<PAGE>

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

                                    FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED:         MARCH 31, 1998
[   ]     TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934    For the transition period from
          ____________________ to __________________

COMMISSION FILE NUMBER:                            1-9481
                        -------------------------------------------------------

                           SANTA FE GAMING CORPORATION
-------------------------------------------------------------------------------
              (Exact name of registrant as specified in its charter)

           NEVADA                                    88-0304348
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
incorporation or organization)

                    4949 N. RANCHO DRIVE, LAS VEGAS, NEVADA  89130
-------------------------------------------------------------------------------
                 (Address of principal executive office and zip code)

                                    (702) 658-4300
               -------------------------------------------------------
                (Registrant's telephone number, including area code)

-------------------------------------------------------------------------------
     (Former name, former address and former fiscal year, if changed since last
report)

     Indicate by a 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     
                                                ---           ---
                  APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                     PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

     Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.  YES          NO
                            ---        ---

                        APPLICABLE ONLY TO CORPORATE ISSUERS:

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

          6,195,356                          as of  MAY 14, 1998
-------------------------------------------------------------------------------
       Amount  Outstanding                         Date      


<PAGE>

                             SANTA FE GAMING CORPORATION

                                        INDEX

                                                                           PAGE
PART I.   FINANCIAL INFORMATION

     Item 1. Consolidated Condensed Financial Statements


               Balance Sheets at March 31, 1998
               (unaudited) and September 30, 1997. . . . . . . . . . . . .    2

               Statements of Operations for the three and six months 
               ended March 31, 1998 and 1997 (unaudited) . . . . . . . . .    3

               Statement of Changes in Stockholders' Equity
               for the six months ended March 31, 1998 
               (unaudited) . . . . . . . . . . . . . . . . . . . . . . . .    4

               Statements of Cash Flows for the six months 
               ended March 31, 1998 and 1997 (unaudited) . . . . . . . . .    5

               Notes to Consolidated Condensed Financial
               Statements (unaudited). . . . . . . . . . . . . . . . . . .    6

               Independent Accountants' Review Report. . . . . . . . . . .   14

     Item 2. Management's Discussion and Analysis of
             Financial Condition and Results of    
             Operations. . . . . . . . . . . . . . . . . . . . . . . . . .   15


PART II.       OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . .   26

                                      1

<PAGE>

                     SANTA FE GAMING CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                      March 31         September 30,
             ASSETS                                                      1998              1997
-------------------------------------------------------------       ------------       -------------
                                                                     (Unaudited)
<S>                                                                 <C>                <C>
Current assets:
  Cash and short-term investments                                    $25,225,743         $15,146,217
  Accounts receivable, net                                             1,076,572             910,867
  Inventories                                                          1,240,640           1,248,199
  Prepaid expenses & other                                             3,977,142           3,546,812
  Assets held for sale                                                 1,605,000           1,605,000
                                                                    ------------       -------------
Total current assets                                                  33,125,097          22,457,095

Land held for development                                             36,589,065          36,589,065

Property and equipment, net                                          112,014,367         104,161,796

Goodwill, net                                                         43,925,152          44,641,391

Other assets                                                          12,126,402           8,446,931
                                                                    ------------       -------------
Total assets                                                        $237,780,083        $216,296,278
                                                                    ------------       -------------
                                                                    ------------       -------------
LIABILITIES and STOCKHOLDERS' EQUITY
------------------------------------------------------------
Current liabilities:
  Current portion of long-term debt                                  $70,988,329          $6,644,979
  Accounts payable                                                     5,136,657           5,117,059
  Interest payable                                                     7,365,653           6,612,750
  Accrued and other liabilities                                        7,712,280           6,525,215
  Debt due upon sale of assets                                         1,559,000           1,559,000
                                                                    ------------       -------------
Total current liabilities                                             92,761,919          26,459,003

Long-term debt - less current portion                                132,515,031         168,978,838
 
Commitments

Stockholders' equity:
  Common stock, $.01 par value; authorized-100,000,000
    shares; issued and outstanding-6,195,356 shares                       61,954              61,954
  Preferred stock, exchangeable, redeemable 8% cumulative,
    stated at $2.14 liquidation value, authorized-10,000,000
    shares; issued and outstanding-8,856,651 shares                   21,227,621          20,469,492
  Additional paid-in capital                                          51,513,504          51,513,504
  Accumulated deficit                                                (60,212,172)        (51,098,739)
                                                                    ------------       -------------
      Total                                                           12,590,907          20,946,211

  Less treasury stock - 4,875 shares, at cost                            (87,774)            (87,774)
                                                                    ------------       -------------
Total stockholders' equity                                            12,503,133          20,858,437
                                                                    ------------       -------------

Total liabilities and stockholders' equity                          $237,780,083        $216,296,278
                                                                    ------------       -------------
                                                                    ------------       -------------
</TABLE>
   See the accompanying Notes to Consolidated Condensed Financial Statements.

                                      2

<PAGE>

                SANTA FE  GAMING CORPORATION AND SUBSIDIARIES
               CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                 (UNAUDITED)

<TABLE>
<CAPTION>
                                                            Three Months        Three Months       Six Months     Six Months
                                                               Ended               Ended              Ended           Ended
                                                           MARCH 31, 1998      MARCH 31, 1997    MARCH 31, 1998   MARCH 31, 1997
                                                           --------------      --------------    --------------   --------------
<S>                                                          <C>                 <C>              <C>               <C>
Revenues:
  Casino                                                     $23,272,800         $21,448,942      $45,252,711       $41,326,115
  Hotel                                                        1,417,122           1,478,359        2,851,056         3,018,243
  Food and beverage                                            5,382,471           5,271,530       10,709,689        10,543,773
  Other revenues                                               1,889,935           2,465,653        3,758,413         4,406,936
                                                           --------------      --------------    --------------     ------------
Gross revenues                                                31,962,328          30,664,484       62,571,869        59,295,067

  Less casino promotional allowances                          (3,291,408)         (3,182,193)      (6,541,703)       (6,404,937)
                                                           --------------      --------------    --------------     ------------

Net operating revenues                                        28,670,920          27,482,291       56,030,166        52,890,130
                                                           --------------      --------------    --------------     ------------
Operating expenses:
  Casino                                                      11,725,165          10,398,711       22,605,997        21,029,528
  Hotel                                                          503,285             447,276          952,308           861,994
  Food and beverage                                            3,574,062           3,544,401        6,951,686         7,459,811
  Other operating expenses                                       731,514             706,321        1,498,696         1,474,146
  Selling, general & administrative                            3,156,335           2,775,359        6,199,503         5,361,462
  Corporate expenses                                             963,024             875,043        1,779,141         1,687,123
  Utilities & property expenses                                2,903,488           2,990,955        6,189,428         5,972,824
  Depreciation & amortization                                  3,005,835           2,760,061        6,138,597         5,487,597
                                                           --------------      --------------    --------------     ------------
Total operating expenses                                      26,562,708          24,498,127       52,315,356        49,334,485
                                                           --------------      --------------    --------------     ------------
Operating income                                               2,108,212           2,984,164        3,714,810         3,555,645

Interest expense                                               5,993,844           5,718,786       12,070,114        11,363,898
                                                           --------------      --------------    --------------     ------------
Loss before income tax benefit                                (3,885,632)         (2,734,622)      (8,355,304)       (7,808,253)
 
Federal income tax benefit                                             0            (808,011)               0        (2,411,285)
                                                           --------------      --------------    --------------     ------------
Net loss                                                      (3,885,632)         (1,926,611)      (8,355,304)       (5,396,968)

Dividends paid or accrued on preferred shares                    379,065             379,064          758,129           758,129
                                                           --------------      --------------    --------------     ------------
Net loss applicable to common shares                         ($4,264,697)        ($2,305,675)     ($9,113,433)      ($6,155,097)
                                                           --------------      --------------    --------------     ------------
                                                           --------------      --------------    --------------     ------------
Average common shares outstanding                              6,195,356           6,195,356        6,195,356         6,195,356
                                                           --------------      --------------    --------------     ------------
                                                           --------------      --------------    --------------     ------------
Loss per common share:
  net loss                                                        ($0.63)             ($0.31)          ($1.35)           ($0.87)
  dividends paid or accrued on preferred shares                   ($0.06)             ($0.06)          ($0.12)           ($0.12)
                                                           --------------      --------------    --------------     ------------
Loss per common share                                             ($0.69)             ($0.37)          ($1.47)           ($0.99)
                                                            --------------      --------------    --------------     ------------
</TABLE>
   See the accompanying Notes to Consolidated Condensed Financial Statements.

                                      3

<PAGE>
                                       
                 SANTA FE GAMING CORPORATION AND SUBSIDIARIES
         CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                               Additional
                                       Common     Preferred      Paid-in      Accumulated   Treasury
                                       Stock        Stock        Capital        Deficit       Stock        Total
                                      -------    -----------   -----------   -------------  ---------   -----------
<S>                                   <C>        <C>           <C>           <C>            <C>         <C>
Balances, October 1, 1997             $61,954    $20,469,492   $51,513,504   ($51,098,739)  ($87,774)   $20,858,437

Net loss                                                                       (8,355,304)               (8,355,304)

Preferred stock dividend accrued                     758,129                     (758,129)                        0
                                      -------    -----------   -----------   ------------   --------    -----------
Balances, March 31, 1998              $61,954    $21,227,621   $51,513,504   ($60,212,172)  ($87,774)   $12,503,133
                                      -------    -----------   -----------   ------------   --------    -----------
                                      -------    -----------   -----------   ------------   --------    -----------
</TABLE>

See the accompanying Notes to Consolidated Condensed Financial Statements.


                                       4

<PAGE>

                   SANTA FE GAMING CORPORATION AND SUBSIDIARIES
                  CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                     (UNAUDITED)

<TABLE>
<CAPTION>
                                                                   Six Months           Six Months
                                                                      Ended                Ended
                                                                 March 31, 1998       March 31, 1997
                                                                 --------------       --------------
<S>                                                              <C>                  <C>
Cash flows from operating activities:
 Cash and short-term investments provided by
    (used in) operations                                            ($1,398,189)            $984,307
     Gain on sale of land held for development                                0             (725,179)
     Decrease (increase) in accounts receivable, net                   (165,705)             112,391
     Increase in accounts receivable, officer                                 0              (25,404)
     Increase in inventories                                              7,559               72,693
     Increase in prepaid expenses & other                             (430,330)             (66,907)
     Decrease in deferred income taxes                                        0           (2,397,178)
     Increase in other assets                                        (3,829,162)          (2,020,897)
     Increase (decrease) in accounts payable                            384,616           (2,236,183)
     Increase (decrease) in interest payable                            752,903             (174,488)
     Increase in accrued and other liabilities                        1,427,701              368,592
                                                                    -----------           ----------
Net cash used in operating activities                                (3,250,607)          (6,108,253)

Cash flows from investing activities:
     Proceeds from sale of land held for development                          0            3,150,000
     Capital expenditures                                            (2,660,987)            (542,209)
                                                                    -----------           ----------

Net cash provided by (used in) investing activities                  (2,660,987)           2,607,791
                                                                    -----------           ----------

Cash flows from financing activities:
     Cash proceeds of long-term debt                                 57,500,000            1,675,658
     Cash paid on long-term debt                                    (41,508,880)          (1,557,627)
                                                                    -----------           ----------

Net cash provided by financing activities                            15,991,120              118,031
                                                                    -----------           ----------

Increase (decrease) in cash and short-term investments               10,079,526           (3,382,431)

Cash and short-term investments, 
  beginning of period                                                15,146,217           17,497,824
                                                                    -----------           ----------

Cash and short-term investments, 
  end of period                                                     $25,225,743          $14,115,393
                                                                    -----------           ----------
                                                                    -----------           ----------
</TABLE>

See the accompanying Notes to Consolidated Condensed Financial Statements.


                                       5
<PAGE>

                                       
                  SANTA FE GAMING CORPORATION AND SUBSIDIARIES

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                  (unaudited)


NOTE 1 - BASIS OF PRESENTATION AND GENERAL INFORMATION

Santa Fe Gaming Corporation, formerly known as Sahara Gaming Corporation, 
(the "Company" or "Santa Fe Gaming"), a publicly traded Nevada corporation, 
is the successor corporation of two affiliates, Sahara Resorts and Sahara 
Casino Partners, L.P., which combined in a business combination in September, 
1993. The Company's primary business operations are conducted through two 
wholly owned subsidiary corporations, Santa Fe Hotel Inc. ("SFHI") and 
Pioneer Hotel Inc. ("PHI") (the "Operating Companies").  SFHI owns and 
operates the Santa Fe Hotel and Casino (the "Santa Fe"), located in Las 
Vegas, Nevada, and PHI owns and operates the Pioneer Hotel & Gambling Hall 
(the  "Pioneer") in Laughlin, Nevada. The Company owns real estate adjacent 
to the Santa Fe, and through an indirect wholly-owned subsidiary of the 
Company, Sahara Las Vegas Corp. ("SLVC"), on Las Vegas Boulevard South and in 
Henderson, Nevada, for possible development opportunities.  

These consolidated condensed financial statements should be read in 
conjunction with the consolidated financial statements and notes thereto 
included in the Company's Annual Report to stockholders for the year ended 
September 30, 1997. The results of operations for the six month period ended 
March 31, 1998 are not necessarily indicative of the results to be expected 
for the entire year.

In the opinion of the Company, the accompanying unaudited consolidated 
condensed financial statements contain all adjustments (consisting of only 
normal accruals) necessary to present fairly the financial position of the 
Company at March 31, 1998, the results of its operations for the three and 
six month periods ended March 31, 1998 and 1997, the changes in stockholders' 
equity for the six month period ended March 31, 1998, and cash flows for the 
six month periods ended March 31, 1998 and 1997.  

Certain reclassifications have been made in the 1997 consolidated financial 
statements in order to conform to the presentation used in 1998.

The preparation of financial statements in conformity with generally accepted 
accounting principles requires management to make estimates and assumptions 
that affect the reported amounts of assets and liabilities and disclosure of 
contingent assets and liabilities at the date of the financial statements and 
the reported amounts of revenues and expenses during the reporting period. 
Significant estimates used by the Company include estimated useful lives for 
depreciable and amortizable assets, certain other estimated liabilities and 
valuation reserves, and estimated cash flows in assessing the recoverability 
of long-lived assets.  Actual results may differ from estimates.


                                       6

<PAGE>

RECENTLY ISSUED ACCOUNTING STANDARDS

During the quarter ended December 31, 1997, the Company adopted Statement of 
Financial Accounting Standards ("SFAS") No. 128 "Earnings per Share."   SFAS 
No. 128 requires the presentation of basic net income (loss) per share and 
diluted net income (loss) per share.  Basic per share amounts are computed by 
dividing net income (loss) by average shares outstanding during the period.  
Diluted per share amounts are computed by dividing net income (loss) by 
average shares outstanding plus the dilutive net income (loss) by average 
shares outstanding plus the dilutive effect of common share equivalents.  The 
effect of options outstanding was not included in diluted calculations during 
the quarter ended March 31, 1998 since the Company incurred a net loss during 
the three-month and six-month periods ended March 31, 1998.

The American Institute of Certified Public Accountants' Accounting Standards 
Executive Committee issued Statement of Position ("SOP") 98-5 "Reporting on 
the Costs of Start-up Activities."  This standard provides guidance on the 
financial reporting for start-up costs and organization costs.  This standard 
requires costs of start-up activities and organization costs to be expensed 
as incurred. This standard is effective for fiscal years beginning after 
December 15, 1998, though earlier application is encouraged.  Management 
believes that this SOP could have a material impact on the consolidated 
financial statements depending on the status of the Company's current and 
future expansion projects at the time of adoption of this standard. 

NOTE 2 - CASH AND SHORT-TERM INVESTMENTS

At March 31, 1998, approximately $9.3 million of the Company's consolidated 
cash and short term investments was held by SFHI and was subject to certain 
restrictions and limitations on its use, including restrictions on its 
availability for distribution to the Company, by the terms of an indenture 
pursuant to which $115 million principal amount of 11% First Mortgage Notes 
due 2000 ("11% Notes") of SFHI was issued.  As of March 31, 1998, SFHI did 
not meet the conditions precedent to making a distribution to the Company.

At March 31, 1998, approximately $12.7 million of the Company's consolidated 
cash and short-term investments was held by PHI and was subject to certain 
restrictions, including restrictions on its availability for distribution to 
the Company, by the terms of an indenture pursuant to which the 13 1/2% First 
Mortgage Notes due 1998 ("13 1/2% Notes") of Pioneer Finance Corp. were 
issued. As of March 31, 1998, PHI did not meet the conditions precedent to 
making a distribution to the Company.

At March 31, 1998, approximately $2.4 million of the Company's consolidated 
cash and short-term investments was held by SLVC and was subject to certain 
restrictions and limitations on its use by the terms of $57.5 million 
principal amount of notes due 1999 ("SLVC Notes") of SLVC. 


                                       7


<PAGE>

NOTE 3 - ASSETS HELD FOR SALE

In November 1997, the Company entered into an agreement to sell the 22 acre 
parcel of land next to the Santa Fe for approximately $3.6 million.  The 
agreement is subject to certain contingencies and, pursuant to an amendment 
entered into on May 12, 1998, will terminate if closing does not occur before 
August 13, 1998.  Pursuant to the amendment, the buyer must pay the purchase 
price in cash.

NOTE 4 - PROPERTY AND EQUIPMENT, NET

In March 1998, the Company acquired, for approximately  $10.7 million, gaming 
equipment and furniture and fixtures previously under lease at the Santa Fe. 
The Company funded the acquisition with a down payment of $100,000 in March 
1998 with cash from operations and the balance of the $10.7 million purchase 
price with proceeds from a $14 million note placement in April 1998. (See 
Note 10)

In December 1997, the Company acquired, for approximately $1.1 million, 
gaming equipment previously under lease at the Pioneer.  In January 1998, the 
Pioneer acquired, for approximately $500,000, an additional 108 gaming 
machines from available working capital.

NOTE 5 - CURRENT PORTION OF LONG-TERM DEBT

As of March 31, 1998, the Company's current liabilities exceeded current 
assets by $59.6 million.  The Company has approximately $71.0 million in 
current maturities of long term debt due to third parties during the 
twelve-month period ending March 31, 1999, comprised primarily of  $5.2 
million principal amount of 10 1/4% Subordinated Debentures due June 1998 
(the "10 1/4% Debentures"), $60.0 million principal amount of 13 1/2% Notes 
issued by Pioneer Finance Corp. and guaranteed by the Company, a $4.8 million 
balloon payment due in December 1998 on the note payable by the Company to 
Sierra Construction Corp. ("Sierra Construction")  and principal amortization 
payments under other notes payable and capital leases.  The scheduled 
maturities applicable to third party debt under notes payable and capital 
leases at SFHI and PHI during the twelve month period ending March 31, 1999 
are $700,000 and $30,000, respectively.

Although management has in the past and is currently exploring refinancing or 
debt modification alternatives, as well as possible dispositions or financing 
of certain assets, in order to satisfy the current maturities of long-term 
debt obligations as they become due in the twelve month period ending March 
31, 1999, no assurance can be given that the Company will be able to 
refinance or modify some or all of its indebtedness or dispose of, or obtain 
financing with respect to any assets.  Any such refinancing or modification 
would be subject to the Company's future operations and the prevailing market 
conditions at the time of such proposed transaction and may require the 
approval of the Nevada Gaming Authorities for such financings or asset sales. 
If the Company is ultimately unable to refinance or modify any such debt 
prior to maturity, and/or obtain sufficient proceeds from 


                                       8


<PAGE>

asset dispositions or financings to repay such debt, events of default would 
occur which would lead to cross-defaults in other material agreements of the 
Company including, without limitation, agreements relating to substantially 
all of the outstanding long-term debt of the Company and its subsidiaries.

NOTE 6 - LONG-TERM DEBT

In November 1997, the Company entered into an amended and restated agreement 
with respect to the SLVC Notes pursuant to which the principal amount of 
notes was increased from $35 million to $57.5 million.  SLVC issued two 
tranches of promissory notes, $37 million principal amount with an interest 
rate of 9.75% and $20.5 million with an interest rate of 13.25%.  Certain 
other provisions of the loan agreement were amended, including the 
elimination of any sinking fund principal payments prior to maturity in 
December 1999.  The additional proceeds were used by SLVC primarily to 
acquire the 39 acre parcel of land in Henderson, Nevada from its affiliate 
Santa Fe Valley, Inc. ("SFVI") for cash consideration of $20 million.  SFVI 
used approximately $5 million to repay the outstanding first mortgage 
indebtedness and paid a dividend of $5 million to PHI.  The balance of the 
proceeds of approximately $10 million was retained by SFVI.

In March 1998, the Company entered into a purchase agreement to acquire 
certain gaming and other equipment under lease at the Santa Fe for $10.7 
million. The Company made a $100,000 down payment in March 1998 and paid the 
balance of the purchase price in April 1998 with a portion of the proceeds of 
the $14 million note placement. (See Note 10)

In March 1998, holders of a majority of the 11% Notes consented to three 
proposals to amend the Indenture under which the 11% Notes were issued and, 
as a result, all three proposals became effective.  Pursuant to the 
amendments, SFHI was permitted to incur $14 million of senior secured 
indebtedness; granted a security interest in certain gaming equipment to 
secure two promissory notes in the aggregate principal amount of 
approximately $10 million to obtain an extension of the maturity of the two 
promissory notes from May 1998 until April 2001 and a reduction in the 
interest rate to 11% and is permitted to lease 3 acres for development of a 
non-gaming hotel. SFHI also expects to purchase additional gaming equipment 
and to fund in part the construction of a parking garage with a portion of 
the proceeds.

NOTE 7 - LEASES

In November 1997, SFHI amended the terms of operating leases for gaming and
other equipment to extend the term of the leases from up to 36 months to 48
months, to defer payment on the leases until August 1998 and to replace older
gaming equipment with new 


                                       9

<PAGE>

equipment.  In January 1998, the Company entered into operating leases for an
additional 200 slot and video poker machines with terms between 36 and 48
months.  In March 1998, the Company acquired the equipment subject to lease. 
(See Notes 4, 6, and 10)

In December 1997, the Pioneer purchased gaming equipment previously subject 
to lease for approximately $1.1 million, as a result of which monthly rental 
expense for gaming equipment decreased by $44,000.

NOTE 8 - SUPPLEMENTAL INFORMATION

Supplemental statement of cash flows information for the three month periods
ended March 31, 1998 and 1997 is presented below:

<TABLE>
<CAPTION>
                                                      (dollars in thousands)
                                                         1998        1997
                                                        -------     -------
<S>                                                    <C>          <C>
Operating Activities:                                   
   Cash paid during the period  for interest,                       
   net of amount capitalized of $108,337
   and $-0- for 1998 and 1997, respectively             $10,708      $10,746
                                                        -------      -------
                                                        -------      -------
Investing and Financing Activities:
   Debt incurred in connection with the
   acquisition of machinery and equipment               $ 9,409      $   552
                                                        -------      -------
                                                        -------      -------
</TABLE>

NOTE 9 - CONTINGENCIES

In February 1998, the Company amended its agreement with the owner of a 
recreational vehicle park, which purchased the rights and obligations under 
contracts with members of Camperland, a recreational vehicle park previously 
owned and operated by the Company.  In accordance with the amendment, the 
Company (i) reconveyed a first deed of trust on 14 acres of vacant land owned 
by the existing park, which secured performance by the existing park's 
operators in connection with the assumption of the Camperland contracts, and 
(ii) was relieved of its obligation, in certain situations, to make payment 
of $750,000 under certain circumstances and of all performance obligations 
with regard to the Camperland contract.

NOTE 10  - SUBSEQUENT EVENT 

SFHI Note Issuance 

In April 1998, SFHI consummated the issuance of $14 million principal amount 
of 9.5% senior secured indebtedness (the "9.5% Notes") contemplated by the 
consent solicitation relating to its 11% Notes.  (See Note 6)   The 9.5% 
Notes require quarterly interest only payments, and mature December 15, 2000.

SFHI used approximately $10.7 million of proceeds to purchase gaming and 
other equipment under lease and approximately $1.2 million of the proceeds 
toward the purchase 

                                      10

<PAGE>

of additional gaming equipment.  SFHI expects to use the balance of the loan 
proceeds to acquire additional gaming equipment and to fund in part the 
construction of a parking structure at the Santa Fe. 

In addition, SFHI modified the terms of outstanding promissory notes 
aggregating approximately $10 million (the "Equipment Notes") in connection 
with a sale by the Company of the Equipment Notes to a third party to reduce 
the interest rate to 11% and to extend the maturity date from May 1998 to 
April 2001.  SFHI also granted a security interest in gaming and other 
equipment to secure the modified notes.

Sale of Notes

In April 1998, the Company consummated the sale of the Equipment Notes for 
cash proceeds of approximately $9 million.  The Company expects to use the 
cash proceeds for working capital purposes, including, without limitation, 
repayment of indebtedness.


                                       11
<PAGE>

10. Supplemental Statement of  Subsidiary Information -
       For The Six Months Ended March 31, 1998 and 1997


     The Company's primary operations are in the hotel/casino industry and in 
fiscal years 1998 and 1997 were conducted through PHI and SFHI. "Other" below 
includes financial information for the Company's other operations before 
eliminating entries.  Identifiable assets listed below excludes balances due 
between affiliates.  In addition  to the financial information for the six 
months ended March 31, 1998 and 1997, as set forth in the table below, see 
notes 2 and 4 for additional discussion of subsidiary operations.

<TABLE>
<CAPTION>
(dollars in thousands)                   Year     PHI      SFHI     Other      Eliminations     TOTAL
----------------------                   ----     ---      ----     -----      ------------     -----
<S>                                      <C>    <C>       <C>        <C>       <C>             <C>
  Operating revenues                     1998   $20,355   $35,136    $1,267         ($728)     $ 56,030
                                                -------   -------    ------        ------      --------
                                                -------   -------    ------        ------      --------
                                         1997   $21,107   $30,568    $1,859         ($644)     $ 52,890
                                                -------   -------    ------        ------      --------
                                                -------   -------    ------        ------      --------

  Operating income (loss)                1998     ($544)   $5,854     ($988)        ($607)     $  3,715
                                                -------   -------    ------        ------      --------
                                                -------   -------    ------        ------      --------
                                         1997      $942    $2,176      $739         ($301)     $  3,556
                                                -------   -------    ------        ------      --------
                                                -------   -------    ------        ------      --------

  Interest expense                       1998    $4,071    $6,710    $1,896         ($607)     $ 12,070
                                                -------   -------    ------        ------      --------
                                                -------   -------    ------        ------      --------
                                         1997    $4,007    $6,446    $1,212         ($301)     $ 11,364
                                                -------   -------    ------        ------      --------
                                                -------   -------    ------        ------      --------

  Depreciation and amortization          1998    $2,785    $2,519      $835                      $6,139
                                                -------   -------    ------        ------      --------
                                                -------   -------    ------        ------      --------
                                         1997    $2,793    $2,602       $93                      $5,488
                                                -------   -------    ------        ------      --------
                                                -------   -------    ------        ------      --------

  Rents                                  1998      $482    $1,214                                $1,696
                                                -------   -------    ------        ------      --------
                                                -------   -------    ------        ------      --------
                                         1997      $489    $1,454                                $1,943
                                                -------   -------    ------        ------      --------
                                                -------   -------    ------        ------      --------

  Capital expenditures                   1998    $2,142    $9,888       $40                    $ 12,070
                                                -------   -------    ------        ------      --------
                                                -------   -------    ------        ------      --------
                                         1997      $455      $512      $127                    $  1,094
                                                -------   -------    ------        ------      --------
                                                -------   -------    ------        ------      --------

  Identifiable assets                    1998   $97,023   $85,840   $56,162       ($1,245)     $237,780
                                                -------   -------    ------        ------      --------
                                                -------   -------    ------        ------      --------
                                         1997  $112,600   $79,197   $29,592       ($1,245)     $220,144
                                                -------   -------    ------        ------      --------
                                                -------   -------    ------        ------      --------
</TABLE>

                                      12

<PAGE>

11.  Supplemental Statement of  Subsidiary Information -
       For The Three Months Ended March 31, 1998 and 1997


     The Company's primary operations are in the hotel/casino industry and in 
fiscal years 1998 and 1997 were conducted through PHI and SFHI. "Other" below 
includes financial information for the Company's other operations before 
eliminating entries.  Identifiable assets listed below excludes balances due 
between affiliates.  In addition  to the financial information for the three 
months ended March 31, 1998 and 1997, as set forth in the table below, see 
notes 2 and 4 for additional discussion of subsidiary operations.

<TABLE>
<CAPTION>
(dollars in thousands)                   Year     PHI      SFHI     Other      Eliminations     TOTAL
----------------------                   ----     ---      ----     -----      ------------     -----
<S>                                      <C>    <C>       <C>        <C>       <C>             <C>
  Operating revenues                     1998   $10,445   $17,994      $809         ($577)     $28,671
                                                -------   -------    ------        ------      -------
                                                -------   -------    ------        ------      -------
                                         1997   $11,178   $15,371    $1,190         ($257)     $27,482
                                                -------   -------    ------        ------      -------
                                                -------   -------    ------        ------      -------

  Operating income                       1998     ($224)   $3,144     ($305)        ($507)     $ 2,108
                                                -------   -------    ------        ------      -------
                                                -------   -------    ------        ------      -------
                                         1997    $1,192    $1,416      $527         ($151)     $ 2,984
                                                -------   -------    ------        ------      -------
                                                -------   -------    ------        ------      -------

  Interest expense                       1998    $2,026    $3,374    $1,101         ($507)     $ 5,994
                                                -------   -------    ------        ------      -------
                                                -------   -------    ------        ------      -------
                                         1997    $2,033    $3,211      $626         ($151)     $ 5,719
                                                -------   -------    ------        ------      -------
                                                -------   -------    ------        ------      -------

  Depreciation and amortization          1998    $1,351    $1,076      $579                    $ 3,006
                                                -------   -------    ------        ------      -------
                                                -------   -------    ------        ------      -------
                                         1997    $1,393    $1,314       $53                    $ 2,760
                                                -------   -------    ------        ------      -------
                                                -------   -------    ------        ------      -------

  Rents                                  1998      $175      $610                              $   785
                                                -------   -------    ------        ------      -------
                                                -------   -------    ------        ------      -------
                                         1997      $211      $837                              $ 1,048
                                                -------   -------    ------        ------      -------
                                                -------   -------    ------        ------      -------

  Capital expenditures                   1998      $864    $9,598       $23                    $10,485
                                                -------   -------    ------        ------      -------
                                                -------   -------    ------        ------      -------
                                         1997      $222      $352        $0                    $   574
                                                -------   -------    ------        ------      -------
                                                -------   -------    ------        ------      -------
</TABLE>

                                      13
<PAGE>

INDEPENDENT ACCOUNTANTS' REVIEW REPORT

Santa Fe Gaming Corporation:

We have reviewed the accompanying consolidated condensed balance sheet of 
Santa Fe Gaming Corporation and subsidiaries as of March 31, 1998, the 
related consolidated condensed statements of operations for the three-month 
and six-month periods ended March 31, 1998 and 1997, stockholders' equity for 
the six-month period ended March 31, 1998 and cash flows for the six-month 
periods ended March 31, 1998 and 1997, in accordance with Statements on 
Standards for Accounting and Review Services issued by the American Institute 
of Certified Public Accountants.  All information included in these financial 
statements is the representation of the Company's management.

A review of interim financial information consists principally of inquiries of
Company personnel and analytical procedures applied to financial data.  It is
substantially less in scope than an audit in accordance with generally accepted
auditing standards, 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 review, we are not aware of any material modifications that should
be made to such consolidated condensed financial statements in order for them to
be in conformity with generally accepted accounting principles.

We have previously audited, in accordance with generally accepted auditing 
standards, the consolidated balance sheet of Santa Fe Gaming Corporation and 
subsidiaries as of September 30, 1997, and the related consolidated 
statements of operations, stockholders' equity and cash flows for the year 
then ended (not presented herein); and in our report dated December 8, 1997 
we expressed an unqualified opinion on those consolidated financial 
statements.  In our opinion, the information set forth in the accompanying 
consolidated condensed balance sheet as of September 30, 1997 is fairly 
stated, in all material respects, in relation to the consolidated balance 
sheet from which it has been derived.

As discussed in Note 5 to the consolidated condensed financial statements, as 
of March 31, 1998 the Company's current liabilities exceeded current assets 
by $59.6 million, which is due to $71.0 million in current maturities of long 
term debt due to third parties during the twelve-months ended March 31, 1999. 
Management of the Company is exploring alternatives to address the $71.0 
million current maturities of long term debt, which consist primarily of the 
Pioneer Hotel, Inc. 13 1/2% Notes of $60 million, including, but not limited 
to, disposition of assets, modifications to existing lease agreements, 
possible reduction of indebtedness and/or refinancing or modification of the 
13 1/2% Notes. If the Company is ultimately unable to refinance or modify any 
such debt prior to maturity, and/or obtain sufficient proceeds from asset 
dispositions or financings to repay such debt, events of default would occur 
which would lead to cross-defaults in other material agreements of the 
Company including, without limitation, agreements relating to substantially 
all of the outstanding long-term debt of the Company and its subsidiaries. No 
assurance can be given that the Company will be able to refinance or modify 
some or all of its indebtedness or dispose of, or obtain financing with 
respect to any assets.

DELOITTE & TOUCHE LLP
Las Vegas, Nevada
May 14, 1998


                                      14
<PAGE>
                             SANTA FE GAMING CORPORATION

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

RESULTS OF OPERATIONS - SIX MONTHS ENDED MARCH 31, 1998 AND 1997

CONSOLIDATED

Consolidated revenues for the six month period ended March 31, 1998 were 
$56.0 million, a $3.1 million or 5.9% increase from $52.9 million for the 
same period in fiscal 1997. Revenues increased by $4.6 million at the Santa 
Fe Hotel and Casino (the "Santa Fe") and decreased by $700,000 at the Pioneer 
Hotel and Gambling Hall (the "Pioneer").  The prior period's revenues 
included a $700,000 gain on the sale of real property.

Consolidated operating income for the six month period ended March 31, 1998 
was $3.7 million, a $100,000 or 4.5% increase from $3.6 million for the same 
period in fiscal 1997.  Operating income increased by $3.7 million at the 
Santa Fe and decreased by $1.5 million at the Pioneer.  Operating income of 
Sahara Las Vegas Corp. ("SLVC") decreased by $1.0 million, primarily due to 
the amortization of debt issue costs associated with the issuance of an 
additional $37.5 million in principal amount of notes (the "SLVC Notes") in 
November 1997.

Consolidated interest expense for the six month period ended March 31, 1998 
was $12.1 million, a $700,000 increase compared to $11.4 million for the same 
period in fiscal 1997.  Interest expense of SLVC increased by $900,000 in 
the 1998 period due to the issuance of the additional SLVC Notes in November 
1997.

Consolidated loss before income taxes  for the six month period ended March 31,
1998 was $8.4 million, a $600,000 increase compared to net loss of $7.8 million
in the same period in the prior year. Loss before income taxes decreased by 
$3.4 million at the Santa Fe and increased by $1.6 million at the Pioneer.

The Company did not record an income tax benefit in the current fiscal year 
due to the uncertainty of the Company's ability to recognize a benefit of the 
net operating loss.  Consolidated net loss, applicable to common shares, was 
$9.1 million in the 1998 period compared to $6.2 million in the prior year 
period.

SANTA FE

Revenues at the Santa Fe increased 15.0%, or $4.6 million, in the six months
ended March 31, 1998 to $35.1 million compared to $30.6 million in the same
period in the prior year.  Casino revenues increased 19.9%, or $4.6 million, to
$27.8 million from $23.2 million when compared to the same six month period of
1997.  Management believes that Santa Fe's revenues in prior periods were
adversely impacted as a result of increased competition in its market area and
restricted access to the property due to road construction that was ongoing from
April 1996 through February 1998. 


                                      15
<PAGE>

Operating expenses increased by 3.1%, or $900,000.  Casino expenses had 
volume-related increases of 10.2%, or  $1.2 million.  Similarly, selling, 
general and administrative expenses increased 10.9%, or $400,000, due to 
increased advertising costs.  Such increases were partially offset by cost 
control related decreases of 10.8%, or $500,000, in food and beverage 
expenses.   Accordingly, operating income increased by $3.7 million, or 
169.1%, to $5.9 million in 1998 from $2.2 million in 1997. 

Santa Fe Hotel, Inc. ("SFHI") is negotiating with the Teamsters, Operating 
Engineers, Culinary and Bartenders Unions ("Unions") with respect to 
collective bargaining agreements covering certain employees at the Santa Fe.  
If negotiations result in  agreements between the SFHI and the Unions, 
operating expenses are expected to increase.  In the event negotiations fail 
to result in agreements,  the Unions may call a strike, which would result in 
operating revenues being adversely affected.   In either event, there would 
be a material adverse effect on the results of operations and  financial 
condition of the Santa Fe and the Company.

PIONEER

Revenues at the Pioneer decreased 3.6%, or $700,000, to $20.4 million as
compared to $21.1 million in the prior year.  Casino revenues were $17.4 million
in 1998, representing a decrease of 3.8%, or $700,000 from $18.1 million when
compared to the 1997 period.  The decrease in the current period's revenues is
believed to be primarily due to the competitive gaming market environment in and
around Laughlin, including Indian gaming facilities opened in Arizona and
Southern California, and new casinos opened in Las Vegas.

Operating expenses increased 3.6%, or $700,000, to $20.9 million.   Casino
expenses increased 4.2%, or $400,000 and selling, general and administrative
expenses increased 7.8%, or $200,000, primarily due to increased advertising and
promotional expenses.    Accordingly, operating income decreased by 157.8% or
$1.5 million to a loss of $500,000  in fiscal 1998 from income of $900,000 in
fiscal 1997.

RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1998 AND 1997

CONSOLIDATED

Consolidated revenues for the three month period ended March 31, 1998 were 
$28.7 million, a $1.2 million, or 4.3%, increase from $27.5 million for the 
same period in fiscal 1997.  Revenues increased by $2.6 million at the Santa 
Fe and decreased by $700,000 at the Pioneer.  The prior period's revenues 
include a $700,000 gain on the sale of real property.

Consolidated operating income for the three month period ended March 31, 1998
was $2.1 million, a $900,000, or 29.3%, decrease from $3.0 million for the same
period in fiscal 1997.  Operating income increased by $1.7 million at the Santa
Fe and decreased by $1.4


                                      16
<PAGE>

million  at the Pioneer.  Operating income of SLVC decreased by $600,000, 
primarily due to the amortization of debt issue costs associated with the 
issuance of the additional SLVC Notes in November 1997.

Consolidated interest expense for the three month period ended March 31, 1998 
was $6.0 million, a $300,000 increase compared to $5.7 million for the same 
period in fiscal 1997.  Interest expense of SLVC increased by $600,000 in the 
1998 period due to the issuance the additional SLVC Notes in November 1997.

Consolidated loss before income taxes  for the three month period ended March
31, 1998 was $3.9 million, a $1.2 million increase compared  to $2.7 million in
the same period in the prior year.  Net loss before income taxes decreased by
$1.6  at the Santa Fe and increased by $1.4 million at the Pioneer.

The Company did not record an income tax benefit in the current quarter due to
the uncertainty of the Company's ability to recognize a benefit of the net
operating loss.  Consolidated net loss applicable to common shares was $4.3
million compared to $2.3 million in the prior year period.

SANTA FE

Revenues at the Santa Fe increased 17.1%, or $2.6 million, in the three months
ended March 31, 1998 to $18.0 million as compared to $15.4 million in the same
period in the prior year.  Casino revenues increased 22.0%, or $2.6 million, to
$14.4 million from $11.8 million when compared to the same three month period of
1997.  Management believes that Santa Fe's revenues in prior periods were
adversely impacted as a result of increased competition in its market area and
restricted access to the property due to road construction that was ongoing from
April 1996 through February 1998.

Operating expenses increased by 6.4%, or $900,000.  Casino expenses had 
volume-related increases of 16.6%, or $900,000.  Similarly, selling, general 
and administrative expenses increased 15.8%, or $300,000, due to increased 
advertising costs.  Depreciation and amortization expense decreased 18.1%, or 
$200,000, primarily due to fixed assets placed in service at the opening of 
the Santa Fe becoming fully depreciated.  Accordingly, operating income 
increased $1.7 million or 122.0% to $3.1 million in 1998 from $1.4 million in 
1997.

PIONEER

Revenues at the Pioneer decreased 6.6%, or $700,000, to $10.4 million in the 
March 1998 quarter as compared to $11.2 million in the prior year.  Casino 
revenues were $8.9 million in 1998, representing a decrease of 8.1%, or 
$700,000 from $9.6 million when compared to the 1997 period.  The decrease in 
the current period's revenues is believed to be 


                                      17
<PAGE>

primarily due to the competitive gaming market environment in and around 
Laughlin, including Indian gaming facilities opened in Arizona and Southern 
California, and new casinos opened in Las Vegas.

Operating expenses increased 6.8%, or $700,000, to $10.7 million in the quarter
ended March 31, 1998.  Casino expenses increased 8.1%, or $400,000, and selling,
general and administrative expenses increased 16.6%, or $200,000, primarily due
to increased advertising and promotional expenses.   Accordingly, operating
income decreased by 118.8% or $1.4 million, to a loss of $200,000 in the fiscal
1998 quarter from income of $1.2 million in the fiscal 1997 quarter.

LIQUIDITY AND CAPITAL RESOURCES; TRENDS AND FACTORS RELEVANT TO
FUTURE OPERATIONS

As of March 31, 1998, the Company ("SFGC") held cash and short-term 
investments of $25.2 million compared to $15.1 million at September 30, 1997. 
In April 1998,  SFHI issued $14 million principal amount of senior notes,  
$10.6 million of the proceeds of which was used to pay the remaining balance 
of the purchase price for equipment previously subject to lease and 
approximately $1.2 million of the proceeds of which was used toward the 
purchase of additional gaming equipment.  SFHI expects to use the remaining 
proceeds to purchase additional equipment and to fund in part the 
construction of  a parking structure.  Additionally, in April 1998 SFGC sold 
promissory notes issued by SFHI with an aggregate principal amount of 
approximately $10 million for approximately $9 million in cash.  SFGC expects 
to use net proceeds from the sale of notes for working capital purposes, 
including, without  limitations, repayment of indebtedness.  (See 
Liquidity-Corporate and Liquidity-SFHI below)

The Company's cash used for operations was $3.3 million for the six months 
ended March  31, 1998 as compared to $6.1 million for  the prior year period. 
 The improvement is due primarily to increased cash flows from operations at 
the Santa Fe. Cash used for investing activities was $2.7 million  during the 
six month period ended March 1998, as compared to cash provided by investing 
activities of $2.6 million during the six month period ended March 1997.  The 
current period use represents the acquisition of gaming equipment at the 
Pioneer.  Cash provided from financing activities was $16.0 million in the 
1998 six month period compared to  $100,000 during the same period in 1997.  
This is primarily the net proceeds resulting from the placement of the 
additional $22.5 million principal amount of SLVC Notes in November 1997. 

The Company owns, through an indirect wholly owned subsidiary, an approximately
39 acre parcel of real property in Henderson, Nevada, located in the southeast
Las Vegas Valley.  The Company is evaluating the potential development of a
hotel/casino and entertainment complex on this property.  The Company has
completed preliminary engineering and architectural drawings.  Any future
development is subject to, among other things, the Company's ability to obtain
necessary financing.  No assurance can be given that the Company will obtain
development financing or develop successfully the Henderson property.  (See
Liquidity-Corporate and Liquidity-SLVC below)

The Company's earnings from operations before interest, taxes, depreciation, 
amortization and rents ("EBITDAR") were $6.9 million and $13.3 million for 
the three and six months ended March 31, 1998,  respectively, as compared to 
$7.7 million and $12.7 million for the


                                      18
<PAGE>

three and six months ended March 31, 1997, respectively.  EBITDAR for the 
1998 three and six month periods represents .97 and 1.01 times rent and 
interest expense, respectively, compared to .95 and 1.13 times rent and 
interest expense in the prior year three and six month periods, 
respectively.  In the fiscal 1998 six month period, the Company reported 
approximately $1.7 million in rent expense compared to $1.9 million in the 
fiscal 1997 period.  The Company will incur less rent expense in future 
periods, offset in part, by increased interest expense as a result of the $14 
million note placement by SFHI in April 1998 and the application of net 
proceeds therefrom.  (See Liquidity-SFHI below)  EBITDAR should not be 
construed as a substitute for operating income or a better indicator of 
liquidity than cash flow from operating activities, which are determined in 
accordance with GAAP.  It is included herein to provide additional 
information with respect to the ability of the Company to meet its future 
debt service, capital expenditure and working capital requirements.  Although 
EBITDAR is not necessarily a measure of the Company's ability to fund its 
cash needs, management believes that certain investors find EBITDAR to be a 
useful tool for measuring the ability of the Company to service its debt.

DEBT OBLIGATIONS  - The Company has approximately $71.0 million in current 
maturities of long term debt due to third parties during the twelve-month 
period ending March 31, 1999, comprised primarily of  $5.2 million principal 
amount of 10 1/4% Subordinated Debentures due June 1998 (the "10 1/4% 
Debentures"), $60.0 million  principal amount of 13 1/2% Notes due December 
1998 issued by Pioneer Finance Corp. and guaranteed by the Company (the "13 
1/2%  Notes"), a $4.8 million balloon payment due in December 1998 on a note 
payable by the Company to Sierra Construction Corp. ("Sierra Construction")  
and principal amortization payments under other notes payable and capital 
leases.  The scheduled maturities applicable to third party debt under notes 
payable and capital leases at SFHI and PHI during the twelve month period 
ending March 31, 1999 are $700,000 and $30,000, respectively.

Although management has in the past and is currently exploring refinancing or
debt modifications alternatives, as well as possible dispositions or financing 
of certain assets, in order to satisfy the current maturities of  long-term debt
obligations as they become due in the twelve month period ending March 31, 1999,
no assurance can be given that the Company will be able to refinance or modify
some or all of its indebtedness or dispose of, or obtain financing with respect
to any assets.  Any such refinancing or modification would be subject to the
Company's future operations and the prevailing market conditions at the time of
such proposed transaction and may require the approval of the Nevada Gaming
Authorities for such financings or asset sales.  If the Company is ultimately
unable to refinance or modify any such debt prior to maturity, and/or obtain
sufficient proceeds from asset dispositions or financings to repay such debt,
events of default would occur which would lead to cross-defaults in other
material agreements of the Company including, without limitation, agreements
relating to substantially all of the outstanding long-term debt of the Company
and its subsidiaries.

The Company had $132.5 million in long-term debt, net of current maturities 
and debt discount, as of March 31, 1998.  Of such amounts, approximately 
$57.5 million and $66.3 million mature in December 1999 and December 2000, 
respectively, comprised primarily of $57.5 million principal amount of SLVC 
Notes issued by SLVC and guaranteed by the


                                      19
<PAGE>

Company and $99 million of 11% Notes due December 2000 (the "11% Notes") 
issued by SFHI and guaranteed by the Company, of which $33 million is held by 
SLVC.

Debt agreements restrict the distribution of cash from certain of the Company's
subsidiaries to the Company.  Cash flow from SFHI, PHI and SLVC is not
currently, and is not expected in the foreseeable future to be, available for
distribution to the Company.  In addition, debt agreements limit additional
indebtedness of such subsidiaries.  Therefore, the Company and its subsidiaries
other than SLVC, PHI and SFHI, (collectively "Corporate") must rely on existing
cash and available resources, including the 22 acre parcel of real property
subject to a sale agreement, or cause subsidiaries to dispose of or refinance
assets, to provide liquidity to fund Corporate cash requirements including
obligations that may arise as a result of the Company's guarantee of subsidiary
debt.  See more detailed discussion of Liquidity for SLVC, PHI, SFHI and
Corporate, below.

LIQUIDITY - CORPORATE - Approximately $4.1 million of the Company's current 
assets at March 31, 1998, including approximately $900,000 of cash and 
short-term investments, was held by Corporate.

In April 1998, the Company consummated the sale of promissory notes ("Equipment
Notes")  from SFHI in the aggregate principal amount of approximately $10
million for cash proceeds of approximately $9 million.  The Company expects to
use the cash proceeds for working capital purposes including, without
limitation, repayment of indebtedness.

In November 1997, the Company entered into an agreement to sell the 22 acre 
parcel of land next to the Santa Fe for approximately $3.6 million.  The 
agreement is subject to certain contingencies and, pursuant to an amendment 
entered into on May 12, 1998, will terminate if closing does not occur before 
August 13, 1998.  Pursuant to the amendment, the buyer must pay the purchase 
price in cash.

Corporate consists primarily of non-operating entities which do not generate 
cash flow from operations.  Corporate's principal uses of cash are for debt 
service, administrative and professional expenses of the parent company and 
costs associated with the evaluation and development of proposed projects.  
Corporate debt service includes payment obligations on $5.2 million principal 
amount of the 10 1/4% Debentures, a $5.1 million note payable to Sierra 
Construction and a $1.6 million loan on a 22 acre parcel of land due December 
1999.  See "Debt Obligations" above.

Additional potential uses of cash by Corporate include the payment of a
guaranteed tenant loan if the Company terminates the lease to which the parcel
on Las Vegas Boulevard South is subject (which loan had an outstanding balance
of $5.1 million as of March 31, 1998). 

Prior to fiscal 1997, the Company satisfied the semi-annual dividend payments 
on its preferred stock through the issuance of paid in kind dividends.  
Commencing in fiscal 1997, dividends paid on the preferred stock, to the 
extent declared, are required to be paid in


                                      20
<PAGE>

cash.  The Company is a party to financing arrangements that restrict the 
Company's ability to exchange the preferred stock to subordinated notes 
commencing in September 1998 and to declare and pay dividends or make 
distributions with respect to the Company's capital stock, which currently 
prohibit the payment of cash dividends on the preferred stock. In the event 
not declared, dividends will accrue on the preferred stock.  The Company 
accrued the semi-annual preferred stock dividends due in March and September 
1997 and March 1998. To the extent dividends in an amount equal to dividend 
payments for one dividend period have accrued and remain unpaid for two 
years, the preferred stockholders will have the right to appoint two members 
to the Board of Directors at the next annual meeting of shareholders.  In 
March 1999, the dividend rate increases to 11.0% from 8.0% and increases by 
50 basis points each semi-annual period thereafter, up to a maximum of 16%.

Management believes that Corporate has sufficient working capital and 
available resources to meet its operating and debt service requirements 
through the twelve month period ending March 31, 1999, including the maturity 
of $5.2 million principal amount of 101/4% Debentures in June 1998 and the 
$4.8 million note due Sierra Construction in December 1998, although no 
assurance can be given to that effect.  Available resources include proceeds 
that may be realized from the sale of the 22 acre parcel of real property 
discussed above.  

The Company has guaranteed the debt of its subsidiaries, PHI, SLVC and SFHI, 
including $60 million principal amount of 13 1/2% Notes due December 1998. 
Furthermore, in the event that cash at SLVC, SFHI or PHI is insufficient to 
meet liquidity requirements, Corporate may make contributions, or, to the 
extent permitted by financing arrangements, loans to  SLVC, SFHI or PHI to 
prevent an event of default under debt instruments to which SLVC, SFHI or PHI 
is a party and which loans have been guaranteed by Corporate.  In order to 
generate necessary liquidity, the Company may cause its subsidiaries to 
dispose of or refinance certain assets to generate sufficient liquidity to 
meet the cash requirements.  No assurance can be given that Corporate would 
have available resources to make such contributions or loans.  See Liquidity 
- SFHI, Liquidity - PHI and Liquidity - SLVC.

LIQUIDITY - SFHI - At March 31, 1998, approximately $12.4 million of the 
Company's current assets, including approximately $9.3 million of cash and 
short term investments, was held by SFHI.

In April 1998, SFHI consummated the issuance of $14 million principal amount 
of 9.5% senior secured notes (the "9.5% Notes"). The 9.5% Notes have an 
interest rate of 9.5%, require quarterly interest only payments, and mature 
on December 15, 2000. SFHI used approximately $10.6 million of net proceeds 
from the issuance of the 9.5% Notes to pay the balance of the $10.7 million 
purchase price for gaming and other equipment under lease and approximately 
$1.2 million toward the purchase of additional gaming equipment. SFHI 
expects to use the balance of the loan proceeds to acquire additional gaming 
equipment and to fund in part the construction of a parking structure at the 
Santa Fe.  In addition, in connection with the sale of the Equipment Notes by 
SFGC to a third party, SFHI modified the terms of the Equipment Notes to 
reduce the interest rate to 11% and to extend the maturity dates from May 
1998 to April 2001. SFHI also granted a security interest in gaming and 
other equipment to secure the modified notes.

                                      21
<PAGE>

Results of operations at the Santa Fe for the three and six months ended 
March 31, 1998 generated EBITDAR of $5.1 million and $10.1 million, 
approximately 1.29 and 1.28 times rent and interest expense, respectively, 
compared to $3.8 and $6.7 million of EBITDAR in 1997, or approximately .94 
and .85 times rent and interest expense, respectively.  In the fiscal 1998 
six month period, the Santa Fe reported approximately $1.2 million in rent 
expense compared to $1.5 million in the fiscal 1997 period.  Management 
believes that Santa Fe's EBITDAR in prior periods was adversely impacted as a 
result of increased competition in its market area and restricted access to 
the property due to road construction that was ongoing from April 1996 
through February 1998.  

SFHI's principal uses of cash from operations are for operating lease 
payments, corporate  charges, interest payments on indebtedness and capital 
expenditures to maintain the facility.  SFHI's lease payments in future 
periods will be decreased, offset in part, by increased interest expense, as 
a result of the issuance of the 9.5% Notes on to placement in April 1998 and 
the use of net proceeds therefrom, as discussed above.  Capital expenditures 
to maintain the facility in fiscal 1998 are expected to be approximately the 
same that was expended in fiscal 1997. SFHI expects to incur approximately 
$5.0 million in improvements, including gaming equipment, pylon signs, and a 
parking structure, through the remainder of fiscal 1998.  The Company expects 
to use approximately $1.9 million of the proceeds of the 9.5% Notes issued to 
fund in part such costs.

Management believes that, based on operations for the six month period ended 
March 31, 1998, SFHI will have sufficient cash resources to meet its 
operating and debt service requirements through the twelve month 
period ending March 31, 1999, although no assurance can be given to that 
effect.  Results for the 1998 first and second quarters improved compared to 
the same quarters in the prior year.  However, results for the 1998 first 
and second quarters are not necessarily indicative of results for the entire 
fiscal year.  SFHI is exploring alternatives to improve liquidity, including, 
but not limited to, possible refinancings or modification of the 9.5% Notes 
and 11% Notes.  The Company has no arrangements for any refinancings, 
dispositions or other financings.  To the extent that SFHI is unable to 
generate sufficient cash to meet its debt service requirements, Corporate 
may, to the extent of available funds, make capital contributions or make 
advances to SFHI.  No assurance can be given that Corporate would have 
available resources to make contributions or advances. See 
"Liquidity-Corporate".

LIQUIDITY - PHI - At March 31, 1998, approximately $14.2 million of the 
Company's current assets, including approximately $12.7 million of cash and 
short term investments, was held by PHI.  A wholly-owned subsidiary (the 
"Pioneer Subsidiary") held $9.6 million of the cash and short-term 
investments held by the Pioneer.

Results of operations at the Pioneer for the three and six months ended March 
31, 1998, generated EBITDAR of  $1.6 million and $3.3 million, approximately 
 .73 and .72 times rent and interest expense, respectively, compared to $3.0 
million and $4.7 million of EBITDAR in 1997, or approximately 1.36 and 1.04 
times rent and interest expense, respectively.  Pioneer reported rent expense 
of approximately $500,000 in both the 1997 and 1998 six 

                                     22

<PAGE>

month periods.  Rent in future periods will be less compared to the current 
six month ended March 31, 1998 due to the purchase of gaming equipment 
previously under lease in December 1997.  

PHI's principal uses of cash are for lease payments, corporate charges, 
interest payments on indebtedness and capital expenditures to maintain the 
facility. Capital expenditures to maintain the facility in fiscal 1998 are 
expected to be approximately the same that was expended in fiscal 1997.  
However, PHI expects to incur approximately $1.8 million to purchase gaming 
equipment in the 1998 period.

Management believes that, based on operations for the six month period ended 
March 31, 1998, PHI will have sufficient cash and available resources to meet 
its operating requirements through the twelve months ending March 31, 1999, 
although no assurance can be given to that effect.  Results for the 1998 
three and six month periods ended March 31, 1998 were down compared to the 
same periods in the prior year.   Approximately $9.6 million of cash is held 
by a subsidiary and could be available to satisfy in part the obligations 
under the 13 1/2% Notes.  The 13 1/2% Notes mature in December 1998.  PHI is 
exploring alternatives to improve liquidity and to address the maturity of 
the 13 1/2% Notes, including, but not limited to, modifications to existing 
lease agreements, and a possible reduction of indebtedness or refinancing or 
modification of the 13 1/2% Notes.  The Company has no arrangements for any 
such refinancings, modifications, dispositions or other financings and no 
assurance can be given that PHI will successfully make such arrangements.

LIQUIDITY - SLVC - At March 31, 1998, approximately $2.4 million of the 
Company's  cash and short-term investments was held by SLVC. 

SLVC owns a 27 acre parcel of real estate on Las Vegas Boulevard South which 
is subject to a lease with a water theme park operator.  SLVC generates 
minimal cash from the lease agreement after payment of property costs.  SLVC 
receives interest income on $33.1 million principal amount of 11% Notes which 
are held as collateral for the SLVC Notes.  SLVC's principal use of cash on 
hand, cash generated under the lease agreement and interest income on the 11% 
Notes is to satisfy principal and interest obligations on the SLVC Notes.

Additional potential required uses of cash by SLVC include the redemption of 
$7.0 million principal amount of SLVC Notes or, alternatively, the purchase 
of $7.0 million principal amount of 11% Notes, if SFHI cash flow, before a 
maximum $2.4 million in lease obligations at the Santa Fe, is less than $13.5 
million for any four quarter period.

SLVC holds a 39 acre parcel of real property in Henderson, Nevada and is 
evaluating the development of a casino entertainment complex on the site. 
Corporate has completed preliminary engineering and architectural drawings.  
Due to restrictions in the SLVC Notes, any future development costs will be 
the responsibility of Corporate and any future development is subject to, 
among other things, the Company's ability to obtain necessary financing.  No 
assurance can be given that the Company will obtain development financing or 
develop successfully the Henderson 

                                      23

<PAGE>

property.

Management believes that SLVC has available resources, consisting primarily 
of restricted working capital and interest income on the 11% Notes held as 
collateral, to meet operating and debt service requirements through the 
twelve months ending March 31, 1998, although no assurance can be given to 
that effect.

RELATED PARTIES   In November 1993, Mr. Lowden, Chairman of the Board, Chief 
Executive Officer and 53% stockholder of the Company, and Bank of America 
(the "bank") entered into a personal loan agreement under which the principal 
balance of the loan is amortized through quarterly principal payments through 
April 1998, with any remaining principal balance due July 31, 1998.   Mr. 
Lowden has advised the Company he has reduced the loan balance to $777,000 by 
repaying an additional $100,000 in May 1998. The loan is secured by 
substantially all of the common stock of the Company owned by Mr. Lowden (the 
"Pledged Shares").  Mr. Lowden's loan agreement provides that in the event 
the market value of the Pledged Shares is less than three times the 
outstanding loan balance, the bank, at its sole option, may require either an 
immediate reduction in the outstanding balance or the pledging of additional 
collateral acceptable to the bank such that the value of the pledged 
collateral is at least three times the outstanding loan balance. The market 
value of the Pledge Shares has from time to time been less than three times 
the outstanding loan balance.  If an event of default were to occur under Mr. 
Lowden's personal loan with the bank, and if the bank acquired the Pledged 
Shares upon foreclosure, Mr. Lowden's ownership of the Company's outstanding 
common stock would be reduced to below 50%.  If Mr. Lowden ceases to own more 
than 50% of the outstanding shares of the Company's common stock, an event of 
default would result under certain of the Company's long-term indebtedness, 
which could result in cross-defaults under substantially all of the Company's 
other long-term indebtedness, including the 13 1/2% Notes, SLVC Notes, the 
11% Notes and the 9.5 Notes.

From 1991 through 1993 LICO, a company wholly-owned by Mr. Lowden borrowed an 
aggregate of $476,000 from a subsidiary of the Company, pursuant to an 
unsecured demand loan which bore interest at 2% over the prime rate.  The 
outstanding balance of the loan including accrued interest was $700,000 as of 
December 31, 1997.  In January 1998, the amount outstanding under the loan 
was satisfied in full through the offset of amounts due Mr. Lowden under 
compensation arrangements.

COMPUTERIZED OPERATIONS AND THE YEAR 2000

During recent years, there has been significant global awareness raised 
regarding the potential disruption to business operations worldwide resulting 
form the inability of current technology to process properly the change from 
the year 1999 to 2000.  Although,  based on a review of its data processing, 
operating and other computer-based systems, the Company does not currently 
believe that it will experience any significant adverse effects or material 
costs resulting therefrom, the Company cannot provide any assurance in this 
regard, and any such costs or effect could materially and adversely effect 
the operations

                                      24
<PAGE>

of the Company.

EFFECTS OF INFLATION

The Company has been generally successful in recovering costs associated with 
inflation through price adjustments in its hotel operations.  Any such 
increases in costs associated with casino operations and maintenance of 
properties may not be completely recovered by the Company.

PRIVATE SECURITIES LITIGATION REFORM ACT

Certain statements in this Quarterly Report on Form 10-Q which are not 
historical facts are forward looking statements, such as statements relating 
to future operating results, existing and expected competition, financing and 
refinancing sources and availability and plans for future development or 
expansion activities and capital expenditures.  Such forward looking 
statements involve a number of risks and uncertainties that may significantly 
affect the Company's liquidity and results in the future and, accordingly, 
actual results may differ materially from those expressed in any forward 
looking statements. Such risks and uncertainties include, but are not limited 
to, those related to effects of competition, leverage and debt service, 
financing and refinancing efforts, general economic conditions, changes in 
gaming laws or regulations (including the legalization of gaming in various 
jurisdictions) and risks related to development and construction activities.

                                      25
<PAGE>
                             SANTA FE GAMING CORPORATION

                             PART II - OTHER INFORMATION


Item 1 - Legal Proceedings

          None

Item 2 - Changes in Securities

          None

Item 3 - Defaults Upon Senior Securities

          None

Item 4 - Submission of Matters to a vote of Security Holders

     The Annual Meeting of Shareholders was held on March 19, 1998, wherein the
     following matters were submitted to a vote:

     The result of the vote taken on the election of Director was as follows:

          Thomas K. Land      6,016,690

     The result of the vote taken for ratification of selection of Deloitte & 
     Touche LLP as outside auditors are as follows:

          For: 6,030,979      Against: 30,791     Votes abstaining: 21,481

     The results of the vote taken for ratification of approval of amendment to
     the 1993 Key Employee Stock Option Plan are as follows:

          For: 4,060,731      Against: 180,657    Votes abstaining: 31,856


Item 5 - Other Information

          None 

                                      26

<PAGE>

Item 6 - Exhibits and Reports on Form 8-K

          A.   Exhibits:  
               10.90     Purchase Agreement by and between Santa Fe Gaming
                         Corporation and Steve Allen dated November 21, 1997

               10.91     First Supplemental Indenture with respect to 11% First
                         Mortgage Notes due 2000 between Santa Fe Hotel Inc., 
                         Santa Fe Gaming Corporation and IBJ Schroder Bank & 
                         Trust Company dated as of April 14, 1998

               10.92     Amended and Restated Note by an between Santa Fe Hotel
                         Inc., Santa Fe Gaming Corporation in favor of PDS
                         Financial Corporation-Nevada, as Collateral Agent dated
                         April 14, 1998

               10.93     Security Agreement between Santa Fe Hotel Inc. and PDS
                         Financial Corporation-Nevada, as Collateral Agent dated
                         April 14, 1998

               10.94     Amended and Restated Promissory Note by and between
                         Santa Fe Hotel Inc., Santa Fe Gaming Corporation in
                         favor of PDS Financial Corporation-Nevada, as
                         Collateral Agent dated April 14, 1998

               10.95     Security Agreement between Santa Fe Hotel Inc. and PDS
                         Financial Corporation-Nevada dated April 14, 1998

               10.96     Note Purchase Agreement dated as of April 14, 1998
                         among Santa Fe Gaming Corporation, Santa Fe Hotel Inc.,
                         SunAmerica Life Insurance Company and Credit Suisse
                         First Boston Mortgage Capital LLC

               10.97     Form of Promissory Note due December 15, 2000

               10.98     Deed of Trust, Fixture Filing and Financing Statement
                         and Security Agreement with Assignment of Rents
                         executed and delivered on April 14, 1998 by Santa Fe
                         Hotel Inc. in favor of SunAmerica Life Insurance
                         Company, as Collateral Agent. 

               10.99     Security Agreement dated as of April 14, 1998 by Santa
                         Fe Hotel Inc. in favor of SunAmerica Life Insurance
                         Company, as Collateral Agent.

                                      27

<PAGE>

               10.100    Environmental Indemnity Agreement dated as of April 14,
                         1998 by Santa Fe Hotel Inc. in favor of SunAmerica Life
                         Insurance Company, as Collateral Agent.

               10.101    Guaranty dated as of April 14, 1998 by Santa Fe Gaming
                         Corporation  in favor of SunAmerica Life Insurance
                         Company, as Collateral Agent.

               10.102    Subordination and Intercreditor Agreement dated as of
                         April 14, 1998 among SunAmerica Life Insurance Company,
                         as Collateral Agent, Santa Fe Hotel Inc. and  IBJ
                         Schroder Bank & Trust Company, as Trustee
       
               23        Consent of Deloitte & Touche LLP.

               27        Financial Data Schedule.


          B.   Reports:  None




                                      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 authorized.

                         SANTA FE GAMING CORPORATION, Registrant




                         By:  /s/ Thomas K. Land
                              ---------------------------------------
                              Thomas K. Land, Chief Financial Officer


Dated: May 14, 1998

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