions ment Stage Total
<S> <C> <C> <C> <C> <C> <C>
Capital contributed by partners - $ - $ 101,845 $ - $ - $101,845

Net (loss) for the period - - - - (96,141) (96,141)
---------- ---------- ---------- ---------- ---------- ---------
Balance, December 31, 1994 - - 101,845 - (96,141) 5,704

Issue shares to founders
(September 1995) 3,775,000 3,775 297,330 301,105

Issuance of stock in private sales:
October 1995 at $1.00 130,000 130 129,870 130,000
(less cost of offering) (7,206) (7,206)

Net (loss) for the year - - - (608,757) (608,757)
Reclassification of partnership losses (152,386) 152,386 -
---------- ---------- ---------- ---------- ---------- --------
Balance, December 31, 1995 3,905,000 3,905 369,453 - (552,512) (179,154)

Issuance of stock foe cash in private sales:
March 1996 at $1.50 20,000 20 29,980 30,000
April 1996 at $1.50 10,000 10 14,990 15,000
July 1996 at $1.50 10,000 10 14,990 15,000
October 1996 at $1.50 86,000 86 128,914 129,000
November 1996 at $1.50 302,400 302 453,298 453,600
December 1996 at $1.50 63,110 63 94,602 94,665

Issuance of stock for services:
June 1996 at $1.50 30,000 30 44,970 45,000
October 1996 at $1.50 35,000 35 52,465 52,500
December 1996 at $1.50 175,000 175 262,325 262,500

Issuance of stock to related party
for debt conversion 327,000 327 490,173 490,500

Option granted to related party for
debt conversion 232,500 232,500

Net (loss) for the year - - - - (1,684,727) (1,684,727)
--------- --------- --------- ---------- ---------- ---------
Balance, December 31, 1996 4,963,510 4,964 2,188,659 - (2,237,239) (43,616)

Issuance of stock for cash in private sales:
January 1997 at $1.50 236,667 237 354,764 355,001
May 1997 at $1.50 120,339 120 180,388 180,509
June 1997 at $1.50 43,000 43 64,457 64,500
July 1997 at $1.50 77,000 77 115,423 115,500
(plus compensation effect of shares
issued at a discount) 77,000 77,000

Exercise of common stock warrants for cash:
September 1997 at $1.50 100,000 100 149,900 150,000
October 1997 at $1.50 100,000 100 149,900 150,000
(plus compensation effect of shares
issued at a discount) 100,000 100,000

Issuance of stock for future services:
February 1997 at $1.50 135,000 135 202,365 (187,500) 15,000
June 1997 at $1.50 20,000 20 29,980 (30,000) -
Amortization of unpaid stock
subscriptions 136,000 136,000

Issuance of stock to related party
for debt conversion
March 1997 at $1.50 45,122 45 67,638 67,683
December 31, 1997 at $.82 339,000 339 277,891 278,230
(plus additional interest effect of
Shares issued at a discount 11,705 11,705
Common stock subscribed for services
in May 1997 at $1.50 15,000 15,000

Net (loss) for the year - - - - (2,606,071) (2,606,071)
----------- --------- --------- --------- ---------- ---------
Balance, December 31, 1996 6,179,638 $ 6,180 $ 3,970,070 $ (66,500) $(4,843,310) $ (933,560)
=========== ========= =========== ========== ========== =========
</TABLE>
See accompanying notes to financial statements.

<PAGE>43

Casiovations Incorporated
(A Development Stage Company)
Statements of Cash Flows
Years Ended December 31, 1997 and 1996
Period From Inception (April 29, 1994) to December 31, 1997

<TABLE>
<CAPTION>
Inception
(April 29, 1994)
to
December 31, 1997 December 31, 1996 December 31, 1997
----------------- ----------------- ------------------
<S> <C> <C> <C>
Net (loss) $ (2,606,071) $ (1,684,727) $ (4,995,696)
Adjustments to reconcile net (loss) to net
cash used in operating activities:
Depreciation and amortization 40,262 2,553 4,489
Stock and options issued for services 136,000 700,500 911,500
Compensation value of cash stock sales 177,000 - 177,000
Stock and options issued for additional interest 117,332 - 117,332
Equipment exchanged for services - 2,903 2,903
Amortization of deferred interest 186,000 46,500 232,500
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (15,327) (2,833) (18,160)
(Increase) decrease in inventory (181,437) - (182,293)
(Increase) decrease in prepaid expenses (39,276) (300) (40,000)
(Increase) decrease in other assets (41,600) (6,119) (47,719)
Increase (decrease) in accounts payable 335,459 (73,330) 442,311
Increase (decreae) in accrued expenses (57,809) 127,596 84,187
___________ _____________ ____________
Total adjustments 656,604 797,470 1,724,050
___________ _____________ ____________

Net cash (used in)
operating activities (1,949,467) (887,257) (3,271,646)
____________ _____________ ______________

Cash flows from investing activities:
Acquisition of plant and equipment (296,156) (12,969) (315,403)
Increase in patents and trademarks (29,110) (65,781) (174,983)
____________ ______________ _______________
Net cash (used in) investing activities (325,266) (78,750) (490,386)

Cash flows from financing activities:
Common stock sold for cash 1,015,510 887,265 1,950,569
Capital contributions by partners - - 402,950
Proceeds from long-term debt 547,100 - 619,100
Proceeds of shareholders loans 120,000 630,168 770,168
Repayment of shareholder loans (38,866) - (58,866)
Proceeds from notes payable 197,500 - 197,500
___________ _______________ ________________
Net cash provided by
financing activities 1,841,244 1,517,433 3,881,421
____________ ________________ ________________

Increase (decrease) in cash (433,489) 551,426 119,389
Cash and cash equivalents,
beginning of period 552,878 1,452 -
___________ ________________ _________________
Cash and cash equivalents,
end of period $ 119,389 $ 552,878 $ 119,389
=================== ========================= =====================
</TABLE>

See accompanying notes to consolidated financial statements

<PAGE>44

Casinovations Incorporated
Notes to Financial Statements
December 31, 1997 and 1996

Note 1. ORGANIZATION

The Company was incorporated on September 20, 1995, in the State of
Washington. The Company is in the business of developing and
distributing products related to the gaming industry. The Company
has not recorded significant revenues to date and is considered to be
in its development stage. The Company's principal products are an
electronic card shuffling device, a table game similar to the card
game "blackjack", and playing cards designed to assist the dealer in
the game of "blackjack". The Company also has secured a license
agreement to develop and market an electronically identified coin
collection box for use with coin operated gaming devices. The
Company is a continuation of a partnership known as Sharps
International, (Sharps) which was formed in April 1994 and whose
principal business activity was the development of an electronic card
shuffler. Pursuant to a funding agreement dated January 15, 1996,
the partners of Sharps received shares of the Company's common stock
on a pro rata basis in exchange for their partnership interests. The
assets and liabilities of Sharps have been carried forward at their
historical basis. Additional shares were issued to partners of the
Sines-Forte general partnership (Sines) in exchange for the assets of
Sines. Such assets consisted of certain intellectual property rights
for products which the Company plans to exploit. The transaction was
accounted for as a reorganization of partnerships into corporate
form since the controlling interests of the partnerships are also controlling
shareholders of the Corporation. The foregoing financial statements present
the operations of the Company and the partnerships from their inception.
Values assigned to the acquired intellectual property rights are limited to
professional fees paid for patents and trademarks. Sines retains a royalty
interest in certain intellectual property transferred as described in Note 9.

SIGNIFICANT ACCOUNTING POLICIES

Estimates
The preparation of the Company's financial statements requires
management to make estimates and assumptions that effect the amounts
reported in the financial statements and accompanying notes. Actual
results could differ from these estimates.

Inventory
Inventory is stated at the lower of cost or market using the first
in, first out method. Finished goods include raw materials, direct
labor and overhead. Raw materials include purchase and delivery
costs. Inventory consists of the following at December 31, 1997

Raw materials $ 3,725
Work in progress 147,368
Finished goods 31,200
----------
$ 182,293

Substantially all of the Company's inventory is produced by an
independent manufacturer of electronic devices. Work in progress at
is located at facilities owned by the manufacturer.

A portion of the Company's inventory is pledged as collateral for
leases as described in Note 5.

Property and equipment
Property and equipment are carried at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the
assets. When assets are retired or otherwise disposed of, the cost
and the related accumulated depreciation are removed from the

<PAGE>45

accounts, and any resulting gain or loss is recognized in operations
for the period. The cost of repairs and maintenance is charged to
operations as incurred and significant renewals or betterments are
capitalized.

Useful lives for property and equipment are as follows:

Office equipment 5 years
Computer software 3 years
Tooling 7 years
Leasehold improvements 2 years

Intangible assets
The Company has applied for patents for certain of its products.
Patent and trademark costs aggregating $169,868 are amortized using
the straight line method over a period of ten years beginning in
1997. Amortization for the year ended December 31, 1997 amounted to
$15,537.

Organization costs aggregating $6,395 are amortized using the
straight line method over a period of five years and are stated net
of accumulated amortization of $2,558 at December 31, 1997 and
amortization expense in each of the two years then ended amounted to
$1,279.

The Company makes reviews for the impairment of long-lived assets and
certain identifiable intangibles whenever events or changes in
circumstances indicate that the carrying amount of an asset may not
be recoverable. Under SFAS No. 121, an impairment loss would be
recognized when estimated future cash flows expected to result from
the use of the asset and its eventual disposition is less than its
carrying amount. No such impairment losses have been identified by
the Company for the 1997 and 1996 fiscal years.

Loss per share:
In February 1997, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 128, "Earnings Per Share." SFAS No. 128 supersedes
and simplifies the existing computational guidelines under Accounting
Principles Board ("APB") Opinion No. 15, "Earnings Per Share."

The statement is effective for financial statements issued for
periods ending after December 15, 1997. Among other changes, SFAS
No. 128 eliminates the presentation of primary earnings per share and
replaces it with basic earnings per share for which common stock
equivalents are not considered in the computation. It also revises
the computation of diluted earnings per share. The Company has
adopted SFAS No. 128 and there is no material impact to the Company's
earnings per share, financial condition, or results of operations.
The Company's earnings per share have been restated for all periods
presented to be consistent with SFAS No. 128.

The basic loss per share is computed by dividing the net loss for the
period by the weighted average number of common shares outstanding
for the period. Loss per share is unchanged on a diluted basis since
the assumed exercise of common stock equivalents would have an anti-
dilutive effect.

Revenue recognition:
The Company recognizes revenue from the sale of its products upon
shipment to the customer. Sales returns and allowances are recorded
after returned goods are received and inspected. The Company expects
to begin sales of its products in 1998 and plans to provide currently
for estimated product returns arising therefrom.

Statement of cash flow information
Cash and cash equivalents consist of cash and other highly liquid
debt instruments with a maturity of less than three months. Cash
paid for interest expense amounted to $64,260 for the year ended
December 31, 1997.

Fair value of financial instruments
The Company's short-term financial instruments consist of cash and cash
equivalents, accounts and loans receivable, and accounts payable and
accruals. The carrying amounts of these financial instruments
approximates fair value because of their short-term maturities.
Financial instruments that potentially subject the Company to a
concentration of credit risk consist principally of cash and accounts
receivable, trade. During the year the Company maintained cash
deposits at financial institutions in excess of the $100,000 limit
covered by the Federal Deposit Insurance Corporation.

Advertising
Advertising expenses are charged to expense upon first showing.
Amounts charged to expense were $17,393 and $733 for the years ended
December 31, 1997 and 1996, respectively.

Stock-based Compensation
The Company adopted Statement of Financial Accounting Standard No. 123
(FAS 123), Accounting for Stock-Based Compensation beginning with the
Company's first quarter of 1996. Upon adoption of FAS 123, the Company
continued to measure compensation expense for its stock-based employee
compensation plans using the intrinsic value method prescribed by APB
No. 25, Accounting for Stock Issued to Employees, and has provided in
Note 7 pro forma disclosures of the effect on net income and earnings
per share as if the fair value-based method prescribed by FAS 123 had
been applied in measuring compensation expense.

New Accounting Pronouncements
SFAS No. 130, "Reporting Comprehensive Income", establishes guidelines
for all items that are to be recognized under accounting standards as
components of comprehensive income to be reported in the financial
statements. The statement is effective for all periods beginning after
December 15, 1997 and reclassification of financial statements of
financial statements for earlier periods will be required for
comparative purposes. To date, the Company has not engaged in
transactions which would result in any significant difference between
its reported net loss and comprehensive net loss as defined in the
statement.

<PAGE>46

Note 2. Property and Equipment.

Property and equipment consist of the following at December 31, 1997:

Furniture and fixtures $ 31,110
Tooling 271,500
Leasehold improvements 7,349
----------
309,959
Accumulated depreciation and
amortization 25,132
----------
$ 284,827
==========

Depreciation expense charged to operations amounted to $23,446 and
$2,553 for the years ended December 31, 1997 and 1996, respectively

The Company owns tooling used in the manufacture of certain plastic
components of its shuffler product. The tooling maintained by an
independent manufacturer of such plastic components.

Substantially all of the Company's fixed assets secure debt described
in Note 5.

Note 3. NOTES PAYABLE

Note payable - bank consists of a $197,450 short term loan from a
bank secured during July 1997. The loan bears interest at 7.2% per
annum and is due on May 4, 1998. The loan is secured by a
certificate of deposit in the amount of $200,000 pledged as
collateral by a company to which the Company has issued its common
stock in exchange for consulting services. The collateral agreement
provides for additional interest costs associated with the loan
calculated at 8.5% of the certificate amount accrued ratably over its
200 day term. The agreement also contains a provision for one 200
day extension period and conversion provisions whereby the consultant
may elect to receive non-restricted shares of the Company's common
stock in lieu of cash repayment of the loan and accrued interest.

The number of conversion shares to be issued in the event of
conversion is to be determined at the conversion date, May 4, 1998
unless further extended, based on a quoted market price of the
common stock during a five day period prior to the conversion date.

Notes payable - others consist of two notes payable to individuals
having face amounts of $50,000 and $25,000. The notes, which were
secured during 1995 and are not collateralized, are due on demand and
accrue interest at 15% per annum.

Note 4. CONVERTIBLE DEBENTURES

During December 1997 and January 1998, the Company received proceeds
from unsecured convertible debentures aggregating $100,000 during
December 1997 and $400,000 during January 1998. The debentures bear
interest at 6% per annum and are due on or before January 31, 1999.
The principal amount of the debentures is convertible at the holder's
option into shares of the Company's common stock at a conversion
price of $2.98 per share

Note 5. LEASES PAYABLE

During December 1997 the Company entered into financing type lease
transactions with a leasing company whereby the Company sold and
leased back from the lessor all of its furniture and equipment,
tooling and a total of twenty six of its shuffler machines.

Scheduled maturities of the obligations as of December 31, 1997 are
as follows:

<PAGE>47

Property recorded under capital leases includes the following as of
December 31, 1997:

Note 6. SHAREHOLDER LOANS

During the year ended December 31, 1997 and 1996, certain officers
and shareholders made advances to the Company for working capital
purposes. The balances payable by the Company aggregated $441,017 at
December 31, 1997, including accrued interest. No cash repayments
were made against the advances, which are due on demand (except as
described below). An advance in the amount of $300,000 was made by a
principal shareholder of the Company on January 15, 1996. The advance
was due on July 15, 1996. The advance was collateralized by
partnership shares of Sharps equivalent to 700,000 shares of the
Company's common stock controlled by two other officer/shareholders.
On October 1, 1996, the principal shareholder exercised his rights
against the collateral and as a result, the collection rights to the
advance plus accrued interest, which aggregated $320,168 at October
1, 1996, transferred to the other officer/shareholders. The advances
accrue interest at between 9.5% and 14.5% per annum. One of the
advances in the amount of $250,000 from the Company's major
stockholder provides for repayment of the loan by December 31, 1997
or, upon default, at the option of the stockholder, by the issuance
of the Company's common stock at a conversion rate of $.82 per share.

The difference between this amount and the fair value of the stock at
the date of the loan ($1.50) was recorded as deferred interest during
1996 with a corresponding credit to paid-in capital. The deferred
interest ($186,000) was amortized as interest expense through
December 31, 1997. At December 31, 1997 the shareholder exercised
his conversion rights and the Company has recorded the issuance of
339,000 shares of its restricted common stock for the conversion of
the loan plus accrued interest. The conversion of the accrued
interest of $28,230 at $.82 per share has resulted in a provision of
additional interest of $11,705 to increase the value of the stock
issued to fair market value of $2.50 per share.

Another shareholder made a loan of $60,000 at 9 1/2% interest to the Company
in May 1996. The Note terms included conversion rights at $1.00 per share.
The shareholder elected to convert a portion of the loan to 45,122 shares of
stock in March 1997. The conversion was recorded by the Company at $1.50
per share, the market value at the date of conversion. The remaining
portion of the loan was paid off during March, 1997.

Note 7. STOCKHOLDERS' EQUITY

During the periods covered by these financial statements the Company
issued securities in reliance upon an exemption from registration
with the Securities and Exchange Commission. Although the Company
believes that the sales did not involve a public offering and that it
did comply with the exemptions from registration, it could be liable
for rescission of said sales if such exemption was found not to
apply.

The Company has not received a request for rescission of shares nor
does it believe that it is probable that its shareholders would
pursue rescission nor prevail if such action were undertaken

Upon formation of the corporation, (September 29, 1995) the Company
issued 2,513,000 shares of its $.001 par value common stock to the
partners of Sharps on a pro rata basis in exchange for their
respective partnership interests and 1,262,000 shares to the partners
of Sines for intellectual property rights as described in Note 1.

During October 1995 the Company sold 130,000 shares of its common
stock to a limited group of investors for cash at $1.00 per share.

During July 1996 the Company entered into a one year consulting
agreement with an entity whereby the entity would provide to the
Company financial consulting services. Pursuant to the agreement the
entity agreed to assist the Company in preparing a private placement
memorandum to obtain equity financing of a minimum amount of $450,000
and to assist the Company in completing the offering.

In exchange for these services the Company agreed to pay $45,000 in
cash and to issue 100,000 shares of its $.001 par value common stock
valued at $150,000. The Company also granted the consultant an

<PAGE>48

option to purchase 50,000 shares of common stock at $1.50 for a two
year period. During February 1997, the Company issued an additional
100,000 shares and granted options to purchase an additional 50,000
shares of common stock at $1.50 to the consultant for a one year
extension of the contract. The shares were valued at $150,000. The
100,000 options to purchase common stock were converted to common
stock purchase warrants during June, 1997. The Company has not
recorded compensation expense with respect to the replacement
warrants as the terms and conditions of the warrants, including
the expiration date, are identical to those of the original
options. The replacement warrants were exercised during October
1997 Additionally, in 1996, the Company issued 75,000 shares of its
$.001 par value common stock valued at $112,500 to other unrelated
individuals for consulting services provided to the Company. These
amounts have been included in general and administrative expenses in
1996 in the accompanying Statement of Operations.

During July 1996, the Company authorized the issuance of 200,000 each
of A, B, and 250,000 of C stock purchase warrants exercisable as
follows:

$ 4.00 plus one A warrant for each share of common stock
$ 6.00 plus one B warrant for each share of common stock
$ 8.00 plus one C warrant for each share of common stock

The warrants are exercisable for a period of 48 months from the date
of issue, and are callable with 30 days notice at a price of $.001
per warrant.

During March 1996 the Company began offering shares of its common
stock at $1.50 per share pursuant to a private placement. Through
December 31, 1996, the Company issued 491,510 shares of common stock
to private investors for net cash proceeds aggregating $737,265.

Additionally during 1996 the Company issued an aggregate of 290,000
shares (including the consulting shares described above) to
consultants and others. The shares were valued at fair value of
$1.50 per share.

During September, 1996 the Company agreed to issue 327,000 shares of
its common stock to its principal shareholder in exchange for
conversion of $150,000 of cash advanced to the Company during 1996.
The excess of the fair value of the stock at $1.50 per share over the
loan amount was charged to interest expense - related parties.

During the period ended December 31, 1997 the Company issued 677,006
shares of its common stock for cash aggregating $1,015,510 ($1,50 per
share)in connection with the continuation of its private sale of
common stock and the exercise of common stock warrants. One hundred
seventy seven thousand of the shares issued in July and October 1997
and were valued at $2.50 per share as the timing of their issuance
was considered to be contemporaneous with the Company's decision to
offer its common stock to the public at that price. The Company
recorded compensation expense of $1.00 per share for these shares.
Additionally, the Company issued 155,000 shares of common stock to
consultants and others for services valued at $232,500 ($1.50 per
share) and issued 45,122 shares for the conversion of debt of $45,122
to related parties pursuant to conversion provisions included in the
debt instruments. The difference between the conversion price for
the debt ($1.00 per share) and the fair value of the shares issued at
the conversion date in April 1997 ($1.50 per share) has been charged
to interest expense. The shares issued for services were for
consulting and advertising services to be provided to the Company
during 1997 and 1998. The unamortized amount of the services
amounted to $81,500 at December 31, 1997 and is included in the
caption "Unpaid stock subscriptions". This amount is offset by the
value of common stock subscribed for in exchange for services during
April 1997 ($15,000) for engineering services fully provided to the
Company at December 31, 1997.

The Company has an aggregate of 360,000 options to purchase common
stock at $1.00 per share (fair market value on the grant date) and
258,000 options to purchase common stock at $1.50 per share (fair
market value on the grant date) outstanding at December 31, 1997.

The weighted average fair value at the date of grant for options
granted during 1997 and 1996 as described above was $.35 per option
in 1997 and $.26 per option in 1996. The fair value of the options
at the date of grant was estimated using the Black-Scholes model with
assumptions as follows:

1997 1996
Market value $1.50 $1.50 - $1.00
Expected life in years 2- 5 2 5
Interest rate 6.56% - 6.25% 5.15% 5.15%
Volatility 10% 10% 10%
Dividend yield 0.00% 0.00% 0.00%

<PAGE>49

Stock based compensation costs would have increased pretax losses by
$89,184 ($.02 per share) and $105,209 ($.03 per share)in 1997 and
1996, respectively if the fair value of the options granted during
those years had been recognized as compensation expense.

Note 8. INCOME TAXES

Deferred income taxes may arise from temporary differences resulting
from income and expense items reported for financial accounting and
tax purposes in different periods. Deferred taxes are classified as
current or non-current, depending on the classification of assets and
liabilities to which they relate. Deferred taxes arising from
temporary differences that are not related to an asset or liability
are classified as current or non-current depending on the periods in
which the temporary differences are expected to reverse. The
deferred tax asset resulting from the operating loss carryforward
described below has been fully reserved.

The Company currently has net operating loss carryforwards
aggregating approximately $3,425,000 which expire beginning in 2010.
The principal difference between the Company's book operating losses
and income tax operating losses results from the issuance of common
stock during 1996 and 1997 for services and interest and options to
purchase common stock at less than fair market value in exchange for
debt conversion rights and other services.

Note 9. RELATED PARTY TRANSACTIONS

Certain officers of the Company who were partners of Sines retain a
3% royalty interest in the gross margin earned from the sale of
products covered by the intellectual property described in Note 1.
Royalty amounts due pursuant to the royalty interest amounted to $150
at December 31, 1997.

Additionally, the Company paid an aggregate of $71,210 in 1997 and
$2,479 in 1996 to a company controlled by one of its officers for
administrative services provided to the Company. At December 31,
1997, the Company had a balance due to this officer and the company
of $35,367. The Company incurred research and development costs
aggregating $244,117 during the year ended December 31, 1996 from a
company controlled by a member of its board of directors, and had a
balance due to this company of $59,784 at December 31, 1996.

During January 1997 the Company entered into a personal service
agreement with an officer which provides for aggregate monthly
compensation $7,500 per month. The agreement has a term of two years
and includes cash and stock option bonus provisions based upon the
Company's attainment of certain corporate goals. The Company has
accrued $11,250 of compensation due the officer pursuant to the cash
bonus provisions, however no grant of stock options has been
approved. An option to purchase up to 150,000 shares of common stock
at $1.50 per share is provided for in the contract upon approval.

During February 1997, the Company entered into a consulting agreement
with an officer which provides for monthly base salary of $12,500 and
a commission of 3.73% of the gross margin on sales attributable to
the officer.

The agreement has a term of two years and provides for options to
purchase up to 300,000 shares of the Company's common stock at $1.50
per share depending upon the achievement of certain corporate goals
as approved by the board of directors. No bonus options were approved for
the 1997 year however a cash bonus of $6,000 has been accrued at
December 31, 1997.

Note 10. COMMITMENTS AND CONTINGENCIES

During 1997, the Company contracted for the production of tooling for
certain plastic parts utilized in the manufacture of its shuffler by
an independent design and manufacturing company. The Company has
made payments of $271,500 for the tooling and has prepaid $40,000 as
an advance against an open purchase order with the manufacturer. The
purchase order requires the Company to purchase an aggregate of
$486,000 of the plastic parts through May 1999.

During October 1997, the Company entered into a license agreement
whereby the Company will develop and market an electronically
identified coin collection box for use with coin operated gaming
devices. The agreement provides for payments to the licensor for use
of certain intellectual property associated with the project as
follows:

1998 Fixed payment $ 80,000
Minimum royalties $ 50,000
1999 Minimum royalties $126,000
Thereafter $150,000

<PAGE>50

Royalties are to be based on a rate of $7.50 per unit sold that
incorporate the licensed technology. The Company made $20,000 of
fixed payments to the licensor in 1997 which amount has been charged
to research and development expense. The Company has the right to

terminate the agreement upon sixty days written notice to the
licensor should it determine that the technology may be unpatentable
or it is determined by the Company that the licensed products are
uneconomical. The Company plans to charge additional fixed payments
to research and development expense as they are made.

During October, 1996 (amended March 26, 1997), the Company entered
into a lease for office space for a thirty month period ending March
31, 1999 at a monthly rental of $2,694, including maintenance costs.
Rent expense was $32,328 and $8,939 for the years ended December 31,
1997 and 1996, respectively.

Future minimum rentals under the lease are as follows:

1998: $32,328 1999: $8,082

The Company has granted joint exclusive licenses to two entities for
marketing rights to one of its products which provide for royalty
payments to the Company of $.04 and $.075 per unit sold. Amounts
paid pursuant to the licenses have not been material.

The Company's primary business activity since its inception has been
the completion of research and development for its electronic
shuffling machine. Substantially all of the costs associated with
this research and development through December 31, 1996 had been paid
to an engineering and design company whose principal shareholder is a
member of the Company's board of directors. A prototype shuffling
machine was delivered to the Company during 1996. The Company
believes that it has fulfilled its contractual obligations to the
design company and has retained the services of another company for
refinements to the prototype and commencement of manufacture of the
device. Manufacture of the device began during September of 1997
with the placement of orders for parts necessary to complete one
hundred units and at December 31, 1997 fifteen units had been
completed. The Company's ability to complete its development stage
and begin product sales is dependent upon the successful manufacture
of commercial quantities of its products .

Note 11 BASIS OF PRESENTATION

The accompanying financial statements have been prepared on a "going
concern" basis which contemplates the realization of assets and the
liquidation of liabilities in the ordinary course of business.

The Company has incurred operating losses during the years ended
December 31, 1997 and 1996 aggregating $2,606,071 and $1,684,727,
respectively. Additionally, the Company has a stockholders' deficit
of $933,560 and negative working capital of $1,031,024 ($590,007
exclusive of shareholder loans) at December 31, 1997.

Profitable operations are dependent upon, among other factors, the
Company's ability to obtain equity or debt financing and the
Company's ability to finance, produce and sell its shuffler product.
Management plans to continue its efforts to complete a public
offering of its common stock at $2.50 per share and the Company's
principal shareholder has continued to fund the Company's operating
cash requirements on an interim basis.

<PAGE>51
PART II
INFORMATION NOT REQUIRED BY PROSPECTUS

Item 24. Indemnification of Officers and Directors.

The By-Laws of the Company provides that a director of the registrant
shall have no personal liability to the Registrant or its stockholders for
monetary damages for breach of a fiduciary duty as a director, except for
liability (a) for any breach of the director's duty of loyalty to the
Registrant or its stockholders, (b) for acts and omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, and
(c) pursuant to Canadian law for any transaction form which the director
derived an improper personal benefit. Registrant's By-Laws exculpates and
indemnifies the directors, officers, employees, and agents of the registrant
from and against certain liabilities. Further the By-Laws also provides that
the Registrant shall indemnify to the full extent permitted under Canadian
law any director, officer employee or agent of Registrant who has served as
a director, officer, employee or agent or the Registrant or, at the
Registrant's request, has served as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise.

Item 25. Other Expenses of Issuance and Distribution.

Other expenses in connection with this offering which will be paid
by Casinovations Incorporated (hereinafter in this Part II referred to as
the "Company") are estimated to be substantially as follows:
<TABLE>
Amount
Payable
Item By Company
<S> <C>
S.E.C. Registration Fees 3,919.53
State Securities Laws (Blue Sky) Fees and Expenses 3,500.00
Printing and Engraving Fees 7,500.00
Legal Fees 15,000.00
Accounting Fees and Expenses 8,000.00
Transfer Agent's Fees 1,500.00
Miscellaneous 2,500.00
---------

Total 41,919.53
</TABLE>

Item 26. Recent Sales of Unregistered Securities.

In September, 1995, the Company issued common shares to the partners of
Sharps on a pro rata basis in exchange for their respective partnership
interests. These issuances were made in reliance on Section 4(2) by
Registrant's management to sophisticated investors who had access to
information on the Company necessary to make an informed investment decision.

<TABLE>
<CAPTION>
Name Total Number
of Shares Date Issued
<S> <C> <C>

Stacy Haskins 15,478 9/1/95
Martin Petri 15,478 9/1/95
Michael Szeremeta 15,477 9/1/95
Sines-Forte Partnership 1,261,900 9/1/95
Cheryl Forte 254,610 9/1/95
Richard S. Huson 1,025,285 9/1/95
Leonard A. Hale 15,478 9/1/95
David A. Krise 61,910 9/1/95
Norman G. Kelln 113,628 9/1/95
John F. Curran 10,193 9/1/95
Randy D. Sines 254,610 9/1/95
David E. Sampson 40,955 9/1/95
</TABLE>

During October, 1995, the Company issued 130,000 for cash consideration of
$130,000. These issuances were made in reliance on Section 4(2) by
Registrant's management to sophisticated investors who had access to
information on the Company necessary to make an informed investment decision.

<PAGE>52

<TABLE>
<CAPTION>
Name Total Number Cash
of Shares Date Issued Consideration
<S> <C> <C> <C>
Jay Willoughby 50,000 10/6/95 $50,000
David Goldsmith 50,000 10/6/95 $50,000
C. Culver Smith 30,000 10/27/95 $30,000
</TABLE>

From March 15, 1995 to January 28, 1997, the Company pursued a private
placement at $1.50 per common shares and issued a total of 828,177 to the
following individuals for aggregate cash consideration of $1,232,265.50.
These issuances were made in compliance with Rule 505, Regulation D of the
Securities Act of 1933 by Registrant's management, consultants and selected
broker/dealers. No commissions or other remuneration was paid to anyone.
No general solicitation was utilized. All of the investors were accredited
investors. The determination of whether an investor was accredited or
nonaccredited was based on the responses in the subscription agreement filled
out by each investor.

<TABLE>
Name Total Number Cash
of Shares Date Issued Consideration
<S> <C> <C> <C>
Don Ludwick 20,000 3/26/96 $30,000
William Martin 10,000 4/12/96 $15,000
Adam Chase 10,000 7/11/96 $15,000
Adam W. Jaslow 30,000 10/25/96 $45,000
Jennifer L. Jaslow 100,000 10/25/96 $150,000
John Horstmann 6,000 10/25/96 $9,000
Richard S. Jaslow, IRA 100,000 11/1/97 $150,000
Lori K. Jaslow Trust 20,000 11/1/96 $30,000
Adam Jaslow Trust 70,000 11/1/96 $105,000
John Plati 20,000 11/12/96 $30,000
Doris Ljubicich 3,400 11/12/96 $5,100
Joseph Hroncich 3,000 11/12/96 $4,500
John S. Cole 3,000 11/12/96 $4,500
Vito Bavaro 3,000 11/12/96 $4,500
Lori K. Jaslow, Trust 80,000 11/14/96 $120,000
Kevo Plumbing & Heating 10,000 11/16/96 $20,000
Tami L. Dirienzo 6,000 11/16/96 $9,000
Peter Jankowski 10,000 11/16/96 $15,000
Renaldo C. Forcellati 3,000 11/16/96 $4,500
Frank Stein 3,000 11/16/96 $4,500
Joan Carranza 3,000 11/16/96 $4,500
Joseph Criscione Sr. 3,000 11/16/96 $4,500
Paul M. Reichenberg 6,000 11/16/96 $9,000
Kathleen M. Mahaffey 3,000 11/16/96 $4,500
Balieri Associates 3,000 11/16/96 $4,500
William S. Dean 6,000 12/1/96 $9,000
Victor & Lana Woinski 3,000 12/11/96 $4,500
James J. & Sheila Criscione 3,000 12/11/96 $4,500
Catherine O'Connell 3,400 12/11/96 $5,100
Joseph & Ida Dellaroba 3,000 12/11/96 $4,500
Mark R. Alleman 3,000 12/11/96 $4,500
William Megnin 3,400 12/11/96 $5,100
James P. Rose 3,000 12/11/96 $4,500
Mark Megnin 3,000 12/11/96 $4,500
Danial Morgan & Sara
Andelina 3,010 12/11/96 $4,515
Richard P. Keshishian 3,000 12/11/96 $4,500
Robert Jouas 4,000 12/11/96 $6,000
David E. & Margaret Winkelman 3,000 12/11/96 $3,000
Carl & Birte Mainardi 3,400 12/11/96 $5,100
Mark Megnin & Helen Connor 3,400 12/11/96 $5,100
Paul S. & Renee Spiegler 6,500 12/11/96 $9,750
Diana Forcellati 3,000 12/16/96 $4,500
Richard Napolitano 3,000 12/11/96 $4,500
Jeremy B. & W. Stern 10,000 1/6/97 $15,000
Aldo R. Beretta 1993
Family Trust 10,000 1/6/97 $15,000
Dr. David Ade 10,000 1/6/97 $15,000
Michael Schaeffer 10,000 1/6/97 $15,000
Joseph & Julie Vaccaro 7,000 1/6/97 $10,500
George & Selma Spiegler 3,000 1/6/97 $4,500
Susan Jaslow 50,000 1/27/97 $75,000
Maria Cunha IRA 8,500 1/28/97 $12,750
Henry and John Horstmann 8,000 1/28/97 $12,000
Antonio Tommolillo 3,000 1/28/97 $4,500
Salvatore LaCognata 3,000 1/28/97 $4,500
Harry & Adele Conti 3,000 1/28/97 $4,500
Nicola Attanasio 5,000 1/28/97 $7,500
Lawrence Mendosa 5,000 1/28/97 $7,500
Janet Ausiello 5,000 1/28/97 $7,500
Michael Ausiello 5,000 1/28/97 $7,500
Mark Malzberg 6,000 1/28/97 $9,000
Laura Giostra 6,700 1/28/97 $10,050
David Lupo 3,000 1/28/97 $4,500
Peter O'Hare, Jr. 4,000 1/28/97 $6,000

<PAGE>53

Giovanni Granata 3,000 1/28/97 $4,500
Mario Tommolillo 4,000 1/28/97 $6,000
Jeffrey Kerne 6,000 1/28/97 $9,000
Gino Ramundo 6,000 1/28/97 $9,000
Evelyn Alleman 3,000 1/28/97 $3,000
Thelma Zube 3,400 1/28/97 $5,100
Vincent & F. Ponte 6,667 1/28/97 $10,000
Laura Giostra 6,700 1/28/97 $10,050
Philip & Concetta Vincenti 6,800 1/28/97 $10,200
Andrew Lesnak 3,400 1/28/97 $5,100
Susan Miller 6,700 1/28/97 $10,050
Uphill c/o Paul Scott 9,400 1/28/97 $14,100
Martin Feldman 3,400 1/28/97 $5,100
Mark DeLorenoz 3,000 1/28/97 $4,500
</TABLE>

On June 29, 1996, the Company issued 30,000 Common Shares to David Krise in
exchange for patents valued at $45,000. This issuance was made in reliance on
Section 4(2) by Registrant's management to a sophisticated investor who had
access to information on the Company necessary to make an informed investment
decision.

In July, 1996, the Board of Directors authorized the distribution of 200,000
A Warrants each exercisable into one Common Share of the Company at the
exercise price of $3.75 per Common Share, 200,000 B Warrants each exercisable
into one Common Share of the Company at the exercise price of $4.00 per
Common Share and 250,000 C Warrants each exercisable into one Common Share of
the Company at the exercise price of $6.00 per Common Share. The A, B and C
Warrants are exercisable for a period of 48 months from the date of issue and
are callable with 30 days notice at a price of $.001 per warrant. These
distributions were be made to the owners of record of Common Shares on the
books of the Company as of July 22, 1996. These issuances were made in
reliance on Section 4(2) by Registrant's management to sophisticated
investors who had access to information on the Company necessary to make an
informed investment decision.

During October, 1996, the Company issued 327,000 Common Shares to Richard
Huson for the conversion of a loan and accrued interest amounting to
$340,500. This issuance was made in reliance on Section 4(2) by
Registrant's management to an accredited investor.

In the fourth quarter of 1996 and the first quarter of 1997, the Corporation
issued an aggregate of 345,000 common shares to consultants who had access to
information on the Company necessary to make an informed investment decision
for services valued at $545,000 in the aggregate and officers and directors
of the Corporation (Steven Blad, David Sampson and Jay L. King) pursuant to
an exemption from registration under Section 4(2) of the Securities Act of
1933.

<TABLE>
<CAPTION>
Name Total Number Services
of Shares Date Issued Valued At
<S> <C> <C> <C>

Gaming Venture Corp. 100,000 12/28/96 $150,000
50,000 2/20/97 $75,000
50,000 2/28/97 $75,000
Pratt, Wylce & Lords 25,000 12/2/96 $37,500
4,100 2/20/97 $6,150
Clinton Clark 50,000 12/2/96 $75,000
10,900 2/20/97 $16,350
Steven Blad 10,000 2/20/97 $15,000
Micro Cap World, L.L.C. 10,000 2/20/97 $15,000
Jay L. King 25,000 10/02/96 $37,500
David Sampson 10,000 10/02/96 $15,000
</TABLE>

Gaming Venture Corp. provides management and capital acquisition consulting.
Pratt, Wylce & Lords provided management and capital acquisition consulting
services.
Clinton Clark provided management and capital acquisition consulting
services.
Micro Cap World, L.L.C. provided management consulting services
On March 31, 1997, the Corporation issued 45,122 Common Shares to Cheryl and
Steve Forte for the conversion of a loan whose principal and interest amount
was $45,122. This issuance was made in reliance on Section 4(2) by
Registrant's management to sophisticated investors who had access to
information on the Company necessary to make an informed investment
decision.

During May and June, 1997, the Corporation issued the following Common Shares
to sophisticated investors who had access to information on the Company
necessary to make an informed investment decision for cash consideration or
services pursuant to an exemption from registration under Section 4(2) of the
Securities Act of 1933.

<PAGE>54

<TABLE>
<CAPTION>
Name Total Number Cash
of Shares Date Issued Consideration (1)
or Services
Valued At (2)
<S> <C> <C> <C>

Jayport Holdings, Inc. (BUI) 20,339 5/2/97 $30,509<F1>
Glenn Fine 30,000 6/5/97 $45,000<F1>
Casino Journal of Nevada, Inc. 20,000 6/5/97 $30,000<F2>
Robert Smith 6,000 6/12/97 $9,000<F1>
John Wasden 5,000 6/12/97 $7,500<F1>
Althea Duggins 1,000 6/12/97 $1,500<F1>
James Beard<F1> 1,000 6/12/97 $1,500

</TABLE>
[FN]
<F1>These individuals or entities paid cash consideration. Jayport
Holdings, Inc. is a nonaffiliate.
<F2>Casino Journal of Nevada, Inc. provided advertising services. The
principal of Casino Journal of Nevada, Inc. is Glenn Fine.

In June 1997, the Company issued 100,000 Class D Warrants to Richard Huson, a
majority shareholder of the Company and 100,000 D Warrants to Gaming Venture
Corp., U.S.A., a consultant of the Company for services valued at $2,000.
Mr. Huson subsequently exercised all of his Class D Warrants in October,
1997. In the fourth quarter of 1997, the 100,000 D Warrants remaining were
exercised and 90,000 Common Shares were issued to Thomas DiSalvatore and
10,000 Common Shares were issued to Michele Gilbert. Mr. DiSalvatore and
Ms. Gilbert are sophisticated purchasers.

During December 1997 and January 1998, the Company received proceeds
from unsecured convertible debentures aggregating $100,000 (VIP Industries,
Inc., a unrelated party during December 1997 and $400,000 (Richard Huson
$150,000, Richarld Jaslow $150,000, Jay Willoughby $50,000 and David
Goldsmith $50,000) during January 1998. The debentures bear interest at 6%
per annum and are due on or before January 31, 1999. The principal amount of
the debentures is convertible after one year, at the holder's option into
shares of the Company's common stock at a conversion price of $2.98 per share

These issuances were made in reliance on Section 4(2) by Registrant's
management to Mr. Huson, an accredited investor and Gaming Venture Corp.,
U.S.A. a sophisticated investor who had access to information on the Company
necessary to make an informed investment decision.

Item 27. Exhibit Index.
<TABLE>
<S> <C>
(1) Not Applicable
(2) Not Applicable
(3) Certificate of Incorporation incorporated by reference to
Form SB-2 filed on July 16, 1997, S.E.C. File Number 333-
31373
(3.1) Amendment to Articles of Incorporation dated October 14,
1996 incorporated by reference to Form SB-2 filed on July
16, 1997, S.E.C. File Number 333-31373
(3.2) Amendment to Articles of Incorporation dated February 18,
1997 incorporated by reference to Form SB-2 filed on July
16, 1997, S.E.C. File Number 333-31373
(3.3) Bylaws incorporated by reference to Form SB-2 filed on July
16, 1997, S.E.C. File Number 333-31373
(4) Specimen certificate for Common Stock incorporated by
reference to Form SB-2 filed on July 16, 1997, S.E.C. File
Number 333-31373
(4.1) Specimen Warrant certificate incorporated by reference to
Form SB-2 filed on July 16, 1997, S.E.C. File Number 333-
31373
(5) Consent and Opinion of Jody M. Walker regarding
legality of securities registered under this
Registration Statement and to the
references to such attorney in the Prospectus filed
as part of this Registration Statement
(6) Not Applicable
(7) Not Applicable
(8) Not Applicable
(9) Not Applicable
(10.1) Consulting Agreement of GameTek and Steven J. Blad dated
February 1, 1997 incorporated by reference to Form SB-2
filed on July 16, 1997, S.E.C. File Number 333-31373
(10.2) Consulting Agreement with Gaming Venture Corp., U.S.A.
dated July 8, 1996 incorporated by reference to Form SB-2
filed on July 16, 1997, S.E.C. File Number 333-31373
(10.3) Exclusive Distributorship Agreement with Sodak Gaming, Inc.
dated April 23, 1997 incorporated by reference to Form SB-2
filed on July 16, 1997, S.E.C. File Number 333-31373

<PAGE>55

(10.4) Exclusive Distributorship Agreement with RGB SDN BHD dated
February 19, 1997 incorporated by reference to Form SB-2
filed on July 16, 1997, S.E.C. File Number 333-31373
(10.5) Exclusive Distributorship Agreement with B. Joel Rahn dated
June 1, 1997 incorporated by reference to Form SB-2 filed
on July 16, 1997, S.E.C. File Number 333-31373
(10.6) Exclusive License Agreement with George C. Matteson Co.,
Inc. incorporated by reference to Form SB-2 filed on July
16, 1997, S.E.C. File Number 333-31373
(10.7) License Agreement with United States Playing Card Company
(10.8) Royalty Agreement with Sines/Forte Partnership dated June
15, 1996 incorporated by reference to Form SB-2 filed on
July 16, 1997, S.E.C. File Number 333-31373
(10.9) Promissory Note with Richard Huson dated July 8, 1997
incorporated by reference to Form SB-2 filed on July 16,
1997, S.E.C. File Number 333-31373
(10.10) Collateral Loan Agreement with Gaming Venture Corp., U.S.A.
incorporated by reference to Amendment 5 to Form SB-2 filed
on February 18, 1998, S.E.C. File Number 333-31373
(10.11) Exclusive License Agreement with Technology Development
Center, LLC.incorporated by reference to Amendment 5 to
Form SB-2 filed on February 18, 1998, S.E.C. File Number
333-31373
(10.12) Funding Agreement dated January 15, 1997 incorporated by
reference to Amendment 4 of Form SB-2 filed on February 18,
1998, S.E.C. File Number 333-31373
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
(14) Not Applicable
(15) Not Applicable
(16) Not Applicable
(17) Not Applicable
(18) Not Applicable
(19) Not Applicable
(20) Not Applicable
(21) Not Applicable
(22) Not Applicable
(23) Not Applicable
(24) Consent of Winter, Scheifley & Associates, P.C.
(25) Not Applicable
(26) Not Applicable
(27) Financial Data Schedule
(28) Not Applicable
(99) Employment Agreement of Jay L. King dated January 1, 1997
incorporated by reference to Form SB-2 filed on July 16,
1997, S.E.C. File Number 333-31373
(99.1) Employment Agreement with Randy D. Sines dated March 31,
1996 incorporated by reference to Form SB-2 filed on July
16, 1997, S.E.C. File Number 333-31373
(99.2) Employment Agreement with Steven L. Forte dated March 31,
1996 incorporated by reference to Form SB-2 filed on July
16, 1997, S.E.C. File Number 333-31373
(99.3) Amendment to Employment Agreement (Personal Service
Agreement) and Covenant Not to Compete and Funding
Agreements dated September 8, 1997 incorporated by
reference to Amendment 2 to Form SB-2, S.E.C. File Number
333-31373

(99.4) Agreement with Officers , Directors and Richard Huson
incorporated by reference to Amendment 5 to Form SB-2, S.E.C.
File Number 333-31373
(99.5) Lock Up Agreement between Officers , Directors and Principal
Shareholder

</TABLE>

Item 28. Undertaking.

The undersigned registrant hereby undertakes:

(a)(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:

(I) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the formation set forth in the Registration
Statement.

(iii) To include any additional or changed material information on the
plan of distribution.

<PAGE>56

(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.

<PAGE>55

(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.

(b) Delivery of Certificates.

The undersigned registrant hereby undertakes to provide to the
Transfer Agent at the closing, certificates in such denominations and
registered in such names as are required by the Transfer Agent to permit
prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions set forth in
the Company's Articles of Incorporation or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

<PAGE>57

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned, in the
City of Las Vegas, State of Nevada on the 1st the day of April, 1998.

Casinovations, Inc.

/s/Steven Blad
--------------------------------
By:, Steven Blad President

In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities
and on the dates stated.

<TABLE>

Signature Capacity Date
<S> <C> <C>

/s/Glen (Tom) Pickell Chief Executive Officer
- ------------------- Director April 1, 1998

/s/Jay L. King controller/Director
- ------------------- Principal Financial Officer April 1, 1998

/s/Steven Forte Director April 1, 1998
- -------------------

/s/David Sampson Director April 1, 1998
- -------------------

/s/Norman Kelln Director April 1, 1998
- -------------------

</TABLE>

<PAGE>58
Jody M. Walker
7841 South Garfield Way
Littleton, Colorado 80122
Telephone (303) 850-7637
Facsimile (303) 220-9902

April 1, 1998

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Dear Sirs:

Re: OPINION RE: LEGALITY AND CONSENT OF COUNSEL TO USE OF NAME IN
AMENDMENT 6 TO THE REGISTRATION STATEMENT ON FORM SB-2 OF
CASINOVATIONS, INC.

I am securities counsel for the above mentioned corporation and I have
prepared Amendment 6 to the registration statement on Form SB-2. I hereby
consent to the inclusion and reference to my name in Amendment 5 to the
Registration Statement on Form SB-2 for Casinovations, Inc.

It is my opinion that the securities of Casinovations, Inc. and those which
are registered with the Securities and Exchange Commission pursuant to Form
SB-2 Registration Statement of Casinovations, Inc. have been legally issued
and will be, when sold, legally issued, fully paid and non-assessable.

Yours very truly,

/s/ Jody M. Walker
--------------------

<PAGE>58

INDEPENDENT AUDITOR'S CONSENT

We do hereby consent to the use of our report dated February 5, 1998 on the
financial statements of Casinovations, Inc. as of December 31, 1996 included
in and made part of the registration statement of Casinovations, Inc. dated
April 1, 1998.

April 1, 1998

/s/ Winter, Scheifley & Associates, P.C.
Certified Public Accountant

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 119,389
<SECURITIES> 0
<RECEIVABLES> 18,160
<ALLOWANCES> 0
<INVENTORY> 182,293
<CURRENT-ASSETS> 359,842
<PP&E> 282,827
<DEPRECIATION> 18,095
<TOTAL-ASSETS> 850,555
<CURRENT-LIABILITIES> 1,390,866
<BONDS> 0
<COMMON> 6,180
0
0
<OTHER-SE> (939,740)
<TOTAL-LIABILITY-AND-EQUITY> 850,555
<SALES> 2,226
<TOTAL-REVENUES> 13,516
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,290,554
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 329,033
<INCOME-PRETAX> (2,606,071)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,606,071)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,606,071)
<EPS-PRIMARY> (.47)
<EPS-DILUTED> (.47)

</TABLE>

Warrant LockUp Agreement

This agreement is by and between Casinovations, Inc. (the
"Corporation") and the undersigned shareholders as agreed to on the
day of March , 1998. The purpose of this agreement is to
define the agreed upon rights and responsibilities of the principal
shareholders, officers and directors in relation to the A, B and C Warrants
being registered on their behalf in Registration Statement on Form SB-2
filed with the Securities and Exchange Commission (SEC).

The undersigned shareholders agree that the Warrants are intended to support
the capitalization of the Corporation and were not intended to be used for
immediate personal gain or to stabilize the market as per Section 10(b)(6) or
10(b)(7) under the SEC Act of 1934. Therefore, the undersigned shareholders
do hereby agree to the following:

The undersigned shareholders agreed that they will not exercise the Warrants
during the offering period. The offering period includes the primary
offering of the Corporation and the secondary offering by Selling
Securityholders. Thereafter, in the event the undersigned shareholders
exercise any Warrants, the common stock issued to the undersigned
shareholders upon said exercise shall be locked in and restricted from
trading for a period of one year. Upon exercise, a notice shall be placed on
the face of each stock certificate stating that the transfer of the common
stock evidenced by said certificate is restricted in accordance with the
conditions set forth on the reverse side of each common stock certificate;
and a typed legend shall be placed on the reverse side of each common stock
certificate which states that the sale or the transfer of the common shares
as evidenced by the certificate is subject to certain restrictions until one
year from the date of issuance pursuant to this Agreement between the
shareholders of the Corporation (whether beneficial or of record) and the
Corporation. This agreement shall be on file with the Corporation and the
transfer agent and a copy shall be available upon request and without charge.

The undersigned shareholders agree not to sell or otherwise transfer their
interest in the Warrants except to an underwriter or other market maker in
the common stock once a market is established. The undersigned
shareholders further agree that the total value in cash or other
consideration, paid by the underwriter/market maker to the undersigned
shareholders shall not exceed $.001
per Warrant.

In witness whereof, the parties hereto have duly executed this agreement as
of the above mentioned date:

Holder of Warrants
- ---------------------------------- --------------