<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-K


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

                                       or

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

                     For the fiscal year ended June 30, 2000

                           Commission File No. 0-19128

                       CAPITAL GAMING INTERNATIONAL, INC.
             (Exact name of registrant as specified in its charter)

    (State or other jurisdiction of         (I.R.S. Employer Identification No.)
    incorporation or organization)

                       3030 East Camelback Road, Suite 295
                             Phoenix, Arizona 85016
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (602) 667-0670

        Securities registered pursuant to Section 12(b) of the Act: None
           Securities registered pursuant to Section 12(g) of the Act:
                           Common Stock, no par value

         Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities 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 any amendment to this
Form 10-K [ ]

         The aggregate market value of the Registrant's Common Stock, no par
value, held by non-affiliates, computed by reference to the average of the
closing bid and asked prices of the Common Stock as reported by the
"NASDAQ-Electronic Bulletin Board" on June 25, 1997 was $0.03 per share.*

Number of shares of Common Stock of the Registrant issued and outstanding as
of September 28, 2000 was 1,999,745

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      NONE


*The Company's common stock was delisted from the NASDAQ OTC Bulletin Board
effective June 25, 1997 because there were no marketmakers for the Company's
common stock. The Company may seek relisting in the future if it can satisfy
certain relevant criteria including registration of market makers.
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                                TABLE OF CONTENTS
<TABLE>
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<S>                                                                                                           <C>
ITEM 1.  BUSINESS..........................................................................................      1

ITEM 2.  PROPERTIES........................................................................................     24

ITEM 3.  LEGAL PROCEEDINGS.................................................................................     24

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...............................................     24

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.............................     24

ITEM 6.  SELECTED FINANCIAL DATA...........................................................................     26

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............     27

ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISKS ......................................     38

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.......................................................     38

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE..............     38

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS..................................................................     39

ITEM 11. EXECUTIVE COMPENSATION............................................................................     41

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT....................................     46

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....................................................     47

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K...................................     48
</TABLE>

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ITEM 1. BUSINESS

General

         Capital Gaming International, Inc., a New Jersey Corporation, (the
"Company"), together with its subsidiaries, is a multi-jurisdictional gaming
company.

         The management and development of Native American gaming facilities is
conducted through Capital Gaming Management, Inc. ("CGMI"), a wholly-owned
subsidiary of the Company. CGMI developed and currently manages a Class III (as
hereinafter defined) Native American casino for the Pueblo of Laguna in Casa
Blanca, New Mexico. CGMI also developed and managed four other Native American
casinos including the Mazatzal Casino in Arizona (Tonto Apache Tribe), the
Wildhorse Gaming Resort in Oregon (Umatilla Tribes), the Cow Creek Casino in
Oregon (Cow Creek Tribe) and the Muckleshoot Casino in Washington (Muckleshoot
Tribe), whose contracts have expired.

         The Company also has a contract to develop and manage the Narragansett
casino project in Rhode Island ("Rhode Island Project"). The development of the
Rhode Island Project is conducted through Capital Development Gaming Corp.
("CDGC"), a wholly-owned subsidiary of the Company. See "Native American Gaming
Operations".

Company's Strategy

         The Company is focusing its efforts on expanding its gaming management
interests with Native American Tribes and seeking other gaming opportunities in
existing and emerging gaming jurisdictions both in the United States and
internationally. The Company believes that it has significant opportunities in
Native American gaming because of its demonstrated and continued success in this
segment, its approval and/or licensing by the National Indian Gaming Commission
(the "NIGC") and various state and tribal gaming jurisdictions and its excellent
reputation in this industry segment. The Company continues to pursue management,
consulting and development opportunities in Native American gaming jurisdictions
where the Company is already licensed, as well as in new jurisdictions. The
Company is also focusing on secondary gaming market opportunities in various
jurisdictions where opportunities exist parallel to the size and scope that the
Company has successfully developed and manages in the Native American gaming
segment of the gaming industry.

         The Company plans to continue its current management arrangements with
the Pueblo of Laguna Tribe over the term of the contract. Management anticipates
this contract's cash flow as well as available cash will provide adequate
working capital to allow the Company to expand its operations into other gaming
businesses and meet its operating expenses.

         The Company has also reduced operating expenses and continues to look
for opportunities to lower its operating costs. The Company has entered into a
new office lease that will reduce its lease expense by approximately 50%. The
Company also anticipates realizing the full cost benefit of its staff reductions
in fiscal 2001.

         The Company is currently in negotiations to enter into new gaming
operations with other casino gaming companies. These opportunities are in both
the United States and foreign countries. Some of these opportunities require
capital investment by the Company, while others involve management or consulting
agreements which would require little or no capital investment by the Company.

         Management intends to prudently invest a portion of its existing cash
flow, cash flow from new operations and post restructuring cash available in new
gaming operations, while at all times maintaining adequate liquidity and
reserves. Management is not currently seeking to raise capital through the
issuance or incurrence of debt.

         The Company believes its experience in and early entry into the Native
American gaming segment of the gaming industry and receipt of certain Approvals
from the NIGC and other state and tribal regulatory authorities will provide it
with a competitive advantage over companies just entering Native American gaming
development and management. The Company further believes that as an entity with
no outstanding secured debt and available cash for investment, it will be better
able to attract capital for new investment in both Native American and other
gaming opportunities.

Company History

         The Company was originally organized in June 1990 as a New Jersey
Corporation and was involved in an unrelated business prior to its entry into
the gaming segment in 1993. From March 31, 1992 through January 20, 1993, the
Company entered into a series of transactions with Great American Recreation,
Inc. and its wholly-owned subsidiary (collectively, "GAR") pursuant to which the
Company sold its assets in this unrelated business segment to GAR. Management
believes that the foregoing transactions have resulted in the satisfaction of
substantially all of the liabilities associated with these prior unrelated
business activities conducted by the Company.


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<PAGE>   4
Native American Gaming Operations

         Background on Native American Gaming

         Native American casino gaming has been a rapidly growing part of the
casino gaming industry. A 1987 United States Supreme Court decision opened the
way for full-scale Native American casinos. The Supreme Court held that if a
state has legalized any form of gaming, even in a restricted form, Native
American Tribes have the right to offer the same gaming on Native American land,
free of state restrictions. In 1988, in response to this decision and to promote
Tribal economic development and self-sufficiency, Congress passed the Indian
Gaming Regulatory Act ("IGRA" or the "Act"). The Act provides the framework for
federal, state and Tribal control over Native American gaming. Native American
Tribes must negotiate compacts with their host states before certain types of
gaming are allowed.

         The Act divides the types of games which may be played into two
principal classes, Class II gaming and Class III gaming. "Class II gaming"
generally consist of bingo, pull-tabs, lotto and, in some circumstances, poker.
"Class III gaming" generally consists of all other forms of commercial gaming,
including table games such as blackjack, craps and roulette, slot machines and
video gaming (including video blackjack and poker), sports betting and
pari-mutuel gaming. The forms of gaming allowed in any class vary from state to
state depending upon the terms of each Tribal/State Compact. All compacts
between Tribes and states must be approved by the Secretary of the Interior.

Operations of the Company's Subsidiaries

         CGMI was incorporated on October 24, 1978, as a wholly-owned subsidiary
of Bass Leisure Group, Inc., a wholly-owned subsidiary of Bass, PLC. CGMI
operated in the Class II gaming market, primarily providing management for high
stakes bingo facilities of certain Native American tribes. On November 19, 1993,
the Company acquired all of the issued and outstanding hares of voting common
stock of CGMI for a total purchase price of $2.6 million. At the time of CGMI's
acquisition by the Company, CGMI was managing various Class II gaming
facilities. CGMI also had a management contract with the Narragansett Tribe
which was and remains in the developmental stage. As contemplated by various
agreements of the Company, CGMI's management and development rights and
obligations with the Narragansett Tribe were subsequently transferred to CDGC.

         In August 1994, CGMI's management contract with the Umatilla Tribes was
approved by the NIGC. The approval followed an extensive background
investigation as required by applicable NIGC regulations into the Company's past
and current business activities and practices as well as the Company's key
employees. This approval was significant because the background investigations,
as well as certain environmental approvals, require the most time in the entire
NIGC management contract approval process. The management contracts between CGMI
and the Tonto Apache Tribe and the Muckleshoot Tribe were approved by the NIGC
in January 1995 and April 1995, respectively. The Company and its subsidiaries
invested approximately $27 million towards the expansion of existing facilities
and for the development of new Class III gaming facilities for which it had
signed contracts exclusive of the proposed Rhode Island Project. Of that amount,
$3.3 million represented equipment financing obtained on behalf of the Tribes.
The expenditures included construction/expansion costs, equipment purchases,
pre-opening expenses and general working capital. The funds were invested in the
form of capital loans from CGMI to the Tribes and were required to be repaid
with interest and principal, generally over the life of the management
contracts. In September 1995, the Cow Creek Tribe prepaid approximately $824,000
and the Muckleshoot Tribe prepaid approximately $7.6 million of loans made by
CGMI to these Tribes relating to the construction of their respective
facilities. In September, 1998 the Umatilla Tribes made their final installment
of principal and interest to CGMI. In April, 2000 the Tonto Apache Tribe made
its final installment of principal and interest to CGMI. In July 1998 CGMI
entered into a management and development agreement with the Pueblo of Laguna to
exclusively develop, construct, operate and manage the Class III Dancing Eagle
Casino to be located approximately 45 miles west of Albuquerque, New Mexico on
Interstate 40. The Dancing Eagle Casino opened in February 2000. The Company
went through an additional background investigation with the NIGC in connection
with the approval of this management contract.


                                        2
<PAGE>   5
         The Company intends to maintain a focused strategy to develop CGMI's
and CDGC's Native American gaming operations and to attempt to capitalize on its
presence in Native American gaming and general casino experience and to seek
additional management, consulting and development contracts. The Company is also
seeking other gaming opportunities both in the United States and
internationally.

         CGMI's and CDGC's principal management and development projects are
described below.

         Capital Gaming Management, Inc.

         Pueblo of Laguna Contract (Dancing Eagle Casino - Casa Blanca, New
         Mexico)

         CGMI developed and currently manages the 21,000 square foot Dancing
Eagle Casino for the Pueblo of Laguna. The Dancing Eagle Casino, which opened in
February 2000, is located at the Casa Blanca exit on Interstate 40 on the
Pueblo's sovereign reservation lands approximately 45 miles west of Albuquerque,
New Mexico. The Dancing Eagle Casino targets business travelers and tourists
traveling along Interstate 40, the main east-west freeway in New Mexico and site
of historic Route 66, as well as residents of Albuquerque, Grants and other
surrounding communities.

         On July 24, 1998, CGMI entered into a management contract with the
Pueblo of Laguna and its wholly-owned corporation, the Laguna Development
Corporation ("LDC"), to exclusively develop, construct, operate and manage the
Dancing Eagle Casino (the "Laguna Management Contract"). The Laguna Management
Contract provides that the term of such agreement is five (5) years from the
official date of opening of the casino. By its terms, the Laguna Management
Contract will expire in February 2005. The contract provides that CGMI will
receive a management fee of 30% of adjusted net revenues (as defined in such
agreement) during the first three years of the term, and 20% of adjusted net
revenues in the fourth and fifth years of the term. The contract also provides
that management fees shall at all times be capped at 34.3% of net revenues as
determined in accordance with generally accepted accounting principles. The
Laguna Management Contract was amended and restated in March 1999 and September
1999. The Third Amended and Restated contract was approved by the NIGC in
September 1999.

         In order to finance construction of the Dancing Eagle Casino, CGMI
secured, in the name of LDC, third-party project financing in the amount of
approximately $7,200,000 (the "Senior Secured Loan"). Additionally, CGMI has
made a subordinate loan ("Subordinate Loan") to LDC in the aggregate amount of
approximately $1,713,424 pursuant to a certain Construction and Pre-Opening Cost
Loan Agreement dated September 14, 1999 between CGMI and LDC ("Subordinate Loan
Agreement"). Pursuant to the Subordinate Loan Agreement, LDC has executed
certain subordinate notes dated September 14, 1999 in the principal amounts of
$1,291,424 ("Subordinate Loan I") and $422,000 ("Subordinate Loan II").
Subordinate Loan I and Subordinate Loan II are fully subordinate to the Senior
Secured Loan. Subordinate Loan I is payable in equal monthly installments of
principal and interest over a period of thirty-six (36) months from the date of
opening of the Dancing Eagle Casino and bears interest at the rate of prime plus
one (1%) percent. Subordinate Loan II is payable interest-free such that
$240,000 was paid at funding and the remaining principal is to be paid in equal
monthly installments over a period of twelve (12) months from February 12, 2000,
the date of opening of the Dancing Eagle Casino. CGMI has also advanced
approximately $250,000 as an addition to Subordinate Loan I, which amount will
be paid back to CGMI in the same manner as Subordinate Loan I. Finally, as part
of the development for the Dancing Eagle Casino Project, CGMI has entered into
an agreement to purchase a building for lease by CGMI to LDC for a period of
five (5) years from the date of commencement of operations at the Dancing Eagle
Casino, as well as certain furniture to be used in connection with the Dancing
Eagle Casino. Monthly payments to CGMI pursuant to these two leases is also
subordinate to the payment of the Senior Secured Loan. All loan and lease
agreements were approved by the Bureau of Indian Affairs prior to closing. See
"Risk Factors - Competition", "Risk Factors - Competition with Dancing Eagle
Casino", "Risk Factors - Loans to Tribes; Limited Recourse Against Tribes",
"Risk Factors - New Mexico Compact Litigation", and "Risk Factors - Accounting
Disagreement".

                                        3
<PAGE>   6
         Tonto Apache Contract (Mazatzal Casino - Payson, Arizona).

         CGMI developed and managed the 35,000 square foot Mazatzal Casino for
the Tonto Apache Tribe which offers slot machines, keno, poker, pull tabs and
high stakes bingo in addition to non-gaming amenities including a restaurant,
sports bar and gift shop. The Mazatzal Casino commenced operations on April 27,
1995.

         The Mazatzal Casino targets both the local Payson residents and other
persons living 75 miles to the south in the Phoenix, Arizona metropolitan area.
The Mazatzal Casino is located just south of Payson on Highway 87. In addition
to the Payson area residents, the Mazatzal Casino attracts customers from the
Phoenix area on day trips and weekend vacations, particularly because of the
more desirable climate in Payson during the summer months.

         On June 29, 1993, CGMI signed a five year management contract with the
Tonto Apache Tribe (the "Tonto Apache Management Contract"), to construct and
operate a Class II and Class III gaming facility. The five-year term commenced
on the date the facility opened in April 1995. The Tonto Apache Management
Contract provides for CGMI to receive a management fee of 30% of Net
Distributable Profits (as defined therein).

         The Tonto Apache Management Contract between CGMI and the Tonto Apache
Tribe was approved by the NIGC on January 30, 1995. In addition, in February
1999, the Company received management certification from the Arizona Department
of Gaming. The management contract expired in April 2000.

         Confederated Tribes of the Umatilla Indian Reservation Contract
         (Wildhorse Gaming Resort - Pendleton, Oregon).

         CGMI developed and managed the Wildhorse Gaming Resort for the Umatilla
Tribes which offers video-lottery terminals, black jack, poker, off track
betting ("OTB"), keno and high stakes bingo in addition to non-gaming amenities
including a restaurant and gift shop. The Wildhorse Gaming Resort commenced
operations on March 10, 1995.

         The Wildhorse Gaming Resort targets local residents of the Tri-Cities
area of southern Washington (Richland, Kennewick and Pasco). The Wildhorse
Gaming Resort site is accessible to residents within a 100 mile radius that also
includes Pendleton and Walla Walla. The Wildhorse Gaming Resort is located
approximately 200 miles east of Portland, Oregon, and targets business travelers
and tourists by attracting potential customers traveling along Interstate 84,
the main east-west freeway in northern Oregon and the site of the historic
Oregon trail.

         CGMI signed a five year contract on November 9, 1993, with the Umatilla
Tribe (the "Umatilla Management Contract"), to construct, manage and operate a
Class II and Class III gaming facility. The five-year term commenced on the date
the facility opened in March 1995. The Umatilla Management Contract provides for
a management fee of 30% of Net Distributable Profits after debt service (as
defined therein). The Umatilla Management Contract between CGMI and the Umatilla
Tribe was approved by the NIGC on August 17, 1995, and the State of Oregon has
approved the Company as being suitable to manage/finance Native American gaming
operations in the State of Oregon. The management contract expired in March
2000.

         Capital Development Gaming Corp.

         Narragansett Contract - Native American Casino (Rhode Island).

         Through CDGC, the Company entered into a seven-year management and
development contract with the Narragansett Indian Tribe (the "Narragansett
Contract") for the development of a Class II and Class III gaming facility in
Rhode Island. The Narragansett Contract provides for the Company to receive a
management fee of 30% of Net Distributable Profits (as defined therein) of the
gaming facility for the first five years, commencing on the opening of the
facility and 20% for the remaining two years. The Narragansett Contract was
submitted to the NIGC for approval in June 1995.


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<PAGE>   7
         In August 1996, the NIGC submitted comments on the Narragansett
Contract. As a result of the Decision (as defined below) invalidating the
Compact (as defined below), the NIGC informed the Company and the Narragansett
Tribe that the NIGC would only consider a contract relating solely to Class II
gaming. In light of this, the Company bifurcated the Narragansett Contract (the
"Management Agreement") and submitted it on June 21, 1996 for review and
approval by the NIGC of only the portions relating to Class II gaming. The
Company reclassified the Class III contract as a development contract until such
time as a Tribal/State Compact for Class III gaming was signed. However, as a
result of the Chafee Rider (as defined below), on December 16, 1996, the NIGC
declined further review of the Management Agreement.

         In declining to review the Management Agreement, the Chairman of the
NIGC asserted that as a result of the application of the Chafee Rider, the
Narragansett Tribe lost its rights to conduct both Class II and Class III gaming
under the Indian Gaming Regulatory Act ("IGRA"). An appeal of the NIGC's action
was filed on December 20, 1996, and on June 17, 1997, the NIGC issued a final
decision upholding the Chairman's actions.

         Purported Termination of Narragansett Contract; Agreement in Principle
on Buyout

         The Narragansett Tribe has informed the Company that it considers that
its contract is terminated and that it seeks to contract with Boyd Gaming
Corporation to develop the Rhode Island Project. In connection with its
purported termination, the Tribe has acknowledged its legal obligation to repay,
in accordance with the terms of the Management Contract, the development loan
made to the Tribe by the Company. The Company disputes the Tribe's purported
termination. Negotiations between the parties resulted in an agreement in
principle concerning reimbursement of the loan and a buyout of the Management
Contract. Although the parties made substantial progress negotiating the
reimbursement and buyout documents, the Tribe and Boyd Gaming Corporation have
refused to abide by the terms of the agreement and the Tribe has requested
mediation concerning its purported termination of the Management Contract. To
date, mediation procedures have not been agreed to. Absent completion of
satisfactory documentation with respect to the agreements reached between the
parties, the Company intends to pursue all of its rights to the fullest extent
permitted by law.

         Bureau of Indian Affairs Approval

         On September 3, 1998 the Secretary of the Interior and the Deputy
Commissioner of the Bureau of Indian Affairs approved the Management Agreement
between the Narragansett Tribe and CDGC pursuant to 25 CFR Section 81. While
this approval does not impact the Narragansett Tribe's right to offer gaming
pursuant to IGRA, the approval is significant because it protects the
Narragansett Tribe and CDGC from any assertion that the Management Contract is
null and void under the provisions of 25 U.S.C. Section 81 due to lack of
approval.

         Tribal/State Compact

         In August 1994, a Tribal/State Compact (the "Compact") was entered into
between the Narragansett Tribe and then Governor Bruce Sundlan of Rhode Island.
In November of 1994, a lawsuit was filed by Rhode Island Attorney General Pine
(the "Pine Case") seeking to void the Compact on the grounds that the Governor
of Rhode Island lacked the authority to bind the State of Rhode Island absent
State Legislative approval. In 1995, Rhode Island's new Governor, Governor
Almond, joined with the Attorney General in the Pine Case.


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<PAGE>   8
         In February 1996, the United States District Court for the District of
Rhode Island decided that the Compact was void for lack of State Legislative
approval (the "Decision"). The State of Rhode Island has subsequently refused to
negotiate with the Narragansett Tribe. In light of this Decision, and similar
decisions in other states, the Secretary of the Interior (the "Secretary")
requested comments from the public as to whether the Secretary has the authority
to adopt Secretarial procedures to permit gaming under IGRA for the Tribes in
states (such as Rhode Island) that refuse to negotiate Tribal/State Compacts in
good faith. On January 22, 1998, a Proposed Rule on Class III Gaming Procedures
("Proposed Rule") was promulgated by the Department of the Interior.

Department of the Interior Issues Regulations for Class III Gaming Compacts

         In April, 1999, the Secretary issued regulations prescribing procedures
to permit Class III gaming when a State interposes its immunity from suit by an
Indian Tribe in which the Tribe accuses the State of failing to negotiate in
good faith. The rule announces the Secretary's determination that the Secretary
may promulgate Class III gaming procedures under certain specified procedures;
it also sets forth the process and standards pursuant to which any procedures
would be adopted. These regulations took effect on May 12, 1999. The rules,
however, have not yet been acted upon in light of litigation pending in the
Florida Federal Court. The States of Florida and Alabama filed a complaint
against the Secretary in April, 1999, challenging the rules on various grounds.
The Seminole Tribe of Florida, the Miccosukee Tribe and the Poarch Band of Creek
Indians have intervened in the litigation. These Tribes, along with the
Secretary, have filed motions to dismiss. The United States and the Tribes
involved argued that the case was not ripe for judicial review. The parties,
however, have agreed that the action would be stayed until the Secretary makes a
determination as to "Procedures" for the Florida Tribes. Once that determination
is made, the court can then make its ruling on the pending motions. To date, no
procedures have been issued. It is unknown when the Secretary will issue any
procedures. There can be no assurance as to when the regulations will actually
become effective, since no such action will occur until the foregoing litigation
is resolved. At this juncture, it is unknown when and how the Court will rule on
the pending motions and how that ruling will impact the regulations. It also is
unknown how such ruling and its impact (if any) on the regulations will apply to
the Narragansett Tribe in light of the Chafee Rider. However, as a result of the
Chafee Rider, there can also be no assurance that the Secretary will have the
authority under any regulations to impose a tribal-state compact between the
Narragansett Tribe and the State of Rhode Island.

         The Chafee Rider

         In September 1996, Federal legislation was passed as a non-relevant
rider (introduced by U.S. Senator John Chafee of Rhode Island, (the "Chafee
Rider") to the must-pass Omnibus Appropriations Bill which has the effect of
singling out the Narragansett Tribe's reservation (where the gaming facility was
planned) for exclusion from the benefits of IGRA. The Chafee Rider, which the
Company believes discriminates against the Narragansett Tribe by treating it
differently than every other Tribe in the United States, was passed without
hearings or debate, with no consultation with the Narragansett Tribe and over
the objections of ranking members of the Senate Indian Affairs Committee.

         In February 1997, as a result of the NIGC's decision to decline further
review of the Management Agreement and the application of the Chafee Rider, the
Narragansett Tribe initiated litigation in the United States District Court for
the District of Columbia (the "District Court"), naming the NIGC and its
Chairman as defendants. In this action, the Narragansett Tribe sought a
declaration of the District Court, that, among other things, would declare the
Chafee Rider unconstitutional under the equal protection component of the Fifth
Amendment to the U.S. Constitution, along with an injunction requiring the NIGC
to review the Management Agreement. Both the Narragansett Tribe and the NIGC
filed cross-motions for summary judgment in the matter. In August 1997, the
District Court granted the NIGC's motion for summary judgment. An appeal by the
Narragansett Tribe to the United States Court of Appeals for the District of
Columbia was unsuccessful.


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<PAGE>   9
         Ongoing Project Development - Statewide Referendum

         Unless the Chafee Rider is overturned, the Narragansett Tribe is
precluded from establishing a Class II or Class III gaming facility under IGRA.
Under Rhode Island State Law, therefore, the Narragansett Tribe's only recourse
to establish a gaming facility, absent a repeal of the Chafee Rider, is to
submit the issue to a statewide and local referendum in a general election.
Efforts by the Tribe to submit the issue to a voter referendum in November 2000
for a site selected in West Warwick, Rhode Island have failed. The earliest date
upon which any such future referendum could be held is November 2002. In June
1998 the Rhode Island General Assembly passed a bill requiring the state
legislature's approval prior to any such referendum question being placed on the
ballot. Additionally, the bill provides that the host city or town must also
approve any such referendum question prior to its being placed on the ballot.
There can be no assurance that the state legislature will approve placement of
the referendum question on the November 2002 ballot or any other general
election ballot, or that any such referendum would be successful or, if
successful, what the ultimate scope of permitted gaming would be.

         As a result of the set-backs caused by the invalidation of the Compact
and the application of the Chafee Rider, and other factors, there can be no
assurance that any legislative, judicial or administrative efforts will be
successful.

         Other Matters

         The Company continued funding of the on-going development costs of the
Rhode Island Project until the Tribe's purported termination of the Narragansett
Contract in October 1999. At June 30, 2000, these expenditures totaled
approximately $10.9 million consisting primarily of legal costs, environmental
engineering and assessment costs, design costs and other administrative costs.
At June 30, 2000, approximately $10.0 million in development costs (of the $10.9
million expended) will be recoverable by the Company only if and when a gaming
facility is established by the Tribe. These funds were expended cumulatively
over the period from Spring 1993 to present, and none of these expenses have
been capitalized.


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Reorganization

         Reorganization of Crescent City Capital Development Corp. and Sale of
Discontinued Operation

         Crescent City Capital Development Corp. ("CCCD"), a former wholly-owned
subsidiary of the Company, held a 50% interest in a riverboat joint venture
gaming facility in New Orleans, Louisiana (the "River City Joint Venture"). The
Company terminated CCCD's operations in June 1995 and the River City Joint
Venture was terminated in July 1995. On July 28, 1995, CCCD consented to the
entry of an order for relief under Chapter 11 of the U.S. Bankruptcy Code (the
"CCCD Reorganization Case") and sought a purchaser for this discontinued
operation.

         On February 21, 1996, the Company entered into a stock purchase
agreement (the "CMC Agreement") with Casino Magic Corp. ("CMC"), two of CMC's
wholly-owned subsidiaries, and CCCD to transfer the ownership of CCCD and
substantially all of its assets to a wholly-owned subsidiary of CMC. An Amended
Plan of Reorganization (the "Amended CCCD Plan of Reorganization") predicated
upon consummation of the CMC Agreement was confirmed by the U.S. Bankruptcy
Court in New Orleans, Louisiana and an order of confirmation was entered on
April 29, 1996. On May 13, 1996, the Company completed the sale of CCCD to a
wholly-owned subsidiary of CMC for an aggregate purchase price of $56.5 million,
consisting of $15 million cash, $35 million in Purchaser's Notes and the
assumption of up to $6.5 million in certain equipment liabilities. The cash and
Purchaser's Notes paid by CMC's wholly-owned subsidiary as the purchase price
for CCCD were distributed in accordance with the provisions of the Amended CCCD
Plan of Reorganization. In connection therewith, $7 million in cash and $28
million in Purchaser's Notes were distributed to First Trust National
Association (now Known as U.S. Bank Trust National Association), the indenture
trustee ("Indenture Trustee") on account of the Company's 11.5% Senior Secured
Notes due in 2001 (the "Old Senior Secured Notes"). The Amended CCCD Plan of
Reorganization also provided for the distribution to CCCD's unsecured creditors
of the proceeds of all of CCCD's remaining assets not sold to CMC.

         On July 29, 1996, the Indenture Trustee for the Old Senior Secured
Notes distributed $49,986,000 in cash and Purchaser's Notes to the holders of
the Old Senior Secured Notes on account of principal and accrued interest (the
"Noteholder Distribution"). The Noteholder Distribution included $28 million in
Purchaser's Notes, as well as cash from the sale of CCCD to CMC, proceeds from
the early payment of a Tribal development loan, proceeds from the buyout of a
management contract, $3.2 million in unused restricted cash and other sources.
Subsequently, in August 1996, the Purchaser's Notes were redeemed by CMC at 100%
of the principal amount plus accrued interest.

         Reorganization of the Company

         As a result of the CCCD Reorganization Case, on June 13, 1995, the
Indenture Trustee notified the Company of the occurrence of certain events of
default ("Events of Default") under the Indenture with respect to the Old Senior
Secured Notes (the "Old Indenture"). The Old Senior Secured Notes were
guaranteed by CGMI and CCCD. The Event of Default cited by the Trustee related
to the assertion of various claims of creditors against Collateral (as defined
in the Old Indenture), which was pledged to secure repayment of the Old Senior
Secured Notes. Additionally, the Company failed to make interest payments on its
Old Senior Secured Notes of $7,302,500 each on August 1, 1995, February 1, 1996
and August 1, 1996, and a $1,350,000 consent fee payment which was due to the
holders of the Old Senior Secured Notes on August 1, 1995, which also
constituted Events of Default under the Old Indenture.


                                        8
<PAGE>   11
         In order to restructure the Old Senior Secured Notes, pursuant to
negotiations with a steering committee ("Noteholders Steering Committee")
representing more than two-thirds of the holders of the Old Senior Secured
Notes, the Company filed a voluntary petition for relief under Chapter 11 of the
Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court
for the District of New Jersey (the "Bankruptcy Court") on December 23, 1996
(the "Prior Petition Date"). The petition did not involve either of the
Company's wholly-owned subsidiaries.

         On the Prior Petition Date, the Company filed a pre-negotiated Plan of
Reorganization (together with all subsequent amendments and modifications, the
"Prior Plan"), and an accompanying disclosure statement (together with all
subsequent amendments and modifications, the "Prior Disclosure Statement"). The
Prior Disclosure Statement was approved by the Bankruptcy Court on February 6,
1997.

         On March 19, 1997, the Bankruptcy Court conducted a hearing regarding
confirmation of the Prior Plan and entered an order confirming the Prior Plan
submitted by the Company as modified by that order. As contemplated by the Prior
Plan, on May 28, 1997, the Company emerged from Chapter 11 and consummated the
Prior Plan.

         Reference is made to the Company's Annual Report on Form 10K for the
fiscal year ended June 30, 1999, Item 1, Sections entitled "Reorganization of
the Company", "Debt After Reorganization", "Description of Second Amended
Indenture", "Default Under First Amended Indenture", "Court Approval of
Modification of Plan and Second Amended Indenture", "Capital Structure Prior to
the Reorganization" and "Capital Structure Following the Reorganization" for a
description of the Prior Plan, and the New Common Stock, New Senior Secured
Notes (the "Senior Notes"), Second Amended Indenture (hereafter, the
"Indenture") and other terms as such terms are defined or used therein, and
default under the Indenture, and the related exhibits filed therewith, all of
which are incorporated herein by this reference.

         The Prior Plan was predicated on the principle that the success of the
Company was dependent upon its ability to obtain new management contracts,
develop new business, and produce an operating profit by reducing expenses
significantly. Through July 1998, the Company was unable to obtain any new
management contracts and was not producing an operating profit. In August 1998,
Edward Tracy, the Company's former Chairman, President and Chief Executive
Officer, resigned from the Company. After Mr. Tracy's resignation, the Board of
Directors appointed Michael W. Barozzi to the office of President and Chief
Operating Officer and William S. Papazian to the position of Executive Vice
President. Additionally, Charles B. Brewer was elected Chairman of the Board of
Directors. The Company's new management team cut expenses significantly and
began a campaign to obtain new management contracts and other gaming
opportunities. In September 1999, the NIGC approved the Laguna Management
Contract. The Dancing Eagle Casino opened in February 2000. The Company has been
actively pursuing new gaming opportunities both in the United States and
internationally.


                                        9
<PAGE>   12
         In late 1999, management determined that the Company's capital
structure was impairing its ability to win new management contracts. While the
Company's operations were expected to generate sufficient revenue to make debt
service payments through the calendar year 2000, the Company anticipated that it
might not have sufficient revenue to make the final principal and interest
payment on the Senior Notes when they became due in May 2001. After extensive
meetings and Negotiations with certain of the Senior Noteholders and the
Indenture Trustee, those Senior Noteholders and the Indenture Trustee, with the
concurrence of the Company, concluded that the best way to maximize recovery to
the Senior Noteholders and preserve the Company as a going concern was to
"de-leverage" the Company by converting the Senior Notes to equity. Although the
long-term success of the Company remains dependent upon its ability to obtain
new management contracts and gaming opportunities, the reorganization would (i)
eliminate the uncertainty created by the existing debt structure; (ii) provide
the Company needed flexibility for financing future operations; and (iii)
provide the Company more flexibility to compete with better financed
competitors.

         Accordingly, on May 15, 2000 (the "Petition Date") the Company filed
another voluntary petition for reorganization of the Company under Chapter 11 of
the Bankruptcy Code in the Bankruptcy Court, Case No. 00-14052 (JHW). The
Company remained in possession of its property and assets and maintained and
operated its business as debtor-in-possession pursuant to the provisions of the
Bankruptcy Code. Additionally no trustee or receiver was appointed. The
Company's two operating subsidiaries were not included in the filing.

         In connection with the filing of the petition, the Company and the
Indenture Trustee jointly submitted a Disclosure Statement and Plan of
Reorganization (the "Plan") for the Company. The Plan is the result of extensive
negotiations among the Company, the Indenture Trustee, and holders of the Senior
Notes holding approximately eighty-four (84%) percent of the Company's
outstanding Senior Notes and holders of approximately seventy (70%) percent of
the Company's stock. A copy of the Plan is attached hereto as Exhibit 10.181.

         The Plan provided that holders of the Senior Notes, as payment in full
for their claims, will receive a distribution on account of their allowed
secured claims equal to their pro rata share of (a) the greater of (i)
$9,000,000 or (ii) the Distributable Cash (hereinafter defined) after payment of
Indenture Trustee fees and expenses, and (b) two million sixty-eight thousand
(2,068,000) shares of New Class A Common Stock, representing ninety-four (94%)
percent of the aggregate voting securities of the Company, as reorganized.
"Distributable Cash" means all cash of the Company, whether held by the
Indenture Trustee or the Company, in excess of $2,900,000, determined after
payment of all Plan distributions to creditors and equity security holders,
other than holders of Senior Notes. General unsecured creditors, including
holders of deficiency claims would receive a pro rata share of $100,000 and
certain holders of the Company's equity interests would receive their pro rata
share of 550 shares of New Class B Common Stock. The Company intends to use its
$2,900,000 post-confirmation cash balance primarily to seek new gaming
opportunities in order to create new sources of cash flow for the Company.

         On September 26, 2000 the Bankruptcy Court conducted a hearing
regarding Confirmation of the Plan and, on October 4, 2000, entered an order
confirming the Plan. In connection with creditor approval of the Plan, 99.9770%
of holders of the Senior Notes who voted approved the Plan. The Effective Date
of the Plan is October 16, 2000, at which time distribution will commence.


                                       10
<PAGE>   13
Summary of Amended Organizational Documents

         Under the terms of the Plan, the Company will adopt amended
organizational documents including an Amended Certificate of Incorporation which
authorizes the Company, among other things, to issue two classes of common
stock, Class A Common Stock and Class B Common Stock. Under the terms of the
Amended Certificate of Incorporation, holders of the two classes of common stock
are entitled, by voting together as a single class, to elect two (2) members of
the Board of Directors of the Reorganized Company (the "Common Directors"). In
addition, holders of Class A Common Stock are also entitled to vote to elect no
less than one (1) and not more than five (5) Directors of the Board of Directors
(the "Class A Directors"). For purposes of voting by the Directors, each Common
Director is entitled to exercise one (1) vote, and the Class A Directors are
entitled to exercise a total of five (5) votes.

         As required by applicable gaming regulations, the Amended Certificate
of Incorporation also provides that all outstanding shares of stock or stock
equivalents in the Company are subject to redemption by the Company in the event
that divestiture of such stock or stock equivalents is required by a gaming
regulatory authority. In the event that such a divestiture becomes necessary,
the Amended Certificate of Incorporation sets forth the terms and conditions
surrounding the redemption of the holder's interest. The Amended Certificate of
Incorporation also contains a provision requiring the Company to indemnify the
officers and directors of the Company for any liability or expenses incurred as
a result of such person's position as an officer or director of the Company as
reorganized.

         Also, the Company will adopt Amended Bylaws which establish, among
other things, (a) the procedures for annual and special meetings of
shareholders, (b) quorum requirements for such meetings, (c) voting procedures
for shareholders meetings, (d) the number and tenure of directors, (e) the
method to remove or replace a director, (f) procedures for conducting meetings
of the Board of Directors, and (g) quorum requirements for such meetings. In
addition, the Amended Bylaws identify the officers of the Company as
reorganized. Copies of the Amended Certificate of Incorporation and Amended
Bylaws are attached hereto as Exhibits 10.182 and 10.183, respectively.

Board of Directors

         The Board of Directors of the Company as reorganized shall initially
consist of four (4) directors; provided, however, that, subject to the
discretion of the Board of Directors and in accordance with the Amended Bylaws,
the Board of Directors of the Company may be expanded to no more than seven (7)
directors. On the Effective Date, the following individuals shall be appointed
and authorized to act as the Board of Directors of the Company.

<TABLE>
<CAPTION>
Name                                 Directorship
<S>                                  <C>
Michael W. Barozzi                   Common Director
Charles B. Brewer                    Class A Director
William S. Papazian                  Common Director
Col. Clinton L. Pagano               Common Director
</TABLE>

         Subject to the terms and conditions of the amended organizational
documents, the Board of Directors shall have complete authority for management
and operation of the Company. No member of the Board of Directors shall be
removed for a period of one (1) year following the Effective Date unless cause
exists or such removal is directed by the affirmative vote of a majority of
stockholders entitled to appoint such director. Director vacancies shall be
filled as provided in the Amended Bylaws. Colonel Pagano shall serve as a Common
Director until the expiration of his term of office on December 31, 2000.
Thereafter, the composition and voting rights of the Board of Directors will be
adjusted as provided in the Amended Certificate of Incorporation.


                                       11
<PAGE>   14
         As Chairman of the Board, Charles B. Brewer shall receive 22,000 shares
of Class B Common Stock representing approximately one (1%) percent of the
outstanding voting securities of the Company.  Mr. Brewer is not presently a
shareholder of the Company.

         Allocation and Distribution of New Stock

         1.      New Class A Common Stock

              On the Effective Date, 3,000,000 shares of New Class A Common
Stock of the Company shall be authorized under the Amended Certificate of
Incorporation. Of the 3,000,000 authorized shares, 2,068,000 shares of New Class
A Common Stock shall be distributed to Class 2A Creditors under the Plan, being
the Senior Noteholders.

         2.       New Class B Common Stock

              On the Effective Date, 2,000,000 shares of New Class B Common
Stock of the Company shall be authorized under the Amended Certificate of
Incorporation. Of the 2,000,000 authorized shares, 132,000 shares of New Class B
Common Stock (the "Management Shares") will be issued to Charles B. Brewer,
Michael W. Barozzi and William S. Papazian "Management Group") and 550 shares of
the New Class B Common Stock will be issued to the holders of Allowed Equity
Interests ("Allowed Equity Interests") classified in Class 5B pursuant to
Article VI, Section E of the Plan.

         Surrender and Cancellation of Outstanding Securities

         1.       Surrender and Cancellation of Equity Interests

              Holders of the Allowed Equity Interests must surrender the
certificates representing such instruments to the Transfer Agent. Upon surrender
of the instruments, holders will receive the distributions set forth in the
Plan. When a holder of an Equity Interest surrenders its certificate to the
Transfer Agent, the Transfer Agent shall hold such instrument in "book entry
only" until the Distribution on account of such certificate is paid, whereupon
such instruments shall be cancelled.

         2.       Surrender and Cancellation of Senior Notes

              As a condition to receiving the Cash and New Class A Common Stock
Distributable under the Plan, holders of the Senior Notes shall surrender such
instruments to the Indenture Trustee. Upon surrender of the instruments, holders
will receive their pro rata share of the Cash and New Class A Common Stock
distributable to Class 2A under the Plan. When a Senior Noteholder surrenders
its Senior Notes to the Indenture Trustee, the Indenture Trustee shall hold such
instrument in "book entry only" until termination of the Indenture, whereupon
such instruments shall be canceled.

         Termination of Indenture

     The Indenture shall terminate as of the Effective Date pursuant to Section
1123(a)(5)(F) of the Bankruptcy Code, except as necessary to administer the
rights, claims, liens, and interests of the Indenture Trustee and Senior
Noteholders (including, to preserve and pursue any claims, rights, or interests
of the Indenture Trustee for fees and expenses under the Indenture). The Company
and the Indenture Trustee shall have no further obligation under the Indenture
and shall be relieved of all obligations under the Indenture relating to the
Senior Notes, except with respect to the payments required to be made to the
Indenture Trustee in respect of its claims for fees and expenses, or with
respect to such other rights of the Indenture Trustee that, pursuant to the
terms of the Indenture, survive the termination of the Indenture.


                                       12
<PAGE>   15
         Allocation of Management Shares

         In order to provide an incentive to the Management Group, the Company
shall distribute to the Management Group the Management Shares, representing six
percent of the aggregate voting securities of the Company, as reorganized.
Michael W. Barozzi and William S. Papazian each will receive 55,000 shares of
the Management Shares, and Charles B. Brewer will receive 22,000 shares of the
Management Shares. Management Shares distributable to Charles B. Brewer will
vest immediately. Ownership of the other Management Shares will vest as
follows:(i) one-third will vest immediately on the Effective Date; (ii) one
third will vest on the first anniversary of the Effective Date; and (iii) the
final one third will vest on the second anniversary of the Effective Date. All
unvested shares of the Management Shares, and dividends accrued thereon, shall
be placed in escrow for their respective owners. If such owner voluntarily
leaves his employment for any reason or is terminated with cause prior to the
vesting date, then such owner shall lose all accumulated rights to such unvested
stock and accrued dividends. If the Company or any of its subsidiaries is sold,
the stock shall vest immediately upon closing of the sale.

         Limitation of Transfer of New Stock

         Pursuant to Section 11 of the Amended Certificate of Incorporation, the
Company is imposing certain transferability restrictions upon its 5-percent
shareholders for purposes of limiting potential adverse effects of the
application of Internal Revenue Code Section 382 to its NOLs. These restrictions
generally provide that the 5-percent shareholders shall be prohibited from
transferring shares of New Common Stock without the consent of a designated Tax
Advisor (the "Tax Advisor"). The Tax Advisor shall have no obligation to consent
to a transfer unless it determines that the proposed transfer and any related
proposed transfers do not create an unreasonable risk of loss of, or material
limitation on, the Debtor's use of its net operating loss carryforwards. In the
event that the Tax Advisor is willing to consent to a transfer of New common
Stock by any one shareholder subject to transferability restrictions, the other
shareholders subject to equivalent restrictions will be offered the opportunity
to engage in a transfer on a ratable basis. These restrictions are scheduled to
expire two years after the Effective Date. Charles B. Brewer will be designated
as the Tax Advisor on the Effective Date of the Plan.

         Federal Income Tax Consequences to the Company

         1. Availability of Existing Net Operating Loss Carry Forwards to the
            Company

              The Company possesses net operating loss carryovers ("NOLs") of
approximately $32,120,000 as of June 30, 2000, which are expected to carry over
and be available to the Company to offset future income. While the issue is not
entirely free from doubt, the Company does not believe that these NOLs are
currently subject to limitation under Section 382 of the Internal Revenue Code.
These NOLs will be reduced as a result of the consummation of the Plan, as
discussed below.


                                       13
<PAGE>   16
         2. Discharge of Indebtedness Income

               Prior to the Effective Date, the Company was indebted to the
Senior Noteholders in the aggregate principal amount of $23,100,000. Because the
Company holds $300,000 of the Senior Notes in treasury, the net amount of this
principal indebtedness for tax purposes is $22,800,000 ($23,100,000 - $300,000).
As of June 30, 2000, the end of the Company's last fiscal income tax return, the
Company had accrued interest expense with respect to this indebtedness of
approximately $1,386,000. Thus, for federal income tax purposes, as of June 30,
2000, the net outstanding indebtedness of the Company with respect to the Senior
Notes was approximately $24,186,000 ($22,800,000 + $1,386,000).

              Pursuant to the Plan, the Senior Noteholders will receive
2,068,000 shares of New Class A Common Stock and Distributable Cash of
approximately $9,000,000. Assuming, for purposes of this income tax summary
only, that the shares of New Class A Common Stock possess a total value of
$4,011,920 based on a value of $1.94 per share as determined in connection with
the Plan, the cancellation of Indebtedness ("COI") income triggered from this
transaction (but for the application of Internal Revenue Code Section 108) to
the Company would amount to approximately $11,174,080 ($24,186,000 - ($9,000,000
+ $4,011,920)). Under Internal Revenue Code Section 108, this amount of COI
income reduces the Net NOLs of the Company to an amount of approximately
$20,945,920 ($32,120,000 - $11,174,080) based on June 30, 2000 tax amounts.

              The precise amount of COI income realized but not recognized upon
Plan consummation, and thus the actual amount of NOL's available after the Plan,
has not been finally determined, and will depend in part upon the fair market
value of the New Common Stock, and the Company's results of operations.

         Net Operating Loss Carryforwards

         The following description of the Company's NOLs is based upon
management's analysis of the application of the relevant sections of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code") to the
NOLs of the Company. There can be no assurance that the Internal Revenue Service
or the relevant courts will agree with management's analysis. There are
substantial risks associated with the Company's utilization of its NOLs.

         Based on its federal income tax returns for the years through June 30,
1996, the Company and its subsidiaries reported cumulative Gross NOLs of
approximately $107,000,000. For purposes of this discussion, unless otherwise
defined or modified, the term "Gross NOLs" means the total NOLs reported to the
Internal Revenue Service on the federal income tax returns of the taxpayer,
before the application of any reductions and related adjustments mandated under
the Internal Revenue Code. Under Section 172(b) of the Internal Revenue Code as
in effect for those years, unused NOLs expire after fifteen taxable years from
the taxable year of a loss. These NOLs should expire in 2011, 2012 and 2013
respectively.

         After taking into account the reorganization of the Company pursuant to
the Prior Plan and assuming that Internal Revenue Code Section 382(1)(5) applied
to the Prior Plan, and prior to taking into account the effects of the Plan,
management of the Company believes the Net NOLs of the Company and its
subsidiaries as of June 30, 1999 were approximately $32,585,000, although no
assurance can be given that the Company will be able to utilize these NOLs. For
purposes of this discussion, the term "Net NOLs" means the amount of NOLs of the
taxpayer for federal income tax purposes adjusted to reflect reductions and
related adjustments required under Internal Revenue Code Sections 108 and
382(1)(5), assuming that Internal Revenue Code Section 382(1)(5) applied to the
Prior Plan, but subject to Internal Revenue Service audits, subsequent changes
in the ownership of the Company and effects under Internal Revenue Code Section
382, and the application of Internal Revenue Code Sections 269 and 384.


                                       14
<PAGE>   17
         These tax attributes will also be reduced by any gain or income
recognized as a result of the transactions contemplated by the Plan, in
particular, any cancellation of indebtedness income ("COI income") excluded from
income pursuant to Section 108 of the Internal Revenue Code.

         While management of the Company believes that the Net NOLs of the
Company and its subsidiaries will approximately equal $20,945,920 after giving
effect to the Plan with respect to the NOL's available as of June 30, 2000,
there are risks that the NOLs may have been significantly diminished or lost as
a result of the cancellation of indebtedness occasioned by the Prior Plan and
possible subsequent transfers of rights to receive common stock under the Prior
Plan to the extent that Internal Revenue Code Section 382(1)(5) did not apply to
the ownership change associated with the Company's use of its NOLs to reduce
federal income tax payments, including the possibility that the Internal Revenue
Service may seek to challenge such use, that the Company may be unable to
produce significant levels of taxable income prior to the expiration of the NOLs
and that a subsequent "change of ownership" of the Company may occur which would
cause the Company to lose the benefit of all or a substantial portion of the
NOLs. Although the Company has attempted to take steps to restrict transfers of
New Common Stock in order to avoid a future "change in ownership", there can be
no assurance that these steps will be successful.

         Cancellation of Debt Income Under Tax Code Section 108.

         Under the Prior Plan, unsecured indebtedness of the Company with an
aggregate face amount of approximately $110,000,000 was canceled. Generally, Tax
Code Section 108 provides that a debtor whose indebtedness is canceled must
include the amount of canceled indebtedness in gross income to the extent the
indebtedness canceled exceeds any consideration (e.g., cash, notes, stock or
other property) given for the cancellation. Tax Code Section 108 further
provides, however, that if a taxpayer is the subject of a bankruptcy case and
the COI income is recognized pursuant to a plan approved by the Bankruptcy
Court, the excess amount canceled is not required to be included in gross
income. Instead, any such excess amounts so excluded from gross income reduce
prescribed tax attributes of the debtor, including NOLs and the basis of the
assets of the debtor, in a specified order of priority beginning with NOLs.
Management of the Company believes that approximately $75,500,000 of its Gross
NOLs of approximately $107,000,000 as of June 30, 1996 must be reduced to take
into account cancellation of indebtedness income of the Company recognized
pursuant to the Prior Plan.

         Tax Code Section 382 In General.

         If a corporation undergoes an "ownership change", Tax Code Section 382
limits the corporation's right to use its NOLs each year to an annual percentage
(based on the federal long-term tax-exempt rate) of the fair market value of the
corporation at the time of the ownership change (the "Section 382 Limitation").
If an ownership change under Tax Code Section 382 is triggered, a corporation
may also be restricted from utilizing certain built-in losses and built-in
deductions recognized during a five-year recognition period after the ownership
change. A corporation is considered to undergo "an ownership change" if, as a
result of changes in the stock ownership by "5-percent shareholders" or as a
result of certain reorganizations, the percentage of the corporation's stock
owned by those 5-percent shareholders has increased by more than 50 percentage
points over the lowest percentage of stock owned by those shareholders at any
time during a prescribed prior three-year testing period. Five-percent
shareholders are persons who hold 5% or more of the stock of a corporation at
any time during the testing period as well as groups of shareholders who are not
individually 5-percent shareholders.


                                       15
<PAGE>   18
         Application of Tax Code Section 382
         Under the Prior Plan. If the Company is subject to the
Section 382 Limitation as a result of the consummation of the Prior Plan, its
annual Section 382 Limitation would be equal to the product of the applicable
long-term tax-exempt rate (5.64%) times the fair market value of the equity of
the Company immediately before the ownership change. Thus, for example, if the
value of the equity of the Company as of the Effective Date of the Prior Plan
was $400,000, the Company could only use approximately $23,000 of its NOLs each
year until they expire. Although a 50% ownership change was expected to occur as
a result of the transfer of stock of the Company to creditors pursuant to the
Prior Plan, an exception under Tax Code Section 382(1)(5) is believed by
management to have applied.

         Under Section 382(1)(5), although the Section 382 Limitation does not
apply, the Gross NOLs originally available to the Company must nevertheless be
reduced to the extent of the amount of interest accrued with respect to such
canceled debt during the three taxable years prior to the taxable year of the
"ownership change" and during the taxable year of the "ownership change" (up to
the change date). The Company's management estimates that this Tax Code Section
382(1)(5) adjustment to the Company's Gross NOLs is approximately $32,000,000.
$27,300,000 of this amount is duplicated as a reduction under Tax Code Section
108, so that if the Company is under Tax Code Section 382(1)(5) the reduction to
NOLs under Tax Code Section 108 would amount to $54,700,000 rather than
$82,000,000. See "Cancellation of Debt Income Under Tax Code Section 108" in
this Section.

         After taking into account the reductions and related adjustments to the
Gross NOLs under Tax Code ss. 108 and Tax Code ss. 382, assuming that Tax Code
ss. 382(1)(5) applies, management of the Company believes that the Net NOLs of
the Company and its Subsidiaries as of June 30, 1999 are approximately
$32,585,000, subject to Internal Revenue Service audits, subsequent changes in
the ownership of the Company and effects under Tax Code ss. 382, and the
application of Tax Code Sections 269 and 384, which are described below in this
section. See "Risk Factors - Net Operating Loss Carryforwards".

         Under the Plan, management of the Company does not believe that the
Plan will effect an "ownership change" under the Tax Code Section 382 with
respect to the Company. See "Risk Factors - Net Operating Loss Carryforwards".

         Effect of Tax Code Section 384.

         Congress adopted Tax Code Section 384 in 1987 to prevent a loss
corporation from using its pre-acquisition NOLs and net built-in losses against
any net built-in gains of a corporation the control of which (utilizing an 80%
test of Tax Code Section 1504(a)(2)) is acquired by the loss corporation or
whose assets are acquired by the loss corporation in certain types of
reorganizations. The limitation of Tax Code Section 384 applies to built-in
gains recognized within the five-year recognition period after the acquisition
date. Tax Code Section 384 will prevent the Company from utilizing its NOLs
against built-in gains recognized by any acquired companies (assuming the
control test is met) within five years of the acquisition date.


                                       16
<PAGE>   19
         Effect of Tax Code Section 269.

         Tax Code Section 269(a) provides that if:

         (1) any person or persons acquire ... directly or indirectly, control
         of a corporation, or

         (2) any corporation acquires ..., directly or indirectly, property of
         another corporation .. the basis of which property, in the hands of the
         acquiring corporation, is determined by reference to the basis in the
         hands of the transferor corporation;

and the principal purpose of such acquisition was the evasion or avoidance of
Federal income tax by securing the benefit of a deduction, credit, or other
allowance which such person or corporation would not otherwise enjoy, then the
Internal Revenue Service may disallow such deduction, credit or other allowance.
Control is defined to mean the ownership of stock possessing at least 50% of the
total combined voting power of all classes of stock entitled to vote or at least
50% of the total value of shares of all classes of stock of the corporation.

         Under Treas. Reg. Section 1.269-3(a), the determination of the purpose
for which an acquisition was made requires a scrutiny of the entire
circumstances in which the transaction or course of conduct occurred, in
connection with the tax result claimed to arise therefrom. It is uncertain
whether the Internal Revenue Service would attempt to apply Tax Code Section 269
to the transactions provided for under the Prior Plan.

Risk Factors

         In addition to other information contained elsewhere in this document,
the reader of this Annual Report on Form 10-K for the fiscal year ended June 30,
2000 should consider carefully the factors set forth below.

         Net Operating Loss Carryforwards. While management believes that the
Net NOLs of the Company and its subsidiaries are approximately $20,945,920
($32,120,000 minus $11,174,080) after giving effect to the Plan with respect to
the NOL's available as of June 30, 2000 (see "Description of Business - Net
Operating Loss Carryforwards - Application of Tax Code Section 382 Under The
Chapter 11 Reorganization"), there are risks that the NOLs may have been
significantly diminished or lost as a result of the cancellation of indebtedness
occasioned by the Prior Plan, or the Plan, and possible subsequent transfers of
rights to receive new common stock under the Prior Plan to the extent that Tax
Code Section 382(1)(5) does not apply to the ownership change associated with
the implementation of the Prior Plan. There are also risks associated with the
Company's use of its NOLs to reduce Federal income tax payments, including the
possibility that the Internal Revenue Service may seek to challenge such use,
that the Company may be unable to produce significant levels of taxable income
prior to the expiration of the NOLs and that a subsequent "change in ownership"
of the Company may occur which would cause the Company to lose all or a
substantial portion of the NOLs. Although the Company has attempted to take
steps to restrict transfers of New Common Stock in order to avoid a future
"change in ownership," there can be no assurance that these steps will be
successful. See "Description of Business - Net Operating Loss Carryforwards" and
Consolidated Financial Statements.


                                       17
<PAGE>   20
         Expirations of Management Contracts. With the exception of the Laguna
Management Contract, CGMI's other management contracts expired in the first half
of the calendar year 2000. The ability of the Company to generate operating cash
flow and gaming opportunities is highly dependent upon the maintenance of its
existing contract and the acquisition of new management contracts or gaming
opportunities. There can be no assurance that the Company will be able to
attract a sufficient number of new management contracts or gaming opportunities
to replace ones that expire.

         Need for Additional Financing for the Development of Gaming Facilities.
The development, management and operation of Native American gaming, other
gaming establishments and ancillary and complimentary businesses is time
consuming and capital intensive. Substantial capital is needed to finance the
licensing, development, construction, architectural, engineering, equipping,
legal and accounting fees and operating expenses associated with the management,
development and operation of casino gaming establishments. It is anticipated
that the Company will require significant additional capital in order to fund
future projects, including, without limitation, the Rhode Island Project. There
can be no assurance that such financing will be available or, if available, that
the terms thereof will be attractive to the Company.

         Need to Comply with Strict Statutory and Regulatory Standards in the
Gaming Industry; Expansion Dependent upon Favorable Regulatory Dispositions. In
order to enter the Native American gaming and other gaming businesses in new
jurisdictions, the Company will be subject to regulation by each state in which
it conducts business, and to a certain extent, federal and Tribal law. See
"Business -- Native American Gaming Operations" and "Business -- Company's
Strategy". In jurisdictions where gaming has recently been legalized, gaming
cannot begin until a licensing and regulatory framework is promulgated and
regulatory commissions are appointed, staffed and funded. The regulatory
framework adopted by any jurisdiction may impose restrictions or costs that
would materially detract from the profitability of gaming operations. The
Company must obtain a gaming license for each location where it will operate or
manage a gaming casino, and each of the Company's officers, directors, managers
and principal shareholders is subject to strict scrutiny and approval by the
gaming commission or other regulatory body of each state in which the Company
may conduct gaming operations. After a gaming license or approval is obtained by
the Company, regulatory authorities have broad powers with respect to the
licensing of casino operations, and may revoke, suspend, condition or limit the
Company's gaming licenses, impose substantial fines and take other actions, any
one of such actions could have a material adverse effect on the Company's
business.

         Congress and the States historically have permitted, restricted and
abolished gaming from time to time depending on prevailing public attitudes.
Congress and the States each have the power to restrict or eliminate gaming at
any time. Any federal or state action to limit Native American or other types of
gaming may have a material adverse effect on the Company. In particular, the
Native American gaming industry has had a limited operating history and there is
uncertainty concerning the future of the industry because of the rapidly
changing and increasingly hostile legal, regulatory and political environment,
as evidenced by the activities of the National Gambling Impact Study Commission.
Further, if new legislation is enacted by Congress further restricting Native
American gaming, it may apply retroactively.


                                       18
<PAGE>   21
         Gaming operators are typically subject to significant taxes and fees in
addition to normal Federal and state corporate income taxes which do not apply
to other industries. Such taxes and fees are generally in excess of 12% of
gaming revenues, may exceed 25% in some jurisdictions and are subject to
increase at any time. Any material increase in these taxes or fees would
adversely affect the Company. The Company anticipates the payment of substantial
taxes and fees with respect to its existing and future operations.

         Competition. The Native American gaming industry and the gaming
industry as a whole, and businesses which are ancillary or complimentary to
these industries, are highly competitive. As the Native American gaming and
other secondary gaming industries emerge, the Company expects that new
competitors will enter the market. Some of the competitors of the Company will
have more personnel and substantially greater finances, technology, gaming
industry experience, political experience and other resources than the Company.

         The Native American gaming industry has also experienced significant
growth in the past few years and competition by management companies for
favorable Class II and Class III contracts has increased significantly. In
contrast to the early stages of Native American gaming, well-established
companies in the primary gaming market now compete for a limited number of
Tribal management contracts as opposed to significantly smaller operations which
competed for such contracts a few years ago. As a result of such competition,
new contracts are becoming less lucrative to management companies as Tribes have
more management companies to choose from. Additionally, many of the Company's
competitors are larger and have greater financial resources than that of the
Company to fund the development of new Tribal casinos and attract new management
contracts. The Company expects substantial competition for new projects as new
companies enter the market and/or industry consolidation creates new
competition. This competition could cause increases in the cost of securing
favorable new projects.

         New jurisdictions may legalize various forms of gaming that may compete
with the operations of Company. If other forms of gaming, including casino
gaming, are legalized in additional jurisdictions, existing or future gaming
establishments in which the Company may become involved will compete with these
new forms of legalized gaming. The Company expects that many of its competitors
will have more gaming industry experience, will be larger and will have
significantly greater financial and other resources than the Company. Given
these factors, it is possible that the competition will increase in the casino
gaming industry and that the Company's existing or future operations will not be
profitable.

         Additionally, Native American casinos experience intense competition
from other Native American casinos, state sponsored lotteries and gaming,
charitable gaming, as well as from gaming in primary markets (Nevada and New
Jersey) and secondary markets (including riverboat, dockside, card rooms, bars,
pari mutuel betting on horse and dog races, and truck stop operations). There
can be no assurance that such competitive factors will not negatively impact
existing or future casinos which the Company manages.


                                       19
<PAGE>   22
         Competition with the Dancing Eagle Casino. In December 1998 the Pueblo
of Laguna announced plans to develop a larger, second casino as early as June
2000 to be located on Interstate 40 on the Tribe's sovereign reservation lands
significantly closer to Albuquerque, New Mexico than the Dancing Eagle Casino.
To date, although it appears that no apparent progress has been made on this
project and construction has not begun, there can be no assurance that such
facility will not ultimately be constructed and opened. Additionally, an
existing casino facility to the West of the Dancing Eagle Casino recently
underwent significant expansion and a gaming facility to the South of
Albuquerque, New Mexico has also commenced construction with respect to a major
expansion. Recently, the Canoncito Navajos announced plans to develop a gaming
facility on Interstate 40 approximately 20 miles west of Albuquerque, New
Mexico. There can be no assurances as to the long term effect that this
increased competition will have on the projected revenues, profits and
management fees derived from the Company's Dancing Eagle Casino Project, or the
ability of the LDC to repay any loans, lease payments or management fees.

         Accounting Disagreement. In connection with the February 29, 2000
fiscal year-end audit of the Dancing Eagle Casino Project, a disagreement has
arisen between LDC and CGMI regarding the effect of the write-off of
approximately $1,400,000 in pre-opening expenses and its impact on net revenues
of the Dancing Eagle Casino Project as it relates to the calculation of
management fees due to CGMI. The LDC maintains that this write-off is to be
credited against cumulative net revenues of the operation; CGMI disagrees. In
the Company's opinion, the dispute centers around the interpretation of the
management contract definitions of net revenues and calculation of the
management fee. CGMI does not believe that the LDC's interpretation of the
management agreement is factually or legally correct on this matter, and intends
to continue discussions with the LDC in an effort to achieve a timely and
amicable resolution to this issue. If an informal resolution does not occur,
arbitration of the issue may be necessary.

         If this accounting issue is not resolved in CGMI's favor, there is a
risk that CGMI's total management fee(s) for the fiscal year ending June 30,
2001 will be negatively impacted, and that CGMI may have to pay to the LDC a
contractually agreed minimum guaranteed payment of $35,000 per month for some
period of time during the current fiscal year. The LDC has taken the position
that the guaranteed minimum payment is past due, a position with which CGMI
disagrees, as it is based upon the LDC's erroneous interpretation of the
contract terms. There is a risk that the LDC could take the position that CGMI's
nonpayment of this fee is a default under the management agreement. There can be
no assurance as to the outcome of such issues in the event of arbitration. The
Company believes that its status as a subordinate secured creditor to the LDC
affords it significant remedies under the financing documents in the event the
management agreement terminates for any reason; however, there can be no
assurance as to whether such remedies will be adequate or enforceable if
obtained. Although there can be no assurance, the Company also believes that it
will have adequate reserves to meet its operating expenses and make any
guaranteed payment to the LDC for the fiscal year ending June 30, 2001, if this
should be necessary as a result of a determination on the issue adverse to CGMI.

         The parties have met on the accounting issues, are continuing
discussions and are seeking to resolve any differences amicably. The operative
agreements contain provisions for arbitration and, so, theoretically arbitration
is possible. There can be no assurance as to the outcome of any such
arbitration.

         New Mexico Compact Litigation.  On June 13, 2000, the State of New
Mexico filed a lawsuit against 12 Indian tribes, including the Pueblo of Laguna,
entitled New Mexico v. Jicarilla Apache Tribe, et al, No. 00-CV-00851-LH/LFG,
USDCNM ("Lawsuit"). The Lawsuit seeks a determination of the legality of the New
Mexico gaming compact revenue sharing payments, and an order to enjoin all Class
III gaming, but only following a declaration by the court that the revenue
sharing payments are legal under the IGRA. In the alternative, if the court
finds the revenue sharing payments are unenforceable for any reason, the suit
seeks a declaration that the compacts are not in effect. Under the financing
agreements related to the Dancing Eagle Casino, the Pueblo has agreed to escrow
the disputed revenue sharing payments until the court determines whether the
Pueblo is legally required to pay the State. To date, such escrow account has
been consistently funded. Subject to certain assumptions and limitations, legal
counsel to the Pueblo has recently opined that although the issues presented by
the regulatory fees provisions of the compact and the revenue sharing Agreement
as alleged in the Lawsuit are novel and untested in the federal court, the legal
and practical factors involved lead them to conclude that the failure of the
Pueblo to pay such payments directly to the State but instead, to pay them into
escrow under the financing agreements and then to the State immediately upon
determination by final court order that the payments are due to the State, in
their opinion, should not form an adequate basis, in fact and law, that would
permit the State, the United States, or any agency, instrumentality, or person
acting on behalf of the foregoing to lawfully cause the termination of gaming
activity presently permitted under the IGRA to be conducted at the Dancing Eagle
Casino. There can be no assurance as to the ultimate outcome of this litigation.

                                       20
<PAGE>   23
         Loans to Tribes; Limited Recourse Against Tribes. In general, Native
American Tribes do not make any equity investments in the construction,
development or equipment of casinos. With respect to existing and future
projects, the Company has been or will be required to make loans to Tribes for
all or a significant portion of the costs associated with the construction,
development, equipment and operation of casinos managed and to be managed by the
Company. These loans are not conventional real estate and construction loans
subject to customary mortgages and encumbrances. If the casinos that the Company
manages do not generate sufficient cash flow, the Company's loans will not be
repaid.

         Native American Tribes are sovereign nations and are generally immune
from legal proceedings commenced in state or federal courts. Also, congressional
policy has mandated limited liability of Native American Tribes in such cases.
Thus, the Company's only recourse for collection of indebtedness from a Tribe or
money damages for breach or wrongful termination of a management contract would
be from revenues, if any, from casino operations. Although CGMI and CDGC
normally seek and obtain limited waivers of sovereign immunity from Tribes,
these waivers are difficult to enforce, particularly prior to receipt of NIGC
or, if applicable, Bureau of the Interior approval of a management contract. In
the event that the Company should make loans to a Native American Tribe, the
Company may be required to subordinate such Tribal loans and other distributions
due the Company from the Tribe to other obligations of the Tribe related to that
casino. Accordingly, in the event of a default by the Tribe, the Company's loans
to that Tribe may not be repaid until the Tribe's senior creditors have been
repaid in full.

         Relationships with Native American Tribes. Native American Tribes are
sovereign nations with their own governmental systems. Tribal officials are
subject to replacement by appointment or election. The Company's relationship
with a Tribe may improve or deteriorate under new administrations. Good
relationships with Native American Tribes and their officials are critical to
the Company's ability to obtain and renew management contracts. A deterioration
in the relationship between the Company and a Tribe would have a material
adverse effect on the Company, including possible termination of management
contracts.

         Tribal/State Compacts. Management contracts and the operation of
casinos on Native American land, including the right to offer certain types of
gaming, are subject to Tribal/State Compacts, the terms of which vary from state
to state, and may vary from Tribe to Tribe within a state. At least 20 states
have signed Tribal/State Compacts with Native American Tribes that permit
certain types of casino gaming on Native American land. Changes in state gaming
laws may limit the types of gaming that are eligible for Tribal/State Compacts.
The repeal of any Tribal/State Compact or any amendment that limits the types of
gaming that may be conducted on Native American land in the state may have a
material adverse effect on the Company. Certain states have resisted entering
into or renegotiating existing Tribal/State Compacts, and Tribal/State Compacts
have been the subject of litigation in several states. The Company cannot
predict which states, if any, will allow casino gaming on Native American land,
the timing of any such approvals or whether the states will attempt to
renegotiate such compacts in the future.

         Risks of Construction. Native American gaming and other gaming projects
and ancillary business construction projects which the Company is expected to
undertake entail risks, including delays in construction, shortages of material
or skilled labor, unforeseen engineering and/or geological problems, including
dredging of waterways to facilitate riverboat casino gaming, work stoppages,
weather interference and unanticipated cost increases. Pursuant to typical
construction contracts, the Company may have to pay certain construction cost
overruns. The Company anticipates that expenses in connection with the dredging
of waterways to facilitate riverboat casino gaming will be substantial depending
upon the location and site conditions. Construction, equipment or staffing
problems or difficulties obtaining any of the requisite licenses, permits and
authorizations from regulatory authorities may delay the construction or opening
of casinos which the Company may develop.


                                       21
<PAGE>   24
         Native American Gaming Regulation. Gaming on Native American lands is
extensively regulated under federal and state law, tribal/state compacts and
tribal law. The terms and conditions of management contracts for the operation
of gaming facilities on Native American lands are governed by IGRA, which is
administered by the NIGC. Under IGRA, the NIGC must approve all management
contracts between Native American tribes and managers of tribal gaming
facilities.

         In addition, in order for the management agreements to be approved by
the NIGC, the Debtor, its directors, persons with management responsibilities
and certain of the Debtor's owners, must provide background information and be
investigated by the NIGC to be found suitable to be affiliated with a gaming
operation. The NIGC regulations provide that each of the ten persons who have
the greatest direct or indirect financial interest in a management contract must
be found suitable, as must the directors and ten largest shareholders of such
entities in the case of a corporate entity, or the ten largest holders of
interest in the case of a trust or partnership. However, the Chairman of the
NIGC may reduce the scope of information to be provided by institutional
investors. At any time, the NIGC has the power to investigate and require the
finding of suitability of any person with a direct or indirect interest in a
management agreement, as determined by the NIGC. The Debtor must pay all fees
associated with background investigations by the NIGC.

         The NIGC regulations provide that a management contract must be
disapproved if the NIGC determines that: (1)(a) any person with a direct or
indirect financial interest in, or having management responsibility for, a
management contract has been convicted of a felony or any misdemeanor gaming
offense; (b) has engaged in prior activities which make him unsuitable to be
connected with gaming; (c) is an elected member of a tribe that is party to the
management contract; or (d) has provided false statements to the NIGC or a tribe
or has refused to respond to questions from the NIGC; (2) the management
contractor has attempted to unduly interfere with or influence tribal decisions
relating to the gaming operation or has failed to follow the management contract
and applicable tribal ordinances; or (3) a trustee would not approve the
management contract.

         The NIGC regulations require that the background information described
above must be submitted for approval within ten days of any proposed change in
financial interest in a management contract. The NIGC regulations do not address
any specialized procedures for investigations and suitability findings in the
context of publicly held corporations. If, subsequent to the approval of a
management contract, the NIGC determines that any of its requirements pertaining
to the management contract have been violated, it may require the management
contract to be modified or voided, subject to rights of appeal. In addition, any
amendments to the management contract must be approved by the NIGC.

         Each of CGMI's Native American gaming management projects is also
regulated by state and/or Tribal gaming commissions. The Company and CGMI have
submitted applications for licenses to manage and finance Native American gaming
operations with the various applicable Tribal and state gaming commissions
applicable to its business and have subsequently received permanent or temporary
gaming licenses from each of such Tribes and states, permitting them to act as
managers/financiers of Native American gaming operations in such states.

         To the best of its knowledge, CGMI is presently in material compliance
with all applicable gaming rules and regulations.

         Continued Listing on NASDAQ. On June 25, 1997, the New Common Stock was
delisted from the OTC-Electronic Bulletin Board by NASDAQ because there were no
longer any market makers for the New Common Stock. The Company has contacted and
will continue to contact its former market makers to encourage such entities to
submit the necessary documents to NASDAQ to become market makers of the New
Common Stock. There can be no assurance that the Company will be able to attract
a sufficient number of market makers for the New Common Stock to be relisted on
the OTC Electronic Bulletin Board or that NASDAQ will approve an application by
the Company for relisting. As of the date hereof, there is no established public
trading market for the New Common Stock.


                                       22
<PAGE>   25
         Dependence Upon Key Personnel. The Company is substantially dependent
upon the experience and abilities of key executives whose experience in gaming
and requisite licensure makes them unique. While the Company has employment
agreements with key executives, the loss of their services could materially
adversely affect the Company.

         Suitability of Associated Persons. The NIGC, state and Tribal gaming
regulatory agencies closely regulate the suitability of persons owning or
seeking to renew an interest in a gaming license or permit. Such suitability can
be adversely affected by persons associated with licensees or permitees.
Additionally, any person or entity having any direct or indirect interests in
the Company or any casino directly or indirectly owned by the Company, including
holders of shares of common stock may be subject to administrative action,
including personal history and background investigations. The actions of such
associated persons over whom the Company may have no control could jeopardize
any licenses held by the Company.

         Repurchase of Securities Relating to Gaming Matters. Persons who
acquire beneficial ownership of the Company's securities may be subject to
certain reporting and qualification procedures established by regulatory
authorities. Such regulatory scrutiny and related limitations could adversely
affect the marketability of the Company's securities. The Company has amended
its Certificate of Incorporation to provide that if the Company reasonably
determines that ownership of its securities by any person or entity will either
preclude, interfere with, threaten or delay the issuance of or jeopardize the
maintenance and existence of any gaming license or result in the imposition of
burdensome terms or conditions on such license, the Company will have certain
rights to repurchase such securities or to require the sale of such securities.
Accordingly, in certain situations, a holder of such securities could be subject
to the risk of forfeiture or compelled sale. There can be no assurance that the
NIGC, tribal and state gaming regulatory authorities will not require background
investigations of holders of the Company's equity securities, that such holders
will cooperate with such background investigations or that such holders will be
found suitable.

         Environmental Matters. The Company is subject to certain Federal, state
and local environmental protection, health and safety laws, regulations and
ordinances that apply to non-gaming businesses generally, such as the Clean Air
Act, Clean Water Act, Resource Conservation and Recovery Act, CERCLA,
Occupational Safety and Health Act and similar statutes. To the best of its
knowledge, the Company believes that it is in material compliance with all such
statutes, regulations and ordinances thereunder.

         Bank Secrecy Act. Similar to banks and other financial institutions,
casinos are required to monitor and report currency receipts and disbursements
in excess of a certain limit to the United States Department of the Treasury.
Under amendments recently adopted by the Department of the Treasury, casinos
must obtain and document customer identification data for all currency
transactions above a specified amount. These requirements impose recordkeeping
requirements on the Company which may increase its overall cost of operations.
However, the Company does not believe that such requirements will have a
material adverse impact on the financial condition or operations of the Company.

Certain Local Regulations.

         The Company must also obtain liquor licenses from state regulatory
agencies for each of its proposed operations. Rules and regulations in this
regard are strict and the loss of such licenses is possible for regulatory
violations. The loss or suspension of a liquor license could significantly
impact a licensee's operations. Local building, health and fire codes and
similar regulations could also impact the Company's operations. Violations of
any of such statutes, codes or regulations could have a material adverse impact
on the financial condition or operations of the Company.


                                       23
<PAGE>   26
Employees

         The Company and its subsidiaries had 3 employees at fiscal year ended
June 30, 2000.

ITEM 2.  PROPERTIES

         The Company leased 2,646 square feet of office space in Phoenix,
Arizona pursuant to a lease agreement which expires December 31, 2000. This
lease was rejected by the Company in its recent reorganization proceedings. The
Company currently subleases 1,000 square feet of office space in Phoenix,
Arizona pursuant to a sublease agreement which expires April 30, 2003. The
sublease contains an early termination clause which may be exercised by the
Company after 18 months.

ITEM 3.  LEGAL PROCEEDINGS

         With the exception of the Company's voluntary reorganization
proceedings commenced on May 15, 2000, there was no material litigation
involving or pending against the Company on June 30, 2000. The Company is or may
become a defendant in pending or threatened legal proceedings in the ordinary
course of business although it is not aware of the existence of any such pending
or threatened legal proceedings at this time. See "Risk Factors - Accounting
Disagreement" for a description of a disagreement with the Laguna Development
Corporation concerning accounting treatment of pre-opening expenses under the
Laguna Management Contract, which disagreement may result in arbitration in the
fiscal year ending June 30, 2001.

         For further details on the Company's reorganization and for information
regarding the reorganization of CCCD, a former subsidiary of the Company, see
"Business-Reorganization".

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         During the fourth quarter of the fiscal year ended June 30, 2000, no
matter was submitted to a vote of security holders, through the solicitation of
proxies or otherwise, other than the solicitation of votes of the Senior
Noteholders in connection with the confirmation of the Plan.

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Through June 24, 1997, the New Common Stock was eligible for trading on
the OTC-Electronic Bulletin Board. On June 25, 1997, the New Common Stock was
de-listed from the OTC-Electronic Bulletin Board by NASDAQ because there were no
longer any market makers for the New Common Stock. There can be no assurance
that the Company will be able to attract a sufficient number of market makers
for the New Common Stock to be re-listed on the OTC Electronic Bulletin Board or
that NASDAQ will approve an application by the Company for re-listing. As of the
date hereof, there is no established public trading market for the New Common
Stock.

         As of June 30, 2000, there were 347 holders of record of the New Common
Stock.

         The Company is currently authorized under its Certificate of
Incorporation to issue up to 5,000,000 shares of New Common Stock.

         The following table sets forth the range of high and low bid prices for
the Common Stock, as reported by the NASDAQ Stock


                                       24
<PAGE>   27
Market for the periods indicated. The prices set forth below represent quotes
between dealers and do not include commissions, mark-ups or mark-downs, and may
not necessarily represent actual transactions.

<TABLE>
<CAPTION>
                             Common Stock
                            --------------
Calendar Quarter             High     Low
<S>                         <C>      <C>
1995:
     Third Quarter          $0.69    $0.16
     Fourth Quarter         $0.38    $0.07

1996:
     First Quarter          $0.30    $0.10
     Second Quarter         $0.30    $0.13
     Third Quarter          $0.14    $0.06
     Fourth Quarter         $0.12    $0.02

1997:
     First Quarter          $0.08    $0.01
     Second Quarter*        $0.03    $0.125
</TABLE>

         * -- On June 25, 1997, the New Common Stock was de-listed from the
OTC-Electronic Bulletin Board by NASDAQ, accordingly, subsequent balances have
not been updated.

         The Company has never paid and does not presently anticipate the
payment of cash dividends in the foreseeable future. It is the present intention
of the Board of Directors to retain earnings, if any, to provide for the growth
of the Company. Payment of dividends in the future will depend, among other
things, upon the Company's ability to generate earnings, its need for capital
and its financial condition. Additionally, the Company's ability to pay
dividends is limited by applicable state law.

         There is no established trading market for the Senior Secured Notes.


                                       25
<PAGE>   28
ITEM 6.  SELECTED FINANCIAL DATA (1)

         The selected consolidated financial data set forth below for each of
the last five fiscal years ended June 30, is derived from the Company's
consolidated financial statements and notes. Due to the Company's reorganization
pursuant to the Prior Plan, comparisons of 1997 to prior years may be of limited
use in determining operating or other financial trends in the Company's
business. This data should be read in conjunction with the consolidated
financial statements of the Company and the notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations".

IN THOUSANDS, EXCEPT SHARE DATA

<TABLE>
<CAPTION>
                                                                                                          PREDECESSOR COMPANY
                                                                 REORGANIZED  COMPANY                     -------------------
 Statement of Operations                      ---------------------------------------------------------    July 1,
Data (1)                                          Year          Year         Year           May 29,         1996       Year
                                                 Ended         Ended        Ended           1997          Through      Ended
                                                June 30,      June 30,     June 30,     Through June 30,   May 28,    June 30,
                                                 2000          1999         1998           1997(A)          1997        1996
<S>                                           <C>           <C>           <C>           <C>               <C>         <C>
Gross Revenues                                   $5,196        $7,264       $ 8,150         $ 753         $ 7,447     $ 7,663
Operating Expenses                                7,175         6,116        12,881         1,921           7,238      14,441
Reorganization Items (Expense)                       64           --            --           --            50,805        (600)
Other Income (Expense)                           (1,619)          112        (2,087)         (168)         (6,603)      3,660
(Loss) Income Before Extraordinary Items(2)      (2,595)          842        (7,154)       (1,351)         44,288      (4,039)
Loss on Early Extinguishment of Debt                 --           --            --            --           (1,998)        --
Gain From Reorganization Items                       --           --            --            --          103,464         --
Net (Loss) Income                                (2,595)          842        (7,154)       (1,351)        145,754      (4,039)

Earnings Per Share, Basic and Diluted:(B)
Income (Loss) Before Extraordinary Item          ($1.30)        $0.43        ($3.82)       ($0.72)            N/A         N/A
Income From Discontinued Operations                  --            --           --           --               N/A         N/A
Gain From Reorganization Items                       --            --           --           --               N/A         N/A
Net (Loss) Income                                ($1.30)        $0.43        ($3.82)       ($0.72)            N/A         N/A

Weighted Average Shares Outstanding(A)(B)     1,999,745     1,939,178     1,872,694     1,866,667             N/A         N/A
</TABLE>

<TABLE>
<CAPTION>
                                                             REORGANIZED                  PREDECESSOR
                                                               COMPANY                      COMPANY
                                               ---------------------------------------       AS OF
                                                            AS OF JUNE 30,                  JUNE 30,
                                               ---------------------------------------     --------
BALANCE SHEET DATA (1):                          2000       1999       1998      1997        1996
                                                 ----       ----       ----      ----        ----
<S>                                            <C>        <C>        <C>        <C>       <C>
Working Capital (Deficit) (2)                  13,207      5,942      5,991      6,431     (118,020)
Total Assets                                   15,341     17,229     16,721     25,114       60,048
Long-Term Debt (2)                                 --     18,240     23,100     23,100           --
Total Liabilities                                 618     24,192     24,826     26,065      160,308
Stockholder's Equity (Deficit)                 (9,558)    (6,963)    (8,105)      (951)    (100,260)
Ratio of Earnings to Fixed Charges                 (3)        (3)        (3)        (3)          (3)
</TABLE>



(1) As a result of the Company's reorganization in 1997 pursuant to the Prior
Plan, the comparability and informative value of information reflected in the
forgoing selected financial data with respect to the fiscal years ended June 30,
1997 may not be meaningful for the reader of this Annual Report on Form 10-K for
the fiscal year ended June 30, 2000.


                                       26
<PAGE>   29
(2) The working capital deficit at June 30, 1996 includes the classification of
$124,020,000  in Senior Secured Notes as current and $19,000,000 in unsecured
notes as current in 1996.

(3) Earnings are inadequate to cover fixed charges.

(A) Commencement of fresh start reporting in connection with the consummation of
the Company's reorganization after the effective date pursuant to the Prior
Plan. See "Business - Reorganization" for further details.

(B) The weighted average number of common shares outstanding and net income per
common share for the predecessor company (periods through May 28, 1997 (the
Effective Date)) have not been presented because, due to the Company's
reorganization pursuant to the Prior Plan and implementation of fresh-start
reporting, they are not comparable to subsequent periods and are therefore
irrelevant. See "Business - Reorganization" for further details.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         The following discussion and analysis should be read in conjunction
with the Selected Consolidated Financial Data and the Company's Consolidated
Financial Statements and the related notes thereto appearing elsewhere in this
Annual Report on Form 10-K for the fiscal year ended June 30, 2000.

         As a result of the sale of the Company's former unrelated business and
disposal of certain gaming operations as well as the reorganization of the
Company's indebtedness pursuant to the Prior Plan, the comparability and
informative value of year-to-year comparisons may not be meaningful or precise.

Notice Regarding Forward-Looking Statements

         To the extent the information contained in this discussion and analysis
of consolidated financial condition and results of operations and the
information included elsewhere in this Annual Report on Form 10-K for the fiscal
year ended June 30, 2000 are viewed as forward-looking statements, the reader is
cautioned that various risks and uncertainties exist that could cause the actual
future results to differ materially from those inferred by the forward-looking
statements. Words such as "expects", "anticipates", "intends", "potential",
"believes" and similar expressions are intended to identify forward-looking
statements. A discussion of the risk factors regarding the implementation of the
Company's business strategy is set forth in this Annual Report on Form 10-K in
the section entitled "Risk Factors." Failure to successfully implement this
strategy would raise substantial doubt about the Company's ability to fulfill
its principal obligations under its New Senior Secured Notes. The reader is
further cautioned that risks and uncertainties exist that have not been
mentioned herein due to their unforeseeable nature, but which, nevertheless, may
impact the Company's future operations.

Liquidity and Capital Resources

         Sources and Uses of Cash: For the fiscal year ended June 30, 2000, the
Company had a net decrease in cash and cash equivalents of $2,088,000, of which
$3,708,000 was provided by Company operating activities, and $5,796,000 was used
in Company investing activities.

         Operating Activities: Cash flows from operating activities for fiscal
year 1999 were provided by (i) Native American casino management fees of
approximately

         Effects of Plan: As a result of the confirmation of the Plan and the
Company's cancellation of all senior indebtedness, the Company anticipates that
the sources of its cash for operating expenses and investing activities for
fiscal 2001 will come primarily from (i) management fees received pursuant to
the Laguna Management Contract, (ii) debt and lease service payments received
from the Laguna Development Corporation and (iii) existing cash on hand of
approximately $2.9 million.



                                       27
<PAGE>   30
$5,843,000, and (ii) interest income of $738,000. Significant operating activity
balances required to reconcile the Company's GAAP accrual net loss of $2,595,000
to net cash flows used in operating activities include (i) depreciation and
amortization of $1,678,000, (ii) write-down of excess reorganization value of
$2,307,000, (iii) a write-off of deferred charges of $785,000, (iv) Muckleshoot
Settlement payments of $1,150,000 (see Footnote [4] to the Consolidated
Financial Statements), (v) an increase in interest receivable of $148,000, (vi)
an increase in prepaid expenses and other assets of $81,000, (vii) an increase
in related party payable of $14,000, (viii) an increase in accrued interest
payable of $1,094,000, and (ix) an increase of $780,000 for income tax
receivable.

         Significant operating activity cash outflows required to reconcile the
Company's GAAP, accrual net income to net cash flows used in operating
activities include (i) a decrease in accounts payable and accrued expenses of
$74,000, (ii) an decrease in Native American management fees and other
receivables of $647,000, and (iii) a decrease in federal income taxes payable of
$257,000, and (iv) a decrease in state income taxes payable of $70,000.

         Investing Activities: For the year ended June 30, 2000, the Company
used $5,796,000 in net cash flows for investing activities. Cash flows from
investing activities were provided by (i) $1,610,000 in repayment of Native
American loans/advances, (ii) decreased by $5,520,000 for an increase in
restricted funds, (iii) decreased by $1,201,000 for additional advances on
Native American loans receivable, (iv) decreased by $706,000 for the origination
of direct financing leases, (v) increased by $21,000 for payments received on
direct financing leases.

         Financing Activities: The Company did not have any financing activities
for the fiscal year ended June 30, 2000.

         The Company's source of cash for the next twelve months is expected to
be derived from the receipt of management fees and the receipt of debt service
payments on the Native American loans and leases. The Company received its final
debt service payment on the Tonto Apache Casino loan in April 2000. In June
2000, the Muckleshoot Casino made its final settlement payment to the Company.

         On July 24, 1998, CGMI entered into a management contract with the
Pueblo of Laguna and its wholly-owned corporation, the Laguna Development
Corporation ("LDC"), to exclusively develop, construct, operate and manage the
Dancing Eagle Casino (the "Laguna Management Contract"). The Laguna Management
Contract provides that the term of such agreement is five (5) years from the
official date of opening of the casino. By its terms, the Laguna Management
Contract will expire in February 2005. The contract provides that CGMI will
receive a management fee of 30% of adjusted net revenues (as defined in such
agreement) during the first three years of the term, and 20% of adjusted net
revenues in the fourth and fifth years of the term. The contract also provides
that management fees shall at all times be capped at 34.3% of net revenues as
determined in accordance with generally accepted accounting principles. The
Laguna Management Contract was amended and restated in March 1999 and September
1999. The Third Amended and Restated contract was approved by the NIGC in
September 1999.


                                       28
<PAGE>   31
         Capital Requirements. The Company will continue to operate, through
CGMI, on the management fees, principal and interest loan repayments, and lease
payments from the Dancing Eagle Casino as well as with its post-Plan cash
reserves of approximately $2.9 million.

         The development, management and operation of Native American gaming,
other gaming establishments and ancillary and complimentary businesses is time
consuming and capital intensive. Substantial capital is needed to finance the
licensing, development, construction, architectural, engineering, equipping,
legal and accounting fees and operating expenses associated with the management,
development and operation of casino gaming establishments. It is anticipated
that the Company will require significant additional capital in order to fund
future projects. There can be no assurance that such financing will be available
or, if available, that the terms thereof will be attractive to the Company.

         Description of Second Amended Indenture.

         See Item 1. Business -- "Reorganization".


                                       29
<PAGE>   32
RESULTS OF OPERATIONS

Overview

         The following discussion about the Company's results of operations
includes the Company and its subsidiaries, CGMI, and CDGC.

         The Company's new management team assumed management control in August
1998. Since that time, the new management team reduced expenses significantly
and began implementation of a business strategy designed to achieve the
following goals: (i) increase revenues at the Company's managed casinos, (ii)
finance, develop, and open the Dancing Eagle Casino project, (iii) build cash
for use in debt service and for future projects, (iv) seek and obtain new
project opportunities, (v) decrease operating expenses instituted by prior
management and (vi) seek out ways to refinance or restructure the Company's
existing indebtedness. The progress of the Company's new business strategy is
reflected in the sections "Fiscal 2000 compared to 1999" and "Fiscal 1999
compared to Fiscal 1998" below.

         In late 1999, management determined that the Company's capital
structure was impairing its ability to win new management contracts. While the
Company's operations were expected to generate sufficient revenue to make debt
service payments through the calendar year 2000, the Company anticipated that it
might not have sufficient revenue to make the final principal and interest
payment on the Senior Notes when they became due in May 2001. After extensive
meetings and negotiations with certain of the Senior Noteholders and the
Indenture Trustee, those Senior Noteholders and the Indenture Trustee, with the
concurrence of the Company, concluded that the best way to maximize recovery to
the Senior Noteholders and preserve the Company as a going concern was to
"de-leverage" the Company by converting the Senior Notes to equity. Although the
long-term success of the Company remains dependent upon its ability to obtain
new management contracts and gaming opportunities, the reorganization would (i)
eliminate the uncertainty created by the existing debt structure; (ii) provide
the Company needed flexibility for financing future operations; and (iii)
provide the Company more flexibility to compete with better financed
competitors.

         Accordingly, on May 15, 2000 (the "Petition Date") the Company filed a
voluntary petition for reorganization of the Company under Chapter 11 of the
Bankruptcy Code in the Bankruptcy Court, Case No. 00-14042 (JHW). The Company
remained in possession of its property and assets and maintained and operated
its business as debtor-in-possession pursuant to the provisions of the
Bankruptcy Code. Additionally no trustee or receiver was appointed. The
Company's two operating subsidiaries were not included in the filing.

         On September 26, 2000 the Bankruptcy Court conducted a hearing
regarding Confirmation of the Plan and, on October 4, 2000, entered an order
confirming the Plan. In connection with creditor approval of the Plan, 99.9770%
of holders of the Senior Notes who voted approved the Plan. The Effective Date
of the Plan is October 16, 2000, at which time distribution will commence.

         The following discussion of the results of operations for fiscal 2000
as compared to fiscal 1999, and fiscal 1999 as compared to fiscal 1998, is
presented on a consolidated basis only.


                                       30
<PAGE>   33
FISCAL 2000 COMPARED TO FISCAL 1999

         The following table sets forth certain key elements of the results of
operations for the combined periods discussed above:

<TABLE>
<CAPTION>
                                                       FISCAL             FISCAL
                                                        2000               1999
                                                        ----               ----
<S>                                                 <C>                <C>
REVENUES:
     Native American Casino Management Fees         $ 5,196,000        $ 7,264,000
                                                    -----------        -----------
COSTS & EXPENSES
     Salaries & Related Costs                         1,116,000          1,588,000
     Native American Gaming Development Costs           999,000            566,000
     Professional Fees                                  723,000          1,274,000
     General & Administrative                           352,000            450,000
     Depreciation & Amortization                      1,678,000          2,238,000
     Write-down of Excess Reorganization Value        2,307,000                 --
                                                    -----------        -----------
   TOTAL COSTS & EXPENSES                             7,175,000          6,116,000
                                                    -----------        -----------
INCOME (LOSS) FROM OPERATIONS                        (1,979,000)         1,148,000


OTHER INCOME (EXPENSE)
       Muckleshoot Settlement, Net                           --          2,285,000
       Interest Income                                  738,000            487,000
       Other Income                                          --             40,000
       Interest Expense                              (2,407,000)        (2,700,000)
                                                    -----------        -----------
   TOTAL OTHER INCOME (EXPENSE)                      (1,669,000)           112,000
                                                    -----------        -----------
REORGANIZATION ITEMS                                     64,000                 --
                                                    -----------        -----------
INCOME (LOSS) BEFORE INCOME TAX                      (3,712,000)         1,260,000
                                                    -----------        -----------
INCOME TAX EXPENSE (BENEFIT)                         (1,117,000)           418,000
                                                    -----------        -----------

NET INCOME (LOSS)                                   $(2,595,000)       $   842,000
                                                    ===========        ===========
</TABLE>

Loss From Operations

         Loss from operations for the year ended June 30, 2000 was $1,979,000,
compared to income of $1,148,000 for the year ended June 30, 1999, a decrease of
$3,127,000 or 272.4%. This decrease in income from operations is due to (i) a
one-time write down of excess reorganization value of $2,307,000, (ii) a
decrease in revenues of $2,068,000, and (iii) an increase in Native American
gaming development costs of $433,000, offset by (i) a decrease in salaries and
related costs of $472,000, (ii) a decrease in professional fees of $551,000, and
(iii) a decrease in general and administrative expenses of $98,000.


                                       31
<PAGE>   34
Revenues

         Revenues for the year ended June 30, 2000 and 1999 are summarized as
follows:

<TABLE>
<CAPTION>
                                      FISCAL YEAR   FISCAL YEAR
                                         ENDED         ENDED
FACILITY                                6/30/00       6/30/99      VARIANCE $   VARIANCE %
                                        -------       -------      ----------   ----------
<S>                                   <C>           <C>           <C>           <C>
Tonto Apache Management Fees          1,932,000      2,335,000       (403,000)    (17.2%)
Umatilla Management Fees              3,176,000      4,929,000     (1,753,000)    (35.6%)
Pueblo of Laguna                         88,000             --         88,000        N/A
                                     ----------     ----------    -----------     ------
Total Revenues                       $5,196,000     $7,264,000    $(2,068,000)    (28.5%)
                                     ----------     ----------    -----------     ------
</TABLE>

         Total revenues for fiscal year 2000, consisting of management fees from
the Company's managed gaming facilities, was $5,196,000, a decrease of
$2,068,000 or 28.5% from the year ended June 30, 1999. The decrease in
management fees is due primarily to the combination of two factors, (i) a
decrease in revenues from the Umatilla and Tonto Apache Casinos due to the
termination of their management contracts in February 2000 and March 2000,
respectively, and (ii) revenues from the Pueblo of Laguna Casino of $88,000
following commencement of operations in February 2000.

Costs and Expenses

         Salaries and related costs decreased approximately $472,000, or 29.7%
in fiscal 2000 as compared to fiscal 1999. This decrease is primarily
attributable to management's efforts to increase efficiency, streamline
operations and reduce costs including (i) a reduction in highly compensated
employees, (ii) a reduction in staff, and (iii) a reduction in taxes and benefit
payments incurred in conjunction with the aforementioned highly compensated
employees and staff.

         Native American Development costs increased $433,000, or 76.5% from
$566,000 in fiscal 1999 to $999,000 in fiscal 2000. The increase in Native
American development costs was due to the write off of start-up expenses
associated with the opening of the Dancing Eagle Casino on February 12, 2000.

         Professional fees decreased $551,000, or 43.2% in fiscal 2000,
decreasing from approximately $1.27 million in fiscal 1999 to $723,000 in fiscal
2000. The overall decrease in legal expenses is primarily attributable to three
factors, (i) the finalization of the Second Amended Indenture in fiscal 1999,
(ii) the finalization of the Muckleshoot settlement in fiscal 1999, and (iii)
management's continuing efforts to reduce legal costs in all categories.

         General and Administrative expenses decreased approximately $98,000,
from approximately $450,000 in fiscal 1999 to $352,000 in fiscal 2000. This
21.8% decrease is due to reduced expenses associated with the streamlining of
the Company's operations and new management's cost-effective philosophy.


                                       32
<PAGE>   35
         Depreciation and amortization decreased approximately $560,000 in
fiscal 2000, a 25.0% decrease from $2,238,000 in fiscal 1999. The decrease in
depreciation and amortization expense is primarily due to (i) the write-off of
the Muckleshoot deferred charges in fiscal 1999, and (ii) the expiration of the
management contracts with the Umatilla and Tonto Apache tribes in fiscal 2000
resulting in lesser amortization of deferred charges in fiscal 2000.

         The item Write-down of Excess Reorganization Value of $$2,307,000
represents the write-down of the balance of the Company's Excess Reorganization
Value which resulted from its emergence from Chapter 11 bankruptcy filing in May
1997. On June 30, 1998, the Company recorded a non-cash impairment loss of
$1,300,000 related to the write-down. The Company had experienced an operating
loss and an operating cash flow loss for the year ended June 30, 1998. In
addition, due to recent developments relating to the Company's Narragansett
gaming project in Rhode Island, management has determined that this project has
a lesser probability of becoming operational. As a result of these
circumstances, the projected future cash flows of the Company were less than the
carrying value of the asset; therefore, an impairment loss was recognized. This
asset was written down to its estimated fair value based on the discounted cash
flows projected through May, 2001, the end of the asset's estimated life. In May
2000, this asset was written down to zero due to the Chapter 11 bankruptcy
filing on May 15, 2000 (see note [3] to the Company's audited consolidated
financial statements contained herein).

Other Income and Expense Items

         The other income line item, Muckleshoot Settlement - Net for $2,285,000
at June 30, 1999, represents the net gain to the Company for fiscal year 1999,
associated with the Muckleshoot settlement (see note [4] to the Company's
audited consolidated financial statements contained herein). The balance
represents the net of the $3.3 million settlement, less a $200,000 receivable
balance due the Company as of June 30, 1998, less the unamortized balance of the
deferred asset Investment in Muckleshoot Agreement, of approximately $815,000.

         Interest Income increased 51.5% from $487,000 in fiscal 1999 to
$738,000 in fiscal 2000. The increase in interest income is the collective
result of four factors, (i) an increase in average idle interest-bearing cash,
cash equivalents and restricted funds outstanding during fiscal year 2000, which
increased interest income, and (ii) greater interest income from Native American
loans and Native American capital leases due to the commencement of operations
at the Dancing Eagle Casino, (iii) the recognition of interest income from state
tax refunds due from Oregon, California, and Arizona for amended returns filed
for years 1995, 1996, 1997, and 1998, and (iv) a reduction of interest income
from Native American loans for the year due to the receipt of the final payment
in April 2000 from the Tonto Apache Casino loan.

         Interest expense decreased $293,000 or 10.9% from $2,700,000 reported
in fiscal 1999. The decrease is due to the reduction of accrued interest on the
Senior Notes released and surrendered to the Company and held in Treasury. The
only interest expense bearing instrument of the Company during both fiscal years
2000 and 1999 was the Senior Notes whose principal balance of $23.1 million and
whose interest rate of 12.0% have both remained unchanged. The New Senior
Secured Notes are subject to compromise in the Company's May 15, 2000 Chapter 11
bankruptcy filing (see note [2] to the Company's audited Consolidated financial
statements contained herein).


                                       33
<PAGE>   36
         Other income of $40,000 recorded in fiscal 1999 represents the receipt
by the Company of a settlement payment on a gain contingency settled during the
year.

         The item, Reorganization Items, represents costs incurred in fiscal
2000 due to the Company's Chapter 11 bankruptcy filing on May 15, 2000.

         The income tax benefit for fiscal year 2000 represents an estimate for
state income tax refunds. During the third quarter of fiscal year 2000, various
state taxing authorities approved the Company's request to file on a
consolidated basis versus a separate entity basis. The filing of amended
consolidated returns for the Company resulted in the utilization of net
operating losses on a consolidated basis for the prior years being amended. Upon
amendment of the prior year returns, the Company realized income tax refunds
from Oregon, Arizona, and California in the amount of approximately $1,132,000.
This amount has been recorded as an income tax receivable and an income tax
benefit as of June 30, 2000. In addition, the Company is estimated to owe
$15,000 in alternative minimum tax. These two amounts net to the $1,117,000
shown on the income statement. The Company does not expect to realize income
tax benefits in the next fiscal year.


                                       34
<PAGE>   37
FISCAL 1999 COMPARED TO FISCAL 1998

         The following table sets forth certain key elements of the results of
operations for the combined periods discussed above:

<TABLE>
<CAPTION>
                                                       FISCAL             FISCAL
                                                        1999               1998
                                                        ----               ----
<S>                                                 <C>                <C>
REVENUES:
     Native American Casino Management Fees         $ 7,264,000        $ 8,150,000
                                                    -----------        -----------
COSTS & EXPENSES
     Salaries & Related Costs                         1,588,000          3,284,000
     Native American Gaming Development Costs           566,000          2,317,000
     Professional Fees                                1,274,000          1,380,000
     General & Administrative                           450,000          1,447,000
     Depreciation & Amortization                      2,238,000          3,153,000
     Write-down of Excess Reorganization Value               --          1,300,000
                                                    -----------        -----------
   TOTAL COSTS & EXPENSES                             6,116,000         12,881,000
                                                    -----------        -----------
INCOME (LOSS) FROM OPERATIONS                         1,148,000         (4,731,000)


OTHER INCOME (EXPENSE)
       Muckleshoot Settlement, Net                    2,285,000                 --
       Interest Income                                  487,000            798,000
       Other Income                                      40,000                 --
       Interest Expense                              (2,700,000)        (2,885,000)
                                                    -----------        -----------
   TOTAL OTHER INCOME (EXPENSE)                         112,000         (2,087,000)
                                                    -----------        -----------
INCOME (LOSS) BEFORE INCOME TAX                       1,260,000         (6,818,000)
                                                    -----------        -----------
INCOME TAXES                                            418,000            336,000
                                                    -----------        -----------

NET INCOME (LOSS)                                   $   842,000        $(7,154,000)
                                                    ===========        ===========
</TABLE>

Income From Operations

         Income from operations for the year ended June 30, 1999 was $1,148,000,
compared to a loss of $4,731,000 for the year ended June 30, 1998, an increase
of $5,879,000 or 124.3%. This increase in income from operations is due to (i) a
decrease in revenues of $886,000, and (ii) a decrease in operating expenses of
$6,765,000.


Revenues

         Revenues for the year ended June 30, 1999 and 1998 are summarized as
follows:

<TABLE>
<CAPTION>
                                        FISCAL YEAR     FISCAL YEAR
                                           ENDED           ENDED
FACILITY                                  6/30/99         6/30/98        VARIANCE $      VARIANCE %
                                          -------         -------        ----------      ----------
<S>                                    <C>              <C>             <C>              <C>
Muckleshoot Casino Management Fees             --       $1,120,000      $(1,120,000)       (100.0%)
Tonto Apache Management Fees            2,335,000        2,275,000           60,000           2.6%
Umatilla Management Fees                4,929,000        4,755,000          174,000           3.7%
                                       ----------       ----------      -----------        -------
Total Revenues                         $7,264,000       $8,150,000      $  (886,000)        (10.9%)
                                       ----------       ----------      -----------        -------
</TABLE>

                                       35
<PAGE>   38
         Total revenues for fiscal year 1999, consisting of management fees from
the Company's managed gaming facilities, was $7,264,000, a decrease of $886,000
or 10.9% over the year ended June 30, 1998. The decrease in management fees is
due primarily to the combination of two factors, (i) a decrease in revenues from
the Muckleshoot Casino of $1,120,000 due to the termination and settlement of
the Muckleshoot management agreement, as explained in Note [6] to the audited
consolidated financial statements contained herein, and (ii) increased revenues
from the Umatilla and Tonto Apache Casinos of $174,000 and $60,000 respectively,
which was a result of effective marketing and cost control procedures in the
managed casinos.

Costs and Expenses

         Salaries and related costs decreased approximately $1.7 million, or
51.6% in fiscal 1999 as compared to fiscal 1998. This decrease is primarily
attributable to (i) a reduction in highly compensated employees, (ii) a
reduction in staff, and (iii) a reduction in taxes and benefit payments incurred
in conjunction with the aforementioned highly compensated employees and staff.

         Native American Development costs decreased $1,751,000, or 75.6% from
$2,317,000 in fiscal 1998 to $566,000 in fiscal 1999. The decrease in Native
American development costs was due to decreased legal fees incurred in
conjunction with the Narragansett Indian Tribe's attempt to further their
position toward an approved gaming Compact.

         Professional fees decreased $106,000, or 7.7% in fiscal 1999,
decreasing from approximately $1.38 million in fiscal 1998 to $1.27 million in
fiscal 1999. The overall decrease in legal expenses is primarily attributable to
the combination of four factors, (i) increased legal fees incurred in the
finalizing of the Second Amended Indenture, (ii) increased legal fees associated
with the Muckleshoot settlement which was finalized in July 1998, (iii)
professional fees incurred relating to the establishment of the Dancing Eagle
Casino Project, and (iv) decreased by management's continuing efforts to reduce
legal costs in all categories.

         General and Administrative expenses decreased approximately $997,000,
from approximately $1,447,000 in fiscal 1998 to $450,000 in fiscal 1999. This
68.9% decrease is due to reduced expenses associated with the streamlining of
the Company's operations and new management's cost-effective philosophy.

         Depreciation and amortization decreased approximately $915,000 in
fiscal 1999, a 29.0% decrease from the $3,153,000 balance in fiscal 1998. The
decrease in depreciation and amortization expense is primarily due to (i) the
write-off of the Muckleshoot deferred charges on July 20, 1998 (see Note [6] to
the Company's audited consolidated financial statements contained herein), and
(ii) the write-down of Excess Reorganization Costs in fiscal 1998 and the
subsequent recalculated amortization of the remaining balance which resulted in
lower amortization expenses in fiscal 1999.

         On June 30, 1998, the Company recorded a non-cash impairment loss of
$1.3 million related to the write-down of the Company's excess reorganization
value in accordance with Statement of Accounting Standards No. 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be disposed
of." The excess reorganization value was written down to its estimated fair
market value based on the Company's discounted operating cash flows anticipated
to be earned through May 2001, the end of the asset's estimated life. The
remaining net unamortized value of the excess reorganization value will be
amortized over the remaining 35 months of the assets' useful life (see footnote
[3] to the Company's audited consolidated financial statements contained
herein).


                                       36
<PAGE>   39
Other Income and Expense Items

         The other income line item, Muckleshoot Settlement - Net for
$2,285,000, represents the net gain to the Company for fiscal year 1999,
associated with the Muckleshoot settlement (see note [3] to the Company's
audited consolidated financial statements contained herein). The balance
represents the net of the $3.3 million settlement, less a $200,000 receivable
balance due the company as of June 30, 1998, less the unamortized balance of the
deferred asset Investment in Muckleshoot Agreement, of approximately $815,000.

         Interest Income declined 39.0% from $798,000 in fiscal 1998 to $487,000
in fiscal 1999. The decrease in interest income is the collective result of two
factors, (i) an increase in average idle interest-bearing cash, cash equivalents
and restricted funds outstanding during fiscal year 1999, which resulted in a
nominal increase in interest income, and (ii) lesser interest income from the
Native American loans due to the receipt of the final payment in September 1998
of the Umatilla Tribes Casino Loan and the normal monthly amortization of the
Tonto Apache Casino Loan, which resulted in lower interest income.

         Other income of $40,000 recorded in fiscal 1999 represents the receipt
by the Company of a settlement payment on a gain contingency settled during the
year.

         Interest expense decreased $185,000 or 6.4% from $2,885,000 reported in
fiscal 1998. The decrease is due to the reduction of accrued interest on the New
Senior Secured Notes released and surrendered to the Company and held in
Treasury. The only interest expense bearing instrument of the Company during
both fiscal years 1999 and 1998 was the new Senior Secured Notes whose principal
balance of $23.1 million and whose interest rate of 12.0% have both remained
unchanged.

Provision for Income Tax Expense

         As discussed in "Business - Net Operating Loss Carryforwards",
management of the Company believes that the Company and its subsidiaries possess
Net NOLs as of June 30, 1999 of approximately $32,585,000 for federal income tax
purposes after taking into account the reorganization of the Company pursuant to
the Plan and assuming that Tax Code ss. 382(1)(5) applies, although no assurance
can be given that the Company will be able to utilize these NOLs. See "Risk
Factors - Net Operating Loss Carryforwards". For financial statement purposes, a
deferred tax benefit with respect to such NOLs could not be recorded on the
balance sheet of the Company because any realization of the NOLs cannot be
assured at this time and the amount cannot be estimated.


                                       37
<PAGE>   40
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company's portfolio of marketable securities includes numerous
issuers, varying types of securities and maturities. Due to the short-term
nature of the portfolio, the fair value of the Company's portfolio of marketable
securities would not be significantly impacted by either a 100 basis point
increase or decrease in interest rates. The Company does not hold or issue
derivative financial instruments.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         This information appears in a separate section of this Annual Report on
Form 10-K for the fiscal year ended June 30, 2000 following Part IV.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         On August 16, 1999, the Company engaged Toback Certified Public
Accountants, a Phoenix-based certified public accounting firm, as its
accountants to replace Moore Stephens, P.C., a New Jersey certified public
accounting firm. The Company's Board of Directors approved the selection of
Toback Certified Public Accountants as the Company's new accountants. The change
in the Company's accountants was necessitated by the Company's relocation of its
New Jersey offices to Phoenix, Arizona and was not as a result of any
resignation, adverse opinion or disagreement with the Company's former
accountants.

         On January 28, 2000, the Company was notified that McGladrey & Pullen,
LLP, had acquired the attest assets of the Company's independent auditors,
Toback CPAs, P.C., and that Toback CPAs would no longer be the auditor for the
Company. McGladrey & Pullen, LLP was appointed as the Company's new auditor.


                                       38
<PAGE>   41
                                    PART III

                                   MANAGEMENT

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

         The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
         Name                        Age    Position                                                 Class
<S>                                  <C>    <C>                                                      <C>
         Charles B. Brewer           52     Chairman                                                 Class A

         Michael W. Barozzi          52     President and Chief Operating Officer and Director       Common

         Col. Clinton L. Pagano      72     Director                                                 Common
         (Retired)

         William S. Papazian         38     Executive Vice President and Director                    Common
</TABLE>

         All terms of these directors will expire at the next Annual Meeting of
Shareholders.

-----------------------------

         Charles B. Brewer was appointed as Chairman of the Board of Directors
on August 24, 1998 and is an outside director of the Company. From August 1996
to present Mr. Brewer has served as Chairman, President and Chief Executive
Officer of Southmark Corporation. From July 1989 through July 1996 Mr. Brewer
served as Chief Operating Officer, Executive Vice President, General Counsel and
Secretary of Southmark Corporation. Additionally, from September 1996 to present
Mr. Brewer has served as Trustee for the Value-Added Communications, Inc.
Litigation Trust and from January 1998 to present as Chairman and President of
Northwest Senior Housing Corporation. Mr. Brewer has also served as an outside
director to Lady Luck Gaming Corporation from January 1997 to present. From July
1989 to July 1996, Mr. Brewer served as Chief Operating Officer, Executive Vice
President, General Counsel and Secretary to Southmark Corporation.

         Michael W. Barozzi was appointed President and Chief Operating Officer
and a member of the Board of Directors on August 24, 1998. From November 1997 to
August 1998, and from April 1993 to September 1995, Mr. Barozzi served as Senior
Vice President of Operations of the Company. Mr. Barozzi served as an outside
gaming consultant to the Company from September 1995 until December 1997. From
August 1989 to July 1992 Mr. Barozzi was Casino Manager of the Trump Taj Mahal
Casino in Atlantic City, New Jersey. From March 1986 to January 1988 Mr. Barozzi
was Vice President and General Manager of the Aruba Concorde Hotel and Casino in
Aruba, Netherlands Antilles. Mr. Barozzi's career in the gaming industry spans
30 years and he has, in addition to the above, worked in Las Vegas, Nevada and
in Monte Carlo, Monaco. Mr. Barozzi has expertise in casino operations and
development.

         Col. Clinton L. Pagano (retired) was appointed Executive Vice President
of Compliance and a Director of the Company in November 1992. Col. Pagano became
an outside director to the Company in January 1999. Col. Pagano was the
Superintendent of the New Jersey State Police from 1975 to 1990, during the
tenures of two Governors. During 1990 and 1991, Col. Pagano was Director of the
New Jersey Division of Motor Vehicles, a position he was appointed to by a third
New Jersey Governor. Col. Pagano has over 35 years of law enforcement experience
including the implementation in New Jersey of a coordinated State and Federal
organized crime control program. During his tenure as Superintendent of the New
Jersey State Police, Col. Pagano was the State Director of Emergency Management,
a Federal crisis management program, and was also responsible for developing and
implementing various security programs for the New Jersey Sports and Exposition
Authority. Col. Pagano also served as a member of the Board of Directors of
Digital Products Corporation of Florida from December 10, 1992 to January 13,
1997, and was Chairman from February 14, 1996 to January 13, 1997.

                                       39
<PAGE>   42
         William S. Papazian was appointed Vice President and General Counsel of
the Company on May 23, 1994, became Senior Vice President and General Counsel on
June 17, 1995 and was appointed Corporate Secretary on September 5, 1995. Mr.
Papazian became a member of the Board of Directors on March 19, 1997 and
Executive Vice President on August 24, 1998. From July 1992 through May 1994,
Mr. Papazian represented the Company in a wide variety of matters as an attorney
with the firm of Mason, Briody, Gallagher & Taylor in Princeton, New Jersey.
From February 1990 through June 1992, Mr. Papazian served as Associate General
Counsel to Mercy Medical Center in New York, New York. From November 1986
through February 1990, Mr. Papazian practiced corporate law with the firm of
Farrell, Fritz, Caemmerer, Cleary, Barnosky & Armentano in Uniondale, New York.
Mr. Papazian has been practicing corporate and regulatory law since 1986, and is
admitted to the bar in the States of New Jersey, California, New York and
Pennsylvania. Mr. Papazian has an expertise in gaming and regulatory law, and is
a recognized expert in Native American gaming. From February 2000 to present Mr.
Papazian has served as an outside noncompensated director to the Maricopa
Advisory Council on Developmental Disabilities, a not-for-profit corporation
providing advocacy services to developmentally disabled individuals and their
families.

         The Company knows of no family relationships between any director,
executive officer or person nominated or chosen by the Company to become a
director or executive officer.

Section 16(a) Beneficial Ownership Reporting Compliance

         Section 16(a) of the Securities Exchange Act requires the Company's
officers and directors, and persons who own more than ten percent (10%) of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the SEC and the
National Association of Securities Dealers. Officers, directors and greater than
ten percent (10%) beneficial owners are required by SEC regulation to furnish
the Company with copies of all Forms 3, 4 and 5 which they file.

         Based solely on the Company's review of the copies of such forms it has
received, and written representations from certain reporting persons that they
were not required to file Form 5 for specified fiscal years, the Company
believes that all of its officers, directors and greater than ten percent (10%)
beneficial owners complied with all filing requirements applicable to them with
respect to transactions during the fiscal year ended June 30, 2000.

                                       40
<PAGE>   43
ITEM 11. EXECUTIVE COMPENSATION

         The following table sets forth compensation to, earned by, or paid to
the Company's chief executive officer, all executive officers and all Board
directors of the Company. Set forth below is such information with respect to
the Company and all of its subsidiaries.


<TABLE>
<CAPTION>
                          SUMMARY COMPENSATION TABLE
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                        SECURITIES
NAME AND        FISCAL                                      OTHER       RESTRICTED      UNDERLYING        LONG            ALL
PRINCIPAL         YEAR                                     ANNUAL            STOCK      OPTIONS/SARS       TERM           OTHER
POSITION         ENDED       SALARY          BONUS   COMPENSATION           AWARDS(7)   GRANTED(8)(9)    PAYOUTS      COMPENSATION
-----------------------------------------------------------------------------------------------------------------------------------
<S>           <C>          <C>              <C>      <C>                <C>             <C>          <C>       <C>
Michael       06/30/00     275,000(16)      50,000           0(12)             0               0            0         9,945(13)
Barozzi (1)   06/30/99     291,667(16)           0           0(12)             0(7)            0            0        10,320(13)
President     06/30/98     200,000               0     $91,667(10/15)          0(7)            0            0         1,152(13)
And Chief
Operating
Officer
-----------------------------------------------------------------------------------------------------------------------------------
William S.    06/30/00     275,000(16)      50,000           0(12)             0               0           0          7,303(13)
Papazian (2)  06/30/99     291,667(16)           0           0(12)             0(7)            0           0          8,825(13)
Executive     06/30/98     304,167               0      41,661(10/15)          0(7)            0           0        169,481(11/13)
Vice
President,
Secretary
and
Director
------------------------------------------------------------------------------------------------------------------------------------
Charles B.    06/30/00      75,000               0            0                0               0           0              0
Brewer (3)    06/30/99      75,000               0            0                0               0           0              0
Chairman      06/30/98           0               0            0                0               0           0              0
of the
Board
------------------------------------------------------------------------------------------------------------------------------------
Clinton L.    06/30/00      75,000               0           0                 0               0           0         10,049(14)
Pagano(4)     06/30/99      87,500               0           0                 0               0           0         10,877(14)
Executive     06/30/98     129,167               0      37,500(10/15)          0               0           0         12,540(14)
Vice
President
and
Director
------------------------------------------------------------------------------------------------------------------------------------
Bradley A.    06/30/00           0               0           0                 0               0           0              0
Denton (5)    06/30/99      70,833               0           0                 0               0           0              0
Vice          06/30/98      32,513               0           0                 0               0           0              0
President
and Chief
Financial
Officer
------------------------------------------------------------------------------------------------------------------------------------
Edward M.     06/30/00           0               0           0                 0               0           0              0
Tracy (6)     06/30/99     345,833               0           0                 0               0           0          5,319(13)
Chairman and  06/30/98     585,417               0     131,667(10/15)          0               0           0        323,707(13/17)
Chief
Executive
Officer
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Mr. Barozzi was appointed Senior Vice President of Operations of the
     Company on November 1997 and President and Chief Operating Officer of the
     Company on August 24, 1998. As such, he functions as the Company's Chief
     Executive Officer. Prior to his appointment in November 1997, Mr. Barozzi
     was a consultant to the Company pursuant to which he was paid $50,000 in
     Fiscal year 1998.

(2)  Mr. Papazian was appointed Vice President and General Counsel of the
     Company on May 23, 1994; Senior Vice President and General Counsel on June
     17, 1995; and Secretary on September 5, 1995. He became Senior Vice
     President and a member of the Board of Directors on March 19, 1997 and
     Executive Vice President on August 24, 1998.

                                       41
<PAGE>   44
(3)  Mr. Brewer was appointed Chairman of the Board of Directors on August 24,
     1998. Mr. Brewer receives a Director's fee as an outside director at a rate
     of $75,000 per annum. Directors are also reimbursed for their expenses in
     connection with their attendance at each Board meeting or otherwise
     incurred in performance of their duties as Directors.

(4)  Mr. Pagano was appointed Executive Vice President of Compliance and a
     member of the Board of Directors of the Company on October 17, 1993. Mr.
     Pagano resigned as Executive Vice President of Compliance on January 1,
     1999, but remains on the Board of Directors of the Company as an outside
     director.  Mr. Pagano receives a Director's fee as an outside director
     at a rate of $60,000 per annum.  Directors are also reimbursed for their
     expenses in connection with their attendance at each Board meeting or
     otherwise incurred in performance of their duties as Directors.  Mr.
     Pagano's term of directorship shall expire on December 31, 2000.

(5)  Mr. Denton was appointed Vice President and Chief Financial Officer of the
     Company on April 1, 1998.  Mr. Denton resigned as Vice President and Chief
     Financial Officer on November 13, 1998.

(6)  Mr. Tracy was appointed President and Chief Operating Officer of the
     Company on January 7, 1993. Mr. Tracy was appointed Chief Executive Officer
     of the Company on May 30, 1995, and became Chairman of the Board of
     Directors on March 19, 1997. Mr. Tracy resigned as an officer and director
     of the Company on August 24, 1998.

(7)  The total value recorded by the Company for the initial installments of the
     stock grants was $13,000. Pursuant to the 1996 Reorganization Mr. Barozzi
     and Mr. Papazian were each awarded 100,000 shares of common stock. These
     shares vested over a 3 year period beginning May 1997. The shares were
     fully vested May 1999. These shares were cancelled in connection with the
     Plan.

(8)  Pursuant to the Stock Option Plan, ten percent (10%) of the Company's
     issued and outstanding stock had been reserved for issuance to management
     as incentive stock options. The Board of Directors did not issue any
     options pursuant to the Stock Option Plan, and the Stock Option Plan was
     cancelled in connection with the Plan.

(9)  All stock options of past and present management were cancelled in
     connection with the Prior Plan.

                                       42
<PAGE>   45
(10) Vacation paid in lieu of time off.

(11) As part of the confirmation award pursuant to the Plan of Reorganization,
     Mr. Papazian was loaned $83,333 as an advance against the confirmation
     award. Mr. Papazian was subsequently paid $161,957, the net proceeds of
     which were used to repay the loan. Also includes certain relocation
     expenses.

(12) Pursuant to the 1996 Reorganization, the Company placed $125,000 in
     principal amount of Senior Notes ("Incentive Notes") in the name of
     employee to be held in escrow and not vested as to principal until May 15,
     2000. Pursuant to employee's employment agreement, if employee voluntarily
     resigned or was terminated for cause prior to May 15, 2000, the Incentive
     Notes would not vest and would be deemed forfeited. All regular interest
     payments (May 15 and November 15) on the Incentive Notes were deemed earned
     by employee when paid. The Incentive Notes are subject to compromise, and
     will receive a pro rata distribution with other Senior Notes in connection
     with the Plan. Compensation expense was recognized when the Senior Notes
     were granted.

(13) Automobile lease and term group life insurance.

(14) Miscellaneous fringe benefits paid relating to automobile allowance and
     medical insurance.

(15) Retroactive payroll per the terms of prior employment agreement.

(16) As reflected in the Summary Compensation Table for fiscal year ended
     6/30/99, Mr. Barozzi and Mr. Papazian each took a $50,000 voluntary
     reduction in base salary to $275,000 in September 1998.

(17) As part of the confirmation award pursuant to the Plan of Reorganization,
     Mr. Tracy was loaned $166,667 as an advance against the confirmation award.
     Mr. Tracy was subsequently paid $320,313, the net proceeds of which were
     used to repay the loan. Additionally, pursuant to the Plan of
     Reorganization Mr. Tracy was designated to receive $366,667 in New Senior
     Secured Notes. Mr. Tracy released the Company of this obligation in
     connection with his resignation from the Company in August 1998.

                                       43
<PAGE>   46
Option/SAR Grants in the Fiscal Year Ended June 30, 2000

         In the fiscal year ended June 30, 2000, no stock options or SARs were
granted to any of the Company's executive officers named in the Summary
Compensation Table. The Company's 1997 Stock Option Plan was cancelled in
connection with the Plan.

Aggregated Option/SAR Exercises in Fiscal Year Ended June 30, 2000, and June 30,
2000 Option/SAR Values

         In the fiscal year ended June 30, 2000 no stock options or SARs were
exercised by any of the Company's executive officers named in the Summary
Compensation Table and no stock options or SARs were held as of June 30, 2000 by
any of such named executive officers. All of the Company's issued and
outstanding stock options were cancelled in connection with the Plan and there
were no stock options issued and outstanding as of June 30, 2000.

Long-Term Incentive Plan ("LTIP") Awards

         The Company does not have, and has made no award under, any
compensation plan constituting a "long-term incentive plan" (as that term is
defined under SEC Regulations). The Stock Option Plan is not a "long-term
incentive plan" as that term is defined under SEC Regulation S-K.

Defined Benefits or Actuarial Plan

         The Company does not have, and has made no award under, any defined
benefit plan or actuarial plan.

Compensation of Directors

         Chairman Charles B. Brewer is entitled to Director's fees as an outside
director at a rate of $75,000 per annum commencing September 1, 1998. Col.
Pagano received Director's fees at the rate of $90,000 for the period January 1,
1999 through December 31, 1999 and $60,000 for the period January 1, 2000
through December 31, 2000. Directors are also reimbursed for their expenses in
connection with their attendance at each Board meeting or otherwise incurred in
performance of their duties as Directors.

         Michael W. Barozzi and William S. Papazian are Directors of the Company
and also employees of the Company, and are compensated as employees under the
terms of employment agreements discussed in this report and described in the
Summary Compensation Table hereinabove.


                                       44
<PAGE>   47
Employment Contracts, Termination of Employment and Change-In-Control
Arrangements

         The Company entered into employment agreements with Michael W. Barozzi,
the Company's President and Chief Operating Officer, and William S. Papazian,
the Company's Executive Vice President, in December 1998, which provide for,
among other things, a rolling term of one (1) year. Mr. Barozzi's and Mr.
Papazian's annual salary are each currently $275,000. Mr. Barozzi's and Mr.
Papazian's employment agreements each have change in control provisions which
provide that upon a Change in Control (as defined in such agreements), employee
may terminate his employment for Good Reason which is defined to mean any of the
following: (i) assignment of duties materially inconsistent with employee's
position, (ii) diminution in employee's position, duties, responsibilities or
status, (iii) change in title or reporting responsibilities, (iv) any removal of
employee or failure to reelect employee to his position, (v) a reduction in
employee's base salary or failure to increase employee's base salary under
certain circumstances, (vi) failure by the Company to continue any benefit plan
or fringe benefit or materially adversely affect employee's participation in
such benefit plan or fringe benefit and failure of the Company to abide by
material terms of the agreement. Upon termination by employee for Good Reason,
employee shall be entitled to (i) base salary through the date of termination
and (ii) severance pay equal to employee's base salary in effect for one year,
in 24 equal semi-monthly payments on the 15th and last day of each month. The
Company assumed the employment agreements of Messrs. Barozzi and Papazian in
connection with the Plan.

Repricing of Stock Options

         There have been no repricing of stock options in the fiscal year ended
June 30, 2000. There were no stock options issued and outstanding as of June 30,
2000.


Compensation Committee Interlocks and Insider Participation in Compensation
Decisions

         As of June 30, 2000 the Company's Chairman, Charles B. Brewer, served
as the sole member of the Executive Compensation Committee. The Executive
Compensation Committee is responsible for setting all Company policies with
respect to compensation of executive officers and directors, as well as for
determining changes to the compensation level of such officers and directors.

         The Company is not aware of any relationship whereby (i) an executive
officer of the Company served as a member of the compensation committee (or
other board committee performing equivalent functions or, in the absence of any
such committee, the entire board of directors) of another entity, one of whose
executive officers served on the compensation committee (or other board
committee performing equivalent functions or, in the absence of any such
committee, the entire board of directors) of the Company; (ii) an executive
officer of the Company served as a director of another entity, one of whose
executive officers served on the compensation committee (or other board
committee performing equivalent functions or, in the absence of such committee,
the entire board of directors) of the Company; or (iii) an executive officer of
the Company served as a member of the compensation committee (or other board
committee performing equivalent functions or, in the absence of any such
committee, the entire board of directors) of another entity, one of whose
executive officers served as a director of the Company.

                                       45
<PAGE>   48
THE EXECUTIVE COMPENSATION PROGRAM

         Report from Board of Directors on Executive Compensation

         This report is furnished by the Board of Directors of the Company.
During the fiscal year ended June 30, 2000, management of the Company spent
significant time and energies implementing the Company's business strategy
including developing, financing and opening the Company's Dancing Eagle Casino
project in New Mexico, maintaining existing Tribal contracts following a
reorganization of management, negotiating and implementing a plan of
reorganization to de-leverage the Company and continuing to streamline
operations and costs. The Executive Compensation Committee of the Board of
Directors did not issue any reports in fiscal 2000. In March 2000, the Executive
Compensation Committee issued a $50,000 bonus to Mr. Barozzi and a $50,000 bonus
to Mr. Papazian in connection with the opening of the Dancing Eagle Casino in
February 2000.

        Compensation paid to executive officers of the Company was determined
pursuant to Employment Agreements entered into with management in December 1998.
These agreements reflected, among other things, voluntary reductions in salary
by management which occurred in September 1998, the issuance of 200,000 shares
of stock, collectively, to management and the contingent issuance of $250,000 in
New Senior Secured Notes, collectively, to management. Mr. Barozzi's and Mr.
Papazian's shares of stock were cancelled in connection with the Plan. In order
to provide an incentive to these individuals, in connection with the Plan the
reorganized Company is distributing to each of these individuals 55,000 shares
of common stock (representing 2.5% of the issued and outstanding stock of the
Company) which shares vest as follows: (i) one third will vest immediately on
the Effective Date, (ii) one third will vest on the first anniversary of the
Effective Date; and (iii) the final one third will vest on the second
anniversary of the Effective Date. All unvested shares and dividends accrued
thereon, shall be placed in escrow for their respective owners. If such owner
voluntarily leaves his employment for any reason or is terminated with cause
prior to the vesting date, then such owner shall lose all accumulated rights to
such unvested stock and accrued dividends. If the Reorganized Company or any of
its subsidiaries is sold, the stock shall vest immediately upon closing of the
sale. The Company currently maintains no formal executive compensation program
other than as outlined herein.

                                       46
<PAGE>   49
STOCK PRICE PERFORMANCE COMPARISON

         The following graph compares cumulative total return of the Company's
Common Stock (the Old Common Stock and the New Common Stock taking into account
the conversion ratio pursuant to the Plan of Reorganization) with the cumulative
total return of the Standard & Poor's 500 Index and a peer group selected in
good faith by the Company. The Company selected a composite of small cap gaming
common stocks for the industry peer group comparison. These stocks include Aztar
Corporation, Grand Casinos and Showboat, Inc. equally weighted.

         The graph assumes $100 was invested on June 30, 1992 in shares of
Common Stock and stocks comprising the S&P 500 Index and the peer group. (As the
Company's stock was de-listed effective June 25, 1997 from the NASDAQ OTC
Bulletin Board due to a lack of market makers for the Company's common stock,
data for the fiscal years ended June 30, 1998, June 30, 1999 and June 30, 2000
are excluded from the chart.)

<TABLE>
<CAPTION>
                                               S&P 500              Peer Group
                        Company                 Index                Composite
                        -------                -------              ----------
<S>                     <C>                    <C>                  <C>
      6/30/92           $100.00                $100.00               $100.00
      6/30/93            900.00                 110.39                125.82
      6/30/94            480.60                 108.80                106.49
      6/30/95             54.50                 133.39                126.52
      6/30/96             10.31                 164.20                142.07
      6/30/97              2.38                 216.58                113.94
</TABLE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information regarding the
beneficial ownership of the New Common Stock as of June 30, 2000: (i) by each
person who was known by the Company to be a beneficial owner of more than five
percent (5%) of the New Common Stock; (ii) by all directors and nominees; (iii)
by each of the named executive officers of the Company (as that term is defined
in Item 402(a)(3) of Regulation S-K); and (iv) by all directors and executive
officers of the Company as a group. Percentage of class is calculated on the
basis of 1,999,745 as of June 30, 2000 except that shares underlying options
currently vested and options exercisable within 60 days are deemed to be
outstanding for purposes of calculating the beneficial ownership of securities
owned by the holder of such options. Pursuant to the Prior Plan, the Company
issued 1,999,745 shares of New Common Stock.

                                       47
<PAGE>   50
<TABLE>
<CAPTION>
Name and Address of               Amount and Nature of
Beneficial Owner                  Beneficial Ownership     Percentage of  Class
-------------------               --------------------     --------------------
<S>                               <C>                      <C>
Charles B. Brewer(1)                         0                        0%

Michael W. Barozzi(1)                  100,000(2)                     5%

Col. Clinton L. Pagano(1)                    0                        0%

William S. Papazian(1)                 100,001(2)                     5%

Directors and Executive                200,001                       10%
Officers As a Group
(4 persons)

Grace Brothers Ltd.                    878,283(3)                  43.9%
1560 Sherman Avenue Ste 900
Evanston, IL 60201

Continental Casualty Company           265,330(3)                  13.3%
CNA Plaza
Chicago, IL 60685

Funsten Asset Management Company       249,165(3)                  12.5%
  as Investment Advisor
121 Outrigger Mall
Marina Del Rey, CA 90292
</TABLE>

-------------

(1) Address of each beneficial owner named in this table, unless otherwise
    indicated c/o Capital Gaming International, Inc., 3030 East Camelback
    Road, Suite 295, Phoenix, Arizona 85016.

(2) New Common Stock

(3) Class A Common Stock. Held in Voting Trust with Charles B. Brewer as Voting
    Trustee. Pursuant to the Voting Trust Agreement, Mr. Brewer retains sole
    voting rights over these shares but is not the beneficial owner of these
    shares.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         There were no related party transactions in the fiscal year ended June
         30, 2000.

                                       48
<PAGE>   51
                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)      1.       Financial Statements - See the Index to Financial Statements
                  on page F-1.

         2.       Financial Statement Schedules - Schedules begin on page S-1.

         3.       Exhibits.

         2.1      Stock Purchase Agreement dated March 15, 1993, by and among
                  the Registrant, Bass Leisure Group, Ltd., Bass Leisure Group,
                  Inc. and British American Bingo, Inc. (4)

         2.3      Involuntary Petition for Bankruptcy filed under Chapter 11 of
                  the U.S. Bankruptcy Code against Crescent City Capital
                  Development Corp. dated July 26, 1995. (19)

         2.4      Consent to Entry of Order for Relief filed by Crescent City
                  Capital Development Corp. in Chapter 11 Bankruptcy Case dated
                  July 28, 1995. (19)

         2.5      First Amended Chapter 11 Plan of Reorganization of Crescent
                  City Capital Development Corp. as confirmed by the Bankruptcy
                  Court on January 12, 1996. (20)

         2.6      Second Amended Chapter 11 Plan of Reorganization of Crescent
                  City Capital Development Corp. and First Immaterial
                  Modification, as confirmed by the Bankruptcy Court on April
                  29, 1996. (21)

         2.7      Stock Purchase Agreement by and among Casino Magic Corp.,
                  Jefferson Casino Corp., C-M of Louisiana, Inc., Capital Gaming
                  International, Inc. and Crescent City Capital Development
                  Corp., dated February 21, 1996. (21)

         2.8      First Amended and Modified Plan of Reorganization of Capital
                  Gaming International, Inc., dated March 19, 1997. (22)

         3.1      Restated Certificate of Incorporation of the Registrant. (15)

         3.2      Amended and Restated Certificate of Incorporation of the
                  Registrant. (26)

         3.2      Bylaws of the Registrant, as amended. (6)

         4.3      Indenture dated February 17, 1994, by and among the
                  Registrant, Crescent City Capital Development Corp., British
                  American Bingo, Inc. and First Trust National Association
                  (without exhibits and schedules). (9)

         4.4      Equity Registration Rights Agreement dated January 20, 1994,
                  by and among the Registrant and the persons who are
                  signatories thereto (without exhibits and schedules) (multiple
                  conformed signatures omitted). (9)

                                       49
<PAGE>   52
         4.5      Senior Secured Notes Registration Rights Agreement dated
                  February 17, 1994, by and among the Registrant, Crescent City
                  Capital Development Corp., British American Bingo, Inc. and
                  the purchasers who are signatories thereto (without exhibits
                  and schedules) (multiple conformed signatures omitted).
                  (9)

         4.6      Security Agreement dated February 17 1994, by and among the
                  Registrant, Crescent City Capital Development Corp., British
                  American Bingo, Inc. and First Trust National Association
                  (without exhibits and schedules). (9)

         4.7      Security Agreement dated February 17, 1994, by and between
                  Crescent City Capital Development Corp. and First Trust
                  National Association (without exhibits and schedules). (9)

         4.8      Pledge Agreement dated February 17, 1994, by and between the
                  Registrant and First Trust National Association (without
                  exhibits and schedules). (9)

         4.9      Pledge Agreement dated February 17, 1994, by and between
                  British American Bingo, Inc. and First Trust National
                  Association (without exhibits and schedules). (9)

         4.10     Warrant Agreement dated January 20, 1994 by and between the
                  Registrant and First Trust National Association (without
                  exhibits and schedules). (9)

         4.11     Form of Old Note. (11)

         4.12     Form of New Note. (11)

         4.13     First Supplemental Indenture dated June 24, 1994, to the
                  Indenture dated February 17, 1994, by and among the
                  Registrant, Crescent City Capital Development Corp., Capital
                  Gaming International Casino Management Division, Inc.
                  (formerly British American Bingo, Inc.) and First Trust
                  National Association (without exhibits). (12)

         4.14     Form of Term Note distributed to Bondholders in exchange for
                  their consent to the first Supplemental Indenture. (12)

         4.15     Amended and Restated Indenture, dated February 17, 1994 and
                  amended and restated as of March 27, 1997, by and among the
                  Registrant, the Guarantor named therein and First Trust
                  National Association. (23)

         4.16     Form of New Secured Note. (25)

         10.1     1990 Stock Option Plan, as amended. (15)

         10.34    Non-qualified Stock Option Agreement, dated February 27, 1992,
                  by and between the Registrant and Michael F. Marino. (1)

         10.35    Non-Qualified Stock Option Agreement, dated February 27, 1992,
                  by and between the Registrant and Thomas E. O'Brien. (1)

         10.36    Non-Qualified Stock Option Agreement, dated February 27, 1992,
                  by and between the Registrant and Robert DeFilippis. (1)

         10.38    Non-Qualified Stock Option Agreement, dated June 30, 1992, by
                  and between the Registrant and Hank Johnson. (1)

         10.39    Non-qualified Stock Option Agreement dated June 30, 1992, by
                  and between the Registrant and Thomas P. Gallagher. (1)

         10.49    Stock Option Agreement dated January 7, 1993, by and between
                  the Registrant and I.G. Davis, Jr. (2) 10.50 Stock Option
                  Agreement dated January 7, 1993, by and between the Registrant
                  and Edward Tracy. (2)

                                       50
<PAGE>   53
         10.52    Non-qualified Stock Option Agreement dated November 23, 1992,
                  by and between the Registrant and Col. Clinton L. Pagano. (2)

         10.53    Non-Qualified Stock Option Agreement dated November 23, 1992,
                  by and between the Registrant and Percival H.E. Leach. (2)

         10.54    Non-qualified Stock Option Agreement dated January 7, 1993, by
                  and between the Registrant and Thomas P. Gallagher. (2)

         10.55    Non-qualified Stock Option Agreement dated January 7, 1993, by
                  and between the Registrant and Joel Sterns. (2)

         10.56    Non-Qualified Stock Option Agreement dated January 7, 1993, by
                  and between the Registrant and Frank Gelb. (2)

         10.62    Stock Option Agreement dated January 29, 1993, between the
                  Registrant and Timothy G. Rose. (3)

         10.70    Stock Option Agreement dated May 7, 1993, between the
                  Registrant and Michael Barozzi. (6)

         10.78    Stock Option Agreement dated September 15, 1993, by and
                  between the Registrant and Peter Liguori. (6)

         10.79    Letter of Intent by and between the Registrant and Republic
                  Corporate Services, Inc. dated April 6, 1993, with amendments
                  dated June 11, 1993, and June 28, 1993. (6)

         10.80    Escrow Agreement by and between the Registrant and Republic
                  corporate Services, Inc. dated April 6, 1993, with Amendment
                  dated June 11, 1993. (6)

         10.81    Non-Qualified Stock Option Agreement by and between the
                  Registrant and Republic Corporate Services, Inc. dated June
                  11, 1993. (6)

         10.82    Option and Letter of Intent by and between the Registrant and
                  Republic Corporate Services, Inc. dated August 25, 1993. (6)

         10.83    Term Note by and between the Registrant and Joel Sterns dated
                  June 11, 1993. (6)

         10.84    Stock and Option Pledge Agreement by and between the
                  Registrant and Joel Sterns dated June 11, 1993. (6)

         10.86    Interim Agreement by and between the Board of commissioners of
                  the Port of New Orleans and Crescent City Capital Development
                  corporation dated June 29, 1993. (6)

         10.92    Common Stock Purchase Warrant by and between the Registrant
                  and First National Bank of Commerce dated September 1, 1993.
                  (6)

         10.93    Berth Infrastructure Reimbursement Agreement by and between
                  Crescent City Capital Development corporation and the Board of
                  Commissioners of the Port of New Orleans dated September 1,
                  1993. (6)

                                       51
<PAGE>   54
         10.94    Engagement Letter by and between the Registrant and Stephen
                  Edwards, Esq. dated July 20, 1993.

         10.95    Common Stock Purchase Warrant by and between the Registrant
                  and Ladenberg, Thalmann & Co. Inc. dated July 22, 1993. (6)

         10.96    Common Stock Purchase Warrant by and between the Registrant
                  and Ronnie Wohl dated July 22, 1993. (6)

         10.97    Common Stock Purchase Warrant by and between the Registrant
                  and Ronald J. Crammer dated July 22, 1993. (6)

         10.98    Common Stock Purchase Warrant by and between the Registrant
                  and Peter M. Graham dated July 22, 1993. (6)

         10.99    Common Stock Purchase Warrant by and between the Registrant
                  and Jay R. Petschek dated July 22, 1993. (6)

         10.10    Common Stock Purchase Warrant by and between the Registrant
                  and Brian M. Gonick dated July 22, 1993. (6)

         10.101   Common Stock Purchase Arrant by and between the Registrant and
                  Thomas M. Ryan dated July 22, 1993. (6)

         10.109   Letter Agreement dated December 2, 1993 by and among the
                  Registrant, Hospitality Franchise Systems, Inc., I.G. Davis,
                  Jr. and John E. Dell. (7)

         10.110   Amended and Restated Agreement dated January 13, 1994, by and
                  between the Registrant and Bender Shipyard, Inc. (8)

         10.111   Purchase Agreement dated January 20, 1994, by and among the
                  Registrant and the persons who are signatories thereto
                  (without exhibits and schedules) (multiple conformed
                  signatures omitted). (10)

         10.112   Amendment to Purchase Agreement dated February 3, 1994, by and
                  among the Registrant and the persons who are signatories
                  thereto (without exhibits and schedules) (multiple conformed
                  signatures omitted).
                  (10)

         10.113   Purchase Agreement dated January 20, 1994, by and between the
                  Registrant and Hospitality Franchise Systems, Inc. (without
                  exhibits and schedules). (10)

         10.114   Amendment to Purchase Agreement dated February 17, 1994, by
                  and among the Registrant, Hospitality Franchise Systems, Inc.
                  and Samuel Levine (without exhibits and schedules). (10)

         10.115   Purchase Agreement dated January 20, 1994, by and between the
                  Registrant and MJM Partners, L.P. (without exhibits and
                  schedules). (10)

         10.116   Purchase Agreement dated January 20, 1994, by and between the
                  Registrant and MJM International Limited (without exhibits and
                  schedules). (10)

         10.117   Purchase Agreement dated March 1, 1994, by and between the
                  Registrant and MJM Partners, L.P. (without exhibits and
                  schedules). (10)

         10.118   Purchase Agreement dated March 1, 1994, by and between the
                  Registrant and MJM International Limited (without exhibits and
                  schedules). (10)

         10.119   Cash Collateral and Disbursement Agreement dated February 17,
                  1994, by and among the Registrant, Crescent City Capital
                  Development Corp., British American Bingo, Inc., First Trust
                  National Association and First National Bank of commerce
                  (without exhibits and schedules). (10)

         10.120   Marketing Services Agreement dated February 17, 1994, by and
                  between the Registrant and HFS Gaming Corp. (without exhibits
                  and schedules). (10)

         10.122   Amendment to Option Letter of Intent dated December 15, 1993,
                  by and between the Registrant and Republic Corporate Services,
                  Inc. (11)

                                       52
<PAGE>   55
         10.123   Agreement of Purchase and Sale dated April 26, 1994, by and
                  among New Orleans 2000 Partnership, Crescent City Capital
                  Development Corp. and Grand Palais Riverboat, Inc. (11)

         10.125   Loan and Security Agreement dated February 17, 1994, by and
                  between the Registrant and Republic Corporate Services, Inc.
                  (11)

         10.126   $5,000,000 Note dated February 17, 1994 from Republic
                  corporate Services, Inc. to Registrant. (11)

         10.127   Letter Agreement dated May 4, 1994, by and between the
                  Registrant and Republic Corporate Services, Inc. (11)

         10.128   $19,000,000 Note from the Registrant to Republic Corporate
                  Services, Inc. (11)

         10.130   First Amendment dated June 24, 1994, to the Cash Collateral
                  and Disbursement Agreement dated February 17, 1994, by and
                  among the Registrant, Crescent City Capital Development Corp.,
                  Capital Gaming International Casino Management Division, Inc.
                  (formerly British American Bingo, Inc.), First Trust National
                  Association and First National Bank of Commerce. (12)

         10.131   Agreement to Purchase and Sell dated June 30, 1994, by and
                  between River City Joint Venture and The Alabama Great
                  Southern Railroad. (12)

         10.132   Term Note by River City Joint Venture to New Orleans 2000
                  Partnership dated July 13, 1994. (13)

         10.133   Assignment of Agreement and Sale dated July 13, 1994. (13)

         10.134   Mortgage and Assignment of Leases and Rentals by River City
                  Joint Venture in favor of New Orleans 2000 Partnership dated
                  July 13, 1994. (13)

         10.135   Amended and Restated partnership Agreement between Grand
                  Palais Riverboat, Inc. and Crescent City Capital Development
                  Corp. dated July 7, 1994. (13)

         10.136   First Amendment dated June 1, 1994, to the Marketing Services
                  Agreement dated February 17, 1994, by and between the
                  Registrant and HFS Gaming Corp. (14)

         10.137   Amendment effective as of October 1, 1994, to the Executive
                  Employment Agreement effective as of October 17, 1993, by and
                  between the Registrant and Clinton L. Pagano. (16)

         10.139   Stock Option Agreement dated June 2, 1994, by and between
                  Registrant and William S. Papazian.

         10.143   Stock Option Agreement dated August 24, 1994, by and between
                  Registrant and James F. Ahearn.

         10.144   Letter Amendment to Warrant Agreements by and between
                  Registrant, Ladenberg, Thalmann & Company, Inc., and certain
                  affiliates, dated October 11, 1994 (without exhibits). (16)

         10.145   Construction Agreement by and between Crescent City Capital
                  Development Corp., Grand Palais Riverboat, Inc., and Grimaldi
                  Construction, Inc., dated October 25, 1994 (without exhibits).
                  (17)

         10.146   Stock Purchase Agreement by and between Registrant, Fidelity
                  Galileo Fund, L.P., and Fidelity Copernicus Fund, L.P., dated
                  as of March 30, 1995. (18)

         10.147   Registration Rights Agreement by and between Registrant,
                  Fidelity Galileo Fund, L.P., and Fidelity Copernicus Fund,
                  L.P. dated as of March 30 1995. (18)

         10.148   Riverboat Casino Operating Agreement by and between Crescent
                  City Capital Development Corp. and River Marine Services,
                  Inc., dated as of January 13, 1995. (18)

         10.152   Promissory Note dated March 27, 1995, between Crescent City
                  Capital Development Corp. and First National Bank of Commerce.
                  (18)

         10.153   Commercial Guaranty dated March 27, 1995, between Registrant
                  and First National Bank of Commerce. (18)

                                       53
<PAGE>   56
         10.154   Credit Agreement dated March 10, 1995, by and among River City
                  Joint Venture, Crescent City Capital Development Corp., Grand
                  Palais Riverboat, Inc., and First National Bank of Commerce.
                  (18)

         10.155   Promissory Note dated March 10, 1995, between River City Joint
                  Venture and First National Bank of Commerce. (18)

         10.156   Mortgage dated March 9, 1995, between River City Joint Venture
                  and First National Bank of Commerce, relating to certain
                  property owned by the River City Joint Venture (the "Orange
                  Street Parcels"). (18)

         10.157   Mortgage dated March 9, 1995, between River City Joint Venture
                  and First National Bank of Commerce, relating to certain
                  Property owned by the River City Joint Venture (the "Cusimano
                  Parcels"). (18)

         10.162   Employment Agreement dated May 30, 1995, by and between the
                  Registrant and Edward Tracy. (19)

         10.163   Employment Agreement dated May 30, 1995, by and between the
                  Registrant and I.G. Davis, Jr. (19)

         10.167   Buy-Out Agreement dated September 1, 1995, by and among
                  Registrant, Capital Gaming Management, Inc. and the Cow Creek
                  Band of Umpqua Tribe of Indians. (19)

         10.168   Amendments to the January 13, 1994, Amended and Restated
                  Riverboat Construction Agreement by and between the
                  Registrant, Crescent City Capital Development Corp. and Bender
                  Shipyard, Inc. dated October 19, 1994, February 3, 1995, and
                  February 9, 1995. (19)

         10.169   First Preferred Ship Mortgage by Crescent City Capital
                  Development Corporation in favor of First Trust National
                  Association dated March 23, 1995. (19)

         10.170   Engagement Agreement between Registrant and Donaldson, Lufkin
                  & Jenrette dated June 20, 1995. (19)

         10.171   Employment Agreement dated May 17, 1996, by and between
                  Registrant and William S. Papazian. (24)

         10.172   Amendment No. 1 to Employment Agreement dated May 28, 1997, by
                  and between Registrant and William S. Papazian. (27)

         10.173   Amendment No. 1 to Employment Agreement dated May 28, 1997, by
                  and between the Registrant and Edward M. Tracy. (27)

         10.174   Employment Agreement as of June 1, 1997, by and between
                  Registrant and Michael Barozzi

         10.175   Employment Agreement dated February 11, 1998, by and between
                  Registrant and Bradley A. Denton.

         10.176   Letter regarding confidentiality of Management Agreement
                  between Capital Gaming Management Inc. and the Pueblo of
                  Laguna.

         10.177   Employment Agreement dated as of December 1, 1998 between
                  Registrant and Michael W. Barozzi

         10.178   Letter Agreement dated January 8, 1999 between Registrant and
                  Michael W. Barozzi

         10.179   Employment Agreement dated as of December 1, 1998 between
                  Registrant and William S. Papazian

         10.180   Letter Agreement dated as of January 8, 1999 between
                  Registrant and William S. Papazian

         10.181   First Amended Plan of Reorganization of Registrant Jointly
                  Proposed by the Registrant and U.S. Bank Trust National
                  Association, as Indenture Trustee, dated as of August 4,
                  2000 #

         10.182   Third Amended and Restated Certificate of Incorporation of
                  Registrant #

         10.183   Third Amended and Restated By-Laws of Registrant#

                                       54
<PAGE>   57
         12.0     Computation of Ratio of Earnings to Fixed Charges #

         23.1     Consent of McGladrey & Pullen, LLP #

         27.      Financial Data Schedule #


#        Filed herewith.

1        Incorporated by reference to the exhibit with the same number, filed in
         connection with the Registrant's form 10-K filed with the Securities
         and Exchange Commission on September 28, 1992.

2        Incorporated by reference to the exhibit with the same number, filed in
         connection with the Registrant's Post-Effective Amendment No. 5 to the
         Registration Statement on Form S-1, File No. 33-36618, declared
         effective by the Securities and Exchange Commission on November 21,
         1990.

3        Incorporated by reference to the exhibit with the same number, filed in
         connection with the Registrant's Post-Effective Amendment No. 6 to the
         Registration Statement on Form S-1, File No. 33-36618, declared
         effective by the Securities and Exchange Commission on November 21,
         1990.

4        Incorporated by reference to the exhibit with the same number, filed in
         connection with the Registrant's Post-Effective Amendment No. 8 to the
         Registration Statement on form S-1, File No. 33-36618, declared
         effective by the Securities and Exchange Commission on November 21,
         1990.

5        Incorporated by reference to the exhibit with the same number filed in
         connection with the Registrant's Current Report on Form 8-K filed with
         the Securities and Exchange Commission on September 27, 1993.

6        Incorporated by reference to the exhibit with the same number filed in
         connection with the Registrant's Form 10-K filed with the Securities
         and Exchange Commission on September 28, 1993.

7        Incorporated by reference to the exhibit with the same number filed in
         connection with the Registrant's Current Report on Form 8-K filed with
         the Securities and Exchange Commission on January 3, 1994.

8        Incorporated by reference to the exhibit numbered 10.109 filed in
         connection with the Registrant's Current Report on form 8-K filed with
         the Securities and Exchange commission on February 1, 1994.

9        Incorporated by reference to the exhibit with the same number filed in
         connection with the Registrant's Current Report on form 8-K filed with
         the Securities and Exchange commission on March 4, 1994.

10       Incorporated by reference to the exhibits numbered 10.110, 10.111,
         10.112, 10.113, 10.114, 10.115, 10.116, 10.117, 10.118 and 10.119,
         respectively, filed in connection with the Registrant's Current Report
         on form 8-K filed with the Securities and Exchange commission on March
         4, 1994.

11       Incorporated by reference to the exhibits with the same number, filed
         in connection with the Registrant's Registration Statement on Form S-1,
         File No. 33-79082, which was filed with the Securities and Exchange
         Commission on May 18, 1994.

12       Incorporated by reference to the exhibits with the same number, filed i
         connection with the Registrant's Pre-Effective Amendment No. 1 to the
         Registration Statement on Form S-1, File No. 33-79082, which was filed
         with the Securities and Exchange Commission on July 11, 1994.

13       Incorporated by reference to the exhibit with the same number, filed in
         connection with the Registrant's Current Report on form 8-K filed with
         the Securities and Exchange Commission on July 29, 1994.

                                       55
<PAGE>   58
14       Incorporated by reference to the exhibit with the same number, filed in
         connection with the Registrant's Pre-Effective Amendment No. 2 to the
         Registration Statement on Form S-1, File No. 33-79082, which was filed
         with the Securities and Exchange Commission on August 11, 1994.

15       Incorporated by reference to the exhibit with the same number filed in
         connection with the Registrant's Form 10-K filed with the Securities
         and Exchange commission on September 28, 1994.

16       Incorporated by reference to the exhibit with the same number filed in
         connection with the Registrant's Registration Statement on Form S-1,
         File No. 33-86094, which was filed with the Securities and Exchange
         Commission on November 7, 1994.

17       Incorporated by reference to the exhibit with the same number filed in
         connection with the Registrant's Pre-Effective Amendment No. 1 to the
         Registration Statement on Form S-1, File No. 33-86094, which was filed
         with the Securities and Exchange Commission on November 15, 1994.

18       Incorporated by reference to the exhibit with the same number filed in
         connection with the Registration Statement on Form S-1, File No.
         33-91024, which was filed with the Securities and Exchange Commission
         on April 7, 1995.

19       Incorporated by reference to the exhibit with the same number filed in
         connection with the Registrant's Form 10-K filed with the Securities
         and Exchange Commission on October 12, 1995.

20       Incorporated by reference to the exhibit with the same number, filed in
         connection with the Registrant's Current Report on Form 8-K filed with
         the Securities and Exchange Commission on January 31, 1996.

21       Incorporated by reference to the exhibit with the same number, filed in
         connection with the Registrant's Form 10-Q filed with the Securities
         and Exchange Commission on May 10, 1996.

22       Incorporated by reference to the exhibit with the same number, filed in
         connection with the Registrant's Form 8-K filed with the Securities and
         Exchange Commission on April 3, 1997.

23       Incorporated by reference to exhibit 4.1, filed in connection with the
         Registrant's Form 8-K filed with the Securities and Exchange Commission
         on April 3, 1997.

24       Incorporated by reference to the exhibit with the same number with the
         Registrant's Form 10-K filed with the Securities and Exchange
         Commission on October 15, 1996

25       Incorporated by reference to exhibit A to exhibit 4.1, filed in
         connection with the Registrant's Form 8-K filed with the Securities and
         Exchange Commission on April 3, 1997.

26       Incorporated by reference to exhibit B to exhibit 2.1, filed in
         connection with the Registrant's Form 8-K filed in connection with the
         Securities and Exchange Commission on April 3, 1997.

27       Incorporated by reference to the exhibit with the same number with
         Registrant's Form 10-K filed with the Securities and Exchange
         Commission on October 14, 1997.

                                       56
<PAGE>   59
(b) Reports on Form 8-K

         Current Report on Form 8-K filed with the Securities and Exchange
Commission on April 3, 1997.

         Current Report on Form 8-K filed with the Securities and Exchange
Commission on June 11, 1997.

         Current Report on Form 8-K filed with the Securities and Exchange
Commission on April 2, 1998.

         Current Report on Form 8-K filed with the Securities and Exchange
Commission on July 31, 1998.

         Current Report on Form 8-K filed with the Securities and Exchange
Commission on September 10, 1998.

         Current Report on Form 8-K filed with the Securities and Exchange
Commission on October 13, 1998.

         Current Report on Form 8-K filed with the Securities and Exchange
Commission on December 18, 1998.

         Current Report on Form 8-K filed with the Securities and Exchange
Commission on August 23, 1999.

         Current Report on Form 8-K/A filed with the Securities and Exchange
Commission on August 25, 1999.

         Current Report on Form 8-K filed with the Securities and Exchange
Commission on February 7, 2000.

         Current Report on Form 8-K filed with the Securities and Exchange
Commission on May 17, 2000.

                                       57
<PAGE>   60
         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                   CAPITAL GAMING INTERNATIONAL, INC.

Dated: October 13, 2000            By: /s/ Michael W. Barozzi
                                       -----------------------------------------
                                       Michael W. Barozzi, President and Chief
                                       Operating Officer
                                       (Authorized Representative)

Dated: October 13, 2000            By: /s/ William S. Papazian
                                       -----------------------------------------
                                       William S. Papazian, Executive Vice
                                       President and Secretary
                                       (Authorized Representative)

Dated: October 13, 2000            By: /s/ James McDermott
                                       -----------------------------------------
                                       James McDermott
                                       (Principal Accounting Officer)

                                       58
<PAGE>   61

                      CAPITAL GAMING INTERNATIONAL, INC.,
                              DEBTOR-IN-POSSESSION
                                AND SUBSIDIARIES

                         CONSOLIDATED FINANCIAL REPORTS

                                  JUNE 30, 2000
<PAGE>   62
                                    CONTENTS

-------------------------------------------------------------------------------

INDEPENDENT AUDITORS' REPORTS                                         F1 - F3

FINANCIAL STATEMENTS

    Consolidated balance sheets                                            F4
    Consolidated statements of operations                                  F5
    Consolidated statements of changes in stockholders' deficit            F6
    Consolidated statements of cash flows                           F7 and F8
    Notes to consolidated financial statements                       F9 - F27

-------------------------------------------------------------------------------
<PAGE>   63
                          INDEPENDENT AUDITOR'S REPORT


Board of Directors and Stockholders
Capital Gaming International, Inc.
Debtor-in-Possession, and Subsidiaries
Phoenix, Arizona

We have audited the accompanying consolidated balance sheet of Capital Gaming
International, Inc., Debtor-in-Possession, and Subsidiaries as of June 30, 2000
and the related consolidated statements of operations, stockholders' deficit and
cash flows for the year then ended. 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 audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Capital Gaming
International, Inc., Debtor-in-Possession, and Subsidiaries as of June 30, 2000,
and the results of their operations and their cash flows for the year then ended
in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. On May 15, 2000, the Company filed a
pre-negotiated plan of reorganization under Chapter 11 of the federal bankruptcy
laws. The accompanying financial statements do not give effect to the possible
adjustments which would result from the confirmation of the plan of
reorganization. Management's plans in regard to these matters are described
in Notes 2 and 19 to the financial statements.

/s/ McGladrey & Pullen, LLP

Phoenix, Arizona
August 30, 2000, except for Footnote 2 as to which the date is October 4, 2000


                                       F-1
<PAGE>   64
Board of Directors and Stockholders
Capital Gaming International, Inc.
 and Subsidiaries
Phoenix, Arizona


                          INDEPENDENT AUDITOR'S REPORT

     We have audited the accompanying consolidated balance sheet of Capital
Gaming International, Inc. and Subsidiaries as of June 30, 1999 and the related
consolidated statements of operations, stockholders' deficit and cash flows for
the year then ended. 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 audit.

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

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Capital
Gaming International Inc. and Subsidiaries as of June 30, 1999, and the results
of their operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles.


                                        /s/ Toback CPAs, P.C.


TOBACK CPAs, P.C.
Phoenix, Arizona
September 27, 1999



                                      F-2
<PAGE>   65
                          INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Stockholders of
  Capital Gaming International, Inc.
  Phoenix, Arizona


     We have audited the accompanying consolidated statements of operations,
changes in stockholders' deficit, and cash flows of Capital Gaming
International, Inc. and its subsidiaries for the fiscal year ended June 30,
1998. The consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.

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

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated results of
operations and cash flows of Capital Gaming International, Inc. and its
subsidiaries for the fiscal year ended June 30, 1998, in conformity with
generally accepted accounting principles.



                                        Moore Stephens, P.C.

                                        MOORE STEPHENS, P. C.
                                        Certified Public Accountants

Cranford, New Jersey
August 7, 1998


                                       F-3
<PAGE>   66
CAPITAL GAMING INTERNATIONAL, INC.,
DEBTOR-IN-POSSESSION, AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
June 30, 2000 and 1999
(ROUNDED TO NEAREST 000'S)

<TABLE>
<CAPTION>
ASSETS                                                                         2000           1999
---------------------------------------------------------------------------------------------------
<S>                                                                     <C>            <C>
CURRENT ASSETS
  Cash and cash equivalents                                             $  2,352,000   $  4,440,000
  Restricted funds (Note 6)                                                9,497,000      3,977,000
  Interest receivable                                                        172,000         24,000
  Native American management fees and expenses receivable (Note 4)                -        647,000
  Current portion of Native American loans receivable (Notes 9 and 16)       627,000      1,441,000
  Muckleshoot settlement receivable (Note 4)                                       -      1,150,000
  Prepaid expenses and other current assets                                  296,000              -
  Income taxes receivable                                                    780,000        215,000
  Current portion of direct financing leases (Note 7)                        101,000              -
                                                                       ----------------------------
     Total current assets                                                 13,825,000     11,894,000
                                                                       ----------------------------

Furniture, fixtures and equipment, net (Note 10)                               5,000         14,000
Excess reorganization value, net (Note 3)                                          -      3,790,000
Other assets:
  Native American loans receivable, net of current portion (Note 9)          927,000              -
  Investment in Native American management agreements, net (Note 11)               -        162,000
  Deferred charges (Note 12)                                                       -      1,369,000
  Direct financing leases, net of current portion (Note 7)                   584,000              -
                                                                       ----------------------------
     Total other assets                                                    1,516,000      1,531,000
                                                                       ----------------------------
                                                                       $  15,341,000   $ 17,229,000
                                                                       ============================
LIABILITIES AND STOCKHOLDERS' DEFICIT
---------------------------------------------------------------------------------------------------
LIABILITIES NOT SUBJECT TO COMPROMISE:

CURRENT LIABILITIES
  Current portion of 12% senior secured notes payable (Note 3)         $          -    $ 4,560,000
  Accounts payable and accrued expenses                                     112,000        711,000
  Accrued interest                                                                -        292,000
  State income taxes payable                                                      -        257,000
  Federal income taxes payable                                                    -         70,000
  Due to related party (Note 13)                                              9,000         62,000
                                                                      ----------------------------
     Total current liabilities                                              121,000      5,952,000

LONG-TERM DEBT
  12% senior secured notes payable, less current portion (Note 3)                 -     18,240,000
                                                                      ----------------------------
     Total liabilities                                                      121,000     24,192,000
                                                                      ----------------------------
LIABILITIES SUBJECT TO COMPROMISE (Note 2)                               24,778,000              -
                                                                      ----------------------------
COMMITMENTS (Notes 14 and 19)

STOCKHOLDERS' DEFICIT
  Common stock, no par value, authorized 5,000,000 shares;
     issued and outstanding 1,999,745 shares at June 30,
     2000 and 1999, respectively (Note 3)                                   400,000        400,000
  Additional paid-in capital                                                300,000        300,000
  Accumulated deficit                                                   (10,258,000)    (7,663,000)
                                                                      ----------------------------
     Total stockholders' deficit                                         (9,558,000)    (6,963,000)
                                                                      ----------------------------
                                                                      $  15,341,000    $17,229,000
                                                                      ============================
</TABLE>

See Notes to Consolidated Financial Statements.

                                       F-4
<PAGE>   67
CAPITAL GAMING INTERNATIONAL, INC.,
DEBTOR-IN-POSSESSION, AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended June 30, 2000, 1999 and 1998
(ROUNDED TO NEAREST 000'S EXCEPT FOR NUMBER OF SHARES AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                        Year ended     Year ended     Year ended
                                                     June 30, 2000  June 30, 1999  June 30, 1998
                                                     -------------  -------------  -------------
<S>                                                  <C>            <C>            <C>
Revenues:
  Native American casino management fees
     (Notes 4 and 16)                                $  5,196,000     $ 7,264,000   $ 8,150,000
Costs and expenses:
  Salaries and related costs                            1,116,000       1,588,000     3,284,000
  Native American gaming development costs                999,000         566,000     2,317,000
  Professional fees                                       723,000       1,274,000     1,380,000
  General and administrative                              352,000         450,000     1,447,000
  Depreciation and amortization                         1,678,000       2,238,000     3,153,000
  Write-down of excess reorganization value (Note 3)    2,307,000               -     1,300,000
                                                     ------------   -------------  ------------
     Total costs and expenses                           7,175,000       6,116,000    12,881,000
                                                     ------------   -------------  ------------
Income (loss) from operations                          (1,979,000)      1,148,000    (4,731,000)
                                                     ------------   -------------  ------------
Other income (expense):
  Muckleshoot settlement, net (Note 4)                          -       2,285,000             -
  Interest income                                         738,000         487,000       798,000
  Other income                                                  -          40,000             -
  Interest expense (Not including $326,000
      as a result of 2000 reorganization) (Note 2)     (2,407,000)     (2,700,000)   (2,885,000)
                                                     ------------   -------------  ------------
                                                       (1,619,000)        112,000    (2,087,000)
                                                     ------------   -------------  ------------
Income (loss) before reorganization items              (3,648,000)      1,260,000    (6,818,000)
Reorganization items:
  Professional fees (Note 2)                               64,000               -             -
                                                     ------------   -------------  ------------
Income (loss) before income taxes                      (3,712,000)      1,260,000    (6,818,000)
Income taxes (Note 8)                                  (1,117,000)        418,000       336,000
                                                    -------------   -------------  ------------
Net income (loss)                                     $(2,595,000)    $   842,000   $(7,154,000)
                                                    =============   =============  ============
Basic and dilutive income (loss) per share            $     (1.30)    $       .43   $     (3.82)
                                                    =============   =============  ============
Weighted average basic and dilutive common
  and equivalent shares outstanding                     1,999,745       1,939,178     1,872,694
                                                   ==============   =============  ============
</TABLE>

See Notes to Consolidated Financial Statements.

                                       F-5
<PAGE>   68
CAPITAL GAMING INTERNATIONAL, INC.,
DEBTOR-IN-POSSESSION, AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
Years Ended June 30, 2000, 1999 and 1998
(ROUNDED TO NEAREST 000'S EXCEPT FOR NUMBER OF SHARES)

<TABLE>
<CAPTION>
                                                                      Additional
                                                Common stock             paid-in        Accumulated
                                            Shares         Amount        capital            deficit
                                       ------------------------------------------------------------
<S>                                    <C>             <C>            <C>            <C>
Balance, June 30, 1997                    1,866,667    $   400,000    $        -     $  (1,351,000)

Stock grants to officers and 0
directors (Note 3)                           66,666              -             -                 -

Net loss                                          -              -             -        (7,154,000)
                                        -----------    -----------   ------------     ------------

Balance, June 30, 1998                    1,933,333       400,000              -        (8,505,000)

Treasury bonds (Note 3)                           -             -        300,000                 -

Stock grants to officers and
directors (Note 3)                           66,412             -              -                 -

Net income                                        -             -              -           842,000
                                        -----------    -----------   ------------     ------------

Balance, June 30, 1999                    1,999,745       400,000        300,000        (7,663,000)

Net loss                                          -             -              -        (2,595,000)
                                        -----------    -----------   ------------     -------------

Balance, June 30, 2000                    1,999,745    $   400,000   $   300,000      $(10,258,000)
                                        ===========    ===========   ============     =============
</TABLE>

See Notes to Consolidated Financial Statements.

                                      F-6
<PAGE>   69
CAPITAL GAMING INTERNATIONAL, INC.,
DEBTOR-IN-POSSESSION, AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, 2000, 1999 and 1998
(ROUNDED TO NEAREST 000'S)

<TABLE>
<CAPTION>
                                                         Year ended     Year ended     Year ended
                                                      June 30, 2000  June 30, 1999  June 30, 1998
                                                      -------------------------------------------
<S>                                                   <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss)                                   $  (2,595,000)   $  842,000   $ (7,154,000)
  Adjustments to reconcile net income
    (loss) to net cash provided by
    (used in) operating activities:
     Depreciation and amortization                        1,678,000     2,238,000      3,153,000
     Write-off of loan receivable                            38,000             -              -
     Write-off of deferred charges                          785,000             -              -
     Muckleshoot settlement, gross                                -    (3,300,000)             -
     Payments on Muckleshoot settlement                   1,150,000     2,150,000              -
     Write-off of investment in Muckleshoot
        management agreement                                      -       815,000              -
     Increase in related party payable                       14,000        62,000              -
     Reorganization adjustments                                   -             -       (426,000)
     Write-down of excess reorganization value            2,307,000             -      1,300,000
     Changes in assets and liabilities:
        Interest receivable                                (148,000)        5,000         43,000
        Native American management fees and
          expenses receivable                               647,000        62,000         62,000
        Prepaid expenses and other current assets           (81,000)       17,000        185,000
        Income tax receivable                              (780,000)            -              -
        Notes receivable, other                                   -             -        100,000
        Officer loans                                             -             -        250,000
        Accounts payable and accrued expenses               (74,000)     (522,000)    (1,481,000)
        Accrued interest                                  1,094,000       (54,000)        95,000
        Federal income taxes payable                       (257,000)       70,000              -
        State income taxes payable                          (70,000)      110,000        147,000
                                                      -------------------------------------------
          Net cash provided by (used in)
             operating activities                         3,708,000     2,495,000     (3,726,000)
                                                      -------------------------------------------
</TABLE>

See Notes to Consolidated Financial Statements.

                                       F-7
<PAGE>   70
CAPITAL GAMING INTERNATIONAL, INC.,
DEBTOR-IN-POSSESSION, AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Years Ended June 30, 2000, 1999 and 1998
(ROUNDED TO NEAREST 000'S)

<TABLE>
<CAPTION>
                                                         Year ended     Year ended      Year ended
                                                       June 30, 2000  June 30, 1999  June 30, 1998
                                                       -------------------------------------------
<S>                                                    <C>            <C>            <C>
CASH FLOWS FROM INVESTING ACTIVITIES
   Principal payments received on Native American
     loans receivable                                       1,610,000      2,252,000     3,939,000
   Advances on Native American loans receivable            (1,201,000)             -             -
   Origination of direct financing lease                     (706,000)             -             -
   Payments received on direct financing lease                 21,000              -             -
   (Increase) decrease in restricted funds                 (5,520,000)    (3,436,000)      385,000
   Increase in deferred charges                                     -     (1,369,000)            -
   Purchase of furniture, fixtures and equipment                    -              -       (23,000)
                                                       -------------------------------------------

        Net cash (used in) provided by
           investing activities                            (5,796,000)    (2,553,000)    4,301,000
                                                       -------------------------------------------

Net (decrease) increase in cash and cash equivalents       (2,088,000)       (58,000)      575,000

Cash and cash equivalents at beginning of year              4,440,000      4,498,000     3,923,000
                                                       -------------------------------------------

Cash and cash equivalents at end of year                 $  2,352,000   $  4,440,000  $  4,498,000
                                                       ===========================================

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
    Interest paid                                        $  1,313,000   $  2,754,000  $  2,672,000
                                                       ===========================================
    State income taxes paid, net of refunds
    of 2000 $574,000                                     $   (169,000)  $    238,000  $      2,000
                                                       ===========================================
    Federal income taxes paid                            $    114,000   $          -  $          -
                                                       ===========================================
    Professional fees paid for services rendered in
    connection with the Chapter 11 proceeding            $     64,000   $          -  $          -
                                                       ===========================================
</TABLE>

SUPPLEMENTARY SCHEDULE OF NONCASH OPERATING AND FINANCING ACTIVITIES

During the year ended June 30, 1999, the potential right to receive $300,000 in
Senior Secured Notes held by a former officer was released and surrendered to
the Company as part of his resignation, thereby creating Treasury Bonds. These
Treasury Bonds are owned by the Company and resulted in a decrease in Senior
Secured Notes and an increase in additional paid-in capital.

During the year ended June 30, 2000, $256,000 of previously incurred deferred
charges were transferred to Native American loans receivable.

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       F-8
<PAGE>   71
CAPITAL GAMING INTERNATIONAL, INC.,
DEBTOR-IN-POSSESSION, AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.   Nature of Company Activities and Significant Accounting Policies

Nature of business:

Capital Gaming International, Inc. and Subsidiaries (the "Company"), is a
multi-jurisdictional gaming company with gaming management interests with Native
American Tribes. The management of the Company's Native American gaming
facilities is conducted through Capital Gaming Management, Inc. ("CGMI"), a
wholly-owned subsidiary of the Company. The development of the Rhode Island
Casino project is conducted through Capital Development Gaming Corp. ("CDGC"), a
wholly-owned subsidiary of the Company.

During the year, the Company's CGMI subsidiary managed and operated three Native
American gaming facilities, which CGMI had developed or expanded into Class III
gaming facilities.

-  Tonto Apache Tribe - Payson, Arizona (Class III facility became operational
   in April 1995) (management agreement terminated March 2000)
-  Umatilla Tribes - Pendleton, Oregon (Class III facility became operational in
   March 1995) (management agreement terminated February 2000)
-  Pueblo of Laguna Tribe - Casa Blanca, New Mexico (Class III facility became
   operational in February 2000)

The Company's CDGC subsidiary has a management and development contract with the
Narragansett Tribe for the development of a Class III gaming facility in
Charlestown, Rhode Island or elsewhere in the state of Rhode Island as may be
permitted by law (see Note 5).

Principles of consolidation:

The accompanying consolidated financial statements of the Company include
the accounts of Capital Gaming International, Inc. and its wholly-owned
subsidiaries Capital Gaming Management Inc. (CGMI) and Capital Development
Gaming Corp. (CDGC).  Intercompany balances and transactions have been
eliminated.

Cash and cash equivalents:

Cash and cash equivalents include cash in banks and overnight investments. The
Company considers all highly-liquid investments purchased with an original
maturity of three months or less to be cash equivalents. The carrying amount of
cash equivalents approximates fair value due to the short-term maturity of those
investments.

Reorganizations:

The Company previously filed for reorganization under Chapter 11 of the federal
bankruptcy laws during 1996 and emerged from that bankruptcy during 1997 (see
Note 3). On May 15, 2000, the Company filed another petition for relief under
Chapter 11 of the federal bankruptcy laws (see Note 2).

                                       F-9
<PAGE>   72
CAPITAL GAMING INTERNATIONAL, INC.,

DEBTOR-IN-POSSESSION, AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.   Nature of Company Activities and Significant Accounting Policies
(Continued)

Furniture, fixtures and equipment:

Furniture, fixtures and equipment are stated at cost, depreciation and
amortization are computed using the straight-line method over the estimated
useful life, primarily 3 to 7 years.

Revenue recognition:

The revenues recognized in these financial statements from Native American
casino management fees are those of CGMI and represent management fees derived
primarily from Class III (gaming) facilities. Management fees are recognized as
revenue when earned based upon earnings sharing arrangements detailed in the
respective management contracts with the Native American Tribes.

Excess reorganization value:

Excess reorganization value originated with the 1996 reorganization and is
amortized on a straight-line basis over four years. When changes in
circumstances require, management evaluates events and circumstances in order to
determine whether the recorded balance has been impaired. During the year ended
June 30, 2000, the balance was determined to be fully impaired and the excess
reorganization value was written down to zero. (See Note 3).

Development costs:

The costs associated with developing, negotiating and securing new management
agreements are expensed as incurred.

Earnings per share:

The Company is required to present basic and diluted earnings per share amount.
Basic earnings per common share is computed by dividing net income by the
weighted average of common shares outstanding. Diluted per share amounts assume
the conversion, exercise, or issuance of all potential common stock instruments
unless the effect is to reduce a loss or increase the income per share from
continuing operations. At June 30, 2000, the Company has no dilutive potential
common shares outstanding.

Reorganization items:

Reorganization items consist of expenses and other costs directly related to the
2000 reorganization of the Company.

                                      F-10
<PAGE>   73
CAPITAL GAMING INTERNATIONAL, INC.,

DEBTOR-IN-POSSESSION, AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.   Nature of Company Activities and Significant Accounting Policies
(Continued)

Use of estimates:

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

Recent accounting developments:

In December 1999, the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements".  SAB No. 101 summarizes some of the staff's interpretations of
the application of generally accepted accounting principles to revenue
recognition.  The Company will adopt SAB No. 101 when required in the second
quarter of fiscal year 2001.  Management believes the adoption of SAB No. 101
will not have a significant affect on its financial statements.

Income taxes:

Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss and tax
credit carryforwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Deferred
tax assets and liabilities are adjusted for the effects of changes in the tax
laws and rates on the date of enactment.

Derivative instruments and hedging activities:

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, which is required
to be adopted in all fiscal quarters of all fiscal years beginning after June
15, 2000. The Statement permits early adoption as of the beginning of any fiscal
quarter after its issuance. The Company will adopt the new Statement effective
July 1, 2000. The Statement will require the Company to recognize all
derivatives on the balance sheet at fair value. Derivatives that are not hedges
must be adjusted to fair value through income. If the derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of derivative
will either be offset against the change in fair value of the hedges assets,
liabilities or firm commitment through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. Because of the Company's minimal use of derivatives,
management does not anticipate that the adoption of the new Statement will have
a significant effect on the Company's earnings or financial position.

                                      F-11
<PAGE>   74
CAPITAL GAMING INTERNATIONAL, INC.,

DEBTOR-IN-POSSESSION, AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.   Nature of Company Activities and Significant Accounting Policies
(Continued)

Segment reporting:

Statement No. 121, Disclosures About Segments of an Enterprise and Related
Information, modifies the disclosure requirements for reportable segments
and establishes standards in the way public businesses report information
about operating segments in financial statements and interim reports
issued to shareholders.  Statement No. 131 also establishes standards
for related disclosures about products and services, geographic areas,
and major customers.  Management has determined the Company to have one
reportable segment.  All revenues are earned in the United States.

Note 2.   2000 Reorganization Under Chapter 11

Reorganization:

On May 15, 2000 (the "Petition Date"), Capital Gaming International, Inc., apart
from its subsidiaries filed a voluntary petition for relief under Chapter 11 of
the United States Bankruptcy Code (the "Code") in the United States Bankruptcy
Court for the District of New Jersey (the "Court'). The petition did not involve
the Company's wholly-owned subsidiaries. The Company will operate as a
debtor-in-possession until October 16, 2000, the anticipated effective date of
the 2000 Plan. As a debtor-in-possession, the Company was authorized to operate
its business but could not engage in transactions outside its ordinary course of
business without the approval of the court.

Subject to certain exceptions under the code, the Company's Reorganization
Proceedings automatically enjoined the continuation of any judicial or
administrative proceedings against the Company. Any creditor actions to obtain
possession of or control over property of the Company or to create, perfect or
enforce any lien against the property of the Company were also enjoined. As a
result, the creditors of the Company were precluded from collecting pre-petition
debts without the approval of the Court.

On the Petition Date, the Company filed a pre-negotiated 2000 Plan of
Reorganization (together with all subsequent amendments and modifications, the
"2000 Plan") and an accompanying disclosure statement together with all
subsequent amendments and modifications, (the "Disclosure Statement"). The
Disclosure Statement was approved by the Court on August 4, 2000.

On September 26, 2000, the Court conducted a hearing regarding confirmation of
the 2000 Plan and entered an order, on October 4, 2000, confirming the 2000 Plan
submitted by the Company as modified by the order. As contemplated by the 2000
Plan, on October 16, 2000 (the "Anticipated Effective Date") the Company will
emerge from Chapter 11 and consummate the 2000 Plan.


As part of the Reorganization, the Company expensed $64,000 for professional
fees incurred.

                                      F-12
<PAGE>   75
CAPITAL GAMING INTERNATIONAL, INC.,

DEBTOR-IN-POSSESSION, AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2.   2000 Reorganization Under Chapter 11 (Continued)

Liabilities subject to compromise:


Liabilities subject to compromise consisted of the following, immediately
preceding the Effective Date:

         Senior Secured Notes, including
           interest of $1,386,000                               $  24,186,000
         Trade Payables and Accrued Expenses                          592,000
                                                              -----------------
                                                                $  24,778,000
                                                              =================

Interest of $326,000 from May 15, 2000 to June 30, 2000 on the Senior Secured
Notes has not been accrued due to the Chapter 11 filing.

Under the Bankruptcy Plan, the Senior Secured Notes are divided into two
classes: Allowed Secured Claims and Allowed Unsecured Claims. The Allowed
Secured Claimants ($13,011,920) will receive the greater of $9,000,000 or the
distributable cash on the Effective Date. Distributable cash is defined as all
cash of the Company in excess of $2,900,000 after payment of all other Plan
distributions. These claimants will also receive 2,068,000 shares of the New
Class A Common Stock. The Allowed Unsecured Claimants ($11,474,080) will receive
$100,000 to be divided pro rata among them. In addition, there are some smaller
claims that will be paid in full through the 2000 Plan.

The holders of the old Common stock will receive 550 shares of the New Class B
Common Stock. The holders of the old Class A Common Stock will receive nothing
for their old Class A Common Stock as they are also noteholders and will receive
cash and new stock for their notes classes as described above. In addition, the
Company management will receive 132,000 shares of the New Class B Common Stock.
Both classes of common stock have no par value. They both classes have voting
rights; however, Class A is allowed to elect a majority of the Board of
Directors.

The New Class A and New Class B Common Stock has been valued at $1.94 per share
based on management's internal estimate of the fair value of the company as
determined by estimated future discounted cash flows. These estimates are
subject to uncertainty which could effect the estimated value of the new common
stock. Any change in estimates would result in an adjustment to employee
compensation and debt forgiveness as it relates to the new common stock that
will be issued.

The effect of the plan of reorganization on the balance sheet as if the Plan had
been confirmed and effective as of June 30, 2000, is as follows:

<TABLE>
<CAPTION>
                                                   Preconfirmation           Debt       Reorganized
                                                     Balance Sheet      Discharge     Balance Sheet
                                                   ---------------    -----------    --------------
<S>                                                <C>                <C>            <C>
                                                                       (unaudited)      (unaudited)
ASSETS
Current Assets:
  Cash and cash equivalents                          $   2,352,000    $  (232,000)     $  2,120,000
  Restricted funds in escrow                             9,497,000     (9,497,000)                -
  Interest receivable                                      172,000              -           172,000
  Native American Management fees and
    expenses receivable                                          -              -                 -
  Current portion-Native American & other
    loans receivable                                       627,000              -           627,000
  Prepaid expenses and other current assets                296,000              -           296,000
  Income tax receivable                                    780,000              -           780,000
  Furniture, fixtures and equipment                          5,000              -             5,000
  Excess reorganization value                                    -              -                 -
  Other assets
    Native American loans receivable                       927,000              -           927,000
    Direct financing leases                                584,000              -           584,000
                                                     -------------    -----------     -------------
      Total assets                                   $  15,341,000    $(9,729,000)    $   5,612,000
                                                     =============    ===========     =============

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Accounts payable and accrued expenses              $     112,000    $         -     $     112,000
  Accrued interest on secured notes                              -              -                 -
  Due to related party                                       9,000              -             9,000
  Liabilities subject to compromise                     24,778,000    (24,778,000)                -
  Common stock                                             400,000      3,869,529         4,269,529
  Additional paid-in capital                               300,000       (300,000)                -
  Unearned stock compensation                                   --       (256,080)         (256,080)
  Retained earnings (deficit)                          (10,258,000)    11,735,551         1,477,551
                                                     -------------    -----------     -------------
      Total liabilities & equity                     $  15,341,000    $(9,729,000)    $   5,612,000
                                                     =============    ===========     =============
</TABLE>

                                      F-13


<PAGE>   76
CAPITAL GAMING INTERNATIONAL, INC.,

DEBTOR-IN-POSSESSION, AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3.   1996 Reorganization Under Chapter 11

On December 23, 1996 (the "Petition Date"), Capital Gaming International, Inc.,
apart from its subsidiaries filed a voluntary petition for relief under Chapter
11 of the United States Bankruptcy Code (the "Code") in the United States
Bankruptcy Court for the District of Camden, New Jersey (the "Court"). The
petition did not involve the Company's wholly-owned subsidiaries. The Company
operated as a debtor-in-possession until March 19, 1997 when its Plan (as
defined below) was confirmed by the Court. As a debtor-in-possession, the
Company was authorized to operate its business but could not engage in
transactions outside its ordinary course of business without the approval of the
Court.

On March 19, 1997, the Court conducted a hearing regarding confirmation of the
Plan and entered an order confirming the Plan submitted by the Company as
modified by the order. As contemplated by the Plan, on May 28, 1997 (the
"Effective Date") the Company emerged from Chapter 11 and consummated the Plan.

Excess reorganization value:

In accordance with AICPA Statement of Position 90-7 "Financial reporting by
Entities in Reorganization Under the Bankruptcy Code" (SOP 90-7), the Company
was required to adopt fresh-start accounting on the Effective Date. In adopting
fresh-start reporting, the Company, with the assistance of its financial
advisors, estimated its reorganization value, which represents the fair value of
the entities under reorganization, before considering liabilities. In order to
accomplish this, the Company provided its financial advisors with cash flow
projections for the post-reorganization operation of the Company's business
under different scenarios. The scenarios, which ranged from three to eight years
of post-reorganization operations, included assumptions related to the
completion of the Rhode Island project and the attraction of new management
agreements. Due to the uncertainty surrounding the Rhode Island project and the
ability of the Company to attract and enter into new management agreements,
there were significant differences in the cash flow projections under the
various scenarios.

Based upon their knowledge and experience in the gaming industry generally, and
their familiarity with the Company's business and description of its contracts,
the financial advisors applied appropriate probability factors to each of the
scenarios. The result of applying the factors to each of the scenarios produced
a probability weighted cash flow projection for the Company as a whole. Due to
the Company's expected NOL carryforwards, no consideration was given to the
effect of federal income taxes. Further, as the Company has no significant
tangible fixed assets, no consideration was given to the terminal value of the
Company. A discount rate of 12% was then applied to the combined cash flow
projections to determine their present value. This resulted in as estimated fair
value of the Reorganized Company of approximately $23,500,000, which was
approved by the Bankruptcy Court during its confirmation hearings. The excess of
the reorganization value over the fair market value of the net assets, totaled
approximately $9,339,000, and is being amortized over a period of four years.

                                      F-14
<PAGE>   77
CAPITAL GAMING INTERNATIONAL, INC.,

DEBTOR-IN-POSSESSION, AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3.   1996 Reorganization Under Chapter 11 (Continued)

Amortization expense of excess reorganization value was approximately
$1,483,000, $1,977,000 and $2,432,000 as of and for the years ended June 30,
2000, June 30, 1999 and June 30, 1998, respectively.

On June 30, 1998, the Company wrote down the excess reorganization value by
$1,300,000. This write down was due to the operating loss and cash flow loss for
the year and due to the setbacks on the Narragansett gaming project in Rhode
Island. As a result of these factors, the projected future cash flows of the
Company were less than the carrying value of the asset; therefore, an impairment
was recognized. In May 2000, the unamortized cost of this asset of $2,307,000
was written down to zero due to the Chapter 10 bankruptcy filing on May 15,
2000.

The recognition of these impairments were in accordance with the provisions of
Statement of Financial Accounting Standards No. 121 - "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."

Senior secured notes:

Pursuant to the Reorganization, the Holders of the Old Senior Secured Notes,
along with certain unsecured creditors and key members of management, received,
on a pro rata basis, the New Senior Secured Notes having an aggregate principal
amount of $23,100,000. Certain members of management received a total of
$550,000 of those Senior Secured Notes which were to vest in May 2000. During
the year ended June 30, 1999, an officer of the Company resigned and forfeited
his rights to receive $300,000 of these Senior Secured Notes. The Company now
holds these $300,000 of the New Senior Secured notes in treasury. Interest on
the New Senior Secured Notes accrues at a rate of 12% per annum, and is payable
semi-annually. The New Senior Secured Notes are secured by substantially all the
assets of the Company, including the common stock of CGMI and CDGC. In addition,
the Amended Indenture includes certain restrictive covenants. The New Senior
Secured Notes are redeemable prior to maturity, in whole or part, at the
election of the Company, at the redemption price of 100% of the principal amount
plus accrued and unpaid interest to the redemption date.

The notes were compromised in the 2000 reorganization under Chapter 11 (see Note
2).

Per the terms of the Amended Indenture, the Company made interest payments of
$1,386,000 on May 15, 1998, November 15, 1998, May 15, 1999, and November 15,
1999. The Company did not make the required May 15, 2000 interest payment.

                                      F-15
<PAGE>   78
CAPITAL GAMING INTERNATIONAL, INC.,

DEBTOR-IN-POSSESSION, AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3.   1996 Reorganization Under Chapter 11 (Continued)

Capital structure after reorganization:

Pursuant to the 1996 Plan, the Predecessor Company's common stock and
outstanding options were canceled on the Effective Date. The Plan also provided
for the amendment and restatement of the Company's Certificate of Incorporation
and bylaws. The new charter authorized 5,000,000 shares of no par value common
stock. Upon the Effective Date, 1,800,000 shares of common stock were authorized
for issuance on a pro rata basis to the Company's various classes of creditors.
The old Class A common stock was issued to holders of the original senior notes
and the old common stock was issued to holders of general unsecured claims. In
addition, the Company's executive management became entitled to receive a total
of 66,667 shares of common stock on the Effective Date. Also on the Effective
Date, 133,333 shares were reserved to be issued to executive management pursuant
to the Plan. The remaining shares were issued in May 1998 and May 1999,
respectively.

In accordance with Section 10 of the Company's Certificate of Incorporation, the
Company is imposing certain transferability restrictions upon its 5-percent
shareholders for purposes of Tax Code ss. 382. These restrictions generally
provide that the 5-percent shareholders shall be prohibited from transferring
shares of New Common Stock without the consent of a designated Tax Advisor (the
"Tax Advisor"). The Tax Advisor shall have no obligation to consent to a
transfer unless it determines that the proposed transfer and any related
proposed transfers do not create an unreasonable risk of loss, or material
limitation on, the Company's use of its net operating loss carryforwards.

                                      F-16
<PAGE>   79
CAPITAL GAMING INTERNATIONAL, INC.,

DEBTOR-IN-POSSESSION, AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4.  Native American Gaming Operations

Facility openings and summarized financial information:

On March 10, 1995, the Umatilla Tribe opened the 40,000 square foot Wildhorse
Gaming Resort in Pendleton, Oregon. This facility, under management by the
Company offers video slot machines, keno, blackjack, poker, off-track betting
(OTB) and high stakes bingo. The first phase of this development opened on
November 5, 1994. During the years ended June 30, 2000, 1999 and 1998, the
facility produced approximately $3,176,000, $4,930,000, and $4,754,000,
respectively, in management fees for the Company. The Company's management
agreement with the Umatilla Tribe expired March 2000.

On April 27, 1995, the Tonto Apache Tribe opened the 35,000 square foot Mazatzal
Casino located approximately 70 miles north of Phoenix, Arizona. The casino
features slot machines, keno, poker and high stakes bingo. The Company, as
manager of the casino, collected approximately $1,932,000, $2,335,000, and
$2,276,000, in management fees for the years ended June 30, 2000, 1999 and 1998,
respectively. The Company's management agreement with the Tonto Apache Tribe
expired February 2000.

The Muckleshoot Tribe opened the first phase of its Muckleshoot Casino on April
28, 1995, and presently offers table games, poker games, keno and OTB. The
facility is located in the Seattle-Tacoma metropolitan area. The final phase of
this facility opened on September 8, 1995 with gaming space of 65,000 square
feet. The Company, as manager of the facility, collected approximately
$1,120,000 for the year ended June 30, 1998 and did not receive any management
fees for the years ended June 30, 2000 and 1999.

On January 30, 1998 the Muckleshoot Trial Gaming Commission summarily notified
the Company that the Company's gaming license had been revoked based on an
assertion that the Company's certification with the Washington State Gambling
Commission ("WSGC") had lapsed. Additionally, on the same date the Muckleshoot
Tribal Council purported to terminate the Company's management contract on
similar grounds. Subsequently, the WSGC had notified the Muckleshoot Tribe that
the Company remained in good standing with the WSGC and would be immediately
recertified upon request of the Muckleshoot Tribe. Moreover, on April 29, 1998
the WSGC notified the Company that it had been recommended for the issuance of a
gaming license.

In response to the termination of the contract, the Company commenced litigation
in the U.S. District Court in the Western District of Washington at Seattle,
("U.S. District Court") which asserted, among other things, breach of contract.
On July 20, 1998 the Company and its subsidiary, CGMI, and the Muckleshoot Tribe
achieved an amicable resolution to the legal proceedings, which resulted in a
payment to the Company of $3,300,000. At June 30, 1999, there was a $1,150,000
receivable from this settlement. During the year ended June 30, 2000, the
settlement was received in full.

On February 12, 2000, the Pueblo of Laguna opened the 21,000 square foot Dancing
Eagle Casino located in Casa Blanca, New Mexico. The casino offers slot
machines, keno, poker, blackjack and high stakes bingo. The Company, as manager
of the casino, collected approximately $88,000 in management fees for the year
ended June 30, 2000. The management agreement entitles the Company to 30% of the
net revenue of the gaming operations for the first three years and 20% of net
revenues of the gaming operations for the remaining two years of the contract.
Operations commenced in the first calendar quarter of year 2000.

At June 30, 1999, there are $647,000 in management fees receivable. There are no
management fees receivable at June 30, 2000.


                                      F-17
<PAGE>   80
CAPITAL GAMING INTERNATIONAL, INC.,

DEBTOR-IN-POSSESSION, AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5.  Rhode Island Development Project

Narragansett Contract - Native American Casino (Rhode Island):

Through CDGC, the Company entered into a seven-year management and development
contract with the Narragansett Indian Tribe (the "Narragansett Contract") for
the development of a Class II and Class III gaming facility in Rhode Island. As
part of the Narragansett Contract, the Company has advanced funds for the
development of the Rhode Island Project which will be repaid over a seven-year
period commencing with opening of a facility. The Narragansett Contract was
submitted to the National Indian Gaming Commission (NIGC) for approval in June
1995.

Subsequent to the original contract there have been several regulatory issues
and other setbacks. As a result of the set-backs caused by the invalidation of
the Compact and the application of the Chafee Rider, and other factors, there
can be no assurance that any legislative, judicial or administrative efforts
will be successful.

Other matters:

The Company has continued funding the on-going development costs of the Rhode
Island Project, which at June 30, 2000, has totaled approximately $10.9 million
consisting primarily of legal costs, environmental engineering and assessment
costs, design costs and other administrative costs. At June 30, 2000,
approximately $9.3 million in development costs (of the $10.9 million expended)
may be recoverable by the Company only if and when a gaming facility is
established by the Rhode Island Project Tribe. Repayment of the development
costs will be made solely from the distributable profits of the gaming facility.
These funds were expended cumulatively over the period from Spring 1993 to
October 1999.

Bureau of Indian Affairs approval:

On September 3, 1998 the Secretary of the Interior and the Deputy Commissioner
of the Bureau of Indian Affairs approved the Management Agreement between the
Narragansett Tribe and CDGC pursuant to 25 CFR Section 81. While this approval
does not impact the Narragansett Tribe's right to offer gaming pursuant to IGRA,
the approval is significant because it protects the Narragansett Tribe and CDGC
from any assertion that the Management Contract is null and void under the
provisions of 25 U.S.C. Section 81 due to lack of approval.


                                      F-18
<PAGE>   81
CAPITAL GAMING INTERNATIONAL, INC.,

DEBTOR-IN-POSSESSION, AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6.  Restricted Funds

Restricted funds are held by the Indenture Trustee as cash collateral (as
defined in the Second Amended Indenture) for payment of the New Senior Secured
Notes. Of the $9,497,000 held by the Indenture Trustee as cash collateral as of
June 30, 2000, $8,906,000 is available to be disbursed to or on behalf of the
Company, upon the fulfillment of certain requirements contained in the Second
Amended Indenture for specific purposes which include (i) to redeem the New
Senior Secured Notes or to make any sinking fund payment required by the Second
Amended Indenture, (ii) to pay interest due or accrued on the New Senior Secured
Notes, (iii) up to $300,000, in any calendar year, to pay any additional
developmental expenses (as defined in the Second Amended Indenture), (iv) to pay
any deferred budgeted expense (as defined in the Second Amended Indenture) for
which the Company did not reserve funds in connection with its most recent
quarterly calculation of excess cash (as defined in the Second Amended
Indenture), (v) to make expenditures with respect to a qualified new project (as
defined in the Second Amended Indenture) or (vi) for any use to which holders of
a majority of the outstanding Senior Secured Notes has consented. The Company
anticipates that some or all of the restricted funds held by the Indenture
Trustee may be applied to interest and/or principal payments due on the new
Senior Secured Notes and to fund new projects of the Company. These Funds will
be distributed as part of the 2000 Reorganization. See Note 2.

Note 7.  Leasing Activities

The Company's leasing activities consist principally of leasing a sprung
structure and furniture. Both of the leases are classified as direct financing
leases. They expire in April 2005.

Under the direct financing method of accounting for leases, the total net
rentals receivable under the lease contracts, initial direct costs (net of
fees), and the estimated unguaranteed residual value of the leased equipment,
net of unearned income, are recorded as a net investment in direct financing
leases, and the unearned income of each lease is recognized each month at a
constant periodic rate of return on the unrecovered investment.

The composition of the net investment in direct financing leases at June 30,
2000 is as follows:

<TABLE>
<S>                                                  <C>
    Total minimum lease payments to be received      $  916,000
    (Deduct) unearned lease income                      231,000
                                                     ----------
         Net investment in direct financing leases   $  685,000
                                                     ==========
</TABLE>

At June 30, 2000, the minimum future lease payments due under the direct
financing leases are as follows:

<TABLE>
<CAPTION>
During the year ending June 30:
<S>                                                <C>
    2001                                           $ 179,000
    2002                                             179,000
    2003                                             179,000
    2004                                             179,000
    2005                                             200,000
                                                   ---------
        Total minimum future lease payments        $ 916,000
                                                   =========
</TABLE>

Note 8.  Income Taxes

Components of income tax (benefit) expense:

<TABLE>
<CAPTION>
                               Year ended      Year ended      Year ended
                            June 30, 2000   June 30, 1999   June 30, 1998
                            -------------   -------------   -------------
<S>                         <C>             <C>             <C>
Current:
  Federal                   $      15,000   $      70,000   $          --
  State                        (1,132,000)        348,000         336,000
                            -------------   -------------   -------------
Current (benefit) expense   $  (1,117,000)  $     418,000   $     336,000
                            =============   =============   =============
</TABLE>

                                      F-19
<PAGE>   82
CAPITAL GAMING INTERNATIONAL, INC.,

DEBTOR-IN-POSSESSION, AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 8.  Income Taxes (Continued)

A reconciliation of income tax (expense) benefit at the federal statutory rate
to the Company's effective income tax (expense) benefit is as follows:

<TABLE>
<CAPTION>
                                                  Year ended      Year ended      Year ended
                                               June 30, 2000   June 30, 1999   June 30, 1998
                                               -------------   -------------   -------------
<S>                                            <C>             <C>             <C>
Federal income tax benefit (expense)
  at the statutory rate                        $   1,351,000   $   (428,000)   $   2,318,000
Amortization of excess reorganization value       (1,289,000)      (672,000)        (827,000)
Federal alternative minimum tax                      (15,000)       (70,000)              --
State tax benefit (expense), net of Federal
  tax benefit (expense)                             (112,000)      (348,000)        (336,000)
(Non) recognition of NOL carryforward                225,000      1,100,000       (1,491,000)
State income tax refunds                           1,132,000             --               --
Other                                               (175,000)            --               --
                                               -------------   -------------   -------------
Current benefit (expense)                      $   1,117,000   $   (418,000)   $    (336,000)
                                               =============   =============   =============
</TABLE>

During the year ended June 30, 2000, the Company received approval from the
States of Arizona, Oregon and California to file on a consolidated basis. As a
result of this, the Company was able to amend four years of previously filed
returns and receive substantial income tax refunds. These refunds were recorded
as income tax benefit in the fiscal year ended June 30, 2000.

Net operating loss carryforwards ("NOLs"):

The net operating losses (NOLs) generated in prior years totaled approximately
$107,000,000. The NOLs have been reduced by approximately $75,500,000 as a
result of the cancellation of indebtedness that was affected by the Company's
1996 reorganization. The NOLs remaining have been reduced by the current year's
taxable income of approximately $650,000. There can be no assurance that the
Company will be able to utilize these NOLs due to the complex nature of the
applicable tax code and the difference that may exist between management's
interpretation of the code and that of the Internal Revenue Service (IRS). As a
result of this risk associated with the NOLs, management has established a 100%
valuation allowance to offset the associated deferred tax asset.

Upon confirmation of the 2000 Plan of Reorganization, any debt forgiveness
resulting from the reorganization will reduce the net operating loss
carryforwards.

As of June 30, 2000, the Company has a federal net operating loss carryforward
expiring as follows:

<TABLE>
<S>                                <C>
      June 30, 2011                $  24,660,000
      June 30, 2012                    4,290,000
      June 30, 2013                    3,170,000
                                   -------------
         Total                     $  32,120,000
                                   =============
</TABLE>

The Company has net operating loss carryforwards for state income tax purposes
of approximately $53,000,000 which expire from 2002 through 2013.


                                      F-20
<PAGE>   83
CAPITAL GAMING INTERNATIONAL, INC.,

DEBTOR-IN-POSSESSION, AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 8.  Income Taxes (Continued)

The income tax effects of temporary differences that give rise to significant
portions of deferred income tax assets as of June 30, 2000 and 1999 are as
follows:

<TABLE>
<CAPTION>
                                              2000               1999
                                              ----               ----
<S>                                   <C>                <C>
Deferred income tax assets:
Federal net operating losses          $ 10,921,000       $ 11,079,000

State net operating losses               3,899,000          7,474,000
                                      ------------       ------------
Total deferred income tax assets        14,820,000         18,553,000

Valuation allowance                    (14,820,000)       (18,553,000)
                                      ------------       ------------
Net deferred income tax assets        $         --       $         --
                                      ============       ============
</TABLE>

The deferred tax asset valuation allowance is equal to the full amount of the
gross deferred tax asset because the realization of the assets cannot be assured
at this time.

Note 9.  Native American Loans Receivable

Pursuant to the Third Amended and Restated Management and Development Agreement
between CGMI and the Pueblo of Laguna dated September 7, 1999, CGMI will loan
approximately $1,700,000 to the Laguna Development Corporation, a wholly-owned
tribal corporation ("LDC") to partially fund pre-opening and construction
expenses of the Dancing Eagle Casino (the "CGMI Loans"). The CGMI Loans are
subordinate to the third party construction loan of $7,200,000. As of June 30,
2000, there were two loans outstanding for approximately $1,427,000 and
$127,000, with monthly payments of approximately $49,000 and $15,000 through
March 2003 and 2001, respectively. The first note bears interest at prime
lending rate +1% (10.5% at June 30, 2000), and the second note is interest-free.

The Company also advanced funds to the Tonto Apache Tribe for pre-opening and
construction costs for the Mazatzal Casino. As of June 30, 1999, there was
$1,441,000 outstanding on this loan. This loan was paid in full during the year
ended June 30, 2000.

Note 10. Furniture, Fixtures and Equipment

Furniture, fixtures and equipment consist of the following as of June 30, 2000
and 1999:

<TABLE>
<CAPTION>
                                            2000            1999
                                            ----            ----
<S>                                    <C>             <C>
Furniture, fixtures and equipment      $ 131,000       $ 131,000
Less accumulated depreciation           (126,000)       (117,000)
                                       ---------       ---------
                                       $   5,000       $  14,000
                                       =========       =========
</TABLE>

Depreciation expense for the years ended June 30, 2000, 1999 and 1998, is
$9,000, $9,000 and $13,000, respectively, and is included in depreciation and
amortization expense.


                                      F-21
<PAGE>   84
CAPITAL GAMING INTERNATIONAL, INC.,

DEBTOR-IN-POSSESSION, AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 11. Investment in Native American Management Agreements

The asset as of June 30, 1999 in this caption on the balance sheet represents
capitalized costs and payments related to the remaining Class III management
agreements with the Tonto Apache Tribe and Umatilla Tribe. The Company was
amortizing such amounts over five years on the straight line method.
Amortization for the years ended June 30, 1999 and 1998, was approximately
$249,000, and $708,000, respectively. Accumulated amortization as of June 30,
1999 was approximately $992,000. During the year ended June 30, 2000, this asset
was written off in accordance with SOP 98-5 which requires such costs to be
expensed as incurred.

Note 12. Pueblo of Laguna Deferred Charges

In June 1998, the Company entered into a Management and Development Agreement
with Pueblo of Laguna tribe to develop and manage a Class III gaming facility
(Dancing Eagle Casino Project). The Agreement was amended and restated in March
and September 1999. The National Indian Gaming Commission (NIGC) approved the
Third Amended and Restated agreement in September 1999.

All initial expenditures incurred by the Company for the establishment and
development of the Dancing Eagle Casino Project, as defined in the Management
and Development Agreement, other than those costs which generally would be
classified as Company administrative costs, were initially capitalized as a
deferred asset. Additionally, as of October 1, 1998, all Company administrative
expenditures relating to the Dancing Eagle Casino Project were also capitalized
as a deferred asset. Upon the commencement of gaming operations at the Dancing
Eagle Casino Project, the total sum of the general and administrative,
non-Laguna loan balances, were to remain a deferred asset and were to be
amortized over the five year period of the Pueblo of Laguna Management and
Development Agreement. In accordance with the provisions of SOP 98-5, these
deferred changes were written off in the year ended June 30, 2000.



                                      F-22
<PAGE>   85
CAPITAL GAMING INTERNATIONAL, INC.,

DEBTOR-IN-POSSESSION, AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 13. Stock Option Plan

Pursuant to the 1996 Reorganization, the Company canceled all of its existing
stock options and adopted the 1997 Stock Option Plan covering 200,000 shares of
the Company's common stock, pursuant to which officers, directors, consultants
of, or other people rendering services to the Company or its subsidiaries are
eligible to receive incentive and/or non-qualified stock options. With respect
to any option granted to any employee who was employed by the Company prior to
the Effective Date of the Company's 1996 Plan of Reorganization, no more than
100,000 of the shares authorized under the Stock Option Plan may be awarded. The
Plan expires in March 2007. Incentive stock options granted under the Plan to
employees who are not 10% owners are exercisable for a period up to ten years
from the date of grant at an exercise price of $1.75 or such lesser amounts
approved by the Company's Noteholders. The exercise price may be adjusted
subject to certain recapitalization provisions of the Plan. Incentive stock
options granted under the Plan to employees who are 10% shareholders are
exercisable for a period up to five years at the same exercise price provision.
As of June 30, 2000 there were no options granted under the Plan. Pursuant to
the 2000 Reorganization, this stock option plan was cancelled.

Note 14. Commitments and Contingencies

Employment agreements:

The Company has employment agreements with the Company's President and Executive
Vice President which require annual compensation of $275,000 and have rolling
terms of one (1) year. The Company also has an agreement with an outside
director of the Company which requires an outside director's fee of $90,000 for
the calendar year ended December 31, 1999 and $60,000 for the calendar year
ended December 31, 2000. In addition, the Company has an informal agreement with
a second outside director of the Company which requires an outside director's
fee of $75,000 for the 12 month period ended August 31, 1999. As of June 30,
2000 and 1999, the Company owed approximately $76,000 and $62,000 to this second
outside director. Pursuant to the 2000 Reorganization, the agreements with the
outside directors were terminated.

Property lease:

The Company leases 2,646 square feet of office space in Phoenix, Arizona under
an operating lease which expires on December 31, 2000. The Company's commitment
under this non-cancelable lease will require lease payments of approximately
$23,000 for the fiscal year ending June 30, 2001. Rent expense for the year
ended June 30, 2000, 1999 and 1998 was approximately $56,000, $116,000, and
$92,000, respectively. As part of the 2000 Reorganization under Chapter 11, this
lease was terminated. The Company entered into a new lease of 1,000 square feet
of office space. This lease agreement expires April 2003 and requires monthly
lease payments of approximately $2,000. The lease can be terminated, at the
option of the Company, in March 2002.

Legal Proceedings

There is a dispute concerning the terms of CGMI's management agreement with the
Dancing Eagle Casino (owned by the Laguna Development Corporation, a tribal
corporation of the Pueblo of Laguna (the "Owner")) and payments due thereunder.
The question centers on whether pre-operating costs incurred by the Dancing
Eagle Casino should be carried forward as a loss and be recouped first out of
current revenues. If so, the Owner contends that there would be no net revenues
(revenues remaining after payment of projected operating costs) and therefore no
basis for payment of CGMI's management fee until the Dancing Eagle Casino
experienced current revenues. Further, the Owner contends that if there are no
net revenues or insufficient net revenues, CGMI is required to pay to the Owner
a monthly "minimum guaranteed payment" under the Indian Gaming Regulatory Act
regulations as incorporated in the management contract. CGMI contends that there
have been net revenues and that the Owner's share of the net revenues have been
applied to discharge the Owner's monthly obligations as the Owner requested in
its Depository Agreement. If CGMI is correct, no minimum guaranteed payments are
due and owing and CGMI is entitled to receive its management fees. The current
amount in controversy is less than $250,000 in each case. The agreement contains
provisions for arbitration. However, because the parties have met, are
continuing discussions and are seeking to resolve any differences amicably,
arbitration may not be required. Nevertheless, under the circumstances, our
management is unable to express an opinion concerning the ultimate resolution of
this matter or the liability of CGMI, if any, in connection therewith.


                                      F-23
<PAGE>   86
CAPITAL GAMING INTERNATIONAL, INC.,

DEBTOR-IN-POSSESSION, AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 15. Retirement Plan

Effective November 1, 1994, the Company adopted a defined contribution (401(k))
plan covering all eligible employees. Under the terms of the Plan, participating
employees deposit a percentage of their salaries in the Plan. The Company
matches 100% of the employee's contribution up to a maximum of 6% of salary. The
expenses of the Plan to the Company for the years ended June 30, 2000, 1999 and
1998 was approximately $54,000, $61,000, and $71,000, respectively.

Note 16. Concentration of Credit Risk

Financial instruments which potentially subject the Company to concentrations of
credit risk are cash equivalents and receivables arising from Native American
gaming development and operations. The Company places its cash investments in
high credit quality financial institutions and currently invests primarily in
U.S. government and Euro rollover obligations that have maturities of less than
three months. The Company had cash of approximately $23,000 as of June 30, 2000,
that is subject to credit risk beyond FDIC insured limits. The Company had
approximately $11,700,000 at June 30, 2000, in U.S. government obligations,
repurchase agreements, cash management funds and Euro investments which are not
insured.

The Company has recorded as of June 30, 2000 and 1999, $1,554,000 and
$1,441,000, respectively, for development loans to Tribes. Federally recognized
Native American Indian tribes are sovereign nations governed by federal statutes
that are different than statutes governing commercial enterprises in the United
States. As of June 30, 2000, these receivables are due from the Pueblo of Laguna
Tribe. While the Company has legal counsel experienced in Indian gaming law and
matters, there is the risk that the Company may not prevail if collectability is
forced into litigation. The Company does not require collateral or other
security to support financial instruments subject to credit risk, beyond the
pledge of each Tribe of their gaming revenues. The Company attempts to take all
necessary legal measures in the documentation and preparation of agreements
executed with Native American Tribes, including the Tribe's waiver of sovereign
immunity related to contract enforcement and securing appropriate regulatory
approval.


                                      F-24
<PAGE>   87
CAPITAL GAMING INTERNATIONAL, INC.,

DEBTOR-IN-POSSESSION, AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 16. Concentration of Credit Risk (Continued)

The Company's management fee revenues were primarily derived from three Native
American Indian tribes as follows:

<TABLE>
<CAPTION>
                     Fiscal Year Ended June 30
                      2000      1999      1998
                      ----      ----      ----
<S>                   <C>       <C>       <C>
Muckleshoot Tribe      --        --        14%
Tonto Apache           37%       32%       28%
Umatilla               61%       68%       58%
Pueblo of Laguna       --        --        --
</TABLE>

Except for the Pueblo of Laguna these Tribes are no longer customers and this
could have a material adverse effect on the Company's financial condition.

Note 17. Risks and Uncertainties

To enter the Native American, riverboat, dockside casino or any other aspect of
the gaming industry, the Company will be subject to regulation by each state in
which it conducts business, and to a certain extent under Federal, Tribal and in
some cases state law with respect to Native American gaming. In jurisdictions
where gaming has recently been legalized, gaming cannot begin until a licensing
and regulatory framework is promulgated and regulatory commissions are
appointed, staffed and funded. The regulatory framework adopted by any
jurisdiction may impose delays in licensure, restrictions or costs that would
materially detract from the profitability of gaming operations. The Company must
obtain a gaming license for each location where it will operate or manage a
gaming casino, and each of the Company's officers, directors, managers and
principal shareholders are subject to strict scrutiny and approval of the gaming
commission or other regulatory body of each state in which the Company may
conduct gaming operations. In addition, gaming on Native American lands is
extensively regulated, and the terms and conditions of management contracts must
be approved by the Tribes and certain regulatory entities. Changes in the
interests of principals must be approved, and the Company and certain of its
principals must be licensed, by Tribal and in some cases, state authorities.
There can be no assurance that the Company or any of its key personnel will
obtain the requisite licenses and approvals of the various state and Tribal
gaming commissions and the National Indian Gaming Commission ("NIGC") in a
timely fashion, if at all.

The Company must also obtain liquor licenses from state regulatory agencies for
each of its proposed operations. Rules and regulations in this regard are strict
and the loss of such licenses is possible for regulatory violations. The loss or
suspension of a liquor license could significantly impact a licensees
operations. Local building, health and fire codes and similar regulations could
also impact the Company operations. Violations of any such statutes, codes or
regulations could have a material adverse impact on the financial condition or
operations of the Company.


                                      F-25
<PAGE>   88
CAPITAL GAMING INTERNATIONAL, INC.,

DEBTOR-IN-POSSESSION, AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 18. Fair Value of Financial Instruments

Effective June 30, 1996, the Company adopted Statement of Financial Accounting
Standards No. 107, Disclosure About Fair Value of Financial Instruments which
requires disclosing fair value to the extent practicable for financial
instruments which are recognized or unrecognized in the balance sheet. The fair
value of the financial instruments disclosed herein is not necessarily
representative of the amount that could be realized or settled, nor does the
fair value amount consider the tax consequences of realization or settlement.

In assessing the fair value of the financial instruments, the Company used a
variety of methods and assumptions, which were based on estimates of market
conditions and risks existing at that time. For certain instruments, including
cash and cash equivalents, trade receivables and trade payables, it was
concluded that the carrying amount approximated fair value because of their
short maturities.

The 12.0% Senior Secured notes due 2001 are carried at their face value of
$23,100,000. As part of the 2000 Reorganization under Chapter 11, these
noteholders will receive approximately $9,000,000 cash, 2,068,000 shares of New
Class A common stock (valued at $1.94 per share based on management's internal
estimate of the fair market value of the Company) and a pro rata share of
$100,000 to be divided among all unsecured creditors. Based on this, the fair
value of the 12% Senior Secured notes is estimated to be approximately
$13,100,000.


                                      F-26
<PAGE>   89
CAPITAL GAMING INTERNATIONAL, INC.

DEBTOR-IN-POSSESSION, AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 19. Management's Plans

The Company plans to continue its current management arrangements with the
Pueblo of Laguna Tribe over the term of the contract. Management anticipates
this contract's cash flow as well as the post bankruptcy cash available will
provide adequate working capital to allow the Company to expand its operations
into other gaming businesses and meet its operating expenses.

During fiscal 2000, the Company implemented a plan to restructure its operations
to reduce operating expenses and continues to look for additional opportunities
to lower its operating costs. The Company has entered into a new office lease
that will reduce its lease expense by approximately 50%. The Company also
anticipates realizing the full cost benefit of its cost reductions in fiscal
2001.

Management is focusing its efforts on expanding its gaming operating activities
in the Native American casino management segment as well as in other gaming
industry segments. The Company is currently in negotiations to enter into new
gaming operations with other casino gaming companies. These opportunities are in
both the United States and foreign countries. Some of these opportunities
require capital investment by the Company, while others involve management or
consulting agreements which would require little or no capital investment by
the Company.

Management intends to prudently invest a portion of its existing cash flow,
cash flow from new operations and post restructuring cash available in new
gaming operations, while at all times maintaining adequate liquidity and
reserves. Management is not currently seeking to raise capital through the
issuance or incurrence of debt.

Although no assurances may be given, with these plans in place, management
believes the Company will be able to sustain operations through the 2001 fiscal
year and beyond.

                                      F-27
<PAGE>   90


                                 EXHIBIT INDEX


         1.       Financial Statements - See the Index to Financial Statements
                  on page F-1.

         2.       Financial Statement Schedules - Schedules begin on page S-1.

         3.       Exhibits.

         2.1      Stock Purchase Agreement dated March 15, 1993, by and among
                  the Registrant, Bass Leisure Group, Ltd., Bass Leisure Group,
                  Inc. and British American Bingo, Inc. (4)

         2.3      Involuntary Petition for Bankruptcy filed under Chapter 11 of
                  the U.S. Bankruptcy Code against Crescent City Capital
                  Development Corp. dated July 26, 1995. (19)

         2.4      Consent to Entry of Order for Relief filed by Crescent City
                  Capital Development Corp. in Chapter 11 Bankruptcy Case dated
                  July 28, 1995. (19)

         2.5      First Amended Chapter 11 Plan of Reorganization of Crescent
                  City Capital Development Corp. as confirmed by the Bankruptcy
                  Court on January 12, 1996. (20)

         2.6      Second Amended Chapter 11 Plan of Reorganization of Crescent
                  City Capital Development Corp. and First Immaterial
                  Modification, as confirmed by the Bankruptcy Court on April
                  29, 1996. (21)

         2.7      Stock Purchase Agreement by and among Casino Magic Corp.,
                  Jefferson Casino Corp., C-M of Louisiana, Inc., Capital Gaming
                  International, Inc. and Crescent City Capital Development
                  Corp., dated February 21, 1996. (21)

         2.8      First Amended and Modified Plan of Reorganization of Capital
                  Gaming International, Inc., dated March 19, 1997. (22)

         3.1      Restated Certificate of Incorporation of the Registrant. (15)

         3.2      Amended and Restated Certificate of Incorporation of the
                  Registrant. (26)

         3.2      Bylaws of the Registrant, as amended. (6)

         4.3      Indenture dated February 17, 1994, by and among the
                  Registrant, Crescent City Capital Development Corp., British
                  American Bingo, Inc. and First Trust National Association
                  (without exhibits and schedules). (9)

         4.4      Equity Registration Rights Agreement dated January 20, 1994,
                  by and among the Registrant and the persons who are
                  signatories thereto (without exhibits and schedules) (multiple
                  conformed signatures omitted). (9)

<PAGE>   91
         4.5      Senior Secured Notes Registration Rights Agreement dated
                  February 17, 1994, by and among the Registrant, Crescent City
                  Capital Development Corp., British American Bingo, Inc. and
                  the purchasers who are signatories thereto (without exhibits
                  and schedules) (multiple conformed signatures omitted).
                  (9)

         4.6      Security Agreement dated February 17 1994, by and among the
                  Registrant, Crescent City Capital Development Corp., British
                  American Bingo, Inc. and First Trust National Association
                  (without exhibits and schedules). (9)

         4.7      Security Agreement dated February 17, 1994, by and between
                  Crescent City Capital Development Corp. and First Trust
                  National Association (without exhibits and schedules). (9)

         4.8      Pledge Agreement dated February 17, 1994, by and between the
                  Registrant and First Trust National Association (without
                  exhibits and schedules). (9)

         4.9      Pledge Agreement dated February 17, 1994, by and between
                  British American Bingo, Inc. and First Trust National
                  Association (without exhibits and schedules). (9)

         4.10     Warrant Agreement dated January 20, 1994 by and between the
                  Registrant and First Trust National Association (without
                  exhibits and schedules). (9)

         4.11     Form of Old Note. (11)

         4.12     Form of New Note. (11)

         4.13     First Supplemental Indenture dated June 24, 1994, to the
                  Indenture dated February 17, 1994, by and among the
                  Registrant, Crescent City Capital Development Corp., Capital
                  Gaming International Casino Management Division, Inc.
                  (formerly British American Bingo, Inc.) and First Trust
                  National Association (without exhibits). (12)

         4.14     Form of Term Note distributed to Bondholders in exchange for
                  their consent to the first Supplemental Indenture. (12)

         4.15     Amended and Restated Indenture, dated February 17, 1994 and
                  amended and restated as of March 27, 1997, by and among the
                  Registrant, the Guarantor named therein and First Trust
                  National Association. (23)

         4.16     Form of New Secured Note. (25)

         10.1     1990 Stock Option Plan, as amended. (15)

         10.34    Non-qualified Stock Option Agreement, dated February 27, 1992,
                  by and between the Registrant and Michael F. Marino. (1)

         10.35    Non-Qualified Stock Option Agreement, dated February 27, 1992,
                  by and between the Registrant and Thomas E. O'Brien. (1)

         10.36    Non-Qualified Stock Option Agreement, dated February 27, 1992,
                  by and between the Registrant and Robert DeFilippis. (1)

         10.38    Non-Qualified Stock Option Agreement, dated June 30, 1992, by
                  and between the Registrant and Hank Johnson. (1)

         10.39    Non-qualified Stock Option Agreement dated June 30, 1992, by
                  and between the Registrant and Thomas P. Gallagher. (1)

         10.49    Stock Option Agreement dated January 7, 1993, by and between
                  the Registrant and I.G. Davis, Jr. (2) 10.50 Stock Option
                  Agreement dated January 7, 1993, by and between the Registrant
                  and Edward Tracy. (2)

<PAGE>   92
         10.52    Non-qualified Stock Option Agreement dated November 23, 1992,
                  by and between the Registrant and Col. Clinton L. Pagano. (2)

         10.53    Non-Qualified Stock Option Agreement dated November 23, 1992,
                  by and between the Registrant and Percival H.E. Leach. (2)

         10.54    Non-qualified Stock Option Agreement dated January 7, 1993, by
                  and between the Registrant and Thomas P. Gallagher. (2)

         10.55    Non-qualified Stock Option Agreement dated January 7, 1993, by
                  and between the Registrant and Joel Sterns. (2)

         10.56    Non-Qualified Stock Option Agreement dated January 7, 1993, by
                  and between the Registrant and Frank Gelb. (2)

         10.62    Stock Option Agreement dated January 29, 1993, between the
                  Registrant and Timothy G. Rose. (3)

         10.70    Stock Option Agreement dated May 7, 1993, between the
                  Registrant and Michael Barozzi. (6)

         10.78    Stock Option Agreement dated September 15, 1993, by and
                  between the Registrant and Peter Liguori. (6)

         10.79    Letter of Intent by and between the Registrant and Republic
                  Corporate Services, Inc. dated April 6, 1993, with amendments
                  dated June 11, 1993, and June 28, 1993. (6)

         10.80    Escrow Agreement by and between the Registrant and Republic
                  corporate Services, Inc. dated April 6, 1993, with Amendment
                  dated June 11, 1993. (6)

         10.81    Non-Qualified Stock Option Agreement by and between the
                  Registrant and Republic Corporate Services, Inc. dated June
                  11, 1993. (6)

         10.82    Option and Letter of Intent by and between the Registrant and
                  Republic Corporate Services, Inc. dated August 25, 1993. (6)

         10.83    Term Note by and between the Registrant and Joel Sterns dated
                  June 11, 1993. (6)

         10.84    Stock and Option Pledge Agreement by and between the
                  Registrant and Joel Sterns dated June 11, 1993. (6)

         10.86    Interim Agreement by and between the Board of commissioners of
                  the Port of New Orleans and Crescent City Capital Development
                  corporation dated June 29, 1993. (6)

         10.92    Common Stock Purchase Warrant by and between the Registrant
                  and First National Bank of Commerce dated September 1, 1993.
                  (6)

         10.93    Berth Infrastructure Reimbursement Agreement by and between
                  Crescent City Capital Development corporation and the Board of
                  Commissioners of the Port of New Orleans dated September 1,
                  1993. (6)

<PAGE>   93
         10.94    Engagement Letter by and between the Registrant and Stephen
                  Edwards, Esq. dated July 20, 1993.

         10.95    Common Stock Purchase Warrant by and between the Registrant
                  and Ladenberg, Thalmann & Co. Inc. dated July 22, 1993. (6)

         10.96    Common Stock Purchase Warrant by and between the Registrant
                  and Ronnie Wohl dated July 22, 1993. (6)

         10.97    Common Stock Purchase Warrant by and between the Registrant
                  and Ronald J. Crammer dated July 22, 1993. (6)

         10.98    Common Stock Purchase Warrant by and between the Registrant
                  and Peter M. Graham dated July 22, 1993. (6)

         10.99    Common Stock Purchase Warrant by and between the Registrant
                  and Jay R. Petschek dated July 22, 1993. (6)

         10.10    Common Stock Purchase Warrant by and between the Registrant
                  and Brian M. Gonick dated July 22, 1993. (6)

         10.101   Common Stock Purchase Arrant by and between the Registrant and
                  Thomas M. Ryan dated July 22, 1993. (6)

         10.109   Letter Agreement dated December 2, 1993 by and among the
                  Registrant, Hospitality Franchise Systems, Inc., I.G. Davis,
                  Jr. and John E. Dell. (7)

         10.110   Amended and Restated Agreement dated January 13, 1994, by and
                  between the Registrant and Bender Shipyard, Inc. (8)

         10.111   Purchase Agreement dated January 20, 1994, by and among the
                  Registrant and the persons who are signatories thereto
                  (without exhibits and schedules) (multiple conformed
                  signatures omitted). (10)

         10.112   Amendment to Purchase Agreement dated February 3, 1994, by and
                  among the Registrant and the persons who are signatories
                  thereto (without exhibits and schedules) (multiple conformed
                  signatures omitted).
                  (10)

         10.113   Purchase Agreement dated January 20, 1994, by and between the
                  Registrant and Hospitality Franchise Systems, Inc. (without
                  exhibits and schedules). (10)

         10.114   Amendment to Purchase Agreement dated February 17, 1994, by
                  and among the Registrant, Hospitality Franchise Systems, Inc.
                  and Samuel Levine (without exhibits and schedules). (10)

         10.115   Purchase Agreement dated January 20, 1994, by and between the
                  Registrant and MJM Partners, L.P. (without exhibits and
                  schedules). (10)

         10.116   Purchase Agreement dated January 20, 1994, by and between the
                  Registrant and MJM International Limited (without exhibits and
                  schedules). (10)

         10.117   Purchase Agreement dated March 1, 1994, by and between the
                  Registrant and MJM Partners, L.P. (without exhibits and
                  schedules). (10)

         10.118   Purchase Agreement dated March 1, 1994, by and between the
                  Registrant and MJM International Limited (without exhibits and
                  schedules). (10)

         10.119   Cash Collateral and Disbursement Agreement dated February 17,
                  1994, by and among the Registrant, Crescent City Capital
                  Development Corp., British American Bingo, Inc., First Trust
                  National Association and First National Bank of commerce
                  (without exhibits and schedules). (10)

         10.120   Marketing Services Agreement dated February 17, 1994, by and
                  between the Registrant and HFS Gaming Corp. (without exhibits
                  and schedules). (10)

         10.122   Amendment to Option Letter of Intent dated December 15, 1993,
                  by and between the Registrant and Republic Corporate Services,
                  Inc. (11)

<PAGE>   94
         10.123   Agreement of Purchase and Sale dated April 26, 1994, by and
                  among New Orleans 2000 Partnership, Crescent City Capital
                  Development Corp. and Grand Palais Riverboat, Inc. (11)

         10.125   Loan and Security Agreement dated February 17, 1994, by and
                  between the Registrant and Republic Corporate Services, Inc.
                  (11)

         10.126   $5,000,000 Note dated February 17, 1994 from Republic
                  corporate Services, Inc. to Registrant. (11)

         10.127   Letter Agreement dated May 4, 1994, by and between the
                  Registrant and Republic Corporate Services, Inc. (11)

         10.128   $19,000,000 Note from the Registrant to Republic Corporate
                  Services, Inc. (11)

         10.130   First Amendment dated June 24, 1994, to the Cash Collateral
                  and Disbursement Agreement dated February 17, 1994, by and
                  among the Registrant, Crescent City Capital Development Corp.,
                  Capital Gaming International Casino Management Division, Inc.
                  (formerly British American Bingo, Inc.), First Trust National
                  Association and First National Bank of Commerce. (12)

         10.131   Agreement to Purchase and Sell dated June 30, 1994, by and
                  between River City Joint Venture and The Alabama Great
                  Southern Railroad. (12)

         10.132   Term Note by River City Joint Venture to New Orleans 2000
                  Partnership dated July 13, 1994. (13)

         10.133   Assignment of Agreement and Sale dated July 13, 1994. (13)

         10.134   Mortgage and Assignment of Leases and Rentals by River City
                  Joint Venture in favor of New Orleans 2000 Partnership dated
                  July 13, 1994. (13)

         10.135   Amended and Restated partnership Agreement between Grand
                  Palais Riverboat, Inc. and Crescent City Capital Development
                  Corp. dated July 7, 1994. (13)

         10.136   First Amendment dated June 1, 1994, to the Marketing Services
                  Agreement dated February 17, 1994, by and between the
                  Registrant and HFS Gaming Corp. (14)

         10.137   Amendment effective as of October 1, 1994, to the Executive
                  Employment Agreement effective as of October 17, 1993, by and
                  between the Registrant and Clinton L. Pagano. (16)

         10.139   Stock Option Agreement dated June 2, 1994, by and between
                  Registrant and William S. Papazian.

         10.143   Stock Option Agreement dated August 24, 1994, by and between
                  Registrant and James F. Ahearn.

         10.144   Letter Amendment to Warrant Agreements by and between
                  Registrant, Ladenberg, Thalmann & Company, Inc., and certain
                  affiliates, dated October 11, 1994 (without exhibits). (16)

         10.145   Construction Agreement by and between Crescent City Capital
                  Development Corp., Grand Palais Riverboat, Inc., and Grimaldi
                  Construction, Inc., dated October 25, 1994 (without exhibits).
                  (17)

         10.146   Stock Purchase Agreement by and between Registrant, Fidelity
                  Galileo Fund, L.P., and Fidelity Copernicus Fund, L.P., dated
                  as of March 30, 1995. (18)

         10.147   Registration Rights Agreement by and between Registrant,
                  Fidelity Galileo Fund, L.P., and Fidelity Copernicus Fund,
                  L.P. dated as of March 30 1995. (18)

         10.148   Riverboat Casino Operating Agreement by and between Crescent
                  City Capital Development Corp. and River Marine Services,
                  Inc., dated as of January 13, 1995. (18)

         10.152   Promissory Note dated March 27, 1995, between Crescent City
                  Capital Development Corp. and First National Bank of Commerce.
                  (18)

         10.153   Commercial Guaranty dated March 27, 1995, between Registrant
                  and First National Bank of Commerce. (18)

<PAGE>   95
         10.154   Credit Agreement dated March 10, 1995, by and among River City
                  Joint Venture, Crescent City Capital Development Corp., Grand
                  Palais Riverboat, Inc., and First National Bank of Commerce.
                  (18)

         10.155   Promissory Note dated March 10, 1995, between River City Joint
                  Venture and First National Bank of Commerce. (18)

         10.156   Mortgage dated March 9, 1995, between River City Joint Venture
                  and First National Bank of Commerce, relating to certain
                  property owned by the River City Joint Venture (the "Orange
                  Street Parcels"). (18)

         10.157   Mortgage dated March 9, 1995, between River City Joint Venture
                  and First National Bank of Commerce, relating to certain
                  Property owned by the River City Joint Venture (the "Cusimano
                  Parcels"). (18)

         10.162   Employment Agreement dated May 30, 1995, by and between the
                  Registrant and Edward Tracy. (19)

         10.163   Employment Agreement dated May 30, 1995, by and between the
                  Registrant and I.G. Davis, Jr. (19)

         10.167   Buy-Out Agreement dated September 1, 1995, by and among
                  Registrant, Capital Gaming Management, Inc. and the Cow Creek
                  Band of Umpqua Tribe of Indians. (19)

         10.168   Amendments to the January 13, 1994, Amended and Restated
                  Riverboat Construction Agreement by and between the
                  Registrant, Crescent City Capital Development Corp. and Bender
                  Shipyard, Inc. dated October 19, 1994, February 3, 1995, and
                  February 9, 1995. (19)

         10.169   First Preferred Ship Mortgage by Crescent City Capital
                  Development Corporation in favor of First Trust National
                  Association dated March 23, 1995. (19)

         10.170   Engagement Agreement between Registrant and Donaldson, Lufkin
                  & Jenrette dated June 20, 1995. (19)

         10.171   Employment Agreement dated May 17, 1996, by and between
                  Registrant and William S. Papazian. (24)

         10.172   Amendment No. 1 to Employment Agreement dated May 28, 1997, by
                  and between Registrant and William S. Papazian. (27)

         10.173   Amendment No. 1 to Employment Agreement dated May 28, 1997, by
                  and between the Registrant and Edward M. Tracy. (27)

         10.174   Employment Agreement as of June 1, 1997, by and between
                  Registrant and Michael Barozzi

         10.175   Employment Agreement dated February 11, 1998, by and between
                  Registrant and Bradley A. Denton.

         10.176   Letter regarding confidentiality of Management Agreement
                  between Capital Gaming Management Inc. and the Pueblo of
                  Laguna.

         10.177   Employment Agreement dated as of December 1, 1998 between
                  Registrant and Michael W. Barozzi

         10.178   Letter Agreement dated January 8, 1999 between Registrant and
                  Michael W. Barozzi

         10.179   Employment Agreement dated as of December 1, 1998 between
                  Registrant and William S. Papazian

         10.180   Letter Agreement dated as of January 8, 1999 between
                  Registrant and William S. Papazian

         10.181   First Amended Plan of Reorganization of Registrant Jointly
                  Proposed by the Registrant and U.S. Bank Trust National
                  Association, as Indenture Trustee, dated as of August 4,2000 #

         10.182   Third Amended and Restated Certificate of Incorporation of
                  Registrant #

         10.183   Third Amended and Restated By-Laws of Registrant #

<PAGE>   96
         12.0     Computation of Ratio of Earnings to Fixed Charges #

         23.1     Consent of McGladrey & Pullen, LLP #

         27.      Financial Data Schedule #


#        Filed herewith.

1        Incorporated by reference to the exhibit with the same number, filed in
         connection with the Registrant's form 10-K filed with the Securities
         and Exchange Commission on September 28, 1992.

2        Incorporated by reference to the exhibit with the same number, filed in
         connection with the Registrant's Post-Effective Amendment No. 5 to the
         Registration Statement on Form S-1, File No. 33-36618, declared
         effective by the Securities and Exchange Commission on November 21,
         1990.

3        Incorporated by reference to the exhibit with the same number, filed in
         connection with the Registrant's Post-Effective Amendment No. 6 to the
         Registration Statement on Form S-1, File No. 33-36618, declared
         effective by the Securities and Exchange Commission on November 21,
         1990.

4        Incorporated by reference to the exhibit with the same number, filed in
         connection with the Registrant's Post-Effective Amendment No. 8 to the
         Registration Statement on form S-1, File No. 33-36618, declared
         effective by the Securities and Exchange Commission on November 21,
         1990.

5        Incorporated by reference to the exhibit with the same number filed in
         connection with the Registrant's Current Report on Form 8-K filed with
         the Securities and Exchange Commission on September 27, 1993.

6        Incorporated by reference to the exhibit with the same number filed in
         connection with the Registrant's Form 10-K filed with the Securities
         and Exchange Commission on September 28, 1993.

7        Incorporated by reference to the exhibit with the same number filed in
         connection with the Registrant's Current Report on Form 8-K filed with
         the Securities and Exchange Commission on January 3, 1994.

8        Incorporated by reference to the exhibit numbered 10.109 filed in
         connection with the Registrant's Current Report on form 8-K filed with
         the Securities and Exchange commission on February 1, 1994.

9        Incorporated by reference to the exhibit with the same number filed in
         connection with the Registrant's Current Report on form 8-K filed with
         the Securities and Exchange commission on March 4, 1994.

10       Incorporated by reference to the exhibits numbered 10.110, 10.111,
         10.112, 10.113, 10.114, 10.115, 10.116, 10.117, 10.118 and 10.119,
         respectively, filed in connection with the Registrant's Current Report
         on form 8-K filed with the Securities and Exchange commission on March
         4, 1994.

11       Incorporated by reference to the exhibits with the same number, filed
         in connection with the Registrant's Registration Statement on Form S-1,
         File No. 33-79082, which was filed with the Securities and Exchange
         Commission on May 18, 1994.

12       Incorporated by reference to the exhibits with the same number, filed i
         connection with the Registrant's Pre-Effective Amendment No. 1 to the
         Registration Statement on Form S-1, File No. 33-79082, which was filed
         with the Securities and Exchange Commission on July 11, 1994.

13       Incorporated by reference to the exhibit with the same number, filed in
         connection with the Registrant's Current Report on form 8-K filed with
         the Securities and Exchange Commission on July 29, 1994.

<PAGE>   97
14       Incorporated by reference to the exhibit with the same number, filed in
         connection with the Registrant's Pre-Effective Amendment No. 2 to the
         Registration Statement on Form S-1, File No. 33-79082, which was filed
         with the Securities and Exchange Commission on August 11, 1994.

15       Incorporated by reference to the exhibit with the same number filed in
         connection with the Registrant's Form 10-K filed with the Securities
         and Exchange commission on September 28, 1994.

16       Incorporated by reference to the exhibit with the same number filed in
         connection with the Registrant's Registration Statement on Form S-1,
         File No. 33-86094, which was filed with the Securities and Exchange
         Commission on November 7, 1994.

17       Incorporated by reference to the exhibit with the same number filed in
         connection with the Registrant's Pre-Effective Amendment No. 1 to the
         Registration Statement on Form S-1, File No. 33-86094, which was filed
         with the Securities and Exchange Commission on November 15, 1994.

18       Incorporated by reference to the exhibit with the same number filed in
         connection with the Registration Statement on Form S-1, File No.
         33-91024, which was filed with the Securities and Exchange Commission
         on April 7, 1995.

19       Incorporated by reference to the exhibit with the same number filed in
         connection with the Registrant's Form 10-K filed with the Securities
         and Exchange Commission on October 12, 1995.

20       Incorporated by reference to the exhibit with the same number, filed in
         connection with the Registrant's Current Report on Form 8-K filed with
         the Securities and Exchange Commission on January 31, 1996.

21       Incorporated by reference to the exhibit with the same number, filed in
         connection with the Registrant's Form 10-Q filed with the Securities
         and Exchange Commission on May 10, 1996.

22       Incorporated by reference to the exhibit with the same number, filed in
         connection with the Registrant's Form 8-K filed with the Securities and
         Exchange Commission on April 3, 1997.

23       Incorporated by reference to exhibit 4.1, filed in connection with the
         Registrant's Form 8-K filed with the Securities and Exchange Commission
         on April 3, 1997.

24       Incorporated by reference to the exhibit with the same number with the
         Registrant's Form 10-K filed with the Securities and Exchange
         Commission on October 15, 1996.

25       Incorporated by reference to exhibit A to exhibit 4.1, filed in
         connection with the Registrant's Form 8-K filed with the Securities and
         Exchange Commission on April 3, 1997.

26       Incorporated by reference to exhibit B to exhibit 2.1, filed in
         connection with the Registrant's Form 8-K filed in connection with the
         Securities and Exchange Commission on April 3, 1997.

27       Incorporated by reference to the exhibit with the same number with
         Registrant's Form 10-K filed with the Securities and Exchange
         Commission on October 14, 1997.