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                      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, 1999

                          Commission File No. 0-19128

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

             New Jersey                                  22-3061189
    (State or other jurisdiction of         (I.R.S. Employer Identification No.)
    incorporation or organization)

                      2701 East Camelback Road, Suite 484
                            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, 1999 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


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ITEM 1.  BUSINESS..........................................................................................      1

ITEM 2.  PROPERTIES.......................................................................................      25

ITEM 3.  LEGAL PROCEEDINGS.................................................................................     25

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...............................................     26

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.............................     26

ITEM 6.  SELECTED FINANCIAL DATA...........................................................................     28

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............     29

ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISKS ......................................     39

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.......................................................     39

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE..............     39

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS..................................................................     40

ITEM 11. EXECUTIVE COMPENSATION............................................................................     42

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT....................................     47

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....................................................     48

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K...................................     49
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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 with gaming management and development interests with Native American
Tribes in several states. The management and development of Native American
gaming facilities is conducted through Capital Gaming Management, Inc. ("CGMI"),
a wholly-owned subsidiary of the Company. The Company is also engaged in the
development of 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.

         CGMI developed and currently manages two Class III (as hereinafter
defined) Native American casinos.

         Tonto Apache Tribe - Mazatzal Casino in Payson, Arizona (Class III
facility opened in April 1995)

         Umatilla Tribes - Wildhorse Gaming Resort in Pendleton, Oregon (Class
III facility opened in March 1995)

         On July 24, 1998 CGMI entered into a management and development
agreement with the Pueblo of Laguna to exclusively develop, construct, operate
and manage a Class III casino to be located at the Casa Blanca exit on
Interstate 40 on the Pueblo's sovereign reservation lands approximately 45 miles
west of Albuquerque, New Mexico ("Dancing Eagle Casino Project"). The proposed
21,000 square foot casino will offer 10 Las Vegas-style table games, 300 slot
machines, a 72-seat full service restaurant, a gift shop and other amenities. As
amended, the management and development agreement provides that the term of such
agreement is five (5) years from the official date of opening of the casino. The
agreement further 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 agreement further provides that the management fees shall
at all times be capped at 34.3% of net revenues as determined in accordance with
generally accepted accounting principles. Construction of the Dancing Eagle
Casino Project is expected to commence by October 1999 and the facility is
anticipated to open in the first quarter of calendar year 2000.

         CDGC has a management and development contract with the Narragansett
Tribe for the development of a Class III gaming facility either on the tribe's
sovereign lands near Charlestown, Rhode Island or elsewhere in the state of
Rhode Island as may be permitted by law. See "Native American Gaming
Operations".

Company's Strategy

         The Company is focusing its efforts on maintaining its existing gaming
management interests with Native American Tribes, pursuing a strategy to develop
CGMI's and CDGC's Native American gaming operations and seeking other gaming
opportunities in existing and emerging gaming jurisdictions. The Company
believes that it has significant opportunities in Native American gaming because
of its demonstrated and continued success at the facilities it currently manages
through its subsidiaries, 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
focus on 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.

         Management 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.

         In September 1999 management of the Company streamlined and reorganized
and began implementation of a business strategy designed to achieve the
following goals: (i) increase revenues at the Company's managed casinos, (ii)
finance and develop the Dancing Eagle Casino project, (iii) build cash for use
in debt service and for future projects, (iv) further develop the Rhode Island
Project, (v) seek and obtain new project opportunities, (vi) decrease operating
expenses instituted by prior management and (vii) seek out ways to refinance or
restructure the Company's existing indebtedness. The progress of the Company's
new business strategy is discussed in Item 7. "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Fiscal 1999
compared to Fiscal 1998". Management intends to continue implementation of its
business strategy in fiscal year 2000.

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 Native American gaming segment in 1993. From March 31, 1992 through January
20, 1993, the Company


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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.

         With the January 1993 hiring of experienced casino industry executives,
the Company embarked on its new strategy of pursuing opportunities in emerging
segments of the gaming industry.

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. If the state does not negotiate a compact in "good faith"
with the Tribe, the Act provides that the Tribe may sue the state in federal
court to force the state to negotiate. If the state continues to resist
negotiations, the Act provides that a court-appointed mediator will impose upon
the parties either the compact proposed by the state or the compact proposed by
the Tribe.

         Several states have resisted entering into Tribal/State Compacts. In
1996, the United States Supreme Court held in the case Seminole Tribe of Florida
v. Florida, that a state may assert an 11th Amendment immunity defense where a
Tribe has commenced an action to enforce the state's obligation to negotiate in
good faith. Thus, the federal courts are incapable of providing the relief
contemplated by IGRA. In response to the Seminole decision, the Secretary of the
United States Department of the Interior ("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 regulations took effect on May 12, 1999
(25 C.F.R. Part 291). The regulations are intended to end any stalemates in the
compact process and allow the Secretary's procedures to substitute for a
tribal-state compact.

         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. Class II gaming is
permitted on Native American land if (a) the state in which the Native American
land is located permits such gaming for any purpose by any person; (b) the
gaming is not otherwise specifically prohibited on Native American Land by
federal law; (c) the gaming is conducted in accordance with an approved Tribal
ordinance; and (d) other miscellaneous requirements are met. Class III gaming is
permitted on Native American land if the conditions applicable to Class II
gaming are met and, in addition, the gaming is in compliance with the terms of
the compact between the Tribal government and the applicable state government.
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


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shares 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
Class II gaming facilities for the Oneida, Muckleshoot and Cow Creek Tribes.
Also, CGMI had executed a management contract with the Narragansett Tribe which
was and remains in the developmental stage. CGMI was also involved in
preliminary negotiations with regard to the execution of a Class III gaming
management contract with the Muckleshoot Tribe. 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 Tribe 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 have 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 are 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. Additionally, in September, 1998 the Umatilla
Tribes made their final installment of principal and interest to CGMI. As of
June 30, 1999, CGMI was owed approximately $1,441,000 on account of the original
tribal loans. In July 1998 CGMI entered into a management and development
agreement with the Pueblo of Laguna to exclusively develop, construct, operate
and manage a Class III casino to be located approximately 45 miles west of
Albuquerque, New Mexico on Interstate 40.

         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 contracts.

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


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         Capital Gaming Management, Inc.

         Tonto Apache Contract (Mazatzal Casino - Payson, Arizona).

         CGMI currently manages 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 people 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 III gaming facility which would offer slot machines, keno,
high stakes bingo, non-banking table games and OTB. The five-year term commenced
on the date the facility opened in April 1995. The Tonto Apache Management
Contract may be extended for two years at the option of the Tonto Apache Tribe
and upon application to the NIGC. 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.

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

         CGMI currently manages the Wildhorse Gaming Resort for the Umatilla
Tribes which offers video-lottery terminals, black jack, poker, 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 location 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 may be extended for two years
if certain contingencies are met. 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.

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

         On July 24, 1998 CGMI entered into a five (5) year management and
development agreement (as amended from time to time, the "Management Agreement")
with the Pueblo of Laguna and its wholly-owned corporation, Laguna Development
Corporation ("LDC"), to exclusively develop, finance, construct, operate and
manage a casino to be 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 will be a 21,000 square foot facility which
will offer 10 Las Vegas-style table games, 300 slot machines, a 72-seat full
service restaurant, a gift shop and other amenities. The Management Agreement
provides that CGMI will receive a management fee of 30% of "adjusted net
revenues" (as defined therein) during the first three years of the term and 20%
of adjusted net revenues in the fourth and fifth years of the term. The
Management Agreement further provides that the management fees shall at all
times be capped at 34.3% of net revenues as determined in accordance with
generally accepted accounting principles.

         The Dancing Eagle Casino will be designed, constructed, equipped and
opened for a total project cost of approximately $10.1 Million. In order to
finance the Dancing Eagle Casino Project, CGMI has secured, in the name of LDC,
third-party project financing in the amount of approximately $7.2 Million which
has been placed by Miller & Schroeder Investments Corporation (the "Senior
Secured Loan"). Additionally, CGMI is making 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
will be repaid by the LDC to CGMI out of the LDC's share of net revenues in
accordance with generally accepted accounting principles. 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 is to
be paid at funding and the remaining principal is to be paid in equal monthly
installments over a period of twelve (12) months from the date of opening of the
Dancing Eagle Casino. CGMI has agreed to fund a $168,000 interest reserve on the
Senior Secured Loan which will be released to CGMI on the first monthly payment
date pursuant to the Senior Secured Loan occurring after all monthly
installments of interest on the Senior Secured Loan have been paid by the LDC on
time and in full for three (3) consecutive monthly payment dates. 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 the 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.

         The Management Agreement was approved by the Chairman of the National
Indian Gaming Commission on September 27, 1999. The parties anticipate that the
Bureau of Indian Affairs will issue an approval of all loan and related
documents on or prior to October 15, 1999. The parties further anticipate
closing and funding of the Senior Secured Loan and the Subordinate Loan
immediately following receipt of the approval of the Bureau of Indian Affairs.

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         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. As part of the Narragansett
Contract, the Company has advanced funds for the development of the Rhode Island
Project and the construction of the gaming facility which will be repaid over a
seven-year period commencing with opening of the facility. The Narragansett
Contract was submitted to the NIGC for approval in June 1995.

         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.

         In light of the Decision (as defined below) to invalidate the Compact
and the application of the Chafee Rider (as defined below), no assurance can be
given if, or when, NIGC approval of the management contract will be obtained or
if the Narragansett Tribe will be able to establish a commercial gaming
enterprise (Class II or Class III) under IGRA. Additionally, it is possible, as
a condition of obtaining such approval, that the NIGC will require material
modifications to the Management Agreement.

         Tribal/State Compact

         In August 1994, a Tribal/State Compact (the "Compact") was entered into
between the Narragansett Tribe and 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.

         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 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. As of September 28, 1999, the Florida
Federal Court had not yet ruled on the pending motions. 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.


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         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 judgement in the matter. In August 1997, the
District Court granted the NIGC's motion for summary judgement. An appeal has
been filed by the Narragansett Tribe in the United States Court of Appeals for
the District of Columbia and is pending. The United States Court of Appeals has
held oral argument on the matter and the parties are awaiting the court's
decision.

        In May 1997, a Congressional Review of the Chafee Rider was initiated
with a hearing before the Committee on Resources of the U.S. House of
Representatives (the "Committee"). The hearing included testimony from the
Department of the Interior, the Narragansett Tribe and the National
Council of American Indians, all of whom testified in support of the repeal of
the Chafee Rider, as well as from several political leaders from the State of
Rhode Island in support of the Chafee Rider. In June 1997, legislation that
would amend and effectively repeal the Chafee Rider ("H.R. 1983") was introduced
in the House of Representatives by Rep. Patrick J. Kennedy (D-RI), a member of
the Committee, and co-sponsored by Rep. Don Young (R-AK), the Chairman of the
Committee and Rep. Dale E. Kildee (D-MI), a member of the Committee and
Co-Chairman of the Congressional Native American Caucus. H.R. 1983, known as
"The Narragansett Justice Act," has subsequently cleared the Committee.
No assurances can be given as to the ultimate outcome of H.R. 1983.

         Ongoing Project Development - West Warwick, Rhode Island

         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. As a
result of the Chafee Rider, the Narragansett Tribe had focused its efforts on
seeking voter approval of a gaming facility to be located in Providence, Rhode
Island and subsequently focused such efforts on seeking voter approval of a
gaming facility to be located near Interstate 95 in West Warwick, Rhode Island.
The earliest date upon which any such referendum could be held is November 2000.
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 2000 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.

         In January 1999 a grassroots group calling itself West Warwick 2000 was
formed in the town of West Warwick, Rhode Island. West Warwick 2000 sought out
the Narragansett Tribe and invited the Tribe to propose a potential casino to be
located in the town of West Warwick. Following public hearings on the issue, the
West Warwick Town Council voted 5 to 0 to hold a non-binding town referendum on
June 8, 1999. On June 8, 1999 the non-binding town referendum was held and
approximately 67% of those voting approved the idea of a Narragansett Casino
being sited in the town of West Warwick. Following the non-binding referendum,
the Town Council of the town of West Warwick sent a resolution to the Rhode
Island General Assembly requesting that the question of a Narragansett Casino in
West Warwick be placed on the ballot in the State's next general election being
held in November 2000. It is expected that the Rhode Island General Assembly
will take up this issue in the Legislative Session beginning in January 2000. If
the Town Council Resolution is ratified by the Rhode Island General Assembly, it
is then subject to gubernatorial veto which can be overriden with a vote of 60%
of each of the state senate and state house of representatives.

         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.

                                       7
<PAGE>   10
         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.


                                       8
<PAGE>   11
         Other Matters

         In connection with the Narragansett Tribe's efforts to seek statewide
voter approval of a gaming facility to be located in Providence, Rhode Island in
the November 1998 general election, the Company had retained Donaldson, Lufkin
and Jenrette Securities Corporation ("DLJ") to act as its exclusive financial
advisor with respect to the review and analysis of financial and structural
alternatives available to the Company. As part of such engagement, the Company
agreed to issue warrants to DLJ to purchase five (5%) percent of the Company's
issued and outstanding common stock on a fully diluted basis, to be exercisable
only if the Narragansett Tribe succeeded in winning voter approval for a
Narragansett gaming facility. In light of the fact that a voter referendum did
not occur in November 1998, and the uncertainty surrounding any future voter
referendum including the West Warwick effort, the Company has not issued and
does not intend to issue such warrants.

         The Company has continued funding the on-going development costs of the
Rhode Island Project, which at June 30, 1999, 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, 1999,
approximately $9.3 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 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
present.

         New England is already home to several full scale casinos, including
the Foxwoods Casino operated by the Mashantucket Pequot Tribe and the Mohegan
Sun Casino operated by the Mohegan Tribe, which opened in October 1996. Both of
these casinos are in Connecticut. It is possible that other casinos will be
established in other parts of New England, including Massachusetts. Because of
the market size, the establishment of existing and such other casinos could have
an adverse impact on the Rhode Island Project's gross revenues and, in turn, on
the income generated by CDGC under the Management Agreement.

         In order to fund the construction costs for the project, it is
anticipated that the Company will require significant additional capital. The
inability of the Rhode Island Project to offer Class III gaming could create a
competitive disadvantage. There can be no assurance that such financing will be
available, or if available, that the terms thereof will be acceptable to the
Company. Given the high level of uncertainty concerning the ability to secure a
binding compact or approval of non-compacted gaming, no financing commitments
for future capital needs have been obtained as of the date hereof.

         Native American Gaming Competition

         The Native American gaming industry has 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 may
become less lucrative to management companies such as the Company as the Tribes
have more management companies to choose from. Additionally, many of the
Company's competitors are larger and have greater financial resources to fund
the development of new Tribal gaming operations and to attract new management
contracts.

         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
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.


                                       9
<PAGE>   12

<PAGE>   13
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"). Due
primarily to unforeseen failure of projected market conditions which have been
widely reported to have severely and negatively impacted the entire New Orleans
riverboat and land-based gaming industry, and to stem operating losses, 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. In addition, on June 13, 1995, the Trustee also notified First
National Bank of Commerce ("FNBC"), the Company's Collateral Agent, that FNBC
could not make further disbursements from cash collateral accounts established
pursuant to the Old Indenture until directed by the Trustee. 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.

         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 in the United States Bankruptcy Court for the District of New
Jersey (the "Bankruptcy Court") on December 23, 1996 (the "Petition Date"). The
petition did not involve either of the Company's wholly-owned subsidiaries.


                                       10
<PAGE>   14
         On the Petition Date, the Company filed a pre-negotiated Plan of
Reorganization (together with all subsequent amendments and modifications, the
"Plan of Reorganization"), and an accompanying disclosure statement (together
with all subsequent amendments and modifications, the "Disclosure Statement").
The 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 Plan of Reorganization and entered an order confirming the
Plan of Reorganization submitted by the Company as modified by that order. As
contemplated by the Plan of Reorganization, on May 28, 1997 (the "Effective
Date"), the Company emerged from Chapter 11 and consummated the Plan of
Reorganization.

         The Plan of Reorganization provided for the continuation of the
Company. Under the Plan of Reorganization, on the Effective Date the outstanding
common stock of the Company (the "Old Common Stock") and the Old Options (as
hereinafter defined) were cancelled and the Company, as reorganized, issued
2,000,000 shares of its new common stock, no par value (the "New Common Stock"),
to be distributed pursuant to the terms of the Plan of Reorganization.

         The Plan of Reorganization provided generally that creditors of the
Company received distributions as follows: (i) holders of Old Senior Secured
Notes received in the aggregate (A) on account of their Allowed Secured Claims
(as defined in the Plan of Reorganization), their Pro Rata Share (as defined in
the Plan of Reorganization) of the Company's 12% Senior Secured Notes due 2001
(the "New Senior Secured Notes") having a principal face amount of $21.45
million and 1,225,000 shares of the New Common Stock, and (B) on account of
their unsecured Deficiency Claims (as defined in the Plan of Reorganization)
totaling $80,688,850, the same treatment as is afforded to holders of General
Unsecured Claims (see subparagraph (iii) below); (ii) holders of Secured Claims
(as defined in the Plan of Reorganization) that are not Claims (as defined in
the Plan of Reorganization) arising out of Old Senior Secured Notes received, at
the option of the Company: (X) such treatment as would leave such holder
unimpaired; (Y) payment in full, in cash; or (Z) return of such holder's
collateral in the possession of the Company; and (iii) holders of General
Unsecured Claims against the Company received their pro rata shares of (A)
525,000 shares of New Common Stock; (B) the right to receive the net proceeds of
Avoidance Actions (as defined in the Plan of Reorganization) recovered pursuant
to the Plan of Reorganization; and $1,100,000 in New Senior Secured Notes. With
respect to Class 4 Claims (as defined in the Plan of Reorganization), the
trustee with respect to the Amended Indenture (the "Amended Indenture Trustee")
could receive no more than 375,000 shares of New Common Stock and $550,000 in
New Senior Secured Notes on account of its allowed Class 4 Claim, and any shares
the Amended Indenture Trustee would otherwise receive on account of its Class 4
Claim in excess of $550,000 in New Senior Secured Notes was required to be
distributed pro rata to all other holders of Allowed Class 4 Claims. See
"Business - Debt After Reorganization" for a description of the New Senior
Secured Notes and "Business - Capital Structure" for a description of the
Company's current capital structure.

         Holders of the Old Common Stock received their pro rata share of 50,000
shares of New Common Stock. Existing warrants, options and other
rights to acquire Old Common Stock (collectively, the "Old Options") were
cancelled and holders of such Old Options received no distributions of property
on account thereof.

         The Plan of Reorganization provided for the discharge of all claims
against the Company and/or the release from liability only of the Company, its
officers and employees, its wholly-owned subsidiaries and their respective
present and former directors, the Amended Indenture Trustee and the Noteholders
Steering Committee of all liabilities in any way related to the Company. In
addition, the Plan of Reorganization provided for the release by the Trustee and
each of the Noteholders of all of their claims against subsidiaries of the
Company arising out of guaranties and pledges, except for the treatment of their
Claims provided for under the Plan of Reorganization.


                                       11
<PAGE>   15
         Debt After Reorganization

         New Senior Secured Notes. Pursuant to the Plan, the holders of the Old
Senior Secured Notes, along with certain unsecured creditors and key members of
management, were entitled to receive New Senior Secured Notes having an
aggregate principal amount of $23.1 million. The Company holds $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 Company's Second
Amended and Restated Indenture effective as of December 4, 1998 ("Second Amended
Indenture") includes certain restrictive covenants. (See "Description of Second
Amended Indenture".) 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 New Senior Secured Notes mature in May 2001. Required
principal payments are as follows:

<TABLE>
<S>                                  <C>
                  May 15, 2000       $  4,620,000
                  May 15, 2001         18,480,000
</TABLE>

         Additionally, the Company has been making required semi-annual interest
payments of approximately $1,386,000 since November 15, 1997 and is obligated to
make such interest payments semi-annually until May 2001.

         Description of Second Amended Indenture.

         The Second Amended Indenture governs the terms of the New Senior
Secured Notes. The New Senior Secured Notes are unconditionally guaranteed
pursuant to a Guaranty (the "Guaranty") as to principal, premium, if any, and
interest, on a senior basis, jointly and severally by all existing and future
Subsidiaries (other than CDGC and its subsidiaries) of the Company (the
"Guarantors"). The New Senior Secured Notes are secured by a lien on
substantially all of the assets of the Company and all existing and future
Guarantors. Under certain circumstances, the Collateral (as defined in the
Second Amended Indenture) may be released from the lien created by the Second
Amended Indenture and, under other circumstances, additional liens may be
granted on the Collateral.

         The Company is required to offer to purchase New Senior Secured Notes
with the proceeds from asset sales which are deposited in a segregated net cash
proceeds account within 365 days after the date of such asset sale, together
with accrued interest to the date of repurchase. The New Senior Secured Notes
and the Guaranty rank pari passu with all existing and future senior
indebtedness of the Company and the Guarantors, respectively, and senior in
right of payment to all subordinated indebtedness of the Company and the
Guarantors, respectively.

         Principal covenants include, among others, limitations on dividends and
other restricted payments and investments, payment restrictions affecting
Subsidiaries, transactions with Affiliates (as defined in the Second Amended
Indenture), consolidations, mergers and sales of assets, incurrences of
additional Indebtedness (as defined in the Second Amended Indenture) and
Disqualified Capital Stock (as defined in the Second Amended Indenture), liens,
as well as on lines of business which the Company may engage in.

         The Company and the Guarantors have covenanted to file under certain
circumstances, upon request from the Holders of the New Senior Secured Notes or
the Holders of the New Common Stock, a registration statement under the
Securities Act of 1933 with respect to the New Senior Secured Notes and the New
Common Stock.

         The Company and the Guarantors also have agreed to use their best
efforts to cause such registration statement to be declared effective by the
Securities and Exchange commission (the "SEC") within 180 days following such
notice.

                                       12

<PAGE>   16
         Default Under First Amended Indenture

         The Company's First Amended and Restated Indenture, dated as of March
27, 1997 (the "First Amended Indenture") contemplated that certain actions of
the Company require prior notice to (and in certain cases, approval from) a
Noteholders Advisory Committee ("Advisory Committee"), including the ability of
the Company to deliver to the Indenture Trustee a Definitive Budget (as defined
in the First Amended Indenture). However, the Advisory Committee never formed,
substantially due to the fact that the Company had been notified by several
state gaming regulators in states in which the Company conducts business that
the breadth and scope of the powers granted to the Advisory Committee in the
First Amended Indenture required that the proposed members of the Advisory
Committee in the First Amended Indenture be licensed by the appropriate various
state gaming regulators.

         On August 7, 1998, the Company was notified by counsel for the
Indenture Trustee of the occurrence of possible events of default ("Events of
Default") under the First Amended Indenture with respect to the New Senior
Secured Notes. The alleged Events of Default included, among other things, an
alleged failure by the Company to deliver to the Indenture Trustee a Definitive
Budget (as defined in the First Amended Indenture). In light of good faith
negotiations between the Indenture Trustee, the holders of a majority in
principal amount of the New Senior Secured Notes and the Company to amend the
First Amended Indenture in such a manner as would facilitate  curing any
alleged Events of Default, the Indenture Trustee had been directed by the
holders of a majority in principal amount of the New Senior Secured Notes to
forebear from taking any action, and in fact took no action, to accelerate the
New Senior Secured Notes, foreclose on any collateral or otherwise execute
any of its rights under the First Amended Indenture. As discussed herein, all
defaults existing under the First Amended Indenture were waived on December 4,
1998, the effective date of the Second Amended Indenture.

         Court Approval of Modification of Plan and Second Amended Indenture

         On October 23, 1998 the Company and the Indenture Trustee filed a
Joint Motion for an Order Approving Modifications to the Plan with the
Bankruptcy Court (the "Joint Motion").

         On November 16, 1998 the Bankruptcy Court ordered the approval of the
proposed modifications to the Plan as set forth in the Joint Motion, including,
without limitation: (i) the Second Amended Indenture; (ii) the Second Amended
and Restated Certificate of Incorporation (the "Second Amended Certificate");
and (iii) the composition of the Company's Board of Directors to consist of the
following individuals: (a) Michael W. Barozzi (Common Director); (b) William S.
Papazian (Common Director); (c) Col. Clinton L. Pagano (Common Director); and
(d) Charles B. Brewer (Class A Director).

         As detailed in the Joint Motion, the principal changes contained in the
Second Amended Indenture are:

         (i)   elimination of the Advisory Committee (as defined in the First
Amended Indenture);

         (ii)  modification of the provisions relating to Excess Cash (as
defined in the Second Amended Indenture);

         (iii) changing the date of the sinking fund payment due 2000 from May
28, 2000 to May 15, 2000; and

         (iv)  changing the final maturity date from May 28, 2001 to May 15,
2001.

                                       13
<PAGE>   17
         As also detailed in the Joint Motion, the principal changes to the
Second Amended Certificate included the creation of a new class of common stock,
Class A Common Stock, and the right of Holders of Class A Common Stock to elect
up to four members of the Board, with weighted voting rights for the Class A
Director(s) if the holders of the Class A Common Stock elect fewer than four
directors. Except for such additional rights of holders of the Class A Common
Stock, the New Common Stock and Class A Common Stock share identical rights.

         The modifications to the Plan did not affect the economic interests of
any creditor receiving distributions under the Plan, and only impacted the
non-economic rights and interests of the holders of the Old Secured Notes. As
detailed in the Joint Motion, the Plan was modified to provide that (i) holders
of the Old Secured Notes received Class A Common Stock in lieu of New Common
Stock on account of their Allowed Secured Claim; and (ii) holders of the Old
Secured Notes received Class A Common Stock in lieu of New Common Stock on
account of their Allowed Unsecured Claims. These modifications to the Plan did
not affect the aggregate number of shares of common stock outstanding. The
Class A Common Stock represents 80 percent of the Company's outstanding voting
securities and the New Common Stock represents 20 percent of the outstanding
voting securities. Only holders of the Class A Common Stock, however, have the
right to elect the Class A Directors.

         The Plan was also modified to eliminate the right of the Noteholder
Steering Committee to designate members of the Board of Directors.

         The Court also ordered that the Indenture Trustee fix December 7, 1998
as the record date for distribution of the New Secured Notes, Class A Common
Stock and other property to the holders of the Old Secured Notes. In compliance
with the Court's Order, the Indenture Trustee has made distributions to the
holders of the Old Secured Notes and to the general unsecured creditors.

         For previously disclosed information regarding the Plan, reference is
made to the following reports of the Company filed under Section 13 of the
Securities Exchange Act of 1934, all of which are on file at the Securities
and Exchange Commission: Quarterly Reports on Form 10-Q for the quarterly
periods ended December 31, 1997, March 31, 1998, September 30, 1998, December
31, 1998 and March 31, 1999, Annual Reports on Form 10-K for the annual periods
ended June 30, 1997 and June 30, 1998 and Current Report on Form 8-K filed
December 18, 1998.

         On December 4, 1998 the Second Amended Certificate was filed with, and
deemed effective by, the Secretary of State of New Jersey.

         On December 11, 1998, the Second Amended Indenture was executed by the
parties thereto, with an effective date of December 4, 1998.

         Also as of December 4, 1998, Holders entitled to receive a majority of
the New Secured Notes waived all defaults existing under the First Amended and
Restated Indenture.

         As per the terms of the Second Amended Indenture, the Company made an
interest payment of $1,285,900 on November 12, 1997, and interest payments of
$1,386,000 on May 15, 1998, November 15, 1998 and May 15, 1999.

                                       14
<PAGE>   18
         Capital Structure Prior To The Reorganization

         Preferred and Common Stock. Prior to the Effective Date, the Company
had authorized 5 million shares of preferred stock (the "Old Preferred Stock"),
of which no shares were issued. The Old Common Stock of the Company consisted of
75 million authorized shares of which approximately 19 million shares were
outstanding immediately prior to the Effective Date. All Old Common Stock and
Old Preferred Stock were cancelled on the Effective Date.

         Capital Structure Following the Reorganization

         The Second Amended Certificate authorizes 5 million shares of New
Common Stock. On the Effective Date, 2,000,000 shares of New Common Stock were
issued to the Company as the disbursing agent under the Plan of Reorganization.
The New Common Stock has been distributed to various classes of creditors
pursuant to the terms of the Plan of Reorganization. In addition, the Company's
executive management has received a total of 200,000 shares pursuant to the Plan
of Reorganization.

                                       15
<PAGE>   19
         Stock Option Plan

         Pursuant to the Plan of Reorganization, the Company cancelled all of
its existing stock options and adopted the 1997 Stock Option Plan (the "Stock
Option Plan") covering 200,000 shares of the New 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 Plan of
Reorganization no more than 100,000 of the shares authorized under the Stock
Option Plan may be awarded. The Stock Option Plan expires in March 2007.
Incentive stock options granted under the Stock Option Plan to employees who are
not 10% owners are exercisable for a period of up to ten years from the date of
the grant at an exercise price of $1.75 or such lesser amount approved by the
Company's noteholders advisory committee. The exercise price may be adjusted
subject to certain recapitalization provisions of the Stock Option Plan.
Incentive stock options granted under the Stock Option Plan to employees who are
10% shareholders are exercisable for a period of up to five years at the same
exercise price provisions. As of June 30, 1999, there were no options granted
under the Stock Option Plan.

Net Operating Loss Carryforwards ("NOLs")

         The following description of the Company's net operating loss
carryforwards is based upon management's analysis of the application of the
relevant sections of the Tax Code (as herein defined) to the net operating loss
carryforwards of the Company. There can be no assurance that the Internal
Revenue Service or the courts will agree with management's analysis. There are
substantial risks associated with the Company's utilization of its NOLs. See
"Risk Factors - Net Operating Loss Carryforwards."

         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 particular taxpayer, before the
application of any reductions and related adjustments described in the following
paragraphs under the heading "Net Operating Loss Carryforwards". 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.
Under Section 172(b) of the Internal Revenue Code of 1986, as amended (the "Tax
Code") and, in effect for those years, unused NOLs expire after fifteen taxable
years from the taxable year of a loss. Because these losses were generated in
1994, 1995 and 1996, they should expire in 2009, 2010 and 2011 respectively.

         For purposes of this discussion, the term "Net NOLs" means the amount
of NOLs of the particular taxpayer for federal income tax purposes adjusted to
reflect reductions and related adjustments required under Tax Code ss. 108 and
Tax Code ss. 382(1)(5), assuming that Tax Code ss. 382(1)(5) applies, but
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. See "Net Operating Loss Carryforwards - Application
of Tax Code ss. 382 Under the Chapter 11 Reorganization". After taking into
account the reorganization of the Company pursuant to the Plan of Reorganization
and assuming that Tax Code ss. 382(1)(5) applies as described in more detail in
this section "Net Operating Loss Carryforwards", management of the Company
believes the Net NOLs of the Company and its subsidiaries as of June 30, 1999
are approximately $32,585,000, although no assurance can be given that the
Company will be able to utilize these NOLs. See "Risk Factors - Net Operating
Loss Carryforwards".


                                       16


<PAGE>   20
         Cancellation of Debt Income Under Tax Code ss. 108.

         Under the Plan of Reorganization, unsecured indebtedness of the Company
with an aggregate face amount of approximately $110,000,000 was canceled.
Generally, Tax Code ss. 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 ss. 108 further
provides, however, that if a taxpayer is the subject of a bankruptcy case and
the cancellation of indebtedness ("COD") is 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 of the Company pursuant to the Plan of
Reorganization.

         Tax Code ss. 382 In General.

         If a corporation undergoes an "ownership change", Tax Code ss. 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 which was 5.64% in May of 1997)
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 ss. 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.

         Application of Tax Code ss. 382

         Under the Chapter 11 Reorganization. If the Company is subject to the
Section 382 Limitation as a result of the consummation of the Plan of
Reorganization, 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 Plan of Reorganization 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 Plan of Reorganization, an exception
under Tax Code ss. 382(1)(5) is believed by management to have applied as
described as follows. Tax Code ss. 382(1)(5) provides that the Section 382
Limitation will not apply to a loss corporation if (1) the corporation,
immediately before the ownership change, is under the


                                       17


<PAGE>   21
jurisdiction of a court in a United States Code Title 11 or similar case, and
(2) the shareholders and creditors of the old corporation own at least 50% of
the total voting power and value of the stock of the corporation after the
"ownership change" as a result of being shareholders and creditors before the
change. Stock transferred to such creditors counts only if it is transferred
with respect to "old and cold" indebtedness. Indebtedness of creditors qualifies
as "old and cold" if the indebtedness (i) was held by a particular creditor for
at least 18 months before the date of the filing of the Chapter 11 case, or (ii)
arose in the ordinary course of the trade or business of the old loss
corporation and was held by the person who at all times held a beneficial
interest in that debt. These requirements will not apply, however, and thus a
loss corporation generally may treat the debt as meeting the holding period
requirement, unless (i) the creditor becomes a 5-percent shareholder of the loss
corporation (directly or indirectly) immediately after the ownership change, or
(ii) such creditor's participation in the formation of the reorganization plan
makes it evident to the debtor that the creditor has not owned the debt in
question for the required period.

         In an attempt to determine the extent to which the indebtedness of
creditors who received stock pursuant to the Plan of Reorganization qualifies as
"old and cold", the Company has obtained corroborative evidence as to the status
of certain creditors including written confirmation of the status of certain
creditors who are receiving New Common Stock. As a result, Management of the
Company believes that sufficient indebtedness of creditors will qualify as "old
and cold" under Tax Code ss. 382(1)(5) so that Tax Code ss. 382(1)(5) will apply
to this ownership change. No assurances, however, can be given that
corroborative documentation obtained by the Company will ultimately sustain such
analysis if challenged.

         Under ss. 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 ss.
382(1)(5) adjustment to the Company's Gross NOLs is approximately $32,000,000.
$35,214,000 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".

         Tax Code ss. 382 and Subsequent Events and Investors.

         If Tax Code ss. 382(1)(5) applies to the Company, and a future
ownership change under Tax Code ss. 382 is triggered within two (2) years after
the ownership change generated pursuant to the Plan of Reorganization, the
Company would not be allowed to use any of its NOLs incurred as of that first
ownership change. It is therefore important for the Company to monitor further
transfers of New Common Stock by its 5-percent shareholders and further
issuances or redemptions of Company common stock. Because Tax Code ss. 382 tests
whether a 50 percentage point ownership change has occurred over a three-year
testing period, the Company's capacity to issue more common stock during the
three years subsequent to the Effective Date will be curtailed.


                                       18
<PAGE>   22
         Certain Transferability Restrictions.

         In accordance with Section 10 of the Company's Second Amended
Certificate, the Company imposed certain transferability restrictions upon its
5-percent shareholders for purposes of Tax Code ss. 382. These restrictions
generally provided 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 Company'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 expired on March
19, 1999, the date that was two years after the Effective Date.

         Effect of Tax Code ss. 384.

         Congress adopted Tax Code ss. 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 ss. 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.

         Effect of Tax Code ss. 269.

         Tax Code ss. 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. ss. 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 ss. 269 to the transactions provided for
under the Plan of Reorganization. Arguably, the "old and cold" creditors'
receipt of Company common stock was a direct consequence of their having
extended credit to the Company. If the Old Secured Notes of a creditor were
acquired by an investor to achieve control of the Company and thus avoid or
evade federal income tax, the Internal Revenue Service might attempt to apply
Tax Code ss. 269 to prevent the Company from utilizing its NOLs.

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,
1999 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 $32,585,000 as of
June 30, 1999 (see "Description of Business - Net Operating Loss Carryforwards -
Application of Tax Code ss. 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 Plan of Reorganization and
possible subsequent transfers of rights to


                                       19
<PAGE>   23
receive New Common Stock under the Plan of Reorganization to the extent that Tax
Code ss. 382(1)(5) does not apply to the ownership change associated with the
implementation of the Plan of Reorganization. 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.

         Substantial Indebtedness of the Company; Potential Limited Capacity to
Satisfy Repayment Obligations. As of June 30, 1999, the total amount of
outstanding Company long-term indebtedness was equal to $23,100,000 comprised of
the New Senior Secured Notes. As a result of the Company's indebtedness, the
Company has significant interest and principal repayment obligations, and
substantial cash is required to fulfill these obligations. This level of debt
poses a substantial risk to the holders of the Company's securities, including
the risk that the Company might not generate sufficient cash flow from existing
and future operations to service the Company's debt and the risk that the
Company could have limited financial capacity to respond to changes in market
conditions, extraordinary or unanticipated capital needs, shortfalls in
projected cash flow from operations or other changes. Because of the amount of
the Company's indebtedness, the Company's financial condition could be
materially adversely affected by a decline in revenues or an increase in
expenses. Additionally, the Company believes it will require new sources of cash
beyond its existing operations in order to fund the final payment of principal
on its New Senior Secured Notes in 2001. Management is currently evaluating the
feasibility of refinancing or restructuring the payment terms of its New Senior
Secured Notes. There can be no assurance, however, that the Company will be able
to refinance or restructure the New Senior Secured Notes or that the terms of
any possible refinancing or restructuring will be favorable to the Company.

         Expirations of Management Contracts. With the exception of the Pueblo
of Laguna contract, CGMI's other management contracts currently expire in the
first half of the year 2000. The ability of the Company to service its debt is
highly dependent upon the acquisition of new management contracts. There can be
no assurance that the Company will be able to attract a sufficient number of new
management contracts to replace existing ones.

        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
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. Given the
high level of uncertainty concerning the ability to secure a binding compact or
approval for non-compacted gaming, no financing commitments for future capital
needs have been obtained as of the date hereof.

         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


                                       20
<PAGE>   24
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.

         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 (See "Business -- Native American
Gaming Competition"). 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 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. The Company's Native American gaming casinos compete
with other forms of gaming, including land-based casinos, other Native American
casinos, riverboat and dockside gaming, bingo and pull-tab games, pari-mutuel
betting on horse racing and dog racing, state-sponsored lotteries and gaming in
bars and truck stops.

         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.

         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.

         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


                                       21
<PAGE>   25
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.

         Native American Gaming Regulation. Gaming on Native American lands is
extensively regulated under federal and state law, Tribal/State Compacts and
Tribal law. The NIGC oversees Class II gaming (essentially bingo and similar
games) and, to a lesser degree, Class III gaming (e.g., slots, casino games and
banking card games). The actual regulation of Class III gaming is determined
pursuant to the terms of Tribal/State Compacts, which govern gaming on Tribal
lands.

         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.


                                       22
<PAGE>   26
         Historically, the Secretary of the Interior, acting through the Bureau
of Indian Affairs (the "BIA"), was charged with the review of management
contracts and collateral agreements, such as promissory notes and security
agreements executed in connection with management contracts. Though IGRA became
law in 1988, the BIA retained approval authority of management contracts and
collateral agreements until February 22, 1993, the effective date of the
regulations regarding the approval of management contracts by the NIGC.

         The NIGC regulations provide detailed requirements as to certain
provisions which must be included in management contracts, including a term not
to exceed five years except, upon the request of a Tribe, a term of seven years
may be allowed by the NIGC Chairman if the Chairman is satisfied that the
capital investment and income projections for the gaming facility require the
additional time. In connection with the Pueblo of Laguna Contract, there can be
no assurance that the NIGC will approve a term of seven (7) years for the
management agreement. Further, the fee received by the manager of a gaming
facility may not exceed 30% of the net revenues except that a fee of 40% of net
revenues may be approved if the NIGC Chairman is satisfied that the capital
investment and income projections for the gaming facility justifies the
additional fee.

         In addition, in order for the management agreements to be approved by
the NIGC, the Company, its directors, persons with management responsibilities
and certain of the Company'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 in order for the management agreement to be approved by the
NIGC. The NIGC regulations also provide that any entity with a financial
interest in a 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 Company must
pay all fees associated with background investigations by the NIGC.

         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.

         The NIGC regulations provide that a management contract must be
disapproved if the NIGC determines that: (1) 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; (ii) has engaged in prior activities which make him unsuitable to be
connected with gaming; (iii) is an elected member of a Tribe that is party to
the management contract; or (iv) 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.

         Several bills have been introduced in Congress which would amend IGRA.
If IGRA is amended, it could change the governmental structure and requirements
within which the Tribe could conduct gaming.

         Each of CGMI's Native American gaming management projects is also
regulated by state and/or Tribal gaming commissions. The Company and CGMI have


                                       23
<PAGE>   27
submitted applications for licenses to manage and finance Native American gaming
operations with the various applicable Tribal and state gaming commissions for
Arizona, Oregon and Washington 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.

         The Second Amended Indenture. The Company is subject to certain
restrictive covenants pursuant to the Amended Indenture. The Company is also
required to repurchase the New Senior Secured Notes under certain conditions.
See "Business--Debt After Reorganization--Description of Second Amended
Indenture."

         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.

         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 New Common Stock, the New Senior Secured Notes or any
warrants or options to purchase shares of New 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 Second Amended
Indenture provides that the New Senior Secured Notes may be redeemed by the
Company at par from holders of Senior Secured Notes if the Company believes such
action is required to prevent impairment of a material gaming license and in
certain other circumstances. 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.

         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.


                                       24
<PAGE>   28
         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.

Employees

         The Company and its subsidiaries had 5 employees at fiscal year ended
June 30, 1999.

ITEM 2. PROPERTIES

         CGMI leases 2,646 square feet of office space in Phoenix, Arizona
pursuant to a lease agreement which expires December 31, 2000.

ITEM 3. LEGAL PROCEEDINGS

         Pursuant to the Plan, all legal proceedings against the parent company
prior to the Effective Date of May 28, 1997 were settled pursuant to the Plan.
As a result there was no material litigation pending against the Company on June
30, 1999. 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.

      1. Muckleshoot Litigation

         On January 30, 1998 the Muckleshoot Tribal Council purported to
terminate the Company's management contract on grounds that the Company's
certification with the Washington State Gambling Commission ("WSGC") had lapsed.
Subsequently, the WSGC had notified the Muckleshoot Tribe that the Company
remained in good standing with the WSGC and would be immediately re-certified
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 and such license was subsequently issued and remains in full force and
effect.


                                       25
<PAGE>   29
         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") and 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 as
follows:

         The parties entered into a Joint Stipulation and requested the U.S.
District Court to enter an order of settlement and dismiss with prejudice the
litigation between the parties. The U.S. District Court subsequently entered the
order of settlement.

         Pursuant to the Joint Stipulation, the Company will receive a total of
Three Million Three Hundred Thousand ($3,300,000) Dollars, with One Million
($1,000,000) Dollars (the "Initial Payment") being paid within three days after
the U.S. District Court entered the order of settlement and Two Million Three
Hundred Thousand ($2,300,000) Dollars being paid in equal monthly installments
over the term of twenty four (24) months, commencing August 1, 1998. Such
payments, when fully received, will constitute mutual fulfillment of the
Exclusive Operating Agreement between the Muckleshoot Tribe and the Company
dated April 24, 1995. The U.S. District Court entered the order of settlement
and the Company received the Initial Payment on July 29, 1998. All monthly
installments to date have been timely received.

Reorganization of the Company

         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, 1999, no
matter was submitted to a vote of security holders, through the solicitation of
proxies or otherwise.

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, 1999, 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

                                       26
<PAGE>   30
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
1995:
<S>                         <C>      <C>
     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 the Amended Indenture and applicable state law.

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



                                       27
<PAGE>   31
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, 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".

<TABLE>
<CAPTION>
IN THOUSANDS, EXCEPT SHARE DATA


---------------------------------------------------------------------------------------------------------------------------
                                                         REORGANIZED                  |
                                                           COMPANY                    |          PREDECESSOR COMPANY
                                              ----------------------------------------|   ---------------------------------
                                                                                      |
Statement of Operations                        Year         Year           May 29,    |
Data (1)(2)                                    Ended        Ended          1997       |
                                               June         June           Through    |  July 1, 1996
                                               30,          30,            June 30,   |  Through
                                               1999         1998           1997(A)    |  May 28, 1997  Years Ended June 30,
                                                                                      |                 -------------------
                                                                                      |                  1996        1995
--------------------------------------------------------------------------------------|------------------------------------
<S>                                         <C>           <C>             <C>         |  <C>         <C>         <C>
Gross Revenues                                 $7,264       $ 8,150           $ 753   |    $ 7,447    $ 7,663     $ 10,637
Operating Expenses                              6,116        12,881           1,921   |      7,238     14,441      111,908
Reorganization Items (Expense)                    --            --             --     |     50,805       (600)        --
Other Income (Expense)                            112        (2,087)           (168)  |     (6,603)     3,660      (15,605)
(Loss)Income Before Extraordinary Items(3)        842        (7,154)         (1,351)  |     44,288     (4,039)    (116,876)
Loss on Early Extinguishment of Debt              --            --              --    |     (1,998)       --          --
Gain From Reorganization Items                    --            --              --    |    103,464        --          --
Net (Loss) Income                                 842        (7,154)         (1,351)  |    145,754     (4,039)    (117,709)
--------------------------------------------------------------------------------------|------------------------------------
Earnings Per Share:(B)                                                                |
Income (Loss) Before Extraordinary Item         $0.43        ($3.82)         ($0.72)  |        N/A        N/A          N/A
Income From Discontinued Operations                --           --             --     |        N/A        N/A          N/A
Gain From Reorganization Items                     --           --             --     |        N/A        N/A          N/A
Net (Loss) Income                               $0.43        ($3.82)         ($0.72)  |        N/A        N/A          N/A
Weighted Average Shares Outstanding(A)(B)   1,939,178     1,872,694       1,866,667   |        N/A        N/A          N/A
                                                                                      |
                                                                                      |
--------------------------------------------------------------------------------------|------------------------------------
</TABLE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
                                                    REORGANIZED              |
                                                      COMPANY                |
                                           ------------------------------    |      PREDECESSOR COMPANY
                                                   AS OF JUNE 30,            |         AS OF JUNE 30,
                                           ------------------------------    |   -------------------------
BALANCE SHEET DATA (1):                      1999      1998         1997     |    1996         1995
-----------------------------------------------------------------------------|----------------------------
<S>                                        <C>       <C>           <C>       |   <C>          <C>
Working Capital (Deficit) (3)               5,942     5,991         6,431    |   (118,020)    (143,893)
Total Assets                               17,229    16,721        25,114    |     60,048       82,977
Long-Term Debt (3)                         18,240    23,100        23,100    |      --          20,293
Total Liabilities                          24,192    24,826        26,065    |    160,308      179,199
Stockholder's Equity (Deficit)             (6,963)   (8,105)         (951)   |   (100,260)     (96,222)
Ratio of Earnings to Fixed Charges             (4)       (4)           (4)   |         (4)          (4)
-----------------------------------------------------------------------------|----------------------------
</TABLE>

(1) As a result of the closure of the River City Joint Venture in 1995 and the
Company's reorganization in 1997, the comparability and informative value of
information reflected in the forgoing selected financial data with respect to
the fiscal years ended June 30, 1997 and 1995 may not be meaningful for the
reader of this Annual Report on Form 10-K for the fiscal year ended June 30,
1999.


                                       28
<PAGE>   32
(2) Includes non-recurring income of $4,196,000 at June 30, 1995 received by the
Company in connection with discontinued operations.

(3) As a result of the closure of the River City Joint Venture in New Orleans in
June 1995, substantial write-downs of assets cost were recorded contributing to
a significant loss from the closure. The working capital deficit at June 30,
1996 and 1995 includes the classification of $124,020,000 and $123,377,000
respectively in Senior Secured Notes as current and $19,000,000 in unsecured
notes as current in 1996.

(4) 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. 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 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, 1999.

         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, 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, 1999 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, 1999, the
Company had a net decrease in cash and cash equivalents of $58,000, of which
$2,495,000 was provided by Company operating activities, and $2,553,000 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

                                       29
<PAGE>   33
$7,264,000, and (ii) interest income of $487,000. Significant operating activity
balances required to reconcile the Company's GAAP accrual net income of $842,000
to net cash flows used in operating activities include (i) depreciation and
amortization of $2,238,000, (ii) Muckleshoot Settlement payments of $2,150,000
(see Footnote [6] to the Consolidated Financial Statements), (iii) a decrease in
Native American management fees and other receivables of $62,000, (iv) a
decrease in interest receivable of $5,000, (v) a decrease in prepaid expenses
and other assets of $17,000, (vi) the write-off of investment in Muckleshoot
management agreement of $815,000, (vii) an increase in related party payable of
$62,000, (viii) an increase of $70,000 for federal income taxes payable, and
(ix) an increase of $110,000 for state income taxes payable.

         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) Muckleshoot settlement of $3,300,000 (see Footnote [6] to
the audited Consolidated Financial Statements), (ii) a decrease in accounts
payable and accrued expenses of $522,000, and (iii) a decrease in accrued
interest payable of $54,000. The decrease in accounts payable and accrued
expenses is primarily attributable to fewer accounts payable outstanding as of
June 30, 1999 due to the payment of legal fees associated with the resolution of
the Muckleshoot legal proceedings, and the payment of accounts payable balances
related to the Narragansett Indian Tribe's attempt to achieve an approved
compact, both of which created a larger accounts payable balance in fiscal 1998.

         Investing Activities: For the year ended June 30, 1999, the Company
used $2,553,000 in net cash flows for investing activities. Cash flows from
investing activities were provided by (i) $2,252,000 in repayment of Native
American loans/advances, (ii) decreased by $3,436,000 for an increase in
restricted funds, and (iii) decreased by $1,369,000 for an increase in deferred
charges relating to the Dancing Eagle Casino project in fiscal 1999.

         Financing Activities: The Company did not have any financing activities
for the fiscal year ended June 30, 1999.

         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. The Company received its final debt
service payment in September 1998 on the Umatilla Tribes Casino loan, and the
Company is scheduled to be paid-in-full on the Tonto Apache Casino loan in April
2000. As of June 30, 1999, the Muckleshoot Casino does not have a loan
receivable balance payable to the Company. In the event conditions arise, for
whatever reasons, that cause a reduction or elimination in such sources of cash,
the Company may not be able to continue operations or service its debt.

         On July 24, 1998 CGMI entered into a management and development
agreement with the Pueblo of Laguna to exclusively develop, construct, operate
and manage a Class III casino to be located at the Casa Blanca exit on
Interstate 40 on the Pueblo's sovereign reservation lands approximately 45 miles
west of Albuquerque, New Mexico ("Dancing Eagle Casino Project"). The proposed
21,000 square foot casino will offer 10 Las Vegas-style table games, 300 slot
machines, a 72-seat full service restaurant, a gift shop and other amenities. As
amended, the management and development agreement provides that the term of such
agreement is five (5) years from the official date of opening of the casino. The
agreement further 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 agreement further provides that the management fees shall
at all times be capped at 34.3% of net revenues as determined in accordance with
generally accepted accounting principles. Construction of the Dancing Eagle
Casino Project is expected to commence by October 1999 and the facility is
anticipated to open in the first quarter of calendar year 2000.

         The Company currently anticipates using a portion of its cash on-hand
to finance certain aspects of the new Dancing Eagle Casino Project. Company
funds utilized for the Laguna Project will be repaid by the Dancing Eagle Casino
Project over an anticipated three year period.

         Capital Requirements. The Company will continue to operate, through
CGMI, the Tonto Apache and Umatilla casinos pursuant to the related management
agreements, installment payments on the Muckleshoot settlement, and management
fees and principal and interest loan repayments from the proposed Dancing Eagle
Casino Project. Absent any new developments, these agreements, along with
debt-service payments on the Tribal Loans with Tonto Apache and cash and cash
equivalents at June 30, 1999 of $4,440,000 and restricted cash of $3,977,000,
will provide the Company with its only sources of cash for the approximately ten
months remaining on the Tonto Apache and Umatilla contracts. The Company
believes that these sources of cash coupled with a new and reduced expense
budget will exceed the ongoing cash requirements for all operating expenses and
general business development costs (including the Rhode Island Project and
Dancing Eagle Casino projects) as well as all interest payments on the New
Senior Secured Notes and principal payments on the New Senior Secured Notes,
with the exception of the final principal payment of $18,480,000 due May 15,
2001. The Company expects to use any excess cash to fund new projects, although
the realization of excess cash is not assured.

                                       30
<PAGE>   34
         In order to complete the funding of the construction or acquisition
costs of new projects, excluding the planned Dancing Eagle Casino anticipated to
open in the first calendar quarter of 2000, and to fund the construction costs
of the Rhode Island Project, if and when a gaming facility is approved in Rhode
Island, it is anticipated that the Company will require significant additional
capital. The Company believes that should any new projects become available or
if the gaming facility is approved for Rhode Island, the Company will have
available funding through the debt and/or equity markets or alternatively though
bank financing, based on the viability of the individual project(s). This belief
is founded on the Company's past success in developing Class III gaming
facilities including obtaining financing of the Dancing Eagle Casino, the
expertise of its management in the gaming industry and its favorable position of
being currently licensed and/or approved by the NIGC and by several state
jurisdictions. However, there can be no assurance that such financing will be
available, or if available, that the terms thereof will be acceptable or
favorable to the Company. Given the high level of uncertainty concerning the
prospects of new development projects and/or the Narragansett Indian Tribe's
ability to secure a binding compact or approval for non-compacted gaming, no
financing commitments have been obtained as of the date of this filing. Further,
the timing of any new capital requirements cannot be reasonably estimated at
this time.

         The Company believes it will require new sources of cash beyond its
existing operations and currently planned expansion plans in order to fund the
final payment of principal of $18,480,000 on its New Senior Secured Notes due
May 15, 2001.


         Description of Second Amended Indenture.

         See Item 1. Business -- "Description of Second Amended Indenture".


         Default Under First Amended Indenture

         See Item 1. Business -- "Default under First Amended Indenture."


         Court Approval of Modification of Plan and Second Amended Indenture

         See Item 1. Business -- "Court Approval of Modification of Plan and
         Second Amended Indenture."



                                       31
<PAGE>   35
RESULTS OF OPERATIONS

Overview

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

         In September 1999 management of the Company streamlined and reorganized
and began implementation of a business strategy designed to achieve the
following goals: (i) increase revenues at the Company's managed casinos, (ii)
finance and develop the Dancing Eagle Casino project, (iii) build cash for use
in debt service and for future projects, (iv) further develop the Rhode Island
Project, (v) seek and obtain new project opportunities, (vi) decrease operating
expenses instituted by prior management and (viii) 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 section "Fiscal 1999 compared to
Fiscal 1998" below.

         On the Petition Date, the Company, apart from its subsidiaries, filed a
voluntary petition for relief and a Plan of Reorganization under Chapter 11 of
the Bankruptcy Code. As contemplated by the Plan of Reorganization, on the
Effective Date, the Company emerged from Chapter 11 and consummated the Plan of
Reorganization.

         On the Effective Date, upon emergence from bankruptcy, the Company
adopted fresh-start reporting as required by American Institute of Certified
Public Accountants ("AICPA") Statement of Position 90-7. Under fresh-start
reporting, all assets and liabilities were restated to reflect their
reorganization value which represents the fair value of the entities under
Reorganization. As a result of adopting fresh-start reporting, the consolidated
financial statements of the Reorganized Company are not comparable with those of
the Predecessor Company prepared before the Effective Date.

         As a consequence of the implementation of its business plan, including
the resultant consolidation of operations, the Company effected a change in the
method used to distribute operating expenses among the Company and its
subsidiaries. Effective in June 1997, all staffing costs (with the exception of
officers of the Company), selling, and most general and administrative expenses
of the Company are charged to CGMI as the primary operating entity of the
Company. The Company's officers payroll expenses and public company general and
administrative expenses are charged to the Company. CDGC continues to be charged
with the expenses relating to the development of the Rhode Island project.
Accordingly, the results of operations for each of the entities of the
reorganized Company are not necessarily comparable to that of the predecessor
Company. As such, the following discussion of the results of operations for
fiscal 1999 as compared to fiscal 1998, and fiscal 1998 as compared to fiscal
1997 is presented on a consolidated basis only.


                                       32
<PAGE>   36
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>

         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.

                                       33

<PAGE>   37
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 [8] to the
Company's audited consolidated financial statements contained herein).

                                       34
<PAGE>   38
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 [6] 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.

         Year 2000 Computer Software Compliance

         The Company relies on computer hardware, software and related
technology in the course of its operations, and such technology is utilized by
the Company and its managed casinos for their delivery of products and services.
The Company has preliminarily reviewed its computer systems as well as those of
its managed casino operations for compliance with the potential hazards of the
year 2000 computer conversion. Based on this preliminary review, it appears the
Company and its managed casino operations will be in compliance with year 2000
protocol prior to the end of the millennium, and that modifications, software or
computer hardware upgrades, or any other procedures required to comply with year
2000 protocol, should primarily be handled by the software and computer system
vendors and/or manufacturers, and that expected costs to the Company are
currently expected to be immaterial.

                                       35




<PAGE>   39
FISCAL 1998 COMPARED TO FISCAL 1997

         As a consequence of the Company's fresh-start accounting, reporting for
the fiscal year ended June 30, 1997, is accomplished by combining the results of
operations for the Reorganized Company (May 29, 1997 through June 30, 1997) and
the Predecessor Company (July 1, 1996 through May 28, 1997).



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

<TABLE>
<CAPTION>
                                                                                |      REORGANIZED            PREDECESSOR
                                                                                |         COMPANY               COMPANY
                                                 FISCAL           FISCAL        |      MAY 29, 1997 -         JULY 1, 1996-
                                                  1998           1997 (1)       |     JUNE 30, 1997           MAY 28, 1997
<S>                                           <C>                <C>                   <C>                   <C>
REVENUES:                                                                       |
     Management Fees                          $ 8,150,000        $8,200,000     |      $  753,000            $ 7,447,000
                                              -----------       -----------     |      ----------            -----------
                                                                                |
COSTS & EXPENSES                                                                |
     Salaries, Wages & Related                  3,284,000         2,006,000     |         188,000              1,818,000
     Native American Develop Costs              2,317,000         2,442,000     |         532,000              1,910,000
     Professional Fees                          1,380,000         1,856,000     |         469,000              1,387,000
     General & Administrative                   1,447,000         1,858,000     |         470,000              1,388,000
     Depreciation & Amortization                3,153,000           997,000     |         262,000                735,000
     Write-Down of Excess Reorganization                                        |
      Value                                     1,300,000                --     |              --                     --
                                               ----------        ----------     |      ----------             ----------
TOTAL COSTS & EXPENSES                         12,881,000         9,159,000     |       1,921,000              7,238,000
                                               ----------        ----------     |      ----------             ----------
                                                                                |
(LOSS) INCOME FROM OPERATIONS                  (4,731,000)         (959,000)    |      (1,168,000)               209,000
                                                                                |
                                                                                |
REORGANIZATION ITEMS (EXPENSE)                         --        50,805,000     |            --               50,805,000
                                                                                |
OTHER INCOME (EXPENSE)                                                          |
       Interest Income                            798,000           958,000     |          83,000                875,000
       Interest Expense                        (2,885,000)       (8,093,000)    |        (251,000)            (7,842,000)
       Gain on Disposal of River                                                |
         Boat Gaming Facility                          --           364,000     |              --                364,000
                                               ----------        ----------     |      ----------             ----------
(LOSS) INCOME BEFORE INCOME TAX                (6,818,000)       43,075,000     |      (1,336,000)            44,411,000
                                               ----------        ----------     |      ----------             ----------
PROVISION FOR INCOME TAX                         (336,000)         (138,000)    |         (15,000)              (123,000)
                                               ----------        ----------     |      ----------             ----------
(LOSS) INCOME BEFORE                                                            |
       EXTRAORDINARY ITEMS                     (7,154,000)       42,937,000     |      (1,351,000)            44,288,000
                                               ----------        ----------     |      ----------             ----------
EXTRAORDINARY ITEMS:                                                            |
       Loss on Early Extinguishment                                             |
         of debt                                     --          (1,998,000)    |          --                 (1,998,000)
                                                                                |
       Gain from Reorganization                      --         103,464,000     |          --                103,464,000
                                               ----------       -----------     |      ----------            -----------
NET (LOSS) INCOME                             $(7,154,000)     $144,403,000     |     $(1,351,000)          $145,754,000
                                               ==========       ===========     |      ==========            ===========
</TABLE>

(1) Reorganized Company and Predecessor Company combined.


Revenues

         Revenues for the years ended June 30, 1998 and 1997 are summarized as
follows:


<TABLE>
<CAPTION>
                                        FISCAL YEAR         FISCAL YEAR
                                           ENDED               ENDED
FACILITY                                 06/30/98            06/30/97            VARIANCE $         VARIANCE %
                                         --------            --------            ----------         ----------
<S>                                     <C>                <C>                  <C>                  <C>
   Tonto Apache Management Fees         $2,276,000         $2,055,000           $  221,000             10.8%
   Umatilla Management Fees              4,754,000          3,866,000              888,000             23.0%
   Muckleshoot Management Fees           1,120,000          2,268,000           (1,148,000)           (50.6)%
   Other                                         0             11,000              (11,000)          (100.0)%
                                       -----------         ----------           ----------           ------

   Total Revenues                       $8,150,000         $8,200,000           $  (50,000)              0.6%
                                       -----------         ----------           ----------           ------
</TABLE>


                                       36
<PAGE>   40
         Total revenues for fiscal year 1998 were $8.15 million, a $50,000
decrease from fiscal 1997's total revenues of $8.2 million. This decrease in
revenues is primarily attributable to the decrease in revenues at the
Muckleshoot Casino due to the Muckleshoot Contract dispute which commenced in
December 1997 and which was settled in July 1998, as further described in Item
3. Legal Proceedings. The revenue increases at the Tonto Apache and Umatilla
Casinos is due to better slot management, increased marketing and promotional
events, and greater traffic flows.

Costs and Expenses

         Salaries and wages increased approximately $1.28 million, or 63.7% in
fiscal 1998 as compared to fiscal 1997. This increase is primarily attributable
to (i) salary increases for officers and staff, (ii) certain one time payments
for retiring employees paid during fiscal 1998, (iii) new officer and staff
appointments made in fiscal 1998, and (iv) changes to the Company's benefit
programs.

        Native American Development costs decreased $125,000, or 5.1% from $2.44
million in fiscal 1997 to $2.32 million in fiscal 1998. The preponderance of
Native American development costs were for the benefit of the Rhode Island
Project Indian Tribe in Rhode Island in their furtherance of obtaining an
approved gaming Compact as described in footnote [7] of the Company's
consolidated financial statements contained herein. The nominal decrease in
expenditures is due to decreased legal expenditures associated with the Rhode
Island Project Indian Tribe's attempt to further their position toward an
approved Compact.

         Professional fees decreased $476,000, or 25.6% in fiscal 1998,
decreasing from approximately $1.86 million in fiscal 1997 to $1.38 million in
fiscal 1997. The decrease in legal expenses is primarily attributable to reduced
legal activity of the Company following the Company's emergence from Chapter 11
Bankruptcy and consummation of its Plan of Reorganization.

         General and Administrative expenses decreased approximately $400,000,
from approximately $1.86 million in fiscal 1997 to $1.45 million in fiscal 1998.
This 22.1% decrease is due to reduced expenses associated with the streamlining
of the Company's operations after the consummation of the Plan of
Reorganization, including the consolidation of all office functions to Phoenix,
Arizona, as well as the Company's overall efforts to control expenses.

         Depreciation and amortization increased approximately $2.2 million in
fiscal 1998, a 216% increase from the $997,000 balance in fiscal 1997. The
increase in depreciation and amortization expenses is primarily due to
amortization of excess reorganization costs capitalized at the time of
consummation of the Company's Plan Reorganization on May 27, 1997. A total of
approximately $9.8 million in excess reorganization value was originally
capitalized, and is being amortized over a 48 month period ending in May 2001.

         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 assets'
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 [8] to the Company's consolidated financial statements contained
herein).

Reorganization Items

         Reorganization adjustments included in Reorganization Items for the
year ended June 30, 1997 were comprised of:

<TABLE>
<S>                                                <C>
         Legal Professional Fees                   $(1,716,000)
         Interest Income                                30,000
         Write-off of Goodwill                        (405,000)
         Excess Reorganization Value                 9,265,000
         Adjustments to Capital Stock               37,217,000
         Adjustment to Paid in Capital               7,877,000
         Reorganization Fees                        (1,463,000)
                                                   -----------
               Total                               $50,805,000
                                                   ===========
</TABLE>

         Reorganization fees paid to management included in Reorganization Items
amounted to $1,463,000 for the year ended June 30, 1997. According to the Plan
of Reorganization, this was comprised of (i) $900,000 from the discontinuance
and sale of the riverboat operation in New Orleans, (ii) $550,000 in New Senior
Secured Notes, and (iii) $13,000 in New Common Stock grants.

                                       37
<PAGE>   41
Other Income and Expense Items

         Interest income declined $160,000 in fiscal 1998, or 16.7% from the
$958,000 balance earned in fiscal 1997. The decreased in interest income is
primarily attributable to less interest income being earned on the Native
American loans receivable, as the principal balances on these loans is amortized
down.

         Interest expense for the fiscal year ended June 30, 1998 is composed of
the following: (i) interest expense on the New Senior Secured Notes Due May 15,
2001 of $2,767,000, and (ii) Interest expense payable for professional services
associated with the Naragansett Casino development of $118,000.

         Interest expense for the fiscal year ended June 30, 1997 is composed of
the following: (i) Old Senior Secured Notes - $5,929,000, (ii) New Senior
Secured Notes - $251,000, (iii) amortization of original issue discount and
deferred finance charges - $813,000, (iv) Republic Note Payable - $1,050,000
and, (v) CGMI equipment notes - $50,000.

         The gain on the disposal of the riverboat gaming facility of $364,000
represents a gain recorded by the Company in the period ended May 28, 1997 for
an adjustment to the carrying value of liabilities related to the sale of CCCD
(see footnote [1] to the consolidated financial statements contained herein).

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, 1998 of approximately $35,214,000 for federal income tax
reporting 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
reporting 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.

         Income taxes for each of fiscal years 1998 and 1997 are for state
income taxes liabilities incurred in the various state jurisdictions in which
the Company operates. The increase in state income taxes of approximately
$200,000 or 144% in fiscal 1998, from $138,000 in fiscal 1997, is primarily due
to greater net income of GGMI.

Extraordinary Items

         The loss on early extinguishment of debt of $1,998,000 for the year
ended June 30, 1997, represents the accelerated write-off of original issue
discounts and deferred finance charges on the Old Senior Secured Notes due to
the closure and sale of the Company's riverboat operations.

         The gain from reorganization items of $103,464,000 for the year ended
June 30, 1997 is composed of the following:


<TABLE>

<S>                                                             <C>
    Write-off Deferred Finance Costs and Original
      Issue Discounts                                            $  (4,311,000)
    Record New Notes in exchange for old debt                      (23,100,000)
    Record New Notes issued to management included in
      Reorganization Items                                             550,000
    Reduce Liabilities Subject to Compromise to zero               130,325,000
                                                                  ------------
    Total                                                         $103,464,000
                                                                  ============
</TABLE>


                                       38
<PAGE>   42


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, 1999 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.

                                       39


<PAGE>   43
                                    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           51     Chairman                                                 Class A

         Michael W. Barozzi          51     President and Chief Operating Officer and Director       Common

         Col. Clinton L. Pagano      71     Director                                                 Common
         (Retired)

         William S. Papazian         37     Executive Vice President and General Counsel,
                                            Corporate Secretary 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
29 years and he has, in addition to the above, worked in Las Vegas, Nevada and
in Monte Carlo, Monaco. Mr. Barozzi is regarded as a foremost expert on 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.

         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 and General Counsel 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


                                       40

<PAGE>   44
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 all aspects of gaming and regulatory law, and is a recognized
expert in Native American gaming.

         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. For information regarding the procedures for the
election of directors contained in the Second Amended Indenture and Second
Amended Certificate, see Item 1. Business -- "Court Approval of Modification of
Plan and Second Amended Indenture."

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, 1999.


                                       41
<PAGE>   45
ITEM 11. EXECUTIVE COMPENSATION

         The following table sets forth compensation to, earned by, or paid to
the Company's Chief Executive Officer, and all executive officers 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>
Edward M.     06/30/99     345,833               0              0              0                0         0            5,319(13)
Tracy(1)      06/30/98     585,417               0        131,667(10/5)        0                0         0          323,707(13/16)
Chairman and  06/30/97     495,000         333,333        272,667(6)           0                0         0          216,250(10/12)
Chief
Executive
Officer
------------------------------------------------------------------------------------------------------------------------------------
Michael       06/30/99     291,667(17)           0            0(18)        100,000              0         0          10,320(13)
Barozzi(2)    06/30/98     200,000(2)            0        $91,667(10/15)         0              0         0           1,152(13)
President     06/30/97
and Chief
Operating
Officer
------------------------------------------------------------------------------------------------------------------------------------
William S.    06/30/99     291,667(17)           0              0(18)      100,000              0         0            8,825(13)
Papazian(3)   06/30/98     304,167               0         41,661(10/15)         0              0         0          169,481(11/13)
Executive     06/30/97     210,000         166,667        127,333(6)             0              0         0           16,667(10/13)
Vice
President,
General
Counsel,
Secretary
and
Director
------------------------------------------------------------------------------------------------------------------------------------
Clinton L.    06/30/99      87,500               0              0              0                0         0           10,877(14)
Pagano(4)     06/30/98     129,167               0         37,500(10/15)       0                0         0           12,540(14)
Executive     06/30/97     100,000               0              0              0                0         0           14,268(14)
Vice
President
and
Director
------------------------------------------------------------------------------------------------------------------------------------
Bradley A.    06/30/99      70,833               0              0              0                0         0                0
Denton(5)     06/30/98      32,513               0              0              0                0         0                0
Vice          06/30/97
President
and Chief
Financial
Officer
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  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.

(2)  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. 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.

(3)  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 a member of the
     Board of Directors on March 19, 1997 and Executive Vice President and
     General Counsel on August 24, 1998.


                                       42
<PAGE>   46
(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.

(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)  Payments made by the Company to cover income taxes.

(7)  The total value recorded by the Company for the initial installments of the
     stock grants was $13,000. In January 1999 Mr. Barozzi and Mr. Papazian were
     each awarded 100,000 shares of common stock, 66,667 shares of which to each
     of Mr. Barozzi and Mr. Papazian respectively, were immediately vested. Mr.
     Barozzi and Mr. Papazian each vested in the remaining 33,333 shares of
     common stock, respectively, in May 1999.

(8)  Pursuant to the Stock Option Plan, ten percent (10%) of the Company's
     issued and outstanding stock has been reserved for issuance to management
     as incentive stock options. The Board of Directors has not, as yet, issued
     any such options.

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


(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) On July 18, 1996, $175,000 was paid to Mr. Tracy in lieu of the Company's
     unfulfilled commitment to purchase Director's and Officer's Liability
     insurance.

(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 employment agreement.

(16) 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 entitled 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.

(17) 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.

(18) On January 8, 1999, the Company placed $125,000 in principal amount of
     Senior Secured Notes ("Incentive Notes") in the name of employee to be held
     in escrow and not vested as to principal until May 15, 2000. If employee
     voluntarily resigns or is terminated for cause prior to May 15, 2000, the
     Incentive Notes will not vest and will be deemed forfeited. All regular
     interest payments (May 15 and November 15) on the Incentive Notes are
     deemed earned by employee when paid.



                                    43

<PAGE>   47
Option/SAR Grants in the Fiscal Year Ended June 30, 1999

         In the fiscal year ended June 30, 1999, no stock options or SARs were
granted to any of the Company's executive officers named in the Summary
Compensation Table.

Aggregated Option/SAR Exercises in Fiscal Year Ended June 30, 1999, and
June 30, 1999 Option/SAR Values

         In the fiscal year ended June 30, 1999 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, 1998 by
any of such named executive officers. All of the Company's issued and
outstanding stock options were cancelled in connection with the Plan of
Reorganization and there were no stock options issued and outstanding as of June
30, 1999.

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. Information
pertaining to the Stock Option Plan is provided herein under
"Business--Reorganization--Stock Option Plan".

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 receives 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. Director's 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.

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 and General Counsel, 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) dimunition 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.

                                       44
<PAGE>   48
Repricing of Stock Options

         There have been no repricing of stock options in the fiscal year ended
June 30, 1999. All of the Company's issued and outstanding stock options were
cancelled in connection with the Plan of Reorganization and there were no stock
options issued and outstanding as of June 30, 1999.


Compensation Committee Interlocks and Insider Participation in Compensation
Decisions

         As of June 30, 1999 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.


                                       45
<PAGE>   49
         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.


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, 1999, management of the Company spent
significant time and energies implementing the Company's business strategy
including developing and financing the Company's Dancing Eagle Casino project in
New Mexico, maintaining existing Tribal contracts following a reorganization of
management, negotiating and implementing the Company's Second Amended Indenture,
and streamlining operations and costs significantly such that the Company has
experienced its first year of profitable operations. The Executive Compensation
Committee of the Board of Directors did not issue any reports in fiscal 1999.
Accordingly, 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. Other than the Stock Option Plan, the Company currently maintains no
formal executive compensation program. No options have been issued pursuant to
the Stock Option Plan.


                                       46

<PAGE>   50
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 and June 30, 1999 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, 1999: (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, 1999 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 Plan of Reorganization, the
Company issued 1,999,745 shares of New Common Stock.


                                       47

<PAGE>   51
<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., 2701 East Camelback
    Road, Suite 484, 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, 1999.


                                       48
<PAGE>   52
                                    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>   53
         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)


                                       50
<PAGE>   54
         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)

         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>   55
         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 Ladenburg, 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>   56
         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>   57
         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


                                       54

<PAGE>   58
         11.0     Schedule of Computation of Earnings Per Share #

         12.0     Computation of Ratio of Earnings to Fixed Charges #

         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>   59
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.

         (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.


                                       56
<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: September 28, 1999          By: /s/ Michael W. Barozzi
                                       -----------------------------------------
                                       Michael W. Barozzi, President and Chief
                                       Operating Officer
                                       (Authorized Representative)

Dated: September 28, 1999          By: /s/ William S. Papazian
                                       -----------------------------------------
                                       William S. Papazian, Executive Vice
                                       President and General Counsel and
                                       Secretary
                                       (Authorized Representative)

Dated: September 28, 1999          By: /s/ Robin K. McEntire
                                       -----------------------------------------
                                       Robin K. McEntire, Corporate Controller
                                       (Principal Accounting Officer)



                                       57

<PAGE>   61
                       CAPITAL GAMING INTERNATIONAL, INC.
                                AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS

                                  JUNE 30, 1999




        CONTENTS

                                                                           Page

Independent auditor's report                                               F-2

Independent auditor's report                                               F-3

Financial statements:

    Consolidated balance sheets                                            F-4

    Consolidated statements of operations                                  F-5

    Consolidated statements of changes in stockholders' deficit            F-7

    Consolidated statements of cash flows                                  F-8

    Consolidated notes to financial statements                             F-11


                                       F-1

<PAGE>   62
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.




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




                                       F-2
<PAGE>   63
                          INDEPENDENT AUDITOR'S REPORT

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


              We have audited the accompanying consolidated balance sheet of
Capital Gaming International, Inc. and its subsidiaries as of June 30, 1998,
and the related consolidated statements of operations, changes in stockholders'
equity [deficit], and cash flows for the fiscal year ended June 30, 1998, the
period May 29, 1997 to June 30, 1997, and the period July 1, 1996 to May 28,
1997. 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 audits.

              We conducted our audits 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
audits provide a reasonable basis for our opinion.

              In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Capital Gaming International, Inc. and its subsidiaries as of June
30, 1998, and the consolidated results of their operations and their cash flows
for the fiscal year ended June 30, 1998, the period May 29, 1997 to June 30,
1997, and the period July 1, 1996 to May 28, 1997, in conformity with generally
accepted accounting principles.

              As more fully described in Note 2 to the consolidated financial
statements, effective May 29, 1997, the Company emerged from bankruptcy. In
accordance with an American Institute of Certified Public Accountants'
Statement of Position, the Company has adopted "fresh start" reporting whereby
its assets, liabilities and new capital structure have been adjusted to reflect
estimated fair values as of May 28, 1997. As a result, the consolidated
financial statements for the period subsequent to May 28, 1997, reflect this
basis of reporting and are not comparable to the Company's pre-reorganization
consolidated financial statements.



                                                   MOORE STEPHENS, P.C.
                                                   Certified Public Accountants

Cranford, New Jersey
August 7, 1998

                                      F-3
<PAGE>   64
                       CAPITAL GAMING INTERNATIONAL, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                             JUNE 30, 1999 AND 1998

                           (ROUNDED TO NEAREST 000'S)

                                     ASSETS
<TABLE>
<CAPTION>
                                                                             1999                1998
                                                                         ------------        ------------
Current assets:
<S>                                                                      <C>                 <C>
    Cash and cash equivalents                                            $  4,440,000        $  4,498,000
    Restricted funds (Note 4)                                               3,977,000                  --
    Interest receivable                                                        24,000              29,000
    Native American management fees and expenses
       receivable (Note 20)                                                   647,000             709,000
    Current portion of Native American loans receivable
       (Notes 10 and 20)                                                    1,441,000           2,249,000
    Muckleshoot settlement receivable (Note 6)                              1,150,000                  --
    Prepaid expenses and other current assets                                 215,000             232,000
                                                                         ------------        ------------
       Total current assets                                                11,894,000           7,717,000
                                                                         ------------        ------------

Furniture, fixtures and equipment (Note 11)                                    14,000              23,000
Excess reorganization value, net (Notes 2 and 8)                            3,790,000           5,767,000
Other assets:
    Restricted funds (Note 4)                                                      --             541,000
    Native American loans receivable (Note 10)                                     --           1,444,000
    Investment in Native American management agreements,
       net (Note 12)                                                          162,000           1,229,000
    Deferred charges (Note 14)                                              1,369,000                  --
                                                                         ------------        ------------
       Total other assets                                                   1,531,000           3,214,000
                                                                         ------------        ------------

                                                                         $ 17,229,000        $ 16,721,000
                                                                         ============        ============

                                       LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
    Current portion of 12% senior secured notes payable (Note 15)        $  4,560,000        $         --
    Accounts payable and accrued expenses                                     711,000           1,233,000
    Accrued interest                                                          292,000             346,000
    Federal income taxes payable                                               70,000                  --
    State income taxes payable                                                257,000             147,000
    Due to related party (Note 18)                                             62,000                  --
                                                                         ------------        ------------
       Total current liabilities                                            5,952,000           1,726,000

Long-term debt:
    12% senior secured notes payable less current portion (Note 15)        18,240,000          23,100,000
                                                                         ------------        ------------
       Total liabilities                                                   24,192,000          24,826,000
                                                                         ------------        ------------

Commitments (Note 18)

Stockholders' deficit:
    Common stock, no par value, authorized 5,000,000
       shares; issued and outstanding 1,999,745 shares and
       1,933,333 shares at June 30, 1999 and 1998, respectively
       (Notes 2 and 16)                                                       400,000             400,000
    Additional paid-in capital (Note 15)                                      300,000                  --
    Accumulated deficit (since May 29, 1997, date of
       reorganization)                                                     (7,663,000)         (8,505,000)
                                                                         ------------        ------------

       Total stockholders' deficit                                         (6,963,000)         (8,105,000)
                                                                         ------------        ------------

                                                                         $ 17,229,000        $ 16,721,000
                                                                         ============        ============
</TABLE>








                          The Accompanying Notes are an
                   Integral Part of these Financial Statements



                                       F-4
<PAGE>   65
                       CAPITAL GAMING INTERNATIONAL, INC.
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                    YEARS ENDED JUNE 30, 1999, 1998 AND 1997

    (ROUNDED TO NEAREST 000'S EXCEPT FOR NUMBER OF SHARES AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                                       |    Predecessor
                                                           Reorganized Company                         |      Company
                                                -----------------------------------------------------  |   -------------
                                                                                        May 29, 1997   |   July 1, 1996
                                                  Year ended         Year ended            through     |      through
                                                June 30, 1999       June 30, 1998       June 30, 1997  |    May 28, 1997
                                                -------------       -------------       -------------  |   -------------
<S>                                             <C>                 <C>                 <C>            |   <C>
Revenues:                                                                                              |
   Native American casino management                                                                   |
        fees (Note 5)                           $  7,264,000        $  8,150,000           $ 753,000   |   $  7,447,000
                                                                                                       |
Costs and expenses:                                                                                    |
   Salaries and related costs                      1,588,000           3,284,000             188,000   |      1,818,000
   Native American gaming development                                                                  |
     costs                                           566,000           2,317,000             532,000   |       1,910,000
   Professional fees                               1,274,000           1,380,000             469,000   |       1,387,000
   General and administrative                        450,000           1,447,000             470,000   |       1,388,000
   Depreciation and amortization                   2,238,000           3,153,000             262,000   |         735,000
   Write-down of excess reorganization                                                                 |
     value (Note 8)                                       --           1,300,000                  --   |              --
                                                ------------        ------------        ------------   |    ------------
       Total costs and expenses                    6,116,000          12,881,000           1,921,000   |       7,238,000
                                                ------------        ------------        ------------   |    ------------
                                                                                                       |
Income (loss) from operations                      1,148,000          (4,731,000)         (1,168,000)  |         209,000
                                                ------------        ------------        ------------   |    ------------
                                                                                                       |
Reorganization items:                                                                                  |
   Reorganization adjustments (Note 2)                    --                  --                  --   |      52,268,000
   Reorganization fees paid to management                                                              |
     (Note 2)                                             --                  --                  --   |      (1,463,000)
                                                ------------        ------------        ------------   |    ------------
       Total reorganization items                         --                  --                  --   |      50,805,000
                                                ------------        ------------        ------------   |    ------------
                                                                                                       |
Other income (expense):                                                                                |
   Muckleshoot settlement, net (Note 6)            2,285,000                  --                  --   |              --
   Interest income                                   487,000             798,000              83,000   |         875,000
   Gain on disposal of riverboat gaming                                                                |
     assets (Note 1)                                      --                  --                  --   |         364,000
   Other income                                       40,000                  --                  --   |              --
   Interest expense                               (2,700,000)         (2,885,000)           (251,000)  |      (7,842,000)
                                                ------------        ------------        ------------   |    ------------
                                                     112,000          (2,087,000)           (168,000)  |      (6,603,000)
                                                ------------        ------------        ------------   |    ------------
                                                                                                       |
Income (loss) before income taxes                  1,260,000          (6,818,000)         (1,336,000)  |      44,411,000
                                                                                                       |
Income taxes (Note 9)                                418,000             336,000              15,000   |         123,000
                                                ------------        ------------        ------------   |    ------------
                                                                                                       |
Income (loss) before extraordinary items             842,000          (7,154,000)         (1,351,000)  |      44,288,000
</TABLE>


                          The Accompanying Notes are an
                   Integral Part of these Financial Statements



                                       F-5
<PAGE>   66
                       CAPITAL GAMING INTERNATIONAL, INC.
                                AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF OPERATIONS, CONTINUED

                    YEARS ENDED JUNE 30, 1999, 1998 AND 1997

    (ROUNDED TO NEAREST 000'S EXCEPT FOR NUMBER OF SHARES AND PER SHARE DATA)


<TABLE>
<CAPTION>
                                                                                                          |     Predecessor
                                                                 Reorganized Company                      |      Company
                                                    ----------------------------------------------------- |   --------------
                                                                                          May 29, 1997    |    July 1, 1996
                                                     Year ended          Year ended          through      |      through
                                                    June 30, 1999       June 30, 1998      June 30, 1997  |    May 28, 1997
                                                    -------------       -------------      -------------  |    ------------
<S>                                                 <C>                 <C>                <C>            |    <C>
Extraordinary item - loss on early                                                                        |
   extinguishment of debt (Note 23)                           --                 --                   --  |      (1,998,000)
Extraordinary item - gain from reorganization                                                             |
   items (Note 23)                                            --                 --                   --  |     103,464,000
                                                       ---------        -----------        -------------  |    ------------
                                                                                                          |
Net income (loss)                                      $ 842,000        $(7,154,000)       $  (1,351,000) |    $145,754,000
                                                       =========        ===========        =============  |    ============
                                                                                                          |
Basic income (loss) per share (a)                      $     .43        $     (3.82)         $     (0.72) |    $        N/A
                                                       =========        ===========        =============  |    ============
                                                                                                          |
Weighted average common and                                                                               |
   equivalent shares outstanding                       1,939,178          1,872,694            1,866,667  |             N/A
                                                       =========        ===========        =============  |    ============
</TABLE>

         Due to the reorganization and implementation of fresh start reporting,
         financial statements for the Reorganized Company (period starting May
         29, 1997) are not comparable to those of the Predecessor Company. See
         Notes to the Financial Statements for additional information.

(a)      The weighted average number of common shares outstanding and basic
         income per common share for the Predecessor Company (period through May
         28, 1997 (the Effective Date)) have not been presented because, due to
         the Company's reorganization and implementation of fresh start
         reporting, they are not comparable to subsequent periods and are
         irrelevant.


                          The Accompanying Notes are an
                   Integral Part of these Financial Statements



                                       F-6
<PAGE>   67
                       CAPITAL GAMING INTERNATIONAL, INC.
                                AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

                    YEARS ENDED JUNE 30, 1999, 1998 AND 1997

             (ROUNDED TO NEAREST 000'S EXCEPT FOR NUMBER OF SHARES)

<TABLE>
<CAPTION>
                                                        Common stock                     Additional
                                                  -------------------------               paid-in           Accumulated
                                                  Shares             Amount               capital             deficit
                                                  ------             ------               -------             -------
<S>                                         <C>               <C>                  <C>                  <C>
Balance, June 30, 1996                          19,329,574        $  37,617,000        $   7,877,000        $(145,754,000)

Cancellation of Predecessor Company
   common stock and elimination of
   deficit (pursuant to fresh start
   reporting) (Note 2)                         (19,329,574)         (37,617,000)          (7,877,000)         145,754,000
                                             -------------        -------------        -------------        -------------

Balance, May 28, 1997                                   --                   --                   --                   --

Issuance of new common stock (pursuant
   to fresh start reporting) (Note 2)            1,800,000              387,000                   --                   --

Stock grants to officers and directors
   (Note 2)                                         66,667               13,000                   --                   --

Net loss from May 29, 1997 through
   June 30, 1997                                        --                   --                   --           (1,351,000)
                                             -------------        -------------        -------------        -------------

Balance, June 30, 1997                           1,866,667              400,000                   --           (1,351,000)

Stock grants to officers and directors
   (Note 2)                                         66,666                   --                   --                   --

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

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

Treasury bonds (Note 15)                                --                   --              300,000                   --

Stock grants to officers and directors
   (Note 2)                                         66,412                   --                   --                   --

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

Balance, June 30, 1999                           1,999,745        $     400,000        $     300,000        $  (7,663,000)
                                             =============        =============        =============        =============
</TABLE>



                          The Accompanying Notes are an
                   Integral Part of these Financial Statements



                                       F-7
<PAGE>   68
                       CAPITAL GAMING INTERNATIONAL, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                    YEARS ENDED JUNE 30, 1999, 1998 AND 1997

                           (ROUNDED TO NEAREST 000'S)

<TABLE>
<CAPTION>
                                                                                                                |    Predecessor
                                                                       Reorganized Company                      |      Company
                                                      --------------------------------------------------------- |   --------------
                                                                                                 May 29, 1997   |    July 1, 1996
                                                       Year ended           Year ended              through     |      through
                                                      June 30, 1999        June 30, 1998         June 30, 1997  |    May 28, 1997
                                                      -------------        -------------         -------------  |    ------------
<S>                                                   <C>                  <C>                  <C>             |    <C>
Cash flows from operating activities:                                                                           |
   Net income (loss)                                  $     842,000        $  (7,154,000)       $  (1,351,000)  |    $ 145,754,000
   Adjustments to reconcile net income                                                                          |
     (loss) to net cash provided by                                                                             |
     (used in) operating activities:                                                                            |
       Depreciation and amortization                      2,238,000            3,153,000              262,000   |          735,000
       Muckleshoot settlement, gross                     (3,300,000)                  --                   --   |               --
       Payments on Muckleshoot settlement                 2,150,000                   --                   --   |               --
       Write-off of investment in Muckleshoot                                                                   |
         management agreement                               815,000                   --                   --   |               --
       Increase in related party payable                     62,000                   --                   --   |               --
       Loss on early extinguishment of debt                      --                   --                   --   |        1,998,000
       Extraordinary gain from reorganization                    --                   --                   --   |     (103,464,000)
       Reorganization adjustments                                --             (426,000)                  --   |      (53,954,000)
       Reorganization fees paid to management                    --                   --                   --   |          550,000
       Amortization of deferred financing costs                  --                   --                   --   |          552,000
       Amortization of original issue discount                   --                   --                   --   |          261,000
       Abandonment of capital asset                              --                   --               75,000   |               --
       Write-down of excess reorganization                                                                      |
         value                                                   --            1,300,000                   --   |               --
       Gain on sale of riverboat gaming                                                                         |
         operations                                              --                   --                   --   |         (364,000)
       Decrease in interest receivable                        5,000               43,000                6,000   |          539,000
       Decrease (increase) in Native American                                                                   |
         management fees and expenses                                                                           |
         receivable                                          62,000               62,000               42,000   |         (146,000)
       Decrease (increase) in prepaid expenses                                                                  |
         and other current assets                            17,000              185,000              200,000   |         (512,000)
       Decrease in notes receivable, other                       --              100,000                   --   |               --
       Decrease (increase) in officer loans                      --              250,000                   --   |         (250,000)
       (Decrease) increase in accounts payable                                                                  |
         and accrued expenses                              (522,000)          (1,481,000)             858,000   |          821,000
       (Decrease) increase in accrued interest              (54,000)              95,000              251,000   |        6,979,000
       Increase in federal income taxes payable              70,000                   --                   --   |               --
       Increase in state income taxes                                                                           |
          payable                                           110,000              147,000                   --   |               --
                                                      -------------        -------------        -------------   |    -------------
                                                          1,653,000            3,428,000            1,694,000   |     (146,255,000)
                                                      -------------        -------------        -------------   |    -------------
         Net cash provided by (used in)                                                                         |
           operating activities                           2,495,000           (3,726,000)             343,000   |         (501,000)
                                                      -------------        -------------        -------------   |    -------------
</TABLE>


                          The Accompanying Notes are an
                   Integral Part of these Financial Statements



                                       F-8
<PAGE>   69
                       CAPITAL GAMING INTERNATIONAL, INC.
                                AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED

                    YEARS ENDED JUNE 30, 1999, 1998 AND 1997

                           (ROUNDED TO NEAREST 000'S)
<TABLE>
<CAPTION>
                                                                                                              |   Predecessor
                                                                              Reorganized Company             |     Company
                                                         ---------------------------------------------------- |   -------------
                                                                                                May 29, 1997  |    July 1, 1996
                                                          Year ended         Year ended            through    |      through
                                                         June 30, 1999      June 30, 1998       June 30, 1997 |    May 28, 1997
                                                         -------------      -------------       ------------- |    ------------
<S>                                                       <C>                <C>                <C>           |    <C>
Cash flows from investing activities:                                                                         |
   Repayments of Native American loans                                                                        |
     receivable                                             2,252,000          3,939,000            332,000   |      3,363,000
   (Increase) decrease in restricted funds                 (3,436,000)           385,000             (2,000)  |        (11,000)
   Increase in deferred charges                            (1,369,000)                --                 --   |             --
   Net transfers to restricted cash                                --                 --                 --   |       (413,000)
   Purchase of furniture, fixtures and                                                                        |
     equipment                                                     --            (23,000)                --   |             --
                                                          -----------        -----------        -----------   |    -----------
         Net cash (used in) provided by                                                                       |
           investing activities                            (2,553,000)         4,301,000            330,000   |      2,939,000
                                                          -----------        -----------        -----------   |    -----------
                                                                                                              |
Cash flows from financing activities:                                                                         |
   Reduction in equipment notice                                   --                 --                 --   |     (1,290,000)
                                                          -----------        -----------        -----------   |    -----------
                                                                                                              |
Net (decrease) increase in cash and cash                                                                      |
   equivalents                                                (58,000)           575,000            673,000   |      1,148,000
                                                                                                              |
Cash and cash equivalents at beginning                                                                        |
   of year                                                  4,498,000          3,923,000          3,250,000   |      2,102,000
                                                          -----------        -----------        -----------   |    -----------
                                                                                                              |
Cash and cash equivalents at end of year                  $ 4,440,000        $ 4,498,000        $ 3,923,000   |    $ 3,250,000
                                                          ===========        ===========        ===========   |    ===========
                                                                                                              |
Supplemental disclosures of cash flows information:                                                           |
                                                                                                              |
   Interest paid                                            2,754,000          2,672,000             50,000   |      2,510,000
   State income taxes paid                                    238,000              2,000                 --   |        423,000
</TABLE>


                          The Accompanying Notes are an
                   Integral Part of these Financial Statements



                                       F-9
<PAGE>   70
                       CAPITAL GAMING INTERNATIONAL, INC.
                                AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED

                    YEARS ENDED JUNE 30, 1999, 1998 AND 1997




      Supplementary Schedule of Noncash Operating and Financing Activities:

         On July 29, 1996, the Indenture Trustee for the Company's Senior
Secured Noteholders distributed an aggregate of $49,986,000 in cash and
Purchaser's Notes to the Senior Secured Noteholders on account of principal and
accrued interest ("Noteholder Distribution"). The Noteholder Distribution
included $28,000,000 in Purchaser's Notes, as well as cash from the sale of
Crescent City Capital Development Corp. (CCCD) and Casino Magic Corp. (CMC),
proceeds from the early payment of the development loan to the Muckleshoot
Tribe, proceeds from the buyout of the Cow Creek contract, $3,200,000 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. The remainder of $413,000 was held in a cash escrow account by the
trustee of the Company's Senior Secured Noteholders.

         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.


                          The Accompanying Notes are an
                   Integral Part of these Financial Statements



                                      F-10
<PAGE>   71
                       CAPITAL GAMING INTERNATIONAL, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. The Company:

         Nature of business:

        Capital Gaming International, Inc. and Subsidiaries (the "Company"),
together with its subsidiaries, is a multi-jurisdictional gaming company with
gaming management interests with Native American Tribes in several states. 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.

         The Company's CGMI subsidiary currently manages and operates two Native
American gaming facilities, which CGMI has developed or expanded into Class III
gaming facilities.

         -        Tonto Apache Tribe - Payson, Arizona (Class III facility
                  became operational in April 1995)

         -        Umatilla Tribes - Pendleton, Oregon (Class III facility became
                  operational in March 1995)

         CGMI also has a management and development agreement with the Pueblo of
Laguna tribe pursuant to which CGMI is developing a Class III gaming facility on
the tribe's sovereign lands located on I-40 West of Albuquerque, New Mexico (see
Note 14).

        The Company's CDGC subsidiary has a management and development contract
with the Narragansett Indian 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 7).

         Disposal of Riverboat Gaming Operation

         The Company's former wholly-owned subsidiary, Crescent City Capital
Development Corp. ("CCCD"), was a 50% partner with Grand Palais Inc. in River
City Joint Venture ("RCJV"), a general partnership formed to develop and operate
two riverboats in New Orleans, Louisiana. The Joint Venture, which was accounted
for using the equity method, was terminated in July 1995. The Company's
riverboat, the Crescent City Queen, opened on April 4, 1995. On June 9, 1995,
the riverboat casino operations in New Orleans were forced to cease due
primarily to significant revenue shortfalls which resulted in operating losses
that the Company could not continue to fund. On July 26, 1995, CCCD was
involuntarily petitioned for reorganization under Chapter 11 of the Federal
Bankruptcy Code. On July 28, 1995, the petition was changed to a voluntary
filing. On October 13, 1995, CCCD filed a Plan of Reorganization (the "January
Plan") under Chapter 11 which was confirmed on January 12, 1996.



                                      F-11
<PAGE>   72
1. The Company, continued:

         Disposal of Riverboat Gaming Operation, continued:

         The January Plan was predicated upon an agreement (the "MRI Agreement")
to sell CCCD to Mirage Resorts, Inc. ("Mirage") for $55,000,000 plus the
assumption of certain equipment liabilities of up to $6,500,000. The sale was
contingent upon certain waivers and conditions being achieved on or before
January 24, 1996, including receipt of all state regulatory approvals. On
January 24, 1996, Mirage announced that conditions to the closing of the
purchase were not satisfied by the contractual deadline and terminated the MRI
Agreement. On February 21, 1996, the Company entered into a stock purchase
agreement (the "CMC Agreement") with Casino Magic Corp. ("CMC") to transfer the
ownership of CCCD and substantially all its assets to a wholly-owned subsidiary
of CMC.

         An Amended Plan of Reorganization (the "Amended Plan"), which was
predicated upon the CMC Agreement, was filed by CCCD and was confirmed by the
Bankruptcy Court on April 29, 1996. On May 13, 1996, the Company completed the
sale of CCCD for an aggregate purchase price of $56,600,000, consisting of
$15,000,000 in cash, Purchaser Notes of $35,000,000, and the assumption of up to
$6,500,000 in certain equipment liabilities. The Purchaser Notes, due no later
than May 13, 1999, had an interest rate of 11-1/2% per annum, payable quarterly
beginning August 13, 1996, and was guaranteed by CMC. The Purchaser Notes were
paid in full on July 29, 1996.

         For the period ended May 28, 1997, the Company recorded a gain on the
disposal of the riverboat gaming asset of $364,000 which represented an
adjustment to the carrying value of liabilities relative to the sale.

         Funds held by Trustee for Old Senior Secured Noteholders:

         As of June 30, 1996, approximately $22,500,000 was reflected as a
contra-liability to the Old Senior Secured Notes and represented cash held by
the Trustee for the benefit of the Old Senior Secured Noteholders against
obligations owed by the Company to the Noteholders. The obligations included
approximately $124,000,000 in Old Senior Secured Notes, a consent fee note
payable of $1,350,000 and accrued interest of approximately $20,700,000. In
addition, the Trustee held $28,000,000 in Purchaser Notes due from CMC as a
result of the sale of CCCD which was reflected as notes receivable of
$35,000,000 and accrued interest of $7,000,000. On July 29, 1996, the Trustee
distributed to the Old Senior Secured Noteholders, an aggregate of approximately
$50,000,000, consisting of $28,000,000 in Purchaser Notes and approximately
$22,000,000 in cash. The remaining $500,000 was held in escrow to indemnify CMC
for any undisclosed liabilities arising from the sale of CCCD.


                                      F-12
<PAGE>   73
2. Reorganization under Chapter 11:

         Reorganization:

         On December 23, 1996 (the "Petition Date"), Capital Gaming
International, Inc. and Subsidiaries, 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.

         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 Plan of
Reorganization (together with all subsequent amendments and modifications, the
"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 February 6, 1997.

         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.

         Plan of Reorganization:

         The Plan provided for the continuation of Capital Gaming International,
Inc. and Subsidiaries' operations. Under the Plan, the old common stock
interests in Capital Gaming International, Inc. and Subsidiaries were canceled
and the Company, as reorganized, issued new common stock (the "New Common
Stock").


                                      F-13
<PAGE>   74
2. Reorganization under Chapter 11, continued:

         Plan of Reorganization, continued:

         The Plan provided generally that creditors of the Company will receive
distributions as follows: (i) holders of Old Secured Notes received in the
aggregate (A) an account of their Allowed Secured Claims, their Pro Rata Share
of the New Secured Notes having a principal face amount of $21,450,000 and
1,225,000 shares of the New Common Stock of the Company; and (B) an account of
their unsecured Deficiency Claims totaling $80,688,850, the same treatment as is
afforded to holders of General Unsecured Claims (see subparagraph (iii) below);
(ii) holders of Secured Claims that are not Claims arising out of Old Secured
Notes receive, at the option of the Company: (X) such treatment as will leave
such holders unimpaired; (Y) payment in full, in cash; or (Z) return of such
holder's collateral in the possession of the Company; and (iii) holders of
General Unsecured Claims against the Company received their pro rata shares of
(A) 525,000 shares of New Common Stock; (B) the right to receive the net
proceeds of Avoidance Actions recovered pursuant to Section 9.4 of the Plan; and
$1,100,000 in New Secured Notes. With respect to Class 4 Claims, the Indenture
Trustee could receive no more than 375,000 shares of New Common Stock and
$550,000 in New Secured Notes on account of its allowed Class 4 Claim, and any
share the Indenture Trustee would otherwise receive on account of its Class 4
Claim in excess of 375,000 shares and any New Secured Notes the Indenture
Trustee would otherwise receive an account of its Class 4 Claim in excess of
$550,000 in New Secured Notes is required to be distributed pro rata to all
other holders of Allowed Class 4 Claims.

         Holders of Old Common Stock of the Company received their pro rata
share of 50,000 shares of New Common Stock of the Company. Existing warrants,
options and other rights to acquire Old Common Stock of the Company
(collectively, the "Old Options") were canceled and holders of such rights
received no distributions of property on account thereof.

         The terms of the Plan provide for the discharge of all claims against
the Company and/or release of liability only of the Company, its wholly-owned
subsidiaries and their respective present and former directors, officers, and
employees, the Indenture Trustee and the Noteholders, and the Steering Committee
of all liabilities in any way related to the Company. In addition, a critical
element of the Plan is the release by the Indenture Trustee and each of the
Noteholders of all their claims against subsidiaries of the Company arising out
of guaranties and pledges, except for the treatment of their claims provided
under the Plan.


                                      F-14
<PAGE>   75
2. Reorganization under Chapter 11, continued:

         Liabilities subject to compromise:

         Prior to the Effective Date, the Company incurred certain secured and
unsecured claims prior to the filing of the Company's Chapter 11 case on the
Petition Date. Additional claims arose subsequent to the Petition Date resulting
from the rejection of certain executory contracts and from the allowance by the
court of contingent and/or disputed claims. Creditors and other parties in
interest filed claims with the Court which were in excess of the amounts
recorded in the Company's records. These differences were related to errors,
duplicative claims and overstatements of claims.

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

<TABLE>
<S>                                                <C>
Senior Secured Notes                               $102,971,000

Consent Fee, Payable to Noteholders                   1,350,000

Guarantee of Notes Payable to Banks                   2,141,000

Notes Payable to Republic Corporate Services         22,630,000

Trade Payables and Accrued Expenses                   3,297,000
                                                   ------------

                                                   $132,389,000
                                                   ============
</TABLE>

         Modification of Plan and Second Amended Indenture:

         The Company's First Amended and Restated Indenture, dated as of March
27, 1997 (the "First Amended Indenture") contemplated that certain actions of
the Company require prior notice to (and in certain cases, approval from) the
Advisory Committee, including the ability of the Company to deliver to the
Indenture Trustee a Definitive Budget (as defined in the First Amended
Indenture). However, the Advisory Committee never formed, substantially due to
the fact that the Company had been notified by several state gaming regulators
in states in which the Company conducts business that the breadth and scope of
the powers granted to the Advisory Committee in the First Amended Indenture
require that the proposed members of the Advisory Committee be licensed by the
appropriate various state gaming regulators.



                                      F-15
<PAGE>   76
2. Reorganization under Chapter 11, continued:

         Modification of Plan and Second Amended Indenture, continued:

         On August 7, 1998, the Company was notified by counsel of the
occurrence of possible events of default ("Events of Default") under the First
Amended Indenture with respect to the New Senior Secured Notes. The alleged
Events of Default included, among other things, an alleged failure by the
Company to deliver to the Indenture Trustee a Definitive Budget (as defined in
the First Amended Indenture). In light of good faith negotiations between the
Indenture Trustee, the holders of a majority in principal amount of the New
Senior Secured Notes and the Company agreed to amend the First Amended and
Restated Indenture in such a manner as would facilitate curing any alleged
events of default.

         The Indenture Trustee had been directed by the Holders of a majority in
principal amount of the New Senior Secured Notes to forebear from taking any
action, and in fact took no action, to accelerate the New Senior Secured Notes,
foreclose on any collateral or otherwise execute any of its rights under the
First Amended Indenture. As discussed herein, all defaults existing under The
First Amended Indenture were waived on December 4, 1998, the effective date of
the Second Amended Indenture.

         On October 23, 1998 the Company and the Indenture Trustee filed a Joint
Motion for an order approving modifications to the Plan with the bankruptcy
court (the "Joint Motion").

         On November 16, 1998 the bankruptcy court ordered the approval of the
proposed modifications to the Plan as set forth in the Joint Motion, including,
without limitation: (i) the Second Amended Indenture; (ii) the Second Amended
and Restated Certificate of Incorporation (the "Second Amended Certificate");
and (iii) the composition of the Company's Board of Directors to consist of the
following individuals: (a) Michael W. Barozzi (Common Director); (b) William S.
Papazian (Common Director); (c) Col. Clinton L. Pagano (Common Director); and
(d) Charles B. Brewer (Class A Director).

         As detailed in the Joint Motion, the principal changes to the Second
Amended Indenture are:

         (i) elimination of the Advisory Committee (as defined in the Second
Amended Indenture);

         (ii) modification of the provisions relating to excess cash (as defined
in the Second Amended Indenture);

         (iii) changing the date of the sinking fund payment due 2000 from May
28, 2000 to May 15, 2000; and

         (iv) changing the final maturity date from May 28, 2001 to May 15,
2001.



                                      F-16
<PAGE>   77
2. Reorganization under Chapter 11, continued:

         Modification of Plan and Second Amended Indenture, continued:

         As also detailed in the Joint Motion, the principal changes to the
Second Amended Certificate include the creation of a new class of common stock,
Class A Common Stock, and the right of holders of Class A Common Stock to elect
up to four members of the Board, with weighted voting rights for the Class A
Director(s) if the holders of the Class A Common Stock elect fewer than four
directors. Except for such additional rights of holders of the Class A Common
Stock, the New Common Stock and Class A Common Stock share identical rights.

         As detailed in the Joint Motion, the Plan is modified to provide that
(i) holders of the Old Secured Notes will receive Class A Common Stock in lieu
of New Common Stock on account of their allowed unsecured claims. These
modifications to the Plan will not affect the aggregate number of shares of
common stock outstanding; the class A Common Stock will represent 80 percent of
the Company's outstanding voting securities and the New Common Stock will
represent 20 percent of the outstanding voting securities. Only holders of the
Class A Common stock, however, will have the right to elect the Class A
Directors.

         The Plan is also modified to eliminate the right of the Noteholder
Steering Committee to designate members of the Board of Directors.

         The Court also ordered that the Indenture Trustee fix December 7, 1998
as the record date for distribution of the New Secured Notes, Class A Common
Stock and other property to the Holders of the Old Secured Notes. In compliance
with the Court's order, the Indenture Trustee has made distributions to the
Holders of the Old Secured Notes and to the general unsecured creditors.

         On December 4, 1998 the Second Amended Certificate was filed with, and
deemed effective by, the Secretary of State of New Jersey.

         On December 11, 1998, the Second Amended Indenture was executed by the
parties thereto, with an effective date of December 4, 1998.

         Also as of December 4, 1998, holders entitled to receive a majority of
the New Secured Notes waived all defaults existing under the First Amended and
Restated Indenture on December 4, 1998.

         Fresh Start Reporting:

        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 project and the attraction of new
management agreements. Due to the uncertainty surrounding the Rhode Island
Project 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, which reflected, among other things, the inherent risks
in realizing the assumptions underlying 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 (see Note 8).

                                      F-17
<PAGE>   78
2. Reorganization under Chapter 11, continued:

         Fresh Start Reporting, continued:

         Excess reorganization value at June 30, 1998 includes the effect of a
reclassification of approximately $426,000 of restricted funds. The $426,000 was
previously reported as held by the Indenture Trustee for the benefit of the
Senior Secured Noteholders. An audit conducted by the Indenture Trustee
determined that these funds were held for the benefit of the Old Senior Secured
Noteholders as a result of the sale of the Company's wholly-owned subsidiary,
Crescent City Capital Development Corp. (CCCD) in May 1996. The sale of CCCD and
the previously reported $426,000 in restricted funds relate to the Predecessor
Company. Had the $426,000 not been reported for the benefit of the New Senior
Secured Noteholders on the consolidated Balance Sheets of the Predecessor
Company, the Excess Reorganization Value of the Reorganized Company would have
been $9,765,000 or $426,000 higher than the $9,339,000 recorded on May 28, 1997,
the Date of Reorganization.

         The adjustments to reflect the consummation of the Reorganization
(including the gain on extinguishment of debt and other pre-petition
liabilities) and the adjustment to record assets and liabilities at their values
have been reflected in the June 30, 1999, 1998 and 1997 consolidated financial
statements. Accordingly, a vertical black line is shown in the consolidated
financial statements to separate post-Reorganization operations from those prior
to May 28, 1997. As a result of adopting fresh-start reporting the reorganized
Company's consolidated financial statements are not comparable with those
prepared before the Effective Date.

         Reorganization adjustments for the period ended May 28, 1997 were
comprised of:

<TABLE>
<S>                                 <C>
Legal/Professional Fees             $ (1,716,000)

Interest Income                           30,000

Write-Off of Goodwill                   (405,000)

Excess Reorganizational Value          9,265,000

Adjustment to Capital Stock           37,217,000

Adjustment to Paid-in Capital          7,877,000
                                    ------------

Total                               $ 52,268,000
</TABLE>


         Reorganization fees paid to management for the period ended May 28,
1997, included in Reorganization Items amounted to $1,463,000 for the year ended
June 30, 1997. According to the Plan of Reorganization, this was comprised of
(i) $900,000 from the discontinuance and sale of the riverboat operations in New
Orleans, (ii) $550,000 in New Senior Secured Notes, and (iii) $13,000 in New
Common Stock grants.

                                      F-18
<PAGE>   79
2. Reorganization under Chapter 11, continued:

         The effect of the Plan of Reorganization on the Balance Sheet as of May
28, 1997, is as follows:


<TABLE>
<CAPTION>
                                        Preorganized                           Exchange of                       Reorganized
                                        Balance Sheet     Debt Discharge          Stock         Fresh Start      Balance Sheet
                                        -------------     -------------     -------------     -------------     -------------
<S>                                     <C>               <C>               <C>               <C>               <C>
Assets
Current Assets:
    Cash and cash equivalents           $   3,250,000     $          --     $          --     $          --     $   3,250,000
    Restricted funds in escrow                924,000                --           924,000
    Interest receivable                        78,000                --                --                --            78,000
    Native American Management
      fees and expenses
      receivable                              813,000                --                --                --           813,000
    Current portion-Native American
      & other loans receivable              3,931,000                --                --                --         3,931,000
    Notes receivable from officers'           250,000                --                --                --           250,000
    Prepaid expenses and other
      current assets                          638,000                --                --                --           638,000
    Property and equipment                     93,000                --                --                --            93,000
    Excess reorganization value                    --                --                --         9,339,000         9,339,000
    Other assets                                   --                --                --                --
      Native American loans
        receivable                          4,032,000                --                --                --         4,032,000
      Investments in Native
        American Management
        Agreements                          2,002,000                --                --                --         2,002,000
      Notes receivable, other                  80,000                --                --                --            80,000
      Deferred financing costs              4,311,000                --                --        (4,311,000)               --
      Goodwill                                405,000                --                --          (405,000)               --

      Deposits and other assets                    --                --                --                --                --
                                        -------------     -------------     -------------     -------------     -------------
        Total assets                    $  20,807,000     $          --     $          --     $   4,623,000     $  25,430,000
                                        =============     =============     =============     =============     =============

Liabilities and Shareholders' Equity
    (Deficit)

Current liabilities:
Accounts payable and accrued
    expenses                            $   1,930,000     $          --     $          --     $          --     $   1,930,000
Accrued interest on secured notes                  --                --                --                --                --
12.0% senior secured notes
    payable                                        --        23,100,000                --                --        23,100,000
Liabilities subject to compromise         132,389,000      (132,389,000)               --                --                --
Common stock                               37,617,000                --       (37,617,000)          400,000           400,000
Additional paid-in capital                  7,877,000                --        (7,877,000)               --                --
Retained earnings (deficit)              (159,006,000)         (550,000)       45,494,000         4,223,000                --
                                                   --       132,389,000                --                --                --
                                                   --       (22,550,000)               --                --                --
                                        -------------     -------------     -------------     -------------     -------------
        Total liabilities & equity      $  20,807,000     $          --     $          --     $   4,623,000     $  25,430,000
                                        =============     =============     =============     =============     =============
</TABLE>



                                      F-19
<PAGE>   80
3. Summary of significant accounting policies:

     Principles of consolidation:

     The accompanying consolidated financial statements of the Reorganized
Company (periods beginning May 29, 1997) and the Predecessor Company (period
prior to May 29, 1997) include the accounts of Capital Gaming International,
Inc. and Subsidiaries 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.

     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 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. If impairment is deemed to exist, the excess reorganization value will
be written down to fair value. (See Note 8).

     Income taxes:

     The Company accounts for income taxes pursuant to statement of Financial
Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. SFAS No. 109
requires the measurement of deferred tax assets for deductible temporary
differences and operating loss carryforwards and of deferred tax liabilities for
taxable temporary differences. Measurement of the current deferred tax
liabilities and assets is based on provisions of enacted tax law; the effects of
future change in tax laws or rates are not anticipated. Deferred tax assets
primarily result from net operating loss carryforwards and impairment of assets
recognized in different periods for financial reporting and tax purposes.

     Capitalization of development costs:

     The costs associated with developing, negotiating and securing new
management agreements are expensed as incurred until such time when management
believes the development requires, at a minimum, a management contract in effect
and indications that regulatory approvals and licensure is probable. Subsequent
costs are capitalized and included in Investments in Native American Management
Agreements. Amortization of capitalized amounts related to new contracts begins
when the facility opens.




                                      F-20
<PAGE>   81
3. Summary of significant accounting policies, continued:

         Earnings per share:

         The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share", which is
effective for financial statements issued for periods ending after December 15,
1997. Accordingly, earnings per share data in the financial statements for the
years ended June 30, 1999 and 1998 have been calculated in accordance with SFAS
No. 128. Prior period earnings per share data have been recalculated as
necessary to conform prior year data to SFAS No. 128. Earnings per share data
for the Predecessor company have not been presented as they are not comparable
to subsequent periods, due to the reorganization and implementation of fresh
start reporting.

         Reorganization items:

         Reorganization items consist of income, expenses and other costs
directly related to the reorganization of the Company, the Chapter 11 filings of
both its former CCCD subsidiary and the reorganization of the parent company,
and subsequent reorganization efforts.

         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.

4. 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 $3,977,000 held by the Indenture Trustee as cash
collateral as of June 30, 1999, $3,413,000 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.

5. 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, 1999 and 1998, the periods
May 29, 1997 to June 30, 1997 and July 1, 1996 to May 28, 1997 the facility
produced approximately $4,930,000, and $4,754,000, $337,000, and $3,529,000,
respectively, in management fees for the Company.


                                      F-21
<PAGE>   82
5. Native American gaming operations, continued:

         Facility openings and summarized financial information, continued:

         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 $2,335,000, and $2,276,000,
$232,000 and $1,823,000, in management fees for the years ended June 30, 1999
and 1998, the periods May 29, 1997 to June 30, 1997 and July 1, 1996 to May 28,
1997, respectively.

         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, $184,000, $2,176,000, for the year ended June 30, 1998, the periods
May 29, 1997 to June 30, 1997 and July 1, 1996 to May 28, 1997, respectively.

         On January 30, 1998 the Muckleshoot Tribal 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 (see
Note 6).

6. Muckleshoot settlement:

         The parties entered into a Joint Stipulation and requested the U.S.
District Court to enter an order of settlement and dismiss with prejudice the
litigation between the parties. The U.S. District Court subsequently entered the
order of settlement.

         Pursuant to the Joint Stipulation, the Company will receive a total of
three million three hundred thousand ($3,300,000) dollars, with one million
($1,000,000) dollars (the "Initial Payment") paid within three days after the
U.S. District Court entered the order of settlement and two million three
hundred thousand ($2,300,000) dollars being paid in equal month installments
over the term of twenty four (24) months commencing August 1, 1998. Such
payments, when fully received, will constitute mutual fulfillment of the
exclusive operating agreement between the Muckleshoot Tribe and the Company
dated April 24, 1995. The U.S. District Court entered the order of settlement
and the Company received the initial payment on July 29, 1998. All monthly
installments to date have been paid in advance of their due date and are
expected to be fully repaid by June 30, 2000.



                                      F-22
<PAGE>   83
6. Muckleshoot settlement, continued:

         The Company recorded other income of $3.3 million, less the $200,000
receivable balance from the Muckleshoot Casino, due as of June 30, 1998, and
wrote-off the unamortized balance of the deferred asset, investment in
Muckleshoot Agreement as of July 20, 1998, of approximately $815,000 for an
other income net gain to the Company of approximately $2,285,000 for the year
ended June 30, 1999. Additionally, on the settlement date the Company recorded a
receivable balance of $2.3 million. The total receivable due the Company on the
Muckleshoot settlement as of June 30, 1999 is $1,150,000.

7. 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. 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. As part of the Narragansett
Contract, the Company has advanced funds for the development of the Rhode Island
Project and the construction of the gaming facility which will be repaid over a
seven-year period commencing with opening of the facility. The Narragansett
Contract was submitted to the NIGC for approval in June 1995.

         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.

         In light of the Decision (as defined below) to invalidate the Compact
and the application of the Chafee Rider (as defined below), no assurance can be
given if, or when, NIGC approval of the management contract will be obtained or
if the Narragansett Tribe will be able to establish a commercial gaming
enterprise (Class II or Class III) under IGRA. Additionally, it is possible, as
a condition of obtaining such approval, that the NIGC will require material
modifications to the Management Agreement.

         Tribal/State Compact

         In August 1994, a Tribal/State Compact (the "Compact") was entered into
between the Narragansett Tribe and 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.

         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.

                                      F-23
<PAGE>   84
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 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. As of September 28, 1999, the Florida Federal Court had not
yet ruled on the pending motions. 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 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 judgement in the matter. In August 1997, the
District Court granted the NIGC's motion for summary judgement. An appeal has
been filed by the Narragansett Tribe in the United States Court of Appeals for
the District of Columbia and is pending. The United States Court of Appeals has
held oral argument on the matter and the parties are awaiting the court's
decision.

         In May 1997, a Congressional Review of the Chafee Rider was initiated
with a hearing before the Committee on Resources of the U.S. House of
Representatives (the "Committee"). The hearing included testimony from the
Department of the Interior, the Narragansett Tribe and the National Council of
American Indians, all of whom testified in support of the repeal of the Chafee
Rider, as well as from several political leaders from the State of Rhode Island
in support of the Chafee Rider. In June 1997, legislation that would amend and
effectively repeal the Chafee Rider ("H.R. 1983") was introduced in the House of
Representatives by Rep. Patrick J. Kennedy (D-RI), a member of the Committee,
and co-sponsored by Rep. Don Young (R-AK), the Chairman of the Committee and
Rep. Dale E. Kildee (D-MI), a member of the Committee and Co-Chairman of the
Congressional Native American Caucus. H.R. 1983, known as "The Narragansett
Justice Act," has subsequently cleared the Committee. No assurances can be given
as to the ultimate outcome of H.R. 1983.

                                      F-24
<PAGE>   85
         Other Matters

         In connection with the Narragansett Tribe's efforts to seek statewide
voter approval of a gaming facility to be located in Providence, Rhode Island in
the November 1998 general election, the Company had retained Donaldson, Lufkin
and Jenrette Securities Corporation ("DLJ") to act as its exclusive financial
advisor with respect to the review and analysis of financial and structural
alternatives available to the Company. As part of such engagement, the Company
agreed to issue warrants to DLJ to purchase five (5%) percent of the Company's
issued and outstanding common stock on a fully diluted basis, to be exercisable
only if the Narragansett Tribe succeeded in winning voter approval for a
Narragansett gaming facility. In light of the fact that a voter referendum did
not occur in November 1998, and the uncertainty surrounding any future voter
referendum including the West Warwick effort, the Company has not issued and
does not intent to issue such warrants.

         The Company has continued funding the on-going development costs of the
Rhode Island Project, which at June 30, 1999, 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, 1999,
approximately $9.3 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 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
present.

         New England is already home to several full scale casinos, including
the Foxwoods Casino operated by the Mashantucket Pequot Tribe and the Mohegan
Sun Casino operated by the Mohegan Tribe, which opened in October 1996. Both of
these casinos are in Connecticut. It is possible that other casinos will be
established in other parts of New England, including Massachusetts. Because of
the market size, the establishment of existing and such other casinos could have
an adverse impact on the Rhode Island Project's gross revenues and, in turn, on
the income generated by CDGC under the Management Agreement.

         In order to fund the construction costs for the project, it is
anticipated that the Company will require significant additional capital. The
inability of the Rhode Island Project to offer Class III gaming could create a
competitive disadvantage. There can be no assurance that such financing will be
available, or if available, that the terms thereof will be acceptable to the
Company. Given  the high level of uncertainty concerning the ability to secure a
binding compact or approval of non-compacted gaming, no financing committments
for future capital needs have been obtained as of the date hereof.

         Native American Gaming Competition

         The Native American gaming industry has 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 may
become less lucrative to management companies such as the Company as the Tribes
have more management companies to choose from. Additionally, many of the
Company's competitors are larger and have greater financial resources to fund
the development of new Tribal gaming operations and to attract new management
contracts.

         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
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.


                                      F-25
<PAGE>   86
         Ongoing Project Development - West Warwick, Rhode Island

         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. As a
result of the Chafee Rider, the Narragansett Tribe had focused its efforts on
seeking voter approval of a gaming facility to be located in Providence, Rhode
Island and subsequently focused such efforts on seeking voter approval of a
gaming facility to be located near Interstate 95 in West Warwick, Rhode Island.
The earliest date upon which any such referendum could be held is November 2000.
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 state legislature will approve
placement of the referendum question on the November 2000 ballot or any other
general election ballot, or 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 2000 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.

         In January 1999 a grassroots group calling itself West Warwick 2000 was
formed in the town of West Warwick, Rhode Island. West Warwick 2000 sought out
the Narragansett Tribe and invited the Tribe to propose a potential casino to be
located in the town of West Warwick. Following public hearings on the issue, the
West Warwick Town Council voted 5 to 0 to hold a non-binding town referendum on
June 8, 1999. On June 8, 1999 the non-binding town referendum was held and
approximately 67% of those voting approved the idea of a Narragansett Casino
being sited in the town of West Warwick. Following the non-binding referendum,
the Town Council of the town of West Warwick sent a resolution to the Rhode
Island General Assembly requesting that the question of a Narragansett Casino in
West Warwick be placed on the ballot in the State's next general election being
held in November 2000. It is expected that the Rhode Island General Assembly
will take up this issue in the Legislative Session beginning in January 2000. If
the Town Council Resolution is ratified by the Rhode Island General Assembly, it
is then subject to gubernatorial veto which can be overriden with a vote of 60%
of each of the state senate and state house of representatives.

         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.

         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.

8. Excess reorganization value:

         Accumulated amortization and amortization expense of excess
reorganization value was approximately $4,602,000 and $1,977,000 as of and for
the year ended June 30, 1999 and $2,625,000, and $2,432,000 as of and for the
year ended June 30, 1998.

         On June 30, 1998, the Company recorded a non-cash impairment loss of
$1,300,000 related to the write-down of the Company's excess reorganization
value. 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 are less than the carrying value of the asset; therefore, an
impairment loss was recognized. The impairment asset is the excess
reorganization value which resulted from the Company's emergence from a Chapter
11 bankruptcy filing on May 28, 1997. 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.

         The recognition of this impairment was 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."


                                      F-26
<PAGE>   87
9. Income taxes:


         Components of income tax expense:


<TABLE>
<CAPTION>
                                                                                                  |    Predecessor
                                                               Reorganized Company                |       Company
                                                ------------------------------------------------  |  ------------------
                                                                                  May 29, 1997    |   July 1, 1996
                                                                                                  |
                                                  Year ended       Year ended        through      |      through
                                                                                                  |
                                                 June 30, 1999   June 30, 1998     June 30, 1997  |    May 28, 1997
                                                ------------------------------   ---------------- |  -----------------
<S>                                             <C>             <C>              <C>              |  <C>
     Current:                                                                                     |
       Federal                                  $       70,000  $              - $             -  |   $              -
                                                                                                  |
       State                                           348,000           336,000           15,000 |            123,000
                                                ---------------  ---------------  --------------- |  -----------------
                                                                                                  |
                                                                                                  |
     Current expense                            $      418,000  $        336,000  $        15,000 |   $        123,000
                                                ==============  ================  =============== |   ================
</TABLE>


         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>
                                                                                                    |     Predecessor
                                                            Reorganized Company                     |      Company
                                                --------------------------------------------------- | -----------------
                                                                                      May 29, 1997  |      July 1, 1996
                                                  Year ended         Year ended          through    |         through
                                                 June 30, 1999      June 30, 1998     June 30, 1997 |      May 28, 1997
<S>                                             <C>             <C>                 <C>             |    <C>
     Federal income tax benefit                                                                     |
       (expense) at the statutory rate          $   (428,000)   $     2,318,000      $ 454,000      |     $(15,100,000)
                                                                                                    |
     Amortization of excess                                                                         |
       reorganization value                         (672,000)          (827,000)           -        |            -
                                                                                                    |
     Federal alternative minimum tax                 (70,000)               -              -        |            -
                                                                                                    |
     State tax benefit (expense)                                                                    |
       net of Federal tax benefit (expense)         (348,000)          (336,000)       (15,000)     |         (123,000)
                                                                                                    |
     (Non) recognition of NOL                                                                       |
       carryforward                                1,100,000         (1,491,000)      (454,000)     |       15,100,000
                                                ------------    ---------------     ----------            ------------
                                                                                                    |
     Current expense                            $   (418,000)   $      (336,000)    $  (15,000)     |     $   (123,000)
                                                ============    ===============     ==========            ============
</TABLE>

                                          F-27
<PAGE>   88
         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 reorganization. The NOLs remaining have been reduced by the
current years income of approximately $3,000,000. 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.

         As of June 30, 1999, the Company has a net operating loss carryforward
expiring as follows:
<TABLE>
<CAPTION>
<S>                                                <C>
         June 30, 2009                             $      3,778,000
         June 30, 2010                                   14,230,000
         June 30, 2011                                   10,152,000
         June 30, 2012                                    1,255,000
         June 30, 2013                                    3,170,000
                                                   ----------------

         Total                                     $     32,585,000
                                                   =================

</TABLE>

                                      F-28
<PAGE>   89



9. Income taxes, continued:

         Net Operating Loss Carryforwards ("NOLs"), continued:

         The Income tax effects of temporary differences that give rise to
significant portions of deferred income tax assets as of June 30, 1999 and 1998
are as follows:

<TABLE>
<CAPTION>
                                                1999               1998
                                          ---------------   ---------------
<S>                                       <C>               <C>
    Deferred Income Tax Assets:
        Federal net operating losses      $    11,079,000   $    11,973,000

        State net operating losses              7,474,000         6,949,000
                                          ---------------   ---------------

        Total deferred income tax assets       18,553,000        18,922,000

        Valuation allowance                   (18,553,000)      (18,922,000)
                                          ---------------   ---------------

        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.


10. Loans receivable - Native American Tribes:

         The Company has funded the development and construction of the Class
III Native American gaming facilities it manages and operates. As of June 30,
1999, there was one loan outstanding for approximately $1,441,000, due March
2000. The full balance is to be realized within one year and as such is
classified as a current asset. This note bears interest at prime lending rate
+1% (8.75% at June 30, 1999).

         Loan Repayment and Contract Buy-out - Pursuant to the terms of the
Class III management contract between the Muckleshoot Tribe and the Company's
Native American gaming subsidiary - Capital Gaming Management, Inc. (CGMI) - the
Tribe has repaid CGMI approximately $7,600,000 that was advanced for developing,
constructing and equipping the gaming facility. Additionally, under the terms of
the Class III management contract, the annual management fee of 11.5% of gross
gaming revenues had been reduced to 3.9% simultaneously upon the repayment of
the loan by the Tribe in September 1995.


                                      F-29
<PAGE>   90

11. Property and equipment:



         Property and equipment consist of the following as of June 30, 1999 and
1998:

<TABLE>
<CAPTION>
                                                   1999               1998
                                               ---------------   ---------------
<S>                                            <C>               <C>
   Office furniture, fixtures and equipment    $   131,000       $   131,000
   Less accumulated depreciation                  (117,000)         (108,000)
                                               ---------------   ---------------
                                               $    14,000       $    23,000
                                               ===============   ===============
</TABLE>

         Depreciation expense for the years ended June 30, 1999 and 1998, the
periods May 29, 1997 to June 30, 1997 and July 1, 1996 to May 28, 1997 is
$9,000, and $13,000, $3,000, and $34,000, respectively, and is included in
depreciation and amortization expense.

12. Investment in Native American Management Agreements:

         The balance of $162,000 and $1,229,000, as of June 30, 1999 and 1998 in
this caption on the balance sheet represents capitalized costs and payments
related only to the remaining Class III management agreements. The Company is
amortizing such amounts over five years on the straight line method. The
remaining life of these management contracts is approximately one year.
Amortization for the years ended June 30, 1999 and 1998, periods May 29, 1997 to
June 30, 1997 and July 1, 1996 to May 28, 1997, was approximately $249,000, and
$708,000, and $59,000, and $687,000, respectively. Accumulated amortization as
of June 30, 1999 and 1998 was approximately $992,000 and $2,119,000,
respectively. When changes in circumstances require, the management of the
Company will evaluate whether the individual carrying value of these assets has
been impaired by comparing the carrying value to the value of the projected net
cash flow from related operations. As of June 30, 1999, management expects the
assets to be fully recoverable.

13. Notes receivable from officers:

         Pursuant to the Reorganization Plan and their respective amended
employment agreements, the Company's two senior executives borrowed a total of
$250,000 from the Company. These loans were evidenced by unsecured notes which
bore six percent (6%) simple interest. Both notes had a maturity date of May 28,
1998 and both were paid in full in December 1997.

14. 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, have been capitalized as a
deferred asset. Additionally, as of October 1, 1998, all Company administrative
expenditures relating to the Dancing Eagle Casino have also been 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, which will remain a deferred asset will be amortized
over the five year period of the Pueblo of Laguna Management and Development
Agreement.


                                      F-30
<PAGE>   91



         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 Pueblo of Laguna Casino Project (the "CGMI Loans").
Additionally, the parties have agreed that a construction loan of $7,200,000
will be privately placed by a third party in favor of LDC ("Third Party Loan").
The CGMI Loans will be subordinate to the third party loan.

         In addition, the management agreement will entitle the Company to 30%
of the net revenues 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 are expected to commence in the first calendar quarter of
year 2000.

15. Debt after reorganization:

         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. These members are not vested in the
Senior Secured Notes until 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 Company has complied with all of the
covenants as of June 30, 1999. 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 New Senior Secured Notes mature in May of 2001. Required
principal payments through maturity is as follows:
<TABLE>
<CAPTION>
<S>                                 <C>
 May 15, 2000                       $     4,620,000
 May 15, 2001                            18,480,000
 Thereafter                                     -
                                    ---------------
 Total                              $    23,100,000
                                    ===============
</TABLE>

         The indenture - The proceeds from the issuance of the Company's New
Senior Secured Notes are subject to certain restrictions, and the Company is
subject to certain restrictive covenants, including dividend restrictions,
pursuant to the Amended Indenture. The Company is also required to repurchase
the New Senior Secured Notes under certain conditions.

         Per the terms of the Amended Indenture, the Company made interest
payments of $1,386,000 on May 15, 1998, November 15, 1998 and May 15, 1999.



                                      F-31
<PAGE>   92



16. Capital structure:

         Capital Structure After Reorganization:

         Pursuant to the 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.
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. Also see Note 2, Modification of Plan and Second
Amended Indenture.

         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.

         Preferred and common stock:

         Preferred stock of the predecessor Company consisted of 5,000,000
authorized shares, of which none where issued. Common stock of the predecessor
Company consisted of 75,000,000 authorized shares. All predecessor common and
preferred stock were canceled under the Reorganization.

         The predecessor Company had adopted a Stock Option Plan. All
outstanding options were canceled pursuant to the Reorganization.

17. Stock option plan:

         Pursuant to the 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 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, 1999 there were no options granted under the Plan.






                                      F-32
<PAGE>   93
18. 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,
1999, the Company owed approximately $62,000 to this second outside director.

         Registration of securities:

         The Company has covenanted to file, upon request from a majority of the
Holders of the New Senior Secured Notes or the Holders of the New Common Stock,
a registration statement under the Securities Act of 1933 with respect to the
New Senior Secured Notes and the New Common Stock. The Company also has agreed
to use its best efforts to cause such registration statement to be declared
effective by the Securities and Exchange Commission (the "SEC") within 180 days
following such notice.

         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 annual
lease payments of approximately $50,000 and $25,000, for the fiscal years ending
June 30, 2000 and June 30, 2001, respectively. Rent expense for the year ended
June 30, 1999 and 1998, the period May 29, 1997 to June 30, 1997, July 1, 1996
to May 28, 1997, was approximately $116,000, and $92,000, $8,000, and $74,000,
respectively.

        Purchase Commitment:

        The Company entered into a purchase commitment to purchase the building
for the Dancing Eagle Casino operations for approximately $630,000. The Company
will lease the building to Laguna Development Corporation for a period of five
years beginning with the commencement of casino operations. See note 14.

19. Pension 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,
1999 and 1998, the periods May 29, 1997 to June 30, 1997 and July 1, 1996 to May
28, 1997 was approximately $61,000, and $71,000, $22,000, and $51,000,
respectively.






                                      F-33
<PAGE>   94



20. 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 $100,000 as of
June 30, 1999, that is subject to credit risk beyond FDIC insured limits. The
Company had approximately $8,300,000 at June 30, 1999, 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, 1999, $647,000, in management
fees due from Native American Tribes under management contracts as well as
$1,441,000, 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, 1999, these receivables are due from two tribes, the
Tonto Apache Tribe and the Umatilla 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. Management has no dispute with any Native American Tribe that would
place doubt on the full collectability of any of the receivables. 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.

         The Company's management fee revenues are derived from three Native
American Indian tribes as follows:
<TABLE>
<CAPTION>

                                    Fiscal Year Ended June 30
                                    -------------------------
                                     1999               1998
                                    ------             ------

<S>                                 <C>                 <C>
        Muckleshoot Tribe              -                 14%

        Tonto Apache                  32%                28%

        Umatilla                      68%                58%
</TABLE>

     The loss of one of these Tribes could have a material adverse effect on the
Company's financial condition.



                                      F-34
<PAGE>   95



21. 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 licensee's operations. Local building, health and fire codes and
similar regulations could also impact the Company's operations. Violations of
any such statutes, codes or regulations could have a material adverse impact on
the financial condition or operations of the Company.

22. 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. The fair value of the Company was determined to be $23,500,000
of which $23,100,000 was attributed to senior secured notes and $400,000 to
common stock.


                                      F-35
<PAGE>   96



23. Extraordinary items:

         Approximately $1,998,000 was recorded as early extinguishment of debt
related to the distribution of an aggregate $49,986,000 on July 29, 1996 in cash
and Purchasers Notes to the Senior Secured Noteholders from the sale of CCCD and
CMC. The $1,998,000 is comprised of the accelerated write-off of $1,350,000 in
Deferred Finance Costs and $648,000 in Original Issue Discounts.

         Approximately $103,464,000 was recorded as an extraordinary gain as the
result of the Company's debt restructuring under Chapter 11 and the adoption of
fresh-start reporting. The $103,464,000 is comprised of the following:
<TABLE>
<CAPTION>
<S>                                                                <C>
           Write-off Deferred Finance Costs and
             Original Issue Discounts                              $ (4,311,000)
           Record New Notes in exchange for old debt                (23,100,000)
           Record New Notes issued to management
             included in Reorganization Items                           550,000
           Reduce Liabilities Subject to Compromise to zero         130,325,000
                                                                   -------------
                                      Total                        $103,464,000
                                                                   =============
</TABLE>


         There is no income tax effect on the extraordinary items due to the
cancellation of indebtedness as more fully described in Note 9.



                                      F-36
<PAGE>   97



24. Legal proceedings:

         Pursuant to the Plan, all legal proceedings against the parent company
prior to the Effective Date of May 28, 1997 were settled pursuant to the Plan.
As a result, there was no litigation pending against the parent company on the
May 28, 1997 Effective Date. The Company may be subject to various legal
proceedings in the ordinary course of business, although is not aware of the
existence of any such pending or threatened legal proceedings at this time.


25. New authoritative pronouncements:

         The Financial Accounting Standard Board (FASB) has issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. SFAS No. 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activities. SFAS No. 133 requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. The
accounting for changes in the fair value of a derivative depends on the intended
use of the derivative and how it is designated, for example, gain or losses
related to changes in the fair value of a derivative not designated as a hedging
instrument is recognized in earnings in the period of the change, while certain
types of hedges may be initially reported as a component of other comprehensive
income (outside earnings) until the consummation of the underlying transaction.

         SFAS No. 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. Initial application of SFAS No. 133 should be as
of the beginning of a fiscal quarter; on that date, hedging relationships must
be designated anew and documented pursuant to the provisions of SFAS No. 133.
Earlier application of all of the provisions of SFAS No. 133 is encouraged, but
it is permitted only as of the beginning of any fiscal quarter. SFAS No. 133 is
not to be applied retroactively to financial statements of prior periods. The
Company will evaluate the new standard to determine any required new disclosures
or accounting.






                                      F-37
<PAGE>   98
                                    Index to Exhibits



         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)

<PAGE>   99
         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)

         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)
<PAGE>   100
         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)

         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)

<PAGE>   101
         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>   102
         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 Ladenburg, 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)

<PAGE>   103
         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)

         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)
<PAGE>   104
         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)

<PAGE>   105
         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)

         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)
<PAGE>   106
         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




<PAGE>   107
         11.0     Schedule of Computation of Earnings Per Share #

         12.0     Computation of Ratio of Earnings to Fixed Charges #

         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>   108
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.

         (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.