SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

Commission file number 000-23401

GameTech International, Inc.

(Exact name of registrant as specified in its charter)

900 Sandhill Road

Reno, Nevada 89521

(775) 850-6000

(Address, including zip code, and telephone number, including area code of principal executive offices)

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

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

Common Stock, par value $.001 per share

Rights to Purchase Series A Junior Participating Preferred Stock

(Title of class)

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

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

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

      The aggregate market value of common stock held by nonaffiliates of the registrant (7,274,248 shares) based on the closing price of the registrant’s common stock as reported on the NASDAQ National Market on April 30, 2004, which was the last business day of the registrant’s most recently completed second fiscal quarter, was $28,806,022. For purposes of this computation, all officers, directors, and 10% beneficial owners of the registrant are deemed to be affiliates. Such determination should not be deemed to be an admission that such officers, directors, or 10% beneficial owners are, in fact, affiliates of the registrant.

      As of January 13, 2005, there were outstanding 11,845,014 shares of the registrant’s common stock, par value $0.001 per share.

Documents Incorporated By Reference

      None

GAMETECH INTERNATIONAL, INC.

ANNUAL REPORT ON FORM 10-K

FISCAL YEAR ENDED OCTOBER 31, 2004

TABLE OF CONTENTS

Statement Regarding Forward-Looking Statements

      The statements contained in this report on Form 10-K that are not purely historical are forward-looking statements within the meaning of applicable securities laws. Forward-looking statements include statements regarding our “expectations,” “anticipation,” “intentions,” “beliefs,” or “strategies” regarding the future. Forward-looking statements also include statements regarding revenue, margins, expenses, and earnings analysis for fiscal 2005 and thereafter; expansion of products or product development; expansion into new domestic and international markets; potential acquisitions or strategic alliances; and liquidity and anticipated cash needs and availability. All forward-looking statements included in this report are based on information available to us as of the filing date of this report, and we assume no obligation to update any such forward-looking statements. Our actual results could differ materially from the forward-looking statements. Among the factors that could cause actual results to differ materially are the factors discussed in Item 1, “Business — Risk Factors.”

PART I

General

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

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

      Bingo is a legal enterprise in 47 states (excluding Arkansas, Hawaii, and Utah) and the District of Columbia. Nonprofit organizations sponsor bingo games for fundraising purposes, while Native American, commercial entities, and government-sponsored entities operate bingo games for profit. As of October 31, 2004, we had systems in approximately 25 of the more than 30 states that allow electronic bingo systems for use with charitable and commercial organizations. Under the Indian Gaming Regulatory Act, or IGRA, electronic bingo may be played on Native American lands in the 47 states where bingo is legal. We estimate that bingo currently is played on Native American lands in 30 states. As of October 31, 2004, we had units in operation in Native American bingo halls in 13 of those states. Collectively, as of October 31, 2004, we had products in 36 states and in six foreign countries.

      Our website is located at www.gametech-inc.com. Through our website, we make available free of charge our annual reports on Form 10-K, our proxy statements, our quarterly reports on Form 10-Q, our current reports on Form  8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) under the Securities Exchange Act. These reports are available as soon as reasonably practicable after we electronically file those materials with the Securities and Exchange Commission.

Business Strategy

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

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

      We plan to continue to expand our product offerings to provide bingo players with more choices and price points. Our wide range of electronic bingo products allow bingo operators to offer players many choices when

establishing their purchases for bingo games. Operators are then better positioned to ensure they meet the needs of all levels of customers. We are continuing to focus our efforts on expanding our product lines so bingo operators can offer players everything from low cost terminals to higher priced player terminals, as well as terminals that are capable of supporting a variety of different games that provide a higher level of entertainment value. Our current product portfolio includes four portable models, two with black and white displays and two with color displays, and two fixed-base color terminal offerings.

      There is an opportunity to continue to attract bingo players who would normally only use paper bingo cards to also utilize electronic terminals when playing bingo. Our internal sales personnel and third-party distributors focus their efforts on actively promoting the use of electronics with players in our markets and in new markets. These efforts include partnering with bingo operators in certain jurisdictions for promotions and other marketing to educate players on the benefits and entertainment value of electronics.

      As part of our strategy to facilitate the expansion of the charitable electronic bingo market, we are pursuing legislative changes to allow or enhance the environment for electronic bingo in various strategic markets. We are also exploring entering certain states where electronic bingo is currently allowed but which do not currently carry our products.

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

      We maintain an ongoing product development program focused on enhancing our existing products and developing new products and additional applications for our technology. We continue to make significant investment in our research and development department and in outside research and development efforts. We anticipate that the higher level of research and development expenditures experienced in fiscal 2004 will continue during fiscal 2005.

      During 2004, we continued to broaden our placement of a product feature called Pay-N-Play^tm, which supports a fast paced or speed bingo game on our fixed based bingo system, as well as introduced the Traveler^tm, a color portable terminal that provides enhanced graphics and a higher level of entertainment to players. Wide spread release of the Traveler terminal is expected to continue to the general market during fiscal 2005. The Bingo Enhanced Tabs System^tm is the latest product to be developed for play on our fixed base bingo system. The Bingo Enhanced Tabs System is a pull-tab system which may be placed primarily with Native American customers. Due to potential regulatory changes, we currently believe the market for the Bingo Enhanced Tab System is limited.

      Currently, the Bingo Enhanced Tabs System and the Pay-N-Play feature are offered for use through our wholly owned subsidiary, GameTech Arizona Corporation.

      We developed one-way radio frequency, or RF, for use on several of our portable products during 2002. We will continue with the widespread rollout of this wireless communications function during 2005.

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

Products

      We provide bingo operators with a variety of electronic player terminals and back-office management systems. Our player terminals operate on a proprietary operating system known as the Diamond^tm system. This operating system includes Point-of-Sale, or POS, functionality and player tracking for bingo operators that allow them to consolidate to one system for selling paper and electronics, while also loading the appropriate sales information to electronic player terminals. The Diamond system provides bingo operators a verifier that confirms whether a called “BINGO” is legitimate and has been won on a bingo card (whether electronic or paper) that was sold during the session being played.

      We also offer bingo operators a back-office management system known as AllTrak® 2 while continuing to support our legacy product, AllTrak®. AllTrak 2 is typically integrated with our electronic bingo terminals to provide a bingo hall with a package of accounting and marketing information that enhances the bingo operator’s ability to manage the bingo hall. The original AllTrak back-office management system operates a multi-purpose DOS-based back-office accounting system for bingo hall operators on a PC platform. The AllTrak 2 system is a Windows-based, multi-purpose accounting system for bingo hall operators running on standard PCs. Both AllTrak systems operate together with the Diamond system and significantly enhance the user interface at POS terminals. In addition, the systems provide inventory-tracking capabilities for bingo paper, complete sales data, player tracking systems and more.

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

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

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

      We currently have the following four variations of portable bingo terminals in commercial use:

      Our portable bingo systems operate similarly to our fixed-base systems. As numbers are input into the terminals, either manually or by way of wireless communication, each bingo card being played is then simultaneously marked. These terminals can mark up to 600 cards per game. In a portable system, the file server, caller unit, and sales units are similar to, and can be shared with, those of fixed-base systems. The portable terminal can recognize almost any bingo game format that the bingo operator wishes to play and alerts the player, both audibly and visually, when “BINGO” has been achieved. Portable terminals are battery powered with rechargeable battery packs. Portable terminals are recharged between bingo sessions in charging crates, which handle 27 Palm Top, 25 TED, 12 TED²C and 12 Traveler terminals, respectively.

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

      The Traveler is a portable player terminal that incorporates a next generation of technology that we plan to use as a foundation for future products. Traveler is designed to cater to players who prefer a compact portable terminal with a color display and wireless communications. The terminal utilizes our crate loading methodology eliminating the need to load a player’s information into an individual terminal at the POS station. This easy-to-use device operates using either the AllTrak 2 back-office system or the Diamond POS system.

      The Palm Top terminal is the high-end black and white portable in our product portfolio. It shows three bingo card faces at all times and can play up to 600 cards in one game. This device resembles a palm top PC and operates on a 386 processor using the Diamond POS system. We plan to replace most of our Palm Top terminals with Traveler terminals during the next several fiscal years.

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

      Our fixed-base bingo systems consist of a local area network of microcomputers, including the file server, the caller unit, the sales unit, and the player’s terminal. All terminals in the fixed-base bingo system use microcomputer hardware and can be operated with light pens or touchscreens. Fixed-base terminals can be played in automatic mode or in manual mode, which requires the players to enter each number called. Players can switch between the two modes as they choose if they are playing in a jurisdiction that allows for automatic daubing. In either mode, up to 600 electronic bingo card images can be marked simultaneously. A complete fixed-base bingo system consists of the following:

      File Server. The file server runs the network. All bingo game data is processed and stored through this unit.

      Caller Unit. The caller unit, which is located on the caller’s stand, allows the caller to communicate with each player’s terminal by use of a touchscreen. By simply touching the screen, the caller enters ball numbers drawn, game number, game patterns, and wild numbers. The caller unit connects with each player’s fixed-base terminal to verify electronic bingo card images and enables the winning electronic bingo card images and paper cards to be displayed on monitors within the bingo hall. The caller unit typically contains a modem that allows us to access data remotely, thereby enabling us to monitor the use of our terminals. Data from the system is also available to assist bingo hall operators to manage their halls.

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

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

Product and System Software Development

      We conduct an ongoing research and development program to enhance the features and capabilities of our bingo systems, to maintain a competitive advantage in the marketplace, and to extend our product line with new games and applications.

      In 2004, we developed the Bingo Enhanced Tabs System, a main menu system that combines player access to bingo and pull tab games for use on our fixed-base terminals. This system allows operators to offer an exciting variety of pull tab based games as well as traditional bingo games on our units. The Bingo Enhanced Tabs System currently is in beta testing at one Native American account. Due to potential regulatory changes, we currently believe the market for the Bingo Enhanced Tabs System is limited.

      During 2003, we introduced a new product feature called Pay-N-Play, which supports a fast paced or speed bingo game on our fixed based units. This application of the Pay-N-Play feature requires a strictly electronic bingo atmosphere where players make their card purchases on a game-by-game basis rather than for a fixed number of games. The prize board for each game using the Pay-N-Play feature is determined as a percentage of the total amount wagered on each game, helping to ensure a profitable game for the operator. This feature allows operators to offer a bingo based game to players during non-session times of the day, as well as during regular sessions, helping them increase their revenue per square foot in dedicated bingo areas. We expect to continue to receive a strong demand for the Pay-N-Play feature throughout fiscal 2005 as bingo operators seek to expand their ability to offer players a variety of entertainment choices. The Pay-N-Play feature is currently available for use in a limited number of charitable bingo jurisdictions and we intend to expand availability during the year. Pay-N-Play is available for broad use in Native American locations.

      In 2001 we developed the TED²C terminal, followed by the Traveler terminal in 2003. We are dedicating resources to further enhance the AllTrak 2 system to provide complete business solutions to bingo operators. We are consistently improving and upgrading our software applications. We are also spending significant amounts of time and expense on systems security improvements and applications.

      We developed one-way radio frequency, or RF, for use on several of our portable products during 2002. We will continue with the widespread rollout of this wireless communications function during 2005.

      During fiscal 2004, we spent approximately $5.2 million for company-sponsored research and development activities compared with approximately $4.7 million during fiscal 2003. We conduct an ongoing research and development program to enhance the features and capabilities of our bingo systems, to maintain a competitive advantage in the marketplace, and to extend our product line with new games and applications.

Sales, Marketing, and Distribution

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

      We strive to work with only those third-party distributors who have the largest market share in bingo supplies for their respective geographic areas. Most distributors carry a complete range of bingo supplies, such as paper, ink daubers, and other consumable products that bingo operations may require. Our distributors typically work in defined geographic jurisdictions under one- to three-year agreements with exclusivity provisions where applicable with us. This exclusivity allows us to align our mutual interests in the market and seek to maintain our market leading positions.

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

      Our marketing strategy is to target bingo operators and demonstrate the benefits of our bingo systems to both bingo operators and bingo players. Our superior customer service and quality products are designed to promote player loyalty and long-term relationships with bingo operators.

      Our installation package typically includes the following:

      We target the thousands of charities licensed to operate bingo games in the United States and Canada. We also target Native American bingo halls and commercial entities. As of December 31, 2004, we had approximately 500 locations serving approximately 1,500 bingo operators, including many charitable bingo halls in which we or our distributors have multiple customers. For the year ended October 31, 2004, portable terminals generated approximately 74% of our revenue and fixed-based terminals generated approximately 26% of our revenue.

      As of December 31, 2004, we operated in 36 states and six foreign countries. We are actively pursuing additional opportunities in other states and countries as well as increased activity at existing sites.

Materials and Supplies

      The hardware portion of our TED and TED²C terminals are assembled by Electronic Evolution Technologies, Inc., or EET, a Nevada-based manufacturer. In addition, EET refurbishes those TED, Palm Top, and TED²C terminals that we do not refurbish internally. Our Traveler terminals are assembled by Western Electronics, an Idaho-based manufacturer. We do not have any long-term supply contracts with EET or Western Electronics.

      We source all fixed-base bingo systems from various domestic suppliers, and we configure those systems at our facility in Nevada. We require that the assemblers of our terminals be dedicated to high quality and productivity as well as support for new product development. There are significant risks inherent in relying on few suppliers for substantially all of our products. See Item 1, “Business — Risk Factors — We depend on third-party suppliers for our portable terminals.”

Intellectual Property

      We have registered trademarks with the U.S. Patent and Trademark Office for the following names: “TED,” “TED²C,” “Bingo Card Minder,” “Bingo Technologies Corporation,” “AllTrak,” “AllTrak2,” “Cadillac Bingo,” “Diamond Bingo,” “Diamond Plus Bingo,” “Diamond Ted,” “Diamond Elite,” and “The Electronic Dauber.” We have trademark applications pending with the U.S. Patent and Trademark Office for

the following names: “Diamond Pro,” “Diamond VIP,” “GameTech and Design,” “Pay-N-Play,” “GameTech,” “Hot Jewels,” “Race Tabs,” “Bingo Enhanced Tabs System,” “Blazing Quarters,” Electronic Daubing Goes Extreme,” “Nevada Classic,” “Sunken Treasurer,” “The Bingo Players Choice,” “Firestar,” and “Traveler.” We have registered Canadian trademarks for the following names: “Diamond Ted,” and “The Bingo’s Players Choice.” We have Canadian trademark applications pending for the following names: “Diamond Bingo,” “Diamond Plus Bingo,” “Race Tabs,” “AllTrak,” “GameTech,” “GameTech and Design,” “Diamond Elite,” “Diamond Pro,” “Diamond VIP,” “Pay-N-Play,” “TED,” and “TED²C.” We have registered Norwegian trademarks for the following names: “GameTech and Design” and “TED.” We have Norwegian trademark applications pending for the following names: “GameTech” and “Pay-N-Play.” We cannot provide assurance that any of our domestic or foreign trademark applications will be granted. In June 2004, we received a patent from the U.S. Patent and Trademark Office for a feature within our wireless communication system.

Competition

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

Government Regulation

      We are subject to regulation and oversight by governmental authorities in virtually all jurisdictions in which we conduct business. As of December 31, 2004, we held approximately 66 licenses with various regulatory agencies. The regulatory requirements vary from jurisdiction to jurisdiction. Governmental regulations may require licenses, approvals, findings of suitability, or qualifications for our company as well as for our products, officers, directors, certain personnel, significant stockholders, or other associated parties. The term “significant stockholder” typically refers to any beneficial owner of 5% or greater of our capital stock. Any person who fails or refuses to comply with these regulatory requirements could be subject to disciplinary or legal action, which could adversely impact our company, including the loss of any existing license and our ability to conduct business in one or more jurisdictions. The licensing approval and finding of suitability processes can be lengthy and expensive. On Native American lands, regulation results from the laws of each tribe, the provisions of IGRA, and various state compacts. Many jurisdictions have comprehensive licensing, reporting, and operating requirements with respect to the manufacture, distribution, sale, lease, use, and operation of bingo and bingo-related products, including electronic bingo equipment. These requirements have a direct impact on the conduct of our day-to-day operations. In substantially all states in which charitable bingo is legal, the state imposes operating restrictions on the game of bingo and on the form of business relations we can have with the charitable entities. Generally, regulatory authorities may deny applications for licenses, other approvals, or findings of suitability for any cause they may deem reasonable. There can be no assurance that our company or our hardware or software products, personnel, officers, directors, significant stockholders, or other associated parties will receive or be able to maintain any necessary licenses, other approvals, or findings of suitability. The loss of a license in a particular state may prohibit us from realizing revenue in that state and may adversely impact our license and ability to realize revenue in other states. Any

change in law or regulation by a state or federal agency, or an unfavorable interpretation of any law or regulation, could adversely impact our ability to earn revenue.

      We are currently classified as a manufacturer and distributor of associated equipment pursuant to the provisions of the Nevada Gaming Control Act and regulations promulgated thereunder. Associated equipment manufacturers and distributors that sell, transfer, or offer associated equipment for use or play in Nevada may be required to file a licensing application for a finding of suitability at the discretion of the Nevada Gaming Commission on the recommendation of the Nevada Gaming Control Board. We have voluntarily applied for such finding of suitability, but there can be no assurance that we will be found suitable. Our associated equipment is subject to evaluation and approval by the state of Nevada prior to product placement or installation. Each of our associated equipment products that are in distribution in Nevada (except for those products in research and development) have been submitted to and approved by the state of Nevada.

      Gaming on Native American lands, including the terms and conditions under which gaming equipment can be sold or leased to Native American tribes, is or may be subject to licensing and regulation under IGRA and other laws of the federal government, the tribes, and the host state, where applicable. Under IGRA, gaming activities are classified as Class I, II, or III. Class I gaming includes social games played solely for prizes of minimal value, or traditional forms of Native American gaming engaged in as part of, or in connection with, Native American ceremonies or celebrations. Class II gaming includes bingo and other card games authorized or not explicitly prohibited and played within the host state, but does not include banking card games, such as baccarat or blackjack. Class III gaming includes all forms of gaming that are not Class I or Class II, including slot machines, casino style games or any other games prohibited by the host state. A Native American tribe typically conducts Class II gaming under IGRA without having entered into a written compact with its host state if the host state permits similar forms of gaming, but must enter into a separate written compact with the state in order to conduct Class III gaming activities. Under IGRA, tribes are required to regulate all gaming under ordinances approved by the Chairman of the National Indian Gaming Commission (“NIGC”). These ordinances may impose standards and technical requirements on gaming hardware and software, and may impose registration, licensing, and background check requirements on gaming equipment manufacturers and suppliers and their key personnel, officers, directors, and stockholders. The NIGC has undertaken an effort to provide further clarity with respect to game classification and technical standards, and has communicated its intention to formally issue its guidance documents sometime during the summer of 2005. We can make no assurance that the NIGC’s final work product will not have a material adverse effect on our business, results of operations and financial condition.

      IGRA defines Class II gaming to include “the game of chance commonly known as bingo, whether or not electronic, computer or other technologic aids are used in connection therewith,” and defines Class III gaming to include “electronic or electromechanical facsimiles of any game of chance or slot machines of any kind.” We believe that our portable and fixed-base terminals and the software they operate are Class II products. In the event that either is classified as a Class III product, such a designation would reduce the potential market for the devices because only Native American gaming halls that have entered into a Native American-state compact that permits Class III electronic gaming systems would be permitted to use the device, unless we could modify the systems to have them reclassified as a Class II game. We may not be able to make any such modifications in the event of such a classification.

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

requirements. Violation of the Johnson Act may result in seizure and forfeiture of the equipment as well as other penalties.

      Our electronic bingo products, including our portable and fixed-base terminals, encounter greater regulation than traditional bingo played with paper cards. Applicable federal, state, Native American, and local regulations and enforcement vary significantly by jurisdiction.

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

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

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

Employees

      As of January 1, 2005, we had approximately 240 full-time equivalent employees. We are not subject to collective bargaining agreements with our employees, and we believe that our relations with our employees are good.

Risk Factors

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

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

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

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

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

      Our financial resources have decreased during fiscal 2004 and we have experienced a downward trend in our cash flows from operating activities. Our cash, cash equivalents, and short-term investments have decreased over each of the last four fiscal quarters. As of October 31, 2004, we had cash, cash equivalents, and short-term investments of $8.7 million, and as of October 31, 2003, we had cash, cash equivalents, and short-term investments of $12.0 million.

      We have a $2.5 million line of credit with Wells Fargo Bank, N.A. that expires April 2, 2005. No assurance can be made for renewal. The credit line was reduced from $5.0 million due to our results of operations and resulting failure to maintain certain financial covenants, as well as our litigation loss contingency. At February 14, 2005, we were not in compliance with certain of the financial covenants and expect that we will not be in compliance with such covenants through April 2, 2005. The bank has agreed to continue the lending relationship, however, the bank reserves the right to terminate the agreement at their discretion. There was no outstanding balance as of October 31, 2004. If cash generated from our operations is insufficient to fund our business and if additional financing is not otherwise available to us, we will have to implement additional measures to conserve cash and reduce costs, which may include, among other things, making additional cost reductions, reducing the scale of our operations, reducing our investment in research and development, and reducing our sales force. However, we cannot assure you that such measures would be

successful. Our failure to raise required additional funds or to maintain or obtain increases in our line of credit would adversely affect our ability to:

      In the event our efforts to reduce costs are unsuccessful, we will likely need additional sources of financing in order to carry on our operations as presently conducted. Any financing may include bank borrowings or public or private offerings of equity or debt securities. We cannot assure you that such additional sources of financing will be available on acceptable terms, if at all.

      The hardware portion of our TED and TED²C terminals are assembled by Electronic Evolution Technologies, Inc., or EET, a Nevada-based manufacturer. In addition, EET refurbishes those TED, Palm Top, and TED²C terminals that we do not refurbish internally. Our Traveler terminals are assembled by Western Electronics, an Idaho-based manufacturer. We believe either manufacturer could assemble any of our portable terminals. We would need to locate a replacement contract manufacturer if both EET and Western Electronics ceased doing business with us. Although we believe that we could locate a substitute contract manufacturer, any such replacement would involve some delay, and we may not be able to procure, substitute, or produce our terminals without significant interruption or price increase. Any failure of our company to receive refurbished or new terminals could have a material adverse effect on our business, results of operations, and financial condition.

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

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

      Our operations in Native American gaming halls, which generated approximately 26% of our revenue during fiscal 2004, are subject to Native American and federal regulation under IGRA, which established the National Indian Gaming Commission, or NIGC. The NIGC has the authority to adopt rules and regulations to enforce certain aspects of IGRA and to protect Native American interests. Under IGRA, electronic bingo devices similar to ours have previously been determined by the NIGC to be Class II products that are subject solely to Native American regulation as approved by the NIGC. We believe our electronic bingo systems meet all of the requirements of a Class II game. We cannot provide assurance that the NIGC will not enact future regulations or reinterpret existing regulations in such a manner so as to limit the authority of tribes to self-regulate Class II gaming or to change the definition of Class II gaming in such a manner that our electronic bingo systems are classified as a Class III game under IGRA. If classified as Class III games, our electronic bingo systems could become subject to federal and state regulation through the Johnson Act and through Native American-state compacts required for Class III games played on Native American lands. In that event, or in the event other federal laws are enacted or interpreted differently that would subject our operations on Native American lands to state regulation, we may not be able to modify our electronic bingo systems to be classified as Class II games, or we may not obtain the necessary state approval and licenses to continue our operations in Native American gaming halls. Any such event could have a material adverse effect on our business, results of operations, and financial condition. Any modifications of our electronic bingo systems would also have the additional risk that such modifications would not appeal to customers or be acceptable to the Native American tribes.

      We are currently classified as a manufacturer and distributor of associated equipment pursuant to the provisions of the Nevada Gaming Control Act and regulations promulgated thereunder. Associated equipment manufacturers and distributors that sell, transfer, or offer associated equipment for use or play in Nevada may be required to file a licensing application for a finding of suitability at the discretion of the Nevada Gaming Commission on the recommendation of the Nevada Gaming Control Board. We have voluntarily applied for such finding of suitability, but there can be no assurance that we will be found suitable. Should we fail to be found suitable, we would no longer be able to provide products in Nevada and we would be forced to move our corporate operations out of the state at considerable expense to our Company.

      The concentration of our revenue in the Texas market, which generated approximately 19% of fiscal 2004 revenue, potentially heightens the exposure of regulatory changes or market changes that may prevent or impede us from doing business in that state. Furthermore, the loss of or inability of our company to find suitable distributors in Texas, where state law requires electronic bingo devices and systems to be placed through qualified distributors, could cause a material adverse effect on our business, results of operations, and financial condition.

      The electronic bingo industry is characterized by intense competition based on, among other things, the ability to enhance the operations of and to generate incremental sales for bingo operators through product appeal to players, ease of use, ease of serviceability, customer support and training, distribution, name recognition, and price. Increased competition may result in price reductions, reduced operating margins, conversion of terminals from lease to sale, and loss of market share, any of which could materially and adversely affect our business, operating results, and financial condition. Additionally, many of our competitors do not face the same level of public company costs and administrative costs that we face, or face the same expense level for maintaining as broad a product line. Furthermore, existing and new competitors may expand their operations in our existing or potential new markets. In addition, we compete with other similar forms of

entertainment, including casino gaming and lotteries. In Native American casinos, competition for space on the casino and bingo room floor is very intense. All forms of gaming compete for square footage at Native American casinos. We can make no assurances that Native American casinos currently leasing our equipment will not significantly limit the play of bingo or eliminate it entirely.

      The current executive officers and directors of our company beneficially own 39.6% of our outstanding common stock. As a result, the executive officers and directors of our company can significantly influence the management and affairs of our company and all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership could have the effect of delaying or preventing a change in control of our company, even when such change of control is in the best interests of stockholders. This concentration of ownership also might adversely affect the market price of the common stock and the voting and other rights of our company’s other stockholders.

      Our operations depend to a great extent on our ability to retain existing and attract new key personnel. Competition is intense for skilled marketing and product research and development employees in particular. We may not be successful in attracting and retaining such personnel, and we may incur increased costs in order to attract and retain personnel. Although we believe we can locate replacement personnel, the loss of key personnel, were we unable to hire suitable replacements, or our failure to attract additional qualified employees, could have a material adverse effect on our business, results of operations, and financial condition.

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

      As a part of our acquisition strategy, we may engage in discussions with various businesses regarding their potential acquisition. In connection with these discussions, we may exchange confidential operational and financial information with each potential acquired business and each of us may conduct due diligence inquiries and consider the structure, terms, and conditions of the potential acquisition. In certain cases, the prospective acquired business may agree not to discuss a potential acquisition with any other party for a specific period of

time, may grant us certain rights in the event the acquisition is not completed, and may agree to take other actions designed to enhance the possibility of the acquisition. Potential acquisition discussions may take place over a long period of time, may involve difficult business integration and other issues, and may require solutions for numerous family relationships, management succession, and related matters. As a result of these and other factors, potential acquisitions that from time to time appear likely to occur may not result in binding legal agreements and may not be consummated. Our acquisition agreements may contain purchase price adjustments, rights of set-off, and other remedies in the event that certain unforeseen liabilities or issues arise in connection with an acquisition. These remedies, however, may not be sufficient to compensate us in the event that any unforeseen liabilities or other issues arise.

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

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

      As of January 13, 2005, we had outstanding 11,845,014 shares of common stock. Approximately 7.3 million of such shares are eligible for resale in the public market without restriction or further registration. The remaining approximately 4.5 million shares of common stock outstanding are held by affiliates of our company and may be sold only in compliance with the volume and other limitations of Rule 144. Sales of substantial amounts of common stock by stockholders in the public market, or even the potential for such sales, are likely to adversely affect the market price of the common stock and could impair our ability to raise capital by selling equity securities. Moreover, the shares of common stock issuable upon exercise of outstanding options will be freely tradable without restriction unless acquired by affiliates of our company. The issuance of such freely tradable shares will result in additional outstanding shares of common stock and will create additional potential for sales of additional shares of common stock in the public market.

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

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

      Our Stockholders’ Rights Plan may have the effect of deterring, delaying, or preventing a change in control that might otherwise be in the best interests of our stockholders. Under the Rights Plan, we issued a dividend of one Preferred Share Purchase Right for each share of our common stock held by stockholders of record as of the close of business on March 17, 2003.

      In general, subject to certain limited exceptions, the stock purchase rights become exercisable when a person or group acquires 15% or more of our common stock or a tender offer or exchange offer for 15% or more of our common stock is announced or commenced. After any such event, our other stockholders may purchase additional shares of our common stock at 50% of the then-current market price. The rights will cause substantial dilution to a person or group that attempts to acquire us on terms not approved by our board of directors. The rights may be redeemed by us at $0.01 per stock purchase right at any time before any person or group acquires 15% or more of our outstanding common stock. The rights should not interfere with any merger or other business combination approved by our board of directors. The rights expire on March 17, 2013.

      Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, beginning with our Annual Report on Form 10-K for the fiscal year ending October 31, 2005, we will be required to furnish a report by our management on our internal control over financial reporting. We were not subject to these requirements for the fiscal year ended October 31, 2004. The internal control report must contain (i) a statement of management’s responsibility for establishing and maintaining adequate internal control over financial reporting, (ii) a statement identifying the framework used by management to conduct the required evaluation of the effectiveness of our internal control over financial reporting, (iii) management’s assessment of the effectiveness of our internal control over financial reporting as of the end of our most recent fiscal year, including a statement as to whether or not internal control over financial reporting is effective, and (iv) a statement that our independent registered public accounting firm has issued an attestation report on management’s assessment of internal control over financial reporting.

      In order to achieve compliance with Section 404 within the prescribed period, beginning on our next fiscal year, we are engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to dedicate internal resources, engage outside consultants, and adopt a detailed work plan to (i) assess and document the adequacy of internal control over financial reporting, (ii) take steps to improve control processes where appropriate, (iii) validate through testing that controls are functioning as documented, and (iv) implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, we can provide no assurance as to our, or our independent registered public accounting firm’s, conclusions as of October 31, 2005 with respect to the effectiveness of our internal control over financial reporting under Section 404. There is a risk that neither we nor our independent registered public accounting firm will be able to conclude at October 31, 2005 that our internal controls over financial reporting are effective as required by Section 404. This may result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

      Some of the statements and information contained in this report concerning future, proposed, and anticipated activities of our company, anticipated trends with respect to our revenue, operating results, capital

resources, and liquidity or with respect to the markets in which we compete or the bingo industry in general, and other statements contained in this report regarding matters that are not historical facts are forward-looking statements, as that term is defined in the securities laws. Forward-looking statements, by their very nature, include risks and uncertainties, many of which are beyond our control. Accordingly, actual results may differ, perhaps materially, from those expressed in or implied by such forward-looking statements. Factors that could cause actual results to differ materially include those discussed elsewhere under this Item 1, “Business — Risk Factors.”

      Our corporate headquarters are located in Reno, Nevada, in a 41,000 square-foot leased facility under a lease that expires in November 2010. We also operate two regional facilities: a 8,080 square-foot site in Broadview Heights, Ohio, and a 4,115 square-foot site in Southlake, Texas. We lease facilities in Truckee, California for GameTech Arizona, a subsidiary of GameTech International. The Ohio lease expires in November 2006 and the Texas lease is month to month. We lease several other facilities, none of which are material to our operations. We believe that our facilities will be adequate for our needs for the foreseeable future.

      On March 22, 2001, we filed a claim in the United States District Court, District of Arizona, GAMETECH INTERNATIONAL, INC. V. TREND GAMING SYSTEMS, LLC, CV 01-540 PHX PGR, seeking a declaratory judgment that we are not in material breach of our November 1, 1999 distribution agreement with Trend Gaming Systems, LLC (“Trend”) and seeking damages for past due payments and wrongful withholdings by Trend. Trend has counterclaimed, alleging that its payments are in compliance with its contractual obligations and that it is entitled to withhold certain monies. Trend also contends that we are in breach of certain of our contractual obligations to Trend or its customers. On December 16, 2002, the court entered at our request an order enjoining Trend from using approximately $540,000 in funds it had collected on our behalf, pending a trial on our ownership interest in those funds. The money has been placed in a bank account subject to the court’s control and now totals approximately $585,000. In addition, collections of accounts receivable by Trend, if any, will also be placed in that account, pending the resolution of the case. We have posted a $450,000 deposit with the court, which is presented as restricted cash on our consolidated balance sheet. The company fully reserved the accounts receivable from Trend as of October 31, 2004 and 2003. Trend filed a motion for summary judgment alleging that the termination of the distribution agreement was improper. On May 16, 2003, the court dismissed Trend’s motion for summary judgment. On December 2, 2003, Trend filed a renewed motion for summary judgment alleging that we did not have the right to terminate the distribution agreement based upon Trend’s failure to ensure that we received our minimum rate of return. The court, on March 19, 2004, denied Trend’s renewed motion for summary judgment. Trial in this matter commenced October 4, 2004. On November  1, 2004, the jury returned a verdict in favor of Trend against us. The jury awarded Trend $3,527,000 in compensatory damages. Trend concedes that it is not entitled to prejudgment interest on that sum. Trend seeks an award of $810,000 in legal fees and $26,000 in expenses and costs. We plan to contest the fee request. The jury also awarded us $735,000 in compensatory damages for funds Trend collected on our behalf. No judgment has been entered in the case. Following entry of judgment, we will move for a new trial. Should the court not grant a new trial, we intend to post a supersedeas bond to stay collection while we take an appeal to the Ninth Circuit Court of Appeals. We expect that it will be required to collateralize the supersedeas bond with cash. Any cash used in the collateralization of the bond would be accounted for as restricted cash on our consolidated balance sheet. We cannot provide assurance that we will succeed in setting the judgment aside by the trial or appellate court. For the year ended October 31, 2004 we have recorded an estimated loss contingency in the Trend Gaming Systems litigation of $3,628,000, which is estimated based on the amounts of the judgment described above. The estimated loss contingency is included in operating expenses in the statement of operations.

      In June 2004, Steven W. Hieronymus, Rhonda Hieronymus and Trend Gaming Systems, LLC filed a claim in the 98th Judicial District Court, Travis County, Texas, STEVEN W. HIERONYMUS, RHONDA HIERONYMUS AND TREND GAMING SYSTEMS, LLC V. THE TEXAS LOTTERY COMMISSION AND GAMETECH INTERNATIONAL, INC, alleging that our judgment against Steven and Rhonda Hieronymus (involving a prior distribution agreement in Virginia discussed below) created an unlawful “credit interest” in Trend Gaming Systems, LLC in violation of the Texas Bingo Enabling Act because Mr. Hieronymus owns a greater than 10% interest in Trend Gaming Systems, LLC. The matter was dismissed in December 2004 via non-suit.

      On October 30, 2002, Capital Gaming Supplies (“Capital”) filed a claim in the United States District Court, Southern District of Mississippi, CAPITAL GAMING SUPPLIES, INC. V. GAMETECH INTERNATIONAL, INC. Civil Action No. 3:02 CV1636WS, seeking a judgment that we tortiously interfered with alleged existing and prospective customer accounts. We denied the allegations and filed a counter-claim seeking a judgment that Capital tortiously interfered with our customer accounts. On April 18, 2003, Capital filed an amended complaint adding other claims against us and other defendants, including a claim for malicious breach of contract against International Gaming Systems, Inc. (“IGS”), and its principals. In November 2002, we acquired certain assets of IGS and we assumed certain claims filed by Capital against IGS and its principals. Capital sought compensatory and punitive damages from all defendants. On September 30, 2004, the district court entered a summary judgment in favor of all defendants dismissing all of Capital’s claims with prejudice. Capital is currently appealing the judgment to the Fifth Circuit Court of Appeals. We continue to believe that Capital’s claims are without merit and that the district court’s judgment will be affirmed. However, we cannot provide assurance that we will successfully defend the judgment on appeal. An unfavorable outcome could have a material adverse effect on our financial position, cash flows and results of operations.

      On March 2, 2004 the jury rendered a unanimous verdict in our favor awarding compensatory and punitive damages against Trend Gaming (involving a prior distribution agreement in Virginia) in the total amount of approximately $1.5 million. The jury also returned a verdict against Steven W. and Rhonda Hieronymus awarding compensatory and punitive damages of $1,030,000. The court reduced compensatory damages against Trend Gaming to $1,055,000. The court affirmed $150,000 in punitive damages against Trend Gaming and awarded GameTech costs of suit in the amount of $650,000. Compensatory damages against Mr. And Mrs. Hieronymus have been reduced to $762,000 but the punitive damage award against them in the amount of $150,000 remains unchanged. Of the total compensatory damages of $1.1 million awarded to us, $762,000 represents compensation for lost profits. We can only collect such damages from one of the defendants to avoid a double recovery. We have not recorded an estimated gain contingency as we can make no assurances whether we will be able to collect any award from the defendants.

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

      We held our 2004 Annual Meeting of Stockholders on September 22, 2004. The following nominees were elected to the Company’s Board of Directors to serve as directors until the next annual meeting of stockholders or until their successors are elected and qualified:

      The following additional item was voted upon by our stockholders:

PART II

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

      On January 13, 2005, the closing sales price of our common stock was $4.75 per share. On January 13, 2005, there were 205 record holders of our common stock.

Dividend Policy

      During December 2003, we announced the initiation of an ongoing quarterly dividend after our Board of Directors reviewed current business conditions and future prospects. We declared ongoing quarterly dividends of approximately $0.03 per share per quarter. In December 2004, the Board decided that payment of a quarterly dividend was inconsistent with the growth objectives of the company and ended the quarterly dividend policy effective January 10, 2005. Any payment of future dividends will be at the discretion of our Board of Directors and will depend upon, among other factors, our earnings, financial condition, capital requirements, level of indebtedness, contractual restrictions with respect to the payment of dividends, and other considerations that our Board of Directors deems relevant.

      The selected consolidated statement of operations data for the fiscal years ended October 31, 2004, 2003, and 2002 and the selected consolidated balance sheet data set forth below at October 31, 2004 and 2003, have been derived from our consolidated financial statements, which have been audited by Ernst & Young LLP, independent registered public accounting firm, included elsewhere herein. The selected consolidated statement of operations data for the years ended October 31, 2001 and 2000 and the selected consolidated balance sheet data set forth below at October 31, 2002, 2001 and 2000 have been derived from our audited consolidated financial statements not included herein. The selected financial data set forth below should be read in conjunction with the Financial Statements and Notes thereto and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” appearing elsewhere in this report.

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

Overview

      We design, develop, and market interactive electronic player terminals and bingo systems. We currently market portable systems that can be played anywhere within a bingo hall and fixed-base systems with light-pen or touchscreen-activated monitors. For our three most recent fiscal years ended October 31, 2004, 2003 and 2002, our portable terminals generated approximately 74%, 73% and 77% of our revenue, respectively, while, during those same years, our fixed-base terminals generated the balance of our revenue. As of October 31, 2004, we had systems in service in 36 states and in six foreign countries.

      We generate revenue by placing electronic bingo systems in bingo halls under contracts based on (1) a fixed fee per use per session; (2) a fixed weekly fee per terminal; or (3) a percentage of the revenue generated by each terminal. Revenue growth is affected by player acceptance of electronic bingo as an addition or an alternative to paper bingo, and our ability to expand operations into new markets and our ability to increase our market share. Fixed-base bingo terminals generate greater revenue per terminal than portable bingo terminals, but also require a greater initial capital investment.

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

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

      During fiscal 2004, a number of events occurred that affected, or may in the future affect, our results of operations or liquidity and capital resources.

      We adopted SFAS No. 142, Goodwill and Other Intangible Assets, on January  1, 2002. Under the new rules, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually for impairment, or more frequently if an impairment indicator arises. Separable intangible assets that are not deemed to have an indefinite life will continue to be amortized over their useful lives.

      We performed our annual impairment test at July 31, 2004 and concluded there was no goodwill impairment. During our fourth quarter, we reviewed our current and expected future results of operations and determined that our future results of operations are expected to be less than previously anticipated, as a result of slower than anticipated development and introduction of new products and technology. Additionally, in November 2004, we received an unfavorable judgment against us in an outstanding legal matter and recorded a litigation loss contingency in the fourth quarter of $3.6 million. As a result, we performed an interim impairment test at October 31, 2004. Based upon this analysis, which included an independent valuation, we recorded an impairment of goodwill of $6,625,000. The impairment charge is attributable to the indicators described above.

      The impairment of goodwill is based on an independent valuation using a combination of the market multiple, discounted cash flows, and comparable transaction approaches. The multiples used in the market approach at October 31, 2004 were consistent with our historical market trends and a control premium of 25% was applied to the estimated fair value as the market values were determined on a minority basis. The discounted cash flows were based on a discount of 20% and an effective tax rate of 40%. Comparable transactions occurring during 2001 through 2003 were used as there were no significant comparable transactions during 2004.

      During October 2004, we learned that the NIGC was in the process of changing its regulations such that the pull tab game developed for our Class II gaming device would not be in compliance with proposed gaming regulations. The proposed regulation would classify this game as a Class III game and with this classification we feel the market is limited for the game. As a result, we believe that future cash projections for this game are not material and the game’s entire value capitalized of $173,000 was charged to research and development expense. We also analyzed our current assets, other assets, bingo terminals, and other identifiable intangible assets and concluded there were no impairment charges.

      We have incurred significant expenses in aggressively defending or pursuing certain legal issues, including the litigation with a former distributor in Texas, defense of a patent infringement lawsuit in Nevada, and litigation with a former distributor for IGS in Mississippi. On November 1, 2004, a jury awarded the former Texas distributor $3,527,000 in compensatory damages while awarding our company $735,000 in compensatory damages. The former Texas distributor is seeking an additional $810,000 in legal fees and $26,000 in expenses and costs. Final entry of judgment has yet to occur in the case. Should entry of judgment occur, we will move for a new trial. Should the court not grant a new trial, we intend to post a supersedeas bond to stay collection while we appeal to the Ninth Circuit Court of Appeals. At and for the year ended October 31, 2004, we have recorded an estimated loss contingency in the Trend Gaming Systems litigation of $3,628,000. The estimated loss contingency is included in operating expenses in the consolidated statement of operations. Regarding the patent infringement matter, an unfavorable outcome at trial could result in substantial damages and payment of the plaintiff’s fees and costs. The Mississippi distributor lawsuit could result in a punitive damages award which could be materially injurious to us. We have not accrued any amounts related to the patent infringement matter or the Mississippi litigation.

      On March 2, 2004, the jury rendered a unanimous verdict in our favor awarding compensatory and punitive damages against Trend Gaming (involving a prior distribution agreement in Virginia) in the total amount of approximately $1.5 million. The jury also returned a verdict against Steven W. and Rhonda Hieronymus awarding compensatory and punitive damages of $1,030,000. The court reduced compensatory damages against Trend Gaming to $1,055,000. The court affirmed $150,000 in punitive damages against Trend Gaming and awarded GameTech costs of suit in the amount of $650,000. Compensatory damages against Mr. and Mrs. Hieronymus have been reduced to $762,000 but the punitive damage award against them in the amount of $150,000 remains unchanged. Of the total compensatory damages of $1.1 million awarded to us, $762,000 represents compensation for lost profits. We can only collect such damages from one of the defendants to avoid a double recovery. We have not recorded an estimated gain contingency as we can make no assurances whether we will be able to collect any award from the defendants.

      We expended approximately $12.6 million as an investment in bingo systems and related support equipment. This investment included an increase in the number of installed Traveler and TED²C, color-portable terminals. We also upgraded our fixed-base systems in many markets.

      As a result of management changes and staff reductions during the fourth quarter of fiscal 2004, we incurred approximately $813,000 of severance related expenses.

Application of Critical Accounting Policies and Estimates

      Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets

and liabilities at the balance sheet date and reported amounts of revenue and expenses during the reporting period. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, bad debts, bingo unit depreciation, goodwill impairment, and contingencies and litigation. We base our estimates and judgments on historical experience and on various other factors that are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

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

      Revenue is recognized for bingo terminals placed in bingo halls under contracts based on (1) a fixed fee per use per session; (2) a fixed weekly fee per terminal; or (3) a percentage of the revenue generated by each terminal. Our revenue recognition is a key component of our results of operations, and determines the timing of certain expenses, such as commissions. We recognize revenue in accordance with accounting principles generally accepted in the United States when all of the following factors exist: (a) evidence of an arrangement with the customer; (b) play or availability of the bingo terminals; (c) a fixed or determinable fee; and (d) collectibility is reasonably assured. We exercise judgment in assessing the credit worthiness of our customers and therefore in our determination of whether collectibility is reasonably assured. Should changes in conditions cause us to determine these criteria are not met for future transactions, revenue recognized for future reporting periods could be adversely affected.

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

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

      We capitalize costs related to the development of certain software products that meet the criteria of Statement of Financial Accounting Standards (“SFAS”) No. 86 — Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed. SFAS No. 86 provides for the capitalization of computer software that is to be used as an integral part of a product or process to be sold or leased, after technological feasibility has been established for the software and all research and development activities for the other components of the product or process have been completed. We are capitalizing qualified costs of software developed for new products or for significant enhancements to existing products. We cease capitalizing costs when the product is available for general release to our customers. We amortize the costs on a straight-line

method over the estimated economic life of the product beginning when the product is available for general release.

      The achievement of technological feasibility and the estimate of a products’ economic life require management’s judgment. Any changes in key assumptions, market conditions or other circumstances could result in an impairment of the capitalized asset and a charge to our operating results.

      We are required to perform an annual goodwill impairment review, and depending upon the results of that measurement, the recorded goodwill may be written down and charged to income from operations when its carrying amount exceeds its estimated fair value. In addition, we assess the impairment of goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable, such as a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, or a loss of key personnel. As a result of the review for fiscal 2004 we determined there is a goodwill impairment. Any subsequent impairment loss could have a material adverse impact on our financial condition and results of operations.

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

      All of these assessments require management judgment. Any changes in key assumptions about the business and its prospects, or changes in market conditions or other externalities, could result in an impairment charge and such a charge could have a material adverse effect on our consolidated results of operations.

      We are currently involved in various legal claims and legal proceedings. Periodically, we review the status of each significant matter and assess our potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be estimated, we accrue a liability for the estimated loss. Significant judgment is required in both the determination of probability and the determination as to whether an exposure can be reasonably estimated. Because of uncertainties related to these matters, accruals are based only on the best information available at the time. As additional information becomes available, we reassess the potential liability related to our pending claims and litigation and may revise our estimates. Such revisions in the estimates of the potential liabilities could have a material impact on our consolidated results of operations and financial position.

Results of Operations

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

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

      Revenue. We generated revenue of $51.5 million for fiscal 2004 compared to $52.3 million for fiscal 2003. The decrease of approximately $800,000, or 1.6%, was a result of several factors, including fewer installed terminals and price erosion as a result of increased competition in the Southern and Western markets. We believe the introduction of feature enhancements to existing products and the availability of new products will provide for future revenue growth. However, it is difficult for us to predict the time required to move newly developed features and products through beta testing and regulatory approvals, where required. Our newest portable color terminal, the Traveler, began with limited nationwide rollout in the third fiscal quarter of fiscal 2004 with favorable results.

      Cost of Revenue. Cost of revenue increased $2.2 million, or 10.3%, to $24.0 million for fiscal 2004 from $21.8 million for fiscal 2003. Cost of revenue as a percentage of revenue for fiscal 2004 was 46.7% compared to 41.6% for fiscal 2003. Key components of our cost of revenue include, among other items, depreciation of bingo equipment and service and operations expenses. Bingo equipment depreciation and amortization of related intangibles increased by approximately $1.3 million over fiscal 2003, primarily due to our investment in Traveler portable color terminals, TED²C portable color terminals, and our fixed-base terminals, and operations expense increased $294,000, principally due to employee severance costs and increased shipping costs. Additionally, costs associated with the obsolete bingo terminals, repair, refurbishment and disposal of bingo terminals and related support equipment increased $710,000, a 21.5% increase, from the prior year, relating primarily to monitor disposals and the disposal of the first generation Traveler terminals which were technologically obsolete.

      General and Administrative. General and administrative expenses totaled $11.2 million for fiscal 2004 compared to $11.4 million for fiscal 2003, a $200,000 decrease. General and administrative costs as a percentage of revenue for the current year were 21.7% compared to 21.8% for fiscal 2003. Fiscal 2004 and fiscal 2003 included elevated levels of legal expenses, including those related to defense of litigation with a

former distributor in Texas, patent infringement lawsuit in Nevada, litigation with a former distributor of IGS in Mississippi, and other legal proceedings including our litigation against a former distributor in Virginia and Kentucky and a Virginia sub-distributor in late 2003. The improvement in general and administrative costs came as a result of a decrease of $446,000 in consulting fees and a decrease in non-litigation outside legal fees of $316,000; partially offset with increases of $399,000 in severance expense and outside accounting fees of $127,000.

      Sales and Marketing. Sales and marketing increased approximately $300,000 to $12.6 million for fiscal 2004 compared to $12.3 million for fiscal 2003. Sales and marketing as a percentage of revenue increased from 23.6% during fiscal 2003 to 24.4% during fiscal 2004. Sales and marketing includes distributor commissions and personnel, travel, promotional, and support costs for our internal sales force. Distributor commissions increased $104,000 to $8.5 million due to an increased percentage of revenues generated by distributors. Costs associated with our internal sales force grew by $133,000 as a result of an increase in severance costs of $36,000 and increases in non-payroll costs such as travel, marketing, and facilities.

      Research and Development. Research and development costs increased $500,000 to $5.2 million for fiscal 2004 compared to $4.7 million for fiscal 2003. Research and development costs as a percentage of revenue increased from 9.0% for fiscal 2003 to 10.0% for fiscal 2004. The increase was primarily attributable to significant growth in the engineering staff. Employee severance costs in October 2004 were $153,000. The Traveler terminal, that began beta testing in December 2003 and commenced limited nationwide rollout in the third fiscal quarter of fiscal 2004, are the positive results of our efforts. The emphasis on new product development and feature enhancements for existing products continues as a major focus.

      During fiscal 2004 we capitalized internally developed software. We capitalized approximately $727,000 of payroll related costs, from our research and development and software quality assurance functions, connected with the internal development of software that meets technological feasibility and recoverability tests in accordance with FASB Statement No. 86. We had no such capitalized costs in fiscal 2003.

      Provision for (Benefit from) Income Taxes. Our effective income tax rate was approximately 14.8% and 43.7% for the fiscal years ended October 31, 2004 and 2003, respectively. The change in effective tax rate reflects certain permanent differences between financial accounting and tax accounting and the effect of state and federal income taxes and nondeductible expenses (including goodwill impairment) on the pre-tax loss in fiscal 2004 versus pre-tax income in the prior year.

Year Ended October 31, 2003 Compared with Year Ended October 31, 2002

      Revenue. We generated revenue of $52.3 million for fiscal 2003 compared to $48.9 million for fiscal 2002. The increase of approximately $3.5 million, or 7.1%, was a result of the acquisition of the assets of IGS, the increase in the installed base of TED²C color portable units, partially offset by decline in the installed base of black and white portable units. The continued roll-out of Pay-N-Play, our fast-action, credit-based pari-mutuel bingo feature, also contributed to the growth in revenue.

      Cost of Revenue. Cost of revenue increased $2.8 million, or 14.7%, to $21.8 million for fiscal 2003 from $19.0 million for fiscal 2002. Cost of revenue as a percentage of revenue for fiscal year 2003 was 41.6% compared to 38.8% for fiscal 2002. Key components of our cost of revenue include, among other items, depreciation of bingo equipment and service and operations expenses. Bingo equipment depreciation and amortization of related intangibles increased by approximately $2.5 million over fiscal 2002 due to the acquisition of certain assets from IGS, investment in TED²C terminals and fixed-base terminal upgrades. Service and operations expenses increased approximately $1.3 million due to planned growth principally as a result of increased personnel costs. Other items in cost of revenue include charges for refurbishment, repair, and disposal of bingo terminals as well as recognition of excess or obsolete bingo terminals. These charges in fiscal 2003 improved by $1.5 million from the prior year.

      General and Administrative. General and administrative expenses totaled $11.4 million for fiscal 2003 compared to $9.5 million for fiscal 2002, a $1.9 million increase. General and administrative costs as a percentage of revenue for the current year were 21.8% compared to 19.5% for fiscal 2002.

      The increase was primarily attributable to a $2.0 million increase in legal and consulting expenses primarily due to defense of a patent infringement lawsuit in Nevada, litigation with our former distributor in Texas, litigation with a former distributor of IGS in Mississippi and other legal proceedings.

      Sales and Marketing. Sales and marketing expenses decreased approximately $900,000 to $12.3 million for fiscal 2003 compared to $13.2 million for fiscal 2002. Sales and marketing as a percentage of revenue decreased from 27.1% during fiscal 2002 to 23.6% during fiscal 2003. Sales and marketing includes distributor commissions and personnel, travel, promotional, and support costs for our internal sales force. Distributor commissions decreased $486,000 to $8.4 million due to the changes in mix of revenue generated by distributors and those customers served directly by us. Additionally, fiscal 2002 included distributor termination and settlement costs. The balance of the decrease in sales and marketing expenses was primarily due to reductions in personnel related costs and travel expenses.

      Research and Development. Research and development costs increased $2.0 million to $4.7 million for fiscal 2003 compared to $2.7 million for fiscal 2002. Research and development costs as a percentage of revenue increased from 5.5% for fiscal 2002 to 9.0% for fiscal 2003. The increase was primarily attributable to significant growth in the engineering staff and external project costs for new or enhanced products such as the Traveler terminal, which was introduced at an industry show in September 2003 and began beta testing in December 2003.

      Provision for (Benefit from) Income Taxes. Our effective income tax rate was approximately 43.7% and 38.2% for the fiscal years ended October 31, 2003 and 2002, respectively. The effective tax rates reflect certain permanent differences between financial accounting and tax accounting and the effect of state and federal income taxes on the pre-tax income.

Liquidity and Capital Resources

      Operating activities provided $13.8 million of cash during fiscal 2004 compared to $16.8 million during fiscal 2003. The $13.8 million consisted primarily of net loss of $9.9 million, adjusted positively by (1) $13.4 million for depreciation, amortization, and obsolescence provisions; (2) provision for the Trend loss contingency of $3.6 million; (3) impairment of goodwill of $6.6 million; and (4) a net change of $100,000 in deferred taxes and other operating assets and liabilities. During fiscal 2003, the $16.8 million provided by operating activities consisted primarily of net income of $1.2 million adjusted by (1) $10.8 million for depreciation, amortization, and obsolescence provisions; (2) taxes refunded of $3.7 million; and (3) a net change of $1.1 million in other operating assets and liabilities.

      We used approximately $15.5 million of cash in investing activities during fiscal 2004 compared to $11.1 million of cash during fiscal 2003. The $15.5 million consisted of $13.6 million of capital expenditures ($12.6 million of which was expended on bingo terminals and associated support equipment), the purchase and development of software and other intangible assets for a total of $1.1 million, and an increase in short-term investments of $855,000. During fiscal 2003, the $11.1 million consisted of $9.5 million of capital expenditures ($8.9 million of which was expended on bingo equipment), the purchase of certain assets of IGS and other intangible assets for a total of $3.9 million, the buyout of two distributorship agreements for an aggregate of $1.0 million, offset by a decrease in short-term investments of $3.3 million.

      Financing activities used $2.3 million during fiscal 2004 compared to the cash provided of $254,000 during fiscal 2003. The $2.3 million used during fiscal 2004 was primarily for cash dividends of $2.5 million and payments of $275,000 on long-term debt, offset by proceeds from stock option exercises of $415,000. The $254,000 provided during fiscal 2003 was primarily from proceeds of $530,000 from stock option exercises offset by payments of $276,000 on a note payable.

      As of October 31, 2004, we had cash, cash equivalents and short-term investments of approximately $8.7 million. In addition to our cash, cash equivalents and short-term investments, we have a $2.5 million line of credit with Wells Fargo Bank, N.A., which has an interest rate based on the prime rate or London InterBank Offered Rate (“LIBOR”) plus 2.0%, at our option, on which there was no outstanding balance at October 31, 2004. The credit line was reduced from $5.0 million due to our results of operations and resulting

failure to maintain certain financial covenants, and our litigation loss contingency. The revolving credit facility expires on April 2, 2005. No assurance can be made for renewal. At February 14, 2005, we were not in compliance with certain of the financial covenants and expect that we will not be in compliance with such covenants through April 2, 2005. The bank has agreed to continue the lending relationship, however, the bank reserves the right to terminate the agreement at their discretion. We believe that cash flows from operations and cash, cash equivalents, and short-term investments on hand and our available line of credit will be sufficient to support our operations, provide for budgeted capital expenditures, make our declared dividend payment for the first quarter of fiscal 2005, provide cash collateral for the posting of a bond to appeal the jury decision relating to our former distributor in Texas, and meet liquidity requirements through the remainder of fiscal 2005. Our long-term liquidity requirements will depend on many factors, including the rate at which we expand our business, and whether we do so internally or through acquisitions. In addition, strategic opportunities we may pursue could require us to fund our portion of operating expenses of such ventures and may require us to advance additional amounts should any partners in such ventures be unable to meet unanticipated capital calls or similar funding events. To the extent that the funds generated from the sources described above are insufficient to fund our activities in the long term, we may be required to raise additional funds through public or private financing. No assurance can be given that additional financing will be available or that, if it is available, it will be on terms acceptable to us.

Contractual Obligations

      The following table presents information on contractual obligations held as of October 31, 2004:

Purchase Commitments

      From time to time, we enter into commitments with our vendors to purchase bingo terminals and support equipment at fixed prices and/or guaranteed quantities. During the second quarter of this fiscal year, we entered into such an agreement with one of our vendors to provide approximately $5.2 million in Traveler terminals. At October 31, 2004, $2.8 million of the commitment was outstanding and all purchases are expected to occur by the end of the third quarter of fiscal 2005.

Inflation and General Economic Condition

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

      As described in Note 10 to our Consolidated Financial Statements, we maintain an investment portfolio, of approximately $2.6 million, in available-for-sale debt securities of the U.S. Government and its agencies, and in investment grade corporate issues. The values of these investments are subject to changes in interest rates. However, because these investments are short-term and are generally allowed to mature, we do not believe that any risk inherent in our portfolio is likely to have a material effect on expected cash flows. We monitor these investments for impairment and make appropriate reductions in carrying value when necessary.

      Our revolving credit facility with Wells Fargo is a $2.5 million line of credit with an interest rate based on the prime rate or LIBOR plus 2.0%, at our option. The credit line was reduced from $5.0 million due to our

results of operations and resulting failure to maintain certain financial covenants, and our litigation loss contingency. The agreement contains certain restrictive covenants, which among other things require that specified financial balances and ratios be maintained, annual profitability be maintained, restrictions on the incurrence of additional indebtedness and payment of dividends. The line of credit expires on April 2, 2005. No assurance can be made for renewal. We currently maintain a zero balance on the revolving credit facility.

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

      Sensitivity Analysis. Assuming we had a $2.0 million balance outstanding as of October 31, 2004, the rate of interest calculated using the prime rate option would be 5.25%. Our monthly interest payment, if the rate stayed constant, would be $8,750. If the prime rate rose to 8.0%, which assumes an unusually large increase, our monthly payment would be $13,333. A more likely increase of 1.0% or 2.0%, given the recent trend of decreasing or relatively low interest rates, would result in a monthly payment of $10,417 or $12,083, respectively. We do not believe the risk resulting from such fluctuations is material or that the payment required would have a material effect on cash flow.

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

      Not applicable.

      We have evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of October 31, 2004. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have each concluded that our disclosure controls and procedures are effective to ensure that we record, process, summarize, and report information required to be disclosed by us in our quarterly reports filed under the Securities Exchange Act within the time periods specified by the Securities and Exchange Commission’s rules and forms. During the fiscal year covered by this report, there have not been any changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

      Subsequent to the date of their evaluation, there have not been any significant changes in our internal controls or in other facts that could significantly affect these controls, including any corrective action with regard to significant deficiencies and material weaknesses.

      Not applicable.

PART III

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

      RICHARD T. FEDOR, a co-founder of our company, has served as our Chairman since December 2003 and as a director since March 1998. Mr. Fedor served as our Vice-Chairman from October 2000 until December 2003. Mr. Fedor served as our interim Chief Executive Officer from August 1999 until October 2000 and as our Chief Executive Officer from 1994 until March 1998. Mr. Fedor also served as our President from 1994 until August 1, 1997. From 1991 to 1994, Mr. Fedor’s occupation was that of a private investor. From 1987 to 1991, Mr. Fedor was President of ZYGO Corporation, a manufacturer of high-performance, laser-based electro-optical measuring instruments. From 1985 to 1987, Mr. Fedor held the position of Operations Vice President at International Game Technology. Mr. Fedor has also held various senior management positions at Hewlett Packard and GTE.

      JOHN B. FURMAN has served as our Chief Executive Officer and President since September 2004 and served has as a member of the Board of Directors since May of 2003. From February 2000 until September 2004, Mr. Furman was a consultant to public and private companies, where he was primarily involved in product commercialization, business transactions, and financial restructurings. Mr. Furman served as President and Chief Executive Officer and a director of Rural/ Metro Corporation, a publicly held provider of emergency and fire protection services, from August 1998 until January 2000. Mr. Furman was a senior member of the Phoenix-based law firm of O’Connor, Cavanagh, Anderson, Killingsworth & Beshears, a professional association, from January 1983 until August 1998 where he chaired the Business Law and Financial Services practice group; he was Associate General Counsel of Waste Management, Inc., a New York Stock Exchange-listed provider of waste management services, from May 1977 until December 1983; and Vice President, Secretary, and General Counsel of the Warner Company, a New York Stock Exchange-listed company involved in industrial mineral extractions and processing, real estate development, and solid and chemical waste management, from November 1973 until April 1977. Mr. Furman is a director, Chairman of the Compensation Committee and member of the Audit Committee of MarineMax, Inc., a publicly traded company that is the nation’s largest boat dealer; and a director and member of the Audit Committee for Smith and Wesson, a publicly traded company engaged in firearm manufacturing and sales;

      VERN D. BLANCHARD, a co-founder of our company, has served as a member of our Board of Directors since November 2001 and is Chairman of our Nominating and Compensation Committees and serves on our Audit Committee. Mr. Blanchard held the position of Director of Engineering of our company from 1994 until his retirement in June 2001. Mr. Blanchard has over 10 years experience in the bingo industry. He was the inventor of our initial portable and fixed-base bingo systems. Mr. Blanchard has spoken before the Patent and Trademark Office concerning software patents and other intellectual property issues and is well publicized in the software industry. Mr. Blanchard started his business career in real estate, and at 21, became

one of the youngest real estate brokers in California honored as one of the 100 charter members of the Academy of Real Estate.

      SCOTT SHACKELTON has served as a member of our Board of Director since October 2004. Mr. Shackelton is Chairman of our Audit Committee, and serves on our Nominating and Compensation Committees. His recent experience includes assisting in the preparation and sale of Sierra Design Group to Alliance Gaming Corporation. Mr. Shackelton’s extensive background in the gaming industry includes his service as Chief Financial Officer from 1996-1999 for Innovative Gaming Corporation of America, various positions including Vice President of Finance and Treasurer of International Game Technology from 1980-1996 and numerous senior financial positions for Harrah’s Entertainment Inc. from 1972-1980. In addition, Shackelton served from 2001-2002 as Chief Financial Officer and assisted in the sale of IGO Corporation, a company that specialized in battery units and accessories for mobile technology products. Mr. Shackelton holds a bachelors degree and MBA from the University of Southern California, is a certified public accountant and has held gaming licenses in 12 states. He is also a trustee of the WS Johnson Foundation which provides funding for disadvantaged family and youth programs.

      DONALD K. WHITAKER has served as a member of our Board of Directors since March 2004 and serves on our Audit, Compensation and Nominating Committees. Mr. Whitaker is the founder and has served as the Chief Executive Officer of Ceronix, Inc., a leading manufacturer of custom designed color video monitors for the gaming industry, since 1984. From June 1973 to October 1979, Mr. Whitaker served as Production manager and Vice President of Operations for Kevex Corporation. Ceronix has achieved many awards since being founded in 1985, including Business of the Year by the Auburn area Chamber of Commerce, several Vanguard Awards presented by Comstock’s magazine, and has been recognized as one of the “Fastest Growing Companies” by the Sacramento Business Journal.

      CORNELIUS (“CORY”) T. KLERK has served as our Chief Financial Officer and Treasurer, since August 2004. Mr. Klerk served as Vice President of Finance for Aristocrat Technologies, Inc., the Americas Division of Aristocrat Leisure Limited from August 2003 to July 2004. With 28 years of gaming experience, Mr. Klerk has held a variety of senior financial positions with Silverton Hotel Casino, Aladdin Hotel Casino, Hilton Gaming and Harrah’s Entertainment. Mr. Klerk began his career as a CPA with Price Waterhouse & Co.

      ANDREJS K. BUNKSE has served as Vice President of our company since December 2001 and as our General Counsel and Corporate Secretary since April 1997. From 1995 to 1997, Mr. Bunkse was an associate at the law firm of Mitchell, Brisso, Delaney & Vrieze. Mr. Bunkse is a graduate of Syracuse University and the Santa Clara University of Law, is a member of the State Bar of California, the American Bar Association, the American Society of Corporate Secretaries and the Association of Corporate Counsel.

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

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

      Based on our review of such forms received by us during the fiscal year ended October 31, 2004 and written representation that no other reports were required, we believe that each person that at any time during the fiscal year was a director, officer, or beneficial owner of more than 10% of our common stock complied with all Section 16(a) filing requirements during such fiscal year except that each of Clarence Thiesen and John Hewitt, both former executives of our company, and Andrejs Bunkse filed one late report on Form 4 each covering one transaction.

Code of Ethics and Committee Charters

      During fiscal 2004, we adopted Corporate Governance Guidelines, a Code of Conduct, a Code of Ethics for the CEO and Senior Financial Officers, an amended and restated Audit Committee Charter, a Compensation Committee Charter, and a Nominating Committee Charter. We have posted to our website

these corporate governance materials. These documents will also be available in print to any stockholder who requests by contacting our corporate secretary at our executive offices.

Information Relating to our Audit Committee of the Board of Directors

      The purpose of the Audit Committee is to assist our board of directors in the oversight of the integrity of the consolidated financial statements of our company, our company’s compliance with legal and regulatory matters, the independent registered public accounting firm’s qualifications and independence, and the performance of our company’s independent registered public accounting firm. The primary responsibilities of the Audit Committee are set forth in its charter, and include various matters with respect to the oversight of our company’s accounting and financial reporting process and audits of the consolidated financial statements of our company on behalf of our board of directors. The Audit Committee also selects the independent registered public accounting firm to conduct the annual audit of the consolidated financial statements of our company; reviews the proposed scope of such audit, reviews accounting and financial controls of our company with the independent registered public accounting firm and our financial accounting staff; and reviews and approves transactions between us and our directors, officers, and their affiliates.

      The Audit Committee currently consists of Messrs. Shackelton, Whitaker and Blanchard each of whom is an independent director of our company under applicable Nasdaq rules as well as under rules adopted by the Securities and Exchange Commission pursuant to the Sarbanes-Oxley Act of 2002. The board of directors has determined that Mr. Shackelton (whose background is detailed above) qualifies as an “audit committee financial expert” in accordance with applicable rules and regulations of the SEC.

Summary of Cash and Other Compensation

      The following table sets forth the total compensation received for services rendered to us in all capacities for the fiscal years ended October 31, 2004, 2003, and 2002 by our Chairman of the Board, our Chief Executive Officer, and our other most highly compensated executive officers whose total annual salary and bonus exceeded $100,000 during fiscal 2004. The table also reflects compensation paid to two former officers during fiscal 2004.

SUMMARY COMPENSATION TABLE

Option Grants

      The following table sets forth certain information with respect to stock options granted to the officers listed during fiscal 2004.

OPTION GRANTS IN LAST FISCAL YEAR

Fiscal 2004 Option Exercises and Year-End Option Values

      The following table sets forth the number and value of stock options exercised in fiscal 2004 by the officers listed and the value of each such officer’s unexercised options as of October 31, 2004.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND

FISCAL YEAR-END OPTION VALUES

1997 Incentive Stock Plan

      We have adopted the 1997 Incentive Stock Plan, which authorizes the grant of options to purchase up to 4,000,000 shares of our common stock. As of January 13, 2005, 1,738,275 shares of common stock have been issued upon exercise of options granted under the plan, and there were outstanding options to acquire 941,425 shares of common stock under the plan. As of that date, an additional 1,320,300 shares of common stock were available for grant under the plan. The 1997 plan provides for the grant of incentive stock options or non-qualified stock options.

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

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

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

      In the event of a proposed dissolution or liquidation of our company each option will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by our Board of Directors. Our Board of Directors may, in the exercise of its sole discretion in such instances, declare that any option will terminate as of a date fixed by the Board of Directors, and give each optionee the right to exercise outstanding options as to all or any part of the options, including shares as to which the option would not otherwise be exercisable. In the event of a proposed sale of all or substantially all of the assets of our company, or the merger of our company with or into another corporation, each option may be assumed or an equivalent option may be substituted by the successor corporation, or if such successor corporation does not assume the option or substitute an equivalent option, our Board of Directors may, in lieu of such assumption or substitute, provide the optionee the right to exercise the option as to all of the shares underlying the option, including shares as to which the option would not otherwise be exercisable. If our Board of Directors makes an option fully exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Board will notify the optionee that the option will be fully exercisable for a period of 15 days from the date of such notice, and the option will terminate upon the expiration of such period.

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

Employment Contracts and Severance Agreements

      We did not have a written employment, severance, or change of control agreement with either Messrs. Thiesen or Hewitt. Effective September 1, 2004, Mr. Thiesen resigned as our Chief Executive Officer and entered into a severance agreement and release of all claims. The agreement provides that Mr. Thiesen be paid $120,000 over a twelve-month period and all unvested stock options held by Mr. Thiesen vest. The compensation charge as a result of the acceleration of Mr. Thiesen’s stock options did not have a material impact on our financial position, cash flows, or results of operations.

      John B. Furman entered into an employment agreement on September 2, 2004, to serve as our Chief Executive Officer and President through September 1, 2006. The employment agreement provides for a base salary that may be increased, but not decreased, at the discretion of the Board of Directors. Mr. Furman’s base salary currently is $262,000 per year. Mr. Furman may be awarded an annual bonus at the discretion of the Board of Directors as described below. Mr. Furman’s employment agreement is for a term of two years, and will automatically renew for one-year periods unless otherwise terminated. If Mr. Furman’s employment is constructively terminated or terminated by us without cause, or if he elects to terminate his employment within 12 months of any change of control, he is entitled to receive an amount equal to eighteen months or the remainder of the term (whichever is greater) of his base salary and immediate vesting of any stock options. In the event of a change of control, the term of Mr. Furman’s agreement will extend automatically for two years following the effective date of the change of control. Mr. Furman’s agreement is terminable by us for cause. The agreement provides that Mr. Furman may not compete with us during the term of his employment and for a period of one year after his retirement or other termination of his employment. The agreement also provides that Mr. Furman is entitled to participate in any long-term incentive plan that we provide to our executives.

      Cornelius T. Klerk entered into an employment agreement on August 3, 2004, to serve as our Chief Financial Officer and Treasurer through January 31, 2007. The employment agreement has an initial six-

month trial period in which either the company or Mr. Klerk may terminate the employment commitment. Effective February 1, 2005, the employment agreement provides for a base salary of $170,000 per year. Mr. Klerk may be awarded an annual bonus at the discretion of the Board of Directors as described below. Mr. Klerk’s employment agreement is for a term of two years, and will automatically renew for one year periods unless otherwise terminated. If Mr. Klerk’s employment is terminated by us without cause, he is entitled to receive an amount equal to six months of his base salary. Mr. Klerk’s agreement is terminable by us for cause. The agreement provides that Mr. Klerk may not compete with us during the term of his employment and for a period of one year after his retirement or other termination of his employment. The agreement also provides that Mr. Klerk is entitled to participate in any long-term incentive plan that we provide to our executives.

      Andrejs K. Bunkse entered into an employment agreement on October 1, 1997 to serve as our General Counsel and Corporate Secretary through September 30, 2005. The employment agreement provides for a base salary that may be increased, but not decreased, at the discretion of the Board of Directors. Mr. Bunkse’s current base salary is $170,000 per year. Mr. Bunkse may be awarded an annual bonus at the discretion of the Board of Directors as described below. Mr. Bunkse’s employment agreement is for a term of two years, and will automatically renew unless otherwise terminated. If Mr. Bunkse’s employment is constructively terminated or terminated by us without cause, or if he elects to terminate his employment within 12 months of any change of control, he is entitled to receive an amount equal to two years of his base salary and immediate vesting of any stock options. If Mr. Bunkse’s employment is terminated due to our decision not to renew the term of Mr. Bunkse’s employment agreement, he is entitled to receive an amount equal to one year of his base salary and immediate vesting of any stock options. In the event of a change of control, the term of Mr. Bunkse’s agreement will automatically extend for two years following the effective date of the change of control. Mr. Bunkse’s employment is terminable by us for cause. The agreement provides that Mr. Bunkse may not compete with us during the term of his employment and for a period of two years after his retirement or other termination of his employment. The agreement also provides that Mr. Bunkse is entitled to participate in any long-term incentive plan that we provide to our executives.

Indemnification of Directors, Officers, Employees, and Agents

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

Compensation of Directors

      Directors who are full-time employees of our company receive no additional compensation for serving as directors. Non-employee directors receive a quarterly director’s fee of $4,000 and reimbursement of expenses per board or committee meeting attended. Our Chairman, in recognition for the time and effort committed to our company, receives monthly compensation of $8,000. With the exception of our Chairman, each outside director receives $1,000 per board meeting attended unless the outside director is chairman of the Audit Committee, in which case the fee is $1,500 per committee meeting. In addition, under our Incentive Stock Option Plan, each outside director receives a grant of 10,000 shares upon joining the Board of Directors and an annual grant of options to purchase 10,000 shares of common stock. The exercise price of the options is the fair market value of common stock on the date of grant, and each option has a term of ten years and becomes exercisable immediately upon grant.

Compensation Committee Interlocks and Insider Participation

      Mr. Fedor is a co-founder of our company, has served as our Chairman since December 2003, and served as our Chief Executive Officer from 1994 until March 1998. On August 1, 1999, Mr. Fedor returned as interim Chief Executive Officer and served as such until October 2000. Mr. Fedor also served as President from 1994 until August 1, 1997.

      Mr. Blanchard is a co-founder of our company and served as our Director of Engineering from 1994 until his retirement in June 2001. During fiscal 2004, we paid $12,500 to Mr. Blanchard for medical benefits and have an outstanding obligation to Mr. Blanchard to provide continued medical benefits to him totaling $159,000.

      The following table sets forth certain information regarding beneficial ownership of our common stock as of January 13, 2005 for (i) all directors, our Chief Executive Officer, two executive officers, and two former executive officers listed in the Summary Compensation Table under Item 11, “Executive Compensation,” (ii) all directors and executive officers as a group, and (iii) each person known by us to beneficially own more than 5% of our outstanding shares of common stock.

Equity Compensation Plan Information

      The following table sets forth information with respect to our common stock that has been authorized for issuance under all of our equity compensation plans as of October 31, 2004.

      During fiscal 2004, we paid our former Chairman $8,000 per month in recognition for the time and commitment to our company.

      Mr. Blanchard is a co-founder of our company and served as our Director of Engineering from 1994 until his retirement in June 2001. During fiscal 2004, we paid $12,500 to Mr. Blanchard for medical benefits and have an outstanding obligation to Mr. Blanchard to provide continued medical benefits to him totaling $159,000.

Audit Fees

      Fees for audit services totaled approximately $484,000 and $371,000 for the fiscal years ended October 31, 2004 and 2003, respectively, including fees associated with the annual audits reviews of our quarterly reports on Form  10-Q, assistance with the review of documents filed with the SEC, and accounting consultations.

Audit-Related Fees

      Fees for audit-related services totaled approximately $4,000 and $31,000 for the fiscal years ended October 31, 2004 and 2003, respectively. Audit-related services principally included assistance in documenting internal control policies and procedures over financial reporting.

Tax Fees

      Fees for tax services, including tax compliance and consultation, amounted to approximately $52,000 and $50,000 for the fiscal years ended October 31, 2004 and 2003, respectively.

All Other Fees

      Our principal accountant did not bill us for any other services for the fiscal years ended October 31, 2004 and 2003.

Audit Committee Pre-Approval Policies

      The duties and responsibilities of our Audit Committee include the pre-approval of all audit, audit related, tax, and other services permitted by law or applicable SEC regulations (including fee and cost ranges) to be performed by our independent registered public accounting firm. Any pre-approved services that will involve fees or costs exceeding pre-approved levels will also require specific pre-approval by the Audit Committee. Unless otherwise specified by the Audit Committee in pre-approving a service, the pre-approval will be effective for the 12-month period following pre-approval. The Audit Committee will not approve any non-audit services prohibited by applicable SEC regulations or any services in connection with a transaction initially recommended by the independent registered public accounting firm, the purpose of which may be tax avoidance and the tax treatment of which may not be supported by the Internal Revenue Code and related regulations.

      To the extent deemed appropriate, the Audit Committee may delegate pre-approval authority to the Chairman of the Board or any one or more other members of the Audit Committee provided that any member of the Audit Committee who has exercised any such delegation must report any such pre-approval decision to the Audit Committee at its next scheduled meeting. The Audit Committee will not delegate the pre-approval of services to be performed by the independent registered public accounting firm to management.

      Our Audit Committee requires that our independent registered public accounting firm, in conjunction with our Chief Financial Officer, be responsible for seeking pre-approval for providing services to us and that any request for pre-approval must inform the Audit Committee about each service to be provided and must provide detail as to the particular service to be provided.

      All of the services provided by Ernst & Young LLP described above under the captions “Audit Fees,” “Audit-Related Fees,” and “Tax Fees,” were approved by our Audit Committee.

PART IV

      (a) Financial Statements and Financial Statement Schedules

      (b) Exhibits

SIGNATURES

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

Dated: February 14, 2005

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

GameTech International, Inc.

Index to Consolidated Financial Statements

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

The Board of Directors and Shareholders

GameTech International, Inc.

      We have audited the accompanying consolidated balance sheets of GameTech International, Inc. as of October 31, 2004 and 2003, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended October 31, 2004. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of GameTech International, Inc. at October 31, 2004 and 2003 and the consolidated results of its operations and its cash flows for each of the three years in the period ended October 31, 2004, in conformity with U.S. generally accepted accounting principles.

Ernst & Young LLP

Reno, Nevada

February 8, 2005

GAMETECH INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

See accompanying notes.

GAMETECH INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes.

GAMETECH INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

See accompanying notes.

GAMETECH INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS