SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

           (Mark One)
[X]        Annual report pursuant to section 13 or 15(d)
        of the Securities Exchange Act of 1934 [No Fee Required]

For the fiscal year ended December 31, 1998

[  ]       Transition report pursuant to sections 13 or 15(d)
         of the Securities Exchange Act of 1934 [Fee Required]

For the transition period from                             to                   

                        Commission file number 000-21430 

                          RIVIERA HOLDINGS CORPORATION
             (Exact name of Registrant as specified in its charter)

       Nevada                                       88-0296885   
(State of Incorporation)             (I.R.S. Employer Identification No.)

2901 Las Vegas Boulevard South
Las Vegas, Nevada                                         89109   
(Address of principal executive offices)               (Zip Code)

Registrant's telephone number, including area code:  (702) 734-5110


Securities registered pursuant to Section 12(b) of the Act:  None

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

                          Common Stock, $.001 par value
                                (Title of class)

           Indicate  by check  mark  whether  the  Registrant  (1) has filed all
reports  required to be filed by Section 13 or 15(d) of the Securities  Exchange
Act of 1934 during the preceding 12 months (or for such shorter  period that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.
YES   X    NO        

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

           Based on the average bid price for the  Registrant's  Common Stock as
of February 26,  1999,  the  aggregate  market value of the voting stock held by
non-affiliates of the Registrant was approximately  $27,560,382.  As of February
26, 1999 the number of outstanding  shares of the Registrant's  Common Stock was
5,068,576.

Documents  incorporated by reference:  The Company's Proxy Statement relating to
the Annual Meeting of  Stockholders  to be held June 2, 1999 is  incorporated by
reference in Part III hereof.


                               Page 1 of 35 Pages
                    Exhibit Index Appears on Page 31 hereof.


                                                                 1

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                   RIVIERA HOLDINGS CORPORATION AND SUBSIDIARY
                    ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
                          YEAR ENDED DECEMBER 31, 1998

                                TABLE OF CONTENTS
<TABLE>
<S>       <C>                                                                                                    <C>
Item 1.   Business................................................................................................3
             General .............................................................................................3
             The Abandoned Merger.................................................................................3
             The Riviera Hotel & Casino...........................................................................3
             The Black Hawk Project...............................................................................8
             Geographical Markets.................................................................................8
             Management Activities................................................................................9
             Competition........................................................................................ 10
             Employees and Labor Relations.......................................................................11
             Regulation and Licensing............................................................................11
             Federal Registration................................................................................18

Item 2.   Properties.............................................................................................19

Item 3.   Legal Proceedings......................................................................................19

Item 4.   Submission of Matters to a Vote of Security Holders....................................................19

Item 5.   Market for the Registrant's Common Stock and Related Security Holder Matters...........................20

Item 6.   Selected Financial Data................................................................................20

Item 7.   Management's Discussion and Analysis of Financial Condition and Results of Operations..................21
             Results of Operations...............................................................................21
             1998 Compared to 1997...............................................................................22
             1997 Compared to 1996...............................................................................23
             Liquidity and Capital Resources.....................................................................24
             Year 2000 ..........................................................................................25
             Forward Looking Statements..........................................................................26
             Recently Adopted Accounting Standards...............................................................26
             Recently Issued Accounting Standards................................................................26

Item 8.   Financial Statements and Supplementary Data............................................................27

Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...................27

Item 10.  Directors and Executive Officers of the Registrant.....................................................28

Item 11.  Executive Compensation.................................................................................28

Item 12.  Principal Shareholders.................................................................................28

Item 13.  Certain Relationships and Related Transactions ........................................................28

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8K.........................................29
</TABLE>

                                                         2

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                                                      PART I

Item 1.    Business

General

           Riviera Holdings  Corporation,  a Nevada corporation (the "Company"),
through its wholly-owned  subsidiary,  Riviera Operating  Corporation,  a Nevada
corporation  ("ROC"),  owns  and  operates  the  Riviera  Hotel  &  Casino  (the
"Riviera")  located on Las Vegas Boulevard (the "Las Vegas Strip") in Las Vegas,
Nevada. Opened in 1955, the Riviera has developed a long-standing reputation for
delivering high quality,  traditional Las Vegas-style gaming,  entertainment and
other amenities. The Company, through its wholly owned subsidiary Riviera Gaming
Management,  Inc. ("RGM"),  manages the Four Queens Hotel/Casino in downtown Las
Vegas.

           The Company, through its wholly-owned subsidiary,  Rivera Black Hawk,
Inc., is currently constructing a limited-stakes casino in Black Hawk, Colorado.
The successful  completion  and opening of the casino will be contingent  upon a
number of factors  including  regulatory  approval and the Company's  ability to
obtain  additional  financing.  The  Company  believes  the  casino  will  begin
operations in the first quarter of 2000.

The Abandoned Merger

           In  March  1998  the  Company  was   notified  by  Allen  E.  Paulson
("Paulson")  that he was terminating the merger  agreement dated as of September
of 1997 among the Company,  and R & E Gaming Corp. and Riviera  Acquisition Sub,
Inc.,  affiliates  of  Paulson.  Pursuant  to the  merger  agreement  a  company
controlled by Paulson was to have  acquired  100% of the Company's  common stock
for $15 per share, plus an interest factor.  Approximately $5.8 million is being
held in escrow for the holders of  1,770,000  Riviera  Contingent  Value  Rights
("CVR's").  The CVR's entitle their holders to share only in the proceeds of the
funds currently in escrow.  Excluded from participating in the CVR's are Morgens
Waterfall,  SunAmerica,  Keyport  Life and  Paulson,  and their  affiliates  and
associates, who own an aggregate 3,355,000 Riviera shares.

           The  Company,  three  major  stockholders  of the  Company  and other
defendants  involved in the  terminated  merger are in  litigation  with Paulson
relating to the merger  agreement and related issues.  The Company is paying the
expenses  of such  litigation  but will not share in any  recovery of the escrow
funds.  See  "Legal  Proceedings"  for  further   information   concerning  this
litigation.  There can be no assurance  that the Company will be  successful  in
collecting all or any part of the funds currently held in the escrow fund.

The Riviera Hotel & Casino

General

           The  Riviera  is  located  on the  corner of the Las Vegas  Strip and
Riviera  Boulevard,  across from Circus  Circus.  The Riviera  targets  slot and
mid-level  table game  customers with a focus on creating  repeat  customers and
increasing  walk-in  traffic.  Key elements of this strategy  include offering a
value-oriented experience by providing a variety of hotel rooms, restaurants and
entertainment,  with some of Las Vegas' most popular  shows,  all at  reasonable
prices.

Gaming

           The  Riviera  has 115,000  square  feet of casino  space.  The casino
currently has approximately 1,600 slot machines and 46 gaming tables,  including
blackjack,  craps,  roulette,  pai gow poker, Caribbean Stud(R) poker, baccarat,
Let It Ride(R) and poker.  The casino also includes a keno lounge and a 200-seat
race and sports book.

           Gaming  operations at the Riviera are continually  updated to respond
to both changing  market  conditions and customer demand in an effort to attract
new customers and encourage repeat customer business through player tracking and
database  management.  The Company maintains a slot players club,  through which
members receive  special  promotions and targeted  mailings.  New and innovative
slot and table games have been introduced based on customer feedback. Management
devotes substantial time and attention

                                                         3

<PAGE>



to the type, location and player activity of all its slot machines.  The Company
recently  completed an extensive capital  investment  program for the upgrade of
its slot machines.

           The  current  management  team  redirected  its  business  away  from
high-stakes  wagerers in favor of the less volatile  mid-level gaming customers.
In order to  effectively  pursue  this  strategy,  management  has made  several
strategic changes including  reconfiguring the casino space, installing new slot
machines  and  bill  acceptors,   reducing  the  number  of  gaming  tables  and
de-emphasizing  baccarat.  In addition,  management  implemented stricter credit
policies and reduced baccarat table limits. As a result, the percentage of table
game dollar volume represented by credit play declined from approximately 24% in
1993  to13%  in 1998.  Also,  in 1998,  revenues  from  slots  and  tables  were
approximately  76%  and,  24%   respectively,   as  compared  to  55%  and  45%,
respectively, in 1992.

           During  1998,  management  continued a number of  initiatives  at the
Riviera to increase slot play,  including the  replacement of old slot machines,
the installation of bill acceptors and the addition of slot hosts. The Company's
strategy is to continue to increase  slot play  through  marketing  programs and
other improvements,  including (i) the Company's slot upgrade program, which was
completed in December 1997, (ii) addition of new signage, (iii) promotion of the
Riviera  Player's Club, (iv)  sponsorship of slot  tournaments,  (v) creation of
promotional  programs,  (vi) marketing of the "World's  Loosest Corner of Slots"
and "$40 for $20(R)" slot promotions,  and (vii) the opening of "Nickel Town(R)"
at the end of 1997. The Company  developed  Nickel Town on the corner of the Las
Vegas Strip and Riviera  Boulevard at the  crosswalk  from Circus Circus and the
local  Strip bus stop for  approximately  $5  million.  The 10,000  square  foot
facility contains approximately 300 slot machines, a bar, snack bar and souvenir
shop.  Food and  beverage  items  are  priced  very  attractively  and  promoted
extensively.   Dramatic  signage  and  lighting  effects   compatible  with  the
property's existing facade facing the Las Vegas Strip create a "must see" effect
for passers by on both sides of the Las Vegas Strip.  The Company  believes that
the nickel player  represents the most rapidly  growing portion of the Las Vegas
gaming market and was frequently  neglected by the Company's  major  competitors
who focus their slot  products  on higher  denominations.  Currently  78% of the
devices in Nickel Town are nickel slot machines.

           Casino segment revenues were $77,676,000, $71,624,000 and $80,384,000
in 1998, 1997 and 1996, respectively.

Hotel

           The   Riviera's   hotel  is  comprised  of  five  hotel  towers  with
approximately 2,100 guest rooms,  including 169 suites. Built in 1955 as part of
the original casino/hotel,  the nine-story North Tower features 391 rooms and 11
suites.  In 1967,  the  12-story  South  Tower was  built  with 147 rooms and 31
suites. Another 220 rooms and 72 suites,  including penthouse suites, were added
to the property  through the  construction  of the 17-story Monte Carlo Tower in
1974.  In 1977,  the  six-story San Remo Tower added 243 rooms and six suites to
the south side of the  resort.  The most  recent  phase of hotel  expansion  was
completed in 1988 upon the opening of the 930 room,  49 suite,  24-story  Monaco
Tower.  By the end of 1997 the  Company  completed  refurbishment  of all of its
approximately  2,100 hotel rooms except for 65  one-bedroom  suites in the Monte
Carlo Building. Despite the significant increase in rooms on the Las Vegas Strip
in the last three years,  management believes that the Riviera has attained room
occupancy rates that are among the highest on the Las Vegas Strip with 97.5% for
1994,  97.0% for 1995,  98.2% for 1996, 96.8% for 1997 and 95.2% for 1998 (based
on  available  rooms).  The average  occupancy  rate  citywide was 85.8% in 1998
according to the Las Vegas Convention and Visitors Authority (the "LVCVA"). Room
revenue has  increased  from $35.4  million in 1993 to $39.1 million in 1998, an
increase of 10.5%.  Management  believes that this performance can be attributed
to its targeted and coordinated  marketing  strategy,  particularly its focus on
conventioneers.

           Rooms segment revenues were  $36,626,000, $39,153,000 and $40,078,000
in 1998, 1997 and 1996, respectively.



                                                         4

<PAGE>



Restaurants

           The  quality,  value and  variety of food  services  are  critical to
attracting Las Vegas visitors. The Riviera offers five bars and five restaurants
and serves an average of approximately  5,000 meals per day,  including banquets
and room service. The following table outlines, for each restaurant, the type of
service provided and total seating capacity:

                                                                         Seating
Name                               Type                                 Capacity
----                               ----                                 --------
Kady's                             Coffee Shop                               290
Kristofer's                        Steak and Seafood                         162
Rik' Shaw                          Chinese                                   124
Ristorante Italiano                Italian                                   126
World's Fare Buffet                All-you-can-eat                           432
                                                                          ------
                                                                           1,134

           In  addition,  the  Riviera  operates  a snack  bar  and  continental
breakfast  buffet as well as a fast food court  operated by a third  party.  The
food court has 200 seats and several fast-food restaurants.

           Food and Beverage segment revenues were $17,635,000,  $15,916,000 and
$16,262,000 in 1998, 1997 and 1996, respectively.

Convention Center

           The Riviera features  160,000 square feet of convention,  meeting and
banquet space.  The convention  center is one of the largest in Las Vegas and is
an important feature that attracts  customers.  The facility can be reconfigured
for multiple meetings of small groups or large gatherings of up to 5,000 people.
The Riviera hosts  approximately  175  conventions per year. The hotel currently
has over 1.15  million  convention  related  advance  bookings of rooms  totaled
approximately  620,000 definite  bookings and  approximately  530,000  tentative
bookings.  On  average,   approximately  25%  of  the  rooms  are  occupied  for
conventions.

           In March  1998 the  Company  commenced  construction  to  expand  its
convention  center  from  100,000  square  feet to  160,000.  The  new  expanded
facilities  include  new,  state-of-the-art  convention,   meeting  and  banquet
facilities,  teleconferencing and satellite uplink capability, and 66,000 square
feet  of  additional  parking.  The  new  facilities  connect  to  the  existing
convention  facility  and  the  main  hotel  buildings  to form  one  integrated
structure.  The new addition known as the Royale  Pavilion  opened  February 12,
1999, with a concert performed by the popular musical group, Air Supply.

Entertainment

           The Riviera has one of the most extensive  entertainment  programs in
Las  Vegas,  offering  four  different  regularly  scheduled  shows and  special
appearances  by  headline   entertainers  in  concert.   The  Company   believes
entertainment  provides an attractive marketing tool to attract customers to the
Riviera. The Riviera offers one of the most extensive  entertainment programs in
Las Vegas,  including such well received shows as Splash(R) (a variety show), An
Evening at La Cage(sm) (a female  impersonation show), Crazy Girls(sm) (an adult
revue) as well as featured  comedians at the Riviera  Comedy  Club.  The Company
updates its shows  continually in response to customer  surveys and to keep them
fresh.  Tickets for the shows are offered at  reasonable  prices in keeping with
the  Company's  emphasis on  mid-level  customers.  The readers of the Las Vegas
Review  Journal voted the Riviera  Comedy Club the number one comedy club in Las
Vegas and the Crazy  Girls  bronze  sculpture  in front of the Hotel as the best
visitor photo  opportunity  in Las Vegas in the most recently  released "Best of
Las Vegas" readers' survey.

           Other  entertainment  includes the  200-seat Le Bistro  entertainment
lounge located in the casino,  which offers live  performances  every night.  In
addition,  the Riviera  presents  major  concerts which since 1996 have included
performers such as the Beach Boys, the Pointer Sisters,  Drew Carey, Air Supply,
Frankie Avalon,  Bobby Vee, Dion, the Doobie  Brothers and Billy Ray Cyrus.  The
Company  believes  the  recently  completed  Royale  Pavilion  will enable it to
increase  attendance  at special  events since,  in the past,  the then existing
facilities could not accommodate the demand for tickets.

                                                         5

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           Entertainment revenues including  complimentaries have increased from
$16.5  million in 1993 to $21.5  million  in 1998,  a 30%  increase.  Management
believes that this increase is  attributable  to the  popularity of the in-house
productions   supplemented  by  focused  marketing  and  consistent  advertising
messages.

           Entertainment  segment  revenues were  $19,764,000,  $19,855,000  and
$20,714,000 in 1998, 1997 and 1996, respectively.

           "All  Other"  segment  revenues,  derived  primarily  from  telephone
revenue,  sales of retail  merchandise  and store  rentals  totaled  $8,254,000,
$7,244,000 and $6,960,000 in 1998, 1997 and 1996, respectively.

Future Expansions

           The Company is exploring the possible development of an approximately
60,000  square-foot  domed  shopping  center  and  entertainment  complex  to be
constructed directly over the casino which will contain stores and entertainment
that will appeal to the Riviera's  main target  audience,  adults aged 45 to 65.
The exit from the complex would be by an escalator which will deliver patrons to
the casino.  The Company would require partners to finance,  develop and operate
the  entertainment  attraction and retail stores.  To date no such partners have
been identified.

           The Company is exploring a number of options for the  development  of
its  existing  26 acre  site.  These  options  include a joint  venture  for the
development of a time-share  condominium  tower or an additional hotel tower and
parking  garage.  Under the terms of the Company's Bond  Indenture,  the Company
could  contribute  up to 6 acres  of land to such  projects  and if the  Company
decides to develop a time share  tower a third party  would  construct  and sell
time-share  units and arrange  financing.  Management  believes that  additional
rooms  adjacent  to the  Las  Vegas  Convention  Center  would  be  particularly
attractive to business customers and would provide a base for additional casinos
customers.  The  development  of a time-share  tower or parking  facility  would
require  additional  financing and, in the case of the time-share tower, a joint
venture partner, none of which the Company has in place at this time.

Marketing Strategies

           The Company has developed a marketing  program  intended to develop a
loyal following of repeat slot and mid-level  table game  customers.  Management
believes  it has been  able to  successfully  attract  these  patrons  using the
Riviera's restaurants, hotel accommodations and entertainment and by focusing on
customer service.  Management has adopted a selective  approach to the extension
of credit to these customers in order to reduce volatility of operating results.
The Company uses its research data to tailor  promotional offers to the specific
tastes of targeted customers.  All slot and table players are encouraged to join
the Riviera  Player's Club and to fill out surveys that provide the Riviera with
personal  information and preferences and tracks their level of play. Members of
the  Riviera  Player's  Club earn bonus  points  based upon their level of play,
redeemable for free gifts,  complimentary services or cash rebates.  Promotional
offers are made to qualifying customers through direct mail and telemarketing.

           The Riviera will continue to emphasize marketing programs that appeal
to slot and  mid-level  table game  customers  with a focus on  creating  repeat
customers and increasing walk-in traffic. In addition,  a key marketing focus is
maintaining  and  expanding  Riviera's  core  conventioneer  customer  base.  In
developing  its overall  marketing  programs,  the Company  conducts  extensive,
ongoing  research  of  its  target  customers'   preferences   through  surveys,
one-on-one interviews and focus groups.

           Create Repeat Customers

           Generating  customer loyalty is a critical  component of management's
business  strategy as retaining  customers is less expensive than attracting new
ones.  The Company has  developed a focused and  coordinated  marketing  program
intended to develop a loyal customer base which  emphasizes (i) providing a high
level of service to its customers to ensure an enjoyable experience while at the
Riviera,  (ii)  responding  to  customer  surveys and (iii)  focusing  marketing
efforts and promotional programs on customers with positive gaming profiles. The
Company  uses its  research  data to tailor  promotional  offers to the specific
tastes of targeted customers.  All slot and table players are encouraged to join
the Riviera  Player's  Club which  tracks  their level of play,  and to fill out
surveys that provide the Riviera with personal information and

                                                         6

<PAGE>



preferences.  Members of the Riviera  Player's Club earn bonus points based upon
their level of play, redeemable for free gifts,  complimentary  services or cash
rebates. Promotional offers are made to qualifying customers through direct mail
and  telemarketing.  The Company designs  promotional offers targeted at certain
mid-level gaming patrons that are expected to provide significant revenues based
upon their  historical  gaming  patterns.  The Company  contacts these customers
through a combination of direct mail and telemarketing by an in-house  marketing
staff and independent  representatives located in major cities. The Riviera uses
a proprietary  database  which is linked to its player  tracking  system to help
identify customers'  requirements and preferences;  thereby allowing the Riviera
to customize promotions to attract repeat visitors. The Company offers customers
personalized   service,   credit   availability  and  access  to  a  variety  of
complimentary  or  reduced-rate  room,  dinner and  entertainment  reservations.
Management  uses  a  specialized  multi-tiered  marketing  approach  to  attract
customers  in each of its major  markets.  Slot and table game  tournaments  and
special  events  are  designed  for  specific  levels  of  play.  Utilizing  its
proprietary database the Company's marketing department then targets and invites
the customers most  appropriate  for the  customized  events.  In addition,  the
Company hosts an array of special events,  including slot and table tournaments,
designed to attract  customers for an extended  stay.  Management has found that
this  individualized  marketing approach has provided  significant  revenues and
profitable repeat business.

           Provide Extensive Entertainment Options

           The Company also focuses on attracting  its guests through a range of
entertainment  opportunities.   The  Riviera  has  one  of  the  most  extensive
entertainment  programs  in Las Vegas with four  different  regularly  scheduled
shows and special appearances by headline entertainers. In addition to providing
a positive impact on the Company's  profitability,  the shows attract additional
gaming revenue. Surveys indicate that approximately 80% of the show patrons come
from outside the hotel and approximately 66% of these individuals  gamble at the
Riviera before or after the shows.

           Attract Walk-In Traffic

           The Company  seeks to maximize the number of people who patronize the
Riviera  that are not guests in the hotel by  capitalizing  on  Riviera's  prime
Strip location,  convention  center proximity and the Riviera's  several popular
in-house  productions.  The Riviera is well situated on the Las Vegas Strip near
Circus Circus, Stardust Hotel & Casino, Westward Ho Casino & Hotel, Sahara Hotel
& Casino,  Las Vegas  Hilton  and the Las Vegas  Convention  Center.  Management
strives to attract customers from those facilities, as well as capitalize on the
visitors in Las Vegas in general, with the goal of increasing walk-in traffic by
(i) the  development  and promotion of Nickel Town,  (ii) providing a variety of
quality,  value-priced entertainment and dining options, and (iii) promoting the
"World's  Loosest  Corner  of  Slots,"  the  "Free  Pull" and "$40 for $20" slot
promotions, and placing them inside the casino.

           Focus on Convention Customers

           This market consists of two groups: (i) those trade organizations and
groups that hold their  events in the banquet  and meeting  space  provided by a
single hotel and (ii) those attending city-wide events,  usually held at the Las
Vegas  Convention  Center.  The Riviera targets  convention  business because it
typically  provides  patrons  willing to pay higher  room rates and it  provides
certain  advance  planning  benefits,  since  conventions are usually booked two
years in advance of the event date.  Management focuses its marketing efforts on
conventions  whose  participants  have the most active gaming profile and higher
room rate,  banquet and function spending habits. The Riviera also benefits from
its  proximity to the Las Vegas  Convention  Center which makes it attractive to
city-wide  conventioneers  looking to avoid the congestion  that occurs during a
major  convention,  particularly  at the south end of the Las Vegas  Strip.  The
Company  derives  approximately  25.5% of its hotel  occupancy  from  convention
customers  and  considers  them  a  critical  component  of its  customer  base.
Management  believes  that the recently  completed  expansion  of the  Riviera's
Convention  Center  from  100,000 to 160,000  square feet will  accommodate  the
growth in the size and number of groups that presently use the facility, attract
new  convention  groups  and  increase  the  percentage  of  rooms  occupied  by
conventioneers.

           Tour and Travel Operators

           Management  has found that many of its  customers use tour and travel
"package" options to reduce the cost of travel, lodging and entertainment. These
packages are produced by wholesale  operators  and travel  agents and  emphasize
mid-week stays.  Tour and travel patrons often book at off-peak periods enabling
the Company to maintain  occupancy  rates at the highest  levels  throughout the
year. Management has developed

                                                         7

<PAGE>



specialized  marketing  programs and  cultivated  relationships  with  wholesale
operators,  travel agents and major domestic air carriers to expand this market.
The  Company's  four largest tour and travel  operators,  currently  account for
approximately  500 of the available  2,100 room bookings per night.  The Company
makes an effort to convert many tour and travel customers who meet the Company's
target customer gaming profile into repeat slot customers.

The Black Hawk Project

           The Company's indirect wholly-owned  subsidiary,  Riviera Black Hawk,
Inc.  ("Riviera Black Hawk") is  constructing a casino in Black Hawk,  Colorado.
This  property  will  be  one of  the  largest  integrated  casino  and  parking
facilities  in the state of Colorado  and will be located at one of the premiere
gaming sites in Black Hawk,  approximately  40 miles west of Denver.  It will be
one of the first casinos  encountered when traveling from Denver to the adjacent
gaming sites of Black Hawk and Central City.  The casino will feature one of the
largest gaming selections in the market with  approximately  1,000 slot machines
and 14 gaming tables.  A variety of other  amenities will be offered,  which are
designed to differentiate this casino, including (1) on-site covered parking for
520  vehicles  offering  convenient  safe  parking  and  valet  options,  (2) an
approximately 265 seat casual dining restaurant with two themed bars, and (3) an
entertainment  center with  seating for up to 600 people.  The Company  believes
that its Black Hawk  casino will be  successful  due to its  premiere  location,
single floor Las Vegas-style casino,  convenient covered self-parking,  superior
size and amenities.

           The casino is expected to be completed  and open in the first quarter
of 2000. The Company presently estimates that the total cost to develop and open
the casino,  excluding capitalized interest and financing related costs, will be
approximately $63.0 million,  which includes: (i) $15.1 million for the purchase
of the land on which the casino is being  developed,  (ii) $27.5 million  bonded
"Guaranteed Maximum Price" construction cost, (iii) $10.6 million for furniture,
fixtures and  equipment,  (iv) $7.7 million for project and  development  costs,
fees and permits and (v) $2.1 million for pre-opening  costs and initial working
capital.  As of December 31, 1998,  the Company had spent $25.0  million on this
project (excluding capitalized interest).

Geographical Markets

The Las Vegas Market

           Las Vegas is one of the  largest and  fastest  growing  entertainment
markets in the country. According to the LVCVA, the number of visitors traveling
to Las Vegas has increased at a steady and significant  rate for the last twelve
years from 15.2  million  in 1986 to 30.6  million  in 1998,  a compound  annual
growth  rate of 6.0%.  Clark  County  gaming  has  continued  to be a strong and
growing  business  with Clark County  gaming  revenues  increasing at a compound
annual growth rate of 8.4% from $2.4 billion in 1986 to $6.3 billion in 1998.

           Gaming  and  tourism  are  the  major   attractions   of  Las  Vegas,
complemented   by  warm  weather  and  the   availability   of  many  year-round
recreational  activities.  Although Las Vegas' principal markets are the western
region of the United States, most significantly Southern California and Arizona,
Las Vegas also serves as a  destination  resort for  visitors  from all over the
world.  A significant  percentage of visitors  originate  from Latin America and
Pacific Rim countries such as Japan, Taiwan, Hong Kong and Singapore.

           Historically, Las Vegas has had one of the strongest hotel markets in
the country.  The number of hotel and motel rooms in Las Vegas has  increased by
over 63% from  approximately  67,000 at the end of 1989 to 109,365 at the end of
1998,  giving Las Vegas the most hotel and motel rooms of any metropolitan  area
in the country.  Despite this  significant  increase in the supply of rooms, the
Las Vegas  hotel  occupancy  rate  exceeded  85% for each of the years from 1993
through 1998. Since January 1, 1998 approximately  4,500 new hotel rooms opened,
and as of December  31, 1998 there were 12,476  hotel rooms under  construction.
The LVCVA states that an additional  approximately 3,500 rooms will be completed
by the end of the year 2000.  The new rooms  under  construction  are  primarily
being  designed to attract the high-end  gaming and  convention  customers,  and
based on construction costs, will be priced at rates well above those which have
been or can be charged by the Riviera based on the investment in its facility.

           The Company believes that the growth in the Las Vegas market has been
enhanced as a result of (i) a dedicated program by the LVCVA and major Las Vegas
casino/hotels  to  promote  Las  Vegas  as a major  convention  site,  (ii)  the
increased  capacity of  McCarran  Airport  and (iii) the  introduction  of large
themed

                                                         8

<PAGE>



"must see" destination resorts in Las Vegas. In 1988,  approximately 1.7 million
delegates  attended  conventions in Las Vegas and generated  approximately  $1.3
billion of economic  impact.  In 1998,  the number of  convention  delegates had
increased to 3.3 million with approximately $4.3 billion of economic impact.

           During  the past  five  years,  McCarran  Airport  has  expanded  its
facilities to accommodate the increased  number of airlines and passengers which
it services.  The number of passengers  traveling  through  McCarran Airport has
increased  from  approximately  22.5  million  in 1993 to 30.2  million in 1998.
Construction  has recently been completed on numerous  roadway  enhancements  to
improve access to the Airport.  An additional runway has also been completed and
is now  operational.  The  Airport  has  additional  long-term  expansion  plans
underway which will provide three new satellite concourses,  60 additional gates
and other facilities.

The Colorado Market

           In November 1990,  Colorado  voters  approved  limited-stakes  gaming
($5.00  or  less  per  wager)  in  three  historic  gold  mining  areas,   Black
Hawk/Central  City and Cripple  Creek.  Because of the $5.00  maximum  bet,  the
casinos in Colorado  emphasize  gaming machine play. Black Hawk and Central City
are  contiguous,  with  Black  Hawk  being  closer to  Denver,  and are  located
approximately  40 miles west of Denver and 10 miles north of Interstate  70, the
main highway connecting Denver to many of Colorado's major ski resorts.  Cripple
Creek is located  approximately 45 miles from Colorado Springs and 75 miles from
Pueblo.  Casinos located in the Black Hawk/Central City area serve primarily the
residents  of  Denver  and  Boulder,   Colorado  and  surrounding   communities.
Approximately  three million  people live within a 100-mile  radius of the Black
Hawk/Central City area.

           The proximity of the Black Hawk/Central City area to major population
centers has  contributed to consistent  growth in gaming  revenues in the market
since the  legalization  of gaming in 1990.  The Company also  believes that the
Black  Hawk/Central  City gaming market has benefitted from the entry of larger,
well-capitalized  gaming operators offering parking and superior amenities. As a
result, gaming revenues have grown from $127.6 million in 1992 to $366.0 million
in 1998, representing a 19% compound annual growth rate. As of December 31, 1998
there were 30 casinos and over 10,000 slot  machines in  operation in Black Hawk
and Central City.

Management Activities

           In order to capitalize on  management's  expertise and  reputation as
successful   operators  of  casino   properties,   the  Company  formed  RGM,  a
wholly-owned  subsidiary  of the Company,  for the primary  purpose of obtaining
casino  management  contracts  in Nevada and other  jurisdictions.  RGM provides
services  such as assisting  new venue  licensee  applicants  in  designing  and
planning  their  gaming  operations  and  managing  the  start-up  of new gaming
operations. These services include casino design, equipment selection,  employee
recruitment  and  training,  control  and  accounting  systems  development  and
marketing programs.  Management believes that management  contracts provide high
margin  income  with  limited  additional  overhead  and  little  or no  capital
expenditure requirements.  Management is continually evaluating opportunities to
manage other casinos/hotels. The Company's objective is to obtain the right to a
substantial  equity  position  in  projects  it  would  manage  as  part  of the
compensation for its services.

Four Queens Management Agreement

           Riviera  Gaming  Management-Elsinore,   Inc.  ("RGME"),  an  indirect
wholly-owned  subsidiary of the Company,  is operating the Four Queens Hotel and
Casino,  located adjacent to the Golden Nugget on Fremont Street in Downtown Las
Vegas, pursuant to a Management Agreement effective as of February 27, 1997. The
term of the agreement is approximately 40 months (subject to earlier termination
by either party on six months notice.  RGME is paid a minimum annual  management
fee of $1 million  and a  performance  fee,  which is payable  only if cash flow
increases  materially above current levels. RGME has warrants to purchase common
stock of Elsinore Corporation (the parent of the Four Queens Hotel/Casino) which
appears unlikely to have significant value.

Other Management Opportunities

           The Company is  continuously  reviewing  opportunities  to expand and
become a  multi-jurisdictional  casino company with greater capital resources to
enable it to compete more effectively. The jurisdictions

                                                         9

<PAGE>



include, but are not limited to, Mississippi, Pennsylvania and Iowa. The Company
may also become involved in financially  distressed  casino  properties where it
believes it may be able to effect a  turn-around  (similar to that which current
management achieved at the Riviera) and can obtain a significant equity stake.

Competition

Las Vegas, Nevada

           Intense  competition  exists among companies in the gaming  industry,
many of which have significantly greater resources than the Company. The Riviera
faces  competition  from all other  casinos  and  hotels in the Las Vegas  area.
Management  believes  that the  Riviera's  most  direct  competition  comes from
certain large  casino/hotels  located on or near the Las Vegas Strip which offer
amenities and marketing programs similar to those offered by the Riviera.

           Las Vegas gaming square  footage and room capacity are  continuing to
grow and are  expected to continue  to  increase  significantly  during the next
several years.

           Since January 1, 1998 approximately 4,500 new hotel rooms opened, and
as of  December  31,  1998 there were  approximately  12,500  hotel  rooms under
construction.  The LVCVA states that an additional 3,537 rooms will be completed
by the end of the year 2000.  Existing  and  future  expansions,  additions  and
enhancements  to existing  properties and  construction of new properties by the
Company's  competitors  could  divert  additional  business  from the  Company's
facilities. There can be no assurance that the Company will compete successfully
in the Las Vegas market in the future.

           During 1998,  available room nights in the Las Vegas market increased
from 37.7  million to 39.0  million or 3.5%,  while total room  nights  occupied
increased  from 32.5 million to 33.4 million or 2.9%.  The ending room inventory
at December 31, 1998 was 109,365  compared to 105,347 at December  31, 1997,  an
increase  of 4,018  rooms  or 3.8 %.  This has had the  effect  of  intensifying
competition.  At the Riviera, room occupancy fell from 96.8% in 1997 to 95.2% in
1998  (still much higher than the Strip  average)  and room rates  decreased  by
$3.43 or 5.8%, from $58.25 in 1997 to $54.82 in 1998.

           The Company  also  competes,  to some  extent,  with casinos in other
states,   riverboat  and  Native  American  gaming   ventures,   state-sponsored
lotteries, on- and off-track wagering, card parlors and other forms of legalized
gaming  in the  United  States,  as well as with  gaming  on  cruise  ships  and
international  gaming  operations.  In addition,  certain  states have  recently
legalized or are considering  legalizing casino gaming in specific  geographical
areas within those states. Any future development of casinos, lotteries or other
forms of gaming in other  states,  particularly  areas close to Nevada,  such as
California,  could have a material  adverse  effect on the Company's  results of
operations.

           The current  business of the Company is entirely  dependent on gaming
in Las Vegas. The Riviera derives a substantial  percentage of its business from
tourists,  principally  from Southern  California  and the  southwestern  United
States.  Weakness  in the economy of Southern  California  has in the past,  and
could in the future,  adversely  affect the  financial  results of the  Company.
Until the Black Hawk casino opens,  the Company's  operations  will be primarily
dependent  upon the  results of  operations  achieved  by the Riviera on the Las
Vegas Strip. Any significant  disruption in operations at the Riviera would have
a material adverse effect on the Company.

Black Hawk, Colorado

           The Black Hawk/Central City gaming market is characterized by intense
competition.  The Company believes that the primary  competitive  factors in the
market are location,  availability  and  convenience of parking,  number of slot
machines and gaining  tables,  types and pricing of non-gaming  amenities,  name
recognition and overall  atmosphere.  The Company  believes its main competitors
will be the larger  gaming  facilities  in the City of Black Hawk,  particularly
those with considerable on-site or proximate parking and established reputations
in the local market.  Of the 30 gaming facilities  currently  operating in Black
Hawk/Central City, eight have over 400 gaming positions.  The largest casinos in
terms of the number of gaming  positions  are  respectively,  the Isle of Capri,
Black Hawk,  Harvey's  Wagon  Wheel  Casino  Hotel,  Colorado  Central  Station,
Bullwhackers Black Hawk, Canyon Casino, Fitzgeralds Casino Black Hawk, the Lodge
and Gilpin Hotel Casino. Construction has also begun on the "Mardi Gras" casino,
which is expected to feature over 600 slot  machines.  Other  projects have also
been announced, proposed,

                                                        10

<PAGE>



discussed  or rumored  for the Black  Hawk/Central  City  market,  although  the
Company is not aware of whether any of these projects are proceeding.

           The Company expects the gaming  facilities  near the  intersection of
Main and Mill Streets to provide significant competition, while at the same time
creating the greatest  concentration of parking in the Black  Hawk/Central  City
market, as well as attracting a critical mass of customers to the area. Colorado
Central Station,  one of the most successful  casinos in the market,  is located
across the street from the Company's Black Hawk casino and has approximately 700
slot machines, 20 gaming tables and approximately 700 valet-only parking spaces.
The Isle of Capri  Black  Hawk,  operated  by Casino  America,  which  opened in
December 1998, is located  directly  across the street from the Company's  Black
Hawk casino and features  approximately 1,100 slot machines, 14 table games, and
1,000 parking spaces.

           Currently,  limited  stakes  gaming in Colorado  is  constitutionally
authorized in Central City,  Black Hawk,  Cripple Creek and two Native  American
reservations  in southwest  Colorado.  However,  there can be no assurance  that
gaming will not be approved in other Colorado communities in the future.

           The Company will also compete with other forms of gaming in Colorado,
including  lottery  gaming,  and horse and dog racing as well as other  forms of
entertainment.

           Pursuant to a license agreement,  the Riviera will license the use at
the Black Hawk casino of all of the trademarks,  service marks and logos used by
the Riviera Hotel & Casino in Las Vegas. In addition, the license agreement will
provide  that  additional  trademarks,  service  marks  and  logos  acquired  or
developed by the Company and used at its other facilities will be subject to the
license agreement.

Employees and Labor Relations

           As of December 31, 1998 the Riviera had approximately 2,100 full time
equivalent  employees and had collective  bargaining  contracts with nine unions
covering  approximately  1,200 of such  employees  including  food and  beverage
employees,  rooms  department  employees,  carpenters,  engineers,  stage hands,
musicians,  electricians,  painters and teamsters. The Company's agreements with
the Southern Nevada Culinary and Bartenders  Union and Stage Hands Union,  which
cover the majority of the Company's  unionized  employees,  were renegotiated in
1998 and  expire in the year 2002.  Collective  Bargaining  Agreements  with the
Operating  Engineers,  Electricians and Musicians will expire in 1999, while the
Agreements with the Carpenters and Painters will expire in 2000. A new Agreement
was negotiated with the Teamsters and expires in 2003. Although unions have been
active  in  Las  Vegas,  management  considers  its  employee  relations  to  be
satisfactory.  There can be no assurance,  however,  that new agreements will be
reached without union action or will be on terms satisfactory to the Company.

Regulation and Licensing

Nevada

Nevada Gaming Authority

           The ownership and operation of casino gaming facilities in Nevada are
subject to: (i) The Nevada Gaming  Control Act and the  regulations  promulgated
thereunder (collectively the "Nevada Act") and (ii) various local ordinances and
regulations.  The Company's  gaming  operations are subject to the licensing and
regulatory control of the Nevada Commission,  the Nevada Board, the Clark County
Board and the City of Las Vegas.  The Nevada  Commission,  the Nevada Board, the
Clark County Board and the City of Las Vegas are collectively referred to as the
"Nevada Gaming Authorities."

           The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities  are based upon  declarations  of public  policy which are concerned
with, among other things:  (i) the prevention of unsavory or unsuitable  persons
from having a direct or indirect  involvement with gaming at any time and in any
capacity;  (ii) the  establishment  and  maintenance of  responsible  accounting
practices and procedures;  (iii) the maintenance of effective  controls over the
financial  practices  of  licensees,  including  the  establishment  of  minimum
procedures  for  internal  fiscal  affairs  and the  safeguarding  of assets and
revenues, providing reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities;  (iv) the prevention of cheating and
fraudulent  practices;  and (v)  providing a source of state and local  revenues
through  taxation  and  licensing  fees.  Change in such laws,  regulations  and
procedures could have an adverse effect on the Company's gaming operations.

                                                        11

<PAGE>



           ROC is required to be licensed by the Nevada Gaming Authorities.  The
gaming  license held by ROC requires the periodic  payment of fees and taxes and
is not  transferable.  ROC is also licensed as a manufacturer and distributor of
gaming devices.  Such licenses also require the periodic payment of fees and are
not  transferable.  The  Company is  registered  by the Nevada  Commission  as a
publicly  traded  corporation  (a "Registered  Corporation")  and has been found
suitable  to own  the  stock  of  ROC.  ROC is  also  registered  by the  Nevada
Commission  as an  intermediary  company and has been found  suitable to own the
stock  of  RGM  which  has  been  registered  by  the  Nevada  Commission  as an
Intermediary  company  and has  been  found  suitable  to own the  stock  of its
subsidiary  RGME.  RGME has been  licensed as the manager of the Four Queens and
such  license is not  transferable.  ROC and RGME are each a Corporate  Licensee
(collectively,  the "Corporate Licensees") under the terms of the Nevada Act. As
a  Registered  Corporation,  the  Company  is  required  periodically  to submit
detailed financial and operating reports to the Nevada Commission and to furnish
any other  information  which the Nevada  Commission may require.  No person may
become a  stockholder  of, or  receive  any  percentage  of  profits  from,  the
Corporate  Licensees  without first  obtaining  licenses and approvals  from the
Nevada Gaming Authorities. The Company, ROC, RGM and RGME have obtained from the
Nevada  Gaming  Authorities  the  various  registrations,   approvals,  permits,
findings  of  suitability  and  licenses  required  in order to engage in gaming
activities and manufacturing and distribution activities in Nevada.

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

           The Nevada Gaming  Authorities may investigate any individual who has
a material  relationship to, or material involvement with, the Company, ROC, RGM
or RGME in order to determine  whether such  individual is suitable or should be
licensed as a business associate of a gaming licensee.  Officers,  directors and
certain key  employees  of ROC and RGME must file  applications  with the Nevada
Gaming  Authorities  and may be required to be licensed or found suitable by the
Nevada Gaming Authorities.  Officers, directors and key employees of the Company
and RGM who are actively and directly  involved in the gaming  activities of ROC
or RGME may be required to be  licensed or found  suitable by the Nevada  Gaming
Authorities. The Nevada Gaming Authorities may deny an application for licensing
for any cause which they deem reasonable. A finding of suitability is comparable
to licensing,  and both require  submission  of detailed  personal and financial
information followed by a thorough investigation. The applicant for licensing or
a finding of suitability must pay all the costs of the investigation. Any change
in a  corporate  position  by a licensed  person  must be reported to the Nevada
Gaming  Authorities  and, in addition to their  authority to deny an application
for a finding of suitability or licensure,  the Nevada Gaming  Authorities  have
jurisdiction to disapprove a change in a corporate position.

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

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

           If it were  determined  that the  Nevada Act was  violated  by ROC or
RGME, the gaming licenses they hold could be limited, conditioned,  suspended or
revoked, subject to compliance with certain statutory and regulatory procedures.
In addition,  the Company,  ROC, RGM and RGME and the persons  involved could be
subject to  substantial  fines for each separate  violation of the Nevada Act at
the  discretion  of the  Nevada  Commission.  Further,  a  supervisor  could  be
appointed  by the Nevada  Commission  to operate the casino and,  under  certain
circumstances,  earnings generated during the supervisor's  appointment  (except
for  reasonable  rental value of the casino)  could be forfeited to the State of
Nevada. Limitation,  conditioning or suspension of the gaming licenses of ROC or
RGME or the  appointment  of a supervisor  could (and  revocation  of any gaming
license would) materially adversely affect the Company's gaming operations.

                                                        12

<PAGE>



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

           The Nevada Act  requires  any person who  acquires  more than 5% of a
Registered  Corporation's  voting  securities to report the  acquisition  to the
Nevada  Commission.  The Nevada Act requires that beneficial owners of more than
10%  of a  Registered  Corporation's  voting  securities  apply  to  the  Nevada
Commission for a finding of suitability within thirty days after the Chairman of
the Nevada Board mails the written notice  requiring such filing.  Under certain
circumstances,  an "institutional investor," as defined in the Nevada Act, which
acquires  more than 10%,  but not more than 15%, of a  Registered  Corporation's
voting  securities  may  apply to the  Nevada  Commission  for a waiver  of such
finding  of  suitability  if  such  institutional   investor  holds  the  voting
securities for investment purposes only. An institutional  investor shall not be
deemed to hold  voting  securities  for  investment  purposes  unless the voting
securities  were acquired and are held in the ordinary  course of business as an
institutional  investor  and  not  for  the  purpose  of  causing,  directly  or
indirectly,  the election of a majority of the members of the board of directors
of the  Registered  Corporation,  any change in the corporate  charter,  bylaws,
management,  policies or operations of the Registered Corporation, or any of its
gaming  affiliates,  or any other action which the Nevada Commission finds to be
inconsistent  with holding the Registered  Corporation's  voting  securities for
investment  purposes  only.  Activities  which are deemed to be consistent  with
holding voting  securities for investment  purposes only include:  (i) voting on
all matters voted on by stockholders;  (ii) making financial and other inquiries
of management of the type normally made by securities analysts for informational
purposes and not to cause a change in its  management,  policies or  operations;
and (iii) such other  activities  as the Nevada  Commission  may determine to be
consistent  with such  investment  intent.  If the  beneficial  holder of voting
securities who must be found suitable is a corporation, partnership or trust, it
must submit  detailed  business and  financial  information  including a list of
beneficial owners. The applicant is required to pay all costs of investigation.

           Any person who fails or refuses to apply for a finding of suitability
or a license  within  thirty  days  after  being  ordered to do so by the Nevada
Commission or the Chairman of the Nevada  Board,  may be found  unsuitable.  The
same  restrictions  apply to a record owner if the record owner,  after request,
fails to identify the beneficial owner. Any stockholder found unsuitable and who
holds,  directly or  indirectly,  any  beneficial  ownership of the common stock
beyond such period of time as may be prescribed by the Nevada  Commission may be
guilty of a criminal offense.  The Company is subject to disciplinary action if,
after it receives  notice that a person is unsuitable to be a stockholder  or to
have any other relationship with the Company,  ROC, RGM or RGME, the Company (i)
pays that person any dividend or interest upon voting securities of the Company,
(ii) allows that person to exercise,  directly or  indirectly,  any voting right
conferred through securities held by that person, (iii) pays remuneration in any
form to that person for services rendered or otherwise,  or (iv) fails to pursue
all lawful  efforts to require such  unsuitable  person to relinquish his voting
securities  including,  if  necessary,  the  immediate  purchase  of said voting
securities for cash at fair market value.  Additionally,  the Clark County Board
has the authority to approve all persons owning or controlling  the stock of any
corporation controlling a gaming licensee.

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

           The Company is required to maintain a current  stock ledger in Nevada
which may be  examined  by the Nevada  Gaming  Authorities  at any time.  If any
securities are held in trust by an agent or by a nominee,  the record holder may
be required  to disclose  the  identity  of the  beneficial  owner to the Nevada
Gaming Authorities. A failure to make such disclosure may be grounds for finding
the record holder  unsuitable.  The Company is also  required to render  maximum
assistance  in  determining  the identity of the  beneficial  owner.  The Nevada
Commission has the power to require the Company's  stock  certificates to bear a
legend

                                                        13

<PAGE>



indicating that the securities are subject to the Nevada Act. However,  to date,
the Nevada Commission has not imposed such a requirement on the Company.

           The Company may not make a public offering of its securities  without
the prior  approval  of the Nevada  Commission  if the  securities  or  proceeds
therefrom  are  intended  to be used to  construct,  acquire or  finance  gaming
facilities  in  Nevada,  or to retire or extend  obligations  incurred  for such
purposes.  In addition,  (i) a Corporate  Licensee may not  guarantee a security
issued by a Registered Corporation pursuant to a public offering, or hypothecate
its assets to secure the payment or performance of the obligations  evidenced by
such a security,  without the prior approval of the Nevada Commission,  (ii) the
pledge of the stock of a Corporate  Licensee  or  Intermediary  company  ("Stock
Pledge"),  such as ROC, RGM and RGME, is void without the prior  approval of the
Nevada  Commission,  and  (iii)  restrictions  upon the  transfer  of an  equity
security issued by a Corporate  Licensee or Intermediary  company and agreements
not  to  encumber  such  securities  (collectively,  "Stock  Restrictions")  are
ineffective without the prior approval of the Nevada Commission.

           Changes in  control of the  Company  through  merger,  consolidation,
stock or asset acquisitions,  management or consulting agreements, or any act or
conduct by a person whereby he obtains control,  may not occur without the prior
approval  of the Nevada  Commission.  Entities  seeking to acquire  control of a
Registered  Corporation must satisfy the Nevada Board and Nevada Commission in a
variety of  stringent  standards  prior to assuming  control of such  Registered
Corporation.  The Nevada Commission may also require  controlling  stockholders,
officers,  directors  and  other  persons  having  a  material  relationship  or
involvement with the entity proposing to acquire control, to be investigated and
licensed as part of the approval process relating to the transaction.

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

           License  fees and taxes,  computed in various  ways  depending on the
type of gaming or activity  involved,  are payable to the State of Nevada and to
the County in which the ROC, RGM and RGME  operations are  conducted.  Depending
upon the particular fee or tax involved, these fees and taxes are payable either
monthly,  quarterly or annually and are based upon either:  (i) a percentage  of
the gross  revenues  received;  (ii) the number of gaming devices  operated;  or
(iii) the number of table games  operated.  A casino  entertainment  tax is also
paid by casino  operations  where  entertainment is furnished in connection with
the selling of food,  refreshments or merchandise.  Nevada Licensees that hold a
license to manufacture and distribute slot machines and gaming devices,  such as
ROC, also pay certain fees and taxes to the State of Nevada.

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


                                                        14

<PAGE>



Other Nevada Regulation

           The  sale  of  alcoholic  beverages  at the  Riviera  is  subject  to
licensing,  control and  regulation by the Clark County Board.  All licenses are
revocable  and are not  transferable.  The Clark  County Board has full power to
limit, condition,  suspend or revoke any such license, and any such disciplinary
action  could (and  revocation  would) have a material  adverse  affect upon the
operations of ROC.

Colorado

Colorado Gaming Regulation

           Pursuant to an amendment to the Colorado  Constitution (the "Colorado
Amendment"),  limited stakes gaming became lawful in the cities of Central City,
Black Hawk and Cripple Creek on October 1, 1991. The Colorado  Amendment defines
limited  stakes  gaming  as the  use of slot  machines  and the  card  games  of
blackjack and poker, with a maximum single bet of five dollars.

           Limited  stakes  gaming is confined to the  commercial  districts  of
these cities as defined by Central City on October 7, 1981, by Black Hawk on May
4, 1978,  and by Cripple  Creek on December 3, 1973.  In addition,  the Colorado
Amendment  restricts  limited  stakes gaming to  structures  that conform to the
architectural  styles and  designs  that were common to the areas prior to World
War 1, and which  conform to the  requirements  of  applicable  city  ordinances
regardless of the age of the structures. The Colorado Amendment provides that no
more than 35% of the square  footage of any building and no more than 50% of any
one floor of any building may be used for limited  stakes  gaming.  The Colorado
Amendment  prohibits  limited  stakes gaming  between the hours of 2:00 a.m. and
8:00 a.m., and allows limited stakes gaming to occur in establishments  licensed
to sell alcoholic beverages.

           Further,  the Colorado  Amendment  provides  that, in addition to any
other  applicable  license  fees,  up to a maximum  of 40% of the total  amounts
wagered  less  payouts to players  may be payable by a licensee  for  conducting
limited  stakes  gaming.  Such  percentage is to be  established by the Colorado
Limited Gaming Act of 1991 (the "Colorado Act").

           The Colorado  legislature  promulgated  the Colorado Act to implement
the provisions of the Colorado  Amendment.  The Colorado Act became effective on
June 4, 1991 and has been amended subsequently.

           The Colorado Act declares  public policy on limited  stakes gaming to
be that:  (i) the  success of limited  stakes  gaming is  dependent  upon public
confidence and trust that licensed  limited stakes gaming is conducted  honestly
and  competitively;  the rights of the  creditors  of licensees  are  protected;
gaming is free from criminal and corruptive elements; (ii) public confidence and
trust can be maintained  only by strict  regulation  of all persons,  locations,
practices,  associations  and  activities  related to the  operation of licenses
gaming  establishments and the manufacture or distribution of gaming devices and
equipment; (iii) all establishments where limited stakes gaming is conducted and
where gambling  devices and equipment must be licensed,  controlled and assisted
to protect the  inhabitants  of the state to foster the stability and success of
limited  stakes  gaming and to  preserve  the economy  and free  competition  in
Colorado; and (iv) no applicant for a license of other approval has any right to
a license or to the granting of the approval sought.

           The Colorado Act subjects the  ownership  and operation of limitation
stakes  gaming  facilities  in Colorado to extensive  regulation by the Colorado
Limited Gaming Control  Commission  (the  "Colorado  Commission")  and prohibits
persons under the age of 21 from  participating  in limited  stakes  gaming.  No
limited stakes gaming may be conducted in Colorado unless all appropriate gaming
licenses are approved by and obtained from the Colorado Commission. The Colorado
Commission has full and exclusive authority to promulgate,  and has promulgated,
rules and  regulations  governing  the  licensing,  conducting  and operating of
limited  stakes gaming (the  "Colorado  Regulations").  Such  authority does not
require any approval by or delegation of authority from the Colorado  Department
of Revenue (the "Colorado  Revenue  Department").  The Colorado Act also created
the  Division  of Gaming  within the  Colorado  Revenue  Department  to license,
implement,  regulate  and  supervise  the  conduct of limited  stakes  gaming in
Colorado,  supervised and administered by the Director of the Division of Gaming
(the "Division Director").

           The Colorado Commission may issue:  (i)  slot machine or distributor,
(ii)  operator,  (iii) retail gaming,  (iv) support and (v) key employee  gaming
licenses.  The first  three  licenses  require  annual  renewal by the  Colorado
Commission.  Support and key  employee  licenses are issued for two year periods
and are

                                                        15

<PAGE>



renewable by the Division Director. The Colorado Commission has broad discretion
to condition,  suspend for up to six months, revoke, limit or restrict a license
at any time and also has the authority to impose fines.

           An  applicant  for  a  gaming  license  must  complete  comprehensive
application forms, pay required fees and provide all information required by the
Colorado Commission and the Division of Gaming.  Prior to licensure,  applicants
must satisfy the  Colorado  Commission  that they are  suitable  for  licensing.
Applicants have the burden of proving their qualifications and must pay the full
cost of any background investigations.
There is no limit on the cost of such background investigations.

           Gaming employees must hold either a support or key employee  license.
Every retail gaming  licensee must have a key employee  license in charge of all
limited stakes gaming  activities when limited stakes gaming is being conducted.
The Colorado  Commission may determine that a gaming  employee is a key employee
and, require that such person apply for a key employee license.

           A retail  gaming  license  is  required  for all  persons  conducting
limited stakes gaming on their  premises.  In addition,  an operator  license is
required  for all  persons who engage in the  business of placing and  operating
slot machines on the premises of a retailer. However, a retailer is not required
to hold an operator  license.  No person may have an ownership  interest in more
than three retail licenses.  A slot machine  manufacturer or distributor license
is required for all persons who manufacture,  import or distribute slot machines
in Colorado.

           The  Colorado  Act  requires  that  every  officer,   director,   and
stockholder of private  corporations or equivalent  office or ownership  holders
for non-corporate applicants, and every officer, director or stockholder holding
either a 5% or greater  interest or  controlling  interest of a publicly  traded
corporation  or owners of an  applicant  or  licensee  shall be a person of good
moral character and submit to a full background  investigation  conducted by the
Division of Gaming and the  Colorado  Commission.  The Colorado  Commission  may
require any person having an interest in a license to undergo a full  background
investigation  and pay the  cost  of  investigation  in the  same  manner  as an
applicant.

           Persons found  unsuitable by the Colorado  Commission may be required
immediately  to  terminate  any  interest,  association,  or  agreement  with or
relationship  to a  licensee.  A finding of  unsuitability  with  respect to any
officer, director, employee, associate, lender or beneficial owner of a licensee
or applicant  also may  jeopardize  the  licensee's  license or the  applicant's
application.  A license  approval may be conditioned upon the termination of any
relationship with unsuitable persons.

           An  applicant  or licensee  must report to the  Division of Gaming or
Colorado  Commission  all leases not later than 30 days after the effective date
of the lease. Also, an applicant or a license,  upon the request of the Colorado
Commission or the Division  Director,  must submit copies of all written  gaming
contracts and  summaries of all oral gaming  contracts to which it is or intends
to become a party. The Division Director or the Colorado  Commission may require
changes in the lease or gaming  contract  before an  applicant  is  approved  or
participation  in such  agreement is allowed or may require  termination  of the
lease or gaming contract.

           The Colorado Act and the Colorado  Regulations  require  licensees to
maintain  detailed records that account for all business  transactions.  Records
must be furnished upon demand to the Colorado Commission, the Division of Gaming
and other law enforcement  authorities.  The Colorado Regulations also establish
extensive  playing  procedures  and rules of play for poker,  blackjack and slot
machines.  Retail gaming  licenses  must adopt  comprehensive  internal  control
procedures.  Such  procedures  must be  approved  in advance by the  Division of
Gaming and  include the areas of  accounting,  surveillance,  security,  cashier
operations,  key control and fill and drop procedures,  among others.  No gaming
devices  may be used in  limited  stakes  gaming  without  the  approval  of the
Division Director or the Colorado Commission.

           Licensees  have  a  continuing  duty  to  immediately  report  to the
Division  of Gaming the name,  date of birth and social  security  number of all
persons who obtain an ownership, financial or equity interest in the licensee of
five (5) percent or greater, or who have the ability to control the licensee, or
who have the ability to exercise significant influence over the licensee, or who
loan any money or other thing of value to the licensee. Licensees must report to
the Division of Gaming all  licenses,  and all  applications  for  licenses,  in
foreign jurisdictions.


                                                        16

<PAGE>



           With limited  exceptions  applicable  to licensees  that are publicly
traded  entities,  no person may sell,  lease,  purchase,  convey or acquire any
interest in a retail  gaming or operator  license or business  without the prior
approval of the Colorado Commission.

           All agreement, contracts, leases, or arrangements in violation of the
Colorado Act or the Colorado Regulations are void and unenforceable.

           The  Colorado  Amendment  requires an annual tax of as much as 40% on
the total amount  wagered less all payouts to players.  With respect to games of
poker, the tax is calculated based on the sums wagered which are retained by the
licensee  as  compensation.  Effective  October  1 of each  year,  the  Colorado
Commission  establishes  the gaming tax for the following 12 months.  Currently,
the gaming tax is: 2% on the first $2  million of these  amounts;  4% on amounts
from $2 million to $4 million; 14% on amounts from $4 million to $5 million; 18%
on amounts from $5 million to $10 million; and 20% on amounts over $10 million.

           The  Colorado  Commission  requires  all gaming  licensees  to pay an
annual device fee for each slot machine, blackjack table and poker table of $75.
The municipality of Black Hawk assesses an annual device fee of $750 per device.
There is no statutory limit on state or city device fees, which may be increased
at the  discretion  of the  Colorado  Commission  or the city.  In  addition,  a
business  improvement  fee of as much as $102 per  device  and a  transportation
authority  device  fee of $77 per  device  also  may  apply  depending  upon the
location of the licensed  premises in Black Hawk.  The current  annual  business
improvement fee is $89.04.

           Black  Hawk  also  imposes  taxes  and fees on other  aspects  of the
businesses of gaming licensees, such as parking, alcoholic beverage licenses and
other municipal taxes and fees.  Significant  increases in these fees and taxes,
or the imposition of new taxes and fees, may occur.

           Violation of the Colorado Act constitutes a class 1 misdemeanor which
may  subject the  violator to fines or  incarceration  or both.  A licensee  who
violates the Colorado Act or Colorado  Regulations  is subject to  suspension of
the  license  for a period of up to six  months,  fines or both,  or to  license
revocation.

           The  Colorado   Commission   has  enacted  rule  4.5,  which  imposes
requirements on publicly traded corporations holding gaming licenses in Colorado
and on gaming  licenses  owned  directly  or  indirectly  by a  publicly  traded
corporation,  whether  through a subsidiary or  intermediary  company.  The term
"publicly traded corporation"  includes  corporations,  firms, limited liability
companies,  trusts,  partnerships and other forms of business organizations even
if  created  under  the  laws of a  foreign  country.  Such  requirements  shall
automatically  apply  to  any  ownership  interest  held  by a  publicly  traded
corporation,  holding  company  or  intermediary  company  thereof,  where  such
ownership  interest  directly or indirectly  is, or will be upon approval of the
Colorado  Commission,  5% or more of the entire  licensee.  In any event, if the
Colorado  Commission  determines  that  a  publicly  traded  corporation,  or  a
subsidiary,  intermediary  company or holding  company has the actual ability to
exercise  influence  over a licensee,  regardless of the percentage of ownership
possessed by said entity,  the  Colorado  Commission  may require that entity to
comply with the disclosure regulations contained in Rule 4.5.

           Under  Rule  4.5,   gaming   licensees,   affiliated   companies  and
controlling  persons  commencing  a public  offering of voting  securities  must
notify  the  Colorado  Commission  within  10 days of the  initial  filing  of a
registration  statement with the Securities  and Exchange  Commission.  Licensed
publicly traded  corporations  are also required to send proxy statements to the
Division of Gaming within 5 days after distribution of such statement. Licensees
to whom Rule 4.5  applies  must  include in their  articles of  organization  or
similar charter documents  provisions that: restrict the rights of the licensees
to issue voting  interests or securities  except in accordance with the Colorado
Act and the Colorado Regulations; limit the rights of persons to transfer voting
interests or securities of licensees  except in accordance with the Colorado Act
and the Colorado  Regulations;  and provide that holders of voting  interests or
securities of licensees found unsuitable by the Colorado  commission may, within
60 days of such finding of unsuitability, be required to sell their interests or
securities  back to the  issuer  at the  lesser  of the cash  equivalent  of the
holders'  investment  or the  market  price  as of the  date of the  finding  of
unsuitability.  Alternatively, the holders may, within 60 days after the finding
of  unsuitability,  transfer the voting  interests or  securities  to a suitable
person (as determined by the Colorado Commission). Until the voting interests or
securities  are held by suitable  persons,  the issuer may not pay  dividends or
interest,  the  securities  may not be voted,  they may not be  included  in the
voting or securities of the issuer,  and the issuer may not pay any remuneration
in any form to the holders of the securities.

                                                        17

<PAGE>



           Pursuant  to  Rule  4.5,  persons  who  acquire  direct  or  indirect
beneficial  ownership of (i) 5% or more of any class of voting  securities  of a
publicly traded corporation  required to include in its articles of organization
the Rule 4.5 charter language  provisions,  or (ii) 5% or more of the beneficial
interest in a gaming licensee directly or indirectly through any class of voting
securities  of any holding  company or  intermediary  company of a licensee (all
such persons hereinafter referred to as "qualifying persons"),  shall notify the
Division of Gaming  within 10 days of such  acquisition,  are required to submit
all  requested  information  and are  subject  to a finding  of  suitability  as
required by the Division of Gaming or the Colorado  Commission.  Licensees  also
must notify any qualifying  persons of these  requirements.  A qualifying person
whose  interest  equals 10% or more must apply to the Colorado  Commission for a
finding of suitability within 45 days after acquiring such securities. Licensees
must also notify any qualifying  persons of these  requirements.  Whether or not
notified,   qualifying   persons  are   responsible  for  complying  with  these
requirements.

           A qualifying  person who is an institutional  investor under Rule 4.5
and who  individually  or in  association  with  others,  acquires,  directly or
indirectly,  the  beneficial  ownership  of 15% or more of any  class of  voting
securities  must apply to the Colorado  Commission  for a finding of suitability
within 45 days after acquiring such interests.

           The Regulation also provides for exemption from the  requirements for
a finding of suitability  when the Colorado  Commission  finds such action to be
consistent with the purposes of the Act.

           Pursuant  to Rule  4.5,  persons  found  unsuitable  by the  Colorado
Commission  must be  removed  from any  position  as an  officer,  director,  or
employee  of a  licensee,  or  from a  holding  or  intermediary  company.  Such
unsuitable  persons also are  prohibited  from any  beneficial  ownership of the
voting  securities of any such entities.  Licensees,  or affiliated  entities of
licensees,  are subject to sanctions for paying  dividends or  distributions  to
persons found unsuitable by the Colorado  Commission,  or for recognizing voting
rights of, or paying a salary or any  remuneration  for services to,  unsuitable
persons.  Licensees or their  affiliated  entities  also may be  sanctioned  for
failing to pursue  efforts to require  unsuitable  persons to  relinquish  their
interest.  The Colorado  Commission  may  determine  that anyone with a material
relationship  to, or material  involvement  with,  a licensee  or an  affiliated
company must apply for a finding of suitability or must apply for a key employee
licensee.

           The sale of alcoholic  beverages in gaming  establishments is subject
to strict  licensing,  control and regulation by state and local authorities and
requires  a liquor  license.  Alcoholic  beverage  licenses  are  revocable  and
nontransferable. State and local licensing authorities have full power to limit,
condition,  suspend  for as long as six  months  or  revoke  any such  licenses.
Violation of state  alcoholic  beverage laws may  constitute a criminal  offense
resulting in incarceration or fines or both.

           There  are  various  classes  of  retail  liquor  licenses  under the
Colorado  Liquor Code. A gaming  licensee  may sell malt,  vinous or  spirituous
liquors only by the  individual  drink for  consumption  on the  premises.  Even
though a retail gaming  licensee may be issued various  classes of retail liquor
licenses,  such gaming licensee may only hold liquor licenses of the same class.
An application for an alcoholic  beverage  license in Colorado  requires notice,
posting and a public hearing before the local liquor  licensing  authority prior
to approval of the same. The Colorado Department of Revenue's Liquor Enforcement
Division must also approve the application.

           Currently, no gaming or liquor licenses in Colorado have been granted
in  connection  with the Black Hawk Project.  Applications  have been made for a
retail  gaming  license  and  for  a  hotel  and  restaurant   liquor   license.
Applications  for key employee  gaming  licenses have also been made.  Associate
Person license  applications  have been submitted for some related  companies as
required  by the  Division  Director.  Additional  gaming  and  support  license
applications  will  have to be made and  approved  prior to the  opening  of the
casino.  Certain  stockholders  of the Company owning more than 5% of the common
stock are submitting  information  relevant to the  requirement for a finding of
suitability, or exemption from such finding.

Federal Registration

           ROC is  required to annually  file with the  Attorney  General of the
United States in connection with the sales, distribution,  or operations of slot
machines. All requisite filings for the present year have been made.


                                                        18

<PAGE>



Item 2.    Properties

           The  Riviera  complex  is located  on the Las Vegas  Strip,  occupies
approximately  26 acres and  comprises  approximately  one-million  square feet,
including  115,000 square feet of casino space,  160,000 square foot convention,
meeting  and  banquet  facility,  approximately  2,100  hotel  rooms  (including
approximately  169 luxury suites) in five towers,  four  restaurants,  a buffet,
four showrooms,  a lounge and  approximately  2,300 parking spaces. In addition,
executive and other offices for the Riviera are located on the property.

           There are 41 food and retail  concessions  operated under  individual
leases with third parties. The leases are for periods from one year to ten years
and expire over the next five years.

           The  entire  Riviera complex is encumbered  by a first  deed of trust
securing  the Notes.  See,  "Management's  Discussion  And Analysis of Financial
Condition And Results of Operations."

           The Company also owns the Black Hawk Land,  which is a 71,000  square
foot parcel of real property in Black Hawk, Colorado.

Item 3.    Legal Proceedings

           The Company is a party to several routine  lawsuits both as plaintiff
and as defendant arising from the normal operations of a hotel.  Management does
not believe that the outcome of such litigation,  in the aggregate,  will have a
material  adverse  effect on the financial  position or results of operations of
the Company.

           On  April  9,   1998,   Paulson,   R&E   Gaming   Corp.   and   other
Paulson-controlled entities (collectively, "Paulson") commenced an action in the
United States District Court for the Central District of California  against the
Company,  Jefferies & Company,  Inc.,  Morgens,  Waterfall,Vintiadis  & Company,
Inc.,  Keyport Life Insurance  Company,  SunAmerica  Life Insurance  Company and
others, asserting various claims for the return of his down payment and damages.
The Company  believes  there is no merit to Paulson's  damage claims against the
Company.  The Company has  vigorously  contested,  and will continue to contest,
Paulson's  claims.  The  Company has  asserted  counterclaims  against  Paulson,
including a claim for the  collection of the Escrow Funds for the benefit of the
holders of CVRs. See, "Business - The Abandoned Merger" for further information.

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

           Not applicable.

                                                        19

<PAGE>



                                                      PART II

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

           The  Company's  Common  Stock  began  trading on the  American  Stock
Exchange on May 13, 1996 and was reported on the NASDAQ  Bulletin Board prior to
that date. As of February 26, 1999, based upon information  available to it, the
Company believes that there were  approximately  1,000 beneficial holders of the
Company's Common Stock.

           The Company has never paid any dividends on its Common Stock and does
not  currently  expect to pay any  dividends  (cash or  otherwise) on its Common
Stock for the  foreseeable  future.  The  Company's  ability to pay dividends is
primarily  dependent  upon receipt of dividends and  distributions  from ROC. In
addition,  the indenture for the First  Mortgage  Notes  restricts the Company's
ability to pay dividends on its Common Stock.

           The table  below sets  forth the bid and ask sales  prices by quarter
for the years ended  December  31,  1998,  1997 and 1996,  based on  information
provided by certain brokers who have had  transactions  in the Company's  Common
Stock during the year:

<TABLE>
<CAPTION>

                                         First                 Second                  Third                 Fourth
-------------------------------------------------------------------------------------------------------------------
                                       Quarter                Quarter                Quarter                Quarter
-------------------------------------------------------------------------------------------------------------------
         1998
-------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                     <C>                    <C>                    <C>  
       HIGH BID                         $10.75                  $6.00                  $5.75                  $3.88
-------------------------------------------------------------------------------------------------------------------
        LOW ASK                          15.06                  10.81                   8.13                   5.81
-------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------------
         1997
-------------------------------------------------------------------------------------------------------------------
       HIGH BID                        $ 12.88                $ 12.25                $ 12.13                $ 12.75
-------------------------------------------------------------------------------------------------------------------
        LOW ASK                          14.50                  14.13                  15.50                  14.94
-------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------------
         1996
-------------------------------------------------------------------------------------------------------------------
       HIGH BID                         $ 7.50                 $11.00                 $14.00                 $12.94
-------------------------------------------------------------------------------------------------------------------
        LOW ASK                           9.75                  17.75                  17.13                  15.63
-------------------------------------------------------------------------------------------------------------------
</TABLE>

           On February  26, 1999,  (the most recent trade date of the  Company's
common stock), 4,300 shares were traded closing at $5.4375 per share.

Item 6.    Selected Financial Data

           The following  table sets forth a summary of selected  financial data
for the Company  for the years ended  December  31 in  thousands  (in  thousands
except Net Income (Loss) Per Common Share):

<TABLE>
<CAPTION>

                                                       1998            1997           1996            1995            1994
                                                       ----            ----           ----            ----            ----
<S>                                                <C>             <C>            <C>             <C>             <C>     
Total Operating  Revenue                           $159,955        $153,793       $164,409        $151,146        $153,921
Net Income (Loss)                                   (4,057)           2,088          8,440           6,344           4,790
Net Income (Loss) Per Diluted                                                                                              
Common Share                                        ($0.81)           $0.40          $1.63           $1.26           $1.00
Total Assets                                        244,909         347,866        167,665         157,931         151,925
Long-Term Debt                                      179,439         177,512        109,088         110,571         113,155
</TABLE>


                                                        20

<PAGE>



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

Results of Operations

           The following table sets forth the Company's income statement data as
a percentage of net revenues  (unless  otherwise  noted) for the Company for the
periods indicated:

<TABLE>
<CAPTION>
                                                                          1998              1997               1996
                                                                          ----              ----               ----
Revenues:
<S>                                                                     <C>               <C>                <C>  
  Casino                                                                 48.6%             46.6%              48.9%
  Rooms                                                                  24.8%             27.2%              25.7%
  Food and Beverage                                                      15.0%             14.0%              13.8%
  Entertainment                                                          13.5%             13.6%              13.2%
  Other                                                                   7.0%              6.9%               6.1%
  Less promotional  allowances                                          (8.7%)            (8.3%)             (7.7%)
                                                                       -------           -------
     Net revenues                                                       100.0%            100.0%             100.0%

Costs and Expenses:
  Casino1                                                                58.3%             56.7%              56.9%
  Rooms1                                                                 52.7%             50.8%              52.9%
  Food and Beverage1                                                     73.3%             74.6%              71.7%
  Entertainment1                                                         78.3%             82.5%              82.4%
  Other1                                                                 29.7%             28.5%              29.2%
  General and administrative                                             16.9%             17.0%              16.9%
  Corporate expenses, severance pay                                       0.3%              0.0%               0.0%
  Depreciation and amortization                                           7.6%              6.8%               5.0%
     Total Costs and Expenses                                            89.8%             87.7%              85.8%

Income from operations                                                   10.2%             12.3%              14.2%
Interest expense on 11%, $100 million notes                              -2.9%             -7.2%              -6.7%
Interest income on Treasury Bills to retire 11%, $100 million notes       1.5%              1.5%               0.0%
Interest expense, other                                                 -12.2%             -4.6%              -0.6%
Interest income, other                                                    1.5%              1.3%               0.7%
Interest, capitalized                                                     1.7%              0.5%               0.0%
Other (income) expense, net                                              -0.8%             -1.0%              -0.3%
                                                                       -------           -------            -------
Income before provision for income taxes                                 -1.0%              2.2%               7.8%
(Benefit) provision for income  taxes                                    -0.3%              0.9%              -2.7%
                                                                       -------            ------            -------
     Net Income before extraordinary item                                -0.7%              1.4%               5.1%
Extraordinary item, net of income taxes of $1.6 million                  -1.9%              0.0%               0.0%
                                                                       -------           -------            -------
     Net Income (Loss)                                                   -2.5%              1.4%               5.1%
                                                                       =======           =======            =======

 EBITDA2  margin                                                         18.2%             19.1%              19.2%
-----------------------
</TABLE>


1 Shown as a percentage of corresponding departmental revenue.

2   EBITDA consists of earnings before interest,  income taxes, depreciation and
    amortization   (excluding   corporate   financing,   severance  and  Paulson
    Merger/litigation  costs.)  While  EBITDA  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
    generally accepted accounting  principles ("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 EBITDA is not necessarily a measure of the Company's
    ability to fund its cash needs,  management  believes that certain investors
    find EBITDA to be a useful tool for  measuring the ability of the Company to
    service its debt.

                                                        21

<PAGE>




1998 Compared to 1997

Revenues

           Net revenues increased by approximately  $6.2 million,  or 4.0%, from
$153.8 million in 1997 to $159.9 million in 1998.  Casino revenues  increased by
approximately  $6.0 million,  or 8.4%,  from $71.7 million  during 1997 to $77.7
million during 1998 due primarily to a $5.5 million, or 11.9%,  increase in slot
revenues as a result of the opening of Nickel Town in late 1997.  Nickel Town is
designed to offer value oriented slot  customers an attractive  location to play
and is attracting  additional walk-in customers from the Las Vegas Strip because
it competes with Circus Circus, Slots-of Fun and Westward Ho with value oriented
food,  beverage and merchandise.  Table games revenue increased as the result of
significant play from selected  regular  customers.  Room revenues  decreased by
approximately  $2.2 million,  or 5.3%.  from $41.8 million 1997 to $39.6 million
during 1998 as a result of a slight  decrease in hotel  occupancy  from 96.8% to
95.2% and a decrease in average room rate of $3.43, or 5.8%, from $58.25 in 1997
to $54.82 in 1998.  Food and  beverage  revenues  increased  approximately  $2.3
million,  or 10.8%,  from $21.6 million 1997 to $23.9 million during 1998 due to
additional covers in the bars and restaurants.  Entertainment revenues increased
by  approximately  $650,000,  or 3.1%,  from $20.9 million  during 1997 to $21.5
million  during  1998 due to 27,000  increased  covers  from  737,000 in 1997 to
764,000 in 1998. Other revenues  increased by approximately  $600,000,  or 5.7%,
from $10.6 million during 1997 to $11.2 million during 1998 due primarily to the
Nickel  Town  gift  shop   revenues.   Promotional   allowances   increased   by
approximately  $1.3 million,  or 10.0%,  from $12.7 million during 1997 to $14.0
million  during  1998 due to  competition  for gaming  revenues on the Las Vegas
Strip.

Direct Costs and Expenses of Operating Departments

           Total direct costs and expenses of operating departments increased by
approximately  $5.6  million,  or 5.7%,  from  $98.2  million  in 1997 to $103.8
million in 1998.  Casino expense  increased by  approximately  $4.7 million,  or
11.5%,  from $40.6 million  during 1997 to $45.3 million  during 1998 and casino
expenses as a percent of casino revenue  increased  from 56.7% to 58.3%,  due to
increased  marketing  costs.  Room costs  decreased  $400,000 or 1.8% from $21.2
million in 1997 to $20.8 million in 1998, however, room costs as a percentage of
room  revenues  increased  from 50.8%  during 1997 to 52.7%  during 1998 as room
revenue  decreased.  Food and beverage  costs  increased by  approximately  $1.4
million,  or 8.8%,  from $16.1 million  during 1997 to $17.5 million  during the
1998  period  resulting  from a  corresponding  increase in  revenues.  Food and
beverage  costs as a percentage  of food and beverage  revenues  decreased  from
74.6%  during  1997 to 73.3%  during  1998  because  food and  beverage  revenue
increased   while  payroll  and  other  costs  remained   relatively   constant.
Entertainment  costs decreased by  approximately  $400,000,  or 2.2%, from $17.2
million during 1997 to $16.8 million during 1998 and entertainment  expense as a
percentage of entertainment  revenues  decreased from 82.5% during 1997 to 78.3%
in 1998 due to the increase in revenues in all Mardi Gras shows,  special events
and  the  box  office  operation.  Other  expenses  increased  by  approximately
$300,000,  or 9.9%,  from $3.0 million to $3.3 million due to the  corresponding
increase in Nickel Town gift shop sales.

Other Operating Expenses

           General  and  administrative   expenses  increased  by  approximately
$800,000,  or 3.1%,  from  $26.2  million  for 1997 to  $27.0  million  1998 due
primarily to increased  incentive and employee  retention plan costs required to
retain personnel in the competitive gaming environment. As a percentage of total
net revenues,  general and  administrative  expenses decreased from 17.0% during
the 1997  period  to  16.9%  during  the 1998  period.  Corporate  expenses  for
severance  settlements  caused by  changes  in the  composition  of the Board of
Directors and executive staff totaled  $550,000 in 1998.  Included were payments
for the  spread  on  options,  consulting  agreements  and  other  compensation.
Depreciation and amortization increased by approximately $1.7 million, or 15.8%,
from $10.5  million  during  the 1997  period to $12.1  million  during the 1998
period due to a significant  increase in depreciable  capital  expenditures  for
operating  assets  in  the  twelve  months  ended  December  31,  1998  totaling
approximately $20,000,000.

Other Income (Expense)

           Interest  expense,  other  increased  by $12.4  million  because  the
Company  issued  10% First  Mortgage  Notes in the  amount of $175.0  million on
August 13,  1997,  in addition to carrying the now  defeased  11%,  $100 million
notes until June 1, 1998,  when the 11%, $100 million notes were  redeemed.  The
Company  used part of the proceeds of the 10% First  Mortgage  Notes to purchase
United States  Government  securities,  which were deposited into an irrevocable
trust held to retire  the 11%,  $100  million  notes.  Interest  income on these
securities

                                                        22

<PAGE>



was $2.3 million in 1998. Interest income, other,  increased $500,000 because of
the increased  cash balances from the remaining  proceeds of the $175.0  million
notes.  Capitalized interest increased $1.9 million primarily on the Black Hawk,
Colorado, and Riviera Convention Center Expansion projects.

           During 1997 the Company  withdrew a secondary  offering due to market
conditions and, as a result,  charged costs totaling  $850,000 to other expense.
Also,  during  1997,  approximately  $400,000  in merger and  acquisition  costs
related  to the R&E  Gaming  Corporation  Plan of Merger  was  charged  to other
expense.  In 1998, $1.2 million in costs related to the abandoned Paulson Merger
were charged to other expense.

Extraordinary Item

           The 11%, $100 million  notes,  for which  retirement  monies were put
into trust in August  1997,  were  retired on June 1, 1998.  The call premium of
$4.3 million and unamortized  deferred  financing  costs totaling  $300,000 were
recorded  net of the 35%  income  tax  effect of $1.6  million  resulting  in an
extraordinary loss of $3.0 million.

Net Income

           As  a  result   of  the   additional   depreciation,   interest   and
extraordinary  item, net income  decreased by approximately  $6.1 million,  from
$2.0 million in 1997 to a loss of $4.1 million in 1998.

EBITDA

           EBITDA,  as defined,  decreased by approximately  $300,000,  or 1.0%,
from $29.4  million in 1997 to $29.1  million in 1998.  During the same periods,
EBITDA margin decreased from 19.1% to 18.2% of net revenues.

1997 Compared to 1996

Revenues

           Net revenues decreased by approximately  $10.6 million, or 6.5%, from
$164.4 million in 1996 to $153.8 million in 1997.  Casino revenues  decreased by
approximately  $8.8  million,  or 10.9%,  from  $80.4  million  in 1996 to $71.6
million in 1997 due to a general  softness  in the  gaming  market in Las Vegas.
Room revenues decreased by approximately $400,000, or 1.0% from $42.2 million in
1996 to $41.8 million in 1997 as a result of a decrease in hotel  occupancy from
98.2% to 96.8%. The decrease in occupancy was partially offset by an increase in
ADR from $57.07 in 1996 to $58.25 in 1997. Food and beverage revenues  decreased
approximately $1.0 million, or 4.8%, from $22.6 million in 1996 to $21.6 million
during  1997 due to fewer  covers  in the  bars and  restaurants.  Entertainment
revenues decreased by approximately $900,000, or 4.1%, from $21.8 million during
1996 to $20.9 million  during 1997, due to the reduction in number of covers for
the Splash variety show. Other revenues increased by approximately  $600,000, or
5.7%,  from $10.0 million during 1996 to $10.6 million during 1997 due primarily
to management fees of  approximately  $1.0 million for operating the Four Queens
Hotel/Casino  in downtown  Las Vegas.  In 1996 the Company  received a refund of
$576,000  from a union  health  and  welfare  trust fund for  reduced  premiums.
Promotional  allowances  remained  relatively  unchanged at approximately  $12.6
million during 1996 and $12.7 million in 1997.

Direct Costs and Expenses of Operating Departments

           Total direct costs and expenses of operating departments decreased by
approximately  $6.9  million,  or 6.5%,  from  $105.3  million  in 1996 to $98.2
million in 1997.  Casino expenses  decreased by approximately  $5.0 million,  or
11.1%,  from $45.7 million in 1996 to $40.7 million in 1997, and casino expenses
as a percent of casino  revenue  decreased  slightly  from 56.9% to 56.7%.  Room
costs decreased  approximately $1.0 million, or 5.0%, from $22.3 million in 1996
to $21.3  million  in 1997,  and room  costs as a  percentage  of room  revenues
decreased from 52.9% during 1996 to $50.8% during 1997.  Payroll and linen costs
were reduced due to the lower  occupancy.  Food and beverage  cost  decreased by
approximately  $100,000, or 0.5%, from $16.2 million in 1996 to $16.1 million in
1997  resulting from a  corresponding  decrease in revenues.  However,  food and
beverage  costs as a percentage  of food and beverage  revenues  increased  from
71.7% during 1996 to 74.6% during l997 because of reduced  beverage  promotional
revenue from the casino bars.  Entertainment  costs  decreased by  approximately
$700,  000, or 4.0% from $17.9 million  during 1996 to $17.2 million during 1997
due  to  the  reduced   expenses   associated   with  lower  covers  in  Splash.
Entertainment  expense as a percentage of entertainment  revenues increased from
82.4% in 1996 to 82.5% in 1997 due to a decrease  in  revenues.  Other  expenses
increased by

                                                        23

<PAGE>



approximately  $100,000,  or 3.3% from $2.9  million to $3.0  million due to the
corresponding increase in other revenues.

Other Operating Expenses

           General and  administrative  expenses decreased by approximately $1.6
million,  or 5.6%,  from $27.8  million in 1996 to $26.2  million in 1997 due to
decreased  incentive plan costs associated with lower earnings.  As a percentage
of total net revenues,  general and administrative expenses increased from 16.9%
in 1996  to17.0% in l997 as a result of  spreading of fixed costs over a smaller
revenue  base in the 1997 period.  Depreciation  and  amortization  increased by
approximately $2.3 million, or 27.7%, from $8.2 million in 1996 to $10.5 million
in 1997 due to capital expenditures of $21.0 million during the 1997 period.

Other Income (Expense)

           Interest  expense,  other,  increased  by $6.1  million  because  the
Company issued 10% First Mortgage Notes of $175.0 million on August13,  1997, in
addition to carrying the 11%, $100 million  notes until June 1, 1998,  when they
were  redeemed.  The Company used part of the proceeds of the 10% First Mortgage
Notes to  purchase  United  States  Government  securities  at a cost of  $104.3
million which were deposited  into an irrevocable  trust held to retire the 11%,
$100 million  notes.  Interest  income on these  securities  was $2.3 million in
1997. Interest income, other, increased  approximately  $759,000, or 65.0%, from
$1.2 million to $1.9 million  because of the  increased  cash  balances from the
remaining proceeds of the $175.0 million notes.

           During the first quarter of 1997, the Company  withdrew its secondary
offering  due to market  conditions  and, as a result,  charged  costs  totaling
$850,000 to other expenses.  Also, during 1997 approximately  $400,000 in merger
and  acquisition  costs  related to the  Paulson  Merger  were  charged to other
expense.

Net Income

           As a result of the factors  discussed  above and a decrease in income
taxes of  approximately  $3.1  million  at a 34.5%  effective  rate,  net income
decreased by approximately $6.4 million, or 75.3%, from $8.4 million during 1996
to $2.1 million during 1997.

EBITDA

           EBITDA , as defined,  decreased by  approximately  $2.1  million,  or
6.8%,  from  $31.5  million in 1996 to $29.4  million  in 1997.  During the same
periods, EBITDA margins were 19.2% and 19.1% respectively.

Liquidity and Capital Resources

           The  Company  had cash  and cash  equivalents  of  $48.9  million  at
December 31, 1998,  which was $16.3  million less than  balances at December 31,
1997, due primarily to capital expenditures of $34.1 million.

           The Company's net cash from operating  activities was approximately $
8.1  million  for 1998  compared  to $18.6  million in 1997.  Cash flows used in
investing  activities were $28.8 million in 1998 and $42.8 million in 1997. Cash
flows from financing  activities  were $4.0 million in 1998 and $63.9 million in
1997. EBITDA, as defined, for 1998 and 1997 was $29.1 million and $29.4 million,
respectively.  Management believes that cash flow from operations, combined with
the $48.9 million cash on hand,  will be sufficient to cover the Company's  debt
service and enable  investment  in budgeted  capital  expenditures  for the next
twelve months,  assuming that $40 million in project and equipment  financing is
available for the Black Hawk casino development.  Should the Company not be able
to finance all of the $40 million required for Black Hawk, capital  expenditures
in Las Vegas will be reduced or financed, if necessary.

           Scheduled  interest  payments  on the 11%,  $100  million  notes were
provided  by the use of the U. S.  Treasury  Bills held to retire the 11%,  $100
million notes and the related  interest income. A portion of the proceeds of the
10% Notes was used to acquire U.S. Treasury Bills sufficient to pay the interest
on the 11%, $100 million notes in December 1997 and the interest,  principal and
premium due June 1, 1998, when the retirement of the 11%, $100 million notes was
accomplished.  Substantially all of the covenants on the 11%, $100 million notes
were released as a result of the "contractual defeasance" in August of 1997. The
debt was redeemed on June 1, 1998, resulting in an extraordinary  charge, net of
tax, of $3 million.


                                                        24

<PAGE>



           On August 13, 1997,  the Company raised $175 million in 10% Notes due
August 15, 2004.  Cash flow from  operations  is not expected to pay 100% of the
principal at maturity.  Repayment will be dependent upon refinancing,  and there
can be no assurance  that the Company will be able to  refinance  the  principal
amount of the 10% Notes at  maturity.  The 10% Notes are not  redeemable  at the
option of the Company until August 15, 2001,  and  thereafter  are redeemable at
premiums beginning at 105.0% and declining each subsequent year to par in 2003.

           The 10% Note Indenture provides that, in certain  circumstances,  the
Company must offer to repurchase  the 10% Notes upon the  occurrence of a change
of control or certain other events. In the event of such mandatory redemption or
repurchase  prior to maturity,  the Company would be unable to pay the principal
amount of the 10% Notes without a refinancing.  The proposed  Paulson Merger was
specifically  excluded from the defined transactions which would be considered a
change in control.

           The 10% Note Indenture  contains certain  covenants,  which limit the
ability  of the  Company  and its  restricted  subsidiaries,  subject to certain
exceptions,  to: (i) incur additional indebtedness;  (ii) pay dividends or other
distributions,   repurchase   capital   stock  or  other  equity   interests  or
subordinated   indebtedness;   (iii)  enter  into  certain   transactions   with
affiliates;  (iv) create certain liens; (v) sell certain assets;  and (vi) enter
into certain mergers and consolidations.  As a result of these restrictions, the
ability  of the  Company  and  ROC to  incur  additional  indebtedness  to  fund
operations or to make capital  expenditures  is limited.  In the event that cash
flow from operations is insufficient to cover cash requirements, the Company and
ROC would be required to curtail or defer certain of their  capital  expenditure
programs  under these  circumstances,  which could have an adverse effect on the
Company's  operations.  Management  believes  that as of December 31, 1998,  the
Company was in compliance with the covenants.

           Management  considers it important to the competitive position of the
Riviera that expenditures be made to upgrade the property.  Capital expenditures
in Las Vegas totaled  approximately  $8.9 million in 1994, $7.8 million in 1995,
$14.9  million in 1996,  $19.8  million in 1997 and $23.6  million in 1998 which
excludes the Black Hawk project expenditures of $27.1 million for 1997 and 1998.
Management has budgeted  approximately $17.3 million for capital expenditures in
Las Vegas for 1999 including the completion of the convention  center expansion.
The Company  expects to finance the majority of such capital  expenditures  from
cash flow and equipment financing.

           In  August  1997,  the  Company,  through  its  indirect  100%  owned
subsidiary, Riviera Black Hawk, Inc., purchased approximately 71,000 square feet
of land in Black Hawk, Colorado, which is entirely zoned for gaming. The Company
is  constructing  a casino  containing  1,000 slot  machines,  14 table games, a
520-space covered parking garage,  and entertainment and food service amenities.
Management  intends to finance the project with a portion of the unused proceeds
from the new First Mortgage Notes, equipment leases and project (first mortgage)
financing.  The casino is  scheduled  to open in early 2000.  As of December 31,
1998,  the  company  had  invested  $27.1  million in the Black  Hawk,  Colorado
project.

Year 2000

           In the past, many computer  software  programs were written using two
digits  rather  than  four  to  define  the   applicable   year.  As  a  result,
date-sensitive  software may recognize a date using "00" as the year 1900 rather
than the year 2000.  This  situation is generally  referred to as the "Year 2000
Problem." If such situation  occurs,  the potential  exists for computer  system
failures  or  miscalculations   by  computer   programs,   which  could  disrupt
operations.

           The Company  has  conducted a  comprehensive  review of its  computer
systems and other systems for the purpose of assessing  its potential  Year 2000
Problem, and is in the process of modifying or replacing those systems which are
not Year 2000  compliant.  Based  upon this  review,  management  believes  such
systems will be compliant by mid-calendar  1999.  However,  if modifications are
not made or not completed timely, the Year 2000 Problem could have a significant
impact on the Company's operations.

           All costs  related to the Year 2000 Problem are expensed as incurred,
while the cost of new hardware and software is  capitalized  and amortized  over
its expected  useful life. The costs  associated  with Year 2000 compliance have
not been and are not  anticipated  to be  material  to the  Company's  financial
position or results of  operations.  As of December  31,  1998,  the Company has
incurred costs of approximately  $75,000  (primarily for internal labor) related
to the system  applications and anticipates  spending an additional  $200,000 to
become Year 2000  compliant.  The estimated  completion date and remaining costs
are based upon management's best estimates,  as well as third party modification
plans and other factors.  However, there can be no guarantee that such estimates
will occur and actual results could differ.

                                                        25

<PAGE>



           In addition,  the Company has communicated with its major vendors and
suppliers  to  determine  their  state of  readiness  relative  to the Year 2000
Problem and the  Company's  possible  exposure to Year 2000 issues of such third
parties. However, there can be no guarantee that the systems of other companies,
which  the  Company's  systems  may  rely  upon,  will be  timely  converted  or
representations  made to the Company by these parties are accurate.  As a result
the failure of a major vendor or supplier to adequately  address their Year 2000
Problem could have a significant adverse impact on the Company's operations.

           Planning for the Year 2000 Problem,  including  contingency planning,
is significantly complete and will be revised, if necessary.

Forward Looking Statements

           The Private Securities Litigation Reform Act of 1998 provides a "safe
harbor" for certain  forward-looking  statements.  Certain matters  discussed in
this  filing  could  be  characterized  as  forward-looking  statements.   These
forward-looking   statements   generally  relate  to  the  Company's  plans  and
objectives  for future  operations  and are based upon  management's  reasonable
estimates of future results or trends. The factors that may affect the Company's
expectations of its operations,  markets and services include, among others, the
following:  local and  regional  economic and  business  conditions;  changes or
developments in laws, regulations or taxes; actions taken or omitted to be taken
by third parties, including the Company's customers, suppliers,  competitors and
stockholders,   as  well  as   legislative,   regulatory,   judicial  and  other
governmental  authorities;  competition;  the loss of any licenses or permits or
the  Company's  failure to renew  gaming or liquor  licenses on a timely  basis;
delays in completing the construction of the casino in Black Hawk,  Colorado due
to casualty, weather or mechanical failure, or labor disputes or work stoppages;
changes  in  business  strategy,  capital  improvements  or  development  plans;
availability  of  additional   capital  to  support  capital   improvements  and
development;  and other  factors  discussed  under the  captions  "Business"  or
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations,"or elsewhere in this Form 10-K.

Recently Adopted Accounting Standards

           The Financial Accounting Standards Board ("FASB") issued Statement of
FinancialAccounting   Standards  ("SFAS")  No.  130,  "Reporting   Comprehensive
Income," which is effective for fiscal years  beginning after December 15, 1997.
This  statement  required  businesses to disclose  comprehensive  income and its
components  in  their  financial  statements.   The  Company  has  no  items  of
comprehensive income.

           The FASB issued SFAS No. 131, "Segment Reporting," which is effective
for fiscal years  ending  after  December  31,  1997.  This  statement  requires
companies to identify and disclose certain information  regarding segments based
upon the operating decisions of certain of the Company's management. The Company
believes that it has complied with the requirements of the FASB.

Recently Issued Accounting Standards

           The FASB issued SFAS No. 133,  "Accounting for Derivatives," which is
effective for fiscal years beginning after June 15, 1999. This statement defines
derivatives  and  requires  qualitative  disclosure  of  certain  financial  and
descriptive  information about a company's  derivatives.  The Company will adopt
SFAS No. 133 in the year ending December 31, 2000.  Management has not finalized
its analysis of this SFAS or the impact on the Company.

           The American Institute of Financial Accountants' Accounting Standards
Executive  Committee  issued  Statement of Position No. 98-5,  "Reporting on the
Costs of Start-Up  Activities." This standard provides guidance on the financial
reporting  costs  for  start-up  costs and  organization  costs.  This  standard
requires cost of start-up and organization costs to be expensed as incurred, and
is  effective  for fiscal years  beginning  after  December  15, 1998,  although
earlier application is encouraged. Management is evaluating the impact that this
standard could have on the Company's consolidated financial statements.

                                                        26

<PAGE>
Item 8.    Financial Statements and Supplementary Data

    Riviera Holdings Corporation
    Financial Statements for the Years Ended
    December 31, 1998, 1997 and 1996 and
    Independent Auditors' Report


<PAGE>
<TABLE>
<CAPTION>



RIVIERA HOLDINGS CORPORATION

TABLE OF CONTENTS
------------------------------------------------------------------------------------------------------------------------------------

                                                                                                                   Page

<S>                                                                                                                 <C>
INDEPENDENT AUDITORS' REPORT                                                                                        F-1


CONSOLIDATED FINANCIAL STATEMENTS:

   Balance Sheets as of December 31, 1998 and 1997                                                                  F-2

   Statements of Operations for the Years Ended December 31, 1998, 1997 and 1996                                    F-3

   Statements of Stockholders' Equity for Years Ended December 31, 1998, 1997 and 1996                              F-5

   Consolidated Statements of Cash Flows for Years Ended December 31, 1998, 1997 and 1996                           F-6

   Notes to Consolidated Financial Statements                                                                       F-8

</TABLE>


<PAGE>





INDEPENDENT AUDITORS' REPORT


Riviera Holdings Corporation
Las Vegas, Nevada

We have audited the accompanying consolidated balance sheets of Riviera Holdings
Corporation and  subsidiaries  (the "Company") as of December 31, 1998 and 1997,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period  ended  December  31, 1998.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

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

In our opinion,  such consolidated  financial  statements present fairly, in all
material respects, the financial position of the Company as of December 31, 1998
and 1997,  and the results of its  operations and its cash flows for each of the
three years in the period ended December 31, 1998, in conformity  with generally
accepted accounting principles.





Las Vegas, Nevada
February 19, 1999



<PAGE>
<TABLE>
<CAPTION>

RIVIERA HOLDINGS CORPORATION

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(In thousands, except share amounts)
-------------------------------------------------------------------------------------------------------------


ASSETS                                                                                     1998         1997

CURRENT ASSETS:
<S>                                                                                  <C>           <C>     
  Cash and cash equivalents                                                            $ 48,883     $ 65,151
  Accounts receivable, net                                                                5,389        4,938
  Inventories                                                                             2,727        3,509
  Prepaid expenses and other assets                                                       4,028        4,554
                                                                                         ------       ------

           Total current assets                                                          61,027       78,152

U.S. TREASURY BILLS HELD TO RETIRE $100 MILLION NOTES                                                106,596

PROPERTY AND EQUIPMENT, Net                                                             175,622      153,611

OTHER ASSETS, Net                                                                         8,260        9,507
                                                                                         ------       ------

TOTAL                                                                                 $ 244,909    $ 347,866
                                                                                      =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current portion of long-term debt                                                       $ 363        $ 364
  Accounts payable                                                                       11,865       10,890
  Accrued interest, other                                                                 6,563        6,570
  Accrued expenses                                                                       10,053        8,795
                                                                                        -------       ------

           Total current liabilities                                                     28,844       26,619
                                                                                        -------       ------

DEFERRED INCOME TAX LIABILITY, Net                                                        3,123        5,958
                                                                                         ------        -----

$100 MILLION NOTES TO BE RETIRED BY THE U.S. TREASURY BILLS                                          100,000
                                                                                                     -------

OTHER LONG-TERM LIABILITIES                                                               4,933        4,076
                                                                                         ------        -----

LONG-TERM DEBT, Net of current portion                                                  174,506      173,436
                                                                                       --------      -------

COMMITMENTS AND CONTINGENCIES (Note 12)                                                          

STOCKHOLDERS' EQUITY:
  Common stock ($.001 par value;  20,000,000  shares  authorized;  5,073,376 and
    4,903,680 shares at December 31, 1998 and 1997, respectively,
    issued and outstanding                                                                    5            5
  Additional paid-in capital                                                             13,457       13,711
  Treasury stock (34,300 shares at December 31, 1998)                                      (167)
  Notes receivable from employee stockholders                                                (3)        (207)
  Retained earnings                                                                      20,211       24,268
                                                                                         ------       ------

           Total stockholders' equity                                                    33,503       37,777
                                                                                         ------       ------

TOTAL                                                                                 $ 244,909    $ 347,866
                                                                                      =========    =========
</TABLE>

See notes to consolidated financial statements.


<PAGE>
<TABLE>
<CAPTION>

RIVIERA HOLDINGS CORPORATION

CONSOLIDATED  STATEMENTS OF OPERATIONS  YEARS ENDED DECEMBER 31, 1998,  1997 AND
1996 (In thousands, except per share and share amounts)
---------------------------------------------------------------------------------------------------------------------


                                                                                     1998         1997         1996

REVENUES:
<S>                                                                               <C>          <C>          <C>     
  Casino                                                                          $ 77,676     $ 71,624     $ 80,384
  Rooms                                                                             39,607       41,812       42,246
  Food and beverage                                                                 23,940       21,603       22,641
  Entertainment                                                                     21,543       20,895       21,778
  Other                                                                             11,155       10,556        9,987
                                                                                   -------      -------       ------

          Total                                                                    173,921      166,490      177,036
  Less promotional allowances                                                       13,966       12,697       12,627
                                                                                   -------      -------      -------

          Net revenues                                                             159,955      153,793      164,409
                                                                                   -------     --------     --------

COSTS AND EXPENSES:
  Direct costs and expenses of operating departments:
    Casino                                                                          45,293       40,620       45,699
    Rooms                                                                           20,859       21,235       22,344
    Food and beverage                                                               17,539       16,118       16,223
    Entertainment                                                                   16,861       17,235       17,956
    Other                                                                            3,308        3,011        2,916
  Other operating expenses:
    General and administrative                                                      27,028       26,211       27,778
    Corporate expenses, severance pay                                                  551
    Depreciation and amortization                                                   12,137       10,485        8,212
                                                                                   -------      -------       ------

         Total costs and expenses                                                  143,576      134,915      141,128
                                                                                  --------     --------      -------

INCOME FROM OPERATIONS                                                              16,379       18,878       23,281
                                                                                   -------      -------      -------

OTHER INCOME (EXPENSE):
  Interest expense on $100 million notes                                            (4,642)     (11,067)     (11,063)
  Interest income on Treasury Bills held to retire $100 million notes                2,334        2,267  
  Interest expense, other                                                          (19,545)      (7,908)      (1,022)
  Interest income, other                                                             2,440        1,926        1,167
  Interest capitalized                                                               2,679          771
  Other, net                                                                        (1,229)      (1,470)         505
                                                                                    --------     --------     ------

          Total other expense                                                      (17,963)     (15,481)     (10,413)
                                                                                   ---------    ---------    --------

INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR TAXES AND
  EXTRAORDINARY ITEM                                                                (1,584)       3,397       12,868

(BENEFIT) PROVISION FOR INCOME TAXES                                                  (533)       1,309        4,428
                                                                                     ------      ------        -----

INCOME (LOSS) BEFORE EXTRAORDINARY ITEM                                             (1,051)       2,088        8,440

EXTRAORDINARY ITEM (net of income tax of $1.6 million)                              (3,006)
                                                                                    -------      ------       ------

NET INCOME (LOSS)                                                                 $ (4,057)     $ 2,088      $ 8,440
                                                                                  ==========    ========     =======
</TABLE>

See notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
RIVIERA HOLDINGS CORPORATION

CONSOLIDATED  STATEMENTS OF OPERATIONS  YEARS ENDED DECEMBER 31, 1998,  1997 AND
1996 (In thousands, except per share and share amounts)
------------------------------------------------------------------------------------------------------------


                                                                        1998         1997         1996

EARNINGS PER SHARE DATA:
  Earnings (loss) per share before extraordinary item:
<S>                                                                       <C>         <C>           <C>   
    Basic                                                                 $ (0.21)    $ 0.42        $ 1.73
                                                                          =========   =======       ======

    Diluted                                                               $ (0.21)    $ 0.40        $ 1.63
                                                                          =========   =======       ======

  Earnings (loss) per share before extraordinary item:
    Basic                                                                 $ (0.60)      $ -            $ -
                                                                          =========     ====           ===

    Diluted                                                               $ (0.60)      $ -            $ -
                                                                          =========     ====           ===

  Earnings (loss) per share:
    Basic                                                                 $ (0.81)    $ 0.42        $ 1.73
                                                                          =========   =======       ======

    Diluted                                                               $ (0.81)    $ 0.40        $ 1.63
                                                                          =========   =======       ======

  Weighted-average common shares outstanding                               5,037       4,913         4,880
                                                                           ======      ======        =====

  Weighted-average common and common equivalent shares                     5,037       5,214         5,169
                                                                           ======      ======        =====

</TABLE>

See notes to consolidated financial statements.
                                                                     (Concluded)
<PAGE>
<TABLE>
<CAPTION>


RIVIERA HOLDINGS CORPORATION

CONSOLIDATED  STATEMENTS OF STOCKHOLDERS'  EQUITY YEARS ENDED DECEMBER 31, 1998,
1997 AND 1996 (In thousands, except share amounts)
-----------------------------------------------------------------------------------------------------------------------------


                                                                                                     Notes
                                                                                                   Receivable
                                                            Additional                                from
                                   Shares         Common      Paid-In    Retained    Treasury       Employee
                                 Outstanding      Stock       Capital    Earnings      Stock      Shareholders       Total

BALANCES,
<S>                               <C>               <C>      <C>         <C>          <C>             <C>           <C>     
  JANUARY 1, 1996                 4,800,000         $ 5      $ 12,537    $ 13,740                                   $ 26,282

  Stock issued under employee
    stock purchase plan             137,000                     1,543                                 $ (1,383)          160
  Collections of stockholders'
    receivables                                                                                            332           332
  Refunds on employee
    stock purchases                 (17,600)                     (198)                                     198    
  Director compensation plan          3,103                        37                                                     37
  Net income                              -                                 8,440                                      8,440
                                         --                                ------                                      -----

BALANCES,
  DECEMBER 31, 1996               4,922,503           5        13,919      22,180                         (853)       35,251

  Stock issued under employee
    stock purchase plan               6,200                        71                                      (71)   
  Collections of stockholders'
    receivables                                                                                            425           425
  Refunds on employee
    stock purchases                 (25,900)                     (292)                                     292    
  Director compensation plan            877                        13                                                     13
  Net income                                                                2,088                                      2,088
                                                                           ------                                     -----
BALANCES,
  DECEMBER 31, 1997               4,903,680           5        13,711      24,268                         (207)       37,777

  Stock issued under executive
    option plan                     269,096                       480                                                    480
  Collections and refunds of
    stockholders' receivables, net                                                                        (530)         (530)
  Purchase of treasury stock        (34,300)                                          $ (167)                           (167)
  Refunds on employee stock
    purchases                       (65,100)                     (734)                                     734    
  Net loss                                                                 (4,057)                                    (4,057)
                                                                           --------                                   -------

BALANCES,
  DECEMBER 31, 1998               5,073,376         $ 5      $ 13,457    $ 20,211     $ (167)              $(3)     $ 33,503
                                 ==========        ====     =========   =========    ========             ======    ========
</TABLE>



See notes to consolidated financial statements.

<PAGE>
<TABLE>
<CAPTION>

RIVIERA HOLDINGS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (In thousands)
-------------------------------------------------------------------------------------------------------------------------


                                                                                         1998          1997         1996

CASH FLOWS FROM OPERATING ACTIVITIES:                                                           
<S>                                                                                   <C>           <C>          <C>    
  Net income (loss)                                                                   $ (4,057)     $ 2,088      $ 8,440
  Adjustments to reconcile net income (loss) to net cash provided by
    operating activities:                                                                                    
    Depreciation and amortization                                                       12,137       10,485        8,212
    Provision for bad debts                                                                782          (16)         524
    Provision for gaming discounts                                                         (76)         (84)         232
    Gain on disposition of long-term debt, net                                                                      (505)
    Extraordinary item, call premium to retire $100 million notes                        4,624               
    Interest income on U.S. Treasury Bills to retire $100 million notes                 (2,334)
    Interest expense, $100 million notes                                                 4,642       11,067       12,085
    Interest paid on $100 million notes                                                 (4,614)     (11,420)     (12,072)
    Interest expense, other                                                             19,545        7,874
    Interest paid, other                                                               (17,688)
    Interest capitalized on construction projects                                       (2,679)        (771)
    Changes in operating assets and liabilities:                                                             
      Increase in U.S. Treasury Bills purchased to retire $100 million notes                         (2,267) 
      (Increase) decrease in accounts receivable, net                                   (1,157)         276       (1,535)
      Decrease (increase) in inventories                                                   782         (470)        (853)
      Decrease (increase) in prepaid expenses and other assets                             526       (1,862)         (90)
      (Decrease) increase in accounts payable                                             (774)       2,167          166
      Increase (decrease) in accrued expenses                                            1,258         (726)         104
      Increase (decrease) in current income taxes payable                                              (413)         362
      (Decrease) increase in deferred income taxes payable                              (2,835)       1,332        1,603
      Decrease in slot annuities payable                                                  (153)         253          578
      Increase in non-qualified pension plan obligation to CEO upon retire                 600          755        1,039
                                                                                          ----         ----        -----

           Net cash provided by operating activities                                     8,529       18,268       18,290

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures for property and equipment, other                               (21,432)     (19,752)     (14,923)
  Capital expenditures - Black Hawk, Colorado                                           (9,842)     (17,353) 
  Interest capitalized on construction projects                                          2,679          771  
  Increase in other assets - Black Hawk, Colorado                                          (27)        (100)
  (Increase) decrease in other assets                                                     (208)      (6,346)       1,906
                                                                                          ------     --------      -----

           Net cash used in investing activities                                       (28,830)     (42,780)     (13,017)
                                                                                       ---------    --------     --------
</TABLE>

See notes to consolidated financial statements.
                                                                     (Continued)

<PAGE>
<TABLE>
<CAPTION>
RIVIERA HOLDINGS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (In thousands)
-------------------------------------------------------------------------------------------------------------------------


                                                                                        1998          1997         1996

CASH FLOWS FROM FINANCING ACTIVITIES:                                                           
<S>                                                                                  <C>          <C>              <C>  
  Proceeds from long-term borrowings                                                              $ 172,848        $ 209
  U.S. Treasury Bills sold (purchased) to retire $100 million notes                  $ 108,930     (104,329) 
  Payments to retire $100 million notes with call premium                             (104,313)
  Payments on long-term borrowings                                                        (364)      (5,041)      (2,226)
  Purchase of treasury stock                                                              (167)
  Proceeds from issuance of stock to employees and directors                                             13          197
  Net collections, cancellations employee stock purchase plan and exercise of employee
    stock options                                                                          (50)         425          332
                                                                                           ----        ----          ---

           Net cash provided by (used in) financing activities                           4,036       63,916       (1,488)
                                                                                        ------      -------       -------

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                       (16,268)      39,404        3,785

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                            65,151       25,747       21,962
                                                                                       -------      -------       ------

CASH AND CASH EQUIVALENTS, END  OF YEAR                                               $ 48,883     $ 65,151     $ 25,747
                                                                                     =========    =========     ========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
  Income taxes paid                                                                       $  -      $ 1,860      $ 2,463
                                                                                          ====     ========      =======

SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
  Stock issued to employees for notes receivable                                          $  -         $ 71      $ 1,383
                                                                                          ====        =====      =======

  Noncash reductions of long-term debt                                                    $  -                     $ 845
                                                                                          ====                     =====

Property acquired with debt and accounts payable                                       $ 2,874
                                                                                       =======

</TABLE>


See notes to consolidated financial statements.
                                                                     (Concluded)
<PAGE>

RIVIERA HOLDINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
--------------------------------------------------------------------------------


1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Basis of Presentation - Riviera Holdings  Corporation and its wholly owned
      subsidiary,   Riviera  Operating  Corporation  ("ROC"),   (together,   the
      "Company"), were incorporated on January 27, 1993, in order to acquire all
      assets and liabilities of Riviera,  Inc. Casino-Hotel Division on June 30,
      1993, pursuant to a plan of reorganization.

      In July  1994,  management  established  a new  division,  Riviera  Gaming
      Management, Inc. ("RGM") for the purpose of obtaining management contracts
      in Nevada and other jurisdictions. In August 1995, RGM incorporated in the
      state of Nevada as a wholly owned subsidiary of ROC.

      All  significant   subsidiaries   are   consolidated   and  inter  company
      transactions eliminated in this presentation.

      Nature of  Operations - The primary line of business of the Company is the
      operation of the Riviera  Hotel and Casino (the  "Riviera") on the "Strip"
      in  Las  Vegas,  Nevada.  The  Company,   through  its  gaming  management
      subsidiary,  also  manages  the Four  Queens  Hotel and  Casino  (owned by
      Elsinore Corporation) in downtown Las Vegas (see Note 13). Currently,  the
      Company is developing a casino in Black Hawk,  Colorado,  through  Riviera
      Black Hawk, Inc., ("RBH") a wholly owned subsidiary of ROC. Riviera Gaming
      Management of Colorado, Inc. is a wholly owned subsidiary of RGM, and will
      manage the casino when completed.

      Casino  operations  are subject to  extensive  regulation  in the State of
      Nevada by the  Gaming  Control  Board and  various  other  state and local
      regulatory agencies. Management believes that the Company's procedures for
      supervising  casino operations,  recording casino and other revenues,  and
      granting  credit  comply,  in all material  respects,  with the applicable
      regulations.

      Principles  of  Consolidation  -  The  consolidated  financial  statements
      include the accounts of the Company,  its wholly owned  subsidiaries,  ROC
      and RGM, and their related subsidiary entities.  All material intercompany
      accounts and transactions have been eliminated.

      Cash and Cash Equivalents - All highly liquid investments  securities with
      a maturity of three months or less when acquired are considered to be cash
      equivalents.  The Company accounts for investment securities in accordance
      with  Statement  of  Financial  Accounting  Standards  ("SFAS")  No.  115,
      "Accounting for Certain Investments in Debt and Equity Securities."

      The  Company's  investment  securities,  along with  certain cash and cash
      equivalents that are not deemed securities under SFAS No. 115, are carried
      on the  consolidated  balance  sheets  in the cash  and  cash  equivalents
      category.  SFAS  No.  115  addresses  the  accounting  and  reporting  for
      investments  in equity  securities  that have  readily  determinable  fair
      values and for all  investments  in debt  securities,  and  requires  such
      securities  to be  classified  as either  held to  maturity,  trading,  or
      available for sale.



<PAGE>


      Management  determines the  appropriate  classification  of its investment
      securities at the time of purchase and re-evaluates such  determination at
      each balance sheet date.  Held-to-maturity  securities  are required to be
      carried at  amortized  cost.  At December  31,  1998 and 1997,  securities
      classified as held to maturity  comprised  debt  securities  issued by the
      U.S.  Treasury and other U.S.  government  corporations and agencies,  and
      repurchase   agreements,   with  an  amortized  cost  of  $35,781,000  and
      $50,534,000, respectively, maturing in three months or less.

      Inventories - Inventories consist primarily of food, beverage,  gift shop,
      and  promotional  inventories;  and  are  stated  at  the  lower  of  cost
      (determined on a first-in, first-out basis) or market.

      Property and Equipment - Property and  equipment  are stated at cost,  and
      capitalized lease assets are stated at the present value of future minimum
      lease payments at the date of lease  inception.  Interest  incurred during
      construction  of new  facilities  or  major  additions  to  facilities  is
      capitalized  and  amortized  over the life of the asset.  Depreciation  is
      computed by the  straight-line  method  over the shorter of the  estimated
      useful lives or lease terms, if applicable,  of the related assets,  which
      range from 5 for certain gaming  equipment to 40 years for buildings.  The
      costs of  normal  maintenance  and  repairs  are  charged  to  expense  as
      incurred. Gains or losses on disposals are recognized as incurred.

      The Company  periodically  assesses the recoverability of property,  plant
      and equipment and evaluates such assets for impairment  whenever events or
      circumstances  indicate  that  carrying  amount  of an  asset  may  not be
      recoverable.  Asset  impairment is determined to exist if estimated future
      cash flows,  undiscounted and without interest charges,  are less than the
      carrying amount.

      Other Assets - Other assets include bond offering  costs and  commissions,
      which  are  amortized  over  the life of the  debt,  and are  included  in
      interest expense.

      Restricted  Cash for  Periodic  Slot  Payments - At December  31, 1998 and
      1997, the Company had interest-bearing  deposits with a commercial bank in
      the amount of $55,000 and $208,000,  respectively, which are restricted as
      to use. These amounts  represent  deposits required by the State of Nevada
      Gaming Control Board to fund periodic slot payments due customers  through
      the year 2000 and are included in other noncurrent assets.

      Stock-Based  Compensation  - The  effect of stock  options  in the  income
      statement  is reported in  accordance  with  Accounting  Principles  Board
      Statement No. 25,  "Accounting for Stock Issued to Employees." The Company
      has adopted the  disclosures-only  provision of SFAS No. 123,  "Accounting
      for Stock-Based Compensation."  Accordingly, no compensation cost has been
      recognized  for unissued  stock options in the stock option plan (see Note
      15).

      Fair Value Disclosure as of December 31, 1998 and 1997:

           Cash and Cash Equivalents,  Accounts Receivable,  Restricted Cash for
           Periodic Slot Payments,  Accounts Payable,  and Accrued Liabilities -
           The carrying  value of these items is a reasonable  estimate of their
           fair value.

           Long-Term  Debt - The fair  value  of the  Company's  long-term  debt
           (including the $100 million Notes to be retired by the U.S.  Treasury
           Bills) is estimated based on the quoted market prices for the same or
           similar  issues or on the  current  rates  offered to the Company for
           debt of the same remaining  maturities.  Based on the borrowing rates
           currently  available to the Company for debt with  similar  terms and
           average  maturities,  the estimated  fair value of long-term  debt is
           approximately   $158,774,000  and  $276,638,000  in  1998  and  1997,
           respectively.



<PAGE>


      Casino Revenue - The Company  recognizes,  as gross  revenue,  the net win
      from gaming  activities,  which is the difference  between gaming wins and
      losses.

      Promotional  Allowances  -  Promotional  allowances  consist  primarily of
      accommodations,  entertainment,  and food and beverage services  furnished
      without charge to customers. The retail value of such services is included
      in  the  respective  revenue  classifications  and  is  then  deducted  as
      promotional allowances.

      The estimated costs of providing promotional  allowances are classified as
      costs  of  the  casino  operating  department  through   interdepartmental
      allocations. These allocations for the years ended December 31, 1998, 1997
      and 1996, are as follows (amounts in thousands):

                                                     1998      1997      1996

Food and beverage                                    $ 6,271   $ 5,759   $ 6,364
Rooms                                                $ 1,698   $ 1,442   $ 1,209
Entertainment                                        $ 1,518     $ 903     $ 922
                                                    --------    ------     -----

Total costs allocated to casino                      $ 9,487   $ 8,104   $ 8,495
                                                     =======   =======   =======

      Federal  Income  Taxes  -  The  Company  and  its   subsidiaries   file  a
      consolidated  federal tax return. The Company accounts for income taxes in
      accordance with SFAS No. 109,  "Accounting for Income Taxes." SFAS No. 109
      requires  recognition  of  deferred  tax  assets and  liabilities  for the
      expected future tax  consequences of events that have been included in the
      financial statements or tax returns. Deferred income taxes reflect the net
      tax effects of (i) temporary  differences  between the carrying amounts of
      assets and  liabilities for financial  reporting  purposes and the amounts
      used for  income  tax  purposes;  and (ii)  operating  loss and tax credit
      carryforwards.

      Estimates and  Assumptions - The  preparation  of financial  statements in
      conformity  with  generally  accepted   accounting   principles   requires
      management  to make  estimates  and  assumptions  that affect the reported
      amounts of assets and  liabilities,  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 accrued liabilities,  and the
      estimated  allowance  for  receivables.  Actual  results  may differ  from
      estimates.

      Reclassifications - Certain  reclassifications  have been made to the 1997
      and 1996 financial statements to conform to the current year presentation.
      These reclassifications had no effect on the Company's net income.

      Recently Adopted Accounting Standards - The Financial Accounting Standards
      Board  ("FASB")  issued SFAS No. 130,  "Reporting  Comprehensive  Income,"
      which is effective  for fiscal years  beginning  after  December 15, 1997.
      This statement required  businesses to disclose  comprehensive  income and
      its components in their financial statements.  The Company has no items of
      comprehensive income.

      The FASB issued SFAS No. 131, "Segment  Reporting," which is effective for
      fiscal years ending after  December  31,  1997.  This  statement  requires
      companies to identify and disclose certain information  regarding segments
      based upon the operating decisions of certain of the Company's management.
      The Company  believes that it has complied with the  requirements  of this
      SFAS.



<PAGE>


      Recently  Issued  Accounting  Standards  - The FASB  issued  SFAS No. 133,
      "Accounting  for  Derivatives,"   which  is  effective  for  fiscal  years
      beginning  after June 15, 1999.  This statement  defines  derivatives  and
      requires  qualitative  disclosure  of certain  financial  and  descriptive
      information about a company's derivatives. The Company will adopt SFAS No.
      133 in the year ending December 31, 2000. Management has not finalized its
      analysis of this SFAS or the impact on the Company.

      The  American  Institute  of  Certified  Public  Accountants'   Accounting
      Standards  Executive  Committee  issued  Statement  of Position  No. 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, and is effective for fiscal
      years beginning after December 15, 1998,  although earlier  application is
      encouraged.

      Management is evaluating  the impact that this standard  could have on the
      Company's future consolidated financial statements.

2.    ACCOUNTS RECEIVABLE

      Accounts   receivable   consist  of  the  following  at  December  31  (in
      thousands):

                                                         1998      1997

Casino                                                   $ 3,492   $ 2,211
Hotel                                                    $ 3,211   $ 3,115
Other                                                        $ -     $ 158
                                                            ----     -----

Total                                                      6,703     5,484
Allowance for bad debts and discounts                     (1,314)     (546)
                                                          -------     -----

Ending balance                                             5,389     4,938
                                                           ======    =====

      Changes in the casino and hotel  allowance for bad debts and discounts for
      the years ended December 31, 1998, 1997 and 1996, consist of the following
      (in thousands):

                                             1998      1997     1996

Beginning balance                              $ 546     $646     $741
Write-offs                                     $(391)   $(438)   $(912)
Recoveries                                      $ 81     $ 49     $ 61
Provision for bad debts                      $ 1,154     $372     $524
Provision for gaming discounts                 $ (76)    $(83)    $232
                                               ------    -----    ----

Ending balance                              $  1,314    $ 546    $ 646
                                            ========    =====     ====

3.    PREPAID EXPENSES AND OTHER ASSETS

      Prepaid  expenses and other assets consist of the following at December 31
(in thousands):

                                                       1998      1997

Prepaid gaming taxes                                   $ 1,209   $ 1,286
Prepaid federal income taxes                           $ 1,092   $ 1,190
Prepaid insurance                                        $ 431     $ 263
Other prepaid expenses                                 $ 1,296   $ 1,815
                                                       -------   -------

Total                                                  $ 4,028   $ 4,554
                                                       =======   =======



<PAGE>


4.    PROPERTY AND EQUIPMENT

      Property  and  equipment  consist  of the  following  at  December  31 (in
thousands):

                                                       1998         1997

Land and improvements                                   $37,638      $36,751
Buildings and improvements                              $80,381      $80,322
Equipment, furniture, and fixtures                      $71,238      $67,793
Construction in progress                                $32,083      $ 2,326
                                                        --------     -------

Total property and equipment                          $ 221,340    $ 187,192
Accumulated depreciation                              $ (45,718)   $ (33,581)
                                                      ----------   ----------

Net property and equipment                            $ 175,622    $ 153,611
                                                      ==========   =========

      In 1998 and 1997, approximately $2,679,000 and $771,000,  respectively, in
      interest costs were  capitalized on construction  projects.  Substantially
      all of the  Company's  property and  equipment is pledged as collateral to
      secure debt (see Note 8).

5.    OTHER ASSETS

      Other assets consist of the following at December 31 (in thousands):

                                                            1998      1997

Deposits                                                      $ 163     $ 725
Bond offering costs and commissions, net                    $ 6,366   $ 7,327
Other                                                       $ 1,676   $ 1,247
Restricted cash for periodic slot payments                     $ 55     $ 208
                                                              -----     -----

Total                                                       $ 8,260   $ 9,507
                                                            ========  =======

6.    ACCOUNTS PAYABLE AND ACCRUED EXPENSES

      Accounts payable consist of the following at December 31 (in thousands):

                                                          1998       1997

Outstanding chip and token liability                        $ 495      $ 681
Casino account deposits                                    $1,055      $ 203
Miscellaneous gaming                                       $  589      $ 716
                                                           ------      -----

Total liabilities related to gaming activities             $2,139     $1,600
Accounts payable to vendors                                $6,516     $7,944
Hotel deposits                                             $1,119     $  969
Construction payables                                      $1,749
Other                                                      $  342      $ 377
                                                           ------     -----

Total                                                   $  11,865   $ 10,890
                                                        =========   ========



<PAGE>


      Accrued expenses consist of the following at December 31 (in thousands):

                                                            1998       1997

Payroll, related payroll taxes, and employee benefits       $5,919   $ 5,593
Incentive, retention, and profit sharing plans              $2,797   $ 1,982
Other                                                       $1,337   $ 1,220
                                                           -------   -------

Total                                                     $ 10,053   $ 8,795
                                                          =========  =======

7.    OTHER LONG-TERM LIABILITIES

      Other  long-term  liabilities  consist of the following at December 31 (in
thousands):
<TABLE>
<CAPTION>

                                                                                          1998      1997

Periodic slot payments due to customers through 2000, pre-funded by
<S>                                                                                       <C>       <C>  
  restricted cash (see Note 1)                                                               $ 55     $ 208
Nonqualified pension plan obligation to the CEO of the Company, payable
  in 20 quarterly installments upon expiration of his employment contract,
  plus accrued interest                                                                   $ 4,878   $ 3,868
                                                                                          --------  -------

 Total other long-term liabilities                                                        $ 4,933   $ 4,076
                                                                                          =======   =======

</TABLE>


<PAGE>


8.    LONG-TERM DEBT

      Long-term debt consists of the following at December 31 (in thousands):
<TABLE>

                                                                                   1998         1997

10% First Mortgage Notes maturing on August 15, 2004,  bearing  interest payable
  semi-annually on February 15 and August 15 of each year,  redeemable beginning
  August 1, 2001,  at 105%;  2002 at 102.5%;  and 2003 and  thereafter  at 100%.
  These notes are collateralized by the land and physical structures  comprising
<S>                                                                               <C>          <C>      
  the Riviera Hotel and Casino                                                    $ 173,271    $ 172,963

5%Special  Improvement  District Bonds - issued by the City of Black Hawk, Black
  Hawk,  Colorado,  in the amount of $2,940,000 in July 1998. Bond proceeds will
  be used to finance certain road improvements and other infrastructure projects
  that will benefit the Riviera  BlackHawk  property  and the Isle of Capri,  an
  adjacent casino.  As of December 31, 1998,  approximately  $1,370,000 had been
  expended. Riviera BlackHawk is responsible to repay 50%
  of the obligation                                                                     687

Capitalized lease obligations (see Note 11)                                             473          741

5.6% note payable to computer  manufacturer  in monthly  installments of $8,835,
  including interest through August 2003, for a computer
  system and related peripherals                                                        438

8.5% unsecured, promissory notes in the original principal amount of
  $441,262, payable monthly and maturing December 31, 1998                                -           96
                                                                                         --           --

Total long-term debt                                                                174,869      173,800
Current maturities by terms of debt                                                    (363)        (364)
                                                                                       -----        -----

Total                                                                               174,506      173,436
                                                                                   ========     =======
</TABLE>

      Maturities of long-term debt for the year ending  December 31, 1998 are as
follows (in thousands):

1999                                                   $ 363
2000                                                   $ 419
2001                                                   $ 230
2002                                                   $ 235
2003                                                   $ 214
2004                                               $ 173,271
Thereafter                                             $ 137
                                                       -----

Total                                              $ 174,869
                                                   =========

      During the fourth  quarter of 1996 the  Company  restructured  and retired
      certain of its long-term  debt  resulting in  recognition of other income,
      net, of $505,000.

      Other income  (expense)  for the year ended  December  31, 1997,  includes
$850,000 of costs for a canceled secondary offering.



<PAGE>


      In February  1997,  the Company  entered into a $15.0  million,  five-year
      reducing  revolving  line of credit (the  "Credit  Facility").  The Credit
      Facility bears interest at prime plus 0.5% or LIBOR plus 2.9%. The Company
      has not utilized this line of credit.  The Credit Facility was modified as
      a result of the 10% First Mortgage  Notes and the proposed  Paulson Merger
      (see Note 12).  The  modifications  included an increase in the  allowable
      funded  debt-to-EBITDA  ratio to 4.75 to one. The Company is not currently
      meeting this  requirement and,  therefore,  cannot draw down on the Credit
      Facility at this time.  The Credit  Facility is callable  upon a change in
      control other than the Merger.

      On August 13, 1997,  the Company issued 10% First Mortgage Notes (the "10%
      Notes")  with a principal  amount of $175 million  dollars.  The 10% Notes
      were issued at a discount in the amount of $2.2  million.  The discount is
      being accreted over the life of the note on a straight-line basis. The 10%
      Note Indenture  contains  certain  covenants that limit the ability of the
      Company and its restricted  subsidiaries,  subject to certain  exceptions,
      to:  (i)  incur  additional  indebtedness;  (ii)  pay  dividends  or other
      distributions,  repurchase  capital  stock or other  equity  interests  or
      subordinated  indebtedness;  (iii) enter into  certain  transactions  with
      affiliates;  (iv) create certain liens; sell certain assets; and (v) enter
      into certain  mergers and  consolidations.  A portion of the proceeds from
      the 10% Notes  totaling $4.5 million was paid to a bank to retire  certain
      long-term  debt.  As  described  in Note 9, a portion of the  proceeds was
      invested in U.S.  Treasury  Notes to pay the 11% $100 Million  Notes.  The
      Company  has  registered  under the  Securities  Act of 1933,  as amended,
      securities  identical  to the 10% Notes.  On January 8, 1998,  the Company
      completed an exchange  offer for such  registered  securities  for the 10%
      Notes effective January 1, 1998.

      The 10% Notes are  unconditionally  guaranteed  by all existing and future
      restricted  subsidiaries of the Company,  which will not initially include
      Riviera Black Hawk, Inc.  ("RBH").  RBH will become collateral for the 10%
      First Mortgage Notes if certain consolidated  operating ratios are met. As
      of December 31, 1998,  RBH had no  operations.  At December 31, 1998,  RBH
      only had assets of approximately $27.1 million,  which represents the cost
      of the  land  for the  Black  Hawk  Casino  project  and  construction  in
      progress.  Therefore,  the Company  has not  included  separate  financial
      information  for the  guarantors  as of  December  31,  1998.  The Company
      intends  to  disclose  such  additional  information  in the future as the
      subsidiary develops.

      The  Company  has credit  facilities  totaling  $1,100,000  for letters of
      credit   issued   periodically   to  foreign   vendors  for  purchases  of
      merchandise.  The letters  require  payment upon  presentation  of a valid
      voucher.

9.    $100 MILLION NOTES RETIRED BY THE U.S. TREASURY BILLS

      On August 13, 1997,  the Company  used part of the  proceeds  from the 10%
      Notes to purchase United States Government  Securities (the  "Securities")
      at a cost of $109.8  million,  which  was  deposited  into an  irrevocable
      trust.  These  Securities,  together  with interest that was earned by the
      Securities,  was used to pay the principal,  interest from August 13, 1997
      to June 1,  1998,  and  call  premium  of  $4,313,000  due on the 11% $100
      Million  Notes on June 1, 1998,  which was the earliest  date the 11% $100
      Million Notes could be redeemed.  Interest  earned from the  Securities is
      included in Interest  income on Treasury Bills held to retire $100 million
      notes.  The  interest  expenses  from the 10%  Notes and from the 11% $100
      Million Notes are reported  separately on the  consolidated  statements of
      income.  As a part of the  funding  for the  retirement  of  these  notes,
      substantially  all the  covenants  (other than  payment of  principal  and
      interest) were released.  The call premium of $4.3 million and unamortized
      deferred  financing  costs totaling  $300,000 were recorded net of the 35%
      income tax effect of $1.6 million,  resulting in an extraordinary  loss of
      $3.0 million.



<PAGE>


10.   FEDERAL INCOME TAXES

      SFAS No. 109 requires the Company to compute  deferred  income taxes based
      upon the  difference  between  the  financial  statement  and tax basis of
      assets and  liabilities  using enacted tax rates in effect in the years in
      which the differences are expected to reverse.

      The  effective  income  tax rates on  income  attributable  to  continuing
      operations differ from the statutory federal income tax rates for the year
      ended December 31, 1998, 1997, and 1996, as follows (in thousands):
<TABLE>
<CAPTION>

                                  1998                  1997                   1996
                                 Amount      Rate      Amount      Rate       Amount       Rate

Taxes (benefit) at federal
<S>                               <C>          <C>       <C>        <C>          <C>         <C>   
  statutory rate                  $ (2,164)    (35.0)%   $ 1,189    35.0 %       $ 4,504     35.0 %
Other                                   21       0.3 %       120     3.5 %           (76)    (1.0)%
                                       ---      -----        ----    -----           -----    ------

Provision (benefit) for
  income taxes                    $ (2,143)    (34.7)%   $ 1,309    38.5 %       $ 4,428     34.0 %
                                  ==========   =======  ========    ======       ========    ======
</TABLE>

      The tax effects of the items  comprising  the  Company's  net deferred tax
      liability consist of the following at December 31 (in thousands):
<TABLE>
<CAPTION>

                                                                              1998        1997

Deferred tax liabilities:
<S>                                                                            <C>         <C>  
  Basis in long-term debt obligations                                                        $ 150
  Reserve differential for hospitality and gaming activities                   $ 1,208     $ 1,214
  Difference between book and tax depreciable property                           6,299       6,955
  Other                                                                            928         867
                                                                                  ----         ---

Total                                                                            8,435       9,186
                                                                                 ------      -----

Deferred tax assets:                                                       
  Reserves not currently deductible                                              2,899       1,845
  Bad debt reserves                                                                460         191
  AMT and other credits                                                          1,953       1,192
                                                                                ------       -----

Total                                                                            5,312       3,228
                                                                                 -----       -----

Net deferred tax liability                                                     $ 3,123       5,958
                                                                               =======       =====
</TABLE>

      The Company has $1,953,000 of alternative  minimum tax credit available to
      offset future income tax liabilities. The credit has no expiration date.



<PAGE>


11.   LEASING ACTIVITIES

      The  Company  leases  certain   equipment  under  capital  leases.   These
      agreements  have  been  capitalized  at the  present  value of the  future
      minimum lease  payments at lease  inception and are included with property
      and equipment.  Management estimates the fair market value of the property
      and equipment,  subject to the leases,  approximates the net present value
      of the leases.  The leased  property and  equipment  consist  primarily of
      signs and air conditioning equipment.

      The  following  is a schedule by year of the minimum  rental  payments due
      under capital leases, as of December 31, 1998 (in thousands).

1999                                                                     $ 462
2000                                                                     $ 232
                                                                         -----
Total minimum lease payments                                             $ 694
Taxes, maintenance, and insurance                                       $ (177)
Interest portion of payments                                             $ (44)
                                                                        ------

Present value of net minimum lease payments                              $ 473
                                                                         =====

      Rental expense for the years ended  December 31, 1998,  1997 and 1996, was
      approximately $287,000, $275,000 and $334,000, respectively.

      In addition,  the Company  leases retail space  (primarily to retail shops
      and fast food  vendors)  to third  parties  under  terms of  noncancelable
      operating leases that expire in various years through 2003. Rental income,
      which is included in other income,  for the years ended December 31, 1998,
      1997, and 1996, was approximately $1,615,000,  $1,555,000, and $1,573,000,
      respectively.

      At December 31, 1998,  the Company had future minimum annual rental income
      due under noncancelable operating leases as follows (in thousands):

1999                                       $ 1,183
2000                                         $ 647
2001                                         $ 428
2002                                         $ 276
2003                                         $ 150
                                             -----

Total                                      $ 2,684
                                           =======

12.   COMMITMENTS AND CONTINGENCIES

      The Company is party to several  routine  lawsuits,  both as plaintiff and
      defendant,  arising from normal operations of a hotel. Management does not
      believe that the outcome of such litigation in the aggregate,  will have a
      material adverse effect on the financial position,  results of operations,
      or cash flows of the Company.

      Allen  Paulson  Merger/Litigation  - In March 1998,  the Company was noti-
      fied by Allen E.  Paulson  ("Paulson") that he was terminating the Merger 
      Agreement  entered into in September of 1997, whereby a company controlled
      by  Paulson  would  acquire 100% of the Company's stock for $15 per share,
      plus  an interest  factor.  Approximately  $5.8 million  is being  held in
      escrow  for  the  holders  of  1,770,000  Riviera  Contingent Value Rights
      ("CVRs").  The CVRs entitle  their  holders to share only in the  proceeds
      of the funds  currently  in escrow.  Excluded  from  participating  in the
      CVRs  are  Morgens  Waterfall, SunAmerica, Keyport Life, and Paulson,  and
      their  affiliates and  associates,  who own an aggregate 3,355,000 Riviera
      shares.
<PAGE>
      The  Company  (and  three  major  stockholders  of the  Company  and other
      defendants  involved in the  terminated  merger) is involved in litigation
      with Paulson  relating to the Merger  Agreement  and related  issues.  The
      Company is paying the expenses of such  litigation,  but will not share in
      any recovery of the  escrow funds. There can be no  assurance that Riviera
      will be successful in  collecting  all or any part of the funds  currently
      held in the escrow account.

      Other  income  (expense)  for the year ended  December  31, 1998 and 1997,
      includes $1,231,000 and $400,000,  respectively,  in costs relating to the
      Allen Paulson merger/litigation.

      Black Hawk Project - The Company is  constructing  a casino in Black Hawk,
      Colorado,  on a site that was  purchased for $15.1 million in August 1997.
      As of December 31,  1998,  the Company had  expended  approximately  $27.1
      million on the  project.  The Company  entered into a contract for a gross
      maximum price of $27.5  million for the  construction  of the casino.  The
      Company  estimated  the cost of the  project at $65  million.  The Company
      believes  that it has,  or can raise,  sufficient  funds to  complete  the
      project.

      Employees  and Labor  Relations - As of December  31, 1998 the Riviera had
      approximately  2,100  full-time  equivalent  employees and had  collective
      bargaining  contracts with nine unions  covering  approximately  1,2000 of
      such employees  including food and beverage  employees,  rooms  department
      employees,  carpenters,  engineers, stage hands, musicians,  electricians,
      painters and teamsters.  The Company's agreements with the Southern Nevada
      Culinary  and  Bartenders  Union and Stage  Hands  Union,  which cover the
      majority of the Company's unionized  employees,  were renegotiated in 1998
      and expire in the year 2002.  Collective  Bargaining  Agreements  with the
      Operating Engineers, Electricians and Musicians will expire in 1999, while
      the Agreements with the Carpenters and Painters will expire in 2000. A new
      Agreement was negotiated with the Teamsters and expires in 2003.  Although
      unions have been active in Las Vegas,  management  considers  its employee
      relations to be satisfactory. There can be no assurance, however, that new
      agreements  will be  reached  without  union  action  or will be on  terms
      satisfactory to the Company.

13.   MANAGEMENT AGREEMENTS

      From August 1996 until February 1997, RGM was operating the Four Queens in
      downtown  Las Vegas  under an interim  management  agreement  for a fee of
      $83,333  per month.  A long-term  management  agreement  (the  "Management
      Agreement") with Elsinore Corporation ("Elsinore"),  the owner of the Four
      Queens,  went into effect on February 28, 1997,  the effective date of the
      Chapter 11 plan of reorganization  of Elsinore.  The Company believes that
      the terms of the Management Agreement are no less favorable to the Company
      than if the Company had negotiated with an independent party.

      The term of the Management  Agreement is approximately 40 months,  subject
      to earlier  termination  or  extension.  Either  party may  terminate  the
      Agreement if cumulative earnings before interest, taxes, depreciation, and
      amortization ("EBITDA") for the first two fiscal years are less than $12.8
      million. The Four Queens EBITDA for the 24 months ending February 28, 1999
      will approximate  $10.7 million.  Management and the Board of Directors of
      Elsinore  have agreed to continue  the  agreement  for its  original  term
      provided,  however,  that it could be  terminated  by either  party on six
      month's  notice.  RGM is  paid a  minimum  annual  management  fee of $1.0
      million,  payable  in equal  monthly  installments.  In  addition,  RGM is
      entitled  to a fee of 25% of the  amount by which the Four  Queens  EBITDA
      exceeds $8 million in any fiscal year.  Based upon current  historical and
      projected  EBITDA,  it is unlikely that the $8 million  threshold  will be
      met.  RGM has  received  warrants to purchase  1,125,000  shares of common
      stock of  Elsinore,  exercisable  during the term or extended  term of the
      Management   Agreement  at  an  exercise   price  of  $1  per  share.   In
      consideration  of Four Queens'  failure to meet the $12.8  million  EBITDA
      threshold for the first two years of the agreement,  RGME and Elsinore are
      negotiating a revised termination bonus.

      Either party can terminate the Management  Agreement if (i)  substantially
      all the Four Queens' assets are sold;  (ii) the Four Queens is merged;  or
      (iii) a majority of the Four Queens' or Elsinore's  shares are sold.  Upon
      such termination RGM will receive a $2.0 million  termination  bonus minus
      any amount realized or realizable upon exercise of the warrants.

      RGM has entered into a  management  agreement,  in principle  with Riviera
      Black Hawk,  Inc.  wherein RGM will receive  management fees for operating
      Riviera Black Hawk, Inc. for a percentage of revenues and EBITDA.

14.   EMPLOYMENT AGREEMENTS AND EMPLOYEE BENEFIT PLANS

      The Company has an employment  agreement with Mr.  Westerman,  Chairman of
      the Board and Chief  Executive  Officer  of the  Company.  This  agreement
      includes an annual base salary,  an incentive  bonus based upon the extent
      of adjusted operating earnings,  contributions to a Non-Qualified  Pension
      Plan,  and  contributions  to a Profit  Sharing  and  401(k)  Plan.  While
      employed by the company,  contributions to the pension plan are in amounts
      equal to Mr. Westerman's salary each year plus interest on accrued amounts
      of a rate equal to the  current  effective  interest  rate of the  Company
      (10.6% at December 31, 1998). In addition, the Company has termination fee
      agreements with each of the Directors, Executive Officers, and Significant
      Employees  pursuant  to which each of such  employees  will be entitled to
      receive  one  year's  salary  and  health  insurance   benefits  if  their
      employment  with the Company is terminated  within one year of a change of
      control of the Company and without cause, or the  involuntary  termination
      of Mr. Westerman.

      On March 20, 1998, Mr. Westerman  exercised a clause in the Agreement that
      requires the Company to establish a trust for the money in his  retirement
      fund  as  permitted  in his  employment  agreement  following  shareholder
      approval of a "change in control." The approval by the shareholders of the
      merger on February 5, 1998, constituted a change of control (see Note 12).
      The Company has entered  into an  agreement  with Mr.  Westerman to permit
      funding the trust amount at his option.

      The Company has an incentive  compensation plan, covering employees of the
      Company who, in the opinion of the Chairman of the Board,  either serve in
      key executive, administrative,  professional, or technical capacities with
      the  Company  or  other   employees  who  also  have  made  a  significant
      contribution  to the successful  and profitable  operation of the Company.
      The  amount  of  the  bonus  is  based  on   operating   earnings   before
      depreciation,  amortization, interest expense, provision for income taxes,
      extraordinary  losses and gains,  any provisions or payments made pursuant
      to the Plan, and any provisions or payments made pursuant to the incentive
      compensation of the Chairman and Chief



<PAGE>


      Executive  Officer.  During the years ended  December 31,  1998,  1997 and
      1996, the Company  recorded  accrued  bonuses of $1,593,475,  $920,000 and
      $2,588,000, respectively, based upon the above incentive compensation plan
      and the incentive  compensation  plan  established for the Chairman of the
      Board under his employment agreement.

      The Company  contributes  to  multi-employer  pension  plans under various
      union agreements to which the Company is a party. Contributions,  based on
      wages paid to covered employees, were approximately $1,657,605, $1,604,199
      and  $1,650,000  for the years ended  December 31, 1998,  1997,  and 1996.
      These contributions were for approximately 1,400 employees, including food
      and beverage employees, room department employees, carpenters,  engineers,
      stage hands, electricians, painters, and teamsters. The Company's share of
      any unfunded  liability  related to  multi-employer  plans, if any, is not
      determinable.

      The  Company  sponsors  a Profit  Sharing  and 401(k)  Plan that  incurred
      administrative expenses of approximately $36,000,  $44,000 and $34,000 for
      the years ended 1998, 1997, and 1996, respectively.

      The profit  sharing  component  of the  Profit  Sharing  and  401(k)  Plan
      provides that the Company will make a contribution equal to one percent of
      each  eligible  employee's  annual  compensation  if a  prescribed  annual
      operating  earnings  target is attained  and an  additional  1/10th of one
      percent thereof for each $200,000 by which operating earnings is exceeded,
      up to a maximum of three  percent  thereof.  The  Company may elect not to
      contribute  to the Profit  Sharing  and  401(k)  Plan if it  notifies  its
      employees  by the first day of January of the  Profit  Sharing  and 401(k)
      Plan year. An employee  will become vested in the Company's  contributions
      based on the employee's years of service.  An employee will receive a year
      of  vesting  service  for each plan year in which the  employee  completed
      1,000 hours of service. Vesting credit will be allocated in 20% increments
      for each year of service  commencing  with the  attainment of two years of
      service.  An employee will be fully vested following the completion of six
      years of service.

      The 401(k)  component of the Profit  Sharing and 401(k) Plan provides that
      each eligible  employee may contribute up to 15% of such employee's annual
      compensation,  and that the Company will  contribute 1% of each employee's
      annual  compensation  for  each  4% of  compensation  contributed  by  the
      employee,  up to a maximum of 2%. All  non-union  employees of the Company
      are eligible to participate in the Profit Sharing and 401(k) Plan after 12
      consecutive months of service with the Company.

      As a result of the  scheduled  opening  of  several  new Las  Vegas  Strip
      properties  in 1998,  1999,  and 2000,  an  estimated  38,000 jobs must be
      filled,  including 5,000 supervisory  positions.  Because of the Riviera's
      performance  and  reputation,  its employees are prime  candidates to fill
      these positions.  In the third quarter of 1998,  management  instituted an
      employee  retention  plan (the  "Plan"),  which  covers  approximately  90
      executive,  supervisory,  and technical support positions,  and includes a
      combination  of  employment   contracts,   stay  put   agreements,   bonus
      arrangements, and salary adjustments.

      The period costs  associated with the Plan are being accrued as additional
      payroll costs and included  approximately $287,000 in 1998. The total cost
      of the Plan is estimated to be approximately  $2.0 million over the period
      July 1, 1998, through June 30, 2001.

15.   STOCK OPTION PLANS

      At a meeting  held on July 27,  1993,  the  Company's  Board of  Directors
      adopted  a  stock  option  plan   providing   for  the  issuance  of  both
      nonqualified  and  incentive  stock  options (as  defined in the  Internal
      Revenue  Code).  This stock  option  plan was  ratified  by the  Company's
      stockholders at the April 26, 1994,  annual meeting.  The number of shares
      available for purchase  under the Stock Option Plan as adopted was 120,000
      (as  adjusted  pursuant  to  antidilution  provisions).  The  stockholders
      approved a  four-for-one  stock split,  increasing the number of shares of
      Common  Stock  available  for  purchase  under  the Stock  Option  Plan to
      480,000.  Options were granted for 228,000 shares for 1993; 132,000 shares
      for 1994;  none for 1995;  and 110,000 for 1996. No options were exercised
      in 1996,  or 1997.  On November  21, 1996,  the Company  amended the Stock
      Option Plan, which was approved at the annual meeting held on May 8, 1997,
      to increase  the number of shares  available  under the Stock  Option Plan
      from 480,000  shares to 1,000,000  shares and granted  options to purchase
      300,000  additional shares to Mr.  Westerman.  During 1998, 95,000 options
      were issued for 1997 to executives excluding Mr.  Westerman.  Also  during
      1998, 284,000 options were exercised by executives. In connection with the
      resignation  of a Board member  and an employee, the Company paid approxi-
      mately $258,000 (included in  non-recurring  corporate expenses) on 54,000
      options for the difference between  the weighted average  option price  of
      $2.22 compared to the weighted  average market price of $7.00 on the dates
      of exercise.  On January 21, 1999, 95,000 options were issued for 1998  to
      executives   excluding  Mr.  Westerman.  Options vest 25% on  the  date of
      grant  and 25% each subsequent year. The term of an option can in no event
      be  exercisable  more  than  10  years  (five  years  in  the  case of  an
      incentive  option  granted  to  a  shareholder  owning  more than  10%  of
      the Common  Stock),  or such  shorter period,  if any, as may be necessary
      to comply with the  requirements  of state securities laws, from the  date
      such option is granted.

      On March 5,  1996,  the  Board of  Directors  adopted  an  employee  stock
      purchase  plan (the  "Stock  Purchase  Plan"),  which was  approved by the
      stockholders  on May 10, 1996.  A total of 300,000  shares of common stock
      (subject to  adjustment  for  capital  changes)  in the  aggregate  may be
      granted  under  the  stock  purchase  plan.  The  Stock  Purchase  Plan is
      administered by the compensation  committee.  The purchase price per share
      of stock shall be 85% of per share market value of the common stock on the
      purchase  date.  Employees may require the Company to repurchase the stock
      prior to  fulfillment  under  certain  conditions.  Refunds  represent the
      return of payroll deductions to employees for persons exiting the Plan. On
      May 31, 1996, approximately 560 union and non-union employees participated
      in the 1996 employee stock purchase plan.  Under the plan,  137,000 shares
      were issued to employees at $11.26 (85% of market price at May 10,  1996),
      for $160,000 cash and the balance in notes receivable of $1,383,000, which
      are payable  over two years via payroll  deduction.  During  1997,  25,900
      shares  were  returned  through  the plan as the  result of refunds to the
      employees.  During 1997,  6,200  shares were  issued  at  $11.47 for notes
      receivable of $71,145.  During 1998,  65,100 shares of stock were returned
      to the Plan due to employee refunds.

      On May 10, 1996, the  stockholders  approved a  Nonqualified  Stock Option
      Plan for Non-Employee Directors (the "Nonqualified Stock Option Plan") and
      a Stock  Compensation  Plan  for  Directors  serving  on the  Compensation
      Committee  (the "Stock  Compensation  Plan").  The total  number of shares
      available  for  purchase  under  each  plan  is  50,000.  Pursuant  to the
      Nonqualified  Stock  Option  Plan,  directors  were  granted   options  to
      purchase  10,000  shares at exercise  prices of $13.25 and  $13.50,  which
      represented  fair  market value in 1996.  As of  December 31, 1997,  3,980
      shares were issued pursuant  to the Stock Compensation  Plan at $12.08 per
      share.  In May and August of 1998, an additional 2,000 options were issued
      at  the market  price,  on the respective dates of issuance, of $9.00  and
      $7.50 per share. As a result of  the  departure  of Board  members,  6,000
      non-vested options were extinquished.

<PAGE>


      Accordingly,  no  compensation  cost has been  recognized for  unexercised
      options  remaining in the stock option plan. Had compensation cost for the
      Company's stock option plan been determined based on the fair value at the
      date of grant for awards  consistent  with the provisions of SFAS No. 123,
      the  Company's net income and pro forma net income common share and common
      share  equivalent  would  have been  decreased  to the pro  forma  amounts
      indicated below at December 31 (in thousands, except per share amounts).
<TABLE>
<CAPTION>

                                                                                   1998         1997         1996

<S>                                                                              <C>           <C>          <C>  
Net (loss) income - as reported                                                  $ (4,057)     $ 2,088      $ 8,440
Net (loss) income - pro forma                                                    $ (4,548)     $ 2,058      $ 8,380
Basic (loss) income per common share - as reported                                $ (0.81)      $ 0.42      $  1.73
Basic (loss) earnings per common share - pro forma                                $ (0.90)      $ 0.42      $  1.72
Diluted (loss) earnings per common and common share equivalent -
  as reported                                                                     $ (0.81)      $ 0.40      $  1.63
Diluted (loss) earnings per common and common share equivalent -
  pro forma                                                                       $ (0.90)      $ 0.39      $  1.61
</TABLE>

      The fair  value of each  option  grant is  estimated  on the date of grant
      using  the   Black-Scholes   option   pricing  model  with  the  following
      weighted-average  assumptions  used for  grants  in 1998,  1997 and  1996,
      respectively:  dividend yield of 0% for all years;  expected volatility of
      62%, 72% and 77%;  risk-free interest rates of 5.46%, 6.50% and 5.70%; and
      expected  lives of five years for all years.  The  weighted  fair value of
      options  granted  in  1998,  1997 and 1996 was  $7.21,  $6.81  and  $3.08,
      respectively.

      Due to the fact that the  Company's  stock option  programs vest over many
      years  and  additional  awards  are made  each  year,  the above pro forma
      numbers are not  indicative  of the  financial  impact had the  disclosure
      provisions of SFAS No. 123 been applicable to all years of previous option
      grants.  The above  numbers do not include  the effect of options  granted
      prior to 1995.

16.   EARNINGS PER SHARE

      For the year ended  December 31, 1997,  the Company  adopted SFAS No. 128,
      "Earnings per Share." This statement  established  standards for computing
      and presenting earnings per share ("EPS") and required  restatement of all
      prior-period  EPS data  presented.  Basic EPS is computed by dividing  net
      income by the weighted-average number of common shares outstanding for the
      period.  Diluted EPS is computed  by dividing  net income by the  weighted
      number of common and common equivalent shares  outstanding for the period.
      Options to purchase  common stock,  whose  exercise price was greater than
      the average  market  price for the  period,  have been  excluded  from the
      computation of diluted EPS. Such antidilutive  options outstanding for the
      12 months ended December 31, 1998,  1997 and 1996,  were 531,000,  410,000
      and 414,000, respectively.



<PAGE>


      A  reconciliation  of income and shares  for basic and  diluted  EPS is as
follows (amounts in thousands, except per share amounts):
<TABLE>
<CAPTION>

                                                                                Year Ended 1998
                                                                 ------------------------------------------------
                                                                    Income             Shares          Per-Share
                                                                 (Numerator)       (Denominator)        Amount


Basic EPS -
<S>                                                                <C>                  <C>             <C>    
  Loss available to common stockholders                            $ (4,057)            $ 5,037         $(0.81)
Effect of dilutive securities -
  Options                                                                 -                   -
                                                                   ---------            --------

Diluted EPS -
  Loss available to common stockholders plus
    assumed conversions                                            $ (4,057)            $ 5,037         $(0.81)
                                                                   =========           ========         =======

                                                                               Year Ended 1997
                                                                  ----------------------------------------------
                                                                     Income             Shares          Per-Share
                                                                  (Numerator)       (Denominator)        Amount

Basic EPS -
  Income available to common stockholders                           $ 2,088             $ 4,913        $ 0.42
                                                                                                       =======
Effect of dilutive securities -
  Options                                                                 -                 301
                                                                    -------             -------
Diluted EPS -
  Income available to common stockholders plus
    assumed conversions                                             $ 2,088             $ 5,214        $ 0.40
                                                                   ========            ========        =======

                                                                               Year Ended 1996
                                                                  -----------------------------------------------
                                                                     Income             Shares          Per-Share
                                                                  (Numerator)       (Denominator)        Amount

Basic EPS -
  Income available to common stockholders                           $ 8,440             $ 4,880        $ 1.73
                                                                                                      ========
Effect of dilutive securities -
  Options                                                               $ -               $ 289
                                                                    --------           ---------

Diluted EPS -
  Income available to common stockholders plus
    assumed conversions                                             $ 8,440             $ 5,169        $ 1.63
</TABLE>

      On  November  16,  1995,  the  stockholders  of the  Company  approved  an
      amendment to the Company's  Amended and Restated Articles of Incorporation
      to  increase  the  authorized  shares of common  stock from  5,000,000  to
      20,000,000  and  a  four-for-one  stock  split.  Accordingly,   per  share
      information,  average number of shares  outstanding,  and number of shares
      outstanding in the  accompanying  consolidated  financial  statements have
      been  adjusted  for the  stock  split as of the  earliest  date  presented
      (January 1, 1996).



<PAGE>


17.   SEGMENT DISCLOSURES

      The Company provides Las Vegas-style gaming,  amenities and entertainment.
      The Company's four reportable  segments are based upon the type of service
      provided: Casino, rooms, food and beverage, and entertainment.  The casino
      segment  provides  customers with gaming  activities  through  traditional
      table games and slot machines.  The rooms segment provides hotel services.
      The food and  beverage  segment  provides  restaurant  and drink  services
      through  a variety  of themed  restaurants  and  bars.  The  entertainment
      segment provides  customers with a variety of live Las Vegas-style  shows,
      reviews, and concerts. All other segment activity consists of rent income,
      retail store income,  telephone, and other activity. The Company evaluates
      each  segment's   performance  based  on  segment  operating  profit.  The
      accounting  policies  of the  operating  segments  are the  same as  those
      described in the summary of significant accounting policies.
<TABLE>
<CAPTION>

                                                                 Food and
               1998                   Casino         Rooms       Beverage       Entertainment   All Other       Total

<S>                                     <C>           <C>          <C>             <C>              <C>          <C>      
Revenues from external customers        $ 77,676      $ 36,626     $ 17,635        $ 19,764         $ 8,254      $ 159,955
Intersegment revenues                                    2,981        6,305           1,779           2,901         13,966
Segment profit                            32,382        15,767           96           2,903           4,946         56,094


               1997

Revenues from external customers          71,624        39,153       15,916          19,855           7,244        153,792
Intersegment revenues                                    2,659        5,687           1,040           3,312         12,698
Segment profit                            31,004        17,918         (202)          2,620           4,233         55,573


               1996

Revenues from external customers          80,384        40,078       16,262          20,714           6,970        164,408
Intersegment revenues                                    2,168        6,379           1,064           3,017         12,628
Segment profit                            34,685        17,734           39           2,758           4,054         59,270
</TABLE>


      Reconciliation  of segment profit to consolidated  net income before taxes
and extraordinary items:
<TABLE>
<CAPTION>

                                                             1998       1997        1996

<S>                                                         <C>         <C>        <C>     
Segment profit                                              $ 56,094    $ 55,573   $ 59,270
Other operating expenses                                    $ 39,715    $ 36,695   $ 35,989
Other expense                                               $ 17,963    $ 15,481   $ 10,413
                                                           ---------   ---------   --------

Net income (loss) before provision (benefit)
  for taxes and extraordinary items                         $ (1,584)    $ 3,397   $ 12,868
                                                            =========    =======   ========
</TABLE>

      The Company does not market to residents of Las Vegas.  Significantly  all
      revenues are derived from patrons visiting the Company from other parts of
      the United States and other countries.  Revenues from a foreign country or
      region may exceed  10% of all  reported  segment  revenues;  however,  the
      Company cannot identify such  information  based upon the nature of gaming
      operations.

<PAGE>

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

           None.


                                                        27

<PAGE>



                                                     PART III

Item 10.   Directors and Executive Officers of the Registrant.

           Information  regarding this item is  incorporated by reference to the
Company's Proxy  Statement dated April 30, 1999,  relating to the Annual Meeting
of Stockholders to be held on June 2, 1999 and is made a part hereof.

Item 11.   Executive Compensation

           Information  regarding this item is  incorporated by reference to the
Company's Proxy  Statement dated April 30, 1999,  relating to the Annual Meeting
of Stockholders to be held on June 2, 1999 and is made a part hereof.

Item 12.   Principal Shareholders

           Information  regarding this item is  incorporated by reference to the
Company's Proxy  Statement dated April 30, 1999,  relating to the Annual Meeting
of Stockholders to be held on June 2, 1999 and is made a part hereof.

Item 13.   Certain Relationships and Related Transactions

           Information  regarding this item is  incorporated by reference to the
Company's Proxy  Statement dated April 30, 1999,  relating to the Annual Meeting
of Stockholders to be held on June 2, 1999, and is made a part hereof.


                                                        28

<PAGE>



                                              PART IV

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

           (a)(1)   List of Financial Statements.

           The  following  Independent  Auditors'  Report  and the  Consolidated
Financial Statements of the Company are incorporated by reference into this Item
14 of Form 10-K by Item 8 hereof:

           -  Independent Auditors' Report dated February 19, 1999.
           -  Consolidated Balance Sheets as of December 31, 1998 and 1997.
           - Consolidated  Statements of Income for the Years Ended December 31,
           1998, 1997 and 1996 - Consolidated Statements of Stockholders' Equity
           for the Years Ended December 31, 1998, 1997 and
              1996.
           -  Consolidated Statements of Cash Flows for the Years Ended December
              31, 1998, 1997 and 1996.
           -  Notes to Consolidated Financial Statements.

           (a)(2)   List of Financial Statement Schedules.

           No financial  statement schedules have been filed herewith since they
are either not required,  are not  applicable,  or the required  information  is
shown in the consolidated financial statements or related notes.

           (a)(3)   List of Exhibits.

           Exhibits  required  by Item 601 of  Regulation  S-K are listed in the
Exhibit Index herein, which information is incorporated by reference.

           (b)      Reports on Form 8-K

           No  reports on Form 8-K were  filed  with the  Commission  during the
fourth quarter ended December 31, 1998.




                                                        29

<PAGE>



                                                    SIGNATURES


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

                                                    RIVIERA HOLDINGS CORPORATION


                                                   By:/s/   WILLIAM L. WESTERMAN
                                                            William L. Westerman
                                           Chief Executive Officer and President
                                                   (Principal Executive Officer)

                                                              March 4, 1999


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

Signature                                   Title                                                Date


<S>                                         <C>                                                  <C>   
/s/ WILLIAM L. WESTERMAN                    Chairman of the Board, Chief                         March 4,1999
William L. Westerman                        Executive Officer and President


/s/ DUANE R. KROHN                          Treasurer (Principal Financial                       March 4,1999
Duane R. Krohn                              and Accounting Officer


/s/ ROBERT R. BARENGO                       Director                                             March 4,1999
Robert R. Barengo


/s/ RICHARD L. BAROVICK                     Director                                             March 4, 1999
-----------------------
Richard. L. Barovick


/s/ JAMES N. LAND, JR.                      Director                                             March 4,1999
James N. Land, Jr.
</TABLE>

                                                        30

<PAGE>



                                                  EXHIBIT  INDEX

<TABLE>
<CAPTION>

Exhibit                                                                                                             
Number                               Description
<S>                                  <C>               
2.1*                                 Agreement and Plan of Merger, dated September 15, 1997, by and among
                                     R&E Gaming Corp., Riviera Acquisitions Sub, Inc., and Riviera Holdings
                                     Corporation (see Exhibit 10.1 to Current Report on Form 8-K filed with the
                                     Commission on September 29, 1997, Commission File No. 0-21430)

3.1*                                 Second Restated Articles of Incorporation of the Company (see Exhibit 3.1
                                     to Registration Statement on Form S-4 filed with the Commission on
                                     September 10, 1997, Commission File No. 0-21430)

3.2*                                 Bylaws of the Company  (see  Exhibit 3.2 to
                                     Registration  Statement  on Form S-4  filed
                                     with the  Commission on September 10, 1997,
                                     Commission File No.
                                     0-21430)

3.3*                                 Articles of Incorporation of Riviera Operating Corporation (see Exhibit 3.3
                                     to Registration Statement on Form S-4 filed with the Commission on
                                     September 10, 1997, Commission File No. 0-21430)

3.4*                                 Bylaws  of  Riviera  Operating  Corporation
                                     (see Exhibit 3.4 to Registration  Statement
                                     on Form S-4 filed  with the  Commission  on
                                     September  10,  1997,  Commission  File No.
                                     0-21430)

3.5*                                 Articles of Incorporation of Riviera Gaming Management, Inc. (see Exhibit
                                     3.5 to Registration Statement on Form S-4 filed with the Commission on
                                     September 10, 1997, Commission File No. 0-21430)

3.6*                                 Bylaws of Riviera Gaming Management, Inc. (see Exhibit 3.6 to Registration
                                     Statement on Form S-4 filed with the Commission on September 10, 1997,
                                     Commission File No. 0-21430)

3.7*                                 Articles of Incorporation of Riviera Gaming Management - Elsinore, Inc. (see
                                     Exhibit 3.7 to Registration Statement on Form S-4 filed with the Commission
                                     on September 10, 1997, Commission File No. 0-21430)

3.8*                                 Bylaws of Riviera Gaming Management - Elsinore, Inc. (see Exhibit 3.8 to
                                     Registration Statement on Form S-4 filed with the Commission on September
                                     10, 1997, Commission File No. 0-21430)

3.9*                                 Articles of Incorporation of Riviera Gaming Management of Colorado, Inc.
                                     (see Exhibit 3.9 to Amendment No. 1 to Registration Statement on Form S-4
                                     filed with the Commission on December 9, 1997, Commission File No. 0-
                                     21430)

3.10*                                Bylaws of Riviera Gaming Management of Colorado, Inc. (see Exhibit 3.10
                                     to Amendment No. 1 to Registration Statement on Form S-4 filed with the
                                     Commission on December 9, 1997, Commission File No. 0-21430)

4.1*                                 Indenture dated as of August 13, 1997 between the Company and Norwest

                                                        31

<PAGE>



                                     Bank Minnesota, N.A., as trustee, the Guarantors party thereto, Jefferies &
                                     Company, Inc. and Ladenburg Thalmann & Co. Inc. (see Exhibit 4.2 to
                                     Current Report on Form 8-K filed with the Commission on August 18, 1997,
                                     Commission File No. 0-21430)

4.2*                                 Form of the Company's 10% Senior Notes due 2004 (included in Exhibit 4.1)

5.1*                                 Opinion  of  Dechert  Price  &  Rhoads  re:
                                     legality  (see Exhibit 5.1 to Amendment No.
                                     1 to  Registration  Statement  on Form  S-4
                                     filed with the  Commission  on  December 9,
                                     1997, Commission File No. 0-21430)

10.1*                                Registration Rights Agreement dated as of August 13, 1997 by and among the
                                     Company, the Guarantors party thereto, Jefferies & Company, Inc. and
                                     Ladenburg Thalmann & Co. Inc. (see Exhibit 4.1 to Current Report on Form
                                     8-K filed with the Commission on August 18, 1997, Commission File No. 0-
                                     21430)

10.2*                                Purchase  Agreement  dated  August  8, 1997
                                     among the  Company,  the  Guarantors  party
                                     thereto,  Jefferies  &  Company,  Inc.  and
                                     Ladenburg Thalmann & Co., Inc. (see Exhibit
                                     1.1 to  Current  Report  on Form 8-K  filed
                                     with the  Commission  on August  18,  1997,
                                     Commission File No. 0-21430)

10.3*                                Lease Agreement between Riviera, Inc. and Mardi Gras Food Court, Inc.
                                     dated April 1, 1990 (see Exhibit 10.1 to Form 10, Commission File No. 0-
                                     21430)

10.4*                                Amendment to Lease Agreement between Riviera, Inc. and Mardi Gras Food
                                     Court, Inc. dated April 1, 1990 (see Exhibit 10.2 to Registration Statement
                                     Form S-1 filed with the Commission on August 11, 1993, File No. 33-67206)

10.5*                                Lease Agreement between Riviera, Inc. and Leroy's Horse and Sports Place
           (see Exhibit 10.3 to Form 10, Commission File No. 0-21430)

10.6*                                Indemnity  Agreement,  dated June 30, 1993,
                                     from Riviera,  Inc. and Meshulam  Riklis in
                                     favor of the Company and Riviera  Operating
                                     Corporation    (see    Exhibit    10.7   to
                                     Registration  Statement Form S-1 filed with
                                     the Commission on August 11, 1993, File No.
                                     33-67206)

10.7*                                Indemnity  Agreement,  dated June 30, 1993,
                                     from the  Company in favor of IBJ  Schroder
                                     Bank & Trust  Company  (see Exhibit 10.8 to
                                     Registration  Statement Form S-1 filed with
                                     the Commission on August 11, 1993, File No.
                                     33-67206)

10.8*                                Equity Registration Rights Agreement, dated
                                     June 30,  1993,  among the  Company and the
                                     Holders of Registerable Shares (see Exhibit
                                     10.9 to  Registration  Statement  Form  S-1
                                     filed  with the  Commission  on August  11,
                                     1993, File No. 33-67206)

10.9*                                Operating  Agreement,  dated June 30, 1993,
                                     between the  Company and Riviera  Operating
                                     Corporation    (see   Exhibit    10.15   to
                                     Registration  Statement Form S-1 filed with
                                     the Commission on August 11, 1993, File No.
                                     33-67206).


                                                        32

<PAGE>





10.10*                               Adoption Agreement regarding Profit Sharing and 401(k) Plans of the
                                     Company (see Exhibit 10.16 to Registration Statement Form S-1 filed with
                                     the Commission on August 11, 1993, File No. 33-67206)

10.11*                               Howard Johnson & Company Regional Defined Contribution Plan, dated
                                     March 16, 1990 (adopted by the Company pursuant to the Adoption
                                     Agreement filed as Exhibit 10.17 to Registration Statement Form S-1 filed
                                     with the Commission on August 11, 1993, File No. 33-67206)

10.12*                               Employment Agreement between Riviera, Inc. and William L. Westerman,
                                     dated January 6, 1993 (see Exhibit 10.18 to Form 10, Commission File No.
                                     0-21430)

10.13*                               Form of Agreement between the Company and Directors (see Exhibit 10.19
                                     to Form 10, Commission File No. 0-21430)

10.14*                               Form of Termination Fee Agreement (see Exhibit 10.20 to Form 10,
                                     Commission File No. 0-21430)

10.15*                               Restricted Account Agreement, dated June 30, 1993, among Riviera
                                     Operating Corporation, IBJ Schroder Bank & Trust Company and Bank of
                                     America Nevada (see Exhibit 10.22 to Registration Statement Form S-1 filed
                                     with the Commission on August 11, 1993, File No. 33-67206)

10.16*                               Disbursement Agreement, dated June 30, 1993, between the Company and
                                     IBJ Schroder Bank & Trust Company (see Exhibit 10.23 to Registration
                                     Statement Form S-1 filed with the Commission on August 11, 1993, File No.
                                     33-67206)

10.17*                               Tax Sharing Agreement between the Company and Riviera Operating
                                     Corporation dated June 30, 1993 (see Exhibit 10.24 to Amendment No. 1 to
                                     Registration Statement Form S-1 filed with the Commission on August 19,
                                     1993, File No. 33-67206)

10.18*                               The Registrant's 1993 Stock Option Plan (see Exhibit 10.25 to Amendment
                                     No. 1 to Registration Statement Form S-1 filed with the Commission on
                                     August 19, 1993, File No. 33-67206)

10.19*                               Form of Stay Bonus  Agreement  (see Exhibit
                                     10.27   to  Form   10-Q   filed   with  the
                                     Commission on November 9, 1994,  Commission
                                     File No. 0-21430)

10.20*                               Amendment dated February 19, 1995, to Lease Agreement between Riviera,
                                     Inc. and Mardi Gras Food Court, Inc. (filed with Exhibits 10.3 and 10.4)

10.21*                               Amendment dated September 30, 1994, to Employment Agreement between
                                     Riviera, Inc. and William L. Westerman (filed with Exhibit 10.12)

10.22*                               Management Agreement by and between Elsinore Corporation, Four Queens,
                                     Inc. and Riviera Gaming Management Corp. - Elsinore (see Exhibit 10.30 to

                                                        33

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                                     Form 10-K for the fiscal year ended December 31, 1996, Commission File
                                     No. 000-21430)

10.23*                               Employment  Agreement  dated as of November
                                     21,  1996  by  and  between  the   Company,
                                     Riviera  Operating  Corporation and William
                                     L.  Westerman  (see  Exhibit  10.31 to Form
                                     10-K for the fiscal year ended December 31,
                                     1996, Commission File No. 000-21430)

10.24*                               Revolving  Line of  Credit  Loan  Agreement
                                     dated  February 28, 1997 by and between the
                                     Company,  Riviera Operating Corporation and
                                     U.S.  Bank of Nevada (see Exhibit  10.32 to
                                     Form  10-K  for  the   fiscal   year  ended
                                     December  31,  1996,  Commission  File  No.
                                     000-21430)

10.25*                               Letter  of  Intent   dated  March  4,  1997
                                     between the Company and Eagle Gaming,  L.P.
                                     (see  Exhibit  10.33  to Form  10-K for the
                                     fiscal  year  ended   December   31,  1996,
                                     Commission File No. 000-21430)

10.26*                               Deed of Trust, Assignment of Rents, Leases,
                                     Fixture  Filing  and  Security   Agreement,
                                     dated August 13, 1997,  executed by Riviera
                                     Holdings  Corporation  for the  benefit  of
                                     Norwest    Bank     Minnesota,     National
                                     Association  (see  Exhibit 10.1 to Form 8-K
                                     filed August 18, 1997, Commission File No.
                                     000-21430)

10.27*                               Security Agreement,  dated August 13, 1997,
                                     by and among Riviera Holdings  Corporation,
                                     Riviera  Operating   Corporation,   Riviera
                                     Gaming  Management,  Inc.,  Riviera  Gaming
                                     Management  of  Colorado,   Inc.,   Riviera
                                     Gaming  Management  -  Elsinore,  Inc.  and
                                     Norwest    Bank     Minnesota,     National
                                     Association  (see  Exhibit 10.2 to Form 8-K
                                     filed August 18, 1997,  Commission File No.
                                     000-21430)

10.28*                               Stock Pledge and Security Agreement, dated August 13, 1997, executed by
                                     Riviera Holdings Corporation (see Exhibit 10.3 to Form 8-K filed August 18,
                                     1997, Commission File No. 000-21430)

10.29*                               Stock Pledge and Security Agreement, dated August 13, 1997, executed by
                                     Riviera Operating Corporation (see Exhibit 10.4 to Form 8-K filed August 18,
                                     1997, Commission File No. 000-21430)

10.30*                               Stock Pledge and Security Agreement, dated August 13, 1997, executed by
                                     Riviera Gaming Management, Inc. (see Exhibit 10.5 to Form 8-K filed
                                     August 18, 1997, Commission File No. 000-21430)

10.31*                               Restricted Account Agreement,  dated August
                                     13,  1997,  by and among  Riviera  Holdings
                                     Corporation,    Norwest   Bank   Minnesota,
                                     National   Association  and  U.S.  Bank  of
                                     Nevada (see  Exhibit 10.6 to Form 8-K filed
                                     August  18,  1997,   Commission   File  No.
                                     000-21430)

10.32*                               First Amendment to Revolving Line of Credit
                                     Loan  Agreement,  dated  August  12,  1997,
                                     between   Riviera   Holdings   Corporation,
                                     Riviera Operating Corporation and U.S. Bank
                                     (see  Exhibit 10.7 to Form 8-K filed August
                                     18, 1997, Commission File No. 000-21430)

10.33*                               Escrow Agreement, dated September 15, 1997, by and among R&E Gaming
                                     Corp., Riviera Holdings Corporation, and State Street Bank and Trust

                                                        34

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                                     Company of California (see Exhibit 10.2 to Form 8-K filed September 29,
                                     1997, Commission File No. 000-21430)

10.34*                               Employment agreement between the Company and Ronald P. Johnson
                                     effective July 1, 1998 (see, Exhibit 10.34 of Form 10Q filed November 6,
                                     1998.)

10.35*                               Employment agreement between the Company and Duane R. Krohn effective
                                     July 1, 1998 (see, Exhibit 10.35 of Form 10Q filed November 6, 1998.)

10.36*                               Employment agreement between the Company and Robert A. Vannucci
                                     effective July 1, 1998 (see, Exhibit 10.36 of Form 10Q filed November 6,
                                     1998.)

10.37*                               Employment agreement between the Company and Jerome P. Grippe
                                     effective July 1, 1998 (see, Exhibit 10.37 of Form 10Q filed November 6,
                                     1998.)

21.1*                                Subsidiaries of the Company (see Exhibit 21.1 to Registration Statement on
                                     Form S-4 filed with the Commission on September 10, 1997, Commission
                                     File No. 0-21430)

99.1*                                Letter, dated March 20, 1998, from R&E Gaming Corp. to the Company
                                     regarding the Company's Agreement and Plan of Merger
</TABLE>

*   The  exhibits  thus  designated  are  incorporated  herein by  reference  as
    exhibits  hereto.  Following the description of such exhibits is a reference
    to the copy of the exhibit  heretofore  filed with the Commission,  to which
    there have been no amendments or changes.

                                                        35

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