<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q


(Mark One)
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

For the quarterly period ended   JUNE 30, 2001
                                 -------------

                                       OR

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

For the transition period from                 to
                               ---------------    ------------------

Commission file number   1-6339
                        --------

                         GREATE BAY CASINO CORPORATION
                         -----------------------------
            (Exact name of Registrant as specified in its charter)
            ------------------------------------------------------

<TABLE>
<CAPTION>

<S>                                                       <C>
                 DELAWARE                                     75-1295630
---------------------------------------------           ----------------------
       (State or other jurisdiction of                     (I.R.S. Employer
        incorporation or organization)                    Identification No.)

    C/O ADVANCED CASINO SYSTEMS CORPORATION
         200 DECADON DRIVE, SUITE 100
        EGG HARBOR TOWNSHIP, NEW JERSEY                         08234
----------------------------------------------          -----------------------
    (Address of principal executive offices)                 (Zip Code)

(Registrant's telephone number, including area code)        (609) 441-0704
                                                        -----------------------
</TABLE>

                                (NOT APPLICABLE)
-------------------------------------------------------------------------------
             (Former name, former address and former fiscal year,
                        if changed since last report.)

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

   Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.


            CLASS                       OUTSTANDING AT AUGUST 8, 2001
   ----------------------------         -----------------------------
   Common Stock, $.10 par value                5,186,627 shares

                                       1
<PAGE>

                GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

PART I: FINANCIAL INFORMATION
-----------------------------

INTRODUCTORY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------

   CURRENT GBCC OPERATIONS -

   Greate Bay Casino Corporation, a Delaware corporation, and its subsidiaries
("GBCC" or the "Company") are engaged in the development and sale of casino-
related information technology systems. In prior years, GBCC was also engaged in
casino-related operations consisting of management and consulting contracts with
gaming facilities located in Aurora, Illinois (the "Aurora Casino") and Tunica
County, Mississippi (the "Tunica Casino") and ownership and operation of the
Sands Hotel and Casino in Atlantic City, New Jersey (the "Sands").  GBCC's
common stock is listed on the OTC Bulletin Board Service under the trading
symbol "GEAA".   Approximately 36% of GBCC's outstanding stock is owned by Jack
E. Pratt, Edward T. Pratt, Jr., William D. Pratt, Edward T. Pratt III and by
certain general partnerships and trusts controlled by the Pratts and by other
family members (collectively, the "Pratt Family").  The Pratt Family also owns
approximately 54% of Hollywood Casino Corporation ("HCC", a Delaware
corporation), which owns the Aurora Casino and the Tunica Casino.  The principal
executive offices of GBCC are located at 200 Decadon Avenue, Suite 100, Egg
Harbor Township, New Jersey 08234, telephone (609) 441-0704.

   GBCC is insolvent and its only remaining operating activity is the
development, installation and maintenance of casino systems by its wholly owned
subsidiary, Advanced Casino Systems Corporation ("ACSC").  At June 30, 2001,
GBCC and its subsidiaries had debt outstanding to HCC consisting of (1) demand
notes and accrued interest thereon totaling $9.7 million and (2) a 14.875%
promissory note due 2006 and accrued interest thereon totaling $50.2 million.
ACSC's  operations do not generate sufficient cash flow  to provide debt service
on the HCC demand notes and, consequently, GBCC is currently insolvent.
Additionally, semi-annual interest payments of approximately $3.5 million
attributable to the 14.875% promissory note become payable commencing in August
2001.  GBCC is currently negotiating with HCC to restructure its obligations
and, in that connection, has entered into certain standstill agreements with
HCC.  Under the standstill agreements, all payments of principal and interest
due from HCC during the period from March 1, 2000 through September 1, 2001 with
respect to an intercompany note as detailed in Note 7 of the Notes to
Consolidated Financial Statements have been deferred until October 1, 2001 in
consideration of HCC's agreement not to demand payment of principal or interest
on GBCC's obligations to HCC (see (1) and (2) above).   The fair market value of
GBCC's assets is substantially less than  its existing obligations to HCC.
Accordingly, management anticipates that any restructuring of GBCC's obligations
will result in the conveyance of all of its assets (or the proceeds from the
sale of its assets) to HCC, resulting in no cash or other assets remaining
available for distribution to the Company's shareholders.  Any restructuring of
GBCC's obligations, consensual or otherwise, will require the Company to file
for protection under federal bankruptcy laws and will ultimately result in
liquidation of the Company.

   The insolvency of GBCC raises substantial doubt about its ability to continue
as a going concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of these uncertainties.

   SUBSIDIARY CHAPTER 7 FILINGS -

   On June 30, 2000, three inactive, wholly owned, indirect subsidiaries of GBCC
filed for liquidation under Chapter 7 of the United States Bankruptcy Code in
the United States Bankruptcy Court for the District of Delaware (the "Delaware
Bankruptcy Court").  The subsidiaries were originally formed to

                                       2
<PAGE>

acquire property and build a second casino/hotel in Atlantic City, New Jersey.
These plans were subsequently abandoned; however, the companies remained in
existence pending the outcome of certain litigation which was substantially
resolved in 1996. The cases were closed by the Trustee in Bankruptcy in December
2000 and are awaiting a final liquidation order from the Delaware Bankruptcy
Court. The filings did not and are not expected to have a significant effect on
the operations or financial position of GBCC.

   FINANCIAL REPORTING -

   The consolidated financial statements as of June 30, 2001 and for the three
and six month periods ended June 30, 2001 and 2000 have been prepared by GBCC
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission.  In the opinion of management, these consolidated financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the consolidated financial position of
GBCC as of June 30, 2001, the results of its operations for the three and six
month periods ended June 30, 2001 and 2000 and its cash flows for the six month
periods ended June 30, 2001 and 2000.

   Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted.  These consolidated financial statements should
be read in conjunction with the consolidated financial statements and notes
thereto included in GBCC's 2000 Annual Report on Form 10-K.

                                       3
<PAGE>

                        INDEPENDENT ACCOUNTANTS' REPORT


To the Board of Directors and Stockholders of
Greate Bay Casino Corporation
Egg Harbor Township, New Jersey


We have reviewed the accompanying condensed consolidated balance sheet of Greate
Bay Casino Corporation and subsidiaries as of June 30, 2001, and the related
condensed consolidated statements of operations for the three and six month
periods ended June 30, 2001 and 2000 and of cash flows for the six month periods
ending June 30, 2001 and 2000.  These financial statements are the
responsibility of the Corporation's management.

We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants.  A review of interim
financial information consists principally of applying analytical procedures to
financial data and of making inquiries of persons responsible for financial and
accounting matters.  It is substantially less in scope than an audit conducted
in accordance with auditing standards generally accepted in the United States of
America, the objective of which is the expression of an opinion regarding the
financial statements taken as a whole.  Accordingly, we do not express such an
opinion.

Based on our reviews, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with accounting principles generally accepted in the United States of
America.

We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of
Greate Bay Casino Corporation and subsidiaries as of December 31, 2000, and the
related consolidated statements of operations, shareholders' deficit, and cash
flows for the year then ended (not presented herein); and in our report dated
March 15, 2001 we expressed an unqualified opinion, including an explanatory
paragraph relating to an uncertainty as to the Company's ability to continue as
a going concern, on those consolidated financial statements.  In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of December 31, 2000 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.



DELOITTE & TOUCHE LLP
Dallas, Texas
August 3, 2001

                                       4
<PAGE>

                 GREATE BAY CASINO CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>
                                                           JUNE 30,
                                                             2001        DECEMBER 31,
                                                         (UNAUDITED)        2000
                                                         -----------     -----------
<S>                                                      <C>            <C>
Current Assets:
 Cash and cash equivalents                               $ 8,049,000     $ 5,903,000
 Temporary cash investments                                  100,000         100,000
 Accounts receivable                                       1,916,000       1,301,000
 Inventories                                                 821,000         520,000
 Costs and estimated earnings in excess of billings        2,241,000         340,000
 Due from affiliates                                       2,602,000       2,241,000
 Other current assets                                        606,000         612,000
                                                         -----------     -----------
  Total current assets                                    16,335,000      11,017,000
                                                         -----------     -----------
Property and Equipment:
 Operating equipment                                       1,110,000         946,000
 Less - accumulated depreciation                            (695,000)       (610,000)
                                                         -----------     -----------
  Net property and equipment                                 415,000         336,000
                                                         -----------     -----------
Other Assets:
 Due from affiliates                                               -         216,000
 Deferred income taxes                                         2,000           1,000
                                                         -----------     -----------
  Total other assets                                           2,000         217,000
                                                         -----------     -----------
                                                         $16,752,000     $11,570,000
                                                         ===========     ===========
</TABLE>


    The accompanying introductory notes and notes to consolidated financial
     statements are an integral part of these consolidated balance sheets.

                                       5
<PAGE>

                 GREATE BAY CASINO CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

                     LIABILITIES AND SHAREHOLDERS' DEFICIT
<TABLE>
<CAPTION>
                                                  JUNE 30,
                                                    2001         DECEMBER 31,
                                                (UNAUDITED)          2000
                                               -------------    -------------
<S>                                            <C>              <C>
Current Liabilities:
 Borrowings from affiliate                     $   5,704,000    $   5,704,000
 Accounts payable                                  3,622,000        1,878,000
 Accrued liabilities -
  Salaries and wages                                 679,000          305,000
  Interest                                         6,582,000        3,635,000
  Other                                               78,000           36,000
 Unearned revenues                                 2,259,000        2,407,000
 Other current liabilities                            65,000           20,000
                                               -------------    -------------
  Total current liabilities                       18,989,000       13,985,000
                                               -------------    -------------
Long-Term Debt                                    47,603,000       46,687,000
                                               -------------    -------------

Commitments and Contingencies

Shareholders' Deficit:
 Common stock, $.10 par value per
  share; 10,000,000 shares authorized;
  5,186,627 shares issued and outstanding            519,000          519,000
 Additional paid-in capital                       75,212,000       75,212,000
 Accumulated deficit                            (125,571,000)    (124,833,000)
                                               -------------    -------------
  Total shareholders' deficit                    (49,840,000)     (49,102,000)
                                               -------------    -------------
                                               $  16,752,000    $  11,570,000
                                               =============    =============
</TABLE>



    The accompanying introductory notes and notes to consolidated financial
     statements are an integral part of these consolidated balance sheets.

                                       6
<PAGE>

                 GREATE BAY CASINO CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED
                                                                  JUNE 30,
                                                          --------------------------
                                                             2001            2000
                                                          -----------    -----------
<S>                                                       <C>            <C>
Revenues:
 System sales and support services                        $10,388,000    $ 4,148,000
                                                          -----------    -----------
Expenses:
 Cost of sales                                              4,591,000      1,820,000
 Marketing                                                    599,000        414,000
 System development and support services                    1,782,000        904,000
 General and administrative                                 1,085,000        818,000
 Depreciation                                                  48,000         48,000
                                                          -----------    -----------
  Total expenses                                            8,105,000      4,004,000
                                                          -----------    -----------
 Income from operations                                     2,283,000        144,000
                                                          -----------    -----------
Non-operating income (expense):
 Interest income                                              141,000        129,000
 Interest expense                                          (1,988,000)    (1,768,000)
                                                          -----------    -----------
  Total non-operating expense, net                         (1,847,000)    (1,639,000)
                                                          -----------    -----------
Income (loss) before income taxes                             436,000     (1,495,000)
 Income tax (provision) benefit                              (239,000)       (50,000)
                                                          -----------    -----------
Net income (loss)                                         $   197,000    $(1,545,000)
                                                          ===========    ===========
Basic and diluted net income (loss) per common share             $.04          $(.30)
                                                          ===========    ===========
</TABLE>


    The accompanying introductory notes and notes to consolidated financial
       statements are an integral part of these consolidated statements.

                                       7
<PAGE>

                 GREATE BAY CASINO CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                           SIX MONTHS ENDED
                                                               JUNE 30,
                                                      ---------------------------
                                                          2001           2000
                                                      -----------    -----------
<S>                                                   <C>                 <C>
Revenues:
 System sales and support services                    $16,913,000    $ 4,865,000
                                                      -----------    -----------
Expenses:
 Cost of sales                                          7,394,000      2,090,000
 Marketing                                                856,000        457,000
 System development and support services                3,326,000      1,635,000
 General and administrative                             2,020,000      1,449,000
 Depreciation                                              94,000         95,000
                                                      -----------    -----------
  Total expenses                                       13,690,000      5,726,000
                                                      -----------    -----------
 Income (loss) from operations                          3,223,000       (861,000)
                                                      -----------    -----------
Non-operating income (expense):
 Interest income                                          287,000        252,000
 Interest expense                                      (3,900,000)    (3,478,000)
                                                      -----------    -----------
  Total non-operating expense, net                     (3,613,000)    (3,226,000)
                                                      -----------    -----------
Loss before income taxes                                 (390,000)    (4,087,000)
 Income tax (provision) benefit                          (348,000)        17,000
                                                      -----------    -----------
Net loss                                              $  (738,000)   $(4,070,000)
                                                      ===========    ===========
Basic and diluted net loss per common share                 $(.14)         $(.79)
                                                      ===========    ===========
</TABLE>

    The accompanying introductory notes and notes to consolidated financial
       statements are an integral part of these consolidated statements.

                                       8
<PAGE>

                 GREATE BAY CASINO CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                    SIX MONTHS ENDED
                                                                        JUNE 30,
                                                              --------------------------
                                                                  2001           2000
                                                              ------------    ----------
<S>                                                           <C>            <C>
OPERATING ACTIVITIES:
 Net loss                                                     $  (738,000)   $(4,070,000)
 Adjustments to reconcile net loss to net cash
  provided by (used in) operating activities:
  Depreciation and amortization, including
   accretion of debt discount                                   1,010,000      3,104,000
  Deferred income tax benefit                                     (22,000)        (3,000)
  Increase in accounts receivable                                (615,000)    (1,176,000)
  Increase in accounts payable and
   other accrued liabilities                                    5,107,000      1,601,000
  Net change in other current assets and liabilities           (2,639,000)        31,000
  Net change in other noncurrent assets                           216,000              -
                                                              -----------    -----------
  Net cash provided by (used in) operating activities           2,319,000       (513,000)
                                                              -----------    -----------
INVESTING ACTIVITIES:
 Purchases of property and equipment                             (173,000)       (58,000)
 Collections on notes receivable                                        -        140,000
                                                              -----------    -----------
  Net cash (used in) provided by investing activities            (173,000)        82,000
                                                              -----------    -----------
  Net increase (decrease) in cash and cash equivalents          2,146,000       (431,000)
  Cash and cash equivalents at beginning of period              5,903,000      4,801,000
                                                              -----------    -----------
  Cash and cash equivalents at end of period                  $ 8,049,000    $ 4,370,000
                                                              ===========    ===========
</TABLE>

    The accompanying introductory notes and notes to consolidated financial
       statements are an integral part of these consolidated statements.

                                       9
<PAGE>

                 GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)


(1)  ORGANIZATION, BUSINESS AND BASIS OF PRESENTATION

   Greate Bay Casino Corporation ("GBCC"), a Delaware corporation, is engaged in
the development, installation and maintenance of casino systems through its
wholly owned subsidiary, Advanced Casino Systems Corporation ("ACSC").  In prior
years, GBCC and its other subsidiaries were also engaged in the operation and
management of and provision of services to casino properties, including the
ownership and operation of the Sands Hotel and Casino located in Atlantic City,
New Jersey (the "Sands") and, until October 1999, contracts to manage and
consult with gaming facilities located in Aurora, Illinois (the "Aurora Casino")
and Tunica County, Mississippi (the "Tunica Casino").

   Approximately 36% of GBCC's outstanding stock is owned by Jack E. Pratt,
Edward T. Pratt, Jr., William D. Pratt, Edward T. Pratt III and by certain
general partnerships and trusts controlled by the Pratts and by other family
members (collectively, the "Pratt Family").  The Pratt Family also owns
approximately 54% of Hollywood Casino Corporation ("HCC"), which owns the Aurora
Casino and the Tunica Casino.

   CURRENT GBCC OPERATIONS -

   GBCC is insolvent and its only remaining operating subsidiary is ACSC.  At
June 30, 2001, GBCC and its subsidiaries had debt outstanding to HCC consisting
of (1) demand notes and accrued interest thereon totaling $9,736,000 and (2) a
14.875% promissory note due 2006 and accrued interest thereon totaling
$50,153,000.  ACSC's  operations do not generate sufficient cash flow  to
provide debt service on the HCC demand notes and, consequently, GBCC is
currently insolvent.  Additionally, semi-annual interest payments of $3,540,000
attributable to the 14.875% promissory note become payable commencing in August
2001.  GBCC is currently negotiating with HCC to restructure its obligations
and, in that connection, has entered into certain standstill agreements with
HCC.  Under the standstill agreements, all payments of principal and interest
due from HCC during the period from March 1, 2000 through September 1, 2001 with
respect to an intercompany note as detailed in Note 7 have been deferred until
October 1, 2001 in consideration of HCC's agreement not to demand payment of
principal or interest on GBCC's obligations to HCC (see (1) and (2) above).
The fair market value of GBCC's assets is substantially less than  its existing
obligations to HCC.  Accordingly, management anticipates that any restructuring
of GBCC's obligations will result in the conveyance of all of its assets (or the
proceeds from the sale of its assets) to HCC, resulting in no cash or other
assets remaining available for distribution to the Company's shareholders.  Any
restructuring of GBCC's obligations, consensual or otherwise, will require the
Company to file for protection under federal bankruptcy laws and will ultimately
result in liquidation of the Company.

   The insolvency of GBCC raises substantial doubt about its ability to continue
as a going concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of these uncertainties.

                                       10
<PAGE>

                 GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                  (UNAUDITED)


   SUBSIDIARY CHAPTER 7 FILINGS -

   On June 30, 2000, three inactive, wholly owned, indirect subsidiaries of GBCC
filed for liquidation under Chapter 7 of the United States Bankruptcy Code in
the United States Bankruptcy Court for the District of Delaware (the "Delaware
Bankruptcy Court").  The subsidiaries were originally formed to acquire property
and build a second casino/hotel in Atlantic City, New Jersey.  These plans were
subsequently abandoned; however, the companies remained in existence pending the
outcome of certain litigation which was substantially resolved in 1996.  The
cases were closed by the Trustee in Bankruptcy in December 2000 and are awaiting
a final liquidation order from the Delaware Bankruptcy Court.  The filings did
not and are not expected to have a significant effect on the operations or
financial position of GBCC.

   FINANCIAL REPORTING -

   In July 2001, the Financial Accounting Standards Board issued Statement No.
141, "Business Combinations" ("SFAS 141") and Statement No. 142, "Goodwill and
Other Intangible Assets" ("SFAS 142").  SFAS 141 requires the use of the
purchase method of accounting for all business combinations initiated after June
30, 2001.  SFAS 142 establishes new standards for goodwill acquired in a
business combination and requires that goodwill and other intangible assets be
periodically reviewed for impairment rather than being amortized.  SFAS 142 is
effective for fiscal years beginning after December 15, 2001 with earlier
application permitted.  The Company does not expect the adoption of SFAS 142 to
have a material effect on its consolidated financial statements.

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

   The consolidated financial statements as of June 30, 2001 and for the three
and six month periods ended June 30, 2001 and 2000 have been prepared by GBCC
without audit.  In the opinion of management, these consolidated financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the consolidated financial position of
GBCC as of June 30, 2001, the results of its operations for the three and six
month periods ended June 30, 2001 and 2000 and its cash flows for the six month
periods ended June 30, 2001 and 2000.

(2)  EARNINGS PER COMMON SHARE

   Basic earnings per common share is calculated by dividing the net (loss)
income by the weighted average number of shares of common stock outstanding.
Diluted earnings per common share is calculated for any period in which income
from continuing operations was earned by dividing the components of net (loss)
income by the weighted average number of shares of common stock and potential
common shares outstanding.  For each of the three and six month periods ended
June 30, 2001 and 2000, there were no potential common shares outstanding and
basic and diluted earnings per share

                                       11
<PAGE>

                 GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                  (UNAUDITED)


were the same. The weighted average number of shares of common stock used in the
calculation of both basic and diluted earnings per share was 5,186,627 for each
of the three and six month periods ended June 30, 2001 and 2000.

(3)  REVENUE RECOGNITION

   ACSC licenses casino information technology systems to affiliates of GBCC as
well as to non-affiliated casino companies.  Revenue is generally recognized
when all significant contractual obligations have been satisfied and collection
is reasonably assured.  Revenue from hardware and inventory sales is recognized
upon delivery and acceptance.  Revenue from services is recognized upon
performance.

   Certain of ACSC's sales of software to third parties are pursuant to
agreements which specify modifications to be made, require on-going vendor
support or provide for other specialized terms and conditions.  In recognizing
revenue under such agreements, ACSC has adopted and complies with the reporting
requirements of Statement of Position 97-2, "Software Revenue Recognition" ("SOP
97-2") issued by the American Institute of Certified Public Accountants.  The
provisions of SOP 97-2 require, among other things, that revenue from software
sales that do not require significant production, modification or customization
be recognized when evidence of an arrangement exists, delivery has occurred, the
fee is fixed as determinable and collectability is probable.  Software sales for
which significant modifications are required are recognized under a percentage-
of-completion method based on costs incurred to date compared with total
estimated costs.  Profit estimates on such contracts are reviewed periodically
whenever there is a change in facts or circumstances.  Any losses on a contract
would result in the full amount of the loss being recognized immediately.

   Costs and estimated earnings in excess of billings on contracts in progress
represent recoverable costs and the estimated profits thereon which have not yet
been billed to the customer.  Unearned revenues represent deposits or
prepayments received by customers for services yet to be performed. Such advance
payments are applied over the lives of the contracts.

(4)  BORROWINGS FROM AFFILIATE

   GBCC and its subsidiaries had outstanding affiliate borrowings from HCC of
$5,704,000 at both June 30, 2001 and December 31, 2000.  During 1996, GBCC
borrowed $6,500,000 from HCC on a demand basis with interest at the rate of
13.75% per annum payable quarterly commencing October 1, 1996.  In addition, a
$250,000 loan from HCC with interest at the rate of 14% per annum payable
semiannually was due on April 1, 1998 and remains outstanding.  These borrowings
from HCC are currently subject to a standstill agreement (see Notes 1 and 7)
while GBCC continues negotiations with HCC to restructure its obligations.
During October 2000, GBCC paid $900,000 of the outstanding principal balance and
agreed to offset an additional $146,000 of principal against other receivables
due from HCC while negotiations to restructure the debt continued.

                                       12
<PAGE>

                 GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                  (UNAUDITED)



(5)  LONG-TERM DEBT AND PLEDGE OF ASSETS

   Long-term debt consists of the following:

<TABLE>
<CAPTION>

                                                      JUNE 30,     DECEMBER 31,
                                                        2001           2000
                                                    -----------    -----------
<S>                                                 <C>           <C>
     14.875% promissory note, due 2006, net of
      discount $916,000 at December 31, 2000        $47,603,000    $46,687,000

     Less - current maturities                                -              -
                                                    -----------    -----------
     Total long-term debt                           $47,603,000    $46,687,000
                                                    ===========    ===========
</TABLE>

   On February 17, 1994, PPI Funding Corp., a subsidiary of GBCC, issued
$40,524,000 discounted principal amount of new deferred interest notes (the "PPI
Funding Notes") to HCC in exchange for $38,779,000 principal amount of 15.5%
unsecured notes (the "PCPI Notes") held by HCC and issued by PCPI Funding Corp.,
another subsidiary of GBCC.  The PPI Funding Notes were discounted to yield
interest at the rate of 14.875% per annum and had a face value of $110,636,000.
Subsequent principal payments by PPI Funding Corp. reduced the maturity value of
the notes to $98,353,000 at December 31, 1996.  During the second quarter of
1997, HCC assigned $13,750,000 undiscounted principal amount of the PPI Funding
Notes to PPI Corporation, a wholly owned subsidiary of GBCC, as consideration,
in part, for HCC's acquisition of the general partnership interest in the entity
which held the management contract for the Aurora Casino (see Note 7).  Such
assignment reduced the maturity value of the notes to $84,603,000.  At December
31, 1997, an additional $37,000,000 undiscounted face value ($23,631,000
discounted value) of the PPI Funding Notes was forgiven by HCC, further reducing
the maturity value to $47,603,000.  Payment of interest on the PPI Funding Notes
was deferred through February 17, 2001 and would have become payable
semiannually beginning on August 17, 2001.  Payment of interest is currently
subject to a standstill agreement (see Notes 1 and 7).  The unpaid principal
balance of the PPI Funding Notes is due on February 17, 2006.

   No interest was paid during the either of the six month periods ended June
30, 2001 or 2000.

                                       13
<PAGE>

                 GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                  (UNAUDITED)


(6)      INCOME TAXES

   GBCC's (provision) benefit for income taxes consists of the following:

<TABLE>
<CAPTION>

                                             THREE MONTHS ENDED          SIX MONTHS ENDED
                                                  JUNE 30,                   JUNE 30,
                                           -----------------------   -------------------------
                                              2001         2000         2001           2000
                                           ---------    ---------    ---------    -----------
<S>                                        <C>          <C>          <C>          <C>
Federal income tax benefit:
 Current                                   $       -    $       -    $       -    $         -
 Deferred                                   (142,000)     553,000      129,000      1,424,000
State income tax (provision) benefit:
 Current                                    (251,000)     (51,000)    (370,000)        14,000
 Deferred                                     12,000        1,000       22,000          3,000
Valuation allowance                          142,000     (553,000)    (129,000)    (1,424,000)
                                           ---------    ---------    ---------    -----------
                                           $(239,000)   $ (50,000)   $(348,000)   $    17,000
                                           =========    =========    =========    ===========
</TABLE>

   GBCC paid no federal income taxes during either of the six  month periods
ended June 30, 2001 or 2000.  GBCC paid state income taxes of $294,000 and
$1,000, respectively, during the six month periods ended June 30, 2001 and 2000.

   Federal and state income tax provisions or benefits are based upon estimates
of the results of operations for the current period and reflect the
nondeductibility for income tax purposes of certain items, including meals and
entertainment and certain other expenses.  Deferred taxes are computed based on
the expected future tax effects of differences between the financial statement
and tax bases of assets and liabilities, using enacted tax rates.  Deferred
income taxes result primarily from differences in the timing of deductions
between financial and federal tax reporting purposes.

   As of June 30, 2001, GBCC and its subsidiaries have net operating loss
carryforwards ("NOL's") totaling approximately $19,300,000 for federal income
tax purposes, none of which begin to expire until the year 2012.  Additionally,
GBCC and its subsidiaries have alternative minimum tax and other tax credits
available totaling approximately $29,000 and $414,000, respectively.
Alternative minimum tax credits do not expire and the other tax credits expire
in 2001.  Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes"  ("SFAS 109"), requires that the tax benefit of such NOL's, credit
carryforwards and deferred tax assets resulting from temporary differences be
recorded as an asset and, to the extent that management can not assess that the
utilization of such asset is more likely than not, a valuation allowance should
be recorded.  Due to the continued availability of NOL's originating in prior
years and uncertainties regarding GBCC's ability to continue as a going concern,
management is unable to determine that realization of such asset is more likely
than not and, thus, has provided valuation allowances for substantially all of
the deferred tax assets for all periods presented. The remaining deferred tax
assets represent state timing differences expected to be utilized.

                                       14
<PAGE>

                 GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                  (UNAUDITED)


   GBCC was included in the consolidated federal income tax returns of HCC until
HCC distributed the stock of GBCC it owned to its shareholders on December 31,
1996.  The Internal Revenue Service has been examining the consolidated federal
income tax returns of HCC for the years 1993 through 1996 during which period
GBCC was included.  Such examination for 1993 and 1994 has been completed and
resulted in adjustments to GBCC's consolidated NOL's and deferred tax assets,
but in no additional tax obligations.  The Internal Revenue Service is
continuing its examination of the consolidated federal income tax returns of
HCC, including GBCC, for 1995 and 1996.  Until such examination is completed,
allocations of tax attributes and additional alternative minimum tax or regular
tax obligations, if any, can not be determined.  As a result, management is
presently unable to estimate the ultimate impact of the examination on the
consolidated financial position or results of operations of GBCC.

(7)  TRANSACTIONS WITH RELATED PARTIES

   In April 1997, HCC issued a five-year note in the original amount of
$3,800,000 and assigned $13,750,000 undiscounted principal amount ($7,597,000
discounted value) of PPI Funding Notes (see Note 5) and $350,000 of accrued
interest due from GBCC to PPI Corporation in exchange for the general
partnership interest in the entity that held the management contract for the
Aurora Casino.  The $3,800,000, as amended in October 1999, provides for monthly
installments of $83,000 including interest and additional quarterly principal
payments of $21,000 beginning January 1, 2000.   PPI Corporation and HCC have
entered into agreements to defer all payments of principal and interest on the
note otherwise due during the period from March 1, 2000 through September 1,
2001 in consideration of HCC's agreement not to demand payment on the short-term
borrowings described in Note 4 and interest on the PPI Funding Notes described
in Note 5.  These deferrals do not extend the maturities or represent a
forgiveness of either principal or interest as all past due amounts, if not
otherwise restructured, will become due and payable on the extended payment date
of October 1, 2001.  The outstanding note receivable balance at both June 30,
2001 and December 31, 2000 is $1,893,000, all of which is included in current
amounts due from affiliates on the accompanying consolidated balance sheet at
June 30, 2001. At December 31, 2000, $198,000 of the outstanding balance was
included in noncurrent due from affiliates on the accompanying consolidated
balance sheet.  Interest income on the note from HCC amounted to $67,000 during
each of the three month periods ended June 30, 2001 and 2000 and $132,000 and
$133,000, respectively, during the six month periods ended June 30, 2001 and
2000.  Accrued interest receivable of $375,000 and $243,000, respectively, is
included in amounts due from affiliates on the accompanying consolidated balance
sheets at June 30, 2001 and December 31, 2000.

   Interest expense with respect to borrowings from HCC is set forth below:

<TABLE>
<CAPTION>
                                   THREE MONTHS ENDED JUNE 30,    SIX MONTHS ENDED JUNE 30,
                                   ---------------------------    -------------------------
                                       2001           2000           2001           2000
                                    ----------     ----------     ----------     ----------
<S>                                 <C>            <C>            <C>             <C>
PPI Funding Notes (Note 5)          $1,771,000     $1,533,000     $3,466,000     $3,009,000
Short-term borrowings (Note 4)         198,000        235,000        397,000        470,000
</TABLE>

                                       15
<PAGE>

                 GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                  (UNAUDITED)


    Accretion of interest on the PPI Funding Notes for periods prior to February
17, 2001 is included in the outstanding note payable balance.  Interest accrued
on short-term borrowings from HCC and on the PPI Funding Notes for periods
subsequent to February 17, 2001 amounted to $6,582,000 and $3,635,000,
respectively, at June 30, 2001 and December 31, 2000.

(8)  LITIGATION

   SUBSIDIARY CHAPTER 7 FILINGS -

   On June 30, 2000, three inactive, wholly owned, indirect subsidiaries of GBCC
filed for liquidation under Chapter 7 of the United States Bankruptcy Code in
the Delaware Bankruptcy Court.  The subsidiaries were originally formed to
acquire property and build a second casino/hotel in Atlantic City, New Jersey.
These plans were subsequently abandoned; however, the companies remained in
existence pending the outcome of certain litigation which was substantially
resolved in 1996.  The cases were closed by the Trustee in Bankruptcy in
December 2000 and are awaiting a final liquidation order from the Delaware
Bankruptcy Court.  The filings did not and are not expected to have a
significant effect on the operations or financial position of GBCC.

(9)  MAJOR CUSTOMERS

   ACSC's computer service revenues are derived primarily from either system
installation contracts or from sales to affiliates.  System installation
contracts generally require an extended period of time to complete and represent
significant, but nonrecurring revenue earned from a given customer.  Upon
completion of an installation, ACSC may continue to recognize service or
maintenance revenues from the customer at a much reduced amount.  The following
table demonstrates ACSC's dependence on installation contracts and on sales to
affiliates:
<TABLE>
<CAPTION>

                                    THREE MONTHS ENDED    SIX MONTHS ENDED
                                         JUNE 30,             JUNE 30,
                                   -------------------   -----------------
                                      2001       2000      2001       2000
                                   ---------    ------   --------   ------
<S>                                <C>          <C>       <C>       <C>
Total percentage of period
 revenues attributable to
 installation contracts               86.3%      90.0%     81.7%      79.0%
Percentage of period revenues
 attributable to
 affiliate sales                       3.1%       2.6%      3.0%       9.1%
</TABLE>


(10) RECLASSIFICATIONS

   Certain reclassifications have been made to the prior year's consolidated
financial statements to conform to the 2001 consolidated financial statement
presentation.

                                       16
<PAGE>

                GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

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


   This Quarterly Report on Form 10-Q contains forward-looking statements about
the business, results of operations, cash flows, financial condition and
prospects of GBCC.  The actual results could differ materially from those
indicated by the forward-looking statements because of various risks and
uncertainties including, among other things, changes in competition, economic
conditions, tax regulations, state regulations applicable to ACSC's operations,
and other risks indicated in GBCC's filing with the Securities and Exchange
Commission.  Such risks and uncertainties are beyond management's ability to
control and, in many cases, can not be predicted by management.  When used in
this Quarterly Report on Form 10-Q, the words "believes", "estimates",
"anticipates" and similar expressions as they relate to GBCC or its management
are intended to identify forward-looking statements.

LIQUIDITY AND CAPITAL RESOURCES

   OPERATING ACTIVITIES

   GBCC's current business activity consists solely of the operations of ACSC.
ACSC licenses casino information technology systems to HCC's casino facilities
and non-affiliated casino companies. The results of ACSC's operations for the
three and six month periods ended June 30, 2001 and 2000 are set forth below:

<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED           SIX MONTHS ENDED
                                                           JUNE 30,                  JUNE 30,
                                                  ------------------------   ------------------------
                                                      2001         2000          2001         2000
                                                  -----------   ----------   -----------   ----------
<S>                                               <C>           <C>          <C>           <C>
System sales and support service
  revenues                                        $10,388,000   $4,148,000   $16,913,000   $4,865,000
                                                  -----------   ----------   -----------   ----------
Cost of sales                                       4,591,000    1,820,000     7,394,000    2,090,000
Marketing                                             599,000      414,000       856,000      457,000
System development and support services             1,782,000      904,000     3,326,000    1,635,000
General and administrative                            762,000      426,000     1,482,000      822,000
Depreciation                                           48,000       48,000        94,000       95,000
                                                  -----------   ----------   -----------   ----------
                                                    7,782,000    3,612,000    13,152,000    5,099,000
                                                  -----------   ----------   -----------   ----------
Income (loss) from operations                     $ 2,606,000   $  536,000   $ 3,761,000   $ (234,000)
                                                  ===========   ==========   ===========   ==========
</TABLE>

   The improvement in operating results during the second quarter and first half
of 2001 from the same periods in 2000 is primarily due to the increased volume
of system sales and installation contracts in the current year as explained in
"Results of Operations".

   ACSC's computer service revenues are derived primarily from system
installation contracts which generally require an extended period of time to
complete and represent significant, but nonrecurring revenue earned from a given
customer.  Upon completion of an installation, ACSC may continue to recognize
service or maintenance revenues from the customer at a much reduced amount.
Accordingly, in order to maintain its current level of revenues, ACSC would need
to continue to obtain installation

                                       17
<PAGE>

                GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                     AND RESULTS OF OPERATIONS (CONTINUED)


contracts. Growth in the performance of installation contracts has greatly
diminished ACSC's reliance on affiliate sales which, in prior periods, were a
significant source of its revenues. The following table demonstrates ACSC's
dependence on installation contracts and on sales to affiliates:

<TABLE>
<CAPTION>

                                                THREE MONTHS ENDED          SIX MONTHS ENDED
                                                     JUNE 30,                    JUNE 30,
                                              ---------------------    --------------------------
                                                 2001       2000           2001           2000
                                              ---------  ----------    -----------    -----------
<S>                                          <C>         <C>           <C>            <C>
Total percentage of period revenues
 attributable to installation contracts          86.3%      90.0%       81.7%           79.0%
Percentage of period revenues
  attributable to affiliate sales                 3.1%       2.6%        3.0%            9.1%
</TABLE>

   GBCC is insolvent and its only remaining operating activity is the
development, installation and maintenance of casino systems by ACSC.  At June
30, 2001, GBCC and its subsidiaries had debt outstanding to HCC consisting of
(1) demand notes and accrued interest thereon totaling $9.7 million and (2) a
14.875% promissory note due 2006 and accrued interest thereon totaling $50.2
million.  ACSC's operations do not generate sufficient cash flow  to provide
debt service on the HCC demand notes and, consequently, GBCC is currently
insolvent.  Additionally, semi-annual interest payments of approximately $3.5
million attributable to the 14.875% promissory note become payable commencing in
August 2001.  GBCC is currently negotiating with HCC to restructure its
obligations and, in that connection, has entered into certain standstill
agreements with HCC.  Under the standstill agreements, all payments of principal
and interest due from HCC during the period from March 1, 2000 through September
1, 2001 with respect to an intercompany note as detailed in Note 7 of the Notes
to Consolidated Financial Statements have been deferred until October 1, 2001 in
consideration of HCC's agreement not to demand payment of principal or interest
on GBCC's obligations to HCC (see (1) and (2) above).   The fair market value of
GBCC's assets is substantially less than  its existing obligations to HCC.
Accordingly, management anticipates that any restructuring of GBCC's obligations
will result in the conveyance of all of its assets (or the proceeds from the
sale of its assets) to HCC, resulting in no cash or other assets remaining
available for distribution to the Company's shareholders.  Any restructuring of
GBCC's obligations, consensual or otherwise, will require the Company to file
for protection under federal bankruptcy laws and will ultimately result in
liquidation of the Company.

   The insolvency of GBCC raises substantial doubt about its ability to continue
as a going concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of these uncertainties.

   FINANCING ACTIVITIES

   During 1994, GBCC issued the PPI Funding Notes to HCC in exchange for $38.8
million principal amount of 15.5% notes issued by another GBCC subsidiary and
held by HCC.  The PPI Funding Notes have a maturity value of $47.6 million.
Payment of interest on the PPI Funding Notes was deferred through February 17,
2001 and would have become payable semiannually beginning on August 17, 2001.
Payment of interest is currently subject to the standstill agreement described
above.  The unpaid principal balance of the PPI Funding Notes is due on February
17, 2006.

                                       18
<PAGE>

                GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                     AND RESULTS OF OPERATIONS (CONTINUED)


   Effective as of April 1, 1997, HCC acquired from PPI Corporation the general
partnership interest in the entity which held the management contract for the
Aurora Casino.  The acquisition price for the general partnership interest
included, among other things, the assignment of a portion of the PPI Funding
Notes to PPI Corporation and a new note in the original amount of $3.8 million.
Principal and interest payments by HCC on the $3.8 million note approximated the
general partner's share of annual partnership distributions.  GBCC and HCC have
entered into standstill agreements to defer all payments of principal and
interest on the note otherwise due during the period from March 1, 2000 through
September 1, 2001 while GBCC negotiates with HCC to restructure its obligations.
These deferrals do not extend the maturities or represent a forgiveness of
either principal or interest as all past due amounts, if not otherwise
restructured, will become due and payable on the extended payment date of
October 1, 2001.

   The demand notes consist primarily of loans in the original amount of $6.5
million borrowed from HCC during the third quarter of 1996.  Such borrowings
accrue interest at the rate of 13.75% per annum payable quarterly commencing
October 1, 1996.  Although payment is on a demand basis, HCC has agreed not to
do so as part of the standstill agreements described in the previous paragraph.
During October 2000, GBCC paid $900,000 of the outstanding principal balance of
the demand notes to HCC and agreed to offset an additional $146,000 of principal
against other receivables due from HCC while negotiations to restructure GBCC's
debt continued.

   As previously described, GBCC is currently negotiating with HCC to
restructure its obligations. The fair market value of GBCC's assets is
substantially less than  its existing obligations to HCC. Accordingly,
management anticipates that any restructuring of GBCC's obligations will result
in the conveyance of all of its assets (or the proceeds from the sale of its
assets) to HCC, resulting in no cash or other assets remaining available for
distribution to the Company's shareholders.  Any restructuring of GBCC's
obligations, consensual or otherwise, will require the Company to file for
protection under federal bankruptcy laws and will ultimately result in
liquidation of the Company.

   CAPITAL EXPENDITURES AND OTHER INVESTMENTS

   Property and equipment additions during the six month period ended June 30,
2001 totaled $173,000; management anticipates that capital expenditures during
the remainder of 2001, consisting only of ongoing equipment replacements and
enhancements at ACSC, will not be significant.

RESULTS OF OPERATIONS

   REVENUES

   System sales and support service revenues earned by ACSC increased $6.2
million (150.4%) and $12 million (247.6%) during the three and six month periods
ended June 30, 2001 compared to the prior year periods.  Such increases were a
result of increased system installations during 2001 compared to 2000.  During
the first six months of 2001, ACSC was engaged in nine system installation
contracts, two of which have been completed.  These nine contracts accounted for
approximately $9 million and $13.8 million of revenues during the second quarter
and first half of 2001.  By comparison, the 2000 second quarter and first half
periods included revenues with respect to four system installations amounting to
$3.7 million and $3.8 million, respectively.  Revenues from inventory sales and
from consulting and

                                       19
<PAGE>

                GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                     AND RESULTS OF OPERATIONS (CONTINUED)


other services provided to third parties also increased in the three and six
month periods of 2001 to $2.6 million and $1.1million, respectively, from
$575,000 and $309,000, respectively, in the comparable 2000 periods. The
addition of personnel during 2000 has better positioned ACSC to service multiple
contracts and provide other ancillary services.

   COST OF SALES

   ACSC's cost of sales increased by $2.8 million (152.3%) and $5.3 million
(253.8%), respectively, during the three and six month periods ended June 30,
2001 compared to the same periods in 2000.  The increases reflect the increased
contract installations during the 2001 periods compared to 2000.  Cost of sales
may not fluctuate proportionately with the increase in revenues due to the mix
of revenues earned (sales versus support services) as well as to differences in
the profitability of system installation contracts resulting from the bidding
process.

   MARKETING EXPENSES

   Marketing expenses for ACSC increased $185,000 (44.7%) and $399,000 (87.3%),
respectively, during the second quarter and first half of 2001 compared to the
same periods during 2000.  The second quarter increases reflect additional sales
volume; however, the second quarter increase has been lessened due to a change
in sales commission policies, whereby the expense is now incurred ratably over
the completion of the underlying installation contract.

   SYSTEM DEVELOPMENT AND SUPPORT SERVICE EXPENSES

   System development and support services increased by $878,000 (97.1%) and
$1.7 million (103.4%), respectively, for the three and six month periods ended
June 30, 2001 compared to the same periods in 2000.  The increases result from
additional personnel and equipment costs as a result of the dramatic increase in
sales volume.

   GENERAL AND ADMINISTRATIVE EXPENSES

   GBCC's consolidated general and administrative expenses increased by $267,000
and $571,000, respectively, during the three and six month periods ended June
30, 2001 compared to the same periods in 2000.  The 2001 three and six month
increases of $336,000 and $660,000, respectively, at ACSC resulting from the
expansion of its operations was partially offset by reductions in corporate
expenses resulting from the curtailment of GBCC's operations other than ACSC.

   INTEREST

   Interest income increased by 9.3% and 13.9%, respectively, during the second
quarter and first half of 2001 compared to the same periods in 2000 due to
increases in cash available for investment purposes.

   Interest expense increased $220,000 (12.4%) and $422,000 (12.1%),
respectively, during the second quarter and first half of 2001 compared to the
same periods in 2000 reflecting additional amortization of discount and the
accrual of interest with respect to the PPI Funding Notes.

                                       20
<PAGE>

                GREATE BAY CASINO CORPORATION AND SUBSIDIARIES

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                     AND RESULTS OF OPERATIONS (CONTINUED)


   INCOME TAX PROVISION

    Due to the availability of NOL's originating in prior years and
uncertainties regarding GBCC's ability to continue as a going concern,
management is unable to determine that realization of deferred tax assets
resulting from NOL's and temporary differences is more likely than not.
Accordingly, under the provisions of Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes", GBCC has provided valuation allowances
for substantially all of the deferred tax assets at June 30, 2001 and December
31, 2000.  The remaining deferred tax assets represent state timing differences
expected to be utilized.

   GBCC was included in the consolidated federal income tax returns of HCC until
HCC distributed the stock of GBCC it owned to its shareholders on December 31,
1996.  The Internal Revenue Service has been examining the consolidated federal
income tax returns of HCC for the years 1993 through 1996 during which period
GBCC was included.  Such examination for 1993 and 1994 has been completed and
resulted in adjustments to GBCC's consolidated NOL's and deferred tax assets,
but in no additional tax obligations.  The Internal Revenue Service is
continuing its examination of the consolidated federal income tax returns of
HCC, including GBCC, for 1995 and 1996.  Until such examination is completed,
allocations of tax attributes and additional alternative minimum tax or regular
tax obligations, if any, can not be determined.  As a result, management is
presently unable to estimate the ultimate impact of the examination on the
consolidated financial position or results of operations of GBCC.

   MARKET RISK

   The Company does not have and does not expect to have any securities subject
to interest rate fluctuations.  Management believes that all market risks are
immaterial.

   INFLATION

   Management believes that in the near term, modest inflation, together with
competition for qualified and experienced personnel, will continue to cause
increases in operating expenses, particularly labor and employee benefits costs.

   SEASONALITY

   Management believes that with the termination of its management contracts and
limited partnership interest in such contracts, seasonality will no longer
materially affect GBCC's results of operations.

                                       21
<PAGE>

PART II:  OTHER INFORMATION
---------------------------

ITEM 1.  LEGAL PROCEEDINGS

   SUBSIDIARY CHAPTER 7 FILINGS

   On June 30, 2000, three inactive, wholly owned, indirect subsidiaries of GBCC
filed for liquidation under Chapter 7 of the United States Bankruptcy Code in
the United States Bankruptcy Court for the District of Delaware (the "Delaware
Bankruptcy Court").  The subsidiaries were originally formed to acquire property
and build a second casino/hotel in Atlantic City, New Jersey.  These plans were
subsequently abandoned; however, the companies remained in existence pending the
outcome of certain litigation which was substantially resolved in 1996.  The
cases were closed by the Trustee in Bankruptcy in December 2000 and are awaiting
a final liquidation order from the Delaware Bankruptcy Court.  The filings did
not and are not expected to have a significant effect on the operations or
financial position of GBCC.

ITEM 6.  - EXHIBITS AND REPORTS ON FORM 8-K

   The Registrant did not file any reports on Form 8-K during the quarter ended
June 30, 2001.


SIGNATURES
----------

   Pursuant to the requirements 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.


                                             GREATE BAY CASINO CORPORATION



Date:        August 9, 2001                  By: /s/  John C. Hull
       -------------------------                -------------------------
                                                John C. Hull
                                                Chief Executive Officer

                                       22